Fri11282014

News

LAH water district begins rate-increase study

 

Staff at the water district that provides service to a majority of Los Altos Hills’ 8,000 residents can’t predict right now how much the price of water will increase next year and don’t expect to know for several months.

But one thing is certain – rates are going up.

The Purissima Hills Water District pays $2.63 wholesale for 748 gallons from the San Francisco Public Utilities Commission (SFPUC), which is currently installing more than $4 billion in seismic upgrades to its water system.

The wholesaler passes the project costs on to retailers, who in turn need to pass it on to customers, according to Patrick Walter, general manager of the non-profit Purissima Hills district.

Because SFPUC hasn’t yet settled on the amount of the next rate increase or assessed how it might affect customer consumption, Walter said he is limited to projections using malleable financial models. His early speculation indicates that the wholesale rate could come in at more than $2.88.

“One of the biggest variables is usage – you just can’t predict it,” Walter told the Town Crier last week, explaining the difficulty in estimating rate increases. “We want to get rates as close to what we need as possible.”

Residential users, who provide 91 percent of the district’s revenue, are currently charged $2.70 to $9.95 per unit, depending on consumption. The district uses a six-tiered structure to encourage conservation.

According to an analysis Walter presented the board of directors last week, the water district currently carries a deficit of approximately $370,000.

“We know we don’t have enough money,” he said.

The district charges what it needs to recoup the cost of buying wholesale. In 2010 the district’s board of directors voted to increase rates by an average of 25 percent and implemented the tiered structure to encourage conservation. At the time, several residents said they perceived the rate increase as a penalty for conserving.

But the district was selling less water and, therefore, brought in less revenue.

“If I had a store and couldn’t sell enough product, you’d be charged more,” Walter said, explaining the need to pay for fixed costs.

While several neighboring municipalities raised their rates July 1 after SFPUC’s latest 40 percent rate increase, Los Altos Hills held off this year and instead “softened” on spending, Walter said, and is now looking for a solution on how to make ends meet.

By January, Walter expects to have a clearer picture of how much rates need to increase for Los Altos Hills users.

The Purissima Hills board of directors last week began preliminary discussions on how best to proceed. The board would have to conduct a rate study and schedule a series of public hearings before implementing a rate increase.

For more information, visit www.purissimawater.org.

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