Explanation of 2010-11 Adjustments | Current Rates 
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At a public hearing on June 14, 2010, Pasadena City Council approved a series of water rate adjustments:  

1. Eliminate block 5 from the tiered rate structure;

2. Reduce block 4 rates by 25 percent;

3. Discontinue the Block 5 Relief Program;

4. Discontinue the Block 4 and 5 Refund or Credit Program;

5. Pass through a $0.095 per billing unit commodity increase on  October 1, 2010 and a $0.12 per billing unit commodity increase on October 1, 2011.

PWP Chief Financial Officer Shari Thomas Explains
the 2010-11 Water Rate Adjustments

(updated July 11, 2010)

Under the previous rate structure, the city's highest volume water users in each meter class were subject to the higher rates in blocks 4 and 5. These higher rates were introduced to the city's tiered rate structure in summer 2009 when the statewide water shortage had become critical. The new five-tiered structure was designed to encourage greater conservation and secure against any penalties from the Metropolitan Water District (MWD), should Pasadena exceed its reduced allocation from the wholesale water supplier. Pasadena's water conservation efforts since summer 2009 have resulted in a 13% reduction in water use citywide.

"This excellent conservation trend is a clear indication that we will finish the [Fiscal Year 2010] under our allocation from MWD and avoid penalties," says Pasadena Water and Power (PWP) Chief Financial Officer Shari Thomas. "We do believe our customers have made lasting changes; if the risk of exceeding our allocation from MWD [in FY 2011] has decreased, so should our rates," Thomas continued, explaining the department's decision to propose reducing block 4 rates and eliminating block 5.

Proposed block 4 rates, although reduced, will still generate enough revenue in FY 2011 to support budgeted conservation programs, while providing funds in the event that Pasadena does exceed its allocation in future years. "We don't anticipate going over the MWD allocation [in FY 2011], but in the event that we do, there will be funds available from the proposed block 4 rates," said Thomas.

Previously high-use water customers in block 5 who demonstrated that they were operating at maximum efficiency could pay at lower block 4 rates through the Block 5 Relief Program. The approved elimination of Block 5 has rendered that program obsolete, and therefore it has been removed from the water rate ordinance (Section 13.20.125).

Also under the previous rate ordinance, blocks 4 and 5 ratepayers were eligible to receive a credit on their bill if Pasadena did not exceed its FY 2010 allocation from MWD and incur penalties. With Pasadena finishing FY 2010 under budget for water use, "customers who paid block 4 and 5 rates [during FY 2010] will get a credit [...] on their September or October bill.  That is great news for a number of customers," said Thomas.

The dollar amount of the Block 4/5 credit will depend on how much the customer used and paid for at the FY2010 water rates. "Some customers may have used block 4 water just once in the year, so they might see a very small credit; others may have been consistent block 4 or 5 users, and they might see a larger credit on their bill this fall," explained Thomas.

Subsequent to the Council's June 14, 2010 decision to eliminate block 5 and reduce block 4 by 25 percent, there will no longer be excess revenue accumulated to credit back to the customer. "All revenues generated from a reduced block 4 rate would be encumbered for real commodity costs, conservation programs and to offset potential penalties from MWD," said Thomas. Accordingly, the Block 4 and 5 Refund or Credit Program has been removed from the water rate ordinance (Section 13.20.120).

While the first four of the 2010 rate adjustments come as a result of customers’ water-wise choices that helped the city avoid penalties from MWD, the last of the adjustments is “a separate matter altogether having to do with cost -- not allocation or penalties -- which PWP and its customers have no control over,” said Thomas.

MWD, on which Pasadena relies for 65 percent of its water supply, announced last spring that it will increase the cost of the commodity in January 2011 and 2012. Costs to produce local groundwater have also increased.

City Council has approved a standard "pass through" of those commodity cost increases. Customers will see the cost of each billing unit (748 gallons or 1 HCF) increase by 9.5 cents starting October 1, 2010, and by another 12 cents on October 1, 2011. These increases would apply to customers across the board, regardless of meter size or the amount of water they use. “Whether a customer uses ten billing units in a month or 1000, each billing unit [will] cost 9.5 cents more on October 1 this year,” explained Thomas.   

The water rate adjustments, approved by City Council on June 14, will take effect on July 1, 2010.

Read the Original Press Release

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Currents Rates, as of July 15, 2010

* Water usage is billed by hundred cubic feet (HCF). 1 HCF = 748 gallons. One billing unit (BU) is equivalent to one HCF (748 gallons), and both terms are used interchangeably.

**Outside city rates are 25% more.

See More on Current Rates

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Frequently Asked Questions

What are the approved changes to the water rates?

1) Eliminate Block 5 from the rate structure.  All water sold in Block 5 would be sold at Block 4 rates effective July 15, 2010.

2) Reduce Block 4 rates by 25% effective July 15, 2010.

3) Discontinue the Block 5 rate relief effective July 15, 2010.  The Block 5 rate relief program will no longer be necessary since Block 5 would be eliminated.

