WATER AND WASTEWATER RATE OVERVIEW
NOVEMBER 18, 2025
1 • Rate setting overview
• Water
• Residential rate structure options (rate design)
• Recommended changes (cost of service)
• Proposed rates (financial plan)
• Wastewater
• Residential rate structure and collection options (rate design) • Recommended changes (cost of service)
• Proposed rates (financial plan)
• Timeline
Key Components
2 Rate Setting Overview
3 Water Facts
POWAY WATER
Poway imports nearly 100% of its water through the San Diego County Water Authority (SDCWA). The City’s water system includes:
• 319 Miles of transmission and distribution pipelines
• 8,890 water valves, 22 pressure stations and 15 pump station (designed to raise water to higher elevations)
• 19 reservoirs (Lake Poway holds ~one billion gallons of water) • One 24 million gallon/day water treatment plant
• 2,898 fire hydrants
• Approximately 60,000 tests annually to ensure Poway water meets or exceeds the State and Federal standards for water quality.
4 • Consultant: Raftelis Financial Consultants
• Objectives:
• Comply with Proposition 218 and other statutes
• Update data on current customer usage demands
• Ensure sufficient funding for operations
• Provide different rate design options
2025 Rate Setting Framework
Rate
Structure
Sustainability
& Resiliency
Conservation
Fair
And Equitable
Legality and
Administration
5 Steps in Conducting a Rate Study
Cost of Service &
Rate Design
• Cost allocations
• Rate design
• Rate calculations
• Customer
impact analysis
Financial Plan
• O&M evaluation
• CIP evaluation &
financing options
• Cash flow analysis
for financial
sustainability &
resiliency
Rate Setting
Framework
• Pricing objectives
• Financial goals &
policies
Final Rate Adoption
• Report
• Prop 218 notice
• Public hearing
6 Long Range Financial Plan
Policies
Revenues
Expenses
Rate Setting Process: Financial Plan
7 Rate Setting Process: Cost of Service
• Revenue
Requirement
Functionalize
• Supply
• Treatment
• Distribution
Allocate
• Base
• Extra Capacity
• Customer
Distribute
• Uniform
• Recycled
Water
Cost of Service by
Customer Class
8 Revenue
Requirement
Supply Base/Delivery
Costs
Extra
Capacity
Meter
Maintenance
Customer
Service
Rate Setting Process: Cost of Service (Allocation)
Variable Rate ($/ccf)
Fixed Charge by Meter Size
9 • Cost of Service
• Article XIIIC and XIIID of California Constitution
• Proposition 218 (1996)
• Proposition 26 (2010)
• Tiered Water Rates
• Local court case impacts (discussed later)
Legal Environment
10 • Began in Finance workplan for FY 2024-25
• Benefits of a Cost Allocation Plan
• Split costs versus paying for entire positions, departments, or services for each benefiting fund.
• Callout in FY 2025-26 Budget
• Utilize results for water and sewer cost of service studies • Impact to water enterprise = de minimis
• Impact to sewer enterprise = reduction in costs
Indirect Cost Allocation Plan Update
11 Reserves
12 • Make up roughly 7.7% of total cost of providing water service ($3,585,200 out of $46,272,136)
• City Council costs as % of cost of water and sewer costs • 0.08% of water service costs ($35,404 out of $46,272,136) • 0.03% of wastewater service costs ($3,219 out of $11,729,741) Salary and Benefit Contributions
13 Water Rate Design Options, Cost of Service, and
Financial Plan
14 • Uniform Volumetric rate
• Same rate across customer classifications
• Recycled water rate
• Based on cost of service – San Diego large increase (+ future?) • Five-year rate cycle
• Adopt rates for calendar years 2026-2030
Water Rate Structure: Rate Design
15 • California Government Code 53756 (2009)
• Automatically pass-through wholesale costs after 30-day written notice to customers • Best practice utilized by 21 of 23 water providers in San Diego County • Effective for wholesale rates implementing through 2030 • San Diego County Water Authority
• Wholesale water purchase costs outside of Poway’s control • City of San Diego
• Wholesale recycled water purchase costs outside of Poway’s control • San Diego Metro Joint Powers Authority
• Wholesale wastewater treatment cost outside of Poway’s control Pass
-
Through Provisions
16 • Wholesale water (SDCWA) and pumping energy (SDGE) costs • Capital Improvement Plan
• Water Infrastructure Program
• Other CIP projects
• Operations and Maintenance Costs
• Meeting debt covenants and payments
Cost Drivers
17 • CY 2025 SDCWA Pass-through approved ~ $1.27M in additional revenue realized
• Utilizing connection fee revenues for several CIP projects - $4.55M • Received Grant Funding
• No new or increased water funded positions forecasted for study period
• RMWD MOU = future year rate suppression opportunity
• Poway expressed opposition to PLA at SDCWA
Rate Suppression Efforts
18 • Recent court rulings have successfully challenged the legal viability of tiered volumetric water rates
• City is moving to a uniform water rate structure as a more equitable and defensible structure
• Affirm current rates being compliant with Proposition 218's cost of service principles.
Uniform Volumetric Rate
19 Poway Water Revenue Adjustments
4.1% 4.0% 4.0% 4.0% 4.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
CY2026 CY2027 CY2028 CY2029 CY2030
Calendar Y ear (CY) Revenue Adjustments
20 SDCWA + Combined Revenue Adjustment
Poway,
4.1%
SDCWA Water,
5.8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
Revenue Recovery Adjustment
Calendar Y ear 2026 Adjustment: All – in 9.9%
Poway SDCWA Water
21 Combined Water Revenue Adjustments
4.1% 4.0% 4.0% 4.0% 4.0%
5.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
CY2026 CY2027 CY2028 CY2029 CY2030
Calendar Y ear (CY) Revenue Adjustments
CY 2026 9.9% Adjustment Breakdown
- SDCWA = 5.8%
- Poway = 4.1%
22 • Target operating fund balances
• Minimum reserve: 90 days of operating
expenses
• Target reserve: 120 days of operating
expenses
• Target capital fund balances
• Minimum reserve: 10% of net capital
assets
• Debt Covenants – 2021 and 2023
Water Revenue Bonds
• Minimum revenue recovery amounts
beyond operating expenses
Water Financial Plan: Policies
23 Water Financial Plan
24 Customer Assistance
• Online bill calculator
• Zero fee payment options
• Directing to other financial
assistance (211 San Diego, etc.)
• Payment arrangements
25 Wastewater Rate Design Options, Cost of Service,
and Financial Plan
26 • Fixed vs commodity rates
• Metro JPA treatment costs
• Five-year rate cycle
• Adopt rates for calendar years 2026 through 2030
Wastewater Rate Structure: Rate Design
27 • Target operating fund
balances
• Minimum reserve: 90 days
of operating expenses
• Target reserve: 120 days of
operating expenses
• Target capital fund
balances
• Minimum reserve: 5-year
average CIP
Wastewater Financial Plan: Policies
28 Poway Wastewater Revenue Adjustments
3.0% 3.0% 3.0%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
CY2026 CY2027 CY2028 CY2029 CY2030
Calendar Y ear (CY) Revenue Adjustments
29 Combined Household Impact
30 • November 18, 2025 – City Council meeting
• Review financial plan and figures
• Set the Proposition 218 Public Hearing for January 20, 2026 • Authorize sending out the Proposition 218 notice to customers • January 20, 2026 Proposition 218 Hearing
• Count public protests to see if a majority protest exists • Consider formal objections and responses to objections • Open the public hearing to consider input from interested parties on proposed rates
• Close the public hearing and consider adoption of rates following Council input
Timeline
31