Water Rates

By John M. "Terry" Mylne

How water rates are structured; and the best ways to control Western's costs and its water rates.

Issue Paper No. 1 Water Rates

Western Municipal Water District is a public agency. Public agencies do not profit from the sale of water—rather they endeavor to reliably recover the costs of providing water(and for some areas sewer) service to their customers. Some of these costs include: The cost of the water, the cost of the power to pump the water to higher elevations, the cost of the debt service on the capital cost of pipes, valves, pumps, etc., the engineering cost to make the infrastructure work properly in delivering the water and to facilitate interconnection with its customers, the cost of maintaining and operating the equipment to deliver the water, and the administrative costs to run the district.

For Retail service some of these costs are incurred in proportion to the amount of water delivered(including the cost of the water to Western, and the power to pump it); and the District has tried to include most of these variable costs in the water rate. Other costs such as the facility/equipment maintenance, and administrative costs are relatively fixed, are independent of the amount of water which is delivered; and the District has tried to include most of these costs in the ‘Monthly Service Charge'. Covering fixed expenses with fixed revenue and variable expenses with variable revenue makes sense to me; and has the desirable result of minimizing the fluctuations in water rates which might otherwise occur during periods of drought and low water use.

For Wholesale service(direct to other retail districts e.g. City of Corona, Elsinore Valley Municipal Water District, Rancho California Water District, El Sobrante) Western sells the water at cost plus a $3.00 per acre foot charge for all water used. This $3.00 fee is all that Western receives from selling this water at wholesale to Cities and water districts; this fee is less than one percent of the total wholesale price; and this fee has been constant for each of the past twenty years. To be sure the wholesale price has gone up; but only because the cost of the water to Western has gone up by the same amount.

For critics, it is easy to say that: ‘water rates are too high and we must cut the District's costs to the bone'. As a past Western Board member I have been very cost conscious; and indeed have helped to form a committee of the Board to investigate and review all of Western's ‘sources and uses' of funds to be sure that those customers who were benefiting from each class of water service were paying the correct, minimum, and fair cost. If elected I would seek to re-establish that committee to review and reduce costs; but the critics will have a difficult time explaining how even ‘cutting Western's costs to the bone' (to reduce the $3.00 fee) is going to materially affect Western's wholesale water rate.

I know about the cost of water; and I know that the best way to control water cost is for Western to seek alternate, high quality, and lower cost supplies from within the Western watershed and; by aggressive involvement in the Metropolitan rate refinement process to prevent further escalation. The best way to control Western's costs and its incremental add on to the water rate is to start with modification of the Board Vision and Strategy to Reorganize Western to behave more like a business.

For the ‘Critics' I say that it may be easy for them to say ‘cut costs to the bone' but it will be hard for them to suggest let alone do anything that materially affects the wholesale water rates which Western charges—I would be happy to hear from them regarding any concrete suggestions which they may wish to offer.

I know about water; I know where its costs are incurred; and I know how to control those costs and the water rate which Western's customers must pay. Please vote for education and experience--Vote for Terry Mylne on November 3rd.

rev.10-06-98