Getting the Skinny on Water Rates: Why have they increased so much?

1. Getting the Skinny on Water Rates: Why have they increased so much? San Gabriel Valley Water Forum August 28, 2012

2. Water Rate Increase Fatigue • 10 years of significant water rate increases • Public Hearings • Some have become hostile • Lack of trust between customers, elected officials and staff • Yet, others supportive, depending on the cost drivers • Communication and outreach is key San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

3. Single Family Monthly Water Rate From 2003 to 2011 By County 1 HCF = 100 cubic feet = 748 gallons of water 15 HCF: average monthly water consumption for single family residential San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

4. Annualized increase in monthly bills Single Family (15 HCF by County) 1 HCF = 100 cubic feet = 748 gallons of water 15 HCF: average monthly water consumption for single family residential San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

5. The Trends • The backbone of the system was funded through a mix of rates and non-rate revenue (i.e. grants, property tax etc…) • Most non-rate revenue is capped • Most system was developed over 30 years ago and the useful life of the system is coming to an end • Increased water supply costs due to: • Regulatory requirements on water quality • Regulatory drought limiting water supply quantity • Water consumption per capita has fallen significantly over the 30 years San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

6. Focusing on Expenditures • Many agencies have or have had many other sources of revenues to offset costs • If the other sources of revenues do not increase, rates will increase at a higher percentage than expenditures • Is this what we are witnessing? • To develop a better understanding of why rates have increased, we examined expenditures per acre foot for: • Metropolitan Water District of Southern California (MWD) – 100% wholesale San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

7. Metropolitan Water Districtof Southern California • Six-County Service Area: 5,200 square miles • Population: 19 million • Gross Domestic Product: $1 Trillion • Projected growth: ~220,000 people/year • MWD provides 40 to 60 percent of Southern California’s water supply MWD Service Area San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

8. MWD Mix of Revenues • In the mid 80’s MWD was 70% dependent on rates • In 2011 MWD is 85% dependent on rates • This is a 21% increase in dependence on rates • Increase in expenditures will cause a further increase in rates • Non-rate revenue is maxed out San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

9. Historical Water Sales Start of the 90’s economic boom Drought is declared in 08 and ends in 11 Drought is declared in 91 and ends in 92 San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

10. Total Expenditure San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

11. Expenditures per Acre Foot Sold San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

12. Sensitivity Analysis on Water Sales Water sales at 2.2 million AF San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

13. Discussion San Gabriel Valley Water Forum - Getting the Skinny on Water Rates

14. Presented by: Gary Breaux AGM / CFO 700 N. Alameda St. Los Angeles, CA 90012 (213) 217 – 7121 gbreaux@mwdh2o.com Sanjay Gaur Senior Manager 201 S. Lake Ave, Ste 301 Pasadena, CA 91101 (213) 327 – 4405 sgaur@raftelis.com