4) Discontinue the refund or credit of the incremental revenues collected from Blocks 4 and 5 rates effective July 15, 2010.  Since Block 5 would be eliminated, there would no longer be any revenue to refund to credit.  The revenues collected at the reduced Block 4 rates will be used to pay for water conservation programs and any future penalties for excess water purchases from the Metropolitan Water District (MWD).

5) Increase the Purchased Water Adjustment Charge (PWAC) by 9.5¢ per billing unit (each 748 gallons) effective October 1, 2010 and 12¢ effective October 1, 2011.

When was the public hearing?

June 14, 2010 at 7:30 p.m. in the City Council Chambers at 100 N. Garfield Avenue, Pasadena, CA, 91101.

Is the water shortage over?

No.  Even though Southern California recently experienced a winter of average rainfall, statewide reservoir levels remain at 50% capacity. The environmental restrictions on water imports from northern California are still in place.  Conservation is still critically important to preserving our water supply

What is MWD?

The Metropolitan Water District (MWD) is the wholesale supplier of treated water for 26 agencies including Pasadena.  MWD provides approximately 65% of Pasadena’s water supply.

Why is it necessary to eliminate Block 5 allocation and rates, and reduce Block 4 rates?

In 2009, MWD reduced its delivery of water (allocation) to each of its member agencies by at least 10%, including Pasadena.  MWD also approved “penalty rates” to be charged to members who exceeded the reduced allocation and had to buy additional water.  In August 2009, Blocks 4 and 5 were put in place in Pasadena to cover potential penalties if the customer water demand in Pasadena caused the City to exceed its reduced allocation from MWD. Through conservation efforts by PWP customers, combined with an adjusted allocation of water from MWD, the potential for penalties is now greatly reduced.

Why did MWD adjust PWP’s water allocation?

MWD staff and its member agencies developed a formula for allocating water supplies in times of shortage.  PWP implemented Blocks 4 and 5 based on a water allocation and penalty rate structure developed by MWD at that time.  MWD subsequently recalculated PWP’s allocation which resulted in a higher allocation than was originally calculated.

Why is it necessary to discontinue the Block 5 Relief Program and the refund or credit of water purchased in Blocks 4 and 5?

Simply put, if Block 5 is eliminated, there will no longer be a need for the relief program.  Also, the reduction of Block 4 rates by 25% will still provide a “price signal” to high volume users to encourage conservation, but the revenue from the reduced Block 4 rates will be used to support conservation programs and provide funding for any future penalties from MWD.

Why is PWP increasing the PWAC?

MWD has approved two rate increases of 7.5% each, effective January 1, 2011 and January 1, 2012.  Since PWP purchases about 65% of our customers’ water supply from MWD, the increased costs from MWD must be passed through to Pasadena’s customers.  This is strictly a pass-through and does not generate “new” money for PWP.  The Water Rate Ordinance Section 13.20.110 allows adjustments to PWAC to reflect changes in PWP’s purchased water cost.

How will customers be impacted by proposed changes?

The proposed changes effective July 1, 2010 will only impact Block 4 and/or Block 5 water users.  Water usage in block 4 will be priced 25% lower than the current Block 4 rates.  This means that high volume customers will notice the biggest impact because it is no longer necessary to fund MWD penalty rates.  Customers using water only in Blocks 1, 2 and 3 will not see an impact from the July 1 rate changes.

The proposed changes effective October 1, of 2010 and 2011 will impact all PWP water customers.  The price for each block of water will increase by 9.5¢ in October 1, 2010 and by and additional 12¢ in October 1, 2011. (A bill estimator is available at www.PWPweb.com to show customers the impact of the proposed water changes to their monthly bill).

Will the proposed rate changes impact residential customers as well as commercial customers?

Yes, the proposed rate changes are applicable to all water customers.

What will happen to the incremental revenues collected (if any) in blocks 4 and 5 prior to July 1, 2010?

If PWP does not exceed its allocation of water from MWD by June 30, 2010, it will not incur any penalties.  As a result, customers using water at Block 4 and 5 rates will receive a credit on their bills in August, September or October for the incremental cost above Block 3 rates. This credit was approved by the City Council to ensure that customers would receive credit for revenue collected that was not required for the purpose of paying MWD penalty rates.

Will the Distribution and Customer Charges (D&C) be affected by the proposed changes?

The D&C increases that were approved by City Council in June 2009 will be implemented as scheduled on July 1, 2010 and July 1, 2011.  There are no additional changes to the D&C rates at this time beyond what was already approved.

If Block 4 rates were established to cover potential penalties, and PWP no longer anticipates penalties, why not eliminate block 4 completely?

The rates for Block 4 will remain in place to encourage continued water conservation.  The revenue generated from the reduced Block 4 rates will be used to support conservation programs and fund future penalties. 

What happens if my billing period begins before and ends after the effective date of the rate change?

Bills will be prorated based on the number of days during a billing period that each of the rates is in effect. Customers will pay for water used at the rates actually in effect when it is used.

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  Explanation of 2010-11 Adjustments | Current Rates 
Water Cost Estimator | FAQ | Public Hearing Notice | Press Release