California Water Rate Studies

California Water Rate Studies

Residential Water Rates

RDN has prepared comparative residential water rate studies focused on explaining differences in rates among purveyors in neighboring jurisdictions. These analyses estimated nominal and effective costs to residential customers of purchasing water from Golden State Water Company in each of the Company’s 24 service areas throughout California and compared these costs to water costs in more than 100 surrounding communities. The analyses required collection of detailed information on water agencies’ rate structures, revenues, budgets, scheduled capital improvement projects, and related service-area demographic characteristics for each agency in this very large sample. The analyses measured the cost to customers of purchasing monthly specified volumes of water from each agency along with the full cost-recovery of consuming the same water quantities in the absence of any agency funding other than from water sales. Our reports included detailed descriptions and a comparative analysis of the water rate structure, financial characteristics, and operating procedures of each purveyor, with econometric analyses of variations in costs among agencies. Our work provided a critical benchmark for Golden State Water Company’s water pricing policies and facilitates communication with rate-payers and the California Public Utilities Commission regarding the reasonableness of Company water rates. This state-wide study program yielded a comprehensive database on water pricing structures for public and private utilities of all sizes, with differing sources of raw water and varying water use efficiency objectives.

Municipal and Industrial Water Demand and Rate Analyses

We prepared an econometric analysis of municipal and industrial (M&I) water demand with forecasts of water use for the water system serving the communities of Calipatria and Niland in Imperial County, California. Driven by Environmental Protection Agency (EPA) water quality improvement requirements under the Safe Drinking Water Act, our client (Golden State Water Company) was obligated to develop plans for costly upgrades to the facilities treating raw water purchased from the Imperial Irrigation District for retail distribution to the customers in these communities. We estimated the short-term and long-term price sensitivity of local demand for water, using time series data on water sales as well as values developed for other areas in the arid southwestern United States. We then used this demand-curve structure to forecast community M&I water consumption. Our analysis formed the basis for the Company’s planning to set local rates, obtain an EPA grant to assist with facility costs, and implement treatment plant improvements in a manner that was economically viable for community residents.

Water-Related Economic Analyses

We successfully completed a broad-scoped water rate economic analysis for the U.S. Bureau of Reclamation, the Santa Barbara County Water Agency, and the Cachuma Project Authority which assessed the impacts of alternative patterns of future Cachuma Project water availability and costs. For several local entities (the cities of Santa Barbara and Carpinteria, as well as the Goleta Water District, Montecito Water District, and Santa Ynez River Conservation District) we estimated cost-recovery water rates based on multiple scenarios of water available for municipal and industrial (M&I) use, agricultural use, and in-stream (environmental) uses. Because most local entities had multiple water sources available, at varying raw water and treatment costs, we estimated a long-run water supply cost function for each agency and measured it against projected water demands. Our analysis, completed in 1995 at about the time the City adapted its current water rate structures, encompassed the local economic impacts of these alternative water sales and prices. This analysis also formed the basis of the assessment of growth inducement effects in the combined NEPA/CEQA Environmental Impact Statement/Report (EIS/EIR).

We prepared an economic analysis of residential and commercial development projections for the service areas of the Goleta Sanitary District and Goleta West Sanitary District in Santa Barbara County in support of the districts’ wastewater treatment capacity planning programs. Our analysis assessed the feasibility of the development projections given projected demand and market conditions. The report summarized projections for housing units, commercial and industrial space, and hotel rooms; compared projected development rates to recent building activity in the sanitary district areas; reviewed historic population growth and housing development; and assessed commercial and industrial development in relation to past and projected future job growth. Our firm performed this work as a subcontractor to Dudek & Associates, Inc. Our work provided the validation these agencies needed to assure their multi-million-dollar capacity plans were economically viable.

We analyzed groundwater use and management in Santa Barbara County to help develop planning guidelines affecting water and environmental agencies; local water purveyors; environmental, business, labor, and agricultural interest groups; and private individuals. Our study provided an overview of potential economic issues that could be expected to emerge if changes in groundwater use and management were instituted in the county. Agriculture is the leading user of groundwater in the county, though municipal and industrial users also are vitally dependent on groundwater supplies. Policies governing groundwater availability among competing uses over time have important implications for use of surface water and other water sources, choice of agricultural practices, costs of water to all users, and long-term sustainability of production in agriculture and other sectors. We identified the current status of water use and groundwater depletion in the county, including the dominant role of agriculture; examined the importance of agriculture in the county economy; summarized the basic policy approaches available to the county for groundwater management; and provided an initial evaluation of the principal socioeconomic implications of each type of approach. Our report in addition provided a computerized listing of abstracts, dissertations, and other economic literature from technical and academic databases and catalogs for further research by county staff.