Pasadena Water and Power
Public Hearing to Approve
Recommended Water Rate Adjustments
City Council
June 3, 2024
Item #11
Recommendation
• Find that the proposed action is not a project subject to CEQA;
• Open a Public Hearing to receive public comment on the recommended water rate adjustments to be effective
beginning July 1, 2024, or as soon as practicable
thereafter (for five fiscal years);
• Close the Public Hearing and approve the recommended
water rate structure and rate adjustments; and
• Direct the City Attorney to prepare an ordinance
amending the Water Rate Ordinance implementing the
changes to the water rates.
2 Pasadena’s
System
3 • Formed in 1912 for reliable water service
• One of the founding members of the
Metropolitan Water District, established in
1928
• Today, PWP provides approximately
162,000 customers with water services
• Service area of approximately 26 square
miles, including some areas outside of the
City
• Delivered 9.8 million HCF (7.3 billion
gallons; 22 thousand acre-feet) of water
during FY 2023
• Water Sources: ~1/3 local, 2/3 imported
*Hundred Cubic Feet (“HCF”) = One Billing Unit (“BU”)
Single-Family Residential, 74%
Multi-Family Residential, 12%
Commercial, 14%
Accounts
Single-Family
Residential, 47%
Multi-Family
Residential, 21%
Commercial, 32% Usage
Continue to Augment Supplies with Enhanced
Stormwater Capture and Groundwater Replenishment
4 Implemented In-Lieu Program with Metropolitan, significantly reducing groundwater pumping
Continue to actively capture stormwater for groundwater replenishment Photo by Urte Barker (Pasadena Resident)
New program for
815 million
gallons of
additional
groundwater
storage
augmentation
4.7 billion gallons
actively
captured and
recharged
stormwater at
Arroyo Seco and
Eaton spreading
basins
Delivering Water to Homes and Businesses
with a Resilient System
5 • SERVICE AREA SQUARE MILES 26
• MILES OF WATER MAINS IN THE DISTRIBUTION SYSTEM 520
• NUMBER OF WELLS 12 (MORE ONLINE SOON)
• NUMBER OF RESERVOIRS 14
• WATER SYSTEM TOTAL STORAGE CAPACITY 105 MG
• GROUNDWATER TREATMENT PLANT 2 (MORE ONLINE SOON)
• BOOSTER STATIONS 19
• NUMBER OF WATER SERVICES 38,000
• METER SIZES 5/8”-10”
Over 520 Miles of
Water Mains
Extensive Network of Infrastructure
and Operations
Providing Safe, High Quality Drinking Water
Meeting All Regulatory Standards
6 Continuing to Meet All
Federal and State Drinking
Water Standards
PWP’s
Certified
Accredited
Water Quality
Laboratory
https://pwp.cityofpasadena.
net/watersafetyquality/
Enhancing Local
Groundwater Quality
Informing
Customers on
Water Quality
New Wadsworth Treatment Facility
Foundation of Water Conservation for
Climate Resilience
7 0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
Population
Water Demands (acre-feet)
Fiscal Year
Population
10-Year Rolling
Demand Average
Continuing trend to reduce water
use, despite increased population
Using the same amount of water
today as in 1949, and
30-40% less than the peak water use
Water Demands
Actively Advancing Water-Use Efficiency as a Community
Building a More Resilient Water Future
Continuing to Invest in the Community
8 Replace and
upgrade aging
infrastructure
Capture and store
more water when
available
Expand water supply
Maintain water
quality
Modernize large-
scale regional water
delivery systems
Modernize
technology and
optimize operations
Workforce
development
Support customer
conservation efforts
Sunset Complex Project
Existing Future
9 Water Fund
$0
$10
$20
$30
$40
$50
$60
$70
$80
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
$ millions
Capital Plan
Rate Funded
Bond Funded
n/a
AAA
Rated Fitch + S&P
-$4M
FY 2023 Under
Collection
-18%
FY 2023 from FY
2022 Water Sales in
HCF
Less
Than1¢
per Gallon
with Delivery
Included
Sources & Uses of Funds (FY 2023)
10 Residential ,
62%
Commercial &
Industrial, 31%
Fire Services,
2%
Non-Operating &
Misc. Others, 5%
SOURCES OF FUNDS
Purchased
Water
32%
Purchased
Power
4%
Direct Operating
18%
Administrative &
General
17%
Net Income
8%
Depreciation &
Amortization
15%
Reimbursement for
City Services
3%
Interest
3%
USES OF FUNDS
$68.7 Million in FY 2023
$ for capital
reinvestment
Historical and Planned Capital Spend
11 $12
$21
$16
$18 $20
$28
$30
$50
$67
$26 $26
$0
$10
$20
$30
$40
$50
$60
$70
FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 millions
Average $38 million
Average $17M
* Increase driven by Sunset Complex Project Construction * *
Tap water – what a
!
