Water Rate Study - Frequently Asked Questions
1. How do I calculate my water bill with the proposed rate adjustments?
2. What were the changes to the water rate structure?
3. What is the increase in revenue from the rate increases?
4. Why do my water rates need to increase?
5. Who helped the City determine the proposed rates?
6. What will be included in my water charges?
7. What projects will these rate increases fund?
8. Will the pipe replacement program result in more streets being repaired (Citywide)?
9. Why is so much more of my water bill tied to my meter size instead of how much water I'm consuming?
10. Why do I have to pay a fixed service fee that benefits other people if I consume less water?
11. What is Proposition 218?
12. Why didn't the rate increases from the previous study result in more pipe replacement?
13. What happens if we decide to delay the rate increase or reduce the rate increase?
14. What processes are in place to ensure that the City will complete the expected pipe replacement and infrastructure projects with these new rate increases?
15. Has the City pursued state or federal funding to support the infrastructure improvements instead of increasing rates?

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1. How do I calculate my water bill with the proposed rate adjustments?

Your water bill is a combination of a fixed meter charge and a water usage charge.

● The fixed meter charge is a monthly charge based on your water meter size.
● The water usage charge is a variable charge based on how much water you consume during the billing period.

Your meter size and your water consumption during the billing period are included on your bill as shown in the illustration below:

 

FIXED METER CHARGE (ALL CUSTOMERS)

The fixed meter charge is a monthly charge based on your water meter size. For customers who are on a bimonthly billing period, the fixed meter charge is charged twice per bill. Starting in July 1, 2020, all customers will be charged according to the following fixed meter charge chart:

Fixed Meter Charge (Starting July 1, 2020)
Meter Size	Monthly Charge	Bimonthly Rate
5/8"	$29.72	$59.44
1"	$47.08	$94.16
1 1/2"	$90.50	$181.00
2"	$142.59	$285.18
3"	$281.52	$563.04
4"	$437.81	$875.62
6"	$871.94	$1,743.88
8"	$1,392.90	$2,785.80
10"	$2,087.51	$4,175.02
12"	$2,934.08	$5,868.16

 

 

SINGLE FAMILY RESIDENTIAL CUSTOMERS USAGE CHARGE

Single Family Residential customers are on a 3-tiered rate structure. The following chart shows the tiered rates along with the corresponding amount of gallons (gal) allocated to each tier per month. For customers on bimonthly billing, the monthly allocations double.

Restructured Tiered Rates Single Family Residential (Starting July 1, 2020)
Tier	Rate (per TGAL) TGAL = 1,000 gal	Monthly Allocation (gal)	Bimonthly Allocation (gal)
Tier 1	$2.60	Up to 12,800	Up to 25,600
Tier 2	$5.30	12,800 to 33,000	25,600 to 66,000
Tier 3	$5.73	Over 33,000	Over 66,000

To calculate your water usage charge:

 

MULTI-FAMILY RESIDENTIAL CUSTOMERS USAGE CHARGE

Multi-family Residential customers are on a 3-tiered rate structure.  The following chart shows the tiered rates along with the corresponding amount of water (in gallons) allocated to each tier per dwelling unit per month.  The tier allocation is multiplied by the number of dwelling units.  For customers on bimonthly billing, the monthly allocations double.

Restructured Tiered Rates Multi-Family Residential (Starting July 1, 2020)
Tier	Rate (per TGAL) TGAL = 1,000 gal	Monthly Allocation (gal) per dwelling unit	Bimonthly Allocation (gal) per dwelling unit
Tier 1	$2.60	Up to 5,100	Up to 10,200
Tier 2	$5.30	5,100 to 11,800	10,200 to 23,600
Tier 3	$5.73	Over 11,800	Over 23,600

 

To calculate your water usage charge:

 

NON-RESIDENTIAL CUSTOMER USAGE CHARGE

All non-residential customers (i.e., Commercial, Industrial, Municipal, Agricultural, and Landscape) are subject to a uniform (i.e., non-tiered) rate structure:

Non-residential Customer Rate (Uniform Rate) (Starting July 1, 2020)

$3.30 per TGAL TGAL = 1,000 gal

 

To calculate your water usage charge:

2. What were the changes to the water rate structure?

The changes to the rate structure will placed more of the fixed operational costs on the meter charge. This shift enables the City to effectively operate, maintain, and improve the water system even during periods of extended drought. Changes were made to the pricing of the tiered water rates to ensure they directly reflect the cost of the City's (less expensive) groundwater and (more expensive) imported water.

