1.  What service does the Kinneloa Irrigation District provide?

Kinneloa Irrigation District’s (KID’s) primary functions as your water provider are to produce, control, conserve, store, and distribute potable drinking water for the beneficial use of its 591 customers. 

2.  How is the KID funded?

The KID is funded exclusively by water rates that its customers pay.  Payment for water service ensures the KID’s ability to deliver high-quality water to its customers on-demand at any moment.

 3.  Does the KID make a profit?

 No. By law, we cannot charge customers more than what it costs to provide the service.  The KID is a Special District of the State of California that are local governmental subdivisions created by the people of a community to deliver specialized services essential to their health, safety, economy and well-being.  Our system is owned by our customers and governed by an elected Board of Directors who are residents and customers of the KID; we do not have shareholders or pay dividends.

 4.  How is the cost of my water bill calculated?

 The water bill consists of two components, a Daily Service Charge and a Usage Charge.

 The Daily Service Charge is a standby charge based on your meter size and is calculated monthly based on a daily rate.  This charge covers a portion of the projected fixed costs for the operations of the KID.  Adequate Daily Service Charges ensure that water is available for use at your tap whenever you need it.  The meter size and the number service days for which you are billed the fixed daily service charge are displayed on your monthly water bill.

 The Usage Charge is based on actual water use.  It is measured in hundred cubic feet (CCF) that has passed through your water meter during the billing period and is billed monthly.  One (1) CCF is equivalent to 748 gallons. You are charged for the consumption on your water meter using the current read on the meter (just prior to billing) and subtracting the read on the meter from your previous billed meter read.   

5.  Why did the KID conduct a water rate study?

Rate studies are conducted as an industry best practice to ensure that a utility’s financial health is maintained and that the utility is setting a course toward meeting future financial obligations.  The industry standard is to perform comprehensive rate studies every three to five years.  The KID recently completed a comprehensive system evaluation identifying necessary system improvements and developed a 10-year Capital Improvement Plan to address those required improvements.  With water rate adjustments, the KID will be able to maintain an adequate annual level of capital reinvestment and improve the pace at which old infrastructure can be rehabilitated or replaced.  Over the long term, this translates to providing a more financially and operationally sustainable water service.

6.  What is the rate study process?

The KID hired Water Resources Economics, LLC, a consulting firm with expertise in water rate studies in California.  Their scope of work includes developing long-range financial plans for water service as well as ensuring compliance with the California Proposition 218 process and the requisite public hearing for rate adoption.  The rate study consists of multiple steps involving data evaluation, performing technical analyses, deriving customer rates, and understanding customer impacts of any modifications.  Once a rate proposal is determined, the complete study is documented in a Report to serve as part of the KID’s administrative record, all of which is publicly available.

In California, all parcels connected to a utility system must be given notice of any proposed rate changes with the ability to protest the proposed rates.  The notice details the proposed rates, the basis for calculating the proposed rates, the reason for the proposed rate adjustment, details of the public hearing, and ratepayers’ or property owners’ rights to protest.  After a protest period of no less than 45 days, the KID Board of Directors will conduct a Public Hearing. Absent a majority protest to the rate proposal, the KID Board may choose to adopt the rates as noticed.

7.  What will the KID do with funding from this potential increase in water rates?

 In addition to funding the regular and recurring operating expense the KID will shore up its near depleted reserve funds which have been used on unexpected repairs because of deferred maintenance and to fund the execution of projects in the 10-Year Capital Improvement Plan.  Many critical projects have been delayed for over a decade, jeopardizing the KID’s ability to provide reliable water service. 

8.  Why is the KID changing from a universal Daily Service Charge to one based on meter size?

The KID’s historical practice of a standardized standby charge, regardless of meter size, is no longer reflective of industry standards or aligned with case law subsequent to the approval of Proposition 218.  The standby charge is intended to recover a portion of the KID’s fixed costs; costs that the system incurs regardless of how much, if any, water is actually used.  Larger sized meters have the potential, or capacity, to use more water than smaller meters; therefore, the charge to maintain the system readiness should be proportionate to each customer’s potential, or capacity, to use water.

9.  Can I change my meter size?

Yes, customers may request that their meter size be reduced if they desire.  The KID will perform this work in the order the request is received and subject to the availability of materials.   The complete cost to perform the work will be billed to the customer and a deposit of 100% of the estimated cost will be required prior to scheduling the work.  Additionally, the KID will require the customer to sign a waiver releasing the KID of any liability due to potential adverse effects of the performance of the customer’s water system as a consequence of change in water meter size. The KID does not stipulate nor recommend meter sizes for customers, meter sizes are requested by the customer based on the specific needs of their property and their lifestyle.  Depending on the size of the meter requested, the cost to change a meter size at the customer’s request is expected to be between $500-$1,000. 

