Wholesale water rates are determined based upon the Wholesale Customers’ collective share of the expenses incurred by the SFPUC in delivering water to them on the basis of proportional annual use. This collective share is defined as the “Wholesale Revenue Requirement.” Wholesale rates are set prospectively based on the budget of the Wholesale Revenue Requirement and estimates of water purchases in the following fiscal year. As such, rates may increase or decrease from year to year.
After the close of each fiscal year, the difference of the actual costs allocable to the Wholesale Customers and the amounts billed to the Wholesale Customers for that fiscal year will be posted to a “balancing account”. The amount in the balancing account shall be taken into consideration in establishing the following year’s wholesale rates.
In 2013, BAWSCA issued Revenue Bonds (Series 2013A and 2013B) to prepay the remaining capital cost recovery payments that the BAWSCA member agencies owed the the SFPUC as of June 30, 2013. The bond transaction and prepayment program was anticipated to generate approximately $62.3 million (net present value) in savings over the term of the bonds, or about 17% of the $356.1 million in principal prepaid from bond proceeds to San Francisco at the end of February 2013.
Beginning in FY 2013-14, BAWSCA began collecting a fixed bond surcharge from each member agency as a separate item on their monthly water bills from the SFPUC. The payments are used to make debt service payments on the revenue bonds, reimburse bond administration expenses, and, as necessary, replenish a stabilization fund set up to limit the volatility in annual changes in the payments.
The allocation of the bond surcharge among the BAWSCA member agencies in a given year is based on the prior year’s actual water sales to each agency. The following year, a financial reconciliation is performed where each agency’s final payments are adjusted based on actual water sales during the prior year.
A comparison of the bond surcharge and the total wholesale water rate for a given year is shown below.