Frequently Asked Questions

  • What factors determine your water rates?

    The District predicts its revenues, maintenance costs, operations costs, and capital improvement costs in setting water rates. There are three elements in this process:

    The first element is forecasting water usage, which determines the basis for establishing rates. This is a lot like predicting the weather – two years in advance.

    The second element is forecasting costs. The largest components of our costs are water and the energy to pump that water throughout the District. These account for about 38% of the total. Many of our other costs have been stable recently, but the costs of water and energy have increased 27% in the last three years. We buy all our water from the San Francisco Public Utilities Commission (SFPUC), which plans to raise the charge for its water by 41% in July 2011. Some costs are predictable and stable, such as salaries, insurance, rents, and fees. Other costs are difficult to determine, such as repair costs which we cannot know in advance. Thus, we estimate repair costs from the number and severity of water main breaks and facility and equipment failures in the recent past.

    The last element of the planning process is the Capital Improvement Program (CIP). The main reasons we emphasize our CIP are to reduce repair costs and to increase the efficiency, reliability, fire worthiness, and seismic resilience of our water system. This comprehensive program is continually updated and prioritized. The excess of revenue over operating costs pays for this program. If revenue falls short of estimates (or costs increase), there is less money for the CIP, so we typically modify it accordingly. If revenue exceeds estimates (or costs decrease) we typically spend the amount budgeted for the CIP, and the excess serves to lessen future water rate increases. Capital improvement projects currently make up 24% of our budget. The overall goal of capital improvement projects is to reduce our operating and maintenance costs and to provide the level of service our customers expect.

  • Why do I pay more for using less water?

    Over the past two years, water use decreased by 22% in the District, as well as throughout the Bay Area. The lower water use increases the cost of a unit of water for both the District and the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy system, our only source of water. Since less than half of the District’s water system costs are variable, the remaining costs and capital spending requirements tend not to decrease when demand decreases. With these fixed costs spread over fewer units, higher rates result.

  • Why is the Hetch Hetchy water so expensive?

    The San Francisco Public Utilities Commission (SFPUC) sells about one-third of its Hetch Hetchy water to retail customers in San Francisco. It sells the other two-thirds wholesale to 26 San Francisco Peninsula agencies, including the District.

    Built in the early to mid-1900s, much of the SFPUC system is near the end of its working life. Crucial portions cross or adjoin three major earthquake faults. As a result of a state mandate, in 2002 SFPUC launched its $4.6 billion Water System Improvement Program (WSIP) to refurbish and seismically upgrade their ageing facilities. The WSIP comprises some 80 projects throughout the system – from San Francisco to the Central Valley. A bond measure approved by San Francisco voters in 2002 pays for the WSIP, currently scheduled to be completed by 2015. The completion of this project will bring a much more robust water system than the Bay Area has had in the past, but the significant cost of this improvement will be borne by its customers.

    Through higher water rates, all SFPUC customers, including the District, fund the payments on the bonds issued by SFPUC, with increments to the rates occurring nearly every year based upon the additional projects that were completed. SFPUC water rates have already increased from $1.10 per unit at the start of the program (about 2003) to $1.90 currently, and are projected to increase to $3.79 per unit by 2015, and $4.43 per unit by 2020.

  • What is the Readiness-to-Serve charge?

    The readiness-to-serve charge (or meter charge, or service charge) is a fixed monthly charge that is based on the size of the customer’s meter. It is important for the District because it provides steady income in the winter months when water usage is at its lowest. This readiness-to-serve charge requires all our customers, heavy and light users alike, to pay a portion of the fixed costs of the system, in proportion to the capacity of their connection.

  • What is the District doing to control its costs?

    Except for the cost of water from the San Francisco Public Utilities Commission (SFPUC) and rising healthcare costs, most of our remaining costs have been stable. Our CIP has kept insurance claims low by curbing property damage and has allowed us to rely primarily on off-peak pumping to decrease energy costs.

    There are obstacles to cost control unique to the District, for example our zoning of one-acre minimum lots and the hills. The low density of Los Altos Hills increases the distance between meters, so fewer customers share the capital cost. The topography requires a substantial investment in pumps as well as the expense of pumping our water uphill. Many water agencies in the flat lands can use system pressure from their supplier to serve their customers, an economy not available to us. Another topographic factor is that high-pressure water mains, needed to provide excellent fire protection, are costly to repair if they break.

