Understanding EBMUD's water rates

EBMUD's water - clean, reliable and great value

Water is the backbone of a thriving economy, environment and society. The East Bay Municipal Utility District, founded in 1923, provides water service to 1.4 million customers and wastewater service to 685,000 customers in Alameda and Contra Costa counties. The clean, reliable, great-tasting water that EBMUD supplies originates in the Sierra Nevada, about 90 miles away from our customers, and flows through more than 4,000 miles of distribution pipelines. Collecting, treating and delivering water to our customers 24 hours a day, seven days a week, year round, requires substantial investments in staffing, operations and equipment. Still, most EBMUD customers pay about a penny a gallon for the water that flows from their tap every day, or about $2 a day for all the water required for drinking, cooking, bathing, washing dishes and clothes and watering outdoor spaces. Replacing those gallons of tap water with bottled water would cost up to $200 a day or more.

EBMUD is a public, not-for-profit water agency. In formulating our water rates, EBMUD performs a meticulous analysis of our costs, since we are required to charge customers only the costs of operating our system. EBMUD’s analysis is also evaluated by an independent third party.

EBMUD's water rates

Part of our mission is to provide fair and reasonable rates for EBMUD customers. Rates are set to recover costs. EBMUD rates are in full compliance with the law, including Proposition 218 requirements for notices and public hearings on proposed rate increases (Proposition 218 notice available on Budget and Rates page).

More than 80 percent of EBMUD’s revenues come directly from customers via water rates. Water rates include a fixed monthly service charge (meter charge) and a water flow charge that varies based on the amount of water used.

The fixed monthly service charge makes up about one-third of revenues and recovers ongoing costs for the service connection and water meter, as well as the cost for customer and billing services. The water flow charge makes up approximately two-thirds of water revenue and pays for the operating and capital costs for water supply, treatment, storage and delivery. About 40 percent of customers also pay an elevation surcharge to cover the cost of the additional pumping required to deliver water to higher elevations.

The building blocks for the water flow charges - base water use and peak water use

Water use by EBMUD customers changes throughout the year in response to many factors (e.g., precipitation, drought or economic conditions). In the winter, water use is typically lower due to colder, wetter weather (which means less or no outdoor watering) and higher in the summer months with warmer, drier weather.

For calculating flow charges, EBMUD looks at average daily water use over the course of an entire year. This is defined as the BASE water use. On the hottest summer days, water use increases significantly; this is referred to as the PEAK water use.

To maintain reliable year-round water service to our 1.4 million customers, EBMUD has built our water system to serve the PEAK water use during the summer. EBMUD’s PEAK water use has typically been between 40 and 60 percent higher than BASE water use. Because PEAK water use is so much higher than BASE water use, there is a significant difference in the cost to build, operate and maintain a water system for the BASE water use as compared to the PEAK water use. For instance, some facilities are brought online only during hot, summer months when demand is highest.

EBMUD analyzes differences in costs to meet the BASE and PEAK water use scenarios as part of its cost-of-service (COS) study. The assignments of costs from the COS study are used to establish the water rates. This approach is consistent with the American Water Works Association’s (AWWA) Principles of Water Rates, Fees and Charges, and with best practices used by water agencies throughout the state (see Water and Wastewater Pricing for an US EPA overview of water and wastewater pricing which references the AWWA approach). The COS study, which is conducted by an independent, outside firm, looks at each EBMUD water facility to determine how much of the facility is used to serve the BASE water use and how much is used to serve the PEAK water use. EBMUD’s current COS study shows that approximately 60 percent of the water system costs are attributed to BASE water use, and about 40 percent of costs are attributed to PEAK water use.

To equitably recover our costs from the customers who generate them, the COS study analyzes overall water use patterns and identifies the BASE water use and PEAK water use for the following three customer classes: single-family residential, multi-family residential, and all other (includes non-residential and industrial). The following table shows the percentages of the BASE and PEAK water use for each customer class from the most recent COS study. The water flow charge to each customer class is derived using this water use data to reflect their proportionate share of the BASE and PEAK costs for the water system.

CUSTOMER   CLASS

% of   Overall BASE Water Use Attributed to Customer   Class

% of   Overall PEAK Water Use Attributed to Customer   Class

Single-family   residential

51

53

Multi-family   residential

18

14

Other

31

33

Total

100%

100%

Water flow charges: tiered and uniform

EBMUD bills water flow charges based on the amount of water used by the customer each billing period. The water industry measures water use in units of one hundred cubic feet, which is called centum cubic feet, or CCF (1 CCF = 748 gallons).

