SDWD Water Rate Study 2021-07-30 Raftelis
Financial Plan, Cost of Service, and
Water & Recycled Water Rate Study
Final Report / July 30, 2021
San Dieguito Water
District
227 W. Trade Street, Suite 1400
Charlotte, NC 28202
www.raftelis.com
July 26, 2021
Mr. Isam Hireish
Interim General Manager
San Dieguito Water District
160 Calle Magdalena
Encinitas, CA 92024
Subject: Water and Recycled Water Financial Plan Study Report
Dear Mr. Hireish,
Raftelis is pleased to provide this 2022 Water and Recycled Water Rate Study Report (Report) for the San Dieguito
Water District (District). This Report includes an updated five-year financial plan for fiscal year (FY) 2022 to FY
2026. The District is setting water rates for FY 2022, FY 2023, and FY 2024.
The Study objectives include the following:
1. Update the District’s five-year financial plan to ensure financial sufficiency, meet operation and
maintenance (O&M) costs, and ensure funding to meet debt obligations and fund necessary capital
expenditures;
2. Conduct a current water cost-of-service that complies with Prop 218;
3. Calculate updated water and recycled water rates for FY 2022, FY 2023, and FY 2024;
4. Update drought rates to ensure collection of sufficient revenue during periods of reduced water demand
due to potential drought or other water shortage emergencies; and
5. Conduct a customer impact analysis for the proposed rates.
It has been a pleasure working with you, Mary Kazungu, Blair Knoll, and other District staff during this Study.
Sincerely,
Steve Gagnon, PE (AZ) Jonathan Jordan
Senior Manager Staff Consultant
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN STUDY REPORT
Table of Contents
1. EXECUTIVE SUMMARY .................................................................. 1
1.1. METHODOLOGY .................................................................................... 1
1.2. PROPOSED FINANCIAL PLAN AND REVENUE ADJUSTMENTS ....... 1
1.3. PROPOSED THREE-YEAR RATES ....................................................... 5
1.3.1. Fixed Potable Bi-Monthly Service Charges ......................................................5
1.3.2. Proposed Potable Commodity Rates ................................................................5
1.3.3. Proposed Recycled Water Rates and Charges .................................................6
1.3.4. Drought Rates .....................................................................................................7
1.3.5. Water Rate Survey ..............................................................................................8
2. INTRODUCTION .............................................................................. 9
2.1. STUDY BACKGROUND ......................................................................... 9
2.2. METHODOLOGY .................................................................................. 10
2.3. KEY STUDY ASSUMPTIONS ............................................................... 10
2.3.1. Account and Water Use Growth Assumptions ............................................... 11
3. LEGAL FRAMEWORK AND RATE SETTING METHODOLOGY 13
3.1. CALIFORNIA CONSTITUTION – ARTICLE XIII D, SECTION 6 (PROP
218) 13
3.2. CALIFORNIA CONSTITUTION – ARTICLE X, SECTION 2 ................. 13
4. FINANCIAL PLAN ......................................................................... 15
4.1. OPERATING AND MAINTENANCE EXPENSES ................................. 15
4.2. DEBT SERVICE .................................................................................... 16
4.3. CAPITAL IMPROVEMENT PROGRAM ................................................ 17
4.4. PROPOSED FINANCIAL PLAN AND REVENUE ADJUSTMENTS ..... 17
5. COST OF SERVICE ANALYSIS .................................................... 23
5.1. ALLOCATION TO COST COMPONENTS ............................................ 23
5.2. REVENUE REQUIREMENT DETERMINATION ................................... 27
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN AND RATE STUDY REPORT
5.3. PRELIMINARY ALLOCATION OF REVENUE REQUIREMENTS TO
COST COMPONENTS .................................................................................... 28
5.4. EQUIVALENT METERS ....................................................................... 29
5.5. ALLOCATION OF PRIVATE FIRE COSTS .......................................... 29
5.6. UNIT COST DERIVATION .................................................................... 31
5.7. FINAL ALLOCATION OF REVENUE REQUIREMENT TO COST
COMPONENTS ............................................................................................... 33
6. POTABLE WATER RATE DESIGN ............................................... 36
6.1. EXISTING RATE STRUCTURE AND RATES ...................................... 36
6.2. BI-MONTHLY WATER METER SERVICE CHARGE ............................ 37
6.3. PRIVATE FIRE ...................................................................................... 39
6.4. COMMODITY RATES ($/HCF) ............................................................. 40
6.4.1. Unit Cost Derivation .......................................................................................... 41
6.4.2. Delivery Unit Costs ........................................................................................... 45
6.4.3. Peaking Unit Costs ........................................................................................... 46
6.4.4. Conservation Unit Costs .................................................................................. 46
6.4.5. Revenue offset Unit Cost ................................................................................. 47
6.4.6. Final Rate Derivation ........................................................................................ 47
7. RECYCLED WATER RATE DESIGN ............................................ 49
7.1. EXISTING RATE STRUCTURE AND RATES ...................................... 49
7.2. RECYCLED WATER RATES ................................................................ 49
8. PROPOSED RATES ...................................................................... 51
8.1. PROPOSED THREE-YEAR RATES ..................................................... 51
8.1.1. Fixed potable Bi-Monthly Service Charges..................................................... 51
8.1.2. Proposed potable Commodity Rates .............................................................. 51
8.1.3. Proposed Recycled WAter Rates and Charges .............................................. 52
9. BILL IMPACTS .............................................................................. 54
9.1. CUSTOMER BILLS IMPACTS .............................................................. 54
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN STUDY REPORT
10. DROUGHT RATES .................................................................. 58
10.1. DROUGHT RATE BACKGROUND .................................................... 58
10.2. DERIVATIONS OF DROUGHT RATES .............................................. 59
10.2.1. Drought Rate Adoption ..................................................................................... 63
11. WATER RATE SURVEY .......................................................... 64
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN AND RATE STUDY REPORT
List of Tables
Table 1-1: Proposed Revenue Adjustments and Capital Accomplishment Rate ........................................ 2
Table 1-2: Proposed Financial Plan Cashflow ................................................................................................ 3
Table 1-3: Proposed Bi-Monthly Service Charges .......................................................................................... 5
Table 1-4: Proposed Fire Service Charges ...................................................................................................... 5
Table 1-5: Proposed Commodity Rates by Class/Tier ................................................................................... 6
Table 1-6: Proposed Recycled Water Rates .................................................................................................... 7
Table 1-7: Drought Rate Calculation ................................................................................................................ 7
Table 2-1: Cost Escalation Factors ................................................................................................................ 10
Table 2-2: Water Supply Escalation Factors ................................................................................................. 11
Table 2-3: Account Growth, Water Use, and Water Loss Assumptions .................................................... 11
Table 2-4: Projected Accounts by Meter Size ............................................................................................... 12
Table 2-5: Projected Water Use by Customer Class (HCF) .......................................................................... 12
Table 4-1: Projected O&M Expenses .............................................................................................................. 16
Table 4-2: Annual Debt Service ....................................................................................................................... 16
Table 4-3: Proposed Capital Improvement Plan ........................................................................................... 17
Table 4-4: Proposed Revenue Adjustments and Capital Accomplishment Rate ...................................... 17
Table 4-5: Proposed Financial Plan Cashflow .............................................................................................. 18
Table 5-1: System-Wide Peaking Factors ...................................................................................................... 23
Table 5-2: Allocation of O&M Expenses to Cost Causation Components ................................................. 25
Table 5-3: Allocation of Assets to Cost Causations Components ............................................................. 26
Table 5-4: Revenue Requirement Determination .......................................................................................... 27
Table 5-5: Allocation of Revenue Offsets to Cost Components ................................................................. 28
Table 5-6: Preliminary Allocation of Costs to Cost Components ............................................................... 28
Table 5-7: Water Equivalent Meters ................................................................................................................ 29
Table 5-8: Private Fire Connections ............................................................................................................... 30
Table 5-9: Public Fire Hydrants ....................................................................................................................... 30
Table 5-10: Allocation of Private Fire Costs .................................................................................................. 31
Table 5-11: Derivation of Cost Causation Components Units of Service .................................................. 32
Table 5-12: Calculation of Fire Service Capacity .......................................................................................... 33
Table 5-13: Final Cost of Service Allocation to Cost Components ............................................................ 35
Table 6-1: Current Potable Bi-Monthly Fixed Charges ................................................................................. 36
Table 6-2: Current Potable Commodity Rates ............................................................................................... 37
Table 6-3: Derivation of Bi-Monthly Fixed Water Meter Service Charge .................................................... 38
Table 6-4: Calculation of Bi-Monthly Fixed Water Meter Charge ................................................................ 38
Table 6-5: Calculation of Private Fire Charges ............................................................................................. 39
Table 6-6: Derivation of Private Fire Rates .................................................................................................... 40
Table 6-7: Calculation of Base Rate Unit Cost .............................................................................................. 41
Table 6-8: Annual Water Use, Water Purchased, and Total Costs by Source ........................................... 41
Table 6-9: Cost to Treat Surface Water .......................................................................................................... 42
Table 6-10: Estimated Imported Water Rate .................................................................................................. 42
Table 6-11: Supply Costs By Source .............................................................................................................. 43
Table 6-12: Total Cost of Water Produced ..................................................................................................... 43
Table 6-13: Customer Account Distribution .................................................................................................. 44
Table 6-14: Use By Source Distributed by Customer Accounts ................................................................. 44
Table 6-15: Calculation of Supply Costs by Class........................................................................................ 45
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN STUDY REPORT
Table 6-16: Calculation of Supply Costs by Residential Tier ...................................................................... 45
Table 6-17:Calculation of Delivery Unit Cost ................................................................................................ 45
Table 6-18: Calculation of Peaking Factor Unit Cost.................................................................................... 46
Table 6-19: Conservation Unit Cost ............................................................................................................... 47
Table 6-20: Derivation of the Revenue Offset ............................................................................................... 47
Table 6-21:Derivation of Rates by Tier and Class ......................................................................................... 48
Table 7-1: Current Recycled Water Rates ...................................................................................................... 49
Table 7-2: Proposed Monthly Recycled Water Fixed Service Charge ........................................................ 50
Table 7-3: Derivation of Recycled Water Commodity Rate.......................................................................... 50
Table 8-1: Proposed Potable Bi-Monthly Service Charges .......................................................................... 51
Table 8-2: Proposed Fire Service Charges .................................................................................................... 51
Table 8-3: Proposed Commodity Rates by Class/Tier ................................................................................. 52
Table 8-4: Proposed Recycled Water Rates .................................................................................................. 53
Table 9-1: Bill Impacts for Single Family Residence .................................................................................... 54
Table 9-2: Bill Impacts for Single Family - Agricultural ............................................................................... 54
Table 9-3: Bill Impacts for Single Family - Commercial ............................................................................... 55
Table 9-4: Bill Impacts for Multi-Family Residence ...................................................................................... 55
Table 9-5: Bill Impacts for Multi-Family - Agricultural .................................................................................. 55
Table 9-6: Bill Impacts for Multi-Family - Commercial ................................................................................. 56
Table 9-7: Bill Impacts for Agricultural/Commercial .................................................................................... 56
Table 9-8: Bill Impacts for Institutional .......................................................................................................... 56
Table 9-9: Bill Impacts for Landscape ............................................................................................................ 57
Table 9-10: Bill Impacts for Construction ...................................................................................................... 57
Table 10-1: Estimated Cutback in Use by Percentage Reduction .............................................................. 60
Table 10-2: Calculation of Lost Revenue ....................................................................................................... 61
Table 10-3: Drought Savings ........................................................................................................................... 62
Table 10-4: FY 2022 of Drought Rate Calculation ......................................................................................... 63
List of Figures
Figure 1-1: Proposed Financial Plan ................................................................................................................ 4
Figure 1-2: Monthly Bill Comparisons for Neighboring Agencies ................................................................ 8
Figure 4-1: Proposed Financial Plan .............................................................................................................. 19
Figure 4-2: Projected Debt Coverage Ratios and Revenue Adjustments .................................................. 20
Figure 4-3: Proposed Capital Financing Plan ............................................................................................... 21
Figure 4-4: Projected Fund Ending Balances ............................................................................................... 22
Figure 11-1: Monthly Bill Comparisons for Neighboring Agencies ............................................................ 64
SAN DIEGUITO WATER DISTRICT WATER FINANCIAL PLAN AND RATE STUDY REPORT
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WATER FINANCIAL PLAN AND RATE STUDY REPORT 1
1. Executive Summary
The District strives to conduct water rate studies every two or three years because its water purchase costs can vary
significantly from year to year based on local water availability. The District’s local surface water is more economical
than purchased imported water from the SDCWA. Water from Lake Hodges Dam is the least expensive District
water source1. Currently, Lake Hodges is operating at reduced capacity under restrictions imposed by the California
Department of Water Resources - Division of Safety of Dams. The District, Santa Fe Irrigation District, and the City
of San Diego are preparing to participate in a large-scale Capital Project to conduct short and long-term repairs to
the Lake Hodges dam. This capital project will be jointly funded and a primary driver of District capital project costs
in future years.
The District conducted this water rate study to ensure that water rates and charges are sufficient to meet enterprise
revenue requirements. Additionally, the District would like to minimize rate increas es and large fluctuations to
mitigate potential impacts on the ratepayers after the COVID -19 pandemic that began in spring 2020. The last Study
(which the Board approved) recommended revenue increases of 6.5% on May 1, 2019 and May 1, 2020.
In the Fall of 2020, the San Dieguito Water District engaged Raftelis to conduct a Water Rate Study (Study)
consisting of a financial plan update, cost of service, and three years of rate adjustments for fiscal year (FY) 2022
through FY 2024. This Report presents the financial plan, Cost of Service, and the resulting rates for implementation
on January 1, 2022, January 1, 2023, and January 1, 2024.
1.1. Methodology
Raftelis and the District developed rates using Cost of Service (COS) principles set forth by the American Wat er
Works Association M1 Manual titled Principles of Water Rates, Fees and Charges (AWWA M1 Manual). COS principles
endeavor to distribute costs to customer classes in proportion to the way each class uses the water system.
Performing a COS study provides the rate basis to meet Proposition 218 requirements – that rates must be based on
costs. It is common to set rates for several years before revisiting the COS to minimize customer rate and bill
fluctuations. This Study uses the AWWA Base-Extra Capacity Method to distribute costs to customer classes and
tiers. This method separates costs into four main cost causation components: base costs, extra capacity costs,
customer costs, and fire protection costs. Base costs are associated with meeting average daily demand needs and
include operations and maintenance costs and capital costs designed to meet average load conditions. Extra capacity
costs are costs (both operating and capital costs) associated with meeting peak demand. Cus tomer costs are costs
associated with serving customers, such as meter reading, billing and customer service, etc. Direct fire protection
costs are related solely to the fire protection function, such as fire hydrants, fire connections, and related mains a nd
valves.
1.2. Proposed Financial Plan and Revenue Adjustments
The financial planning model enables the District to set rates and charges to generate enough water revenue to meet
the District’s short-term and long-term obligations and avoid significant rate fluctuations. It shows the revenues that
will maintain appropriate reserves and provide adequate debt service coverage while maintaining a sensitivity to
ratepayers rate increases.
1 Lake Hodges water is referred to as local raw water in this report.
2 SAN DIEGUITO WATER DISTRICT
Table 1-1 shows the proposed revenue adjustments and CIP accomplishment rate selected by the Board of Directors
at the June 16, 2021 Board Meeting. The proposed financial plan implements a gradual increase of revenue
adjustments on January 1 for each year. To enable these revenue adjustments, the Capital Accomplishment
decreased in FY 2023-2024. This proposed scenario allows the District to maintain reserves and mitigate impacts
that ratepayers see to their bill directly. Revenue adjustments are shown outside the rate-setting period (FY 2025 &
FY 2026) for planning purposes only and are subject to the District Board’s approval in future years. The blue box
shows the revenue adjustments that the District will implement for the next three years.
Table 1-1: Proposed Revenue Adjustments and Capital Accomplishment Rate
Table 1-2 shows the proposed financial plan incorporating the proposed revenue adjustments and CIP
accomplishment rate. Line 1 shows revenue from current rates, assuming no increase in rates. Rate revenue from
current rates includes water, recycled water, and private fire customers and consumption, where applicable. Line 2
shows the additional revenue received from the revenue adjustments proposed in Table 1-1. Lines 3 - 6 shows non-
rate revenues. Interest revenues (Line 6) decrease in FY 2024 due to declining reserve balances caused by the negative
net cash flow (Line 21). Line 7 shows all projected revenues, including rate revenue, non-rate revenue, and interest
revenue. Lines 10 – 15 summarizes the O&M expense projections. Line 16 shows the existing debt service. Line 18
shows the CIP Expenditures adjusted for the reduced accomplishment proposed in Table 1-1. Total expenses,
including O&M, debt service, and rate-funded capital, are shown in Line 19. Line 21 shows a negative net cash flow
FY 2021 through FY 2023, largely due to the planned expenditures in capital facilities during those years. The debt
coverage ratio is projected to exceed the target debt coverage ratio throughout the study period. The proposed
financial plan ensures financial sufficiency and solvency for the District to meet projected expenditur es and financial
obligations, including debt service, debt coverage, and most reserve targets while funding CIP projects at a reduced
capacity.
