BOARD AGENDA MEMORANDUM
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; Receive an Update on Valley Water’s Water Rate Assistance Program; and Provide Direction to Staff as Needed.
End
RECOMMENDATION: Recommendation
A. Receive results of the completed consultant study regarding Santa Clara Valley Water District’s water use projections, water demand elasticity, and customer affordability;
B. Receive an update on Valley Water’s Water Rate Assistance Program (WRAP); and
C. Provide direction to staff, as needed.
Body
SUMMARY:
As the water wholesaler to Santa Clara County, Santa Clara Valley Water District (Valley Water) is keenly sensitive to the impact rising water rates have on the community, both residential and commercial.
In an effort to understand the broader impacts wholesale water rates have, Valley Water engaged a consultant to conduct a study focused on water use projections, water demand elasticity, and water rate affordability. In response to the identified local need for water utility bill assistance, the Board of Directors established the Water Rate Assistance Program (WRAP) in July 2021.
This memo summarizes the study results and highlights the ongoing connection between water rate affordability and WRAP.
Study Background and Results
Santa Clara Valley Water District (Valley Water) recently finalized a consultant 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.
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 recognized that the scope of the Study presented unique challenges, one of which was obtaining detailed water usage data from non-Valley Water sources. The Study largely relied on publicly available data in addition to Valley Water sources.
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 Retailers’ 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.
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.
Monitoring and Metrics:
Specific to the Water Affordability Analysis, it is important to note that only publicly available data was used. The detailed information necessary to create meaningful metrics for ongoing monitoring is not available to Valley Water as the wholesaler.
Water Rate Assistance Program (WRAP) Updates: Implementation, Current Status and Metrics to Date
Summary:
On July 13, 2021, the Board of Directors approved the implementation of the Low-Income Residential Water Rate Assistance Program (now called WRAP) to help low-income households in Santa Clara County who had been financially impacted by the COVID-19 pandemic with paying their water bills. To date, the Board has provided $3 million in relief funding for low-income families and committed an additional $2.5 million in relief funding for continued WRAP implementation through 2028.
Background:
The Board approved $1.225 million to cover the program's total cost, including $1 million to disburse to the community and up to $225,000 to cover third-party administration costs. Due to continued need, the Board voted on April 26, 2022, to extend the program and to provide an additional $1 million for community relief and up to $225,000 for administrative costs. On May 27, 2025, the Board voted to approve the operating and capital rolling biennial budget, which included WRAP funding of $1 million per year for community relief and up to $333,333 annually for program development, implementation, and administrative costs. Finally, on April 28, 2026, the Board approved the staff recommendation to augment annual relief funding by $250,000, bringing the total funding for community relief to $1.25 million per fiscal year in 2027 and 2028, to avoid a funding gap in each of those years.
In 2021, Valley Water selected Sacred Heart Community Service (SHCS) as the third-party WRAP administrator. SHCS officially launched the program in November 2021 and has implemented it since then. They initially reached out to their database of over 40,000 low-income households who previously qualified for emergency financial assistance under the Low-Income Home Energy Assistance Program (LIHEAP). SHCS also works with other Emergency Assistance Network (EAN) partners throughout the County to share information on WRAP. In addition to SHCS’s outreach, Valley Water also actively promotes WRAP to ensure community awareness.
Metrics to Date:
Since the launch of WRAP in November 2021, SHCS has disbursed approximately $2.6 million in financial assistance to pay 5,544 water bills for low-income households in Santa Clara County. Based on WRAP's historical baseline data from the first two program cycles, participating households are experiencing extreme financial hardships. For example, the average household income of participants was $26,412, which is less than 50% of the self-sufficiency standard ($57,034) for a single adult in Santa Clara County. Of the participating households, 2,543 included a person aged 60 or older; 1,186 included children under age 5; and 679 included a person with a disability.
The households served to date span across 11 water retailers, with over 60% being clients of the San Jose Water Company, the largest water retailer in Santa Clara County. Funds have been disbursed to residents of 13 of the 15 cities in Santa Clara County; only Los Altos (95024) and Monte Sereno (95030) have residents who have not yet received WRAP relief.
Below is a breakdown of program participation by retailers for the current program year.
• San Jose Water Co.: 64%
• City of San Jose: 11%
• Landlords & Property Managers: 5%
• Other retailers: 20%
As WRAP transitions from an emergency response program into a longer-term, sustainable assistance model, Valley Water remains committed to improving program implementation and enhancing opportunities to connect eligible households to much-needed resources.
Next Steps - Water Rate Affordability and WRAP Program
As the County’s largest water wholesaler, Valley Water is committed to working with Water Retailers to reduce any barriers and support the community through a transparent annual rate-setting process and by offering a long-term, sustainable water bill assistance model through WRAP.
Staff have begun and continue to expand collaborating with regional partners and other Customer Assistance Programs to identify opportunities to raise awareness about and streamline and facilitate access to available assistance programs. However, successfully expanding program access will likely increase demand for limited program resources.
ENVIRONMENTAL JUSTICE IMPACT:
While receipt of these updates is not an action subject to environmental justice analysis, increasing wholesale water rates may have a direct impact on water bill affordability for households in Santa Clara County. The continued support for relief funding under the WRAP program supports the health of vulnerable households by ensuring continued access to safe, clean drinking water.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
CEQA:
The recommended actions do not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: PowerPoint
Attachment 2: Comprehensive Executive Summary
Attachment 3: Full Study Report
UNCLASSIFIED MANAGER: Manager
Rachael Gibson, 408-630-2884
Darin Taylor, 408-630-3068