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Water Equity Study is on Hold: Elk Grove Water Service Must Keep Cash Flow Up to Keep Rate Study at Bay.

Posted on: Sunday, 19 March 2006, 15:00 CST

By Loretta Kalb, The Sacramento Bee, Calif.

Mar. 19--The Elk Grove Water Service, which planned last year to choose a contractor to study the equity of water rates on behalf of its 11,600 east-area water customers, has put the idea on hold.

The three bids received last fall were higher than expected, and the governing board decided early this year that a study wasn't "necessary or timely," General Manager Michael B. Kenny said Friday.

Instead, board members on Wednesday night agreed that consultant Ben Levine, president of BHL Investments of San Rafael, should work with staff members to examine the district's cash flow at midyear to ensure that it meets the terms of its existing bonds.

The district is required to maintain a level of revenue beyond its debt service on each bond. If it fails, a rate study will be mandatory.

The optional rate study was to have tackled several topics. Kenny said each is likely to be revisited eventually.

Some 6,000 customers, for example, do not have water meters, and the district must complete a retrofit program by 2025. Funding for the program has not been decided by the district.

And on hold indefinitely, pending board review, is a rate study that could be significant to customers living near the eastern edge of Elk Grove.

The water district has two service areas, the older Tariff Area 1, which includes Old Town Elk Grove, and the faster-growing Tariff Area 2 to the east.

Customers in the two areas pay sharply differing rates. In some cases, customers in Tariff Area 2 pay hundreds of dollars more during summer billing cycles than homeowners in Tariff Area 1.

That's largely because the water service had to go outside the district to buy wholesale water from the Sacramento County Water Agency to serve Tariff Area 2.

In Tariff Area 1, there are 5,948 non-metered service connections. Those customers pay $47.98 every two months, plus about $12 for every 1,000 square feet of lot size above 4,000.

Those with meters in Tariff Area 1 pay $30.60 every two months, plus 4.5 cents for every 748 gallons used.

Both billing strategies are modest compared with the costs in Tariff Area 2, where a few residents have resorted to digging wells instead of hooking up to the water service.

Tariff Area 2 has a little less than 4,000 water service customers, all on meters. In summer, bills can average $400 every two months, the district reports. At the high end, they can be $550.

Any rate equity study could examine whether the district water rates should be blended, Kenny said.

"We'll look at what a blended rate would do," Kenny said. "Will it be cheaper overall for everybody? Or should we have two rates."

The district also could include in that rate study how it might allocate costs in the coming decades to replace the district's aging infrastructure.

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Copyright (c) 2006, The Sacramento Bee, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Source: The Sacramento Bee

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