DEAR JON: What’s in your water bill?

Water, always a hot topic. But the big question is how much are we paying for it? And where does a customer’s money go? “Dear Jon, I’m not using as much water as last year, but my bill is 60 to 70 percent higher. Who gets the extra money that I’m paying?”

Cyrus is a customer of California American Water on the Monterey peninsula. I met with Cal Am’s Manager of External Affairs, Catherine Stedman she wanted to clear up a common misconception that people have about their water bill, “Contrary to what a lot of people think, we don’t make more money if we sell more water.”

That’s a true statement in that Cal Am’s budget it submitted to the California Public Utilities Commission for 3 years in advance. The PUC will approve or deny their budget, of which their profit is built into the approved budget based on their proposed infrastructure costs.

I showed her Cyrus’ bill for June of 2013 for $37.45, then I showed her his bill for June of 2014 for 54.73; just over 17 dollars more year to year.

So where does the extra 17 dollars go?

Stedman says a customer’s water allotment is the key to what they are charged. Prices are based on a tiered system. Water allotments at the various tiers are based on an annual survey of residential customers and how many persons reside in the home.

So in Cyrus’ case Stedman says his family had a change in their home from the previous year. “So in this case this customer made a change in his allotment which reduced the allotment of water that he was allowed at those lower tiers.”

So that caused Cyrus’ 2014 bill to be higher than 2013 given the higher priced tier he was being charged for. “On our new bills, we show you what your allotment is for each tier,” says Stedman.

But it’s not just water you’re paying for.

Every operational dollar charged by Cal Am includes water production costs, taxes, customer services, and labor and community infrastructure. The California public utilities commission approves what Cal Am is allowed to charge customers.

So where do they make a profit?

Stedman says on water production costs or capital infrastructure expenditures, “Anything that is investment in infrastructure then we are enabled to earn a return on that capital investment.”

The utility is required to send their proposed improvements to the PUC, 3 years in advance. In that proposed budget is profit built into their water production costs. Once approved, Cal Am passes these approved costs on to their customers. Cal Am annual approved budget is currently 50 million dollars. A new 3 year budget is being considered by the PUC, to begin in 2015.

The largest portion of Cal Am’s expenditures pie are water production cost at just over 35 cents of every dollar. Stedman says, of every dollar a customer pays, roughly 8 cents is built in profit.

What about the $4 million dollar test well for the new $218 million dollar desalination plant being built on the peninsula? Cal Am received a $1 million dollar grant and the balance is being passed onto customers.

Says Stedman, “A customer’s water bill will increase on average by 40 percent from 75 dollars a month to 106 dollars over the next 5 years.”

Stedman says a customer’s bill would triple without the desalination plant due to no new water source.

So each month when you look at that water bill, know that you’re paying for the cost to produce the water coming out of your tap.

If you have a question, email to DearJon@KionRightNow.com. You can find my on Facebook and Twitter too.