10.  Why are KID’s fixed costs, as a percentage of total costs, so high?

Given that KID self-produces all its water and does not pay to import water there are very little variable costs associated with customer demand. Our only true variable operating cost is electricity to pump groundwater and move it throughout the KID, but even in low demand periods we incur substantial electrical costs to provide the minimum level of groundwater pumping and in system circulation to meet regulatory requirements.  KID management estimates that our fixed costs are at least 95% of total operational expenses.

11.  How do we compare to other water agencies? 

The final Water Rate Study Report includes some comparison to other public water agencies.  Neighboring agencies in the Altadena area generally have lower rates than are being proposed; however, those agencies are private, mutual benefit corporations that do not have the same operating and compliance costs as public agencies like the KID does.  Regardless of if the water system is a Special District, municipally owned, private for-profit or private not-for- profit, all local water suppliers are currently facing increased operating costs and significant capital reinvestment needs.  Most are in the process of either proposing or approving significant rate increases in the near future.  

The closest public water agency is Pasadena Water and Power (PWP).  The proposed KID rates are higher than the current PWP ones for most user profiles.  This is due to the larger rate base of PWP than KID (38,338 for PWP vs. 591 for KID) that allows for their fixed costs to be spread across substantial multiple of more customers.  

PWP has approximately 65 times the number of customers than KID does; however, the ratio of customers to physical assets is more favorable for PWP.  With a customer base 65 times the size of KID’s, PWP has only approximately 6 times the number of groundwater wells and only 5 times the number of booster pumps than KID does.  The small dead-end streets, winding roads and incredible views that are found throughout the KID make for an attractive place to live but require an inefficient water system.  PWP’s service area includes some high operating expense areas like KID’s, but the cost of operating those infrastructure intensive areas is partially offset by large portions of their service are that are much less expensive to operate.  PWP and other larger agencies have cost advantages due to economies of scale that KID does not have which leads to higher comparable rates to operate our small and less efficient system.

 12.  Has the KID applied for any grant funding?

Yes. KID management constantly monitors available grant monies that are applicable to our needs and applies for those that are relevant.  Grant funding for projects in our service area is difficult to obtain due to the economic demographics of our customers.  Most grant opportunities are intended for “economically disadvantaged communities,” of which KID is not.  The 2022 American Community Survey by the United States Census Bureau reports Median Household Income for the KID as $227,083 per year which is 2.6 times the median household income for Los Angeles County, putting the KID in the top 10% of median household incomes nationwide.  Furthermore, the average (mean) assessed property value of residential customers in the KID is approximately $1.3 million.  Both average property values and incomes for our customers are at relatively high levels compared to other communities locally and nationally, making us ineligible for many grant opportunities. 

13.  Why don’t we have tiered consumption rates?

Many neighboring agencies have tiered water consumption rates, meaning that an initial quantity of monthly usage has a certain price and then the more water they use above that the higher per unit price they are charged.  KID is unique in that we have not historically needed to import water to meet customer demand nor do we have access to be able to do so.  Self-producing groundwater is significantly less expensive than purchasing imported water.  Agencies that have a limited amount of groundwater production available and must supplement with higher priced imported water, may create a tiered cost structure because that additional water costs the agency more and they can proportionally allocate costs to those customers based on their higher consumption.   Because the KID’s production costs are the same at all demand levels as we do not import water, we cannot create a compliant tiered cost structure based on higher demand.

14.  Can KID charge higher rates to those that use more water?

To encourage water conservation, some agencies have proposed charging higher rates to less efficient water users.  However, courts have interpreted Proposition 218 to prohibit such rate structures for disproportionately allocating costs among customers.  

15.  Are the proposed capital improvements necessary and, if so, why?

Based on the recently completed and comprehensive Water System Evaluation, the Board of Directors believes that the many critical projects identified in that study are both necessary and time sensitive.  To that end, the Board recently adopted a 10-year Capital Improvement Plan that contains these projects in a logical and cost-efficient sequence.  Much of the pipeline in the KID is at or near its expected service life as are many of our production and pumping facilities.  Much of the distribution system pipeline also does not meet current applicable fire flow requirements.  Many pipeline upgrade projects were identified following the 1993 Kinneloa Fire to improve fire flow, some were completed but many were not due to funding constraints.  Previously, it was a goal of the KID to meet current applicable fire flow requirements though this threshold was not statutorily required.  There is now a regulatory requirement, per Senate Bill 552 passed in 2022, that distribution system capacity to meet fire flow requirements must be achieved by January 1, 2032.  

 In addition to pipeline projects related to fire flow upgrades and replacements due to aging materials, there are many other critical projects related to water production, treatment, storage, distribution and emergency preparedness.  At the Board of Directors meeting on September 24, 2024, the Board approved the Water System Evaluation and 10-year Capital Improvement Plan detailing the projects that are to be funded by this proposed adjustment to water rates.  The full plan is available to view on the KID website.