    Except for a part-time water conservation specialist in 2006, the District has added no employees in the past 15 years, even with added regulatory requirements for water agencies. One example of how we achieved this is our installation of technology to allow drive-by meter reading. We now read virtually all our meters by radio in one and one-half days (compared to five days previously), freeing staff to perform work necessary to meet regulatory requirements. In addition, the wireless meters allow us a limited capability to detect unknown homeowner system leaks.

    Our investments in capital improvement and maintenance projects have helped reduce the amount of unbilled water generally attributed to unknown system leaks. Our unbilled water is currently about 4%, and is far better than the state average of 10%.

    The District pursues grant opportunities. For example, in the past five years the District has secured over two million dollars from the Los Altos Hills County Fire District for capital improvement projects.

  • What process does the PHWD follow in establishing its water rates?

    The District follows an extensive public process to set its rates. Before any rate changes, the District Board of Directors considers alternative rates and capital spending levels, and discusses and analyzes various options. The Board then sets a date for a public rate hearing and mails hearing notices to all customers/property owners 45 days before the public hearing. In addition, we post notices of the public hearing within the District, put the notice on our website, and publish it in local newspapers. At the public hearing, the Board considers all comments received regarding proposed changes in rates.

    Before the public rate hearing the District completes a water rate study, which evaluates our historical and projected income and costs. The goal of the water rate study is to ensure that we have sufficient income to cover our costs.

    The District exceeds the legal requirements for notification.

  • How do the PHWD water rates compare to the water rates of other retail water providers in the area?

    Rising wholesale water prices caused most San Francisco Peninsula water agencies to raise their retail rates in recent years. To compare prices current at the end of 2010, we surveyed 13 other Peninsula agencies. Figures 1 and 2 present the results of that survey. Charges in Figures 1 and 2 are actual billed amounts, including all readiness-to-serve and miscellaneous charges, but not including sewer charges where applicable.

    In winter months our median customer uses 265 gallons a day (8,000 gallons or 10 units monthly) paying $42.00 per month. This ranks 11th of the 14 agencies, i.e., 10 of the 14 charge more, 3 charge less.

    In summer months our median customer uses 1,100 gallons a day (33,000 gallons or 45 units monthly) paying $209.00 per month. This ranks 8th of the 14 agencies, i.e., 7 of the 14 charge more, 6 charge less for a customer using our median summer usage. It is important to note that our median customer generally uses more water in the summer than customers of most of the nearby agencies.

  • Why does the District have a tiered rate structure?

    The District has a tiered rate structure, with rates increasing as usage increases, to promote conservation. The start of the tiers with increased rates is set well above typical needs for indoor usage; high rates apply primarily for water used for irrigation. Customers using large amounts of water on landscaping pay a much higher rate for usage above 45,000 gallons per month (60 units). The higher rates provide a strong incentive to reduce landscaping demands on our drinking water system. We offer free advice and consultation to assist our customers in using water more efficiently.

  • Why are the water rates for some residents of the Town of Los Altos Hills different from other residents of the Town of Los Altos Hills?

    The San Francisco Public Utilities Commission (SFPUC) serves the Peninsula north of Los Altos. Both SFPUC and Santa Clara Valley Water District (SCVWD) serve the southern Peninsula. Depending on facility locations, groundwater availability, and contractual agreements, most agencies buy water from either SFPUC or SCVWD, and in some cases, both.

    The District and California Water Service (CWS) serve Los Altos Hills. The District buys its water from SFPUC. CWS-Los Altos buys its water from SCVWD. Historically the wholesale prices of SFPUC and SCVWD have been similar. SCVWD wholesale rates have stayed at $1.42 per unit for the last three years. SFPUC is now conducting a Water System Improvement Program (WSIP) to refurbish and harden its system against major earthquakes. WSIP will raise SFPUC wholesale rates from today’s $1.90 per unit to $4.43 (projected) per unit in 2020.

  • What steps is the District taking to augment its water supply to reduce our exposure to rate increases by the San Francisco Public Utilities Commission (SFPUC)?

    Rising wholesale price projections, and usage exceeding our guaranteed allocation, motivated a comprehensive water supply augmentation study completed in 2004. We looked at building wells, buying water from the Santa Clara Valley Water District (SCVWD), and even buying water rights from farmers in the central valley. In 2002, we drilled two test wells, which did not produce sufficient quality or quantity of water to augment our supplies. SCVWD does not currently have the infrastructure capacity or the available water to supply us. We continue to investigate buying SCVWD water. We are still seeking other water sources primarily for emergency use.