Silicon Valley water supplier plans rate hikes

Santa Clara County residents could see higher water bills in the upcoming year, as one water agency looks for ways to cover costs.

Valley Water, the region’s main water supplier, is proposing raising groundwater production charges on cities and private water retailers. The increase will be passed on to household ratepayers through local water companies such as San Jose Water. This could add $8.78 a month to customers’ bills in the upcoming fiscal year.

Valley Water is spending big to fix the Anderson and Pacheco dams and other projects that hold and protect the county’s water supply from climate change. The board of directors is looking for more money amid a multimillion-dollar structural deficit, putting residents on the hook for the district’s losses.

“Average household water bills are already forecasted to increase more than $100 per month over the next 10 years. If these projects go forward, rate increases will undoubtedly be significantly more than that and will continue far beyond the current 10 year projections,” Katja Irvin, a San Jose resident and Sierra Club Loma Prieta member, told directors at their April 9 meeting.

Valley Water is the supplier for San Jose Water Company, a for-profit retailer serving 1 million Santa Clara County residents. San Jose Water is separately asking the California Public Utilities Commission to allow an increase of the company’s average water rates by about 22% over three years beginning in 2025. The water company is also seeking approval to add a surcharge to customers’ bills to recoup roughly $23 million it claims to have previously spent on unforeseen costs since its last rate hike in 2021.

Valley Water spokesperson Matt Keller declined to comment on San Jose Water’s coinciding rate increase. But he said his agency is “very concerned about affordability” and that since 2021, the agency’s water rates assistance program has provided $2 million to Sacred Heart Community Service to help qualified residents in Santa Clara County.

“People are seeing costs rise for everything in their lives, from energy, groceries, cars, gas and housing. Valley Water is subject to those same economic conditions,” Keller told San José Spotlight. “We’re doing all we can to keep water rates as low as possible while providing a safe, reliable water supply with aging infrastructure and a changing climate.”

The district held two public hearings on the proposed rate increases last week — one in San Jose for North County and one in Gilroy for South County. North County households would see the $8.78 increase, while South County can expect a smaller increase, between $1 and $3.20. A final decision will be made on May 14, when Valley Water’s board approves the upcoming budget.

Earlier this year, officials froze hiring for 72 job vacancies amid a $222 million budget deficit for the current fiscal year ending in June. The district’s ballooning budget shortfall is expected to increase to $300 million in 2024-25 and $350 million the following fiscal year, according to a recent Valley Water presentation.

At the same time, the water district wants to expand Pacheco Reservoir’s capacity from 5,500-acre feet of water to 140,000-acre feet of water. Situated atop the remote Pacheco Pass in the county, the expansion project requires extensive geological and engineering work, which opponents claim would exacerbate environmental issues, flood private property and intrude on culturally significant land for local Indigenous tribes, including burial sites. The project’s estimated cost is $2.78 billion, but factoring financing and other contingencies could escalate to $5.5 billion.

Likewise, the projected cost of rebuilding Anderson Dam near Morgan Hill — the county’s largest source of surface water — to prevent the uncontrolled release of hundreds of millions of gallons of water if the dam were to fail in an earthquake, has gone from $648 million to $2.3 billion, according to the Mercury News.

“Current cost estimates for these projects are preliminary and extremely large and unprecedented projects such as these will have unpredictable future cost increases,” Irvin said at the April 9 meeting.

The hearings got contentious between water board directors over whether the increases — and the capital projects fueling them — could be justified and whether the public was being included in the decision-making process.

Director Barbara Keegan said she’s always felt comfortable defending water charge increases to residents because of needed investments to the water infrastructure’s years of neglect.

“I have to say, I think we’ve reached a point where I no longer feel it’s defensible,” Keegan said at the meeting.

She said the community needs to scrutinize which capital projects can be delayed while the district shoulders a structural budget deficit.

“I don’t know if any of my colleagues feel that that’s something important, but I do,” Keegan said.

Contact Brandon Pho at [email protected] or @brandonphooo on X, formerly known as Twitter.