Where: Lebec, California
Problem: The unincorporated community’s rate structure did not fund capital reserves necessary for routine maintenance and was not in compliance with California Proposition 218 requirements.
Solution: Rural Community Assistance Corporation (RCAC) completed a rate study and the utility accepted one of the recommended rate adjustment options. The utility is now in compliance with state regulations and can earn enough revenue to repair and replace old equipment.
Lebec is a small, unincorporated, financially disadvantaged community in Kern County, California, of about 1,500. The community is a popular stop for food, fuel and rest for travelers passing through the Grapevine, a mountain pass north of Los Angeles. Lebec County Water District (LCWD) is a small utility that provides potable and non-potable water to 227 residential service connections and 52 commercial service connections.
For years, LCWD charged barely enough to cover its operational costs, but its rates did not fund the capital reserves necessary to ensure the replacement of assets, endangering its ability to continue operating and providing clean water to the community. Additionally, the tiered rate structure LCWD used charged some of the usage rate for variable costs within its base rate. By making commercial ratepayers supplement the rates of residential ratepayers, the utility was inadvertently violating California’s Proposition 218. Complicating matters further, the COVID-19 pandemic sent the community reeling, infecting staff across the utility and claiming the life of the utility’s nearly decade-long president. Economic conditions directly resulting from the pandemic meant that extremely low-income members of the community were unable to pay their water rates. At the same time, consumer protection provisions the state enacted prevented LCWD from shutting off the water of delinquent accounts.
RCAC’s relationship with Lebec began in 2017 following a request from the California State Water Resource Control Board to conduct an in-depth rate study, but Lebec did not act on RCAC’s recommendations. In March 2021, Lebec contacted RCAC again to request a new rate study to determine how to preserve the system’s long-term sustainability while ensuring that new rates would not be overly burdensome for the community.
RCAC immediately set to work performing a cost-of-service study to determine the costs of providing water to the community. With Lebec’s population sure to grow in the next five years in planned new subdivisions, there was no possible way that the utility’s rate schedule could meet projected costs, especially with costs of repair or replacement of system components growing more expensive by the day. RCAC prepared several potential rate adjustment options to cover its debt service, ensure future operational and capital project needs, and comply with Prop 218.
LCWD ultimately accepted one of the rate adjustment options and moved to uniform block rates dependent on meter size. The new water rates came into effect on March 1, 2022, and the people of Lebec can now look forward to their utility having sufficient revenue to provide reliable, safe and clean drinking water for the foreseeable future.