The City Council unanimously approved a water rate increase for 16,500 customers in the center of town who are served by a city-run utility that serves about 37 percent of the population.

The increase is due to higher costs from Calleguas Municipal Water District, the source of the city's water. The increase is $2.75 per month or 3.8 percent of the total bill of a typical customer, said Mark Watkins, public works manager.

The rate increase will begin Dec. 31.

During its Nov. 18 meeting, the council also unanimously agreed to spend $196,000 to reduce a surcharge for customers in the Conejo Oaks service area.

They were charged for capital improvements that were needed when the city water company began providing water to the tract.

In 2004, California American Water company, which served Conejo Oaks, traded the tract to the city for the Seventh-day Adventist Specific Plan 13 water service area. That exchange was effective in January 2008. In July 2007, the council approved for Conejo Oaks customers a 13 percent surcharge above rates paid by other customers to reimburse the city for capital improvements needed in the area.

The surcharge came to about $20 per month per customer. The council's vote will reduce the capital gains costs to about $5 a month for customers for the next 10 years.

The $196,000 used to reduce the Conejo Oaks improvement costs came from fees collected by the city water company from the Seventhday Adventist water service area customers. After the exchange, the city no longer needed to use that money to serve the Seventh-day Adventist area customers because they're now California American Water Company customers, Watkins said.

"If the approximately $200,000 from Specific Plan 13 were not to be used for this payback, what would that money be used for?" asked Councilmember Claudia Bill-de la Peña.

"That money could only be used for water projects," Watkins said.

On charts provided by Watkins, it appeared as if the two other major water companies that serve city residents currently have lower rates. Watkins explained that California American and California Water Company also get their water from Calleguas but haven't yet made rate adjustments for the wholesale water increases.

Not long ago, water cost half the price it does now. When the dust clears, the other utility companies' rates will be higher, city manager Scott Mitnick said.

"Water's becoming very expensive," he said.