COMMITTEE AGENDA MEMORANDUM
Water Supply and Demand Management Committee
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: title
Receive Results of Consultant Study Regarding Santa Clara Valley Water District’s Water Use Projections, Water Demand Elasticity, and Customer Affordability; Provide Feedback or Recommendations to Board.
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RECOMMENDATION: Recommendation
A. Receive results of the consultant study regarding Santa Clara Valley Water District’s water use projections, water demand elasticity, and customer affordability, including study scope, objectives, and status update; and
B. Provide feedback or recommendation(s) to the Board as desired.
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SUMMARY:
Santa Clara Valley Water District (Valley Water) has engaged two consultants to perform a study to validate or suggest refinements to Valley Water’s current water use projections for Valley Water-managed water use, analyze water demand elasticity, and determine or address the affordability of water to residents and businesses within Santa Clara County (the Study). The majority of County residents and businesses receive water service from a retailer, while Valley Water acts as the water wholesaler. Study results have been finalized and may impact future Valley Water groundwater charges.
Background:
The Financial Planning and Revenue Collection office manages long-term forecast models and the annual rate setting process for the Water Utility. Water charges are adopted annually. Based upon feedback received from the Board during previous long-term forecasting cycles, staff pursued a study to inform future rate setting cycles.
The consultants - Raftelis Financial Consultants, Inc. and Hazen and Sawyer - were tasked to provide analyses for the following Study scope and objectives:
1. Analyze water use projections in Santa Clara County, for retailers, their direct customers, and private well owners to better determine Valley Water-managed water use projections. Valley Water-managed water use translates to revenue for Water Utility.
2. Prepare a water demand elasticity analysis to better understand how rates impact water demand.
3. Determine the affordability of water provided by Valley Water to Santa Clara County residents and businesses now and based on future rate projections.
Valley Water staff and Valley Water’s consultants both recognize that the scope of this Study presented unique challenges, one of which was obtaining detailed water usage data from non-Valley Water sources.
Technical memorandums for each of the three (3) analyses have been compiled into a final report documenting the study. Attachment 1 is a PowerPoint presentation. A Comprehensive Executive Summary is included in Attachment 2, and a link to the full report is provided in Attachment 3.
Study Results:
Task 1: Water Use Projections key takeaways are:
• Valley Water’s approach to projecting water use is consistent with peer agencies
• Forecast-to-actual water use has been largely accurate, with reduced variance in recent years
• High level statistical analyses demonstrate that the current approach yields reasonable ranges for near-term demand
• Water use overall continues to trend downward
• Tools exist to refine the forecasting method, if desired
Task 2: Water Demand Elasticity Analysis key takeaways are:
• Three econometric methods were used to assess Retailer’s water demand sensitivity to Valley Water’s wholesale rates, and understand the effect on Retailer’s customers.
• Water use in Santa Clara County is generally inelastic with respect to price; a 10% increase in price would be expected to reduce retail demand by about 2%
• There is a high correlation (about 83%) and common trend between Valley Water and Retailer’s volumetric rates
Task 3: Water Affordability Analysis key takeaways are:
• Based on multiple affordability indicators residential water bills are generally below threshold levels
• Based on both the Poverty Prevalence Indicator and Household Burden Indicator, nearly all Retailer water providers fall within the Low Burden category
• An estimated 37,000 households - equivalent to 6% of Santa Clara County households - could have water bills that are unaffordable (defined as annual water bills that total more than 2% of reported household income)
The three study tasks produced discrete and valuable results, highlighting the dynamic interrelationships among water demand projections, price elasticity, and affordability. The Study has provided a foundation by identifying a feedback loop that can inform future rate setting cycles and policy decisions:
• Demand forecasts drive rate levels and are key to rate stability.
• Rate increases reduce demand through price elasticity.
• Wholesale prices pass through to volumetric retail rates.
• Affordability constrains rate-setting flexibility.
Staff seeks input from the Committee on recommendations for the Board, if any. Staff will also be sharing results from the Study with the Santa Clara Valley Water Commission, scheduled for April 2026.
ENVIRONMENTAL JUSTICE IMPACT:
Increasing wholesale water rates may have a direct impact on water bill affordability for households in Santa Clara County.
ATTACHMENTS:
Attachment 1: PowerPoint
Attachment 2: Comprehensive Executive Summary
Attachment 3: Full Study Report
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068