Keeping up with changes to your water rates can be challenging. Providing you with clear explanations to help you understand your bill is one of our top goals.
Recently, you might have seen reports that the California Public Utility Commission, which oversees San Jose Water (SJW) and other investor owned water utilities, made a decision to reduce a component of your water bill referred to as the “Cost of Capital.”
The most important takeaway is that SJW will be making modest reductions to the two primary components that make up your bill; your service charge and your quantity rates (costs for the volume of water used during the billing cycle).
For the typical customer with a standard 3/4-inch meter, this will mean a decrease of 47 cents per month in service charge costs and a quantity rate decrease from $4.98 per ccf to $4.90 per ccf (one ccf = 748 gallons).
Cost of capital (COC) is just one component of your rate. The typical SJW customer pays around $100 per month for water service. Prior to the most recent CPUC decision, the COC was set at 8.09%. The Commission’s most recent decision reduces that rate to 7.64%.
COC refers to the way that investor-owned water utilities, like SJW, pay for capital improvements to the network of systems, pipes, pumps, tanks, and reservoirs that deliver the safe, high-quality, round-the-clock water service our customers rely on.
Capital improvements are paid for through a mix of shareholder equity and debt financing. The COC is the part of your water rate that goes to repay both the equity and the loans that are required to maintain and modernize our 150-year old water system.
Every three years the CPUC requires the utilities it oversees to submit a proposed cost of capital application. After a thorough evaluation, the Commission makes a final recommendation, which is then implemented through a series of Advice Letters that each utility submits to confirm that it is moving forward with changes to reflect the new cost of capital and its impacts on the customer’s rate. The recent COC decision for SJW will be effective for 2018 – 2020.
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