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New Rate Study 2020

FAQ: Frequently Asked Questions

Click here for Questions - & Answers!

Public Hearing: June 25, 2020, 9:30 a.m.

Montecito Water District is Considering Changes to How it Charges for Water Services

We’ve heard from our customers, who want their drinking water to come from local, reliable supplies with stable, predictable, and affordable rates. Rates have not increased since 2016. The proposed rate changes are the result of detailed budget analysis and the findings of the Montecito Water District Rate Study Report prepared by Raftelis, an independent financial consulting firm specializing in cost of services analyses and rate setting.

Process:

• Developing a sound financial plan that aligns with our need to invest in water supply and infrastructure projects.
•  Performing a detailed cost of service analysis to verify that revenue coming from customers aligns with the costs to serve them. This approach helps us ensure we keep rates fair, equitable, and tied to the demand customers place on the water system.
•  Delivering a comprehensive water rate study. This industry best practice helps ensure that the District will be able to meet future obligations to our customers.

Goals:

• Keeps things simple and transparent; making it easy for our customers to monitor their water use to encourage water efficiency.
• Adjusts tiered volumetric rates to more accurately reflect how customers use water today, and to reinforce our commitment to conservation.
• Funds critical water supply investments and infrastructure improvements to ensure water supply availability long term and prevent/reduce service disruptions and associated water loss.
• Adjusts rates to be aligned with total District consumption and include drought related expenses to avoid the need for a surcharge.
• Solidifies MWD’s long-term financial plan and builds responsible reserve funds that will help maintain gradual, predictable future rate increases.

RATE STUDY FAQ

  • What’s driving the need for water rate changes?

    We’ve heard from our customers, who want their drinking water to come from local, reliable supplies with stable, predictable, and affordable rates. To that end, there are several primary factors influencing our review of how we charge for water service:

    The Challenges:
    o Our current water sources are projected to be insufficient to meet our community’s future needs.
    o In the most recent drought, surface supplies dwindled, groundwater was relied on heavily and became severely depleted. High-risk supplemental water had to be purchased to cover our community’s needs, even though customers cut their water use. Future droughts are forecast to last longer and be more severe. Climate change is one factor.
    o Environmental and regulatory restrictions are expanding, which further limits supplies from the State Water Project and Lake Cachuma.
    o Water storage is also a concern. Capacity in Jameson Lake and Lake Cachuma has been permanently reduced as a result of silting and fires, which also impacts water quality. 
    o Many parts of Montecito and Summerland rely on water infrastructure that is almost 100 years old and becomes less reliable each day.
    We must have a plan to provide for water needs moving forward. Our solution includes:
    o Negotiating a long-term Water Supply Agreement (WSA) with the City of Santa Barbara. The City’s desalination plant provides the foundation for the WSA, which will cement a regional partnership in water management and provide our customers with a flexible, drought resilient supply at a guaranteed cost for the next 50 years.
    o Continuing to modernize our water system to better ensure reliability, with planned investments of more than $11.7 million over the next five years.
  • How often are water rates updated and adjusted?

    Water rate studies are an industry best practice that helps ensure that the District is setting a course toward meeting future obligations to our customers. Given rapidly changing conditions, these studies typically occur every five years. MWD’s last five-year rate study has expired, and the District has not requested a rate increase since 2016.

  • Why is MWD pursuing a Water Supply Agreement with the City of Santa Barbara?

    It’s vital that we have a reliable drought-proof water supply and predictable water rates. A long-term water supply agreement with the City of Santa Barbara will provide our customers certainty for the next 50 years.
    This new water supply would provide:
    • Guaranteed supply at predictable cost — to dramatically reduce the need to purchase costly and unreliable supplemental water in the future; especially important given the uncertain availability and cost of State Water Project water.
    • Local, reliable water — Securing the supply agreement will make 40% of our water supply nearly 100% reliable.
    • Increased value for our State Water Project (SWP) investment — if there is surplus SWP water in non-drought cycles, water can be “banked” and securely stored for future use, or possibly leased/sold.
    • Potential for the District to become a water seller — not buyer — of supplemental water in the future. This limits unknown costs for future supplemental water purchases and creates an opportunity to earn revenue that would reduce costs for our customers.

  • How do rising costs and inflation figure into this process?
    Changing conditions means that costs are rising to deliver the water service customers expect when they turn on the faucet. We’re not alone; water costs are increasing across the country, and especially in California.
    Inflation does impact the cost of providing water service. Costs are increasing about 2% annually due to inflation as tracked by the consumer price index in our region, and costs for imported water and capital needs are increasing as much as 6%.
  • Droughts come and go, why can’t we just rely on current sources and conserve more rather than committing to new water sources?

