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Home My WebLink About08-07-2012 ss1 water rate structure studyA counci lagenea Report Meeting Date August 7, 201 2 Item Number S S 1 C I T Y O F S A N L U I S O B I S P O FROM : Carrie Mattingly, Utilities Directo r Prepared By :Wade Horton, Deputy Director of Wate r Ron Munds, Conservation Manage r SUBJECT :WATER RATE STRUCTURE STUD Y RECOMMENDATION Participate in the second of five water rate structure sessions with HDR Engineering . DISCUSSIO N Background At the July 10, 2012 City Council meeting, Shawn Koorn from HDR Engineering kicked off th e Water Rate Structure Study by providing the Council with a comprehensive presentation on th e fundamentals of water rate structure design . The talk included a thorough discussion on th e fundamentals of developing cost-based water rate structures and the philosophy of rate setting , the underlying rate setting goals and objectives, terminology, and technical aspects of rat e structure design . The presentation also summarized the water rate structure study process and th e topics to be covered in the remaining four meetings . Session 2 Overview During Session 2, Mr . Koorn will engage Council in an overvie w discussion of commonly accepted rate design goals and objectives, their meanings and implications to an overall rat e structure design, and current industry thinking and trends in rat e design . The presentation will also include a review of the curren t rate structure and goals . This will give the Council a basis t o move forward in the decision making process . Following an explanation of ten "general accepted" rate desig n goals, Council will work through identifying and defining goal s in alignment with City of San Luis Obispo values, and the n weight them ; a useful and necessary process which will result in an updated set of rate design goals and objectives . Ultimately, Council and staff will be asked to prioritize their top five rat e structure goals for use in developing the conceptual rat e structures . Council members will review and discuss the Current \Water Rat e Structure Coal s I .Comply \\ lega l 1Cgni!CnlentS . E7Co11t e CUI1iseFV£111017 . . Ensure revenue adequac y to lulls meet syste m operating and capita l nced~. }.Pri1v toe equity and fairnes s betvv een cttistunlcri,. BC caSV tip Und rStalnd an d administer . h .Facilitate en1eoin'e revie w to maintain rate stahilit■. Water Rate Structure Study Page 2 conceptual rate structures during Water Rate Structure Study Session 3 . Next Step s There are two more study sessions planned in September and October and one wrap-up meetin g where the Council will make a final decision on a rate structure design which will be schedule d before the end of the year. cssio n 3 Topic Outcom e Developing Conceptual Rate Structures Review up to ten conceptual rate structure s 4 Technical Review of Rate Structures Review the final selected conceptual rate structure s 5 Selection of a Water Rate Structure Receive a report with a final recommended rate structure Study Session 3 .Developing Conceptual Rate Structures — September 18, 2012 (tentative). At a study session tentatively scheduled for September 18, the results of the Council weightin g of recommended rate structure goals will be presented and discussed . Based on the prioritize d rate design goals and objectives of the City, up to ten conceptual water rate designs (rat e structures only,no actual rates, meaning no dollars) will be presented . Based on input from th e meeting, HDR and staff will then narrow the field to the top three rate structures . These thre e rate structures will be evaluated and presented to the Council in Study Session 4 . Study Session 4 . Technical Review of Rate Structures — October (tentative).A fourth Council meeting in October will present the "road test" of the final selected conceptual rat e structures which will support the prioritized goals and financial policies . Actual rates and bil l comparisons will be used to review any impacts to customers . Although there will be number s associated with the "road test", it is not an exercise in setting the actual rates . A recommendatio n on the rates will be presented to the Council as part of the 2013-2015 financial planning process . Meeting 5 . Selection of the Final Rate Structure — TBD.After completion of the study sessions, HDR will provide the Council with a report summarizing the steps taken to review th e rate structure, an overview of the rate structures reviewed during the study, recommendations o f the analysis HDR will undertake, and a recommended final proposed rate structure . FISCAL IMPAC T There is no fiscal impact associated with participating in the water rate structure study sessions . ATTACHMEN T HDR Engineering's Session 2 Presentatio n I :\t.;ounctl Agenda Reports \2012\2012-Ua-07\Water Rate Structure Study tiVlatungly-Hortun7 SS1-2 -4 ft t 14 d +f 1 )1 :L . ,+,;' :.I-.. 