This deck was presented by Saratoga city attorney based upon council direction from August 17th 2016

1. October 19, 2016

2. San Jose Water Company Rate Review
Procedures and City Authority to Regulate
October 19, 2016

3. Council Direction
• At its August 17, 2017 meeting the City Council directed staff to
prepare a report on how water rates are set and what, if any,
jurisdiction the City has regarding rates.
• Staff has reviewed:
• Laws regarding private utility rate-setting;
• State proceedings concerning the recent San Jose Water Company rate
increases;
• The scope of City jurisdiction regarding water rates; and
• Options for the City to influence water rates.

4. Key Players
• San Jose Water Company (SJWC)
• Santa Clara Valley Water District (District)
• California Public Utilities Commission (PUC)
• Office of Ratepayer Advocates (ORA)

5. Overview of Rate-Setting Process
• Utility Application
• Revenue Requirement
• Rates
• Surcharges
• Review by Public and ORA
• PUC Proceedings
• PUC Decision
• Requests for Modification/Complaints

6. Factors Affecting SJWC Water Bills
1. Water Rate Increase
2. Drought Surcharges
3. District Rate Increases

7. Water Rate Increase
• In 2015 SJWC applied for a 12.22% increase in its revenue
requirement and authority to adjust water rates.
• Following objections from ORA and others PUC approved an 8.6%
increase in the revenue requirement.
• Decision in June, 2016 was retroactive to January 1.
• PUC requires that rates recover 70% of revenue requirement from
volume-based charges and 30% from fixed fees.

8. Drought Surcharge
• In 2015 State of California mandates 25% statewide water
conservation.
• PUC orders private water utilities to file plans to achieve water
conservation goals.
• San Jose Water files plan for 30% conservation consistent with
District water conservation goal.
• Plan sets “baseline” based on average usage of all residential
customers and sets increasingly higher charges for use above the
baseline.
• Adjusted for 20% Goal in 2016

9. SJWC Residential Customer Drought Allocations
Month
2013 Average
Monthly Residential
Usage (ccf)
June 15, 2015 –
June 30, 2016
Monthly Drought
Allocation (ccf)
(70% Average Monthly
Residential Usage)
Effective July 1, 2016
Monthly Drought
Allocation (ccf)
(80% Average Monthly
Residential Usage)
Jan 10 9 9
Feb 9 9 9
Mar 9 9 9
Apr 11 9 9
May 14 10 12
Jun 16 11 13
Jul 19 13 16
Aug 19 13 16
Sep 19 13 16
Oct 17 12 14
Nov 17 12 14
Dec 14 10 12
SJWC Drought Surcharges
Surcharge (per ccf)
Drought Surcharge 1
Excess consumption over Monthly Drought
Allocation up to the 2013 Average Monthly
Usage
$3.5634
Drought Surcharge 2
Excess consumption over the 2013 Average
Monthly Usage
$7.1268

10. ORA Objections to Drought Surcharge
• Surcharge Trigger should not be based on the average usage of all
residential customers but instead on each customer’s past use.
• Surcharge should not be limited to residential customers.
• PUC rejected both claims and approved SJWC Drought Surcharge
Proposal.

11. Santa Clara Valley Water District Rate Increase
• District raised rates by roughly 7% effective July 1, 2016
• PUC rules allow SJWC to pass through all rate increases to customers.

12. Options for City
• City has no regulatory authority over SJWC rates.
• Proposition 218 does not apply to private utility rates.
• City, like other customers, may appeal past PUC decisions.
• City, like other customers, may participate in future PUC proceedings.
• City may seek to influence future rates by promoting dialog regarding
the 70/30 cost allocation rule.