City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: MARCH 11, 2025 FROM: RIVERSIDE PUBLIC UTILITIES WARDS: ALL SUBJECT: ELECTRIC AND WATER UTILITY RATE PLAN UPDATE FOR THE RESULTS OF FISCAL YEAR 2023-24 ISSUE:
Receive the annual electric and water utility rate plan update for the results of Fiscal Year 2023-24.
RECOMMENDATION:
That the City Council receive the annual electric and water utility rate plan update for the results of Fiscal Year 2023-24.
BOARD RECOMMENDATION:
On February 24, 2025, the Board of Public Utilities unanimously recommended that the City Council receive the annual electric and water utility rate plan update for the results of Fiscal Year 2023-24.
BACKGROUND:
The Riverside Public Utilities Department (RPU) is responsible for the operations of the City-owned water and electric utilities. It provides high quality and reliable services to over 113,000 metered electric customers and approximately 67,000 metered water customers throughout the City of Riverside. The electric and water utility funds are self-supporting enterprise funds that provide services for a fee. The Board has the authority to adopt, and the City Council has the authority to approve rate changes when necessary to ensure the continued recovery of costs for services and to secure reinvestment into the system infrastructure for long-term sustainability.
On August 28, 2023, the Board of Public Utilities (Board) conducted a public hearing to receive public input related to the electric and water utility five-year rate proposals. With one board member absent, the Board recommended that the City Council approve the 2023-2028 Electric and Water Rates.
On September 19, 2023, the City Council approved the electric and water utility rate plans with water rate increases effective October 1, 2023, and electric rate increases effective January 1, 2024.
The Board and City Council received the annual electric and water utility rate plan update for FY 2022-23 on April 22, 2024, and May 7, 2024.
DISCUSSION:
Final FY 2023-24 financial information and results of the annual audit were presented to the Board on January 27, 2025, with the Riverside Public Utilities 2024 Financial Report. The five-year annual rate plan is shown below.
Electric Fund
The Electric Utility maintains and operates 99 circuit miles of transmission lines, 1,358 circuit miles of distribution lines, 16 substations, and three (3) generating plants that can generate a total of 262 megawatts. Charges for service through rates are the primary source of funding for operations and funds a portion of the capital improvement program. The capital improvement program is funded by a combination of bond proceeds, rates, reserves, and developer fees.
Electric rates for customers are comprised of a fixed monthly customer charge, a reliability charge based on the customers’ energy consumed or service plan size, a network access charge, a commercial demand charge, and energy charges that are based on the quantity of energy consumed by the user. During FY 2023-24, the average residential customer experienced a $7.97 increase in their monthly bill with the first year of the new rate plan effective January 1, 2024. For FY 2024-25, the average residential customer will experience an $8.58 increase in their monthly bill with the second year of the new rate plan effective January 1, 2025.The implementation of the scheduled rate plan ensures adequate funding for essential capital projects for addressing aging infrastructure and escalating costs of materials and services in today’s market.
Preliminary Electric Utility Revenues:
The chart below provides an historical view of energy consumption, which illustrates a 4.5% decrease in FY 2023-24 from the previous year. FY 2023-24 includes the scheduled first year rate plan adjustment effective January 1, 2024. The increase in retail sales from the previous year of 1.4% is due to the impacts of the scheduled first year rate plan adjustment effective January 1, 2024, and offset by decreased energy consumption.
Historic Retail Sales
The fiscal impact of the Electric rate plan for the undesignated cash reserve balance, in conjunction with the line of credit, is included in the chart below. The undesignated cash reserve balance in conjunction with the line of credit is projected to fall below target minimum reserve levels for two years before returning above target minimum reserve levels in Fiscal Year 2026/27 as permitted by the RPU Cash Reserve Policy and consistent with the approved Electric rate plan.
ELECTRIC UNDESIGNATED CASH RESERVES
The following table is an example of a typical RPU residential customer’s monthly electric bill reflecting rates as of October 1, 2024 as compared to Southern California Edison and San Diego Gas and Electric for the same time.
