Change on Water Rate Structure Seen to ‘Encourage Conservation’ and ‘Allow PWP to Reach Goals’

Pasadena is expected to change how water bills are calculated, leading to higher bills for some customers. The new rate structure and rates to be determined soon will allow the utility to meet its revenue requirement.

An outside consultant firm, Vice Raftelis Financial Consultants, is now completing PWP’s cost of service analysis, known as COSA, which will determine if the current water rates are adequate to cover the costs of the PWP’s operation.

Currently, PWP’s pricing system is tiered by meter size. The structure charges heavy users more per gallon than light users — an approach designed to promote conservation. 

“This year’s cost of service analysis is a little different,” Jeremy Marquette from PWP said at the Municipal Services Committee (MSC) meeting on Tuesday. “We’re dealing with climate change, we’re dealing with encouraged conservation and we’re going to build a rate structure that will encourage conservation and still allow us to still collect our costs, expenses.” 

Marquette said in the process of developing a new rate structure, PWP will be bound by Proposition 218, which mandates that an agency cannot collect revenue beyond what is necessary to provide service. 

“We are not a profit center, we’re just trying to recover costs in a way that encourages conservation.” 

“We’ve had a rate structure for a while but we do believe that there are some opportunities to deploy a new rate structure that will allow us to meet our goals.” 

Marquette said PWP will come back to the Municipal Services Committee no later than September and present the proposed rate structure to be implemented in Pasadena, along with its financial impacts.

According to Steve Gagnon from Vice Raftelis Financial Consultants, PWP staff is evaluating each rate structure being used by other utilities in California including Uniform Rates, Tiered By Customer Class, Tiered by Customer Class and by Meter Size, and Budget-Based Rates.

Of all the options, PWP staff is eyeing Tiered by Customer Class and by Meter Size.

“It looks like Tiered by Customer Class and by Meter Size is shaping up well but staff is not done doing their evaluation,” said Gagnon. 

“A pro of this is it avoids complaints that only a single family is tiered because they are all tiered,” he added. 

Gagnon however said the system is more complex compared to others.

The Committee members requested PWP to present more information not only Tiered by Customer Class and by Meter Size but also on the Budget-Based Rates when it comes back to the committee following requests of members of the community who said this system is fair to smaller users. 

“We would like to see how Budget-Based Rates would play out in Pasadena,” said Vice Mayor Felicia Williams.

Williams also asked the PWP to report which cities use Budget-Based Rates and whether or not water conservation has improved after they have shifted to the system.

PWP is planning to implement the new rate design and rate adjustment in April 2024 following public hearings.