Water Utility Growth Programs in California - Overview and Insights

Implementation of D.11-05-020: Growth in Water Utility CARW/LIRA Programs California Water Association Low-Income Oversight Board October 29, 2012 Sacramento, CA Working together. Achieving results.

Presentation Overview Overview of California PUC-Regulated Water Utilities Summary of R.09-12-017 and D.11-05-020 Existing Investor-Owned Water Company (IOWC) California Alternative Rates for Water (CARW) or Low-Income Rate Assistance (LIRA) Programs 2

Presentation Overview (cont.) Low-Income Data-Sharing: Program and Goals Results of Data-Sharing w/ Energy Utilities (by company) Increases in IOWC CARW/LIRA Participation IOWC Low-Income Conservation Programs Current Proceedings Affecting CARW/LIRA Programs Conclusions/Observations/Lessons Learned 3

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CWA Overview Class A and B Members 12 Cal Water; Golden State; San Jose; Cal-Am; San Gabriel Valley; Suburban, Valencia, Park, Apple Valley Ranchos, Alco, Del Oro, East Pasadena Class C and D Members 25 Represents Business Interests of All 137 CPUC- Regulated IOWCs Principal Activities Promote sound water policy: utility/customer balance Provide consensus on regulatory, legislative positions Internal and external communications Small system assistance Forum for sharing best management practices 5

IOWCs in California Total Service Connections: 1.47 million out of 7.5 million total in the state ( 20%) Population Served: 5.6 million out of 37 million ( 15%) Class A Company Annual Revenues: $1.4 Billion PG&E ($15b); SCE ($10.6b); Sempra ($7.2b) Customer Base: 81-90% residential Water Revenues from Res./Commercial Customers: 57% - 93% - most companies derive >80% of their revenues from their smaller customers 6

Most Capital Intensive Industry Capital Investment Required to Produce $1 of Revenue EPA rules require large investment in water quality Substantial investment needed for distribution system More capital per revenue than all other utilities Marginal cost of new source is very high Source: 2009 AUS Utility Reports 7

Cost Structure vs. Rate Structure Cost Structure vs. Rate Structure 8

Customer Info-Sharing OIR Class A IOWC 2007 CARW/LIRA Penetration Rate: 16.1% Energy Utilities CARE 2008 Penetration Rate: 78.8% Objectives of Order Instituting Rulemaking (R.09-12-017) Enhance penetration of IOWC CARW programs among eligible customers Develop an open yet secure exchange of information that benefits customers and utilities alike Provide clear guidance on information sharing to regulated and municipal utilities Protect the confidential nature of customer information Proceeding Concluded in May 2011 w/D.11-05-020 9

Summary of D.11-05-020 Adopted Guidelines for Sharing Low-Income Customer Information Eligibility Requirements Adopted for Energy IOUs Apply to IOWCs IOWCs to Prepare and File Data-Sharing Plans w/CPUC IOWCs to Establish Memo Accounts to Track Costs IOWCs, Energy IOUs Executed MOUs/Non-Disclosure Agreements; Coordinated IT Interface; Undertook Trial Information Exchanges in First Half of 2012 Commenced Formal Data Exchanges in September 2012 10

Existing CARW/LIRA Programs Apple Valley Ranchos Water (CARW) Eligible customer discount: $6.69/month Non-qualifying customer surcharge: $0.55/month California American Water (LIRA) Eligible customer discount: As set, per customer discount in all districts except Monterey varies from $6 to $23 per month; in Monterey Main Service Area, discount is a set amount per service, depending on the number of residents at the premise - it varies from $10 - $20 per month Non-qualifying customer surcharge: None (tracked in memo account) California Water Service (LIRA) Eligible customer discount: 50% off monthly service charge (approx. $6/month) Non-qualifying customer surcharge: $0.06/Ccf Non-qualifying customer temporary surcharge: $0.0182/Ccf 11

