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Water Rate Cost-of-Service Study Section 5. Rate Design HF&H Consultants, LLC | July 8, 2025 | Page 44 of 53 Implementation The recommended Drought Rates in Figure 5-12 are implemented only during periods of declared water shortage emergencies. Once a mandatory shortage is declared, the City Council has discretion to enact Drought Rates corresponding to the level of shortage reduction implemented using the rates provided in Table 5-12. The adjustments can go in either direction from stage to stage depending on whether the level of reduction is increasing or decreasing during the shortage. At least 30 days prior to making the adjustment, notice must be provided to rate payers, which can be included in the customer’s bills. No protest process is required. These adjustments would be temporary, and rates would return to the regular schedule at the conclusion of the water shortage emergency. Figure 5-12. Drought Rates The Drought Rates could be applied when the City requires its customers to reduce water use. At such times, the Drought Rates would be added to the Water Use Charge rates proposed in the current rate study. The City can choose to enact Drought Rates when the water emergency demand levels will fall short of the respective year of modeled demand. The Drought Rates only apply to Water Use Charge rates and not to Service Charge rates, which are independent of water demand. The Drought Rates are added to the non-water shortage, normal-year Water Use Charge rates proposed in this report. The Drought Rates would be adopted as part of the rate notification in the Proposition 218 implementation process. Once adopted, the City could apply the Drought Rates as needed during conservation stages. As a further example, Figure 5-13 has Water Use Charge rates after applying the Drought Rates to the rates proposed for FY 2025-26 through FY 2027-28. The table shows the proposed rates followed by the rates that correspond to each stage of conservation. Note that if reductions in water use are higher or lower than the specified stages set in the WSCP due to state mandated reductions in the level of potable water usage, or other natural disaster or event that results in a water shortage and an unforeseen drop in water demand, the Drought Rates will be adjusted in accordance with the methodology above. Demand Surcharge Stage Reduction FY 2025-26 FY 2026-27 FY 2027-28 0 0% $0.00 $0.00 $0.00 1 10% $0.38 $0.40 $0.42 2 20% $0.85 $0.90 $0.95 3 30% $1.45 $1.54 $1.62 4 40% $2.25 $2.39 $2.51 5 50% $3.38 $3.58 $3.76 6 60% $5.07 $5.37 $5.64 ATTY/RESO.0109/CC RESO WATER RATES - EXHIBIT A REV: 11-05-25 MI