3. What is the increase in revenue from the rate increases?

To ensure Fullerton's water utility system continues to provide a safe and reliable water supply, the overall proposed rates will be adjusted according to the following chart:

The actual rate increases will vary among different customers in Year 1 (effective July 1, 2019) due to the proposed rate structure adjustments. Some customers may see higher increases in their water bills than the average rate revenue adjustment for Year 1 while other customers' water bills may increase by less or even decrease. Starting in Year 2 (July 1, 2020), all components of the water bill (fixed meter charge and water usage rates) will be adjusted by the same uniform percentage as shown in the rate adjustment chart above.

4. Why do my water rates need to increase?

Residents, businesses, and visitors in Fullerton count on the City to deliver high-quality, reliable water for a variety of community needs including indoor use, outside irrigation, and fire protection. The water utility is self-funded, meaning its revenues must equal its expenditures. Water rates must cover the cost of service and maintain prudent reserves in case of an emergency such as an earthquake or wildfire that could damage major infrastructure.

The City has over 420 miles of pipe, 15 reservoirs, 10 wells, and 12 booster pump stations along with other water facilities (e.g., valves, fire hydrants, etc.). Most of these pipes and facilities have exceeded their recommended service life as seen by the approximate 100 water pipeline breaks per year and deteriorating facilities. With these rate adjustments, the City will be able to substantially increase the annual level of capital reinvestment needed to upgrade aging infrastructure, as well as provide a financially and operationally sustainable water utility now and for the future. Costs to provide water service are increasing as well. The cost to purchase imported water is increased by 3% in 2020 as rates go up, so must the City's cost.

5. Who helped the City determine the proposed rates?

A Water Rate Study Ad Hoc Committee—made up of volunteer Fullerton residents dedicating months of study—reviewed the water system and made recommendations related to water rates. This Committee provided input resulting in changes to the rate structure and also recommended an increase in rates to provide for operational costs and necessary capital improvements. These improvements include the replacement of pipelines and wells, ensuring a safe and reliable water supply.

6. What will be included in my water charges?

Your water charges consists of two components: a fixed charge and a usage charge.

Your fixed charge is tied to the size of your meter and is designed to fund many costs required to maintain, operate, and administer a water system. These fixed charges ensure the City has the necessary funding to deliver drinking water to more than 144,000 residents and businesses served. Providing this water service takes a team of highly-trained staff who operate more than 420 miles of pipe, maintain 67.5 million gallons of storage, and monitor over 100 compounds by taking 4,000 samples annually. The fixed charges cover those fixed operating costs. In addition to funding regular operations, these costs provide for the upgrade and replacement of the City's deteriorating water system infrastructure (i.e., pipes, pumps, reservoirs, and wells). Whether a customer uses water or not, these costs must still be paid.

Your usage charge will be directly tied to the cost of water and electricity required to pump water to your residence or business. The City relies on a combination of local groundwater and imported water to meet its water needs. The City works together with two wholesale water agencies—Orange County Water District (OCWD) who manage the groundwater basin and Metropolitan Water District of Southern California (MWD) who provide imported water. The City pays fees to these agencies for this water. The usage costs tie directly to the production of around six billion gallons of water annually from OCWD groundwater wells and importation of approximately two billion gallons of MWD water to serve our residents and businesses.

7. What projects will these rate increases fund?

The water rate increases will fund a pipe replacement program that will ultimately reach nine miles of pipe replacement every year starting in FY 2024 and thereafter (three miles in FY 2020, three miles in FY 2021, five miles in FY 2022, seven miles in FY 2023). The City operates and maintains over 420 miles of pipeline, most of which are over 50 years old and have reached the end of their useful service life. Due to their age, City pipes can experience breaks in excess of more than 100 per year.

The non-pipe replacement projects will include rehabilitating or replacing the City's water wells, reservoirs, booster pump stations, and associated equipment. These assets are vital for extracting drinking water and distributing water throughout the City. Like the City's pipes, the majority of these facilities are old (mostly installed in the 1950s and 1960s) and have reached the end of their useful service life.

The City has also prioritized other projects including isolation valve replacement, Supervisory Control and Data Acquisition (SCADA) system upgrades, adaptation and procurement of emergency generators, and preparation of a Water Master Plan.