Depending on the customer class, a tiered rate structure or a uniform rate structure will apply to the flow charge. A tiered rate applies to our single-family residential customers, and a uniform rate structure applies to all other customer classes. Under the tiered rate structure, the price per unit of water depends on the amount of water used, and whether it triggers the price that applies to Tier 1, 2, or 3. Higher amounts of water usage trigger the higher tiers, and customers are charged a higher per unit price. This allows EBMUD to recover the higher costs to provide PEAK water use, and has the added benefit of providing customers an incentive to conserve water. For single-family residential customers, water use up to 7 CCF per month is billed at Tier 1 of the tiered rate structure. Tier 1 represents the average indoor water year-round usage for single-family residential customers. While the indoor water use for individual single-family residential customers can vary widely throughout the service area, the average indoor use across the EBMUD service area is about 172 gallons per day based on winter water use when there is minimal outdoor irrigation. Tier 1 has the lowest per unit price because this daily water use is generally constant year-round and does not significantly contribute to the need for the more expensive PEAK capacity in the water system.

Water use beyond 7 CCF is billed at the higher Tiers 2 and 3 rates, which recover the costs attributable to PEAK water use patterns of the single-family residential customer class. Tiers 2 and 3 are structured to recover a higher amount of PEAK water use costs from the higher water users.

For all customer classes other than single-family residential, EBMUD uses a uniform rate structure where the same price is charged for every unit of water regardless of the volume of usage. These uniform rates combine the costs for BASE water use and PEAK water use for the non-single-family residential customer classes, which results in water flow charges higher than the single-family residential Tier 1 and Tier 2 rates. It is not possible to design a fixed structure of tiered water rates that would apply to these customers because of the huge variation of BASE and PEAK water use patterns among these customers, which can range from large refineries to small restaurants.

Other water rate structures

Before water meters were common, single-family residential customers were billed a flat monthly or bimonthly charge regardless of the amount of water they used; this rate structure is still used in areas of the country where there is not a concern about limited water supplies. To encourage conservation and water awareness, California legislation requires urban water utilities to install water meters for all water connections and to charge all customers based on the volume of water delivered by 2025. Some water utilities do not charge a fixed monthly service charge and raise 100 percent of their water revenues from the variable water flow charge based on use. Other rate structures include seasonal rates, which results in higher rates charged during the PEAK water use season to recover the additional cost to provide for PEAK water use. With the use of additional customer data and advanced billing systems, some water utilities have implemented custom rate structures for individual customers within a customer class. These billing systems can be used to directly bill for a customer’s BASE and PEAK water use, or charge customers based on their individual water use patterns. While EBMUD does not currently have the systems required for customized rate structures, such structures could be considered in the future. To implement this type of rate structure, EBMUD would need to conduct a new COS study to establish the basis for the new water rates, and develop and implement a new billing system.

Rate-setting process

EBMUD adopts new water service charges, flow charges and elevation surcharges, which are governed by Proposition 218, on a two-year cycle, with new rates taking effect at the start of its fiscal year on July 1st. In developing the proposed rate changes, EBMUD holds a series of Board rate and budget workshops that are open to the public and noticed in advance on the EBMUD website. These rate and budget workshops typically begin in January and conclude in May before the formal public hearing in June. EBMUD has also held regular media briefings and at least one evening public meeting in recent years. The public is encouraged to attend and provide comments at these Board workshops and public meetings. When significant changes to rates are being considered, the COS study generally needs to be updated, and it may be necessary to hold additional Board workshops. These COS study Board workshops are also open to the public and noticed in advance on the EBMUD website. Members of the public interested in EBMUD’s water rates can check the Board agenda and materials posted on the EBMUD website to monitor Board discussion of proposed water rates (see link to Board meetings).

Before adopting proposed changes to the charges collected on the water bill, the EBMUD Board holds a public hearing, typically in June, to hear all­­­ oral comments and consider all formal written protests to the proposed rate changes. For water charges governed by Proposition 218, a notice of the public hearing and proposed rate changes is sent weeks in advance of the public hearing to all parcel owners and tenants who are directly responsible for payment of the water charges. If written protests against the proposed rate changes are not presented by the majority of property owners or tenants directly responsible for the charges, the EBMUD Board is authorized to adopt the rate changes (Proposition 218 notice available on Budget and Rates page).

Update - January 2020