| | | | | | | | Agenda Item - 2.e.
City of Garden Grove
INTER-DEPARTMENT MEMORANDUM
| To: | Scott C. Stiles
| From: | Patricia Song
| | Dept.: | City Manager
| Dept.: | Finance
| | Subject: | Approval of the adjustment to the calendar year 2021 Water Commodity Delivery Charges. (Action Item) | Date: | 6/8/2021 |
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| | | | | | | | OBJECTIVE
To request that the City Council amend the current water commodity delivery charge that went into effect on January 1, 2021. |
| | | | | | | | BACKGROUND
The current water rate was adjusted on January 1, 2021 to reflect a pass-through commodity delivery charge caused by wholesale water charge increase imposed by the Metropolitan Water District of Southern California (MET), the Municipal Water District of Orange County (MWDOC), and Orange County Water District (OCWD). The City purchases water from MET and MWDOC, and pays a replenishment assessment to the OCWD for its groundwater supply. Ordinance No. 2890 adopted by the City Council on March 27, 2018 provides for automatic pass-through adjustment for purchased water cost.
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| | | | | | | | DISCUSSION
On November 10, 2020, staff took the water commodity adjustment calculation to the City Council for review and approval according to Ordinance No. 2890. The pass-through adjustment was correctly calculated, yet the base rate used in establishing the new water rate for calendar year 2021 was incorrect. Instead of using the Fiscal Year 2020-21 Commodity Delivery Charge listed in Section 14.12.010 B. of the Municipal Code, staff erroneously applied the rate increase to Fiscal Year 2019-20 rate, causing a difference of $0.03 per HCF for Tier 1 usage and $(0.13) per HCF for Tier 2 usage.
Below is a comparison between the current rate and the correct rate of the 2021 Commodity Delivery Charge for both Tier 1 and Tier 2.
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Correct
2021 Rate (per HCF)
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Current
2021 Rate (per HCF)
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Difference (per HCF)
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Tier 1
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$ 3.11
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$ 3.14
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$ (0.03)
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Tier 2
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$ 4.50
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$ 4.37
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$ 0.13
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Once approved by the City Council, Notice of Changes to Water Commodity Delivery Charges will be mailed to all City water customers on June 9, 2021. The revised rates will be become effective on July 8, 2021.
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| | | | | | | | FINANCIAL IMPACT
The proposed water commodity rate increase has no impact to the General Fund. The rate change is a correction to the previously established water Commodity Delivery Charge for calendar year 2021. It is estimated that this correction will help the Water Enterprise to recoup approximately $307,478 in water purchase cost, using the 2019 consumption level. |
| | | | | | | | RECOMMENDATION
It is recommended that the City Council:
- Approve the adjustment to the calendar year 2021 water Commodity Delivery Charges that will become effective on July 8, 2021.
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