El Toro Water District

California

RFC has assisted El Toro Water District (District) with the development of its rates on an ongoing basis since 2006. At that time, the District had not updated its water and wastewater rates or rate structure in more than 10 years and was operating at a deficit. RFC prepared a 12-year financial plan evaluating the operating and capital expenses, debt service, and reserve requirements. A cost of service analysis was conducted to review the equity of the rates and existing rate structures. The adopted rates, resulting from the cost of service study in 2006, unbundled rate components to convey the true cost of various service components and to continue to equitably pass on the cost of water, wastewater, and recycled water services to users.

In 2009, the District engaged RFC to design a water budget rate structure for its residential and irrigation accounts to help promote water-use efficiency. RFC designed a water budget rate structure which ensured revenue stability, financial sufficiency, and provided the appropriate price signal for different supply costs and conservation program funding for the District. The following outlines the methodology used to develop the water budget rate structure:

Indoor allocations varied by the number of occupants and outdoor allocations varied based on weather data and irrigable area

The irrigable area was determined by taking the total parcel area less the building area acquired from the Assessors’ Secured Roll

The allocation budgets considered irrigation efficiency and type of landscape

Next, RFC developed a water budget rate model that allowed the District to quickly view the impacts of alternative rates and budgets, to aid policy makers in making well-informed decisions in a timely manner. This tool proved invaluable when presenting the results in a graphical format to the District Board of Directors because it enabled them to easily see the impacts of different water budgets on their customers in real-time. As a result, the Board adopted the water budget rate structure in June 2010. To minimize rate shock to upper-tier users, RFC developed a three-phase implementation plan that slowly phased in Tier 3 and Tier 4 rates. The rate unbundling and phase-in implementation plan were found beneficial and useful for the District during public outreach and rate implementation. The findings and recommendations resulting from the Study were summarized and documented in the Study Report.

Since the Water Budget Rate Study in 2009, each year RFC was retained by the District to conduct the cost of service annual study to update its water and wastewater rates. In 2012, the District engaged RFC to conduct a recycled water financial plan study to evaluate the impacts of the recycled water expansion on the Water and Wastewater Enterprises.

In late 2014 and early 2015, California has experienced one of the most severe droughts in state history. The District currently purchases 100 percent of its potable water supply from the Metropolitan Water District of Orange County (MDWOC), a wholesale customer of the Metropolitan Water District of Southern California (MWD). To address water supply issues, MWD developed the Water Supply Allocation Plan (WSAP) which provides reduced allocations to wholesale customers within MWD’s service area. In turn, on January 20, 2015, MWDOC adopted a methodology to determine the allocation to its member agencies. Member agencies, such as the District, can purchase water above the allocation, but such purchases are subject to severe penalties. The District engaged RFC in a Drought Rate Study to determine the indoor and outdoor drought factor adjustments necessary to encourage conservation among its residential and irrigation customers and to develop penalty rates for commercial customers in order to achieve the required reductions in consumption under increasing levels of drought. As part of the Study, RFC conducted financial impact analysis on revenues, expenditures, and net revenues for each drought stage. The Study analyzed the impacts if: 1) customers continued to consume at normal (non-drought) levels, or 2) customers reduced consumption by the amount required. The methodology and results of the Study were documented in the Drought Study Report and submitted to the District to support the adoption of the District’s “Water Conservation & Water Supply Shortage Ordinance” in March of 2015.