Water Fund
The Water Utility maintains and operates 994 miles of pipeline, 56 wells, 16 active reservoirs, and six (6) treatment plants. Charges for service through rates are the primary source of funding for operations and also fund a portion of the capital improvement program. The capital improvement program is funded by a combination of bond proceeds, rates, reserves, and developer fees.
Water rates for customers are comprised of a fixed monthly customer charge based on the size of the meter and a commodity charge that is based on the quantity of water consumed by the user. During FY 2023-24, the average residential customer experienced a $4.07 increase in their monthly bill with the first year of the new rate plan effective October 1, 2023. For FY 2024-25, the average residential customer will experience a $4.14 increase in their monthly bill with the second year of the new rate plan effective July 1, 2024. The implementation of the scheduled rate plan ensures adequate funding for essential capital projects for addressing aging infrastructure and escalating costs of materials and services in today’s market.
Preliminary Water Utility Revenues:
The table below provides an historical view of water sales, which illustrates a 1.3% decrease in water usage for FY 2023-24 from the previous year. Weather significantly impacts retail sales for the utility and during FY 2020-21 and FY 2021-22, Riverside experienced below average precipitation that increased the overall demand for water. FY 2022-23 and FY 2023-24 experienced above average precipitation that decreased the overall demand for water. FY 2023-24 includes the scheduled first year rate plan adjustment effective October 1, 2023. The increase in retail sales from the previous year of 4.6% is due to the impacts of the scheduled first year rate plan adjustment effective October 1, 2023, and offset by decreased consumption.
HISTORIC RETAIL SALES
The fiscal impact of the Water rate plan for the undesignated cash reserve balance, in conjunction with the line of credit, is included in the table below. In compliance with the RPU Cash Reserve Policy, undesignated cash reserves in conjunction with the line of credit are projected to maintain target minimum reserve levels.
WATER UNDESIGNATED CASH RESERVES
The following table is an example of a typical RPU residential customer’s monthly water bill reflecting rates as of July 1, 2024, as compared to Western Municipal Water District and Eastern Municipal Water District for the same time period.
Unfunded Future Costs
RPU is aware of mandates and initiatives that will have significant impacts to the Electric and Water Utilities and will most likely result in future cost increases. Due to the uncertainty of the timing and requirements of the mandates along with costs being unknown, these costs were not included in the current Electric and Water 5-year rate plans. RPU is monitoring the ongoing developments and will continue to develop and refine impacts, cost estimates, and funding scenarios. As additional information becomes available, RPU staff will return to the Board and City Council. Unfunded future costs include:
Electrification and Distribution System Upgrades
Clean Fleet Rules - Zero emission vehicle purchases
Distribution System Upgrades – Internal operations and to support community Per- and polyfluoroalkyl substances (PFAS) drinking water standards and regulations - Meeting the future compliance order Aging infrastructure continues to be challenging
Water pipeline replacement
Lifecycle 125 years to industry standard 75 years
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 6 - Infrastructure, Mobility & Connectivity and Goal 6.2. - Maintain, protect, and improve assets and infrastructure within the City’s built environment to ensure and enhance reliability, resiliency, sustainability, and facilitate connectivity.
This item aligns with EACH of the five Cross-Cutting Threads as follows:
Community Trust – The utility rate plans are transparent and developed with our customers’ and the community’s wellbeing as a top priority.
Equity – The utility rate plans include an equitable allocation of costs among customer classes.
Fiscal Responsibility – The utility rate plans incorporate forecasted operating and capital expenditures funded by the prudent use of rate revenue, bond proceeds, and reserves in accordance with RPU’s Fiscal Policies.
Innovation – The utility rate plans fund operating and capital expenditures to meet the current and future needs of its customers.
Sustainability & Resiliency – The utility rate plans equitably recover costs while maintaining the long-term financial health of RPU and ensures the utility is resilient to future challenges.
FISCAL IMPACT:
There is no fiscal impact associated with receiving this annual electric and water utility rate plan update.
Prepared by: David A. Garcia, Utilities General Manager Certified as to
availability of funds: Kristie Thomas, Finance Director/Assistant Chief Financial Officer Approved by: Rafael Guzman, Assistant City Manager
Approved as to form: Jack Liu, Interim City Attorney
Attachment: Presentation
Utility Rate Plan Update FY 2023/24 – Page 10