Pasadena Water and Power PROPOSED CHANGES TO THE PURCHASED WATER ADJUSTMENT CHARGE (“PWAC”) Item # 13 City Council Meeting June 15, 2015

Pasadena Water and Power Recommendation That the City Council open the public hearing and receive public comment on the proposed water rate adjustments, close the public hearing and in the absence of a majority protest, take the following action: 1.Find that the proposed changes to the Purchased Water Adjustment Charge are statutorily exempt from the California Environmental Quality Act (“CEQA”) pursuant to State CEQA Guidelines Section (Rates, Tolls, Fares, and Charges); 2. Approve the proposed water rate adjustments to: a)Increase the Purchased Water Adjustment Charge (“PWAC”) by $0.05 per billing unit effective October 2015 b)Increase by an additional $0.02 per billing unit effective October

Pasadena Water and Power Water Rate Components Commodity Charge volumetric charge generates revenues to cover the costs of actual water both groundwater and purchased water Purchased Water Adjustment Charge (PWAC) volumetric charge mechanism to recover the increased cost of water purchased from the Metropolitan Water District (“MWD”) Distribution and Customer (D&C) Charge fixed charge generates revenues to recover maintenance and operations costs Includes Fire Protection Surcharge which covers the cost of fire hydrant replacements and upgrades that are not directly related to new development Capital Improvement Charge (CIC) volumetric charge generates revenues dedicated to capital improvements as approved in the Water Distribution System Master Plan Revenues also cover the debt service of bonds issued for investment in the water infrastructure. 3 CIC $0.64 Current $4.28

Pasadena Water and Power Revenues from Water Rates 4

Pasadena Water and Power 5 Purchased Water Cost and MWD Rates PWP’s Purchased Water Costs are driven by rates charged by the Metropolitan Water District of Southern California (MWD) * Purchased water costs for 2015 through 2016 are projected numbers, while MWD rates are the approved rates MWD Rates ($ / Acre Ft) Purchased Water costs ($000’s) Acre Ft)

Pasadena Water and Power 6 Proposal Summary and Schedule Why are there PWAC changes now?  Metropolitan Water District rate actions approved:  January % rate increase  January Additional 1% rate increase  Increased costs passed directly to water purchases Rate Proposal Schedule April 28Notice of hearing mailed to all customers April – JuneNewspaper publication, social media, public outreach June 15Conduct public hearing October 2015Implement 1 st PWAC increase of $0.05 per billing unit October 2016Implement 2 nd PWAC increase of $0.02 per billing unit