Frequently Asked Questions

Are tiered water rates illegal?

No. Tiered water rates are permitted. Proposition 218 requires all water rate structures, including tiered or inclining rates that increase progressively in relation to usage, to be proportional with the costs of providing service. In Capistrano Taxpayers Association v. City of San Juan Capistrano, the court explicitly upheld the validity of tiered water rates but found that the City of San Juan Capistrano had failed to provide an administrative record correlating its tiered prices with the actual costs of providing water at those increased levels. Thus, to comply with Proposition 218, tiered rates must be justified based on the incremental costs of providing service to each tier.

Are fixed sewer charges illegal?

No. Both fixed sewer charges (such as a flat fee billed per dwelling unit) and/or volume rates are permitted in California. Proposition 218 requires that utility rates be based on the proportional cost of service for each customer. However, wastewater rates can be difficult to apportion because actual sewer discharge is not metered. L&T recommends agencies develop estimated flow and loading averages for residential customers based on engineering estimates, observed influent at the treatment plant, and/or sampling. A class-wide average can be used to assign sewer service costs to residential customers.

My agency's utility rates are already high.
How can I convince the public that a rate
adjustment is needed?

Nobody likes a utility rate increase. However, rate adjustments are necessary to keep public services and infrastructure in good working order. L&T’s approach is to tailor our messaging based on the drivers of rate increases in each community. Examples include adjustments needed to: keep up with cost passthroughs from other agencies (such as wholesale purchased water costs), regulatory compliance (Chromium 6 water treatment; additional wastewater treatment; etc.), or to fund capital projects to avoid costly emergency repairs like water main breaks or sanitary sewer overflows.

What are your expert witness services?

Our services are two-fold. We assist public agencies in responding to legal challenges. Utility rates in California are litigious and many agencies have difficulties keeping up with the latest legislation and court rulings. We are not attorneys, but we are available to provide an independent analysis of utility rates in response to potential litigation. L&T also serves as an expert witness representing public agencies in matters before the California Public Utilities Commission (CPUC). We draft testimony challenging electric rates paid by municipal entities to investor-owned utilities. L&T staff have also been involved in reviewing rate increases proposed by private water companies before the CPUC.

What are your utility appraisal services?

A utility appraisal can be a worthwhile exercise for public agencies that are interested in buying or selling infrastructure from or to another public agency or for-profit company. We go beyond the engineering approach (i.e., the depreciated replacement cost of assets) and also review comparable sales of similar systems and the profit or income that could be earned from the utility over its useful life. These other methods often result in a lower market value than the engineering approach.

Can a firm of three staff members handle big jobs?

This is the #1 question we are asked during interviews with prospective clients. Both L&T principals (Alison and Cat) have worked for larger rate consulting firms and have provided services to communities with populations of 100,000+. We understand the complexities of working for both large and small clients and the level of effort involved. We assign two or three staff members to each assignment – a project manager and lead analyst, a supporting financial analyst, and peer reviewer/quality control reviewer. This approach ensures that we have appropriate staffing available to conduct quality work on-time and on-budget.

A rate study sounds like a big undertaking.
How much work will it be for public agency staff?

We strive to make rate studies as painless as possible. Prior to project kickoff, we gather and review publicly available documents to streamline the data gathering process. Our job is to take on the administrative burden of the project and act as an extension of public agency staff. For the public approval process, L&T drafts notices and newsletters. We can even provide outlines of the Proposition 218 hearing procedures for officials to use during public meetings.

What is the approval process for utility rates vs. miscellaneous fees vs. connection fees?

Proposition 218 includes the approval process for utility rates which requires an agency to complete a rate study and then hold a public hearing to consider any rate increase. The agency must mail a notice to all property owners at least 45 days prior to the public hearing informing them of the rate increases and the public hearing. If more than 50 percent of property owners submit a protest, then the agency cannot proceed with the rate increases.

If they do not exceed the reasonable cost of providing service, miscellaneous fees fall into one of the seven exempted fee categories under Proposition 26 and therefore, can be enacted without voter approval.

Water and wastewater connection fees (also known as capacity charges and development impact fees) are governed by Section 66013 of the California Government Code which requires that an agency hold at least one public meeting prior to levying a new connection fee or an increase in an existing fee. At the meeting, the governing board, either by ordinance or resolution, can vote to approve the fees. A public protest vote is not required.