Politics & Government

City to Introduce New Water and Sewer Rates

Proposed new rates are based on projections in the rise of infrastructure and operational costs from two water districts and the wastewater treatment plant.

Update: A community informational meeting is scheduled for . A public hearing on the rate increases is scheduled for May 3 at 7 p.m. at city council chambers. The proposed increases would go into effect on June 2. 

The wholesale water agency that supplies Hetch Hetchy water to Milpitas residents is on track to finish $4.6 billion worth of seismic infrastructure projects by 2015.

Milpitas will likely absorb some of the expenses to retrofit the 100-year-old infrastructure through increased water rates by the San Francisco Public Utilities Commission (SFPUC), and that is just one cost projection factored into the proposed new rates to be discussed at the City Council meeting Tuesday night.

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"These are very expensive projects, but they are also extremely important for the public," said the city's utility engineer, Kathleen Phalen. "If SFPUC didn't do the program, we would be at major risk without water for 60 days in a major earthquake."

SFPUC is one of two water agencies, providing about two-thirds of Milpitas' supply, said Phalen. 

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"The Milpitas residential community receives San Francisco's Hetch Hetchy water while the Santa Clara Valley Water District (SCVWD) serves mostly industrial, R&D and commercial customers outside of the residential areas," said City Manager Tom Williams. 

He referred to the SCVWD's projected rate increases as "nominal." A report produced by city staff stated the agency had not increased its rates since fiscal year 2008-09. The report listed the current rate of $1.42 per hundred cubic foot (hcf) is expected to rise to $1.56 per hcf in fiscal year 2011-12, followed with 10 percent annual increases.

Comparatively, single-family households pay $1.77 per hcf (the actual wholesale cost is $1.90) for water from the Hetch Hetchy reservoir. The projected rate hike from SFPUC for the 2011-12 fiscal year is expected to increase from $1.90 hcf to $2.68 hcf.

Which means, according to the report, the average household that uses 23 hcf every two months and pays about $69 for water could see that portion of the bill rise to $83 starting this summer. 

It's easy to focus on the numbers instead of the value of the project, said Tyrone Jue, a spokesman for the SFPUC.

"What we will have at the end of 2015 is a seismically reliable water supply that will serve our current generation and future generations," he said. "And the importance of that cannot be overstated."  

As an incentive to conserve water, the city staff looked at the current two-tier rate system—in which households pay $1.77 for under 20 hcfs and almost twice as much for anything over 20 hcfs—and recommended four tiers.

"The reason you have tiers is to provide incentives for conservation," said Phalen. "We concluded the [current] tiers were too large to do that effectively."

Residential tiers proposed current FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 Tier 1 (1-10 hcf)

$1.77

$1.77

$2.02

$2.30

$2.62

Tier 2 (11-20 hcf)

$1.77

$2.76

$2.98

$3.22

$3.48

Tier 3 (21-30 hcf)

$3.72

$3.72

$4.02

$4.34

$4.69

Tier 4 (31 and above)

$3.72

$4.17

$4.50

$4.86

$5.29

The city staff report also recommends that sewer rates, in which single family households are billed about $72 every two months, increase about $5 each year.

Phalen said the staff already factored the city's $168 portion of the price tag for the wastewater treatment plant master plan into the recommended sewer rate.

The city's share of the capital costs associated with and eliminating the sludge lagoons are spread over three decades, she said. It won't come all at once.

The staff's recommended sewer rate includes the plant's projected 4 percent increase in operational costs, which comes out to $4.5-$6.4 million over the next four years.

Cheryl Wessling, a spokeswoman for the , said the operational costs include inflation, increases in costs for parts, supplies and chemicals, such as the transition from gaseous chlorine to a more expensive but safer way to disinfect through liquid chlorine.

As many employees are retiring from the plant, there are costs associated with retirement and medical benefits as well, she said.

While Bay Area cities range across the board on how they set water and sewer rates, Phalen said there are a lot of variables.

"They're all seeing the same huge cost run San Francisco [PUC] is imposing on the wholesale rate," she said. "Each city or agency does its analysis, they look at the wholesale cost of the commodity, and they also look at internal costs."  

There can be differences if the city has old infrastructure and has had to make very large investments to bring that up to par, she said.

city water sewer total Santa Clara $63.02 $38.80* $101.82 Fremont $74.96 $48.31 $123.27 Sunnyvale $65.48 $58.46 $123.94 Mountain View $79.04 $48.40* $127.44 San Jose (Municipal) $71.34 $65.72* $137.06 Cupertino $91.84 $48.00* $139.84 Milpitas (FY 2010-11) $68.97 $70.94* $139.91 Campbell $91.84 $49.04* $140.88 San Jose (Water Co.) $91.84 $65.72* $157.56 Milpitas (FY 2011-12) $82.23 $75.92* $158.15 Palo Alto $115.90 $49.30 $165.20 San Mateo $104.80 $123.28 $228.08

*Cities that use the

Both tables reproduced from the City of Milpitas 2011 Utility Rate Analysis Report.


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