Item 28 - Urban Water Management Plan and Water Shortage Contingency Plan

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Santa Ana 2020 Water Shortage Contingency Plan 3-15 increase or decrease with varying circumstances. Expenditures may increase in the event of significant damage to the water system, resulting in emergency repairs. Expenditures may also decrease as less water is pumped through the system, resulting in lower power costs. Water shortage mitigation actions will also impact revenues and require additional costs for drought response activities such as increased staff costs for tracking, reporting, and communications. The City receives water revenue from a service charge and a commodity charge based on consumption. The service charge recovers costs associated with providing water to the serviced property. The service charge does not vary with consumption and the commodity charge is based on water usage. Rates have been designed to recover the full cost of water service in the charges. Therefore, the total cost of purchasing water would decrease as the usage or sale of water decreases. In the event of a drought emergency, the City will impose excessive water use penalties on its customers, which may include additional costs associated with reduced water revenue, staff time taken for penalty enforcement, and advertising the excessive use penalties. The excessive water use penalties are further described in the City’s Municipal Code Chapter 39 Article VI Water Shortage Contingency Plan (Appendix B). However, there are significant fixed costs associated with maintaining a minimal level of service. The City will monitor projected revenues and expenditures should an extreme shortage and a large reduction in water sales occur for an extended period of time. To overcome these potential revenue losses and/or expenditure impacts, the City may use reserves. If necessary, the City may reduce expenditures by delaying implementation of its Capital Improvement Program and equipment purchases to reallocate funds to cover the cost of operations and critical maintenance, adjust the work force, implement a drought surcharge, and/or make adjustments to its water rate structure. Based on current water rates, a volumetric cutback of up to 50% of water sales may lead to a range of reduction in revenues from $4,111,774 to $20,558,870 (Table 3-3). The impacts to revenues will depend on a proportionate reduction in variable costs related to supply, pumping, and treatment for the specific shortage event. The City could mitigate these impacts by increasing water rate revenues and/or increasing fix charges.