South Coast Water District proposes 15% water rate hikes amid healthy sewer reserves

South Coast Water District proposes 15% water rate hikes amid healthy sewer reservesThe Californian utility is reviewing a five-year financial plan that necessitates double-digit water revenue adjustments to meet debt coverage ratios, while wastewater rates remain stable due to a $70 million reserve fund.

A proposed rate study outlines 15% annual water revenue adjustments for the first three years, followed by 14% increases.

Sewer revenue adjustments are projected at a modest 3% annually, supported by $70 million in existing reserves.

The district plans to transition to budget-based tiered rates within two to three years.

Multifamily customers may see sewer rate reductions after data analysis revealed lower-than-estimated usage.

The South Coast Water District (SCWD) Board of Directors has reviewed a proposed rate structure that would implement consecutive 15% water revenue adjustments over the next three years to ensure financial stability and meet debt obligations. Presented during a January 22, 2026, workshop by Sanjay Gower of RDN, the study highlights a significant disparity between the district’s water and wastewater financial positions. According to the presentation, the water utility requires substantial revenue increases—15% for the first three years and 14% subsequently—to manage uncertainty regarding the Doheny desalination project and WIFIA loan participation. Gower noted that while the adjustments are conservative, the district aims to lower them if possible. The plan ensures the district meets a debt coverage ratio of 1.25, though forecasts show the utility dipping slightly below policy targets in 2030 before recovering. Conversely, the wastewater utility is in a "stable state" following previous rate adjustments. The study proposes a 3% annual increase for sewer services. Gower highlighted that the sewer fund currently holds healthy reserves of approximately $70 million, which the district plans to draw down over time to fund capital pay-go expenditures. By the end of the planning horizon in 2031, reserves are expected to remain robust despite the modest rate increases. The proposed rate design also includes structural adjustments. The former "peaking charge" is being rebranded as a "capacity charge," and fixed meter charges are being realigned based on updated engineering estimates for flow. Notably, data analysis revealed that multifamily units generate less wastewater than previously estimated, leading to a proposed decrease in sewer charges for that customer class. Public discussion during the workshop touched on the methodology for sewer billing, which currently relies on average winter water usage. While staff defended the current method as defensible under Proposition 218, they confirmed that the district intends to transition to budget-based rates—customized plans based on household size and landscape area—within the next two to three years. This transition would require a new Proposition 218 hearing process. The board provided concurrence to proceed with the report, with final adoption anticipated following a public hearing scheduled for June 11, 2026.