By Jim Abercrombie
In the course of managing a complex agency like EID, there are a number of constraints and challenges to overcome in order to build a strong, sustainable path forward.
Over nearly ten years, EID has done just that. We built a financial plan that has allowed us to consolidate and reduce our long term debt— all the while raising our ratings in the eyes of the credit agencies, which saves our customers money.
Our financial plan reflects this path and was modeled to fund a secure and sustainable capital improvement program—doing the projects that keep our system in good order.
There have been some unsettled days to get us here. We had to raise rates significantly in 2010 – 2013 to counter the many, many years of no rate increases. These funds were vital to help fund the vast and needed construction projects that had been offset for far too long as well as an overreliance on new connection charges and not rate revenue.
EID’s system is very large, geographically and hydraulically complex, and requires regular rehabilitation and construction to keep it in top shape.
Recently, the board voted to rescind 2018’s modest rate adjustments—the adjustments that were approved after the Proposition 218 process that saw a less than two percent customer protest rate against the proposed 2016 – 2020 rate schedule.
Given the cancelled rate adjustments, we may have to defer needed projects until later. And yes, rescinding those modest rate increases will likely require us to borrow more money than we had planned during our next bond issuance in 2020, adding to our debt. But this debt will be necessary to rebuild our decaying infrastructure.
Now, proposed state legislation might add to EID’s burdens—burdens we do not want and have actively worked to head off.
In particular Senate Bill No. 606 and Assembly Bill No. 1668 are poised to go into law and the results for EID and its customers would be potentially significant and long-lasting.
The bills are concerned with not only onerous reporting requirements to the state, but more alarming, the requirement of limiting indoor water usage to 55 gallons per person per day.
EID already reports to the State Water Resources Control Board monthly for water usage.
Using the February reported numbers for 2016 and 2017, it is estimated the indoor usage for EID’s customers to be between 69 and 71 gallons per person per day. If the district were required to impose the 55 gallons per person per day limit on our customers, it would result in at least a 20 percent reduction in indoor water consumption, with the estimated loss in water revenues being over $1 million and the corresponding loss in wastewater revenues being over $500,000.
We would need to recoup those losses because most of the costs to provide safe and reliable water and wastewater services are fixed costs.
To do that through rate increases would mean an almost 8 percent increase in the water consumption charge and a $1.00 per cubic foot increase in the wastewater commodity charge.
These restrictions would also reduce the volume of wastewater to treat for our recycled water program use. This reduction would actually increase the need to pump more water out of the American River to augment the recycled water outdoor demands in the summer months.
The legislation proposes an initial target of 55 gallons per person per day, but the bills provide for further reductions by 2025 and 2030, resulting in further rate increases to cover revenue losses.
EID firmly stands against the proposed legislation, along with more than a hundred other water purveyors statewide. We do not believe the one-size-fits all approach the legislation advocates is a good answer to a complex problem that districts like EID solve every year in continuous planning for times of drought and for times of plenty.
EID’s mission remains the same: to provide high quality water, wastewater treatment, recycled water, hydropower generation, and recreation services in an environmentally and fiscally responsible manner.
As needed rates are rescinded and harmful legislation is proposed, we are caught in the middle trying to solve many problems with fewer and fewer tools.
I strongly believe the best decisions are carried out with full transparency to the consequences a cancelled rate adjustment or blunt-edged piece of legislation can create.
EID’s staff will continue to make the best fiscal and operational decisions possible to maintain our community infrastructure now and for the generations to come.
Every man and woman at EID remains committed to finding a sustainable path forward to do the vital work of the district for the more than 110,000 people we serve. This will never change.