Water Rates FAQ

Water Rates FAQ

When do approved changes to the water and meter service charges to into effect?

The rates and charges for fiscal year 2017-18 go into effect on August 1, 2017 ONLY for City municipal water customers, with additional rate adjustments occurring each July 1 through the year 2021.

Why is there an increase in meter service charges?

The meter service charge, which is based on the size of the City municipal water customer's meter, recovers a portion of the fixed costs associated with providing water service 24 hours a day, 7 days a week.  This charge recovers fixed costs such as billing and collections, customer service, and a portion of capital costs, which do not vary with the amount of water used.  The financial consultant hired by the City to prepare the Water and Wastewater Cost of Service Study recommended increasing the percent of fixed costs recovered from meter service charges from 34% to 44% for better revenue stability.

What will be the average monthly water bill for a single family residence under the recently adopted rates and meter service charges?

The average water bill for a SFR City water customer with a 5/8 inch meter, using 15 units (or 11,220 gallons) of water a month, will increase from $82.40 to $91.79 on August 1, 2017.  The cost will then increase by a little over $2 per month on July 1 of each subsequent year until 2021.  The monthly bill includes the pass-through of wholesale water costs which makes up about 60% of the water bill.  Zone 7 Water Agency (water wholesaler) typically adjusts wholesale water rates in January of each year.

Why was there a jump in the Single Family Residential customer's variable (volume-based) rates?

The jump in SFR water rates is a result of closely evaluating the proportionate cost of water service.  Proposition 218 requires rates and charges for water service to correspond to the cost associated with providing the service, and the customers within each customer classification pay their fair share of the total cost of service.  The fixed meter service charges are set to recover 44% of the fixed costs of providing water service, (i.e., the costs that do not vary with the amount of water used). 

The variable rate was calculated to recover the remaining portion of the fixed costs, the cost of the water supply, operation and maintenance, capital projects and reserves.  The Comprehensive Water and Wastewater Cost of Service Study provided by Raftelis Financial Consultants to the City found the need to adjust the SFR customer classification because these customers use about 51% of the water, but rates had been recovering only about 41% of the costs. 

Also, the City's previous three tier water rate structure was designed to encourage water conservation by allocating more of the cost of water service to customers that use the most water.  This type of rate structure is not supported by actual cost of service calculations.  The financial consultant hired by the City designed a new rate structure that spreads the cost of water service to SFR customers from three tiers to two tiers.  Tier 1 represents the average indoor water use consistent with the State's water usage target of 55 gallons per capita per day, or about 7 units of water per month.  One unit of water is 100 cubic feet or 748 gallons of water.  Tier 2 represents all other water use.

What are the different items under "Current Charges" on my monthly water bill?

SERVICE CHARGE:  This is a fixed charge based on the size of the meter at the property.  It is calculated to recover a portion o fthe City's fixed costs such as billing and collections, customer service, and a portion of capital costs, which do not vary with the amount of water used.

CITY DISTRIBUTION COST:  This volume-based charge varies by customer class and volume of water used.

WHOLESALE COST:  The City of Livermore purchases all of its water supplies from water wholesaler Zone 7 Water Agency, and passes through the costs to customers.  Zone 7 typically adjusts wholesale costs in January.

FIXED CHARGE:  The wholesale fixed cost is allocated to City water customers based on the size of their water meter.

VARIABLE/VOLUME-BASED CHARGE:  This charge is determined by the amount of water used.

Why don't all of the water rates change by the same percent?

The Comprehensive Water and Wastewater Cost of Service Study provided by Raftelis Financial Consultants to the City determined the need to increase total revenues to continue to fund the operation, maintenance, renewal and replacement needs of the City's water utility.  Proposition 218 requires rates and charges for water service to correspond to the costs associated with providing service, also that customers within each customer classification pay their fair share of the total cost.  The percent difference in the water rate reflects each customer's class proportionate demand on the system.  Therefore, some of the customer classes required additional adjustments to maintain balanced pricing between the different classes to remain legally compliant with Proposition 218. 

Why does the City only consider written protests when considering adjustments to water rates and meter service charges?

The City follows the requirements of Proposition 218 when considering adjustments to water rates and meter service charges.  In accordance with Proposition 218, the City must mail a Notice of Proposed Water Rates and Meter Service Charges to all affected property owners that specifies the basis and reason for the rates and charges, information about the public hearing at which the proposed rates and charges will be considered by the City Council, and how the property owner can protest the proposed rates and charges.  At the public hearing, the proposed water rates and meter service charges are subject to "majority protest".  That means that if more than 50% of property owners submit written protests before the end of the public hearing, then the City Council cannot adopt the proposed water rates and meter service charges.

Why does the meter service charge increase with meter size?

The meter service charge recovers fixed costs such as billing and collections, and customer service, which do not vary with the amount of water used.  It also recovers the maintenance and capital costs associated with the meter.  As meters increase in size, they require additional testing and attention, and cost more to repair and replace.

