Recently The Signal offered an opinion that unfortunately conflated our normal three-year retail rate setting process for Santa Clarita Water Division with the recent passage of legislation that will create a new unified and improved water agency serving almost all of the Santa Clarita Valley. The Signal noted that while economies of scale and related savings were part of the benefits of the proposed merger, the proponents had been careful not to promise reductions in rates. That much is correct. But The Signal went on to question the need for any rate increase. That isn’t logical.
Here are facts. The proposed Santa Clarita Water Division rates do factor in projected savings from the upcoming new water agency merger (it will take effect in January, 2018) of an average of $275,000 per year, or $825,000 over three years. Unfortunately, these savings do not fully offset increases in costs, but they do result in lower rates than would have otherwise been proposed.
We also have been working to save money for our ratepayers in other ways. Santa Clarita Water Division recently refinanced capital bonds to take advantage of very low interest rates, with a total savings of over $6 million for our customers over the next 20 years. These annual savings are factored into our rate proposal.
The Signal also mentions double digit increases. This is over a period of three years, with an average increase of 4.3% per year. This comes on the heels of a record drought and state ordered reductions in water use in 2015 and 2016. Santa Clarita Water Division deferred as many costs as we could and used reserve funds in those drought years so that we didn’t have to ask customers for an extra rate increase during the drought.
When it comes to the expense of delivering clean, reliable water to Santa Clarita Water Division customers, it’s important to create a distinction about the ongoing costs to operate a vital system and the longer-term savings that will result from the creation of a new, more efficient water agency.
It’s easy to assume that a water agency can simply, with the stroke of a pen, delay a rate increase decision, without consequences. Yet, the day-to-day costs of producing and delivering clean water and maintaining the many pumps, water tanks and miles of underground pipelines can’t be ignored or waved off. These expenses add up daily.
The more prudent and fiscally responsible step is to cover our current costs while we continue to work on realizing future cost savings. In the short term, these rate adjustments mean we can maintain our investment in our water system by covering our basic expenses and continuing scheduled preventative maintenance and capital improvements.
Our expenses and revenues are an open book, and the careful analysis that was done to project our short-term financial requirements is available to anyone. The Retail Water Rate Cost of Service Study is easily found on our website (www.santaclaritawater.com) for anyone who wants to see, in black and white, the actual costs – many of which are rising – that we expect to incur to run a system 24/7 without service interruption for the next three years.
We remain committed to our customers to ensure our rates reflect the actual cost of service. Any delay or deferment of expenditures and needed system maintenance will only result in higher costs in the future and jeopardize reliability.
Matthew Stone is the General Manager of the Castaic Lake Water Agency.