An Early Look at 2010 Metropolitan Water Rates 

With continuing drought, rising supply acquisition costs, increasing operating expenses, and pending changes to the Interim Agricultural Water Program, Metropolitan has accelerated its rate setting process and begun to develop preliminary estimated "average" water rates for 2010. When it adopted rates for 2009 this past spring, Metropolitan projected that 2010 Tier 1 rates would increase by about 5%, however, current estimates of the increase in Tier 1 rates for 2010 range from 15% to 21%. 

In early September, Metropolitan staff presented rate scenarios for 2010 to its Budget and Finance Committee. The two primary scenarios considered the following factors:

Projected demands

• Available imported and storage supplies
• Additional water supply costs, especially estimated water transfer costs
• SWP allocations in 2009 through 2011
• The timing for refilling of Metropolitan's in-basin surface and groundwater storage

Following are the rate projections for treated, Tier 1 supplies presented at the September committee meeting, plus the 2010 rate projections included in Metropolitan's 2009 rate setting process this past year: 

Projected Treated Tier 1 Rates 

	Jan. 1, 2009	Jan. 1, 2010	Jan. 1, 2011
2008 Rate Setting Process	$579	$606	$635
15% increase for 2010, 4% thereafter	$579	$666	$692
21% increase for 2010, 4% thereafter	$579	$701	$729

Both current scenarios assume an average SWP allocation of 54% in 2009 and 64% in 2010. If the SWP allocation is significantly lower, it will likely result in larger rate increases because of larger water acquisition costs.

Current participants in Metropolitan's Interim Agricultural Water Program (IAWP) receive a discount of $90/AF on untreated, Tier 1 rates and $114/AF on the treated, Tier 1 rates. As discussed in the cover story, in June 2008, Metropolitan's Board authorized staff to initiate a review of the IAWP and to bring recommendations on changes to the program by the end of 2008. Following this review, Metropolitan staff has proposed revisions to the program that will be considered by the Board at its October 2008 meeting. These revisions include a five-year phase out of the program starting in 2009. The IAWP discount would be gradually reduced during the phase-out period, and the required delivery cutbacks would be adjusted as the discount diminishes. Under the Metropolitan proposal, the IAWP discount would be phased out as shown below: 

Below are the projected IAWP rates based on the projected rates assumptions from above and the proposed phase out of the IAWP discount: 

Projected Untreated, IAWP Rates 

 
Projected Treated, IAWP Rates 

Note that these are wholesale water rates charged by Metropolitan to its member agencies. Local water rates will be higher and will vary by local agency.

Related Links:

• New Water Rates for 2007/08
• Projected Water Rates for 2008-2010
• 2006 Rate Structure
  
  
  

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