44.T Presented by : Shawn Koo m Associate Vice Presiden t HDR Engineering, Inc . SS1-3 the P sentatio n • Process and goals of the revie w • Technical analysis developmen t of th e conceptual rate structures ~~.Rate Structure Revie w Propose enhancements or changes based on the City's current goals an dobjectives,{r This study will focus on the rate structur e AU rate structures can be designed to collect the City's target rev slevelsgrevenue Evaluatio n ~=- -~_ - _ :.- t F t y Y .+..'. } • Revised goals and objectives may result in en hancements to the rate structur ecture ''~".y~da.'Se a °a't,3 P .a .!!yye~p {i+iif A a, rk ."3' ♦~'.'~.#--~~^ • Additional tiers for n on-residential did not meet goals and objective s ~Tier`ed~~~te structure reflects n ~ *."= the higher cost Qf Water for n esuppIes i .~$x 2 •Reflects the cost of providing additional water supplie s•At the time was based on the projected costs of the Nacimiento reservoir Single Family Residential Customer s 1 to 5 units $5 .73/Uni t 6 to 25 units $7 .17/Uni t 26+ units $8 .99/Uni t All Other Customers $5 .73/Uni t1to5units$7.17/Uni t 6+ units ..... purpose Reviewing .s \~ .... ~ 06sigh ~ ~ Objective s d . .\ o ant a n d.a .. ~ Fem .~~~~k .,:~..~' •ova, Attributes ..~.~ SOund ..\`\>/.> c t.~u +4 SS1-11 Attribute #1 Applies t o. any rate design alternative) air ,i .,9 ...., t ~i'4 wf. .~•'ir '?,ey,.,4cr4 .t~`~,,~-+k ~ ip 4,41::". r * ' 14. lr a ~~,.u ^fit a44 ~"E 3.1'4 .444 IL* 4 rig-. .-4044 oso~uµo asaq ssajunp`s~seq j~nuua ue uo %OZ".'ue~{aaaa~~uau~ snip eueanauyou pjnogs `a es n ,j acua ou„p ue `suo!rpuo D jewiou aapun `Jowo sn D •aan1.2na~s a a~ui a uaq~~tu e 5uuanp s eduar aau o sn D az!ua~u~ua pueAgdosojic d ua~~as aIe ..A ~.iji n sad ~rnn qua .sosuo 2 aq pjnoc s sa~n ~na~s ak a nnau ~o 'uoi~~u`auaajdua ~ agl :uo~4iu pQ .....ai o....... p:........ "9 .":"./":.....:."...., p U?...Vk.~.o a:.::.......:.:.... asn i3 aal.O........:pino~s n a~aa ail 1'4 !u !ja a ... .,e'j n 03S 1 ue sas,, oSS a U . , Z13 I ' :..:i:...:....:i ...::: 1k..I.I .1,1.2tt. f r q Definition :The rate structure should be developed such that i t either respond s appropriately and directl y to changes in supply, demand,etc, o r alternatively,contains th eflexibilitytoallow th e utility to respond to th e changing needs as a resul t of supply, demand,and/o r environmental concern s ~x . (e .g .drought conditions ,lack of treatment capacity, Bonbright :Th e related, practica lattributesof simplicity,certainty,convenienc eofpayment,econom y in collection , understandability ,public acceptability ari d feasibility o f application . urea ± ?6+«° ! ,: paleia ld-le3113,ei d w\»<w\«w««myw«, y+\\%ƒ\\~i±«%*a K..» < « T' ±2 ?f.2323\%... ~»7 «c V'~ *« » 2 « « m x «w + * v !~ ~l Jad oi d O,se aI}2/\OJ .UOJ WO J J~ y 2|iguo s WOpaa i j 14,~!»y w &%» A Review of Rate Structure foals an d Objectives (Bonbright ) Revenue Attribute s w 4 • Rates should mee t (yield) the tota l revenue needs (tota l revenu e requirements ) •Revenues are stabl e and predictable (Cit y perspective ) •Rates themselves ar e stable an d predictabl e (Custome r perspective) •Discouragin g wasteful us e •Rate structur e should reflect al l costs the City Incur s •Rates are fair an d equitable betwee n customer s •Rates are non - discriminatory an d avoid subsidie s •Rates structure i s flexible to respon d to supply an d demand •Rate structur e should be simple t o understan d (Custome r perspective ) •Rate structur e should be simple t o explain, interpre t and administe r SS 1-23 Gained a n understandin g of the goals an d objective s esent to Cit y Council Selection o f preferre d alternative s Development o actual rates Present result s to City Council Page intentionally left blank .