Fiscal Year Proposed Revenue
Adjustments
Proposed CIP
Accomplishment
2022 5.5%100%
2023 6.0%75%
2024 6.5%75%
2025 5.0%75%
2026 5.0%75%
WATER FINANCIAL PLAN AND RATE STUDY REPORT 3
Table 1-2: Proposed Financial Plan Cashflow
Figure 1-1 graphically illustrates the operating Financial Plan – it compares existing (current) and proposed revenues
with projected expenses. The stacked bars show expenses, including O&M expenses, debt service, and rate-funded
CIP. Total revenues at existing and proposed rates are shown by horizontal light blue and dark blue lines . Current
revenue from existing rates, in light blue, does not meet future total expenses and shows the need for revenue
adjustments.
Line
No. Cash Flow FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 Revenue from Rates $16,191,174 $16,591,869 $16,714,270 $16,837,854 $16,962,635 $17,088,623
2 Additional Revenue from Revenue Adjustments $0 $456,276 $1,448,291 $2,603,886 $3,744,743 $4,815,616
3 Misc Operating Revenue $497,624 $505,517 $513,612 $521,914 $530,430 $539,165
4 Property Taxes $1,081,600 $1,081,600 $1,081,600 $1,081,600 $1,081,600 $1,081,600
5 Capital Revenue $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
6 Interest Revenue (Pooled Investment Earnings)$293,201 $206,294 $190,034 $187,119 $196,134 $218,394
7 Total Revenue $18,163,599 $18,941,557 $20,047,807 $21,332,373 $22,615,542 $23,843,398
8
9 Expenses
10 Administration $2,649,493 $2,703,241 $2,758,657 $2,815,796 $2,874,712 $2,935,461
11 Customer Service $898,472 $925,651 $953,664 $982,535 $1,012,293 $1,042,963
12 Water Purchases and Treatment $9,173,392 $8,417,298 $8,868,243 $9,159,364 $9,605,966 $10,077,456
13 Recycled Water Program $876,339 $810,785 $842,126 $875,809 $910,857 $947,328
14 Field Operations $2,341,895 $2,415,798 $2,492,076 $2,570,809 $2,652,076 $2,735,962
15 Planning and Engineering $530,613 $547,138 $564,186 $581,775 $599,922 $618,646
16 Existing Debt Service $1,401,766 $1,402,497 $1,405,744 $1,406,016 $633,950 $0
17 Proposed Debt Service $0 $0 $0 $0 $0 $0
18 Rate Funded CIP $3,399,527 $2,966,400 $2,558,095 $2,839,724 $3,515,808 $4,047,316
19 Total - Expenses $21,271,497 $20,188,807 $20,442,790 $21,231,828 $21,805,585 $22,405,131
20
21 Net Cash Flow -$3,107,897 -$1,247,250 -$394,983 $100,545 $809,957 $1,438,267
22 Debt Service Coverage 121%223%254%309%782%
Target Coverage 115%115%115%115%115%115%
4 SAN DIEGUITO WATER DISTRICT
Figure 1-1: Proposed Financial Plan
WATER FINANCIAL PLAN AND RATE STUDY REPORT 5
1.3. Proposed Three-Year Rates
1.3.1. FIXED POTABLE BI-MONTHLY SERVICE CHARGES
Table 1-3 shows the proposed bi-monthly service charge. Table 1-4 shows the proposed fire service charges. FY 2022
charges shown incorporate the revenue adjustments shown in Table 1-1. However, the charges for FY 2022 are set
using the cost of service analysis and do not equate to increasing the current rates by the revenue adjustment. The
cost of service analysis is detailed in Section 5 and Section 6. Charges for FY 2023 and FY 2024 can be calculated
by increasing FY 2022 rates by the proposed revenue adjustments. The proposed fire service charges apply to all
customers with private fire service connections. The rates for the current and proposed bi -monthly service charges
and fire service charges are calculated based on the meter size and diam eter of the fire line serving a property,
respectively. The proposed rates are rounded to the nearest cent.
Table 1-3: Proposed Bi-Monthly Service Charges
Table 1-4: Proposed Fire Service Charges
1.3.2. PROPOSED POTABLE COMMODITY RATES
Table 1-5 shows commodity rates for the next three years. FY 2022 charges shown incorporate the revenue
adjustments shown in Table 1-1. However, the rates for FY 2022 are set using the cost of service analysis and do not
equate to increasing the current rates by the revenue adjustment. The cost of service analysis is detailed in Section 5
and Section 6. Charges for FY 2023 and FY 2024 can be calculated by increasing FY 2022 rates by the proposed
revenue adjustments. Commodity rates are charged for each unit (HCF) of water. All rates are rounded to the cent.
FY 2021 FY 2022 FY 2023 FY 2024
Meter Size Current Proposed Proposed Proposed
5/8"$45.16 $46.75 $49.56 $52.78
3/4"$45.16 $46.75 $49.56 $52.78
1"$66.50 $69.15 $73.30 $78.06
1.5"$119.37 $124.65 $132.13 $140.72
2"$183.06 $191.52 $203.01 $216.21
3"$331.78 $347.66 $368.52 $392.47
4"$544.61 $570.67 $604.91 $644.23
6"$1,074.78 $1,127.69 $1,195.35 $1,273.05
8"$1,711.73 $1,796.38 $1,904.16 $2,027.93
FY 2021 FY 2022 FY 2023 FY 2024
Meter Size/Line Diameter Current Proposed Proposed Proposed
1"$9.61 $9.81 $10.40 $11.08
1.5"$10.83 $8.74 $9.26 $9.86
2"$18.88 $15.15 $16.06 $17.10
3"$47.77 $38.15 $40.44 $43.07
4"$97.59 $77.81 $82.48 $87.84
6"$276.40 $220.17 $233.38 $248.55
8"$584.82 $465.72 $493.66 $525.75
6 SAN DIEGUITO WATER DISTRICT
Table 1-5: Proposed Commodity Rates by Class/Tier
1.3.3. PROPOSED RECYCLED WATER RATES AND CHARGES
Table 1-6 shows recycled water charges rates for the next three years. Recycled water customers are billed monthly.
The fixed charge is set to be half the potable bi-monthly fixed charge and is based on the meter size serving the
customer. The bottom half of the table shows the commodity rate per HCF. All rates are rounded to the cent.
FY 2021 FY 2022 FY 2023 FY 2024
Class/Tier Tier
Breakpoint Current Proposed Proposed Proposed
Single Family Residence
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $7.12 $7.86 $8.33 $8.87
Single Family - Agriculture
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $6.25 $6.95 $7.37 $7.85
Single Family - Commercial
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $6.25 $6.95 $7.37 $7.85
Multi-family
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $7.12 $7.86 $8.33 $8.87
Multi-family - Agriculture
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $6.25 $6.95 $7.37 $7.85
Multi-family - Commercial
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $6.25 $6.95 $7.37 $7.85
Commercial/AG Uniform $5.42 $5.61 $5.95 $6.34
Institutional Uniform $5.93 $6.19 $6.56 $6.99
Landscaping Uniform $6.25 $6.49 $6.88 $7.33
Construction Uniform $6.36 $6.62 $7.02 $7.48
WATER FINANCIAL PLAN AND RATE STUDY REPORT 7
Table 1-6: Proposed Recycled Water Rates
1.3.4. DROUGHT RATES
Drought rates were updated using the existing methodology and are assessed per unit (HCF) of water. The percent
reduction in water demand during each water shortage emergency stage is defined in the District ’s Water Shortage
Contingency Plan, approved by the Board as a part of the 2020 Urban Water Management Plan and Municipal
Code.
Table 1-7 shows the derivation of the proposed drought rates. Net revenue loss (Line 3) in each stage is determined
by subtracting the projected water purchase cost savings from the projected lost reven ue. The percentage increase
required to collect lost revenues is determined by dividing the net revenue loss at each stage by the corresponding
projected water sales in HCF. Drought rates recover the anticipated reduction in net revenues during each water
shortage emergency stage by applying the percentage increase (Line 6) to commodity rates to recoup the lost revenue.
The percentage increase needed for each drought stage is calculated by dividing the net lost revenue (Line 3) by the
expected drought revenue (Line 4). This percentage increase is applied to the proposed commodity (Table 1-5) rates
to yield the drought rates.
Table 1-7: Drought Rate Calculation
FY 2021 FY 2022 FY 2023 FY 2024
Current Proposed Proposed Proposed
Fixed Meter Charges
Meter Size
5/8"$22.58 $23.38 $24.78 $26.39
3/4"$22.58 $23.38 $24.78 $26.39
1"$33.25 $34.58 $36.65 $39.03
1.5"$59.69 $62.33 $66.07 $70.36
2"$91.53 $95.76 $101.51 $108.11
3"$165.89 $173.83 $184.26 $196.24
4"$272.31 $285.34 $302.46 $322.12
6"$537.39 $563.85 $597.68 $636.53
Commodity Rates ($/HCF)
Customer Class
Agriculture $4.34 $5.39 $5.71 $6.08
Commercial $4.34 $5.39 $5.71 $6.08
Public $4.74 $5.39 $5.71 $6.08
Government $4.74 $5.39 $5.71 $6.08
Landscaping $5.00 $5.39 $5.71 $6.08
Construction $5.09 $5.39 $5.71 $6.08
Line
No.
1 Estimated Lost Revenue $1,577,371 $3,133,122 $4,711,875 $6,070,090 $7,228,384 $8,502,732
2 Estimated Drought Savings $717,749 $1,428,820 $2,133,284 $2,847,791 $3,595,624 $4,307,018
3 Estimated Lost Revenue After Savings $859,622 $1,704,302 $2,578,591 $3,222,299 $3,632,760 $4,195,714
4 Expected Revenue $10,609,938 $9,054,186 $7,475,434 $6,117,219 $4,958,924 $3,684,577
5 Drought Revenue Requirement $11,469,560 $10,758,489 $10,054,025 $9,339,518 $8,591,684 $7,880,291
6 % Increase 8%19%34%53%73%114%
Declared Water Supply
Shortage Response 4 5123 6
Up to 60%Up to 10%Up to 20%Up to 30%Up to 40%Up to 50%
8 SAN DIEGUITO WATER DISTRICT
1.3.4.1. Drought Rate Adoption
The Board would adopt the drought rates separately from any other type of rate increase. For the duration of the
rate proposal period (3 years), the Board would have the ability to adopt drought rates by increasing the then-
current commodity rate without having to re-issue the Proposition 218 notice.
1.3.5. WATER RATE SURVEY
Raftelis conducted a rate survey to benchmark current and proposed Water rates against eight neighboring water
providers. While a useful benchmark, it is worth noting that such comparisons only paint a partial picture since many
factors, such as water sources, age and replacement of infrastructure, service area characteristics, revenue sources,
and other local conditions, affect the total cost of providing water services.
Figure 1-2 shows a monthly2 water bill comparison for the current (2021) and proposed (2022) rates against eight
neighboring agencies. The survey assumes a single-family residential customer using 12 HCF of water per month,
with a 3/4” metered connection. This survey was conducted in March 2021 and should only be used as a reference
point or snapshot in time.
Figure 1-2: Monthly Bill Comparisons for Neighboring Agencies
2 Agencies with a bi-monthly billing cycle are adjusted to a monthly billing cycle by dividing fixed charges and tier
widths in half.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 9
2. Introduction
2.1. Study Background
The San Dieguito Water District (District) provides potable water to Leucadia, Old Encinitas, Cardiff, and portions
of New Encinitas. The Olivenhain Municipal Water District serves the remainder of the City. The San Dieguito
Water District is a subsidiary district of the City of Encinitas. The City Council serves as the Board of Directors of
the District. The District operates and maintains 175 miles of pipelines, the 7.5 million-gallon (MG) Encinitas Ranch
reservoir, the 2.5 MG Balour Reservoir, 19 pressure reducing stations, 1 pump station, and 11,785 water meters. In
addition, the District also jointly owns, with the Santa Fe Irrigation District, the 40 MGD Badger Filtration Plant, a
13 MG clear well, a hydroelectric plant, the San Dieguito Pump Station, the 850 AF San Dieguito Reservoir, and 14
miles of transmission mains.
The District receives local water from Lake Hodges and imported raw water from the San Diego County Water
Authority (SDCWA) for potable water. Both sources are treated at the R.E. Badg er Filtration Plant located in
Rancho Santa Fe. The District and Santa Fe Irrigation District jointly own the treatment facility. Treated water from
the San Diego County Water Authority can also be delivered directly to the District. The amount of water av ailable
from Lake Hodges varies from year to year; in FY 2022, the District projects to use 2,135 acre-feet (AF) of local
water from Lake Hodges and approximately 3,624 AF of imported water from SDCWA. The District also sells
recycled water received from the San Elijo Joint Powers Authority (SEJPA). The District’s current conservation
objectives are driven by limited water resources, regional drought conditions, rapidly increasing costs of imported
water, and the volatility of local water supply.
The District strives to conduct water rate studies every two or three years because its water purchase costs can vary
significantly from year to year based on local water availability. The District’s local surface water is more economical
than purchased imported water from the SDCWA. Water from Lake Hodges Dam is the least expensive District
water source3. Currently, Lake Hodges is operating at reduced capacity under restrictions imposed by the California
Department of Water Resources - Division of Safety of Dams. The District, Santa Fe Irrigation District, and the City
of San Diego are preparing to participate in a large-scale Capital Project to conduct short and long-term repairs to
the Lake Hodges dam. This capital project will be jointly funded and a primary driver of District capital project costs
in future years.
The District conducted this water rate study to ensure that water rates and charges are sufficient to meet enterprise
revenue requirements. Additionally, the District would like to minimize rate increases and large fluctuations to
mitigate potential impacts on the ratepayers after the COVID-19 pandemic that began in spring 2020. The last Study
(which the Board approved) recommended revenue increases of 6.5% on May 1, 2019 and May 1, 2020.
In the Fall of 2020, the San Dieguito Water District engaged Raftelis to conduct a Water Rate Study (Study)
consisting of a financial plan update, cost of service , and three years of rate adjustments for fiscal year4 (FY) 2022
through FY 2024. This Report presents the financial plan, Cost of Service, and the resulting rates for implementation
on January 1, 2022, January 1, 2023, and January 1, 2024.
3 Lake Hodges water is referred to as local raw water in this report.
4 Note, this report will refer to fiscal years as those ending June 30th of the selected year.
10 SAN DIEGUITO WATER DISTRICT
2.2. Methodology
Raftelis and the District developed rates using Cost of Service (COS) principles set forth by the American Water
Works Association M1 Manual titled Principles of Water Rates, Fees and Charges (AWWA M1 Manual). COS principles
endeavor to distribute costs to customer classes in proportion to the way each class uses the water system.
Performing a COS study provides the rate basis to meet Proposition 218 requirements – that rates must be based on
costs. It is common to set rates for several years before revisiting the COS to minimize customer rate and bill
fluctuations. This Study uses the AWWA Base-Extra Capacity Method to distribute costs to customer classes and
tiers. This method separates costs into four main cost causation components: base costs, extra capacity costs,
customer costs, and fire protection costs. Base costs are associated with meeting average daily demand needs and
include operations and maintenance costs and capital costs designed to meet average load conditions. Extra capacity
costs are costs (both operating and capital costs) associated with meeting peak demand. Customer costs are costs
associated with serving customers, such as meter reading, billing and customer service, etc. Direct fire protection
costs are related solely to the fire protection function, such as fire hydrants, fire connections, and related mains and
valves.
2.3. Key Study Assumptions
The Study period is from FY 2022 to FY 2026. This study develops rates for FY 2022, FY 2023, and FY 2024.
Revenue adjustments for FY 2025 and FY 2026 are for planning purposes only, as the District will undertake another
rate study in the future. Table 2-1 shows the cost escalation factors assumed in the Study.
Table 2-1: Cost Escalation Factors
We developed the inflationary assumptions in consultation with District Staff. The capital inflation rate is based on
Engineering News-Record Construction Cost Index average inflation in the past ten years.
Table 2-2 shows the water supply inflationary used to calculate water purchase costs. The SDCWA escalation factors
are calculated using the compound annual growth rate of the charges from 2015 to 2021. District staff estimates no
inflation of Lake Hodges O&M costs during the Study Period.
Line
No.
Inflationary
Category FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 General 3%3%3%3%3%3%
2 Salary 3%3%3%3%3%3%
3 Benefits 4%4%4%4%4%4%
4 Benefits - Medical 1%1%1%1%1%1%
5 Benefits - CalPers 3%3%3%3%3%3%
6 Benefits- OPEB 5%5%5%5%5%5%
7 Utilities 4%4%4%4%4%4%
8 Capital 3%3%3%3%3%3%
WATER FINANCIAL PLAN AND RATE STUDY REPORT 11
Table 2-2: Water Supply Escalation Factors
Inflationary factors were applied to non-rate revenues and reserve interest earnings to project future revenue.
2.3.1. ACCOUNT AND WATER USE GROWTH ASSUMPTIONS
The two factors used to estimate future water rate revenue are new account growth and annual water demand
changes. Table 2-3 shows the financial plan assumptions in new water service connections and water use growth for
the Study period. District Staff anticipates low account growth since the District is nearly built out and new
construction is primarily infill projects. District staff estimates that water demand forecast will annually increase due
to warm, dry weather and account growth. The District estimates a 5% water loss assumption for the study period.
The additional water purchases above customer demand account for water losses in the system, such as water lost
during treatment, leaks in pipes, etc.
