Board approves study of wholesale pass-through charges; directs staff to include cap recommendations

The San Dieguito Water District board unanimously authorized staff on Jan. 28 to incorporate wholesale "pass-through" charges for potable and recycled water into the district's next cost-of-service study, adopting the intent behind Resolution 2026-01.

Finance and Administrative Services Manager Shoshana Aguilar told the board the item would not change rates at the meeting or alter the district's rate structure; it only directs staff to analyze and, if appropriate, include pass-through mechanisms in the upcoming study. She described the existing infrastructure access charge (IAC) pass-through as a modest line item equal to about 5% of the district's annual payment to its wholesaler, the San Diego County Water Authority, and said 19 of the 22 member agencies of the Water Authority already use pass-through charges.

Aguilar explained pass-throughs would move wholesale cost increases from the district's reserves onto customers as a separate billed line item, subject to a board-approved annual-percentage cap. She told the board staff would recommend caps developed with an outside rate consultant during the cost-of-service study and gave examples of neighboring agency caps that range from about 10% to 30% per year.

Boardmember Schaeffer and others raised affordability and equity concerns, arguing the district should consider how drought-driven reduced consumption can still result in higher bills. Vice President Ehlers expressed support for the transparency pass-throughs provide and endorsed a cap on annual pass-through increases; Boardmember Lines emphasized that local water supplies are limited (about 15% local supply from Lake Hodges) and that imported-water costs affect affordability.

After discussion and no public comment, Boardmember Schaeffer moved to authorize staff to incorporate pass-through charges into the next cost-of-service study; Vice President Ehlers seconded. The motion carried unanimously.

The action authorizes staff to develop pass-through language and cap recommendations for the consultant-led cost-of-service study; any actual pass-through rate or cap would be proposed and approved by the board in a future public hearing as part of the formal rate-setting process.