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HomeMy WebLinkAbout02-06-2018 Item 03 Water and Wastewater Rate Setting Methodology Meeting Date: 2/6/2018 FROM: Carrie Mattingly, Utilities Director Prepared By: Jennifer Metz, Utilities Projects Manager SUBJECT: WATER AND WASTEWATER RATE SETTING METHODOLOGY RECOMMENDATION Participate in a study session on water and wastewater rate setting methodology with HDR Engineering, Inc. DISCUSSION Background The City reviewed its water and wastewater rate structures through study sessions in 2017 concluding on January 9, 2018. During one of these sessions the City Council updated its rate structure goals. Key changes to the proposed rate structures in alignment with these goals are: 1. A greater percent of revenues collected through the fixed portion of the water and wastewater rates. 2. The fixed portion of the water and wastewater rates for non-residential water users based on meter size. 3. The number of tiers for residential water users increased from two to three. Eighty to ninety percent of expenses associated with providing water and wastewater services are fixed, meaning the expenses are the same each year regardless of the amount of water sold or wastewater treated. These fixed costs include debt payments and operation and maintenance. Currently, fixed revenues are 14 and 11.5 percent respectively. The appropriate level of fixed revenue required for the water and wastewater funds will be proposed in alignment with Council’s rate structure goals. Rate Study and Proposition 218 With the Council’s guidance on rate structure goals, the City is moving forward with its water and wastewater rate setting analysis and process. The goal of the rate setting process is to provide sustainable funding to the City’s Water and Sewer Fund s for operation, maintenance, and capital project needs. Rates must be developed that are stable, equitable, and cost -based in compliance with California Constitution Article XIII C and D, commonly referred to as Proposition 218 (Prop 218). Table 1: City Council Rate Structure Goals ✓ Revenue Stability and Predictability ✓ Discourage Wasteful Use ✓ Stability and Predictability of the Rates ✓ Fair Allocation of Total Cost of Service Among Customer Classes ✓ Reflect all Present and Future Costs Packet Pg. 31 3 The City hired HDR Engineering, Inc. (HDR) to assist with this process and prepare the rate studies. The stud ies will provide necessary documentation and an administrative record of the cost basis for the proposed water and wastewater rates in compliance with California Constitution Article XIII D, section 6 which regulates property-related fees and charges to which water and wastewater are bound [California Supreme Court in Bighorn-Desert View Water Agency v. Verjil (2006)]. In accordance with the provisions of Prop 218, water and wastewater rates are designed based on a cost -of-service methodology that fairly apportions costs to all customers. Rate Setting Process - Methodology The City’s water and wastewater rate setting process will use a three-component methodology accepted in the water and wastewater industry: a revenue requirement analysis; a cost of service analysis; and rate design analysis, described in detail below, will incorporate the Council’s rate structure goals. Revenue Requirements Analysis The City’s current Water and Sewer Funds revenue requirement s from the 2017-19 Financial Plan are shown in Figure 1. The following financial objectives and recognized best management practices will be used in the revenue requirement analysis to identify projected rates: 1. Current and Projected Operation and Maintenance Expenses - aligned with Fiscal Health Response Plan direction to the City’s Enterprise Funds. 2. Debt Service Coverage Requirements - based on outstanding obligations; driven by capital needs and policy direction. 3. Level of Operating Expenses in Reserves - funding reserves to maintain prudent financial practices. $18.7 $18.9 $19.1 $19.2 $19.4 $19.6 $15.6 $16.2 $16.8 $17.5 $19.2 $21.2 $- $5.0 $10.0 $15.0 $20.0 $25.0 2017-18 (Current) 2018-19 2019-20 2020-21 2021-22 2022-23 Current and Projected Water and Wastewater Fund Revenue Requirements (In million $) Wastewater Fund Water Fund Packet Pg. 32 3 4. Rate Funded Capital Program - target annual asset depreciation expenses at a minimum, with the balance of necessary capital projects funded through reserves, capacity and connection fees, and/or long-term debt proceeds. Current annual depreciation for water ~$3 million; wastewater ~$2.5 million. 5. Term of Rate Increases - The City has historically aligned its rate increases with its Financial Plan cycle every two years, however, a longer term of projected increases such as three years, or a shorter term such as a single year, will be considered. 6. Inflationary Rate Increases – to minimize the potential for dramatic rate increases associated with not maintaining adequate revenues to absorb chemical and electrical cost increases rates should increase by an inflationary factor annually at a minimum, such as the Municipal Cost Index. 