Table 2-3: Account Growth, Water Use, and Water Loss Assumptions
Table 2-4 shows the estimated number of water accounts, not including Fire Service, by meter size for the Study
Period. The number of accounts is used to forecast the amount of fixed revenue the District will receive from Meter
Service Charges. Raftelis inflated actual FY 2020 meter counts to estimate FY 2021 meter counts. District staff
estimates that most customer growth will occur in the 3/4-inch meter size.
Line
No.Inflationary Category FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 SDCWA Raw Water Rate 4%4%4%4%4%4%
2 SDCWA Treated Water Rate 1%1%1%1%1%1%
3 SDCWA Infrastructure Access Charge 7%7%7%7%7%7%
4 SDCWA Customer Service Charge 1%1%1%1%1%1%
5 SDCWA Storage Charge 1%1%1%1%1%1%
6 SDCWA Supply Reliability Charge 8%8%8%8%8%8%
7 SDCWA Transportation Rate 7%7%7%7%7%7%
8 SDCWA Standby Availability Charge 0%0%0%0%0%0%
9 MWD Tier 2 Supply Rate 2%2%2%2%2%2%
10 MWD Capacity Charge 0%0%0%0%0%0%
11 MWD Readiness To Serve 0%0%0%0%0%0%
12 City of San Diego LH O&M 0%0%0%0%0%0%
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Projected Projected Projected Projected Projected Projected
Account Growth (Residential)0.5%0.5%0.5%0.5%0.5%0.5%
Water Use Growth 1.0%1.0%1.0%1.0%1.0%1.0%
Water Loss 5.0%5.0%5.0%5.0%5.0%5.0%
12 SAN DIEGUITO WATER DISTRICT
Table 2-4: Projected Accounts by Meter Size
Table 2-5 shows the projected water use totals by class. Water use by class is escalated by the water use growth
assumption shown in Table 2-3.
Table 2-5: Projected Water Use by Customer Class (HCF)
Meter Size FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Actual Projected Projected Projected Projected Projected Projected
5/8"3,673 3,673 3,673 3,673 3,673 3,673 3,673
3/4"5,937 5,966 5,995 6,025 6,054 6,084 6,113
1"1,519 1,519 1,519 1,519 1,519 1,519 1,519
1.5"429 429 429 429 429 429 429
2"414 414 414 414 414 414 414
3"2 2 2 2 2 2 2
4"3 3 3 3 3 3 3
6"0 0 0 0 0 0 0
8"1 1 1 1 1 1 1
Total 11,978 12,007 12,036 12,066 12,095 12,125 12,154
Customer Class FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Actuals Projected Projected Projected Projected Projected Projected
Single Family Residence (SFR)1,284,212 1,297,054 1,310,025 1,323,125 1,336,356 1,349,720 1,363,217
SFR -w- Agriculture 16,396 16,560 16,726 16,893 17,062 17,232 17,405
SFR -w- Commercial 1,771 1,789 1,807 1,825 1,843 1,861 1,880
Multi-Family Residence (MFR)472,626 477,352 482,126 486,947 491,817 496,735 501,702
MFR -w- Agriculture 8,626 8,712 8,799 8,887 8,976 9,066 9,157
MFR -w- Commercial 1,197 1,209 1,221 1,233 1,246 1,258 1,271
Agriculture 82,294 83,117 83,948 84,788 85,635 86,492 87,357
Commercial 218,181 220,363 222,567 224,792 227,040 229,311 231,604
Public 45,878 46,337 46,800 47,268 47,741 48,218 48,700
Government 7,812 7,890 7,969 8,049 8,129 8,210 8,293
Landscaping 144,808 146,256 147,719 149,196 150,688 152,195 153,717
Construction 17,250 17,423 17,597 17,773 17,950 18,130 18,311
Total 2,301,052 2,324,062 2,347,303 2,370,776 2,394,483 2,418,428 2,442,613
WATER FINANCIAL PLAN AND RATE STUDY REPORT 13
3. Legal Framework and Rate
Setting Methodology
3.1. California Constitution – Article XIII D, Section 6 (Prop
218)
Proposition 218, reflected in the California Constitution as Article XIII D, was enacted in 1996 to ensure that rates
and fees are proportional to the cost of providing service. The principal requirements for fairness of the fees, as they
relate to public water service, are as follows:
1. A property-related charge (such as water and recycled water rates) imposed by a public agency on a parcel
shall not exceed the costs required to provide the property-related service.
2. Revenues derived by the charge shall not be used for any purpose other than that for which the charge was
imposed.
3. The amount of the charge imposed upon any parcel shall not exceed the proportional cost of service
attributable to the parcel.
4. No charge may be imposed for a service unless that service is actually used or immediately available to the
owner of the property.
5. A written notice of the proposed charge shall be mailed to the record owner of each parcel at least 45 days
prior to the public hearing when the agency considers all written protests against the charge.
As stated in AWWA’s Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices M1, 7th
Edition (M1 Manual), “water rates and charges should be recovered from classes of customers in proportion to the
cost of serving those customers.” Proposition 218 requires that water rates cannot be “arbitrary and capricious,”
meaning that the rate-setting methodology must be sound and that there must be a nexus between the costs and the
rates charged. This Study follows industry-standard rate-setting methodologies set forth by the M1 Manual, adhering
to Proposition 218 requirements by developing rates that do not exceed the proportionate cost of providing water
services.
3.2. California Constitution – Article X, Section 2
Article X, Section 2 of the California Constitution (established in 1976) states the following:
“It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water
resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or
unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is
to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public
welfare.”
Article X, Section 2 of the State Constitution institutes the need to preserve the State’s water supplies and to
discourage the wasteful or unreasonable use of water by encouragin g conservation. As such, public agencies are
constitutionally mandated to maximize the beneficial use of water, prevent waste, and encourage conservation.
14 SAN DIEGUITO WATER DISTRICT
Cost-Based Rate-Setting Methodology
As stated in the M1 Manual, “the costs of water rates and charges should be recovered from classes of customers in
proportion to the cost of serving those customers .” The four major steps to develop utility rates that comply with
Proposition 218 and industry standards while meeting other emerging goals and objectives of the utility are discussed
below.
Calculate Revenue Requirement
The rate-making process starts by determining the test year (rate-setting year) revenue requirement. The revenue
requirement should sufficiently fund the utility’s O&M, debt service, capital expenses, and other identified costs with
funding to reserves (positive cash) or using reserves (negative cash), all based on a long-term financial plan.
Cost-of-Service Analysis (COS)
The annual cost of providing water service is distributed among cu stomer classes commensurate with their service
requirements. A COS analysis involves the following:
• Functionalize costs. Examples of functions include storage, treatment, and distribution.
• Allocate functionalized costs to cost components. Examples of cost components include supply, base
delivery, peaking, and meter servicing.
• Distribute the cost components. Distribute cost components, using unit costs, to customer classes in
proportion to their burden on the water system.
Rate Design and Calculations
Rates do more than simply recover costs. Within the legal framework and industry standards, properly d esigned rates
should support and optimize a blend of various utility objectives, such as promoting water conservation, affordability
for essential needs, and revenue stability, among other objectives. Rates may also act as a public information tool in
communicating these objectives to customers.
Rate Adoption
Rate adoption is the last step of the rate-making process and is part of the procedural requirements of Proposition
218. Raftelis documents the rate study results in this Report to serve as the utility’s administrative record and a public
education tool about the proposed changes, the rationale and justifications behind the changes, and their anticipated
financial impacts.
Government Code §54999.7(c) requires that water and wastewater agencies must conduct a cost-of-service study a
minimum of every ten years. Raftelis conducted a comprehensive cost-of-service rate study for the District in Section
5 and documented the results and findings in this Report. This Study focuses on financial plan updates and
incorporates the latest financial information and cost projections for the next five years. The proposed revenue
adjustments resulting from the financial plan will be applied across all categories of the updated rates to calculate the
proposed rates for FY 2022, FY 2023, and FY 2024.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 15
4. Financial Plan
This section describes the assumptions used to project operating and maintenance (O&M) expenses, rate funded
capital expenses, reserve targets, and calculate debt service coverage requirements to determine the revenue
adjustments required to ensure the District’s financial stability. Note that the SDCWA Infrastructure Access Charge
(IAC) is not included in the Financial Plan, as it is passed through directly to the customer by the District.
The District has three official Reserves and a contribution fund. The reserve targets are as follows
1. Operating Reserve – 90 days of the annual operating budget
2. Capital Replacement Reserve – at minimum, the average yearly capital expenses over five years
maximum is 2 x average yearly CIP expense
3. Rate Stabilization Reserve – 15 % of annual water revenue from rates and charges
4. Vehicle Replacement Contribution. - schedule of cash requirements for fleet replacement based on
an amortization schedule, regular vehicle condition assessment, and anticipated vehicle lifespan
Revenue adjustments represent the average rate increase for District customers as a whole; rate increases for
individual classes will depend on the cost of service results – since a cost of service analysis allocates costs to each
user class.
4.1. Operating and Maintenance Expenses
The District’s O&M budget is shown by fiscal year in Table 4-1. The O&M budget incorporates the inflationary
factors discussed in Table 2-1. Costs are projected to increase largely due to the increase in water purchase costs (Line
14). Administration expenses (Line 1) include general administrative costs and the 15-year repayment schedule for
the CalPERS Unfunded Accrued Liability Payment Plan. This payment level was assumed in the last rate study and
is scheduled to end in FY 2033.
The water purchase and treatment expenses, summarized in Line 14, are calculated using the projected water use
assumptions. SDCWA water supply unit and fixed costs are inflated based on historical averages shown in Table
2-2.
16 SAN DIEGUITO WATER DISTRICT
Table 4-1: Projected O&M Expenses
4.2. Debt Service
The District is currently obligated to make annual debt service payments for two revenue bonds:
• 2007 Water Revenue Refunding Bonds (2007 Bond);
• Water Revenue Refunding Bonds, Series 2014 (2014 Bond).
Table 4-2 shows the annual debt service associated with the two existing revenue bonds. Table 4-2 shows that both
bonds will have matured by FY 2026. This Study assumes no additional debt for the study period.
Table 4-2: Annual Debt Service
Line Item FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Actuals Projected Projected Projected Projected Projected Projected
1 Administration $2,533,329 $2,649,493 $2,703,241 $2,758,657 $2,815,796 $2,874,712 $2,935,461
2 Customer Service $747,158 $898,472 $925,651 $953,664 $982,535 $1,012,293 $1,042,963
3 Water Purchases and Treatment
4 Treatment Costs $2,406,285 $2,851,400 $2,966,311 $3,085,854 $3,210,214 $3,339,585 $3,474,171
5 Imported Treated Water $281,572 $453,169 $349,894 $362,830 $376,341 $390,455 $405,204
6 Imported Untreated Water $3,032,089 $4,399,333 $3,676,777 $3,905,180 $4,147,688 $4,405,172 $4,678,582
7 Local Untreated Water $57,077 $115,000 $157,000 $207,000 $75,000 $75,000 $75,000
8 MWD Readiness to Serve $31,447 $32,705 $27,192 $27,192 $27,192 $27,192 $27,192
9 CWA Empergency Storage Fee $665,458 $611,425 $538,527 $543,913 $549,352 $554,845 $560,394
10 MWD Capacity Reservation $86,917 $85,398 $82,212 $82,212 $82,212 $82,212 $82,212
11 CWA Customer Service Fee $241,038 $221,544 $212,461 $214,586 $216,731 $218,899 $221,088
12 CWA Supply Reliability $351,531 $403,418 $406,923 $439,477 $474,635 $512,606 $553,614
13 Subtotal Water Purchases and
Treatment $7,153,415 $9,173,392 $8,417,298 $8,868,243 $9,159,364 $9,605,966 $10,077,456
14 Recycled Water Program $606,486 $876,339 $810,785 $842,126 $875,809 $910,857 $947,328
15 Field Operations $1,898,768 $2,341,895 $2,415,798 $2,492,076 $2,570,809 $2,652,076 $2,735,962
16 Planning and Engineering $464,034 $530,613 $547,138 $564,186 $581,775 $599,922 $618,646
17 Total O&M $13,403,189 $16,470,204 $15,819,910 $16,478,952 $16,986,089 $17,655,827 $18,357,815
Line
No.
Line
No.Existing Debt Service FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 2007 Bonds $636,466 $634,397 $636,044 $635,916 $633,950 $0
2 2014 Bonds $765,300 $768,100 $769,700 $770,100 $0 $0
3 Total Existing Debt Service $1,401,766 $1,402,497 $1,405,744 $1,406,016 $633,950 $0
WATER FINANCIAL PLAN AND RATE STUDY REPORT 17
4.3. Capital Improvement Program
Table 4-3 summarizes the District’s five-year Capital Improvement Plan. The District has proposed approximately
$22 Million in Capital Expenditures over the Study period. The District plans to finance its capital projects over the
Study Period through System Development Charges (Capacity Fees) and rate revenue (also known as PAY-GO
funding). The Capital Improvement Plan below is adjusted for inflation5.
Table 4-3: Proposed Capital Improvement Plan
4.4. Proposed Financial Plan and Revenue Adjustments
The financial planning model enables the District to set rates and charges to generate enough water revenue to meet
the District’s short-term and long-term obligations and avoid significant rate fluctuations. It shows the revenues that
will maintain appropriate reserves and provide adequate debt service coverage while maintaining a sensitivity to
ratepayers rate increases.
Table 4-4 shows the proposed revenue adjustments and CIP accomplishment rate selected by the Board of Directors
at the June 16, 2021 Board Meeting. The proposed financial plan implements a gradual increase of revenue
adjustments on January 1 for each year. To enable these revenue adjustments, the Capital Accomplishment
decreased in FY 2023-2024. This proposed scenario allows the District to maintain reserves and mitigate impacts
that ratepayers see to their bill directly. Revenue adjustments are shown outside the rate-setting period (FY 2025 &
FY 2026) for planning purposes only and are subject to the District Board’s approval in future years. The blue box
shows the revenue adjustments that the District will implement for the next three years.
Table 4-4: Proposed Revenue Adjustments and Capital Accomplishment Rate
Table 4-5 shows the proposed financial plan incorporating the proposed revenue adjustments and CIP
accomplishment rate. Line 1 shows revenue from current rates, assuming no increase in rates. Rate revenue from
current rates includes water, recycled water, and private fire customers and consumption, where applicable. Rate
5 Capital inflation percentages are shown in Table 2-1.
Line
No.Capital Project Category FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 SDWD Infrastructure Projects $999,527 $751,900 $1,129,859 $1,436,936 $1,142,391 $1,744,707
2 Joint Facilities Projects and Capital
Acquisitions $1,900,000 $1,699,500 $1,750,485 $1,803,000 $2,982,598 $3,072,076
3 Lake Hodges Capital Repairs $500,000 $515,000 $530,450 $546,364 $562,754 $579,637
4 Total Inflated CIP $3,399,527 $2,966,400 $3,410,794 $3,786,299 $4,687,744 $5,396,421
Fiscal Year Proposed Revenue
Adjustments
Proposed CIP
Accomplishment
2022 5.5%100%
2023 6.0%75%
2024 6.5%75%
2025 5.0%75%
2026 5.0%75%
18 SAN DIEGUITO WATER DISTRICT
revenues were calculated using the water use and customer account assumptions shown in Section 2.3. Line 2 shows
the additional revenue received from the revenue adjustments proposed in Table 4-4. Lines 3 - 6 shows non-rate
revenues. Interest revenues (Line 6) decrease in FY 2024 due to declining reserve balances due caused by the negative
net cash flow (Line 21). Line 7 shows all projected revenues, including rate revenue, non-rate revenue, and interest
revenue. Lines 10 – 15 summarizes the O&M projections shown in Table 4-1. Line 16 shows the existing debt service
(Table 4-2 ). Line 18 shows the CIP Expenditures (Table 4-3) adjusted for the reduced accomplishment proposed in
Table 4-4. Total expenses, including O&M, debt service, and rate funded capital, are shown in Line 19. Line 21
shows a negative net cash flow FY 2021 through FY 2023, largely due to the planned expenditures in capital facilities
during those years. The debt coverage ratio is projected to exceed the target debt coverage ratio throughout the study
period. The proposed financial plan ensures financial sufficiency and solvency for the District to meet projected
expenditures and financial obligations, including debt service, debt coverage, and most reserve targets while funding
CIP projects at a reduced capacity.
Table 4-5: Proposed Financial Plan Cashflow
Figure 4-1 graphically illustrates the operating Financial Plan – it compares existing (current) and proposed revenues
with projected expenses. The stacked bars show expenses, including O&M expenses, debt service, and r ate-funded
CIP. Total revenues at existing and proposed rates are shown by horizontal light blue and dark blue lines . Current
revenue from existing rates, in light blue, does not meet future total expenses and shows the need for revenue
adjustments.