• This is what one “billing unit”
looks like – 748 gallons
• Less than 1¢ per gallon
• 25¢ for a 10-minute shower
(with low flow shower head)
• Bottles of water at least
100xs the cost, $1.06/gallon
12 •PWP is a self-funding enterprise - is not like other government services (Police, Fire, Parks) that are funded by tax dollars from the General Fund
›Funded by customer rate revenue
›Non-profit business
•Rate revenue pays for:
›O&M expenses (labor, supplies, electricity)
›Capital costs (projects to rehabilitate pipes, tanks, wells etc.) ›Debt service to pay back loans
›Reserve funding
•Rates must keep up with costs to operate the water system •To review the equity and fairness of the rate structure (who pays what)
13 Why Did We Do a Water Rate Study?
14 A financial planning process to set rates that:
Considers Community Values
• Conservation
• Affordability
• Fairness/Equity
Promotes Utility Financial
Viability
• Operations & Maintenance
• Infrastructure Investment
• Debt
• Reserves
Must be Legally Defensible
• Proposition 218
What is a Rate Study?
Steps in Conducting a Rate Study
15 STEP 1
Rate Setting Framework
STEP 2
Financial
Plan
STEP 3
Cost of Service
& Rate Design
STEP 4
Final Rate Adoption
• Pricing objectives
• What is important?
• Revenue Requirements
• How much $ do you need
• Evaluation of operating and
capital needs
• Cash flow analysis for
financial sufficiency
• Rate design (evaluated 5
designs)
• Water use (who and how much)
• Rate calculations
• Customer impact analyses
• Cost allocations
• Public Outreach
• Report
• Prop 218 Notice
• Public Hearing
• June 3, 2024
We are here
Why Do Rates Need Adjustment?
16 Cost Types Revenue
Requirement
Fixed
costs
Variable
costs
Aging
infrastructure
Purchased
water
costs
Inflation
/supply
chain
Power
costs
$ Needed
to run the
system
Cost Drivers
Climate
adaptation
17 Cost-of-Service
Cost-of-Service
18 Conservation
Meter
Maintenance
Customer Service
Allocate Revenue Requirements to Cost Causation
Components
Extra
Capacity/Peaking
Delivery
Supply
Distribute Cost Components to Each Class = Cost to Serve Each Class (Single-Family, Multi-Family, Commercial)
Rate Design
•Calculate Commodity Rate (Volumetric Rate)
Combine the unit ($/HCF) rate of supply, delivery, conservation costs, extra capacity/peaking
Must develop a nexus between tiered rates and costs to serve those tiers by adding unit rates for each cost component
19 HCF: Hundred Cubic Feet or One Billing Unit
Total Volumetric Rate For Each Tier ($/HCF)
Extra Capacity /
Peaking ($/HCF)
Meter
Maintenance
Customer
Service
Conservation
($/HCF)
Delivery
($/HCF)
Supply
($/HCF)
Fixed Rate by Meter Size
Volumetric Cost Allocation to Tiers
20 System Capacity
Cost per Unit Water
Imported Water for Extra Capacity (Peak Use)
Groundwater
Tier 3
Tier 2
Base Demand Period Base Demand PeriodPeak Demand Period Mostly Imported Water for Moderate (Outdoor) Use
Groundwater for Base (Indoor) Use Tier 1
21 Rate Design
Recommended Rate Design
Adjustments
• Single family residential (1 dwelling unit); 77% of customers • Multi-family residential (2+ dwelling units); 12% of customers • Commercial customers; 11% of customers
Created Customer
Classes/Type
• Single family (HCF): tier 1 @ 7, tier 2 @ 29, tier 3 @ 29+ • Multi-family (HCF per dwelling unit): tier 1 @ 5, tier 2 @ 10, tier 3 @ 10+ • Commercial (Small/Medium/Large): The % of water sold in each tier is the same as SFR for each meter size (small, med, large)
