CCWD leans on reserves to hold firm on 2026 rate plan despite $7 million operating cost spike

CCWD leans on reserves to hold firm on 2026 rate plan despite $7 million operating cost spikeThe California district verified that scheduled rate hikes of 7% for treated water and 4% for untreated water remain adequate after a review of revenue requirements revealed inflationary pressures on labor and energy.

Operating costs are projected to exceed the 2025 financial plan by $7 million, including $3 million in labor and $2 million in energy costs.

The Board confirmed the previously approved February 1, 2026 rate increases of 7% for treated water and 4% for untreated water.

Late payment penalties were increased from 1.5% to 3% to encourage timely bill payment and reflect the time value of money.

The Contra Costa Water District (CCWD) Board of Directors has confirmed that its multi-year rate strategy remains viable for 2026, despite projecting that operating costs will exceed the financial plan by $7 million. Following an annual review of revenue requirements, district staff determined that the rate increases approved in January 2025—7% for treated water and 4% for untreated water—are sufficient to cover the district's needs without further adjustment. Director of Finance Herman Williams presented the financial analysis, identifying specific cost drivers contributing to the $7 million increase over the 2025 projection. This variance represents roughly 8% to 10% of the district’s annual operating expenses. The primary contributors included $3 million in additional labor and benefits costs and $2 million in higher energy costs—pressures that mirror broader inflationary trends currently impacting water agencies throughout California. Additional variances included $1.5 million in operating and professional services and $0.5 million in insurance costs. Williams noted that rate-funded capital is projected to reach $43.2 million, with debt service at $33.8 million per year. To manage these variances without altering the rate schedule, the district will utilize reserves. "The reserve use coupled with the fiscal year 25 financial plan benefits will help to offset these increased operating costs," Williams told the Board. The confirmed rates will become effective on February 1, 2026. In concurrent legislative action, the Board adopted Resolutions 26-001, 26-002, and 26-003 to update various fees and charges. A notable adjustment was the increase of the penalty for late payments from 1.5% to 3% of outstanding balances. Williams stated this change was intended to "encourage the more timely payment of customers' water bills as well as to better reflect the time value of money." He added that even at 3%, CCWD remains at the lower end compared to neighboring agencies, which charge between 5% and 10%. The Board also approved inflationary adjustments to Facility Reserve Charges (FRC), based on the Engineering News-Record (ENR) index. These adjustments resulted in a 0.3% increase for untreated water FRCs and a 0.7% increase for treated water FRCs. Additionally, boat rental fees at the Los Vaqueros Reservoir were increased, as a recent review indicated current rates were significantly lower than neighboring agencies.