Line
No. Cash Flow FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
1 Revenue from Rates $16,191,174 $16,591,869 $16,714,270 $16,837,854 $16,962,635 $17,088,623
2 Additional Revenue from Revenue Adjustments $0 $456,276 $1,448,291 $2,603,886 $3,744,743 $4,815,616
3 Misc Operating Revenue $497,624 $505,517 $513,612 $521,914 $530,430 $539,165
4 Property Taxes $1,081,600 $1,081,600 $1,081,600 $1,081,600 $1,081,600 $1,081,600
5 Capital Revenue $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
6 Interest Revenue (Pooled Investment Earnings)$293,201 $206,294 $190,034 $187,119 $196,134 $218,394
7 Total Revenue $18,163,599 $18,941,557 $20,047,807 $21,332,373 $22,615,542 $23,843,398
8
9 Expenses
10 Administration $2,649,493 $2,703,241 $2,758,657 $2,815,796 $2,874,712 $2,935,461
11 Customer Service $898,472 $925,651 $953,664 $982,535 $1,012,293 $1,042,963
12 Water Purchases and Treatment $9,173,392 $8,417,298 $8,868,243 $9,159,364 $9,605,966 $10,077,456
13 Recycled Water Program $876,339 $810,785 $842,126 $875,809 $910,857 $947,328
14 Field Operations $2,341,895 $2,415,798 $2,492,076 $2,570,809 $2,652,076 $2,735,962
15 Planning and Engineering $530,613 $547,138 $564,186 $581,775 $599,922 $618,646
16 Existing Debt Service $1,401,766 $1,402,497 $1,405,744 $1,406,016 $633,950 $0
17 Proposed Debt Service $0 $0 $0 $0 $0 $0
18 Rate Funded CIP $3,399,527 $2,966,400 $2,558,095 $2,839,724 $3,515,808 $4,047,316
19 Total - Expenses $21,271,497 $20,188,807 $20,442,790 $21,231,828 $21,805,585 $22,405,131
20
21 Net Cash Flow -$3,107,897 -$1,247,250 -$394,983 $100,545 $809,957 $1,438,267
22 Debt Service Coverage 121%223%254%309%782%
Target Coverage 115%115%115%115%115%115%
WATER FINANCIAL PLAN AND RATE STUDY REPORT 19
Figure 4-1: Proposed Financial Plan
Figure 4-2 shows the modeled revenue adjustments (yellow bars) and graphs the calculated and minimum debt
coverage requirements as shown by the green and respectively. The debt coverage ratios increase due to District
bonds maturing in FY 2024 and FY 2025 (Table 4-2).
20 SAN DIEGUITO WATER DISTRICT
Figure 4-2: Projected Debt Coverage Ratios and Revenue Adjustments
Figure 4-3 summarizes the projected CIP and its funding sources solely rate revenue. CIP costs depicted account
for inflation and are adjusted for the CIP accomplishment rate proposed in Table 4-4.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 21
Figure 4-3: Proposed Capital Financing Plan
Figure 4-4 shows the projected Water Utility Fund ending balances exceed the O&M and Capital Reserve target
balances under the proposed financial plan, depicted as the green line. In addition to the starting balance, FY 2021
shows the SDCWA settlement proceeds in the red bar. These proceeds help decrease rates by helping the water fund
to meet reserve targets. Note that the yellow line includes the rate stabilization reserve and with these revenue
adjustments, the District is only partially funding the rate stabilization reserve. This demonstrates the necessity for
the proposed revenue adjustments and new debt issuance in the proposed financial plan.
22 SAN DIEGUITO WATER DISTRICT
Figure 4-4: Projected Fund Ending Balances
WATER FINANCIAL PLAN AND RATE STUDY REPORT 23
5. Cost of Service Analysis
A Cost of Service (COS) analysis distributes a utility’s revenue requirement, i.e., the yearly revenue needed, to each
customer class by allocating the District’s revenue requirement to the cost causation components. The cost causation
components include:
1. Base (average) costs
2. Peaking costs
3. Meter service
4. Billing and customer service
5. Fire protection
6. Conservation
7. Recycled Water
8. General and administrative costs
Peaking costs can be further divided into maximum day and maximum hour demand. The maximum day demand
is the maximum amount of water used in a single day in a year. The maximum hour demand is the maximum hour
usage on the maximum usage day. Both maximum day and maximum hour peaking demand are used to calculate
peaking unit rates to distribute costs to customer classes. Peaking costs are allocated in proportion to how the different
customer classes use water during peak day and hour demands. Different facilities, such as distri bution and storage
facilities, are designed to meet the peaking demands of customers. Extra capacity costs include the O&M and capital
costs associated with meeting peak customer demand. This method is consistent with the AWWA M1 Manual and
is widely used in the water industry to perform the cost of service analyses.
5.1. Allocation to Cost Components
In a COS analysis, expenses are allocated to the cost causation components. Table 5-1 shows the system-wide
peaking factors. The system-wide peaking factors are used to derive the cost component allocation bases (i.e.,
percentages) shown in columns C through E of Table 5-2. To understand the interpretation of the percentage, we
must first establish the base as the average daily demand during the year – which is assigned an allocation basis of 1.
If the base allocation basis is used to allocate an expense, the costs associated with that expense are to meet average
daily demand (base) related costs. Expenses that are allocated to the cost causation components using the Maximum
Day bases attribute 59% (1.00/1.70) of the demand (and therefore costs) to base (average daily demand) use and the
remaining 41% to maximum day (peaking) use. Expenses allocated using the maximum hour bases assume 33%
(1.00/3.00) of costs are due to base demands, 33% due to max day ((1.70-1.00)/3.00)) and 43% ((3.00-1.70)/3.00)
are due to max hour costs. Collectively the maximum day and hour cost components are known as peaking costs.
These allocation bases are used to assign O&M Functions, shown in Column A of Table 5-2, to the cost causation
components, visible as the column headers of Table 5-2.
Table 5-1: System-Wide Peaking Factors
System Peaking Factor Base Max Day Max Hour
Base 1.00 100%0%0%
Max Bi-monthly / Avg Bi-monthly 1.24 81%19%0%
Max Day 1.70 59%41%0%
Max Hour 3.00 33%23%43%
24 SAN DIEGUITO WATER DISTRICT
Table 5-2 shows the allocation of the District’s O&M expenses to the cost causation components. The percentages
shown in Lines 1 through 20 are used to allocate the functionalized costs to each cost causation component. The
allocation basis is selected based on the type of cost for each line item and the proportion of those costs associated
with each cost causation component (max day, max hour, general, customer, etc.). For example, Transmission &
Distribution (Line 14) is allocated using the max hour basis; in proportion to max hour allocations identified in Table
5-1. This is because the distribution and storage system must be sized and operated to meet max hour demands.
Certain cost bases are identical to the cost causation components – such as Meter Service – and are easily allocated
to the cost component with the same name. Line 42 shows the result of the allocation of all expenses to the cost
causation components. Line 44 shows the total percentage allocated to each cost component, excluding Admin and
General and Recycled Water. This reflects the fact that general and administrative costs support the other functions
in proportion to their share of costs, and Recycled Water costs are recovered through recycled water rates. The
Operating portion of the revenue requirement is allocated to the cost causation components using the allocation
shown in Line 44 –this is shown later in Table 5-6.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 25
Table 5-2: Allocation of O&M Expenses to Cost Causation Components
Line
No.Function Allocation Basis Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter Total
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)(K)(L)
1 Water Purchase and Treatment
2 Treatment Costs Max Bi-monthly / Average Bi-monthly 81%19%0%0%0%0%0%0%0%100%
3 Imported Treated Water Base 100%0%0%0%0%0%0%0%0%100%
4 Imported Untreated Water Base 100%0%0%0%0%0%0%0%0%100%
5 Local Untreated Water Base 100%0%0%0%0%0%0%0%0%100%
6 MWD Readiness To Serve Base 100%0%0%0%0%0%0%0%0%100%
7 SDCWA Infrastructure Acces Base 100%0%0%0%0%0%0%0%0%100%
8 SDCWA Emergency Storage Fe Meter Service 0%0%0%100%0%0%0%0%0%100%
9 MWD Capacity Reservation Max Day 59%41%0%0%0%0%0%0%0%100%
10 SDCWA Customer Service Fee Meter Service 0%0%0%100%0%0%0%0%0%100%
11 SDCWA Supply Reliability Max Day 59%41%0%0%0%0%0%0%0%100%
12
13 Treatment Max Bi-monthly / Average Bi-monthly 81%19%0%0%0%0%0%0%0%100%
14 Transmission & Distribution Max Hour 33%23%43%0%0%0%0%0%0%100%
15 Distribution Storage Max Hour 33%23%43%0%0%0%0%0%0%100%
16 Customer Service & Meter Reading Billing & Customer Service 0%0%0%0%86%14%0%0%0%100%
17 Meter Service Meter Service 0%0%0%100%0%0%0%0%0%100%
18 Admin & General General & Administration 0%0%0%0%0%0%100%0%0%100%
19 Recycled Water Recycled 0%0%0%0%0%0%0%100%0%100%
20 Private Fire Meter Maintenance Private Fire Meter Charge 0%0%0%0%0%0%0%0%100%100%
21
Function Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter Total
22 Water Purchase and Treatment
23 Treatment Costs Max Bi-monthly / Average Bi-monthly $2,392,187 $574,125 $0 $0 $0 $0 $0 $0 $0 $2,966,311
24 Imported Treated Water Base $349,894 $0 $0 $0 $0 $0 $0 $0 $0 $349,894
25 Imported Untreated Water Base $3,676,777 $0 $0 $0 $0 $0 $0 $0 $0 $3,676,777
26 Local Untreated Water Base $157,000 $0 $0 $0 $0 $0 $0 $0 $0 $157,000
27 MWD Readiness To Serve Base $27,192 $0 $0 $0 $0 $0 $0 $0 $0 $27,192
28 SDCWA Infrastructure Acces Base $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
29 SDCWA Emergency Storage Fe Meter Service $0 $0 $0 $538,527 $0 $0 $0 $0 $0 $538,527
30 MWD Capacity Reservation Max Day $48,360 $33,852 $0 $0 $0 $0 $0 $0 $0 $82,212
31 SDCWA Customer Service Fee Meter Service $0 $0 $0 $212,461 $0 $0 $0 $0 $0 $212,461
32 SDCWA Supply Reliability Max Day $239,366 $167,556 $0 $0 $0 $0 $0 $0 $0 $406,923
33
34 Treatment Max Bi-monthly / Average Bi-monthly $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
35 Transmission & Distribution Max Hour $512,060 $358,442 $665,679 $0 $0 $0 $0 $0 $0 $1,536,181
36 Distribution Storage Max Hour $179,291 $125,504 $233,078 $0 $0 $0 $0 $0 $0 $537,873
37 Customer Service & Meter Reading Billing & Customer Service $0 $0 $0 $0 $891,979 $145,206 $0 $0 $0 $1,037,185
38 Meter Service Meter Service $0 $0 $0 $610,347 $0 $0 $0 $0 $0 $610,347
39 Admin & General General & Administration $0 $0 $0 $0 $0 $0 $2,730,597 $0 $0 $2,730,597
40 Recycled Water Recycled $0 $0 $0 $0 $0 $0 $0 $810,785 $0 $810,785
41 Private Fire Meter Maintenance Private Fire Meter Charge $0 $0 $0 $0 $0 $0 $0 $0 $57,572 $57,572
42 Total $7,582,128 $1,259,479 $898,757 $1,361,335 $891,979 $145,206 $2,730,597 $810,785 $57,572 $15,737,839
43
44 Allocation (Omitting General and Recycled Water)51%8%6%9%6%1%18%0%0%100%
26 SAN DIEGUITO WATER DISTRICT
The District’s functionalized assets are allocated to the same cost components as the O&M expenses. Capital costs are allocated in proportion to the
functionalized assets to recognize that all assets need to be refurbished and replaced over time. This ensures that the allocations to the cost causation
components and the rates remain relatively stable over time.
Raftelis, with the assistance of Distri ct staff, functionalized and allocated capital assets to the cost causation components. The assets were valued using
the replacement cost less depreciation by escalating cost with the Engineering News-Record Construction Cost Index. Table 5-3 summarizes the allocation
of the District’s capital assets to the cost causation components. The resulting total asset allocation is derived in the same manner as the O&M allocation
in Table 5-2. Raftelis functionalized the District’s assets (Lines 1 through 7 of Table 5-3) and then allocated the value to the cost causation components
(Lines 9 - 17). Part of the District’s revenue requirement includes rate-funded capital projects. This capital portion of the revenue requirement is allocated
to the cost causation components using the asset allocation shown in Line 20. Line 20 shows the total percentage allocated to each cost component,
excluding Admin and General. This reflects that general and administrative costs support the other functions in proportion to t heir share of costs.
Table 5-3: Allocation of Assets to Cost Causations Components
WATER FINANCIAL PLAN AND RATE STUDY REPORT 27
5.2. Revenue Requirement Determination
Table 5-4 shows the revenue requirement determination. Line 26 shows the total revenue required from rates,
calculated by subtracting revenue offsets (Line 18) and Adjustments (Line 23) from the Operati ng and Capital
Revenue Requirements (Line 10). Line 25 shows the operating and capital revenue requirements before subtracting
revenue offsets by adding Line 10 and 23. Raftelis calculated the revenue requirement using the FY 2022 budget,
including water purchases, O&M expenses, capital expenses, and existing debt service, as shown in lines 1 – 10.
Lines 13 – 17 show the Revenue Offsets from non-rate revenues. The adjustments in Lines 21 and 22 ensure the COS
accounts for the annual cash balances and that the impending rate adjustment will take place six months into FY
2022.
Table 5-4: Revenue Requirement Determination
Line
No.Description Operating Capital Total
(A)(B)(C)(D)
1 Revenue Requirement
2 Administration $2,703,241 $2,703,241
3 Customer Service $925,651 $925,651
4 Water Purchases and Treatment $8,417,298 $8,417,298
5 Recycled Water Program $810,785 $810,785
6 Field Operations $2,415,798 $2,415,798
7 Planning and Engineering $547,138 $547,138
8 Total Debt Service Expenses $1,402,497 $1,402,497
9 Rate Funded Capital Projects $2,966,400 $2,966,400
10 Total Revenue Requirement $15,819,910 $4,368,897 $20,188,807
11
12 Revenue Offsets
13 Misc Operating Revenue $505,517 $505,517
14 Property Taxes - Applied to Specific Tiers $540,800 $540,800
15 Property Taxes - General Offset $540,800 $540,800
16 Capital Revenue $100,000 $100,000
17 Interest Revenue (Pooled Investment Earnings)$206,294 $206,294
18 Total Revenue Offsets $1,793,411 $100,000 $1,893,411
19
20 Adjustments
21 Adjustment for Cash Balance $1,247,250 $1,247,250
22 Adjustment for Mid-year Increase ($456,276)($456,276)
23 Total Adjustments ($456,276)$1,247,250 $790,973
24
25 Revenue Requirement Before Revenue
Offsets $15,363,633 $5,616,147 $20,979,780
26 Revenue Required from Rates $14,482,775 $3,021,647 $17,504,422
28 SAN DIEGUITO WATER DISTRICT
5.3. Preliminary Allocation of Revenue Requirements to Cost Components
Table 5-5 shows the allocation of the revenue offsets to cost components. Non-rate revenue and a portion of property taxes are allocated to O&M, based
on the expense allocation percentages derived in Table 5-2. Capital Revenue is allocated to capital, based on asset allocation percentages derived in Table
5-3. A portion of property tax revenue is allocated to the Revenue Offset cost component and used as a rate offset to decrease rates for Residential tiers 1
and 2 and commercial/agricultural customers.
Table 5-5: Allocation of Revenue Offsets to Cost Components
Table 5-6 shows a preliminary allocation of costs, including O&M Expenses (Table 5-2), Capital Expenses (Table 5-3), and Revenue Offsets (Table 5-5)
based on the revenue requirement determined in Table 5-4, prior to an adjustment for fire-related capacity costs. Line 1 in Table 5-6 allocates the operating
revenue requirement to the cost components using the percentages shown in Table 5-4 (Line 27, Column B). The total amount, in column L, was calculated
with the total operating revenue requirement less the adjustments. Line 2 in Table 5-6 allocates the capital revenue requirement, in column L, to the cost
components using the percentages shown in Table 5-3. Line 3 subtracts the allocated revenue offset (Table 5-5). Line 4 shows the preliminary allocation
of revenue requirements to the cost components.
