A utility rate study is an evaluation of the costs needed to provide utility services to customers and an analysis of the customer rates to ensure they are fair and reasonable. 

The City of West Sacramento partners with an independent financial consultant to conduct the study. Factors considered in a utility rate study may include the cost of providing service, the revenue needed to cover those costs, the number of customers and their usage patterns, and the local, state and federal regulations that affect the utility provider.

Utility rate studies are typically conducted every three to five years.

The results of a utility rate study are used to determine whether utility rates should be adjusted, and if so, by how much. The results may also help to inform the development of rate structures that support policy goals such as environmental and fiscal responsibility. 

A rate design is the structure of the rates charged to customers. It includes the types of charges, such as fixed fees or variable charges, and the levels of those charges.

The City’s water and sewer utilities are primarily funded through the rates customers pay via Enterprise Funds, which are separate accounts from the City’s General Fund. A City Enterprise Fund is a dedicated account where money collected from customers for specific City services—such as water or sewer—is used exclusively to pay for those services. Enterprise funding ensures the City’s ability to provide high-quality, reliable water and sewer services in a way that values our environment and community, while sustaining resources. The City is committed to good governance, fiscal accountability and transparency. 

No. By law, the City cannot charge customers more than the actual cost of providing the service. Each utility is self-funded, so its revenues must equal expenditures. The City’s water and sewer systems are owned by the City and governed by the City Council; the City does not have shareholders or pay dividends.

Rate studies help the City make sure its utilities have sufficient funding to meet current and future needs. The industry standard is to conduct a comprehensive rate study every three to five years. The City’s current rates were implemented July 1, 2021, and they have not kept pace with the rising costs of maintaining and operating the utility systems. In 2023, the City initiated a rate study that was later put on hold until mid-2025. To maintain service levels and ensure the long-term reliability of utility infrastructure, rate adjustments will be needed in 2026.

With updated rates, the City will be able to plan and fund the level of annual capital reinvestment required to upgrade outdated equipment and replace infrastructure. These adjustments will also help maintain financially and operationally sustainable water and sewer services. Rates must continue to cover the full cost of service and maintain prudent reserves for emergencies. 

It’s important for the City to regularly evaluate the cost of providing high-quality, reliable water and sewer services. Given the increasing requirements for infrastructure maintenance and improvements, water quality compliance, and rising operational costs, rate adjustments must be considered.

Revenues from the current rates are no longer fiscally sustainable. Rates need to keep pace with the costs of operating, maintaining, and repairing the systems, as well as replacing aging infrastructure essential to service delivery.

The City is conducting a much-needed water and sewer rate study to develop a new five-year rate structure that will financially support the utilities’ current and future needs. The City’s rates are based solely on the actual cost of providing water and sewer services. Adjustments are made only when necessary to cover operating and capital expenses and to maintain the reliability of the systems.

Proposed rates are determined by evaluating and analyzing cost increases related to operation and maintenance, water purchase and treatment, wastewater collection, capital projects, general inflation, and material and supply expenses. 

Under California’s Proposition 218 local municipalities must follow specific procedures when proposing rate adjustments for services such as water and sewer. Property owners have the right to protest proposed rate increases. Proposition 218 requires that ratepayers receive a public notice outlining the proposed rate adjustment, the protest process, and the date of the City Council Public Hearing.

Customers are given at least 45 days to submit written protests. During the Public Hearing, the City Council reviews all customer protests and considers whether to approve or deny the proposed rate adjustments. If a majority of property owners submit valid protests, the rate adjustments will not be implemented.

No, Enterprise Funds can only be used for the specific Enterprise Fund’s projects (ie: water revenues may only be used for water projects).

If rates are not raised, the City would face difficult decisions about the levels of service it can provide to the community. Replacing infrastructure proactively helps prevent emergency outages, costly after-hours repairs, and potential property damage. Gradual rate adjustments allow the City to balance immediate needs with long-term planning.

The City has hired a consulting firm with expertise in California utility rate studies. Their work includes developing long-range financial plans for water, wastewater, and solid waste services as well as assisting with the Proposition 218 process and public hearing for rate adoption. The rate study involves several steps, including data evaluation, technical analyses, development of customer rates, and assessment of the impacts on customers. Once proposals are determined, the complete study is documented in a Study Report to serve as part of the City’s administrative record.

Under California law, all parcels connected to a utility system must be given notice of any proposed rate changes, along with the right to protest. The notice includes the proposed rates, the basis for their calculation, the reason for the increase, public hearing details, and instructions for submitting a protest. After a protest period of at least 45 days, the City Council conducts a Public Hearing. If a majority of property owners do not submit protests, the City Council may adopt the rates as proposed.

The City will also host a webinar and multiple open houses to give ratepayers the opportunity to learn about, discuss, and provide feedback on proposed rates. Information will be mailed to residents and updated on the City’s website.

The City is committed to using industry best practices to ensure we thoughtfully plan for the future. Utility rates are an investment in our infrastructure today to secure our systems for the future. Revenues from water, sewer, and trash rates support the ongoing operation and maintenance of services, providing nearly 55,000 residents with continuous, dependable service. Rates cover the costs associated with delivering these essential utility services.

For more information, please email utilityrates@cityofwestsacramento.org.