Reedley taps into water rate increase

Reedley City Council sets Proposition 218 public hearing to consider 13% increase to water utility rates to maintain city’s revenue stream

Reedley City Council members addressing concerns from the public regarding the Bio Lab discovered in the city at its Aug. 8 meeting. (Kenny Goodman)
Reedley City Council members addressing concerns from the public regarding the Bio Lab discovered in the city at its Aug. 8 meeting. (Kenny Goodman)
Serena Bettis
Published March 28, 2024  • 
1:00 pm

REEDLEY – After a study revealed that annual inflationary increases to water rates have not kept pace with rising operational costs, the city of Reedley has proposed slightly higher water rate increases for the next two years to ensure municipal utility services stay afloat.

Consulting firm HDR Engineering presented the findings of the water rate study to the Reedley City Council at its March 26 meeting, which the council accepted and adopted on a 3-0 vote; Mayor Anita Betancourt and Councilmember Mary Fast were absent. The council’s action did not approve the increases, but rather set forth the process to do so as required by California Proposition 218. 

Public Works Director Russ Robertson acknowledged that no one likes to see utility rate increases, but said “it is of vital importance that we have these conversations, that we provide data (and) that we provide updated financial information pertaining to the financial health of our water utility.”

HDR Engineering recommended the city increase rates by approximately 13% in both fiscal year 2024-25 and fiscal year 2025-26, and then use an inflationary adjustment mechanism for increases in subsequent years. If approved, the new rates would go into effect on July 1. 

Proposition 218 is an initiative passed by California voters in 1996 that outlines the manner in which cities can increase utility rates. First, cities must conduct rate studies that dig into a detailed cost of service analysis that shows the proportional distribution of costs per customer group, such as residential and nonresidential. 

Then, the city must hold a public hearing on the rate increases and notify utility customers by mail of the proposed increases at least 45 days in advance of the public hearing, which is scheduled for June 11. 

Utility customers are allowed to protect the increases in written or verbal form; if a majority of the customers protest the increase, it cannot be implemented. 

Proposed increases

HDR Engineering Vice President Shawn Koorn walked the council through the proposed rate increases and the steps the consulting firm took to get to those rates. 

Residential, nonresidential and irrigation customers are all billed the same service charge based on the size of their water meter. For three-quarter inch or one inch meters, the present rate will increase from $37.67 to $42.36 on July 1 and then from $42.36 to $47.87 on July 1, 2025. 

Charges for larger water meters increase as meter size increases, and those rates will also increase over the next two years. The exact proposed increases are listed in the council meeting agenda packet and will be distributed by the city alongside notice of the Proposition 218 public hearing.

Water utility customers are also billed a consumption charge per 1,000 gallons of water used. Irrigation customers are billed a single rate regardless of water usage, while residential and nonresidential customers are billed on a tiered system.

For residential and nonresidential customers, the charge for usage up to 15,000 gallons will increase from $1.20 to $1.29, and then to $1.46; the charge for 15,000 to 25,000 gallons will increase from $1.25 to $1.55, and then to $1.75; and the charge for more than 25,000 gallons will increase from $1.30 to $1.64, and then to $1.86. 

Irrigation rates, regardless of usage, will increase from $1.38 to $1.66, and then to $1.88. 

Overall, the average residential customer who has a three-quarter inch or one-inch meter will see the following monthly increase on their water bill depending on water usage: 

  • $5.14 for 5,000 gallons
  • $5.58 for 10,000 gallons
  • $6.03 for 15,000 gallons
  • $7.52 for 20,000 gallons
  • $10.71 for 30,000 gallons

Also included in the proposal was the implementation of drought rates, which the city would put into effect only if mandated by the state to reduce total water usage by a certain percentage, Koorn said. 

The suggested drought rates are also outlined in the council agenda report. The rates are higher because the utility’s operating costs are largely fixed; even as customers use less water, the utility has to use the same amount of electricity and so forth to deliver the service.

Therefore if customers are using less water, the city needs to charge more per customer and per 1,000 gallons to recuperate the same costs as when customers use more water.

The city has not previously had drought rates in place and does not anticipate needing to use them, but Robertson said that it is something the state has indicated it wants to see from cities in the event it is needed. 

“They’re a nice tool in the toolbox when you need them; trying to implement and develop and implement them in the middle of a drought is not when you want to do that,” Koorn said.

Rate justification 

Koorn explained that HDR Engineering arrived at the suggested rate increases through a three-step process that looked at revenue requirements, the cost of service and the rate design. 

“The revenue requirement, you can think of as the financial plan,” Koorn said. “It compares our existing revenues at today’s rates — so what do we recover today from customers to pay the cost of providing water service — and what is the overall change in revenue needed, so it’s system-wide.”

The revenue requirement analysis showed that annual rate adjustments are necessary to “prudently fund the water utility,” and cover all costs while taking into account annual inflationary impacts on those costs as well. Costs include regular operation and maintenance, capital funding for renewal and replacement of infrastructure and the maintenance of a reserve fund.

One of the most significant factors in rising operational costs are the increased Pacific Gas & Electric Company (PG&E) utility rates, Robertson said. Just like residents, the city has to pay for its electricity, and for the water system to function properly, it must be powered at all times.

Electrical costs for the water utility increased from $550,000 in fiscal year 2022-23 to an estimated $791,000 for fiscal year 2023-24, Robertson said. That cost distributed across all 6,000 utility customer accounts equates to an extra $3.34 per month in electric costs alone.

City Manager Nicole Zieba noted that Reedley’s increases are less than those neighboring cities are facing at the moment, in part thanks to action taken by the city and council over the last decade to keep up with inflationary adjustments and regular rate studies.

Serena Bettis
General Assignment Reporter