Table 5-6: Preliminary Allocation of Costs to Cost Components
Line
No.Description Allocation
Basis Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter
Revenue
Offset Total
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)(K)(L)(M)
1 Misc Operating Revenue O&M 51%8%6%9%6%1%18%0%0%0%100%
2 Property Taxes - Applied to Specific Tiers Revenue Offset 0%0%0%0%0%0%0%0%0%100%100%
3 Property Taxes - General Offset O&M 51%8%6%9%6%1%18%0%0%0%100%
4 Capital Revenue Capital 49%24%25%3%0%0%0%0%0%0%100%
5 Interest Revenue (Pooled Investment Earnings)O&M 51%8%6%9%6%1%18%0%0%0%100%
6
7 Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter
Revenue
Offset Total
8
9 Misc Operating Revenue $256,775 $42,653 $30,437 $46,103 $30,208 $4,918 $92,474 $0 $1,950 $0 $505,517
10 Property Taxes - Applied to Specific Tiers $0 $0 $0 $0 $0 $0 $0 $0 $0 $540,800 $540,800
11 Property Taxes - General Offset $274,697 $45,630 $32,562 $49,321 $32,316 $5,261 $98,928 $0 $2,086 $0 $540,800
12 Capital Revenue $50,795 $8,438 $6,021 $9,120 $5,976 $973 $18,293 $0 $386 $0 $100,000
13 Interest Revenue (Pooled Investment Earnings)$100,281 $48,617 $50,806 $6,590 $0 $0 $0 $0 $0 $0 $206,294
14 Total Revenue Offsets $682,548 $145,338 $119,826 $111,133 $68,499 $11,151 $209,695 $0 $4,421 $540,800 $1,893,411
Line
No.Description Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter
Revenue
Offset Total
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)(K)(L)
1 Operating Expenses $7,841,491 $1,302,563 $929,501 $1,407,903 $922,491 $150,173 $2,824,003 $838,520 $59,542 $0 $16,276,186
2 Capital Expenses $1,517,454 $735,668 $768,803 $99,722 $0 $0 $0 $0 $0 $0 $3,121,647
3 Revenue Offsets ($682,548)($145,338)($119,826)($111,133)($68,499)($11,151)($209,695)$0 ($4,421)($540,800)($1,893,411)
4 Total Cost of Service $8,676,398 $1,892,893 $1,578,478 $1,396,491 $853,992 $139,022 $2,614,308 $838,520 $55,121 ($540,800)$17,504,422
WATER FINANCIAL PLAN AND RATE STUDY REPORT 29
5.4. Equivalent Meters
The concept of equivalent meters needs to be understood to allocate meter-related costs appropriately. By using
equivalent meters instead of a total meter count, the analysis accounts for the fact that larger meters impose greater
demands on the system and are more expensive to install, maintain, and replace than smaller meters. Equivalent
meters are used in calculating meter service costs.
Equivalent meters are based on meter hydraulic capacity. Equivalent meters represent the potential demand on the
water system in terms of the base meter size. A ratio of hydraulic capacity is calculated by dividing large meter
capacities by the base meter capacity. The capacity ratio is calculated using the meter capacity in gallons per minute
(GPM) provided in the AWWA M1 Manual Principles of Water Rates, Fees, and Charges (7th Edition).
The base meter is the most common smallest meter, in this case, a 3/4-inch meter. The capacity ratio is proportional
to the potential flow through each meter size as established by the American Water Works Association (AWWA)
hydraulic capacity ratios. For example, the flow through a 4-inch meter is 16.7 times that of a 3/4-inch meter, and
therefore, the meter capacity component of the fixed meter charge should be 16.7 times that of the 3/4-inch meter.
Table 5-7 shows the total equivalent meters (Column D), calculated by taking the number of meters by size (Column
C) and multiplied by the corresponding capacity ratio (Column B). The number of annual equivalent meters is
calculated by multiplying the equivalent meters by six bi-monthly billing periods. These totals are used as the
denominator in developing unit costs for the rate components of the bi-monthly fixed service charges.
Table 5-7: Water Equivalent Meters
5.5. Allocation of Private Fire Costs
Water systems provide two types of fire protection: private fire protection that provide fire flow to buildings and
other structure sprinkler systems for fire suppression within private improvements , and public fire protection for
firefighting, generally visible as hydrants on the street. Raftelis uses the potential flow of private fire lines and public
hydrants to determine the share of total fire costs responsible for each.
Meter Size Capacity
Ratios Total Meters Equivalent
Meters
Annual
Equivalent
Meters
(A)(B)(C)(D)(E)
5/8"1.00 3,673 3,673 22,038
3/4"1.00 5,995 5,995 35,971
1"1.67 1,519 2,537 15,220
1.5"3.33 429 1,429 8,571
2"5.33 414 2,207 13,240
3"10.00 2 20 120
4"16.67 3 50 300
6"33.33 0 0 0
8"53.33 1 53 320
Total 12,036 15,964 95,781
30 SAN DIEGUITO WATER DISTRICT
Table 5-8 shows the equivalent potential demand from private fire lines. Different fire connection sizes have a
different fire flow demand factor like the hydraulic capacity factor of a water meter6. The count of connections
(Column C) by size is multiplied by the fire flow demand factor (Column B) to derive total equivalent fire demand
units (Column D). The Hazen-Williams equation is used to calculate equivalent potential demand by raising the
pipeline’s diameter to the power of 2.637.
Table 5-8: Private Fire Connections
Table 5-9 shows the equivalent potential demand from public fire hydrants. Fire hydrant fire ratios are based on the
size and number of ports to calculate the fire flow demand factor. The fire ratio for each hydrant type can be
calculated by summing all the hydrant ports raised to the power of 2.638. The total equivalent potential demand
(Column D) is calculated by multiplying the number of hydrants (Column C) by the calculated fire flow demand
factor (Column B).
Table 5-9: Public Fire Hydrants
6 Total demand for fire connections is based on line diameter and will vary from potable demand, based on meter size.
7 Hazen-Williams equation via AWWA M1 Manual
8 Hazen-Williams equation via AWWA M1 Manual
Fireline Size
(inch diameter)
Fire Ratio
based on Port
Size/Count
Number of
Hydrants
Equivalent
Potential
Demand
(A)(B)(C)(D)
1 x 2.5", 1 x 4" 49.45 1,069 52,864
1 x 2.5", 2 x 4" 87.77 370 32,475
1 x 2.5", 4 x 4" 164.41 1 164
2 x 2.5", 1 x 4" 60.58 9 545
2 x 2.5", 2 x 4" 98.90 1 99
Total Public Fire Hydrants 1,450 86,147
WATER FINANCIAL PLAN AND RATE STUDY REPORT 31
Table 5-10 summarizes the equivalent potential demand through private fire connections (Table 5-8) and public
hydrants (Table 5-9). The potential fire demand percentage, and therefore cost allocation to public and private fire
(Column C), is calculated by dividing the equivalent potential demand (Line 1 or Line 2, column B) by the total
potential demand (Line 3). Eighty-three percent of fire capacity, and therefore costs, relate to public fire and will be
recovered on the bi-monthly fixed charges. The remaining seventeen percent is attributable to private fire service and
recovered through private fire service charges.
Table 5-10: Allocation of Private Fire Costs
This approach to allocating costs related to public fire service has been confirmed by SB 1386, which added section
53750.5 to the Government Code effective January 1, 2021.
5.6. Unit Cost Derivation
The end goal of a cost-of-service analysis is to distribute the revenue requirement to each customer class. Raftelis
calculated unit costs for every component by assessing the total water demanded, meter count (number of
accounts/bills), or equivalent service units. Table 5-11 shows the derivation of the unit cost. Projected FY 2022 water
use was divided by 365 days to determine daily use (Column C & D). The max day and max hour capacities are
calculated by multiplying the average daily use by the max day or max hour peaking f actor. This results in the total
capacity, with extra capacity calculated by subtracting the average daily use from the total capacity for the max day
and by subtracting the total capacity for the max day from the total capacity for a max hour, respectivel y. The flow
unit of HCF/Day is used for both max day and max hour calculations. The values shown are rounded to the nearest
HCF. Column J summarizes the total number of equivalent meters or potential demand and customers for potable
water (Table 5-7) and private fire (Table 5-8).
Line
No.Description Equivalent Potential
Demand
Percent of Total
Demand
(A)(B)(C)
1 Private Fire 17,352 17%
2 Public Fire 86,147 83%
3 Total 103,499 100%
32 SAN DIEGUITO WATER DISTRICT
Table 5-11: Derivation of Cost Causation Components Units of Service
Line
No.Customer Class Tier Width
(hcf)
Annual Use
(hcf)
Average Daily
Usage (hcf)
Capacity
Factor
Total Capacity
(HCF/day)
Extra Capacity
(HCF/day)
Capacity
Factor
Total Capacity
(HCF/day)
Extra Capacity
(HCF/day)
Equivalent
Meters
Number of
Customers
Number of
Private Fire
Customers
Number of Bi-
monthly Bills
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)(K)(L)(M)(N)
1 Single Family Residence 1,310,025 3,589 1.84 6,591 3,002 3.24 11,632 5,040 10,355 9,345
2 Tier 1 12 586,031 1,606 1.44 2,311 705 2.54 4,078 1,767 0 0
3 Tier 2 20 249,915 685 1.74 1,191 506 3.07 2,101 910 0 0
4 Tier 3 40 297,716 816 2.12 1,731 915 3.75 3,055 1,324 0 0
5 Tier 4 >40 176,362 483 2.81 1,359 876 4.96 2,398 1,039 0 0
6 Single Family - Agriculture 16,726 46 2.25 103 57 3.96 182 79 81 23
7 Tier 1 12 1,977 5 1.44 8 2 2.54 14 6 0 0
8 Tier 2 20 1,187 3 1.74 6 2 3.07 10 4 0 0
9 Tier 3 40 2,620 7 2.12 15 8 3.75 27 12 0 0
10 Tier 4 >40 10,942 30 2.48 74 44 4.37 131 57 0 0
11 Single Family - Commercial 1,807 5 1.86 9 4 3.29 16 7 14 9
12 Tier 1 12 738 2 1.44 3 1 2.54 5 2 0 0
13 Tier 2 20 306 1 1.74 1 1 3.07 3 1 0 0
14 Tier 3 40 324 1 2.12 2 1 3.75 3 1 0 0
15 Tier 4 >40 439 1 2.48 3 2 4.37 5 2 0 0
16 Multi-family 482,126 1,321 1.69 2,239 918 2.99 3,951 1,712 2,879 1,713
17 Tier 1 8 315,788 865 1.44 1,245 380 2.54 2,197 952 0 0
18 Tier 2 12 72,261 198 1.74 344 146 3.07 608 263 0 0
19 Tier 3 16 39,987 110 2.12 232 123 3.75 410 178 0 0
20 Tier 4 >16 54,089 148 2.81 417 269 4.96 735 319 0 0
21 Multi-family - Agriculture 8,799 24 2.39 58 33 4.21 102 44 16 5
22 Tier 1 8 498 1 1.44 2 1 2.54 3 2 0 0
23 Tier 2 12 249 1 1.74 1 1 3.07 2 1 0 0
24 Tier 3 16 233 1 2.12 1 1 3.75 2 1 0 0
25 Tier 4 >16 7,820 21 2.48 53 32 4.37 94 41 0 0
26 Multi-family - Commercial 1,221 3 2.08 7 4 3.67 12 5 9 5
27 Tier 1 8 372 1 1.44 1 0 2.54 3 1 0 0
28 Tier 2 12 97 0 1.74 0 0 3.07 1 0 0 0
29 Tier 3 16 73 0 2.12 0 0 3.75 1 0 0 0
30 Tier 4 >16 678 2 2.48 5 3 4.37 8 4 0 0
31 Ag/Commercial Uniform 306,515 840 1.98 1,450 610 2.94 2,467 1,108 1,424 593
32 Institutional Uniform 54,769 150 1.63 312 162 3.67 550 239 372 109
33 Landscaping Uniform 147,719 405 1.73 860 455 3.75 1,518 658 814 234
34 Construction Uniform 17,597 48 0.00 102 54 3.77 182 80 0 0
35 All Classes (No Fire)Uniform 0 0 2.11 0 0 0.00 0 0 0 0 72,216
36 Fire Protection Meters Uniform 0 0 1.94 0 0 0.00 0 0 0 0 2,456 14,736
37 Total 2,347,303 6,431 5,300 8,972 15,964 12,036 2,456 86,952
Max Day Max Hour
WATER FINANCIAL PLAN AND RATE STUDY REPORT 33
Table 5-12 shows the calculated public and private fire service capacity. Line 1 shows that a typical fire lasts four
hours, and the needed fire flow is 4,000 gallons per minute (GPM), as shown in Line 2. Line 4 shows the percentage
of the District’s fire costs that are allocated to Public Fire (Table 5-10). Max day capacity demanded by fire protection
(Line 5) is determined by converting 4,000 GPM to gallons per hour, then multiplying by the four-hour duration of
a typical fire. This is converted to HCF per day in Line 5, Column B. A similar calculation is done for the max hour
capacity, multiplying the max day capacity by 24 hours less the capacity already allocated to Max Day. This is
converted to HCF per day in Line 5, Column C. Public Fire is allocated 83 percent of each of those capacities. The
values for max day and max hour total extra capacity shown in Line 9 are calculated by adding the total fire service
capacity in Line 8 to the respective max day and max hour extra capacities shown in Columns G and J of Table 5-11.
Table 5-12: Calculation of Fire Service Capacity
5.7. Final Allocation of Revenue Requirement to Cost
Components
The COS can now be completed by making the final adjustments shown in Table 5-13. Line 4 is the result of the
preliminary cost allocation to cost components in Table 5-6. Line 6 allocates General costs to all cost components
except Recycled Water and Revenue Offset, based on the percentage of costs allocated in the preliminary cost of
service (Line 5). Line 7 adjusts public fire peaking costs (Columns C & D) to potable meter capacity (Column E).
The amount of peaking costs adjusted for public fire is calculated by multiplying the max day and max hour allocated
costs in Line 4 and Line 6 by the max day and max hour extra capacity percentages9. Line 8 allocates costs from the
max day and max hour (Column C & D) to private fire (Column J). The percentage of peaking costs allocated to
private fire is calculated by multiplying the max day and max hour allocated costs on Line 4 and Line 6 by the
percentage of private fire extra capacity10. Line 9 allocates a portion of max day and max hour costs to the meter
component so that these costs can be collected through a fixed charge. This is so the District meets its revenue stability
goals and collects a portion of capacity through a fixed charge. Line 10 allocates a portion of Customer Billing to
private fire for billing associated costs since Private fire customers receive customer service and bills. The final
adjusted COS allocation to the cost components is shown in Line 11.
9 The max day and max hour percentage of extra capacity can be calculated dividing the extra capacity demanded by
public fire (Line 6, Table 5-12) by the total extra capacity (Line 9, Table 5-12).
10 The max day and max hour percentage of extra capacity can be calculated dividing the extra capacity demanded by
private fire (Line 7, Table 5-12) by the total extra capacity (Line 9, Table 5-12).
Line
No.Fire Estimate Max Day Max Hour
(A)(B)(C)
1 Hours for Typical Fire: 4
2 Fireflow Required for Typical Fire: 4,000 (gallons per minute)
3
4 Cost to Public Fire 83%83%
5 Capacity Demanded for Fire (hcf/day)1,283 6,417
6 Public Fire 1,068 5,341
7 Private Fire 215 1,076
8 Total Fire 1,283 6,417
9 Total Extra Capacity - Fire and Potable
(hcf/day)6,584 15,389
34 SAN DIEGUITO WATER DISTRICT
Utilizing the final COS (Line 11) as the numerator and the units of service derived in Table 5-11 as the denominators
(Line 12), we derive unit costs of service in Line 13. The total COS is divided by the respective units of service to
calculate the unit cost of each cost component. Meter costs are divided by total meter equivalencies multiplied by six
bi-monthly bills to determine a cost per equivalent meter in Table 5-7, and annual customer costs are divided by the
estimated number of annual bi-monthly bills, from the number of meters in Table 5-7 and number of lines in Table
5-8. Fire protection costs are divided by total equivalent private fire demand from Table 5-8 to determine a cost per
equivalent demand for private fire connections. The unit costs are used to distribute the cost components to service
and commodity rates.
Once the District’s expenses have been allocated to the cost causation components, rates are derived to collect the
total amount shown in Column L of Table 5-13.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 35
Table 5-13: Final Cost of Service Allocation to Cost Components
Line
No.Description Base Max Day Max Hour Meter Service
/ Capacity
Customer
Billing Conservation General Recycled
Water
Private Fire
Meter
Revenue
Offset Total
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)(K)(L)
1 Operating Expenses $7,841,491 $1,302,563 $929,501 $1,407,903 $922,491 $150,173 $2,824,003 $838,520 $59,542 $0 $16,276,186
2 Capital Expenses $1,517,454 $735,668 $768,803 $99,722 $0 $0 $0 $0 $0 $0 $3,121,647
3 Revenue Offsets ($682,548)($145,338)($119,826)($111,133)($68,499)($11,151)($209,695)$0 ($4,421)($540,800)($1,893,411)
4 Total Cost of Service $8,676,398 $1,892,893 $1,578,478 $1,396,491 $853,992 $139,022 $2,614,308 $838,520 $55,121 ($540,800)$17,504,422
5 Allocation of General Cost %59%13%11%10%6%1%0%0%0%0%100%
6 Allocation of General Cost $1,554,425 $339,122 $282,793 $250,189 $152,997 $24,907 ($2,614,308)$0 $9,875 $0 ($0)
7 Allocation of Public Fire to Meter $0 ($362,138)($645,980)$1,008,118 $0 $0 $0 $0 $0 $0 $0
8 Allocation to Private Fire $0 ($72,942)($130,113)$0 $0 $0 $0 $0 $203,055 $0 $0
9 Allocation Peak to Meter $0 ($341,418)($206,184)$547,601 $0 $0 $0 $0 $0 $0 $0
10 Allocation of Customer Bills to Private
Fire $0 $0 $0 $0 ($45,315)$0 $0 $0 $45,315 $0 $0
11 Adjusted Cost of Service $10,230,823 $1,455,518 $878,994 $3,202,400 $961,675 $163,928 $0 $838,520 $313,365 ($540,800)$17,504,422
12 Units of Service 2,347,303 5,300 8,972 95,781 72,216 1,939,869 17,352 2,127,218
13 Unit hcf hcf/day hcf/day Eq Meters/Year Customer Bills Conservation
hcf
Equivalant
Demand hcf
14 Unit Cost $4.36 $274.61 $97.97 $33.43 $13.32 $0.08
15 Unit $/hcf hcf/day hcf/day equi.
Line/month $/bill $/hcf
36 SAN DIEGUITO WATER DISTRICT
6. Potable Water Rate Design
This section calculates potable water rates based on the Cost of Service (Section 5). The rates developed in this section
will be referred to as the Cost of Service rates.
