What is WRAM?
The Water Revenue Adjustment Mechanism (WRAM) is a rate-making mechanism adopted by the California Public Utilities Commission that breaks the link between water sales and revenues to encourage conservation. The WRAM works with the Modified Cost Balancing Account (MCBA) to balance out cost savings and revenue under collection.
Each year, Cal Water is allowed to recover a set amount of revenue to cover its fixed and variable operating expenses. When sales go down, Cal Water collects less in revenue, but it also incurs lower variable expenses. The cost savings from the variable expenses is deducted from the authorized revenue level. The difference between the actual revenue collected and the authorized revenue, after taking out the cost savings, is the shortfall in revenue for fixed costs. Cal Water is allowed to implement a surcharge to recover the annual shortfall in revenue. This is what you see on the bill.
With the WRAM, Cal Water instituted tiered rates for metered customers, which do not increase overall revenues to the company, but instead reallocate those revenues so that high-water-using customers pay a higher rate, and low-water-using customers pay a lower rate. The quantity charge is lowest for the first several units of water a customer uses, and the quantity charge goes up in steps as usage increases. These rates are designed to reward water conservation, so the less water a customer uses, the more money he or she saves.