COUNCIL WATER COMMITTEE
2026 WATER RATE STUDY OVERVIEW
July 10, 2025
Agenda Item No. 25-0763
PURPOSE OF NEW RATE STUDY
Develop a rate that demonstrates fairness and equity across all customers.
Required to comply with Proposition 218.
Prepared every 5 years.
Reflect prudent financial planning criteria
Maintain Legally Required Debt Service Coverage Ratios
Fund Continued Operations
Adequate Rate Funding of Capital Projects
Meet Target Reserve Ending Balances
Develop the study using accepted methodologies tailored to the City’s system and customer characteristics
WHAT THE RATES CURRENTLY SUPPORT
Maintain a comprehensive water transmission and distribution system, including:
7 reservoirs
9 active groundwater wells
600 miles of pipeline
Over 50,000 water meters
7,500 fire hydrants
Serve a population of more than 180,000 residents
Produce approximately 9 billion gallons of potable water annually Operate the Delta Water Treatment Plant with a treatment capacity of up to 30 million gallons per day Capital Improvement Program (CIP) projects for system repairs and upgrades Water resource planning and conservation programs
CITY OF STOCKTON WATER SERVICE AREAS
MUD serves North and South Stockton
California Water Service Company serves Central Stockton
THE PHILOSOPHY OF RATE MAKING
APPROACH TO ESTABLISHING COST-BASED RATES
OVERVIEW OF THE REVENUE REQUIREMENT
OVERVIEW OF THE COST OF SERVICE
RATE DESIGN
2021 RATE INCREASES
Phased Rate Increase in Effect July 2021 to June 2026
Fiscal Year
Water Rate Increase
2021/2022
0.0%
2022/2023
3.5%
2023/2024
3.5%
2024/2025
4.0%
2025/2026
4.0%
HOW THE MONEY WAS USED
Meet legally required debt service coverage ratios
Fund increased purchase water costs
Fund operations and maintenance activities
Fund construction of capital improvement
Groundwater Recharge Project
DWTP Campus Improvement Project
Advanced Metering Infrastructure
Treatment at Well SSS8
Rehab of Reservoirs and wells
Security improvements at remote sites
Lateral pipeline replacement
2026 RATE STUDY –Key Assumptions
Starting point is the FY 24/25 and FY 25/26 actuals and budgets O&M expenses are escalated annual at approx. ~5%
Primarily driven by inflation, labor contract and purchase water estimates Capital funding plan is based on water master plan that identified system replacement needs and deficiencies Assumes no new debt in draft analysis
Maintain current rate structure and customer classes of service (rate schedules)
Next Steps
July 2, 2025 - Informational discussion with the Water Advisory Group – Complete July 10, 2025 – Informational discussion with Council Water Committee – (Today) August 12, 2025 - Request Council to award a contract to HDR Engineering August 27, 2025 - Project Kickoff Meeting with MUD Staff February 4 and 12, 2026 – Return to WAG and CWC with preliminary rate study results