6.1. Existing Rate Structure and Rates
The District’s current rate structure has a fixed and variable component for all customers. The fixed service charge
is comprised of a bi-monthly Meter Service Charge, a San Diego County Water Authority (SDCWA) Infrastructure
Access Charge (IAC), and Fire Line Service Charge. The Fire Line Service Charge is only for those customers with
private fire protection connections. The variable rates for water consumption are tiered commodity charges for
residential customer classes and uniform commodity charges for non-residential customer classes. Table 6-1 shows
the current fixed service charges. Table 6-2 shows the current commodity rate per hundred cubic feet (HCF)11.
Table 6-1: Current Potable Bi-Monthly Fixed Charges
11 One hundred cubic foot is equivalent to 748 gallons.
Meter Size
Water Meter
Service
Charge
SDCWA
Infrastructure
Access
Charge
Fire Line /
Meter Service
Charge
Effective Date 6/1/2020 1/1/2021 6/1/2020
5/8"$45.16 $8.48 $9.61
3/4"$45.16 $8.48 $9.61
1"$66.50 $13.57 $9.61
1.5"$119.37 $25.43 $10.83
2"$183.06 $44.07 $18.88
3"$331.78 $81.38 $47.77
4"$544.61 $139.00 $97.59
6"$1,074.78 $254.30 $276.40
8"$1,711.73 $440.78 $584.82
WATER FINANCIAL PLAN AND RATE STUDY REPORT 37
Table 6-2: Current Potable Commodity Rates
6.2. Bi-Monthly Water Meter Service Charge
Raftelis proposes that the District retain its bi-monthly water meter fixed charge by meter size for potable water.
There are two cost components that comprise the total proposed bi-monthly fixed charge:
1. Customer Billing
2. Meter Service & Capacity.
The Customer Billing component recovers costs associated with meter reading, customer billing, as well as customer
service costs. These costs are the same for all meter sizes as it costs the District the same to provide billing and
customer services to any account, regardless of meter size. The Meter Service / Capacity cost component recognizes
Class Tier Tier Width Rate ($/HCF)
Effective Date 6/1/2020
SFR Tier 1 12 $3.19
Tier 2 20 $5.06
Tier 3 40 $6.25
Tier 4 >40 $7.12
SFR -w- Agricultural Tier 1 12 $3.19
Tier 2 20 $5.06
Tier 3 40 $6.25
Tier 4 >40 $6.25
SFR -w- Commercial Tier 1 12 $3.19
Tier 2 20 $5.06
Tier 3 40 $6.25
Tier 4 >40 $6.25
Multi-Family Residence (MFR) - per Dwelling Unit Tier 1 8 $3.19
Tier 2 12 $5.06
Tier 3 16 $6.25
Tier 4 >16 $7.12
MFR -w- Agriculture Tier 1 8 $3.19
Tier 2 12 $5.06
Tier 3 16 $6.25
Tier 4 >16 $6.25
MFR -w- Commercial Tier 1 8 $3.19
Tier 2 12 $5.06
Tier 3 16 $6.25
Tier 4 >16 $6.25
Agriculture Uniform $5.42
Commercial Uniform $5.42
Public Uniform $5.93
Government Uniform $5.93
Landscaping Uniform $6.25
Construction Uniform $6.36
38 SAN DIEGUITO WATER DISTRICT
the fact that the District incurs fixed cost s related to maintaining/replacing meters. These costs generally increase
with meter size increases, as it takes less time and resources to repair and maintain smaller meters compared to a
larger meter. Table 6-3 shows the derivation of the components for the base meter size (3/4-inch).
Table 6-3: Derivation of Bi-Monthly Fixed Water Meter Service Charge
Table 6-4 shows the calculation of the total bi-monthly fixed charge for each meter size. The Meter Service/Capacity
component is based on the number of equivalent meters for each meter size. It reflects the fact that larger meters have
the potential to demand more capacity compared to smaller meters. The potential capacity demanded is proportional
to the potential flow through each meter size as established by the AWWA hydraulic capacity ratios, shown in
Column C. The ratios show the potential flow through each meter size compared to the flow through a 3/4 -inch
meter. The meter service component for larger meters shown are calculated by multiplying the capacity ratio by the
bimonthly meter service charge, derived in Table 6-3. Meter Service and Capacity (Column E) is calculated by
multiplying the capacity ratio by the bi-monthly potable meter capacity charge, as derived in Line 9 of Table 6-3.
Allocating capacity costs by meter size is a common way to recover the fixed cost s and increase revenue stability.
The Customer Billing and Meter Service / Capacity components are combined to yield the total proposed fixed
charge by meter size.
Table 6-4: Calculation of Bi-Monthly Fixed Water Meter Charge
Line
No.Description Charge Basis
1 Customer Service Charge Component Per Account
2 Customer Service Costs $961,675
3 Number of Annual Bills 72,216
4 Bi-monthly Customer Service Charge $13.32
5
6 Meter Service + Capacity Per Equivalent Meter
7 Meter Service + Capacity Costs $3,202,400
8 Number of Equivalent Meters 95,781
9 Bi-monthly Meter Service $33.43
Line
No.Meter Size
Number of
Accounts
(Potable)
Meter Ratio Meter Service
and Capacity
Customer
Billing
Proposed Bi-
Monthly
Service
Charge
(A)(B)(C)(D)(E)(F)
1 5/8"3,673 1.00 $33.43 $13.32 $46.75
2 3/4"5,995 1.00 $33.43 $13.32 $46.75
3 1"1,519 1.67 $55.84 $13.32 $69.15
4 1.5"429 3.33 $111.34 $13.32 $124.65
5 2"414 5.33 $178.21 $13.32 $191.52
6 3"2 10.00 $334.35 $13.32 $347.66
7 4"3 16.67 $557.35 $13.32 $570.67
8 6"0 33.33 $1,114.38 $13.32 $1,127.69
9 8"1 53.33 $1,783.07 $13.32 $1,796.38
WATER FINANCIAL PLAN AND RATE STUDY REPORT 39
6.3. Private Fire
Private Fire bi-monthly fixed charges are composed of three cost components: Meter Maintenance, Billing &
Customer Service, and the Fire Capacity Costs components. The Meter Maintenance cost component recovers fixed
costs related to reading, maintaining, and replacing the ¾-inch and 1-inch fire meters. Meter maintenance costs
generally increase with meter size, as it takes less time and resources to repair and maintain smaller meters compared
to a larger meter. The Customer Billing component recovers costs associated with meter reading and customer billing.
These costs are the same for all meter sizes as it costs the District the same to provide billing and customer services
to Private Fire accounts, regardless of fire line meter size.
Table 6-5 shows the derivation of the private fire rate components. Lines 2 - 4 show the fire meter maintenance
charge for the customers with fire meters. This accounts for the expense of reading and repairs to the meter. The
charge (Line 4) can be calculated by dividing the amount allocated12 to private fire, including the General reallocation
in the COS (Line 2), by the total amount of fire meters (Line 3). Lines 7 – 9 show the calculation of the
Billing/Customer Service charge component. The Billing Customer Service charge component (Line 9) is calculated
by dividing the amount allocated13 to private fire from Customer Billing (Line 7) by the number of annual fire bills
(Line 8). Lines 12 – 14 show the calculation of the Fire Fighting Capacity charge component. The charge (Line 14)
is calculated by dividing the amount allocated14 to private fire for firefighting capacity from Peaking (Line 12) by the
equivalent potential demand (Line 13 & Table 5-8). Line 16 shows the total amount collected through all charges for
fire protection.15
Table 6-5: Calculation of Private Fire Charges
12 The allocation to Private Fire Meter from the Cost of Service and General Allocation is found in Line 4 and Line 6 of
Table 5-13.
13 The allocation to Private Fire Meter from Customer Billing is found in Line 10 of Table 5-13.
14 The allocation to Private Fire Meter from Peaking is found in Line 8 of Table 5-13.
15 The total Private Fire Costs allocated in the COS are found in Line 11 of Table 5-13.
Line
No.Description Charge Basis
1 Meter Maintenance Per Fire Meter
2 Cost to Maintain Private Fire Meters $64,996
3 Number of Fire Meters 2,262
4 Bi-Monthly Fire Meter Maintenance $4.79
5
6 Billing/Customer Service Per Bill
7 Costs to Bill Private Fire Customers $45,315
8 Number of Fire Bills (Annual):14,736
9 Bi-Monthly Billing Component $3.08
10
11 Fire Fighting Capacity Per Equivalent Demand
12 Fire Capacity Costs $203,055
13 Equivalent Potential Demand (Private Fire): 2,892
14 Fire Fighting Capacity Component $1.95
15
16 Total Private Fire Costs $313,365
40 SAN DIEGUITO WATER DISTRICT
Table 6-6 shows the calculation of the total bi-monthly private fire charge for each private fire connection size. The
total proposed private fire charge connection size is calculated by combining the Meter Maintenance,
Billing/Customer Service, and firefighting capacity costs. The Meter Maintenance component (Line 4, Table 6-5)
applies to 1” compound meter customers. It reflects the fact that Private Fire customers with fire meters have periodic
maintenance performed on the meter. The Customer Billing component (Line 9, Table 6-5) applies uniformly to all
private fire customers. Firefighting capacity costs are proportional to the potential flow through each private fire line
or size (Column B), shown in Table 5-8. The firefighting capacity costs are calculated by multiplying the capacity
ratio (Column C) by the bimonthly firefighting capacity cost (Line 14, Table 6-5).
Table 6-6: Derivation of Private Fire Rates
6.4. Commodity Rates ($/HCF)
Raftelis proposes that the District retain its commodity rate structure and tier breakpoints. The District has a tiered
commodity rate for residential customers and a uniform commodity rate for non-residential customers. The
commodity rate has five cost components:
1. Water Supply
2. Delivery
3. Peaking
4. Conservation
5. Revenue Offset.
Water Supply costs are costs associated with obtaining and treating water to make it ready for transmission and
distribution. The District has three sources of water; local water from Lake Hodges16 (local raw), SDCWA imported
treated, and SDCWA imported untreated.
Delivery costs are the operating and capital costs associated with delivering water to all customers at a constant
average rate of use – also known as serving customers under average daily demand conditions. Therefore , delivery
costs are spread over all units of water which results in equal delivery unit costs for all classes and tiers.
Peaking costs, or extra-capacity costs, represent costs incurred to meet customer peak demands in excess of a base
use (or in excess of average daily demand). Total extra capacity costs are comprised of maximum day and maximum
hour demands, as discussed in Section 5. For the portion of extra capacity costs collected through the commodity
16 The District jointly retains water rights to the surface water stored in Lake Hodges with the Sante Fe Irrigation District
and the City of San Diego.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 41
rate, peaking costs are distributed to each tier and class using peaking factors derived from customer use data – this
is shown in columns 2 and 3 in Table 5-8. For the portion of extra capacity costs collected through the fixed charge,
AWWA hydraulic capacity factors are used to distribute extra capacity costs to customer classes – this is shown in
Column B of Table 5-7.
Conservation costs are costs that cover water conservation and efficiency programs and efforts. These programs are
targeted at high-volume water users. Therefore, conservation costs were allocated to Tier 4, for which conservation
programs are designed to promote water efficiency. Allocation of conservation costs to upper tiers helps provide a
strong price signal for conservation, consistent with Article X Section 2 of the State of California Constitution, and
proportionately allocates such costs to those customers whose greater demand creates the need for conservation and
efficiency programs and efforts.
Revenue Offset is a cost component that applies a credit that applies a portion of property tax revenue to reduce
the rates to promote affordability for Tiers 1 and 2 as well as the Commercial class. The District has discretion on
how to use this non-rate revenue.
6.4.1. UNIT COST DERIVATION
Water Supply costs are associated with obtaining and treating water to make it ready for delivery. Base Costs are the
operating and capital costs associated with delivering water to all customers through the distribution system (not
including distribution storage) at a constant average rate of use, also known as serving customers under average daily
demand conditions (base use). Table 6-7 shows the Base Rate unit cost in dollars per HCF.
Table 6-7: Calculation of Base Rate Unit Cost
The supply rate for each tier and class is a function of the cost and amount of water allocated from each of the
District’s water sources. Table 6-8 shows the estimated volume purchased and sold (Table 2-5)17 from each water
source.
Table 6-8: Annual Water Use, Water Purchased, and Total Costs by Source
17 Water loss is considered for purchase water required to meet demand (water use), shown in Table 2-3.
Line
No.Water Supply Unit Cost
1 Base Cost $10,230,823
2 Water Use (hcf)2,347,303
3 Unit Cost ($/hcf)$4.36
42 SAN DIEGUITO WATER DISTRICT
Table 6-9 shows the unit cost per acre-foot to treat raw water18 at the R.E. Badger Filtration Plant19. The unit cost is
calculated by dividing the projected test year water treatment costs by the total volume of untreated water from all
District water sources.
Table 6-9: Cost to Treat Surface Water
The SDCWA imported water rates for treated and untreated water are updated on a calendar year (CY) basis. Table
6-10 shows the weighted average rate for FY 2022. Analysis of the District’s customers’ actual water use in FY 2019
and FY 2020 shows roughly 60% and 40% of water use occur in the first and second half of a fiscal year, respectively.
The weighted average rate for imported treated water, weighed by seasonal water use, is shown in Line 6. Similarly,
the weighted average rate for imported raw water is shown in Line 7.
Table 6-10: Estimated Imported Water Rate
Table 6-11 shows the total water supply cost purchased from each water source. Imported treated water (Line 1) does
not require additional treatment costs. Line 5 and Line 9 show the total supply cost of imported raw and local raw
water, including the additional cost of treatment (Table 6-9). This accounts for the treatment the raw water must
undergo before being provided to District’s customers.
18The FY 2022 Projected Treatment Costs are found in Table 4-1.
19 The R.E. Badger Filtration Plant is co-owned by the District and Santa Fe Irrigation System.
Line
No.Description CY 2021 Rate CY 2022 Rate
1 Months Effective July-December January-June
2 Percentage of Water Use 60%40%
3 Imported Treated $1,385 $1,436
4 Imported Raw $1,090 $1,138
5
6 Weighted Average Imported Treated Rate $1,405
7 Weighted Average Imported Raw Rate $1,109
WATER FINANCIAL PLAN AND RATE STUDY REPORT 43
Table 6-11: Supply Costs By Source
Table 6-12 shows the total cost of water produced by source. Line 1 and Line 2 are the calculated supply and
treatment costs (Table 6-11) per AF and HCF, respectively. Line 3 shows the supply cost accounting for lost water20.
Line 5 and Line 6 show the projected amount of water that will be purchased in FY 2022 (Table 6-8). Line 8 shows
the total cost of water produced, calculated by multiplying the cost of water (Line 6) by the projected water purchase
amount (Line 3).
Table 6-12: Total Cost of Water Produced
Table 6-13 shows the number of accounts and percentage distribution of accounts in each customer class for FY
2022.
20 This cost accounting for lost water maintains the water loss assumptions shown in Table 2-3.
Line
No.Description FY 2022
1 Imported Treated Water Rate (Treated M&I Rate)$1,405
2
3 Imported Raw Water Rate (Untreated Rate)$1,109
4 Cost to Treat Imported Untreated M&I Water $544
5 Cost to Obtain and Treat Untreated Imported Raw Water $1,653
6
7 Local Raw Water ($/AF)$74
8 Cost to Treat Lake Hodges Water ($/ AF)$544
9 Cost to Obtain and Treat Local Raw Water ($/AF)$618
Line
No.Description Imported
Treated Water
Treated
Imported Raw
Water
Treated Local
Raw Water Total
1 Cost of Water Produced ($/AF)$1,405 $1,653 $618
2 Cost of Water Produced ($/HCF)$3.23 $3.80 $1.42
3 Cost Accounting for Lost Water ($/hcf)$3.41 $4.01 $1.50
4
5 Water Purchased (AF)249 3,315 2,135 5,699
6 Water Purchased (HCF)108,464 1,444,147 930,006 2,482,617
7
8 Total Cost of Water Produced $349,894 $5,481,121 $1,318,967 $7,149,983
44 SAN DIEGUITO WATER DISTRICT
Table 6-13: Customer Account Distribution
Table 6-14 shows the source and total volume of water allocated to each class in proportion to the number of
accounts by class (Table 6-13).
Table 6-14: Use By Source Distributed by Customer Accounts
Table 6-15 shows the average supply cost by class. Line 1 shows the water supply cost, accounting for water loss
(from Table 6-12). The average supply cost for each customer class is calculated by the weighted average - weighted
by the use from each source - of the supply cost for each source. The average supply, in column F, can be calculated
by adding the total supply costs21 and dividing by the total use in each class (Column E). Column F shows the average
supply cost for each class used to derive rates for each class. The average cost of water supply for all classes is shown
in Line 8 – though this is only used in Table 6-20
21 For example, the total supply costs for Residential customers is calculated by multiplying the amount of water from
each source, shown in Line 3, Columns B, C, & D, and unit costs shown in Line 1, Columns B, C, & D.