    The impacts of climate change are evident in our region. Droughts are increasing in intensity and impacting all our main water sources including surface water and groundwater. Environmental requirements, like safeguarding fish habitats and protecting groundwater supplies, will further reduce water supply availability. 

    MWD relies heavily on State Water Project (SWP) infrastructure for allocation deliveries and supplemental water purchases. On average, the District receives just 60% of its annual allocation, with future allocations projected by the state of California to drop as low as 40%. This year we expect to receive just 15% of our allocation. Costs for SWP supply will continue to rise while deliveries remain unreliable in the future.

    An ongoing commitment to water conservation remains an essential part of our water supply plan. District customers reduced their water use by nearly 50% during the recent historic drought, though conservation has relaxed a bit since then. Frankly, there’s not much more water use that can be cut without significant lifestyle changes.

  • What is the basis for the proposed water rate structure and water rates?

    The rate setting process began last year, when MWD hired Raftelis, an independent financial consulting firm with water district clients throughout California and across the United States. Raftelis helped the District develop our plan that provides water supply reliability at predictable costs.
    Raftelis’ work included three critical elements:
    • Developing a sound financial plan that aligns with our need to invest in water supply and infrastructure projects.
    • Performing a detailed cost of service analysis to verify that revenue coming from customers aligns with the costs to serve them. This approach helps us ensure we keep rates fair, equitable, and tied to the demand customers place on the water system.
    • Delivering a comprehensive water rate study. This industry best practice helps ensure that the District will be able to meet future obligations to our customers.

  • What were the results of the rate study?

    The rate study determined that the District requires 2.8 percent more revenue each year for five years, beginning July 1, 2020 to fund operating and capital costs, maintain adequate reserve balances, and meet existing debt service obligations.
    The results of the rate study allowed us to develop a proposed rate structure that:
    • Keeps things simple and transparent; making it easy for our customers to monitor their water use to encourage water efficiency.
    • Adjusts tiered volumetric rates to more accurately reflect how customers use water today, and to reinforce our commitment to conservation.
    • Funds critical water supply investments and infrastructure improvements to ensure water supply availability long term and prevent/reduce service disruptions and associated water loss.
    • Adjusts rates to be aligned with total District consumption and include drought related expenses to avoid the need for a surcharge.
    • Solidifies MWD’s long-term financial plan and builds responsible reserve funds that will help maintain gradual, predictable future rate increases.

  • What impact will this have on my monthly bill?

    If the new proposed rate structure is implemented in July 2020, approximately 56% of customers will see a decrease in their bills for the next 12 months, assuming their water consumption remains the same as it has been in the past. The following is examples of three typical residential MWD customers and anticipated impacts on their bills:

     

    Sample Customer 1

    12 hundred cubic feet/mo.

    Sample Customer 2

    23 hundred cubic feet/mo.

    Sample Customer 3

    36 hundred cubic feet/mo.

    Monthly Bill Decreases by $11.47

    Monthly Bill Decreases by $13.72

    Monthly Bill Increases by $37.11

     

    Note: one hundred cubic feet = 748 gallons

    Even with changes it will still cost less than two pennies per gallon to have water delivered to your faucet 24/7/365. As a comparison:

    • The average cost for one gallon of whole milk in our community is $3.63.
    • The average for one gallon of gas in Santa Barbara is $3.05. Bottled water costs about $1.11 per gallon to produce—or more than 50 times the cost of a gallon of tap water.
  • Where can I get more information?

    Much information about the rate study can be found here on this web page. To learn more about how the District’s rate study and water supply planning, we encourage customers to sign up for e-News at www.montecitowater.com/enews to stay informed and attend Board and/or Committee meetings when possible. Reviewing Agendas and minutes may also be helpful. To learn more about your own usage, review your monthly water bill.  For personal  assistance, please call 805-969-2271

CALENDAR SUMMARY

Mid-May 2020 - Proposition 218 Notice detailing potential rate changes mailed to all customers

May 26, 2020 - District Board Regular Meeting

June 9, 2020 - *Presentation at Montecito Association Monthly Board Meeting: Water Supply Agreement and Rate Study Update provided by Montecito Water District, 4-6 p.m.

June 15, 2020
- *Special Board Meeting: Public Meeting on Water Supply Agreement with City of Santa Barbara and Rate Study, 1-3 p.m. 

June 23, 2020 - *District Board Regular Meeting 

June 25, 2020 - *Public Hearing to consider rate changes

July 1, 2020 New rates go into effect if approved by District Board

Regular Online District Calendar

*Remote access information will be posted.

Presentation

See Calendar Summary above for upcoming live virtual presentations on June 9 and June 15.