Adjusted Block/Tier
Breakpoints
(formerly tier breakpoints
were by meter size)
• More consistent with base extra capacity standard methodology • Recovery is based on capital needs and reinvestments of the system • Simplifies rate structure
Capital Improvement
Charge Incorporated into
Fixed and Variable Rates
• An optional charge to recover lost revenue to pay for fixed costs during a drought
• Pricing developed to accommodate the various drought stages Drought Charges
22 Customer Classes/Type
23 Single Family
Residential
77% of all
customers
Multifamily
Residential
12% of all
customers
Commercial
(Small,
Medium and
Large)
11% of all
customers
All rates are currently
based on meter-size only
Proposed rates will
create customer classes
based on distinctive use
patterns
0-5
6-10
Over 10
0-8 0-52
0-8509-43
53-265
851-5,050
Over 43
Over 265
Over 5,050
Adjusted Block/Tier Break Points
24 Monthly Billing Units
Small
Meter Size 5/8''-1‘’
0-7
8-29
Over
29 Single-Family Multi-Family
per dwelling unit
Medium
Meter Size 1 1/2‘’- 4‘’
Large
Meter Size 6‘’+
Tier 1 Tier 2 Tier 3
Residential
Commercial
Not to scale
Rate Components
25 D&C
Fixed Rate by
Meter Size
Commodity Charge
Volumetric,/Tiered Rate per Billing Unit
CIC
Volumetric, Flat Rate per Billing
Unit
Fixed Charge
Fixed Rate by Meter Size
Variable Charge
Volumetric,/Tiered Rate per Billing
Unit
RecommendedCurrent
Drought Rates
• % increase to variable charges portion of a customer’s bill IF enacted • Recovers revenue to cover fixed costs and costs associated with drought • Once Council declares a drought level, the General Manager has the option to implement drought rates to the variable charge for the different drought stages as defined in the “2020 Urban Water Management Plan”
• Drought rates send a stronger price signal when water is in short supply in addition to other programmatic measures
26 The variable rates in place at the time would be increased by the percentages shown Pasadena's Water
Shortage Plan Levels Level 1 Level 2 Level 3 Level 4
California’s Water Shortage
Contingency Plan Stages Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Tier 1 0% 0% 10% 35% 58% 125%
Tier 2 11% 29% 52% 89% 152% 178%
Tier 3 17% 51% 77% 127% 175% 225%
27 Revenue Recovery
Analysis
28 Revenue Increase Development
Debt coverage inadequate
Rapid Depletion of Reserves
WITHOUT REVENUE INCREASES
WITH REVENUE INCREASES
Recommended Revenue Increases
29 13% 12% 7%9% 8%0%
REVENUE
INCREASES
$ millions
minimum operating reserve
operating reserve target
total reserve target
Does not include new
debt
Revenues and Expenses
30 $ millions
31 Customer Bill Impacts
User Case: The “Small” Family
32 Use 7 HCF monthly
Has mainly indoor plants & cat “Stella”
The Small Family is in the 30%
percentile for Single Family
Residential customers
Fixed Charge
3/4” Meter $38.62
Variable Charge
Tier 1
Usage
7 HCF @
$2.24818 for $15.74
Total……………. . . $54.36
Current bill: $46.68
Increase $7.68, 16.5%
Note: Immaterial rounding differences may exist.
User Case: The “Medium” Family
33 Use 11 HCF monthly
Has a small garden & dog “Muffin”
The Medium Family is in the 47%
percentile for Single Family Residential
customers
Fixed Charge
3/4” Meter $38.62
Variable Charge
Tier 1
Usage
7 HCF @
$2.24818 for $15.74
Tier 2
Usage
4 HCF @
$5.92680 for $23.71
Total……………. . . $78.07
Current bill: $64.19
Increase $13.88, 21.6%
Note: Immaterial rounding differences may exist.