Line
No.Description Number of
Accounts % of Accounts
1 Single Family Residence 9,345 78%
2 Single Family - Agriculture 23 0%
3 Single Family - Commercial 9 0%
4 Multi-family 1,713 14%
5 Multi-family - Agriculture 5 0%
6 Multi-family - Commercial 5 0%
Subtotal 92%
7 Ag/Commercial 593 5%
8 Institutional 109 1%
9 Landscaping 234 2%
10 Construction 0 0%
11 All Classes (No Fire)0 0%
12 Total 12,036 100%
WATER FINANCIAL PLAN AND RATE STUDY REPORT 45
Table 6-15: Calculation of Supply Costs by Class
Table 6-16 shows the calculation of the supply unit cost for each residential tier (Column I). The water allocated to
the residential class (line 3 of Table 6-15) is allocated to each tier as shown in column H. Tier 1 (line 1) is allocated
local water. Tier 2 (line 3) is allocated the remaining amount of imported treated water and imported untreated water
in that order to meet its water demand. Tiers 3 and 4 (lines 3 and 4) are allocated solely imported treated water. The
weighted average supply cost by tier (Column I) is calculated by taking the weighted average of the supply cost by
source (Line 7 & Table 6-12), weighted by the use in each tier to produce the average supply cost by tier. The average
supply cost for the residential class as a whole, shown in the bottom right corner, is the same as th e residential-class
average supply cost Table 6-15.
Table 6-16: Calculation of Supply Costs by Residential Tier
6.4.2. DELIVERY UNIT COSTS
Delivery costs are spread over all units of water, which results in an equal delivery unit cost for all classes and tiers.
Table 6-17 shows the delivery unit cost. The delivery unit cost is calculated by subtracting the weighted average water
supply rate (Table 6-15) from the Base Rate (Table 6-7). The base rate is the cost to obtain, treat and deliver water
under average daily demand conditions. By subtracting the average supply rate, we identify the cost to deliver water
under the same conditions.
Table 6-17:Calculation of Delivery Unit Cost
Line
No.Tier Bi-Monthly
Break Point % of Use Use By Tier
(HCF)
Treated Local
Raw Water
Imported
Treated Water
Treated
Imported Raw
Water
Total Average Supply
Costs
(A)(B)(C)(D)(E)(F)(G)(H)(I)
1 Tier 1 12 50%905,404 810,936 94,468 0 905,404 $1.70
2 Tier 2 20 18%324,016 0 109 323,907 324,016 $4.01
3 Tier 3 40 19%340,953 0 0 340,953 340,953 $4.01
4 Tier 4 >40 14%250,330 0 0 250,330 250,330 $4.01
5 Total 100%1,820,703 810,936 94,578 915,190 1,820,703 $2.86
6
7 Average Supply Cost By Water Source ($/HCF)$1.50 $3.41 $4.01 $2.86
Total Water Supply By Source (HCF)
Line
No.Description
1 Base Rate - COS $4.36
2 Average Supply & Treatment Cost $3.05
3 Delivery Cost ($/HCF)$1.31
46 SAN DIEGUITO WATER DISTRICT
6.4.3. PEAKING UNIT COSTS
Table 6-18 shows the derivation of the unit peaking costs for all classes. The peaking costs in Column D are
derived in Section 5.22 The peaking rate is calculated by dividing the peaking costs (Column D) by the use (Colum
E) for each class and tier23.
Table 6-18: Calculation of Peaking Factor Unit Cost
6.4.4. CONSERVATION UNIT COSTS
Table 6-19 shows the calculation of the conservation unit costs by class and tier. The conservation rate component
is calculated by dividing the allocated conservation cost by customer class usage in the higher tiers. The District
concentrates conservation efforts on Residential Tier 4 users and the Landscape customer class. District Staff
22 The peaking costs are the sum of the Max Day and Max Hour costs for each class and tier.
23 Peaking rates are correlated with the peaking factor – a higher peaking factor correlates to a higher peaking rate.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 47
provided “Time and Resources” percentages which are used as the conservation costs24 allocation basis between
Residential and Landscape customers. Allocation of conservation costs to upper tiers helps provide a price signal for
conservation, consistent with Article X Section 2 of the State of California Constitution. It proportionately allocates
such costs to those customers whose greater demand creates the need for conservation and efficiency programs and
efforts. The remaining classes are not allocated conservation costs since the District does not focus on reducing their
water use, and therefore, these classes do not have a conservation rate.
Table 6-19: Conservation Unit Cost
6.4.5. REVENUE OFFSET UNIT COST
Table 6-20 shows the calculation of the revenue offsets to specific classes and tiers. As mentioned in Sections 5.2 and
5.3, half of the District’s property tax revenue was allocated specifically to tiers 1 and 2 and the Commercial (which
comprises the former Agricultural and Commercial classes) class. The District has discretion on how to use property
tax as non-rate revenue and has chosen to apply a portion of it to reduce the rates to promote affordability for
Residential tiers 1 and 2 and the Commercial class. The residential revenue offset is allocated to a tier based on water
use in tier 1 and tier 2. The commercial class revenue offset is calculated by dividing the allocated revenue offset
(Column C) by the class use (Column 4). The Institutional customer class does not receive a revenue offset since
public/government customers do not pay property tax and should not receive associated revenue offset benefits.25
Table 6-20: Derivation of the Revenue Offset
6.4.6. FINAL RATE DERIVATION
Table 6-21 shows the final rates for the commodity rate derivation by summing each unit cost to the total rate for
each tier and class is shown in Column I.
24 The total conservation costs were derived in Table 5-13.
25 The property tax revenue that was allocated to the Institutional (Public/Government) class based on flow in Table 5-8
was reallocated to the Commercial class.
Line
No.Class/Tier % of Time and
Resources
Allocated
Conservation
Cost
Use
(hcf)
Conservation
Rates
($/hcf)
(A)(B)(C)(D)(E)
1 Residential - Tier 4 84%$137,700 230,451 $0.60
2 Landscape 16%$26,229 147,719 $0.18
3 Total $163,928 378,170
Line
No.Class/Tier Tier
Breakpoint
Revenue
Offset
Allocation
Factor Use (hcf)
Weighted
Allocation
Factor
Percent
Allocation of
Propery Tax to
Each Tier
Allocated
Revenue
Offset
Revenue
Offset ($/hcf)
(A)(B)(C)(D)(E)(F)(G)(H)(I)
1 Residential Classes (SFR & MFR)
2 Tier 1 ($230,180)1.00 905,404 905,404 74%($340,884)($0.38)
3 Tier 2 ($82,374)1.00 324,016 324,016 26%($121,992)($0.38)
4 Tier 3 ($86,680)0.00 340,953 0 0%$0 $0.00
5 Tier 4 ($63,641)0.00 250,330 0 0%$0 $0.00
6 Total Residential Classes ($462,875)1,820,703 1,229,420 0 ($462,875)
7 Commercial/AG Uniform ($77,925)1.00 306,515 306,515 0 0 ($0.25)
8 Institutional Uniform $0 0.00 54,769 $0.00
9 Landscaping Uniform $0 0.00 147,719 $0.00
10 Construction Uniform $0 0.00 17,597 $0.00
11 Total 0 ($540,800)2,347,303
48 SAN DIEGUITO WATER DISTRICT
Table 6-21:Derivation of Rates by Tier and Class
Line
No.Class/Tier Tier
Breakpoint
Peaking
Factors
Delivery
($/HCF)
Peaking
($/HCF)
Conservation
($/HCF)
Revenue
Offset
($/HCF)
Total
Proposed
Rate ($/HCF)
(A)(B)(C)(E)(F)(G)(H)(I)
1 Single Family Residence
2 Tier 1 12 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
3 Tier 2 20 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
4 Tier 3 40 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
5 Tier 4 >40 2.05 $1.31 $1.94 $0.60 $0.00 $7.86
6 Single Family - Agriculture
7 Tier 1 12 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
8 Tier 2 20 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
9 Tier 3 40 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
10 Tier 4 >40 1.81 $1.31 $1.62 $0.00 $0.00 $6.95
11 Single Family - Commercial
12 Tier 1 12 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
13 Tier 2 20 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
14 Tier 3 40 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
15 Tier 4 >40 1.81 $1.31 $1.62 $0.00 $0.00 $6.95
16 Multi-family
17 Tier 1 8 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
18 Tier 2 12 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
19 Tier 3 16 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
20 Tier 4 >16 2.05 $1.31 $1.94 $0.60 $0.00 $7.86
21 Multi-family - Agriculture
22 Tier 1 8 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
23 Tier 2 12 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
24 Tier 3 16 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
25 Tier 4 >16 1.81 $1.31 $1.62 $0.00 $0.00 $6.95
26 Multi-family - Commercial
27 Tier 1 8 1.05 $1.31 $0.63 $0.00 ($0.38)$3.26
28 Tier 2 12 1.27 $1.31 $0.91 $0.00 ($0.38)$5.86
29 Tier 3 16 1.55 $1.31 $1.28 $0.00 $0.00 $6.61
30 Tier 4 >16 1.81 $1.31 $1.62 $0.00 $0.00 $6.95
31 Commercial/AG Uniform 1.26 $1.31 $0.90 $0.00 ($0.25)$5.61
32 Institutional Uniform 1.52 $1.31 $1.24 $0.00 $0.00 $6.19
33 Landscaping Uniform 1.55 $1.31 $1.28 $0.18 $0.00 $6.49
34 Construction Uniform 1.56 $1.31 $1.29 $0.00 $0.00 $6.62
WATER FINANCIAL PLAN AND RATE STUDY REPORT 49
7. Recycled Water Rate Design
This section calculates recycled water rates based on the Cost of Service (Section 5). The rates developed in this
section will be referred to as the Cost of Service recycled water rates.
7.1. Existing Rate Structure and Rates
Table 7-1 shows the current fixed and variable recycled water rates. The District charges recycled water customers
on a monthly basis26. Fixed charges are anchored to the potable bi-monthly rate charged on a monthly basis. Current
recycled commodity rates are based on an 80% price differential from potable commodity rates by customer class.
Table 7-1: Current Recycled Water Rates
7.2. Recycled Water Rates
Rates developed in this section will recover the amount allocated to the Recycled Water cost component in Table
5-13. The District provides recycled water from San Elijo Reclamation facility. The distribution system is managed
by the San Elijo Joint Power Authority (SEJPA). The District pays a uniform rate for SEJPA recycled water. The
District does not own or maintain the recycled water system costs, however, it does bill customers.
The District sets recycled water fixed charges equal to the fixed charge for potable meters (Table 6-3). Table 7-2
shows the proposed fixed service charge and the total revenue collected from fixed charges.
26 The difference in billing cycles make recycled water fixed charges appear to be half of the potable fixed charge.
50 SAN DIEGUITO WATER DISTRICT
Table 7-2: Proposed Monthly Recycled Water Fixed Service Charge
Raftelis recommends the District charge its customers a uniform rate for recycled water since it is charged a uniform
rate from SEJPA and moreover does not incur infrastructure costs to meet peaking demand. The current recycled
water commodity rates provide an 80% discount from the potable commodity rates. Table 7-3 shows the derivation
of the unit rate for all recycled water customers. Line 1 shows the total allocated costs to the Recycled Water utility
(Table 5-13). Line 2 shows the total recycled water revenue collected from the fixed service charge (Table 7-2). Line
3 is the amount of revenue remaining to be collected from commodity rates, calculated by subtracting the fixed
revenues from the allocated recycled water costs. Line 5 shows the estimated amount of recycled water use. Line 6
shows the recycled water commodity rate for all recycled water customers. The unit rate is calculated by dividing the
recycled water costs (Line 3) by the total recycled water use (Line 5).
Table 7-3: Derivation of Recycled Water Commodity Rate
Line
No.Meter Size
Proposed
Potable Bi-
Monthly
Service
Charge
Proposed
Monthly
Service
Charge
Number of
Recycled
Water
Customers
Total Revenue
from Fixed
Charges
(A)(B)(C)(D)(E)
1 5/8"$46.75 $23.38 0 $0
2 3/4"$46.75 $23.38 1 $281
3 1"$69.15 $34.58 15 $6,224
4 1.5"$124.65 $62.33 10 $7,479
5 2"$191.52 $95.76 62 $71,247
6 3"$347.66 $173.83 7 $14,602
7 4"$570.67 $285.34 3 $10,272
8 6"$1,127.69 $563.85 0 $0
9 8"$1,796.38 $898.19 0 $0
10 Total 98 $110,104
Line
No.Class/Tier
1 Recycled Water Allocated Costs $838,520
2 Recycled Revenues from Fixed Charges $110,104
3 Remaining Recycled Water Costs $728,416
4
5 Recycled Water Usage (HCF)135,174
6 Recycled Water Volumetric Rate $5.39
WATER FINANCIAL PLAN AND RATE STUDY REPORT 51
8. Proposed Rates
This section shows the proposed rates for FY 2023 and FY 2024 by applying the revenue adjustments shown in Table
4-4 to rates derived for FY 2022 in Section 6 and Section 7. However, the rates for FY 2022 are set using the cost of
service analysis and do not equate to increasing the current rates by the revenue adjustment for FY 2022 (5.5%). The
cost of service analysis is detailed in Section 5.
8.1. Proposed Three-Year Rates
8.1.1. FIXED POTABLE BI-MONTHLY SERVICE CHARGES
Table 8-1 shows the proposed bi-monthly service charge. Table 8-2 shows the proposed fire service charges. The
proposed fire service charges apply to all customers with private fire service connections. The rates for t he current
and proposed bi-monthly service charges and fire service charges are calculated based on the meter size and diameter
of the fire line serving a property, respectively. The proposed rates are rounded to the cent.
Table 8-1: Proposed Potable Bi-Monthly Service Charges
Table 8-2: Proposed Fire Service Charges
8.1.2. PROPOSED POTABLE COMMODITY RATES
Table 8-3 shows commodity rates for the next three years. Commodity rates are charged for each unit (HCF) of
water. All rates are rounded to the cent.
FY 2021 FY 2022 FY 2023 FY 2024
Meter Size Current Proposed Proposed Proposed
5/8"$45.16 $46.75 $49.56 $52.78
3/4"$45.16 $46.75 $49.56 $52.78
1"$66.50 $69.15 $73.30 $78.06
1.5"$119.37 $124.65 $132.13 $140.72
2"$183.06 $191.52 $203.01 $216.21
3"$331.78 $347.66 $368.52 $392.47
4"$544.61 $570.67 $604.91 $644.23
6"$1,074.78 $1,127.69 $1,195.35 $1,273.05
8"$1,711.73 $1,796.38 $1,904.16 $2,027.93
FY 2021 FY 2022 FY 2023 FY 2024
Meter Size/Line Diameter Current Proposed Proposed Proposed
1"$9.61 $9.81 $10.40 $11.08
1.5"$10.83 $8.74 $9.26 $9.86
2"$18.88 $15.15 $16.06 $17.10
3"$47.77 $38.15 $40.44 $43.07
4"$97.59 $77.81 $82.48 $87.84
6"$276.40 $220.17 $233.38 $248.55
8"$584.82 $465.72 $493.66 $525.75
52 SAN DIEGUITO WATER DISTRICT
Table 8-3: Proposed Commodity Rates by Class/Tier
8.1.3. PROPOSED RECYCLED WATER RATES AND CHARGES
Table 8-4 shows recycled water charges rates for the next three years. Recycled water customers are billed monthly.
The fixed charge is set to be half the potable bi-monthly fixed charge and based on the meter size serving the customer.
Commodity rates are charged for each unit (HCF) of recycled. All rates are rounded to the cent.
FY 2021 FY 2022 FY 2023 FY 2024
Class/Tier Tier
Breakpoint Current Proposed Proposed Proposed
Single Family Residence
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $7.12 $7.86 $8.33 $8.87
Single Family - Agriculture
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $6.25 $6.95 $7.37 $7.85
Single Family - Commercial
Tier 1 12 $3.19 $3.26 $3.46 $3.68
Tier 2 20 $5.06 $5.86 $6.21 $6.61
Tier 3 40 $6.25 $6.61 $7.01 $7.47
Tier 4 >40 $6.25 $6.95 $7.37 $7.85
Multi-family
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $7.12 $7.86 $8.33 $8.87
Multi-family - Agriculture
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $6.25 $6.95 $7.37 $7.85
Multi-family - Commercial
Tier 1 8 $3.19 $3.26 $3.46 $3.68
Tier 2 12 $5.06 $5.86 $6.21 $6.61
Tier 3 16 $6.25 $6.61 $7.01 $7.47
Tier 4 >16 $6.25 $6.95 $7.37 $7.85
Commercial/AG Uniform $5.42 $5.61 $5.95 $6.34
Institutional Uniform $5.93 $6.19 $6.56 $6.99
Landscaping Uniform $6.25 $6.49 $6.88 $7.33
Construction Uniform $6.36 $6.62 $7.02 $7.48
WATER FINANCIAL PLAN AND RATE STUDY REPORT 53
Table 8-4: Proposed Recycled Water Rates
FY 2021 FY 2022 FY 2023 FY 2024
Current Proposed Proposed Proposed
Fixed Meter Charges
Meter Size
5/8"$22.58 $23.38 $24.78 $26.39
3/4"$22.58 $23.38 $24.78 $26.39
1"$33.25 $34.58 $36.65 $39.03
1.5"$59.69 $62.33 $66.07 $70.36
2"$91.53 $95.76 $101.51 $108.11
3"$165.89 $173.83 $184.26 $196.24
4"$272.31 $285.34 $302.46 $322.12
6"$537.39 $563.85 $597.68 $636.53
Commodity Rates ($/HCF)
Customer Class
Agriculture $4.34 $5.39 $5.71 $6.08
Commercial $4.34 $5.39 $5.71 $6.08
Public $4.74 $5.39 $5.71 $6.08
Government $4.74 $5.39 $5.71 $6.08
Landscaping $5.00 $5.39 $5.71 $6.08
Construction $5.09 $5.39 $5.71 $6.08
54 SAN DIEGUITO WATER DISTRICT
9. Bill Impacts
This section discusses bill impacts for each potable water customer class. It is essential to understand how the
proposed rates would impact the District’s customers. The customer impact analysis is a powerful tool to assist
elected officials in making informed decisions. All customers will experience an increase in the fixed service charge.
