Consolidated Water Rates

Background

On November 10, 2011 the CPUC initiated a Rulemaking to address objectives in the CPUC's Water Action Plan related to setting rates that balance investment, conservation, and affordability for multi-district water utilities. The CPUC proposed to consider solutions such as subsidizing high-cost areas via a special fund or consolidating districts and rates across multi-district water utilities. In 2012 CPUC held workshops to examine the types of mechanisms that might be used to advance its objective of setting rates that balance investment, conservation, and affordability.

In November 2012, the CPUC issued a Ruling requesting stakeholders input on the CPUC’s proposed High Cost and Affordability Framework. In 2013, the CPUC held a series of workshops to gather stakeholder input. The CPUC issued its final Workshop Report in January 2014.  

On October 22, 2014, the CPUC issued a Final Decision, which requires:

  • Each multi-district water utility to perform a district-based rate review to assess whether high-cost and affordability problems exist in any of its districts.
  • Each water utility must report on this review in its next General Rate Case or in each district-specific Tier 3 advice letter filing.
  • If the review determines that high-cost and affordability problems exist in one or more districts, the utility must propose one or more solutions to mitigate those problems such as:
    • A Rate Support Fund or similar cross–subsidy fund.
    • Reduction in high costs.
    • Consolidation in some form (i.e., rate consolidation, cost consolidation, rate base consolidation, operational consolidation).
    • Intra-utility grant / loan funding.
    • Rate Design solution (affordability through the first rate tier).
    • Budget plans. 

 

ORA Position

ORA supports mechanisms to make the efficient use of water more affordable. Affordability is a function of the price of water service, the quantity of water consumed, and the ability of households to pay for that service.  

ORA was successful in drafting language that was included in the CPUC’s October 2014 final decision that will ensure that all proposals to consolidate districts should, at a minimum, address the public interest benefits that are achieved in light of the proximity, rate comparability, water supply, and operation of the districts that are proposed for consolidation. These criteria are important for the CPUC to consider when weighing whether to consolidate rates across a water company’s service territory because supply and distribution costs for different water utilities and districts can vary significantly. It is important to ensure that all district consolidation proposals are evaluated in light of district-specific benefits to ratepayers. 

See ORA’s September 2, 2014 Comments on the Proposed Decision.

See ORA’s September 8, 2014 Reply Comments.

 

Proceeding Status 

See the Proceeding docket.  

Other Resources

Consolidated Water Rates: Issues and Practices in Single-Tariff Pricing, a joint publication of the United States Environmental Protection Agency (EPA) and the National Association of Regulatory Utility Commissioners (NARUC), September 1999.  

Guidelines for Combining of Water Utility Districts for Ratemaking and Public Utilities Commission Reporting Purposes, August 20, 1992, Division of Ratepayer Advocates  and Class A water utilities. 

CAPS Standard Procedure, which addresses phased-in rates and targets affordability, Memo to Professional Staff from W.R. Ahern, Director, CPUC Utilities Division, February 22, 1983.