Existing CARW/LIRA Programs Golden State Water (CARW) Eligible customer discount: Flat discount equivalent to 15% of avg. CARW customer monthly bill (excluding surcharges) Non-qualifying customer surcharge: Region 1 - $0.033/Ccf/month; $1.00/month for flat rate customers; Region 2 - $0.0056/Ccf/month; Region 3 - $0.0035/Ccf/month Great Oaks Water (LIRA) Eligible customer discount: 50% of bi-monthly service charge Non-qualifying customer surcharge: None (tracked in memo account) Park Water (CARW) Eligible customer discount: $5.50/month (current); $6.65/month (1/1/2013) Non-qualifying customer surcharge: $0.00/month; $6.07/month (1/1/2013) 12

Existing CARW/LIRA Programs San Gabriel Valley Water (CARW) Eligible customer discount: 50% off monthly service charge Non-qualifying customer surcharge: None (incorporated into rate design of monthly service charge; will change in new GRC ) San Jose Water (WRAP) Eligible customer discount: 15% off total monthly bill Non-qualifying customer surcharge: $0.20/month Suburban Water (LIRA) Eligible customer low-income credit: $6.50 per month Non-qualifying customer surcharge: $0.014/Ccf Valencia Water (LIRA) Eligible customer discount: 50% off monthly service charge Non-qualifying customer surcharge: $0.04/month 13

Low-Income Data Sharing Program Details Data-sharing w/energy utilities Hard matches automatically enroll in IOWC LIRA/CARW programs Soft matches automatically enrolled upon verification 14

Low-Income Data Sharing Goals Align energy and water IOU CARE/LIRA programs Increase water utility LIRA/CARW penetration Long-term goal of achieving energy IOU penetration levels 15

Low-Income Data Sharing Issues Largely increased water customer participation Low revenue base over which to spread increased costs Water companies are highly residential revenue-driven Water companies have filed to increase the surcharge levels that fund their CARW/LIRA programs 16

Low-Income Data Sharing Results Apple Valley Ranchos Water 175% increase in participation in LIRA Program Surcharge increase (recovery from non-LIRA qualifying customers and other customer classes) - will remain at $0.55/month until next GRC (2015) California American Water 207% increase in participation Surcharge increase - TBD California Water Service 128% increase in participation Surcharge increase from $0.01 to $0.06 per Ccf Temporary surcharge:$0.0182/Ccf 17

Low-Income Data Sharing Results Golden State Water 53% increase in participation in CARW Program Surcharge increase TBD (pending GRC application) Great Oaks Water 469% increase in participation in LIRA Program Surcharge increase TBD Park Water 328% increase in participation in LIRA Program Surcharge increase from $2.27/month to $0.00 to $6.65/month 18

Low-Income Data Sharing Results San Gabriel Valley Water % increase in participation in CARW program - TBD Surcharge increase from $0.00 to $0.1297/Ccf (Fontana Water Co. Division effective when current GRC is completed) and (probably) from $0.00 to $0.0637/Ccf for the Los Angeles Division (in its next GRC) San Jose Water 128% increase in participation in WRAP Surcharge increase TBD Suburban Water % increase in participation in LIRA Program - TBD Surcharge increase TBD Valencia Water 386% increase in participation in LIRA Program Surcharge increase from $0.04/month to $0.91/month 19

Increases in Participating Customers Pre-Sharing After Apple Valley Ranchos Water California American Water California Water Service Golden State Water Great Oaks Water Park Water San Gabriel Valley Water San Jose Water Suburban Water Valencia Water 1,707 5,477 16,800 40,965 93,732 30,304 46,504 431 2,266 22,455 23,566 7,994 18,241 4,085 446 4,695 2,452 9,697 TBD 2,168 20

Current Penetration Increases Apple Valley Ranchos Water: California American Water: California Water Service: Golden State Water: Great Oaks Water: Park Water: San Gabriel Valley Water: San Jose Water: Suburban Water: Valencia Water: 2009 Current 6.9% 14.5% 41.6% 31.1% 13.2% 77.0% 7.1% 72.3% TBD 19.9% 5.5% 6.5% 24.2% 44.8% 93.8% 58.0% 35.6% 55.8% TBD 31.1% Methodology: Each company s residential customer count was applied to its respective household eligibility percentage, as derived in the CPUC Div. of Water & Audits report, Assessment of Water Utility Low-Income Assistance Programs (October 2007; page 17), to derive an estimate of LIRA-eligible customers. The 2009 and 2012 LIRA customer totals were divided by the estimate of LIRA-eligible customers to calculate the penetration percentages above. 21

