City Council Agenda Report
Meeting Date: November 4, 2025
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Senior Management Analyst
Subject
Vernon Public Utilities Water Rate Study
Recommendation
No action required by the City Council. This is a presentation only.
Background
A Cost of Service (COS) Study is an essential analytical tool that utilities use to develop rates reflecting the actual cost components associated with each customer rate class. It is considered best practice for utilities to conduct a COS every five years, a standard that many nearby public utilities follow. The most recent Water COS and Rate Design Study for Vernon Public Utilities (VPU) was completed in 2019.
To set appropriate rates that satisfy stakeholder business requirements, while ensuring that only the necessary operating and capital costs for the Utility's operation and management are included in VPU's rates, VPU requested approval from the City Council on February 4, 2025, for an agreement with NewGen Strategies & Solutions, LLC (NewGen). This agreement provides VPU with utility cost of service analysis, rate design, financial planning services, and recommendations for adjustments to its rates.
The Water COS Study completed by NewGen allows VPU to make informed decisions and recommendations about Utility finance, operations, and future capital investments, while clearly understanding customer affordability, competitiveness, cost constraints, and the steps required to stabilize expenses in a fluctuating global economic environment.
VPU staff will be presenting the results of the Water Fund COS, which is in compliance with Proposition 218. Enacted in 1996, Proposition 218 mandates that public utility service rates, fees, and charges must be reasonable and proportional to the costs of providing those services. This means that the approach to setting rates must be sound, with a clear connection between the costs incurred and the rates charged. Based on the findings of the Water COS and Rate Design Study, staff proposes modifying the Water Rate Schedule to implement a 7% increase in water rates, as supported by the study. On October 28, 2025, VPU mailed out notices to each property owner regarding the proposed water rate increase. Additionally, a public hearing will be conducted on December 16, 2025, as required by Proposition 218.
Fiscal Impact
There is no fiscal impact associated with this report.
Attachments
1. NewGen Strategies & Solutions, LLC – Water Rate Study