Note that customer bill impacts will vary with each customers’ meter size and commodity water use.
The monetary impact at various usage levels in sample customer bills below assume bi-monthly billing and compare
bills under current rates/charges with proposed rates/charges effective January 1, 2022. Districts staff anticipate that
SDCWA IAC pass-through charges for 2022 will not increase (Table 6-1).
9.1. Customer Bills Impacts
Table 9-1 shows the water bills for typical Single-Family Residential (SFR) customers with a ¾-inch meter for a bi-
monthly billing period at various water consumption levels under current and proposed rates. The average and mode
(most common) bi-monthly water usage for SFR customer class is 23 and 11 HCF, respectively.
Table 9-1: Bill Impacts for Single Family Residence
Table 9-2 shows the water bills for typical Single-Family – Agricultural customers with a 1½ inch meter for a bi-
monthly billing period at various water consumption levels under current and proposed rates. The average and mode
(most common) bi-monthly water usage for the Single-Family - Agricultural customer class is 121 and 8 HCF,
respectively.
Table 9-2: Bill Impacts for Single Family - Agricultural
Table 9-3 shows the water bills for typical Single-Family - Commercial customers with a 1-inch meter for a bi-
monthly billing period at various water consumption levels under current and proposed rates. The average and mode
(most common) bi-monthly water usage for the Single-Family - Commercial customer class is 33 and 13 HCF,
respectively.
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 12 $91.92 $94.35 $2.43
2 24 $157.40 $167.67 $10.27
3 32 $207.40 $220.55 $13.15
4 40 $257.40 $273.43 $16.03
5 48 $314.36 $336.31 $21.95
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 30 $286.06 $302.18 $16.12
2 60 $473.56 $507.28 $33.72
3 126 $886.06 $965.98 $79.92
4 140 $973.56 $1,063.28 $89.72
5 180 $1,223.56 $1,341.28 $117.72
WATER FINANCIAL PLAN AND RATE STUDY REPORT 55
Table 9-3: Bill Impacts for Single Family - Commercial
Table 9-4 shows the water bills for typical Multi-Family Residential (MFR) customers with a ¾-inch meter
for a bi-monthly billing period at various water consumption levels under current and proposed rates. The
bill impacts assume a multi-family residence with two dwelling units. The average and mode (most common)
bi-monthly water usage for the MFR customer class is 47 and 14 HCF, respectively.
Table 9-4: Bill Impacts for Multi-Family Residence
Table 9-5 shows the water bills for typical Multi-Family – Agricultural customers with a 2-inch meter for a bi-monthly
billing period at various water consumption levels under current and proposed rates. The bill impacts assume a multi-
family residence with two dwelling units. The average and mode (most common) bi-monthly water usage for the
Multi-Family – Agricultural customer class is 293 and 297 HCF, respectively.
Table 9-5: Bill Impacts for Multi-Family - Agricultural
Table 9-6 shows the water bills for typical Single-Family Residential (SFR) customers with a 1-inch meter for a bi-
monthly billing period at various water consumption levels under current and proposed rates. The bill impacts
assume a multi-family residence with two dwelling units. The average and mode (most common) bi-monthly water
usage for the Multi-Family – Commercial customer class is 41 and 11 HCF, respectively.
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 10 $111.97 $115.32 $3.35
2 20 $158.83 $168.72 $9.89
3 34 $246.33 $261.26 $14.93
4 40 $283.83 $300.92 $17.09
5 50 $346.33 $370.42 $24.09
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 26 $157.66 $167.49 $9.83
2 40 $252.12 $270.03 $17.91
3 50 $323.32 $348.63 $25.31
4 80 $536.92 $584.43 $47.51
5 100 $679.32 $741.63 $62.31
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 100 $793.65 $860.11 $66.46
2 200 $1,418.65 $1,555.11 $136.46
3 300 $2,043.65 $2,250.11 $206.46
4 400 $2,668.65 $2,945.11 $276.46
5 500 $3,293.65 $3,640.11 $346.46
56 SAN DIEGUITO WATER DISTRICT
Table 9-6: Bill Impacts for Multi-Family - Commercial
Table 9-7 shows the water bills for typical Agricultural/Commercial customers with a 5/8-inch meter27 for a bi-
monthly billing period at various water consumption levels under current and proposed rates . The average and
mode (most common) bi-monthly water usage for the Agricultural/Commercial customer class is 86 and 7 HCF,
respectively.
Table 9-7: Bill Impacts for Agricultural/Commercial
Table 9-8 shows the water bills for typical Institutional customers with a 2-inch meter for a bi-monthly billing period
at various water consumption levels under current and proposed rates. The average and mode (most common) bi-
monthly water usage for the Institutional customer class is 84 and 1 HCF, respectively.
Table 9-8: Bill Impacts for Institutional
27 The average meter size for Agricultural customers is 2”. Agricultural customers average water use is about 250 hcf.
Line
No.
Use
(HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 10 $111.97 $115.32 $3.35
2 20 $151.35 $158.32 $6.97
3 42 $284.09 $304.14 $20.05
4 60 $396.59 $429.24 $32.65
5 80 $521.59 $568.24 $46.65
Line
No.Use (HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 40 $270.44 $279.63 $9.19
2 80 $487.24 $504.03 $16.79
3 120 $704.04 $728.43 $24.39
4 160 $920.84 $952.83 $31.99
5 200 $1,137.64 $1,177.23 $39.59
Line
No.Use (HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 20 $345.73 $359.39 $13.66
2 60 $582.93 $606.99 $24.06
3 88 $748.97 $780.31 $31.34
4 100 $820.13 $854.59 $34.46
5 200 $1,413.13 $1,473.59 $60.46
WATER FINANCIAL PLAN AND RATE STUDY REPORT 57
Table 9-9 shows the water bills for typical Landscape customers with a 2-inch meter for a bi-monthly billing period
at various water consumption levels under current and proposed rates. The average and mode (most common) bi-
monthly water usage for the Landscape customer class is 105 and 1 HCF, respectively.
Table 9-9: Bill Impacts for Landscape
Table 9-10 shows the water bills for typical construction customers with a ¾-inch meter for a bi-monthly billing
period at various water consumption levels under current and proposed rates. The average bi-monthly water usage
for the Institutional customer class is 10 HCF.
Table 9-10: Bill Impacts for Construction
Line
No.Use (HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 26 $389.63 $404.33 $14.70
2 50 $539.63 $560.09 $20.46
3 110 $914.63 $949.49 $34.86
4 160 $1,227.13 $1,273.99 $46.86
5 300 $2,102.13 $2,182.59 $80.46
Line
No.Use (HCF)
Current Bi-
Monthly Bill
Proposed Bi-
Monthly Bill
Difference
($)
1 4 $79.08 $81.71 $2.63
2 6 $91.80 $94.95 $3.15
3 10 $117.24 $121.43 $4.19
4 16 $155.40 $161.15 $5.75
5 28 $231.72 $240.59 $8.87
58 SAN DIEGUITO WATER DISTRICT
10. Drought Rates
10.1. Drought Rate Background
This section documents the development of Drought Rates to be implemented only during a declared water supply
shortage response. This section provides an overview of the water shortage emergency stages, corresponding revenue
impacts, drought rate calculations, and a summary of proposed consumption charges at each stage effective January
1, 2022, January 1, 2023, and January 1, 2024. The drought rates calculated in this section are separate charges
independent from the water rates derived in Section 7.
The District would like to update the drought rates using the existing methodology. Under District direction, Raftelis
updated the drought rates to be assessed per unit (HCF) of water. The percent reduction in water demand during
each water shortage emergency stage is defined in the District’s Water Shortage Contingency Plan, approved by the
Board as a part of the 2020 Urban Water Management Plan and Municipal Code. The District can establish drought
rates to:
• Recover lost revenue due to decreased consumption during a drought; and
• Encourage water conservation to meet the desired conservation goals for each drought stage.
The District is subject to penalties from the SDCWA should it exceed it s water allocation. Also, the District may be
subject to penalties from the State Water Resources Control Board if it does not reach future mandated water use
reductions. Drought Rates help maximize the probability that the District will escape penalties. Drought Rates will
still be needed to recoup lost revenues as District customers curtail their water consumption.
Revenue Collection during a Drought
Water shortage emergencies can have significant impacts on an agency’s financial stability. During a drought, the
District’s revenue requirement (costs) decreases along with revenue. However, the District’s revenue decreases more
than its costs do. The majority of the District’s costs are fixed (salaries, benefits, debt service, etc.) Drought Rates are
required to recover lost revenue to cover its fixed costs. Raftelis recommends that the District utilize Drought Rates
as part of a cohesive and fiscally sound response to water shortage emergencies. Drought rates are a mechanism to
maintain revenue stability and achieve debt coverage requirements during a water shortage emergency.
Customer Bills during a Drought
Provided that customers cut back their water use in line with the drought cutback goal, their total water bill should
be equal to or lower than their bill during “normal” water/rainfall years. Conversely, those that do not cut back
consumption will face higher charges.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 59
10.2. Derivations of Drought Rates
Drought rates recover the projected decrease in net revenues experienced during each water shortage emergency
stage. To calculate drought rates, Raftelis adhered to the following steps:
1. Determine the lost revenue at each stage of reduction.
2. Account for variable water supply cost savings to offset a portion of the revenue loss.
3. Divide the net revenue loss at each stage by the respective estimated sales volume.
Table 10-1 shows the assumed reduction in water sales by customer class and tier at each drought stage.
60 SAN DIEGUITO WATER DISTRICT
Table 10-1: Estimated Cutback in Use by Percentage Reduction
Table 10-2 shows the total consumption charge revenue at each stage, calculated by multiplying projected water sales (Table 10-1) by the proposed
consumption charge (Table 8-3). The total estimated lost revenue is shown in line 35.
WATER FINANCIAL PLAN AND RATE STUDY REPORT 61
Table 10-2: Calculation of Lost Revenue
1 2 3 4 5 6
Line
No.
Customer
Class
FY 2022
Proposed
Rate Up to 10%Up to 20%Up to 30%Up to 40%Up to 50%Up to 60%
1 Single Family Residence
2 Tier 1 $3.26 $0 $0 $0 $95,523 $382,092 $477,615
3 Tier 2 $5.86 $73,225 $146,450 $292,901 $512,576 $659,027 $1,171,603
4 Tier 3 $6.61 $393,581 $688,766 $983,952 $1,298,817 $1,672,718 $1,869,509
5 Tier 4 $7.86 $346,551 $720,827 $1,178,275 $1,316,895 $1,386,206 $1,386,206
6 Single Family - Agriculture
7 Tier 1 $3.26 $0 $0 $0 $322 $1,289 $1,611
8 Tier 2 $5.86 $348 $696 $1,392 $2,435 $3,131 $5,567
9 Tier 3 $6.61 $3,463 $6,060 $8,658 $11,428 $14,718 $16,450
10 Tier 4 $6.95 $19,011 $39,543 $64,637 $72,242 $76,044 $76,044
11 Single Family - Commercial
12 Tier 1 $3.26 $0 $0 $0 $120 $481 $601
13 Tier 2 $5.86 $90 $179 $359 $628 $807 $1,435
14 Tier 3 $6.61 $429 $750 $1,072 $1,415 $1,823 $2,037
15 Tier 4 $6.95 $762 $1,585 $2,591 $2,896 $3,049 $3,049
16 Multi-family
17 Tier 1 $3.26 $0 $0 $0 $51,474 $205,894 $257,368
18 Tier 2 $5.86 $21,173 $42,345 $84,690 $148,208 $190,553 $338,760
19 Tier 3 $6.61 $52,863 $92,510 $132,157 $174,447 $224,667 $251,098
20 Tier 4 $7.86 $106,285 $221,074 $361,370 $403,885 $425,142 $425,142
21 Multi-family - Agriculture
22 Tier 1 $3.26 $0 $0 $0 $81 $325 $406
23 Tier 2 $5.86 $73 $146 $292 $511 $656 $1,167
24 Tier 3 $6.61 $307 $538 $769 $1,015 $1,307 $1,461
25 Tier 4 $6.95 $13,587 $28,262 $46,197 $51,632 $54,350 $54,350
26 Multi-family - Commercial
27 Tier 1 $3.26 $0 $0 $0 $61 $243 $303
28 Tier 2 $5.86 $28 $57 $114 $199 $256 $454
29 Tier 3 $6.61 $97 $170 $243 $320 $413 $461
30 Tier 4 $6.95 $1,179 $2,452 $4,007 $4,479 $4,715 $4,715
31 Ag/Commercial $5.61 $171,955 $429,887 $515,864 $687,819 $687,819 $859,774
32 Institutional $6.19 $84,755 $135,608 $169,511 $203,413 $203,413 $220,364
33 Landscaping $6.49 $287,608 $575,216 $862,825 $910,759 $910,759 $958,694
34 Construction $6.62 $0 $0 $0 $116,490 $116,490 $116,490
35 Total Lost Revenue $1,577,371 $3,133,122 $4,711,875 $6,070,090 $7,228,384 $8,502,732
36 Non-Drought Commodity Revenue $12,187,309 $12,187,309 $12,187,309 $12,187,309 $12,187,309 $12,187,309
37 Percent of Commodity Revenue Lost 13%26%39%50%59%70%
Declared Water Supply
62 SAN DIEGUITO WATER DISTRICT
As water sales decrease by stage, the District’s variable water supply costs will also decrease. Table 10-3 shows the reduction in water purchase costs as
water demand is reduced at each stage. The assumed curtailment in water use was determined previously in Table 10-1. Water supply availability and
variable unit costs are outlined in Table 6-8. Projected water purchase costs are determined by multiplying the unit rate for each supply source by the
corresponding acre-feet supplied for each stage. The total amount saved due to decreased water purchase costs is shown in line 7.
Table 10-3: Drought Savings
Table 10-4 shows the derivation of the proposed drought rates. Net revenue loss (Line 3) in each stage is determined by subtracting the projected water
purchase cost savings (from Table 10-3) from the projected lost revenue (Table 10-2). The percentage increase required to collect lost revenues is determined
by dividing the net revenue loss at each stage by the corresponding projected water sales in HCF (Table 8-1). Drought rates recover the anticipated
reduction in net revenues during each water shortage emergency stage by applying the percentage increase (Line 6) to commodity rates to recoup the lost
revenue. The percentage increase needed for each drought stage is calculated by dividing the net lost revenue (Line 3) by the expected drought revenue
(Line 4). This percentage increase is applied to the proposed commodity (Table 8-3) rates to yield the drought rates. Lines 8 – 41 show the dollar increase
for each drought stage, assuming the proposed FY 2022 rates.
Declared Water Supply Shortage Response 1 2 3 4 5 6
Line
No.Description FY 2022 Up to 10%Up to 20%Up to 30%Up to 40%Up to 50%Up to 60%
1 Water Supply Costs $4,183,671
2 Treatment Costs $2,966,311
3 Subtotal Variable Costs $7,149,983
4 Cutback (%)10%20%29.8%39.8%50%60%
5 Total Drought Savings $717,749 $1,428,820 $2,133,284 $2,847,791 $3,595,624 $4,307,018
6
7 $11,469,560 $10,758,489 $10,054,025 $9,339,518 $8,591,684 $7,880,291Drought Volumetric Revenue Requirement -
All Classes
WATER FINANCIAL PLAN AND RATE STUDY REPORT 63
Table 10-4: FY 2022 of Drought Rate Calculation
10.2.1. DROUGHT RATE ADOPTION
The Board would adopt the drought rates separately from any other type of rate increase. For the duration of the rate proposal period (3 years), the Board
would have the ability to adopt drought rates by increasing the then-current commodity rate without having to re-issue the Proposition 218 notice.
64 SAN DIEGUITO WATER DISTRICT
11. Water Rate Survey
Raftelis conducted a rate survey to benchmark current and proposed water rates against eight neighboring water
providers. While a useful benchmark, it is worth noting that such comparisons only paint a partial picture since many
factors, such as water sources, age and replacement of infrastructure, service area characteristics, revenue sources,
and other local conditions, affect the total cost of providing water services.
Figure 11-1 shows a monthly28 water bill comparison for the current (2021) and proposed (2022) rates against eight
neighboring agencies. The survey assumes a single-family residential customer using 12 HCF of water per month,
with a 3/4” metered connection. This survey was conducted in March 2021 and should only be used as a reference
point or snapshot in time.
Figure 11-1: Monthly Bill Comparisons for Neighboring Agencies
28 Agencies with a bi-monthly billing cycle are adjusted to a monthly billing cycle by dividing fixed charges and tier
widths in half.