2024 Water Rates

The City Council of the City of Shasta Lake (“City”) considered and approved a rate increase at the June 4, 2024, City Council meeting. The new rates will take effect on July 1, 2024, and your August bill will reflect these changes.

The new rate structure has shifted from a monthly tiered rate to a uniform rate. This means that, effective July 1, the consumption rate will be $2.85 per hundred cubic feet (hcf), regardless of water usage—every customer will pay the same rate per hcf. Additionally, the City has increased the monthly fixed charge to secure the financial stability of the City’s water enterprise needs related to the cost of capital improvement projects, billing, meter maintenance, planning for drought years, and volatile water markets.

Many aspects of our water enterprise benefit everyone. For example, fire hydrants supplied with sufficient water are essential during fire emergencies. The City also operates and maintains six large storage tanks and a water treatment plant that delivers some of the highest-quality drinking water in the nation directly to your home.

The City does not take raising rates lightly and has opted not to raise rates since 2021. However, rising utility operation costs have prompted the City to study the overall cost of service, leading to the new rates necessary to continue providing water services to the community.

RATE DEVELOPMENT BACKGROUND

The City is dedicated to maintaining affordable rates by maintaining lean staffing levels and utilizing reserves when necessary. However, similar to other utilities such as wastewater, electricity, and gas, the expenses associated with purchasing, pumping, treating, and delivering water, as well as maintaining the water system infrastructure, are continually increasing. To mitigate the impact on water utility customers, the City has actively pursued grant funding for essential capital projects. Recently, the City secured over $6.3 million in grants to construct a new water tank at Centimudi. As a result, the City has not increased rates on our customers since 2021, even though inflation has increased 18% during the three-year period.   Failure to adjust rates could lead to a deficit in the water fund by 2026, necessitating support from the General Fund, potentially resulting in cuts to vital services like law enforcement and parks.

Over the past few months, the City has conducted a thorough analysis of its water costs, revenues, and rates, engaging independent financial experts for an accurate assessment of water service costs and their impact on customer bills. Several factors have led to proposed adjustments in water rates and charges:

• Transition from a tiered water rate system to a uniform water rate as authorized by the City Council.
• Increase in the fixed revenue percentage from 46% to 55%.
• Rising unfunded regulatory costs to meet federal and state compliance mandates include, but are not limited to, U.S. Environmental Protection Agency’s Lead and Copper Rule Revisions, where water suppliers are required to prepare and maintain an inventory of service line materials by October 16, 2024. Section 7584 of the California Code of Regulations requires that each public water system have a cross-connection control program by July 1, 2025. UCMR5 testing completion by January 2025 with an increase of base unit rates of 5.9% with a nominal increase in standard fees and surcharges on all samples at Pace Analytical Laboratory effective January 1, 2024. General operating supplies such as chemicals, reagents, analytical equipment services, replacement parts, and maintenance services have increased exponentially. 
• Planned expenditure of $11 million over the next five years for capital projects addressing aging infrastructure, tank maintenance, and the addition of a new raw water tank at the City’s Water Treatment Plant.  Improvements to the City’s distribution system include the replacement of water meter transmitters (city-wide), aging pressure-reducing valves, and aging water distribution mains. 
• Increased rates and charges are needed to cover the water system’s fixed costs, which do not vary with water sales. 
• The increased rates fund capital investment projects that maintain system reliability and water quality.
• Establishment of prudent long-term capital reserves aligned with industry standards.
• Escalating wholesale water costs and unpredictable water supply, with the City relying entirely on Shasta Lake water due to the absence of groundwater

The City remains committed to providing reliable and safe drinking water from source to tap. Recognizing that rate increases may pose financial challenges for some customers, various assistance programs such as Lifeline rates, SHHIP, SHARES, and LiHEAP are available. Customers can inquire about these programs by contacting our customer service staff at 530-275-7400.

Summary of proposed rate increases:

The City’s proposed water rate structure includes the following changes:

• Rate revenue adjustments of 25% in FY 2025 and 6% annually from FY 2026 through FY 2029
• Lifeline program discount of $4 per customer per month, applied on the monthly service charge
• Uniform consumption charges per hcf of water use for all customer classes
• Increasing fixed revenue recovery percentage from 45% to 54% for financial stability
• Drought rates based on six drought stages from the City’s Water Shortage Contingency Plan to recover lost revenue during periods of government-mandated usage cutbacks
• Pass-through water supply surcharges to recover additional costs associated with purchasing ACID and McConnell water during constrained water supply years