ITEM 24 ATTACHMENT 2 - Laserfiche WebLink

City of Pleasanton 2025 Water Rate Study Water Resources Economics 84 6. DROUGHT RATES 6.1 DROUGHT RATE DESIGN METHODOLOGY In addition to the base water rates developed in the prior section of the report, drought rates were developed to be implemented during water shortage emergencies. The key steps in determining the drought rates are as follows: • Evaluate financial risks: the City faces different risks based on drought emergencies, when government-mandated usage cutbacks reduce the City ’s variable charge revenues. • Determine cost impact: the cost impact is dependent upon the water shortage condition. Constrained water supply results in higher costs to purchase water for the City to meet its customer demand. Drought emergencies result in lost revenues from variable charges when customers use less water. • Calculate drought rates: the resulting cost impact is then used to calculate drought rates, to be implemented during shortage emergencies and which vary based on stages (from the City’s Water Shortage Contingency Plan). 6.2 RISKS RELATED TO WATER SHORTAGES WATER SHORTAGE EMERGENCIES The City’s WCSP includes six stages of water shortages, which all require a different level of usage reduction from the City’s customers. When customers reduce their usage in each stage, the City’s rate revenues from variable charges are directly impacted. When water shortage emergencies occur, especially during more severe stages, the amount of lost revenue can significantly impact the City’s ability to meet its operating, capital, and reserve requirements. Drought rates are a tool for the City to effectively respond to water shortage emergencies while maintaining financial sufficiency and operational reliability. Drought rates are designed to recover the costs of water shortages, which include loss of variable revenues and cost differences (savings) from purchased water supply changes. 6.3 PROPOSED DROUGHT RATES DROUGHT RATE ALLOTMENT Currently the City has a shortage/drought usage allotment policy where each customer has 10 ccf per bi- monthly billing period that is exempt from being charged drought rates. The drought allotment recognizes that usage reductions are more difficult for customers that are already using low amounts of water during non-drought conditions. Based on updated consumption patterns, WRE recommends reducing the shortage usage allotment to 8 ccf per bi-monthly billing period to ensure that the total annual usage allotment remains below the annual usage reduction requirement for each stage of drought rates. Table 6-1 shows the annual usage exempted for each customer class based on the total number of accounts under each class in FY 2026 (Table 2-6), the first year of drought rates. The annual usage exempted for each class is calculated by multiplying the total number of accounts by the bi-monthly exempted usage (8 ccf) for a period of 12 months.