Valencia Water Company

California Public Utilities Commission-Approved Budget-Based Rates

VWC’s individually metered Residential Water Smart Allocation (WSA) and Tiered Rates Program (i.e., BBRs) was approved by the California Public Utilities Commission (CPUC) on December 16, 2010 in the General Rate Case Decision 10-12-029. VWC formally implemented the associated BBRs component for individually metered residential customers on February 1, 2011. For a full year prior to the implementation of the program, VWC conducted an extensive customer outreach effort that provided customers with information on the program’s look, feel, and potential impacts. The WSA Program is a BBR structure for individually metered residential and dedicated irrigation metered customers that is a fair and equitable method for calculating the water needs of water utility customers.

Following the implementation of the WSA program for residential customers, VWC expanded the program to include Dedicated Irrigation Metered (DIM) and Dedicated Irrigation Metered Mixed-Source (DIM-MS) customers. In Decision D.10-12-029, the CPUC directed VWC to seek authority to implement the WSA program for DIM/DIM-MS customers before January 2012. In accordance with that decision, VWC formally requested authority to implement the WSA and Tiered Rates Program by application, A.11-08-015, on August 16, 2011 for the DIM/DIM-MS customer classes in question. The authorization to implement WSA and Tiered Rates Program to DIM/DIM-MS was approved by Commission Decision D.12-01-005 on January 12, 2012. Pursuant to the approval by the Commission, VWC formally implemented the new WSA and Tiered Rates Program on February 1, 2012.

Residential and Dedicated Irrigation Budgets

Following are descriptions of the technical information and data used by VWC to establish residential and dedicated irrigation water budgets:

Residential Customers
The Residential WSA Program was the first phase of VWC’s new conservation rate design. Residential customers are comprised of VWC’s single family and multi-family individually metered accounts. There are approximately 26,000 residential customers in VWC’s service territory, with single family meters accounting for 74% of total customer connections and 44% of total water sales. Multi-family individually-metered customers account for 15% of total meter connections and 4% of total annual water sales.

VWC measured each residential customer’s landscaped area using aerial imaging and mapping software. Landscaped areas range from a low of 500 square feet to a high of 42,200 square feet. The average irrigated area for a residential customer is approximately 2,300 square feet.

Water budgets generally consist of water use characteristics that combine water use efficiency benchmarks with consumer demand. For instance, most residential customers have two basic areas of water need—indoor and outdoor. Indoor water needs were determined using national studies that measured efficient water use norms for sample groups compared to demand loads for customers with inefficient faucets, fixtures, and practices. The indoor water allocation is set at 55 gallons per person per day, for 4 persons per home, times the number of days in a given billing cycle. This equates to 6,500 gallons per month (or 9 ccf) for most billing periods.

For the outdoor allocation, VWC utilized the customer’s landscaped area and weather information to calculate the water needed to maintain the customer’s landscaped area for any given billing cycle per month. Weather data is collected from the local California Irrigation Management Information System (CIMIS) station and input into VWC’s WSA proprietary software that is updated nightly to provide real- time water allocations. The daily outdoor water need for each day in the billing cycle is accumulated for the monthly outdoor allocation. The formula for daily outdoor water is:

Daily Outdoor Water Allocation = (ETo × Kc × La × 0.623) + (ETo × Kc × La × 0.623) IE IE

1. ETo – Actual ET factor (in inches/day)
2. Kc1=0.7
   Note: Crop Coefficient for the first 2500 square feet of Landscaped Area. The 0.7 crop coefficient is for high water using plants such as turf grass.
3. Kc2 =0.5
   Note: Crop Coefficient for any incremental increase in landscaped area that exceeds 2,500 square
   feet up to 10,000 square feet. The 0.5 crop coefficient is for medium water using plants such as shrubs, trees, and ground cover.
4. LA1 – First 2,500 square feet of actual Landscaped Area
5. LA2 – Any incremental increase in actual landscaped area that exceeds 2,500 square feet up to a limit of 10,000 square feet
6. 0.623 = Conversion factor (gallons/square feet)
7. IE = Irrigation Efficiency = 0.71
8. Pool and Spa surface areas are included in the actual Landscaped Area measurements with the following parameters:

1. Minimum Landscaped Area – 500 square feet
2. Maximum Landscaped Area – 10,000 square feet

VWC’s
Budget-Based Rates Tier Structures.

There have been few customer complaints since the implementation of the Residential WSA Program. In most cases, customer concerns can be addressed through the mechanisms provided in VWC’s tariffs, such as a variance request, or can be mitigated via water conservation (lower water use equals lower water costs). Customer dissatisfaction tends to focus on four main areas:

1. The parameters of a customer’s outdoor allocation for the 10,000 square feet landscape limitation
2. The parameters of a customer’s indoor water allocation for the number of people in a home
3. Questioning the various tier descriptors (i.e. Inefficient, Excessive, or Wasteful) as seen in Examples of Budget-Based Rates Tier Structures.
4. The marginal water rate increases in the higher tiers for water use above the customer’s monthly water allocation

VWC asserts that the continuation of the program has built upon the program’s successes including, but not limited to, the following areas:

• Sustainable motion towards:

• Senate Bill X7-7’s goal of a 20% reduction in gallons per capita per day by 2020
• Compliance with California Urban Water Conservation Council (CUWCC) Best Management Practice (BMP) 1.4 Conservation Rate requirements
• Long term ability to meet customer water demands

• Pricing stability and increased certainty pertaining to water rates and water costs for future years
• Continuity of VWC’s marketing and branding efforts
• Continuity of VWC’s conservation strategy
• Improved consumer education and increased program participation rates
• Improved relationships and communication opportunities between VWC and its customers

Dedicated Irrigation Meter Customers
DIM/DIM-MS customers account for 4.04% of total customer connections and 25.04%% of total water sales. As of 2012, 93% of all customer accounts have been integrated into the WSA program, representing approximately 73% of total annual water sales.

The method used to determine each billing period’s allocation for irrigated accounts is based on DWR’s 2010 Model Water Efficient Landscape Ordinance (MWELO). However, the majority of VWC’s DIM customers were constructed under pre-2010 MWELO. Therefore, their irrigation systems design did not address the increased irrigation efficiency requirement of the new 2010 MWELO. VWC recognized this issue and used the pre-2010 MWELO lower irrigation efficiency in the allocations.

The formula for the outdoor allocation for the program is:
Daily Outdoor Water Allocation = (ETo × Kc × LA × 0.623) + (ETo × Kc × SLA × 0.623) IE IE

1. ETo – Actual ET factor (in inches/day)
2. Kc1=0.5
   Note: Crop Coefficient for the Landscape Area. This is for medium water using plants such as shrubs, trees, ground cover, or a mixture of low water using plants (native) and high water using plants (turf).
3. Kc2=.2
   Note: Crop Coefficient for any Special Landscaped Area
4. LA – Actual Landscaped Area, including the surface area or swimming pools, spas, fountain, ponds, and lakes being served by the dedicated irrigation meter.
5. SLA – Special Landscaped Area is the landscaped area within the LA for areas of active play such as parks, sports fields, and golf courses or dedicated solely to edible plants.
6. IE = Irrigation Efficiency = 0.625

The DIM/DIM-MS tier structure is discussed in detail in Examples of Budget-Based Rates Tier Structures »