Deteriorating Infrastructure (Left to Right): Laguna Booster Pump Station (BPS) Motor Control Center (MCC), Lower Acacia Reservoir before rehabilitation, and water pipe break



New Infrastructure (Left to Right): New Laguna BPS MCC, Lower Acacia Reservoir after rehabilitation, and new water pipes

8. Will the pipe replacement program result in more streets being repaired (Citywide)?

The Public Works Department tries to combine pipe replacement projects with street repair projects for cost savings purposes. If a water pipe is replaced independent from street reconstruction work, the City will replace the entire driving lane as opposed to only where the pipe trench runs. The City has found that reconstructing only the trench accelerates the degradation of the surrounding pavement and results in uneven pavement.

9. Why is so much more of my water bill tied to my meter size instead of how much water I'm consuming?

Prior to July 1, 2019 the fixed meter portion of your water bill covered 22% of Fullerton's fixed water system expenses. The costs to maintain, operate, and upgrade the City's water infrastructure amounts to around 41% of the total water system expenses. Aligning the fixed charge with these fixed expenses stabilizes the water utility's operating revenues, which had been volatile over the past few years due to the drought. A disproportionate amount of revenue recovery depended on water consumption revenues. Because of conservation mandates, these water consumption revenues fell far short of anticipated revenues and the City had to delay critical infrastructure upgrades.

10. Why do I have to pay a fixed service fee that benefits other people if I consume less water?

Think of the fixed service charge as a “readiness to serve" charge. The fixed charge is assessed based on the size of each account's meter since the system is sized in order to serve the collective water meters that it supports. Everyone pays into keeping the water system operating effectively and safely, which guarantees that water can be served to each person's property. Conversely, if a customer is charged less than it actually costs to serve that water, other customers would be subsidizing the high-conservation customer, which is a violation of Proposition 218.

11. What is Proposition 218?

California voters adopted Proposition 218 in November 1996 to amend the State Constitution to establish the process by which public agencies can raise taxes or service fees. It provides for greater public involvement in water rate-making. Among other things, Proposition 218 required the City to mail a notice of proposed water rates to every property owner and customer to hold a public hearing, allowing ratepayers the ability to submit written protests against the proposed rates. If a majority of parcel owners or customers had done so, the City could not impose the new rates.

12. Why didn't the rate increase from the previous study result in more pipe replacement?

The rates disproportionally relied too much upon how much water was consumed. The previous water rate study was based upon usage data from 2011 and 2012 when water usage was much higher than it is now. Since the previous water rate study, the City has experienced many challenges including the historic drought, which resulted in State-mandated conservation measures. Unfortunately, the hidden cost of the drought was the loss of revenue which resulted in less funding available for pipe replacement projects.

In addition, the City pays OCWD and MWD fees for pumping water from the groundwater basin and importing water, respectively. The last water rate study projected the cost of these water supplies and unfortunately, those projections fell short of the actual costs. The proposed pass-through formula will be dynamic and reflect the actual cost for pumped groundwater and imported water, helping to keep pipeline and facility replacement projects on track.

13. What happens if we decide to delay the rate increase or reduce the rate increase?

If the City were to delay a rate increase, the City will not be budgeting any new water infrastructure projects in the next year. In addition, some projects budgeted in previous years would be cancelled to ensure the City maintains some reserves for emergencies. If there is a reduction in the proposed rates, the City's ability to fund operational and capital costs would be negatively impacted.

14. What processes are in place to ensure that the City will complete the expected pipe replacement and infrastructure projects with these new rate increases?

Based on the input from the Water Rate Study Ad Hoc Committee, the City will be required to prepare a Capital Report every year summarizing the progress of the water capital program in relation to the rate increases. This annual Capital Report will assess the Water Funds' cash reserves to determine whether there are opportunities to delay, lessen, or avoid previously-approved rate increases. This report will be presented to the Infrastructure and Natural Resources Advisory Committee (INRAC) who will provide recommendations to Council.

15. Has the City pursued state or federal funding to support the infrastructure improvements instead of increasing rates?

The City continuously works to identify grant opportunities to help offset costs of critical infrastructure projects. The City is currently pursuing three grants: two for a new well and another to replace a critical emergency generator. It should be noted that if the City is successful in obtaining the grants, this revenue would be included in the Capital Report as a consideration for the need for future rate increases.

 

 

Revised:   7/1/2020