Helping PWD restructure water budget rates to meet financial goals

Palmdale Water District (PWD) is located in the southern Antelope Valley in Los Angeles County. Its service area includes the central and southern portions of the City of Palmdale, as well as adjacent unincorporated areas of the County encompassing approximately 187 square miles. The District serves approximately 115,000 people through 27,600 connections, providing potable water to single and multi-family residential, irrigation, commercial/industrial, fire service and other customer classes.

RDN completed a rate study for the District, which included a long-term financial plan, demand projections, a cost of service analysis, and rate setting with multiple rate alternatives. One of the rate study objectives was to reevaluate the District’s current water budget rate structure. Substantial changes were made to improve the District’s previous rate structures, increasing the accuracy of the District’s method to allocate water budgets to different customer classes. RDN completed extensive econometric analyses to supplement data provided by Eagle Aerial, an aerial imagery and data management company. RDN identified the District’s revenue shortfall and necessary rate adjustments for the five-year study period. We also assisted the District in creating a schedule for capital improvement projects and selecting appropriate funding sources. RDN designed defensible rates by creating a strong nexus between the actual costs and pricing of the rates.

We used innovative instruments such as our bill impact assessment tool and state water budget evaluation tool to ensure the District’s newly designed rates would satisfy Proposition 218 requirements. RDN also supported the District’s community outreach (customer workshops) and Proposition 218 preparations along with subconsultants Tom Ash and CV Strategies. RDN presented the results of the study at two board meetings as well as the Proposition 218 hearing. The proposed rates were passed with majority votes and successfully implemented in January 2020.

To help the District navigate forthcoming state efficiency regulations, RDN provided the District with web-based interactive tools that allow the District to adjust key parameters in the water budget model. As the state was still determining the parameters to allocate water budgets, these tools gave the District the necessary flexibility to reach the moving targets in this volatile regulatory landscape.