The Los Angeles Department of Water and Power has an increasing block rate structure with two tiers that applies to all customer classes. The first tier rate includes pass-through adjustment factors for water procurement, water quality improvements, water security, Owens Valley regulatory expense, and lifeline and low-income subsidies. The second tier rate is based on the cost for new water supplies (marginal cost) and has a seasonal component. The second tier rate also includes pass-through adjustments factors for water security, Owens Valley regulatory expense, and lifeline and low-income subsidies.

The Water System’s rate ordinance contains surcharges that recover costs related to water procurement, water quality, water security, Owens Valley regulatory, and lifeline and low-income subsidies.

The water procurement adjustment covers the cost of purchased water, including water purchased from MWD, in-City pumping, demand-side management programs and reclaimed water. The water quality improvement adjustment recovers expenditures to equalize water quality throughout the City or to meet State and federal water quality standards. The water security adjustment recovers costs to secure and protect the water supply, storage and conveyance infrastructure and related facilities. The Owens Valley regulatory adjustment recovers expenditures to operate and maintain infrastructure and related facilities for the Owens Lake Dust Mitigation Project and the Lower Owens River Project. The low-income subsidy adjustment recovers the cost of credits provided to lifeline and low-income customers.

The ordinance limits to $.50 per billing unit the recovery of combined expenditures for water quality improvement, water security and a portion of demand-side management and water reclamation. The surcharges are calculated on a quarterly basis. One billing unit equals one hundred cubic feet of water (hcf); one hcf equals 748 gallons.

Peak second tier rates are applicable to usage in June through October; off-peak second tier rates are applicable to usage in November through May.

There are no fixed monthly charges except for private fire service.

The formula for determining first tier usage for peak and off-peak periods varies with customer class.

For single-family residential customers, Schedule A, the breakpoint between first and second tier usage is based on lot size (five categories), temperature zone (three zones), and household size (the household adjustment involves a sliding scale of allowed extra first tier usage for households of seven to households of thirteen or more).

For multi-family residential customers, Schedule B, all usage in the off-peak period is billed at the first tier rate; usage in the peak period in excess of 125 percent of the previous average winter usage for December through March is billed at the second tier rate.

For commercial, industrial and governmental customers, Schedule C, all usage in the off-peak period is billed at the first tier rate; usage in the peak period in excess of 125 percent of the previous average winter usage for December through March is billed at the second tier rate.

Schedule B and C customers with high seasonal variation in usage and large turf customers that have achieved maximum practical reductions in usage via conservation practices may apply to have 95 percent of their usage in the peak period billed at the first tier rate.

Two-tiered rates were first implemented by the DWP in 1993 to encourage conservation. The significant impact of this change was on single-family residential customers. The single-family residential tiers were revised in 1995 to account for lot size, temperature zone, and household size.

The motivation for the two-tier rate structure of the DWP is (1) to induce efficient water use, and (2) to confront future droughts without having to increase rates for those customers practicing conservation and thus remaining within the first tier usage block.

SEWER SERVICE CHARGES BASED UPON PRIVATE SUB-METER READINGS—

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