El Dorado faces $360m capital funding cliff as it launches comprehensive rate study

El Dorado faces $360m capital funding cliff as it launches comprehensive rate studyThe California utility is weighing major rate structure changes and up to $410 million in potential debt issuances over the next decade to finance critical rehabilitations at its El Dorado Hills treatment plant and the 1870s-era Silver Lake Dam.

EID's five-year capital improvement plan totals $360 million, with a major $176 million spike expected in 2028.

Initial financial modeling suggests the district may need to issue $150 million in debt in 2028, followed by $65 million in 2032 and $195 million in 2035, to maintain reserve policies.

The board is considering simplifying the district's complex rate structure, potentially abandoning tiered rates in favor of a single uniform commodity rate.

The district is grappling with a 2% decrease in water sales since 2011, despite a 15% increase in customer connections, driving a need for revenue stability.

El Dorado Irrigation District (EID) has initiated a comprehensive cost-of-service and rate study as it prepares to finance a $360 million five-year capital improvement plan (CIP) dominated by aging infrastructure. During a March 3 workshop, General Manager Pravani Vandeyar outlined the district's pressing infrastructure needs, highlighting a massive funding cliff approaching in 2028. The district anticipates needing $176 million that year alone, primarily to fund capacity and condition rehabilitations at the El Dorado Hills Water Treatment Plant and critical safety upgrades to the Silver Lake Dam, which features an 1876-era timber crib. An additional $132 million rehabilitation project at Reservoir 1 is slated for 2035. Consultant Sanjay Gaur of Water Resource Economics warned the board that maintaining the district's current rate trajectory while executing the CIP would deplete reserves and effectively bankrupt the utility. An initial financial iteration—presented as a baseline rather than a formal proposal—suggested that to fund the capital projects and maintain its AA- credit rating, EID may need to issue $150 million in debt in 2028, followed by $65 million in 2032 and $195 million in 2035. To support this financial burden, the board is considering a significant overhaul of its rate structure. Gaur noted that the district has experienced a 2% decrease in water sales since 2011, despite a 15% increase in customer connections. This trend of declining per-capita use has exposed the utility to revenue volatility. Currently, the district collects approximately 50% of its revenue through fixed charges and 50% through commodity charges. While this provides some stability, several board members expressed a desire to simplify the district's complex customer classifications and evaluate moving away from tiered pricing. Director Day advocated for a single uniform rate, arguing that it would be more transparent, equitable, and legally defensible under California's Proposition 218 proportionality requirements. The board also plans to scrutinize its recycled water rates. Directors noted that the recycled system lacks sufficient seasonal storage, requiring the district to supplement it with high volumes of potable water during the summer—costs that are not currently fully reflected in the recycled water rates. Additionally, the district will reevaluate how historical project debt is assigned across customer classes. The board discussed unwinding convoluted debt assignments that were originally designed to subsidize agricultural rates, aiming for a more transparent, proportional cost allocation. The rate study is currently in its initial phases, with staff and consultants expected to return to the board with a formal schedule and refined rate recommendations in the coming months.