Utilities Rate Advisory Commission Workshop on Water and Wastewater – September 9, 2015

The Utilities Rate Advisory Commission (URAC) met on Wednesday, September 9, 2015, at 5:30 p.m. in the Council Chambers at 915 I Street, Sacramento. The meeting featured a detailed workshop from the Department of Utilities on water and wastewater commodity programs, capital improvement plans, and financing approaches. The commission approved the previous meeting's minutes and elected a new vice chair.

Consent Calendar

• Approval of Minutes (August 26, 2015): Approved unanimously by roll call vote (6-0). The minutes' cover date was corrected to September 9, 2015, and the staff contact was updated.

Discussion Items

• Selection of New Commission Vice Chair: Commissioner Timothy Horner was nominated by Commissioner April Butcher and seconded by Commissioner Brian McCannis. Horner accepted and was elected by unanimous roll call vote. Horner succeeded the previous vice chair.
• Introduction of New Commission Members: Two new commissioners were introduced: Ryan Vander Weil and Andrew Day. A third new member, John Mathis, was not present. Each expressed enthusiasm for serving the community.
• Department of Utilities Water & Wastewater Workshop:
  • Overview & Strategic Plan (Mike Malone): Presented the department's mission, vision, core values (customers, environmental stewardship, compliance, infrastructure investment, cost efficiency), and recent achievements: advanced metering infrastructure (AMI), pipeline assessment, well rehabilitation, combined system storage (3.8 million gallon Oak Park facility), community outreach (500+ web portal sign-ups), security master plan, and emergency preparedness.
  • Accountability & Financial Stewardship (Susan Goodison):
    • Water CIP: Expected expenditures from 2013 bond program: $239.5 million raised with only $215 million in debt (due to bond premium). Program delivery exceeded projections: 28 miles of pipeline replacement completed (vs. 11 projected), 27 groundwater wells rehabbed (vs. 6 projected). FY16 water CIP investment: $23 million (no rate adjustment), with $20 million directed to accelerated meter program.
    • Wastewater CIP: Combined system rehab: 2.5 miles completed. FY16 wastewater CIP investment: $11 million from fund balance.
    • Grant Funding: $7.7 million secured in the last three years (on top of $6.4 million previously). A new grant manager position was filled.
    • Credit Ratings: Water bonds rated AA- (S&P, Fitch); wastewater bonds rated AA (Fitch).
  • Water System Overview (Michelle Carey):
    • Supply: 80-85% from rivers (American and Sacramento treatment plants), 15-20% from groundwater wells. Key programs: meter acceleration (deadline 2025, accelerated to 2020 with $230 million additional funding contingent on approval), rehab of aging infrastructure (many pipes >100 years old), regulatory compliance, and security upgrades.
    • Challenges: Aging pipes (tuberculated cast iron reducing fire flow), treatment plant rehab (Sacramento plant built 1920s, Fairburn 1960s), well rehabilitation neglected for decades, IT/billing system nearing obsolescence, security improvements recommended by Homeland Security.
    • Proposed 4-year water CIP (FY17-20): $265.5 million, including $230 million for meter program, $18 million for rehab/replacement (8.5 miles of distribution main), $7.5 million for security/emergency preparedness, and $2 million in operating support.
  • Wastewater System Overview (Brett Grant):
    • System: 35% maintained by outside agency; combined system (central city) conveys both wastewater and stormwater; separated system (41 basins) with 8 gravity basins and 35 pumped basins (higher cost).
    • Combined Sewer Improvement Plan (adopted 1995): $150 million spent to date; goal of zero flooding in a 10-year storm. Updated 30-year plan identifies 29 projects costing >$280 million (mostly underground storage).
    • Challenges: Pipes >100 years old (some brick), leaky pipes/inflow/infiltration (e.g., Pocket area), backyard easements, flat terrain requiring pump stations, need for master planning (8 of 41 basins completed), security.
    • Proposed 4-year wastewater CIP (FY17-20): $53.5 million, including $30 million for combined sewer improvement, $13 million for critical rehab, IT/security, and $1.3 million in operating support.
  • Financing Approach (Susan Goodison):
    • Development of financial plan ongoing; guiding principles: mix of bond/cash/grant funding, self-contained debt (paid by rate adjustments), rate smoothing, pursuit of grants.
    • Revenue assumptions consider conservation impacts (every 10% conservation reduces water fund revenue by $3 million per year), cost drivers (labor, pension/OPEB changes), and efficiency gains (solar panels, alternative fuel vehicles).
    • Benefits of continued investment: local control, 711 jobs and $109.8 million economic benefit from water program, 143 jobs and $22 million from wastewater program. Risks of underfunding: loss of local control, public health/safety impacts, impaired service delivery.
    • Proposed next steps (draft): Further URAC workshops, city council discussions, and eventual presentation of final financial plan for rate adjustment consideration.

Key Outcomes

• Consent Calendar: Approved unanimously.
• Vice Chair Election: Timothy Horner elected vice chair by unanimous vote.
• Workshop Received and Filed: The commission received and filed the Department of Utilities Water & Wastewater workshop presentation. No formal action was taken on the financing plan; it will be brought to a future meeting.
• Commissioner Requests:
  • Future presentations to include printed handouts for note-taking (requested by Commissioner Butcher).
  • Financial plan to show working capital impact (target 120 days), scenario analysis for interest rates and reserves, and clarification on project budget assumptions (conservative vs. aggressive).
  • Grant funding opportunities and past performance to be shared at subsequent meetings.
• Next Steps: The Department will continue developing the financial plan and return to URAC with a detailed proposal. The commission will hold additional workshops on the rate adjustment process later in fall 2015.