Managing Rates - Guiding Principles

In 1993, the City Council approved and adopted seven guiding principles for managing the Water Enterprise Fund as summarized below.

1. Revenues and Expenditures in Balance. The water fund is self-sustaining. Revenues derived from customer charges should equal the costs of running the water system.
2. Capital Improvement Program. The capital improvement program will fund the systematic and efficient replacement/renewal of the water distribution system. It will also support compliance actions to meet health and safety regulations.
3. Emergency Reserve Fund. A reserve fund shall be maintained to potentially address emergency engineering projects and/or the costs of catastrophic or unforeseen events (e.g., earthquake, drought, regulatory change).
4. Basic Service Charge Equal to Fixed Costs. A basic service charge will cover all fixed costs related to operating or maintaining the water system. The charge varies with meter size, not water usage. Other costs that vary with the quantity consumed will be assessed per water unit (hundred cubic foot) used by customers as recorded by water meters.
5. Cost of Service Equity Among Customer Groups. Each customer group is to pay its fair share of the costs of providing water service. No rate differentials will be applied to subsidize a customer group.
6. Water Conservation Rate Structure. Rates will be structured to encourage customers to conserve water. Customers will pay higher unit prices for increasing increments of water use.
7. Economic Growth and Development. Promote and support the economic growth and development throughout the City by prudent water resource planning.