User Case: The “Large” Family
34 Use 20 HCF monthly
Has a lawn and garden,
dog “Lucky” and cat “Leo”
The Large Family is in the 74%
percentile of single family
residential customers
Fixed Charge
1” Meter $60.19
Variable Charge
Tier 1 Usage
7 HCF @
$2.24818 for $15.74
Tier 2
Usage
13 HCF @
$5.92680 for $77.05
Total……………. . $152.98
Current bill: $123.90
Increase $29.08, 23.5%
Note: Immaterial rounding differences may exist.
User Case:
Multi-Family Duplex Landlord
35 Use 17 HCF monthly
Duplex maintains outdoor space
Per Unit is $51.07
PWP does not control water payments
via property owner
Fixed Charge
3/4” Meter $38.62
Variable Charge
Tier 1
Usage
10 HCF @
$2.24209 for $22.42
Tier 2
Usage
7 HCF @
$5.87186 for $41.10
Total……………. . $102.14
Current bill: $93.42
Increase $8.72, 9.3%
Note: Immaterial rounding differences may exist.
User Case: Medium Commercial
Coffee Shop
36 Use 75 HCF monthly
No outdoor watering
Fixed Charge
2” Meter $178.82
Variable Charge
Tier 1
Usage
52 HCF @
$2.25510 for $117.27
Tier 2
Usage
23 HCF @
$5.88262 for $135.30
Total……………. $431.39
Current bill: $508.42
(Decrease $77.03, 15.2%)
Note: Immaterial rounding differences may exist.
37 Comparison with
Neighboring
Agencies
Surrounding Agency Water Bill Survey
38 Note: Information provided is based on publicly available information as of January 2024. Other organization's rates may be different at the time of rate adoption.
39 Alternative Scenario and Option
The W(IF)IA Scenario
40 13% 9% 7%7% 7%0%
REVENUE
INCREASES
$ millions
minimum operating reserve
operating reserve target
total reserve target
Does not include new
debt
Water Infrastructure Finance and Innovation Act (WIFIA) • Competitive loan process therefore not included in
recommended financial plan
• To return to City Council upon WIFIA loan closing ~ FY 2026 with a reduced rate plan (cannot reduce in FY25 due to
timing)
13% 12% 7%9% 8%0%RECOMMENDED
REVENUE INCREASES
Delay CIP: Not Recommended
Option to delay AMI and Some
Distribution Mains Projects
41 12% 11% 7%9% 8%0%
REVENUE
INCREASES
$ millions
minimum operating reserve
operating reserve target
total reserve target
Does not include new
debt
13% 12% 7%9% 8%0%RECOMMENDED
REVENUE INCREASES
Utility Bill Impact Example
42 COMBINED IMPACT OF PROPOSED AND APPROVED UTILITY RATE INCREASES EFFECTIVE JULY 1, 2024 Current FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Proposed SFR Water Rate Increases
Avg. Monthly SFR Water Service
Residential Cart @ 60 gallon
Avg. Monthly SFR Water Service
Approved SFR Solid Waste Rate Increases
Approved SFR Sewer Rate Increases
$64.19 $78.06 $87.43 $95.30 $102.92 $110.13 $26.44 $35.19 $37.65 $40.29 $43.11 $46.13 $4.55 $11.05 $12.81 $13.33 $13.86 $14.41 Current FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Total SFR Rate Increases July 1, 2024 (Water + Solid Waste + Sewer ) $95.18 $124.30 $137.89 $148.92 $159.89 $170.67 TOTAL COMBINED SFR RATES Annual Combined Increase
Total 5-year Combined Increase
31% 11% 8% 7% 7%
79%
Online Bill Estimator: https://egov1.cityofpasadena.net/BillEstimator Public Outreach and Education
43 July 25, 2023 – Update/Workshop
February 13, 2024 – Update/Workshop
March 26, 2024 – Recommend to Set Public Hearing
MSC
April 8, 2024 – Set Public Hearing
June 3, 2024 – Public Hearing - TodayCity Council
April 1, 2024
May 14, 2024
EAC
April 8, 2024 – Virtual
April 23, 2024 – Key Accounts Meeting
May 1 & 23, 2024 – Victory & Robinson Parks
Community
Meetings
Public Outreach and Education
PWPweb.com/WaterRateDesign
Social Media and Local
Media Coverage
Explainer Video
Bill Inserts
44 Community Meetings
Public Hearing
Notice
Website
Backup Slides
45 Utility Bill Impact Example