Are other water retailers also adjusting water rates?

Yes, they are.  Water retailers have largely been recovering operating, maintenance, and renewal/replacement costs through volume based water rates.  During the recent four-year drought, lower water use resulted in insufficient revenues being collected and reserves being drawn down.  The retailers have fixed costs that are not affected by low much water is used (i.e., cost of maintaining pipes, pump stations and tanks, employee costs, and customer service costs.  Maintenance and replacement costs also increase as the water infrastructure ages.  Factors such as these have led water retailers to adjust and increase water rates.

How does the City of Livermore water customer rates compare to other Valley water retailers?

Water rates cannot be directly compared between retailers due to a variety of factors such as differences in the age and size of water storage and distribution systems, the use of groundwater pumping to meet demands, the number of customers, average customer water consumption, and policy objectives.

For example, as a result of historical agreements, the California Water Service Company-Livermore District and the City of Pleasanton have substantial "Independent Pumping Quotas", which means they are able to pump and distribute groundwater at lower costs to meet their customers' water demands; Single Family Residential customers using 15 units of water a month, pay in the range of $65 to $78 per month. In comparison, the City of Livermore's Municipal Water Utility and the Dublin San Ramon Services District have minimal Independent Pumping Quotas, which means they must rely on more expensive water supplies purchased from water wholesaler, Zone 7 to meet customer demands; single family customers using 15 units of water a month may pay about $95 per month.

Whose pipes are whose?

Livermore Municipal Water is responsible for pipes on the "street side" of the Livermore Municipal Water customers' water meter, including all service lines and water mains extending throughout the Livermore Municipal Water community, as well as the Livermore Municipal Water water meter itself. If you notice a water leak in the street or in the vicinity of your water meter, please call 960-8100 to report it. The property owner is generally responsible for all pipes and plumbing on the "customer side" of the water meter. This includes the interior plumbing of the home, the outside irrigation system, and the area where the property's water system connects to the water meter.

What has the City of Livermore Water Resources Division done to control costs?

The Water Resources Division did not fill vacant positions during the economic downturn to reduce costs; water system replacement projects were delayed; and reserve balances were used to offset on-going and accumulated depreciation.  The City proactively maintains the water infrastructure to maximize the lifespan of the equipment and structures.  Since 2008, staff has used an asset management planning approach to maintain and replace water system facilities at the lowest life-cycle cost, while still meeting required levels of service to customers.

What are the changes in water rates for Fiscal Year 2017-18 by customer class?

The Table below shows the volume-based City distribution costs.

CustomerClasses

FY 2016/17

FY 2017/18

Rate Change

Percent Change

SingleFamilyResidential

Tier1

$0.52

$1.00

$0.48

92%

Tier2

$1.07

$1.40

$0.33

31%

Tier3

$2.89

-

-

-

Multi-FamilyResidential

Tier1

$1.07

$1.00

($0.07)

 -  7%

Tier2

$2.89

$1.40

($1.49)

 -52%

Commercial

Tier1

$1.07

$1.08

$0.01

    1%

Tier2

$2.89

-

-

-

Irrigation

Tier1

$1.07

$1.40

$0.33

  31%

Tier2

$2.89

-

-

-

Construction

$1.07

$1.08

$0.01

    1% 


What was approved by the Livermore City Council on June 26, 2017, with respect to water rates and meter service changes?

The City hired Raftelis Financial Consultants to prepare a Comprehensive Water and Wastewater Cost of Service Study. The Study determined a need for rate adjustments based on the total required revenue to operate the utility. The City Council approved a zero percent increase in revenue in FY 2017-18, followed by a four percent increase in revenue for each of the following four years through FY 2021-22. These revenue requirements were allocated based on the demand on the water system by customer classes. The percent change in a customer class’ water rates and meter service charge reflects the proportion of the class’ demand on the system. Therefore, some of the customer classes require additional adjustments to maintain equity between the different classes to remain legally compliant with Proposition 218. The largest of the equity-adjustments occurs in the single family residential category and is caused by the previous rates under-collecting revenue from this customer class. 

The 3-tiered structure for SFR was changed to a 2-tiered rate structure. Tier 1 corresponds to “indoor use” of about 55 gallons per capita per day each month, and Tier 2 represents all usage above that level. For Livermore, this translates to 7 units per month for Tier 1. One unit of water = 100 cubic feet (ccf) = 748 gallons.

The 2-tiered structure for Multi-Family Residential customers remains the same but the tiers were adjusted to match the Single Family Residential tier widths noted above; the 2-tiered rate structure for all Commercial customers was changed to a uniform rate; the 2-tiered rate structure for all Irrigation customers was changed to a uniform rate.

The fixed costs recovered from meter service charges was increased from 34% to 44% for better revenue stability Recycled water customers are treated as a customer class within the Water Enterprise. These customers pay the same monthly meter service charge as potable water customers, and pay a volume based recycled water usage rate.