FREMONT -- The plan for Tri-City residents to cut back water use during the drought has brought good and bad news: It conserved the Alameda County Water District's supply at a crucial time but lowered the agency's income.

Despite raising rates for 12 consecutive years, the Fremont-based district now has a $15 million budget hole, and it might charge its biggest water consumers even more to fill it.

"Conservation will be critical during the coming months," said water district board President Paul Sethy. "But conservation means less revenue for the district, and (we) must continue to fund the treatment and distribution of drinking water."

Water district leaders say they are considering several options, including switching to a tiered rate structure that charges more money per unit of water as water use exceeds mandated levels.

Most residences pay $3.37 per unit of water, which stays the same no matter how much the customer uses, said Alameda County Water District spokesman Frank Jahn.

Tiered rates would not affect the fixed service charge of $31.95 customers pay every other month.

The switch could come as early as July, said General Manager Walt Wadlow.

The agency's five-member Board of Directors will study that option at a special workshop at 4:30 p.m. Tuesday at the district's Fremont headquarters.

If district leaders pursue the new rate structure, they will notify customers and invite them to a public hearing before the board votes on it, Jahn said.

"It can't take effect immediately," he said. "The details have not been worked out yet."

Board members at Tuesday's meeting will also consider alternatives, such as cutting expenses, delaying construction projects and issuing a new bond.

The board also could empty its $10 million drought reserve, but doing so would still leave the agency with a $5 million gap, Jahn said.

The water district's projected budget for 2014-15 -- the upcoming fiscal year -- will be $120.5 million. Its drought-related budget shortfall is estimated at $11.7 million -- a 11.5 percent loss for the upcoming year, Jahn said.

The budget for fiscal year 2013-14, which ends June 30, will have a $3.4 million loss because of the conservation measures that district leaders imposed to manage the drought, agency leaders said.

District leaders have spent the past two months trying to manage customer water use. In February, they requested that customers in the Tri-City area voluntarily reduce their water use by 20 percent. Last month, the board declared an emergency water shortage and put mandatory limits on landscape irrigation.

For details about the workshop, call 510-668-4200 or go to www.acwd.org.

Contact Chris De Benedetti at 510-353-7011. Follow him at Twitter.com/cdebenedetti.

If you go
The Alameda County Water District special public workshop Tuesday on ways to offset budget shortfalls stemming from the drought. 4:30 p.m. in district offices, 43885 S. Grimmer Blvd., Fremont. For details, call at 510-668-4200 or go to www.acwd.org.