TO: Honorable Mayor and Members of the City Council
THRU: Jarad Hildenbrand, City Manager
FROM: Christopher Cash, Public Works Director
1. Subject
title
Water rate pass-through notice for Calendar Year 2027
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2. Summary
City staff calculated the pass-through charge for Calendar Year 2027 using the formula approved by the City Council in March 2023. The calculation resulted in an additional $0.17 per billing unit adjustment from last year’s rate to offset cost increases in water purchases necessary to supply water to the City of Orange.
3. Recommended Action
recommendation
Receive and file.
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4. Fiscal Impact
Additional pass-through revenues of $1,759,300 will offset corresponding expenditures for import water and groundwater costs.
5. Strategic Plan Goals
Goal 5: Improve Infrastructure, Mobility, and Technology
6. Discussion and Background
On March 14, 2023, the City Council approved Resolution No. 11437, which amended the Master Schedule of Fees and Charges for water rates. This resolution established a five-year rate structure and provided for an annual automatic pass-through formula.
The pass-through mechanism accounts exclusively for external wholesale water cost increases incurred by the City. It compares the current fiscal year's wholesale pricing with baseline metrics, dividing the difference across projected calendar-year usage. These adjustments are implemented only if the wholesale increases are not already covered by the active schedule of charges.
Based on the approved formula, a wholesale pass-through charge of $0.17 per unit (1 unit = 748 gallons) is required for Calendar Year 2027. This adjustment is due to rising water supply costs from the region's two main water providers:
1. Imported Water: Metropolitan Water District of Southern California via the Municipal Water District of Orange County (MWDOC)
2. Groundwater: Orange County Water District (OCWD)
This pass-through adjustment, combined with the pre-approved 3% scheduled rate increase from Resolution No. 11437, will take effect on January 1, 2027. The pass-through adjustments will generate approximately $1,759,300 in necessary revenue for the City's Water Fund to offset the rising wholesale water supply costs.
The average residential customer in the City of Orange utilizes 32 units of water per bi-monthly billing cycle (equivalent to 23,936 gallons). Based on the current water rates, the average customer has a bill of $163.44 bi-monthly. With the 3% rate increase that was approved for January 2027 and the addition of $0.17 per unit pass-through charge, the average bill will increase to $173.57 bi-monthly. For the average Orange household, this is a bi-monthly increase of $10.13.
The City of Orange will mail postcard notices containing detailed pass-through information to all affected ratepayers at least 30 days prior to the January 1, 2027, implementation date.
7. ATTACHMENTS
• Notice of Pass-through Increase