Water wholesaler expected to raise rates at Wednesday meeting

Zone 7, which sells water to DSRSD, to vote on rate increase

Zone 7 Water Agency's Board of Directors will meet Wednesday evening to decide how much to raise wholesale water rates, a decision that will trickle down to affect water bills of local residents and businesses.

The water agency, which sells potable water to Dublin San Ramon Services District, the cities of Pleasanton and Livermore and Cal Water's Livermore service area, is expected to raise rates roughly 30%.

While Zone 7 doesn't sell directly to homeowners, retailers historically raise water bills when wholesale rates increase. Board members are expected to vote on the measure at their public meeting at 7 p.m. Wednesday at the Zone 7 office, 100 North Canyons Parkway in Livermore.

A reluctance to raise rates significantly amid recession recovery has put the agency in a situation where it will be financially unstable within two years if it continues with its current wholesale rate, according to Raftelis Financial Consultants, which was paid to evaluate Zone 7's wholesale rate and financial viability.

The agency is facing about $20 million a year in capital improvement project costs to replace and repair outdated pipes, pumps and filtration systems, which general manager Jill Duerig said cannot be delayed any longer. The agency has also taken a revenue hit due to reduced sales because of water conservation in the Tri-Valley area, prompted by the drought.

The roughly 30% increase will likely translate to an increase of $7.90 per month for residents starting Jan. 1, the agency estimated.

The board will be presented with a proposed rate of $3.15 per hundred cubic feet of water for 2016, $2.93 per hundred cubic feet for 2017 and $3.32 for 2018, according to a staff report included in the board agenda packet.

At the board meeting last month, staff suggested about 20% of the increase be a temporary drought surcharge and about 10% be an ongoing rate increase.

The specifics behind the final recommended rate structure had not been released as of Friday afternoon, but consultants presented a potential tiered rate structure that charged retailers based on their historic use.

The increases are based upon the consultant firm's recommendation that the agency bring in $3.5 million in revenue from Jan. 1 to June 30, $7 million from July 1 to June 30, 2017, and $5 million from July 1, 2017, to June 30, 2018.

The city of Pleasanton was among the retailers that spoke out against the tiered structure, particularly because the city would receive about a 38% increase in their water charges, whereas other retailers would have a roughly 33% increase.

"We request that Zone 7 spend time evaluating rate structure options and work with the retailers to ensure any new structure is uniform and relatively easy to understand and implement," Pleasanton city manager Nelson Fialho wrote in a letter to the board.

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