Amador Water Agency
Financial Impacts of Water Shortage
and Proposed Shortage Strategy
April 9, 2015
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The Reed Group, Inc.
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Purpose of Water
Shortage Analysis
 To
assess the financial risks and potential
mitigation measures associated with water
shortages
 To develop a strategy for countering the
financial risks of water shortage
 To aid in providing incentives to customers
for reaching water use reduction goals
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Proposed Stages of Water Shortage
and Water Use Reduction Goals
 Normal
conditions
 Stage 1 –Water Alert
• Up to 20% use reduction
 Stage
2 – Water Warning
• 21% to 30% use reduction
 Stage
3 – Water Crisis
• 31% to 40% use reduction
 Stage
4 – Water Emergency
• 41% to 50% use reduction
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Financial Impacts of
Water Shortage
 Reduced
water sales revenue
 Reduced pumping and chemical costs
 Increased water conservation program
costs
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Financial Deficits Created
by Water Shortages (FY 14-15)
Deficit due to shortage
{
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Bridging the Financial Deficit
Created by Water Shortage
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Water System Reserves

Operating Reserve equal to 2-months (16.67%)
of annual operating and maintenance costs


Rate Stabilization Reserve equal to 1-month
(8.33%) of annual operating and maintenance
costs


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About $850,000 for FY 14-15
Capital Replacement Reserve equal to 1% of
capital asset value (net of depreciation)


About $1,370,000 for FY 14-15
About $790,000 for FY 14-15
Total water system reserve target would be
about $3.0 million
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Financial Reserves
(as of June 30, 2014)
 Unrestricted



Water system
Wastewater system
Agency general
 Restricted


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cash
$1,247,000
$468,000
$252,000
cash/investments
Water system
Wastewater system
$1,937,000
$310,000
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Water Rates and
Water Shortage Charges
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FY 15-16 Water Rates
 Water
usage rates and monthly service
charges to increase by 2.5% due to
changes in SF-CPI
 Monthly debt service charges remain the
same
 CAWP-R pumping surcharge is rescinded
 CAWP-W districts become wholesale
customers similar to Jackson, Plymouth,
and Drytown
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Water Shortage Surcharges
 Incremental
increases to the normal water
usage rates; amount (%) varies by Stage
•
•
•
•
Stage 1 = 15% surcharge on usage all rates
Stage 2 = 30% surcharge on usage all rates
Stage 3 = 45% surcharge on usage all rates
Stage 4 = 60% surcharge on usage all rates
 No
change to monthly service charges or
monthly debt service charges
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Proposed Water Shortage Surcharges
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Bill Impacts – Typical Usage
(Typical 5/8” single family water service)(1)
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Bill Impacts – Low Usage
(Typical 5/8” single family water service)
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Bill Impacts – High Usage
(Typical 5/8” single family water service)
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Recommendations
 Establish
a Rate Stabilization Reserve and
build funding to 1-month of annual
operating and maintenance costs
 Adopt water shortage surcharges
(percentages) through Prop. 218 rate
setting process
 Implement water shortage surcharges
during declared water shortage
emergencies
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Rate Adoption Process

Refine analyses based on comments
 Submit final report on water shortage financial
strategy and water shortage surcharges
 Mail notice of proposed rates to customers by
April 27 (45 days prior to public hearing)
 Hold public hearing on water rates on early
June 11
 Implement water shortage surcharges based
on Board’s declared Stage of water shortage
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Transition to Metered Rates
 Less
than 100 customers remain on flat
monthly water rates

Only a few are unmetered
 State
law requires all customers to be
transitioned to metered rates
 Water meters are a proven means of
achieving water conservation
 Drought conditions help justify making the
transition now
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Summary

Confronting a water shortage requires a multipronged effort and a balanced use of available
tools
 Efforts should be scaled to the severity of the
shortage
 Water shortage surcharges help, but do not
resolve all challenges
 Reserves are key to a sound financial strategy
 Rate proposal attempts to strike the right
balance under a range of potential needs
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