The San Diego County Water Authority Board of Directors approved a 9.5% wholesale water rates increase on Thursday. The bump goes into effect in 2024, which is when San Diegans could see changes in their water bills.
Citing "extraordinary inflationary pressures and depressed water sales," the board said the increase — the board decided between 8.4% and 9.5% increases and approved the latter — was a way to manage cost increases while still protecting ratepayers, ensuring water reliability and maintaining the authority's credit ratings.
Rate increases for residents and businesses will vary based on their retail water provider.
At its May 25 meeting, the board directed staff to prepare a package of rates and charges that would increase wholesale water costs for the region's retail water agencies by an average of 8.2% next year, which would not meet financial policies set by the board.
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According to a board statement, after reviewing additional information, the Water Authority's Finance Planning Work Group recommended another approach — a rate increase of 9.5% that would meet the board's financial policies.
"This is the most challenging budget cycle I've seen in more than three decades of public service leadership," said Water Authority General Manager Sandra L. Kerl. "The headwinds were strong from the start, and they only got stronger over the past three months, with unexpectedly large energy bills driving up costs and the persistence of highly unusual wet weather that has depressed water sales."
The new rate is below initial forecasts due to efforts by the board to reduce expenditures, including spending on capital projects, the statement reads.
The board previously announced a planned withdrawal of nearly $35 million from the rate stabilization fund by July 2024 to provide ratepayer relief, but which will also "bring the fund to its lowest level in more than a decade." The fund was created in 1990 to avoid rate spikes — particularly those driven by reduced water sales following abnormally wet weather or mandatory cutbacks.
"Decades of board decisions to ensure water security for our region, including during this most recent dry period, have come at a cost," said Kerl. "The value of water reliability for our region has never been higher, but at the same time we must pay the bills as they come due.
"Those costs have combined with significant negative forces that are out of our control -- specifically extreme inflation that is driving up the cost of everything, including energy, steel, chemicals and other materials," she said.
Kerl said the authority has taken budget- and rate-control measures for the past several years, leaving fewer options this year. Those actions have included front-loading savings on debt-refinancings.
According to the agency, while it sets rates annually to address changing conditions, the Water Authority's budgets span two fiscal years. The board also approve a $1.8 billion budget proposal for fiscal years 2024 and 2025, up 5% from the current budget "due to higher costs for water, treatment and infrastructure maintenance."
Around 90% of the Water Authority's recommended budget is for buying and treating and delivering water, combined with debt service and infrastructure projects to ensure water is available when and where it's needed.