LIRA Customers as % of Total Residential Customers YE 2011 Current 9.9% 26.7% 3.7% 11.3% Apple Valley Ranchos Water California American Water California Water Service 12.4% 23.4% Golden State Water Great Oaks Water Park Water San Gabriel Valley Water San Jose Water Suburban Water Valencia Water 15.0% 22.0% 2.2% 12.8% 8.4% 38.7% 19.2% 28.4% 3.9% 9.3% 5.1% TBD 1.5% 8.4% 22

Low-Income Conservation Programs Apple Valley Ranchos Water Three-tiered conservation quantity rates for residential customers Free water audits to all customers Cash for Grass to all customers partnership with Mojave Water Agency California American Water Low Income Toilet Direct Install Program Low Income Toilet exchange program (self install) California Water Service Three-tiered conservation quantity rates for residential customers Bathroom Fixture Replacement Program Conservation Kit Program Residential Water Use Survey Program High-efficiency sprinkler nozzles 23

Low-Income Conservation Programs Golden State Water Low-income toilet direct install program; Multi-family direct install Free water audits; free indoor conservation kits; free outdoor conservation kits/devices Great Oaks Water Three-tiered conservation quantity rates Recommendations to obtain free water audit Park Water Two-tiered conservation quantity rates for residential customers Low Income Toilet Direct Install Program Low Income Toilet Direct (self-installed) Free water audits to all customers 24

Low-Income Conservation Programs San Gabriel Valley Water Direct toilet install to CARW customers only Rebates, conservation kits, turf removal directed to all customers San Jose Water Two-tiered conservation quantity rates for residential customers Free water audits to single- and multi-family customers Rebate programs offered to SJWC customers via SCVWD Suburban Water High-efficiency toilet program Valencia Water Upon enrollment in LIRA, outreach letter is sent offering free water saving devices, free water audits, and explaining rebate programs. 25

Advertising and Promotion Apple Valley Ranchos Water/Park Water Bill inserts; Company Newsletters; All public events, fairs, PPHs, etc. Company websites w/link to application Application presented to all new customers English, Spanish (Park) California American Water Bill inserts; website; outreach at all community events CSR notices to delinquent or near-delinquent customers English, Spanish California Water Service Bill inserts (full color flyer w/applications; company website Applications in customer centers English, Spanish (where applicable) 26

Advertising and Promotion Golden State Water Website, customer mailers, pamphlets at public meetings Hotline for customers to speak directly w/Low-Income Dept. CSR English, Spanish, Chinese Great Oaks Water Information on LIRA program provided on every bill CSRs personally discuss LIRA program eligibility and discounts w/customers who have trouble paying their bills San Gabriel Valley Water Bill inserts; website; direct-mail postcard to CARW customers; outreach at public/community events Customer service representatives English, Spanish 27

Advertising and Promotion San Jose Water Bill inserts; website; customer service representatives English, Spanish, Vietnamese Suburban Water Community outreach and education conservation programs Valencia Water Upon enrollment in LIRA, outreach letter is sent offering free water saving devices, free water audits, and explaining rebate programs Website, posted in lobby, customer bills 28

Proceedings Affecting LIRA Programs California American Water s Current GRC Settlement: Low-Income Assistance Proposal D.12-09-020 California Water Service Temporary surcharge (36 months) to amortize memorandum account balance Increase in Surcharge from $0.01 per Ccf to approximately $0.06 per Ccf Establish balancing account for implementation costs Maintain memorandum account for administrative costs R.11-11-008: Rate Consolidation OIR 29

Lessons Learned The information-sharing program has been successful dramatic increases to date in water IOU LIRA programs The IT issues with the energy utilities were far more complex and difficult than originally contemplated LIRA/CARW eligibility criteria limits ability of water IOUs to achieve high penetration levels of energy IOUs CPUC s eligibility percentages derived from 2000, 2006 census data and encompass all residential citizens; water IOU participation limited to single-family dwellings, so eligibility universe should be limited to single-family dwellings Primary eligibility based on customer participation in the energy CARE program; however, water companies solicit all residential customers Difficulty reconciling existing recertification procedures with the automatic enrollment from the data-exchange program 30