46 COMBINED IMPACT OF PROPOSED AND APPROVED UTILITY RATE INCREASES EFFECTIVE JULY 1, 2024 Current FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Proposed SFR Water Rate Increases
Avg. Monthly SFR Water Service
Residential Cart @ 60 gallons
Avg. Monthly SFR Water Service
Approved SFR Solid Waste Rate Increases
Approved SFR Sewer Rate Increases
$64.19 $78.06 $87.43 $95.30 $102.92 $110.13 Current SFR Electric Rates
Residential Electric Service @ 500 kWh
$26.44 $35.19 $37.65 $40.29 $43.11 $46.13 $4.55 $11.05 $12.81 $13.33 $13.86 $14.41 $124.64 $124.64 $124.64 $124.64 $124.64 $124.64 Current FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Total SFR Rate Increases July 1, 2024 (Water + Solid Waste + Sewer + Electric) $219.82 $248.94 $262.53 $273.56 $284.53 $295.31TOTAL COMBINED SFR RATES Annual Combined Increase
Total 5-year Combined Increase
13% 5% 4% 4% 4%
34%
Online Rate Calculator: https://egov1.cityofpasadena.net/BillEstimator *Electric Rate Study efforts underway
PWP Projects Identified for W(IF)IA
• PWP Projects Identified
• Loan Features
> Deferred 5-year repayment
> Interest does not accrue until loan is drawn
> Customized repayment schedule
47 Letter of
Interest
Application
Closing
Project 5-Year Project Cost 49% Loan Amount
Sunset Complex $73 million $36 million
Distribution Mains $39 million $19 million
AMI $9 million $4 million
Total $121 million $59 million
Approximately one year process
Utility Bill Impact Example
Rate Adjustments Current FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Approved Sewer $4.55 $11.05 $12.81 $13.33 $13.86 $14.41 Approved Solid Waste
Residential Cart @ 60 gallons $26.44 $35.19 $37.65 $40.29 $43.11 $46.13 Recommended Water
11 HCF with 3/4” meter $64.19 $78.06 $87.43 $95.30 $102.93 $110.13 Current Electric (500 kWh-summer rates)* $124.64 $124.64 $124.64 $124.64 $124.64 $124.64 Combined Bill Estimate $219.82 $248.94 $262.53 $273.56 $284.54 $295.31 Annual Increase % 13% 5% 4% 4% 4%
5-Year Increase % 34%
48 Monthly Bill Estimates for Average Single-Family Residential Customer Online Bill Estimator:
https://egov1.cityofpasadena.net/BillEstimator
PWPweb.com/WaterRateDesign
*Electric Rate Design Study efforts underway:no proposed electric rate adjustments have been developed at this time
Today’s Presenters
49 Stacie Takeguchi
Assistant General Manager - Water
Lynne Chaimowitz
Assistant General Manager –
Finance & Administration
Stacie Takeguchi is a leader with more than 23 years of experience in the water industry. Prior to joining PWP, she worked for The Metropolitan Water District of Southern California for 15 years, serving in various capacities including leading regional drought action planning efforts. Ms. Takeguchi has a bachelor's degree from Tulane University and is a licensed engineer in the State of California.
Lynne Chaimowitz was most recently with the Mojave Water Agency where she served as the Chief Financial Officer (CFO). Prior to becoming CFO, Ms. Chaimowitz served the City of Ann Arbor, Public Services. She is a Certified Public Finance Officer (CPFO). She earned an Environmental Program undergraduate degree from the University of Michigan, and a graduate degree in Accounting from Eastern Michigan University.
Steve Gagnon
Vice President-
Raftelis Financial Consultants, Inc.
Steve Gagnon has conducted water and wastewater rate studies in Southern California for over 15 years out of his 26 years as an engineering consultant. He is a registered environmental engineer, a Municipal Advisor with the U.S. Securities and Exchange Commission, and the former chair of the California/Nevada American Water Works Association Financial Management Committee.