7. Affordability - will be assessed by comparing the City’s average customer water and wastewater bills as a percentage of median household income. As described in objective #4, Rate Funded Capital Program, the rate studies will identify a rate funded capital program based on annual depreciation. The City adopted a series of water and wastewater master plans to identify and prioritize necessary capital improvements following the adoption of the General Plan’s updated Land Use Element in November 2014. The City updated its water and wastewater asset lists as part of those efforts. The master plans include: • Potable Water Distribution System Operations Master Plan (2015) • Wastewater Collection System Infrastructure Renewal S trategy (2015) • Water Resource Recovery Facility Facilities Plan (2015) • Recycled Water Master Plan (2017) These documents, along with the City’s Financial and Capital Improvement Plans, provide the basis for depreciation estimates and future project capita l costs. Cost of Service Analysis The cost of service analysis will describe customer class characteristics, identify unit costs, and equitably allocate costs among the City’s customer classes to establish the cost -basis of the proposed rates. At least three technical approaches will be considered to demonstrate the individual pricing of the tiers including: • Cost differences in water supply (i.e., contract purchases). • Cost differences from high peak use consumers (relationship of average use to peak use). • Direct assignment of costs to specific tiers (e.g., conservation program costs, etc.). This analysis will also look at water consumption, seasonal usage patterns, water meter sizes, wastewater strength, and other factors to determine service-related cost factors. For residential customers, tier pricing will be developed to provide the cost -basis and meet the requirements of Prop. 218. Rate Design Analysis The final step in the preparation of the City’s water and wastewater rate studies is the design of rates to collect the desired levels of revenues based on the results of the revenue requirement and Packet Pg. 33 3 cost of service analyses. Rate design will align with the goals identified by the City Council through the rate structure review. The City’s recycled water rate design, including the construction water permit cost, will also be reviewed as part of the water rate study. Public Outreach The City is committed to helping the public understand the rate setting process. The Utilities Department included a feature article on the water and wastewater rate structure changes in the most recent Resource publication and information on the Utilities web page. Outreach efforts, such as open houses at 879 Morro Street, will continue until final consideration of the propo sed rates in June. CONCURRENCES Concurrence from other City departments is not required for this item. ENVIRONMENTAL REVIEW No environmental review is required for this study session. Modification of rates and charges by public agencies is statutorily exempt from the California Environmental Quality Act (CEQA) under Section 15273 of the Public Resources Code because the change in fees is not intended to fund expansion of capital projects not otherwise evaluated under CEQA. FISCAL IMPACT There is no fiscal impact associated with Council participation in this study session. Packet Pg. 34 3 Study Session:Water and Wastewater Rate Setting MethodologyFebruary 6, 201802-06-2018 Item 3 - Staff Presentation Participate in a study session on water and wastewater rate setting methodology with HDR Engineering, Inc.Recommendation02-06-2018 Item 3 - Staff Presentation © 2014 HDR, all rights reserved.February 6, 2018Methodology of Setting Cost-Based Rates02-06-2018 Item 3 - Staff Presentation Methodology of Setting Cost‐Based Rates4Rate DesignDesign rates for each class of service to meet the revenue needs of the utility, along with any other rate design goals and objectivesCost of ServiceEquitably allocates the revenue requirement between the various customer classes of serviceRevenue RequirementCompares the revenue of the utility to the expenses to evaluate the level of overall rates02-06-2018 Item 3 - Staff Presentation Overview of the Rate DesignReflect the findings of the revenue requirement and cost of service analysesMeet the  rate design goals and objectives of the CityProduce sufficient revenues to meet the target revenues of the utility, and each class of serviceAre cost‐based and equitable502-06-2018 Item 3 - Staff Presentation Overview of the Water Rate Structure6ResidentialMulti‐FamilyNon‐Residential IrrigationFixed ChargeFlat, per account Varies by meter sizeVaries by meter sizeVaries by meter sizeVariable Charge3‐tiered increasingblockUniform (all usage)Uniform(all usage)Uniform(all usage)Drought RatesYes Yes Yes Yes02-06-2018 Item 3 - Staff Presentation Pricing of fixed and consumption charges are based on cost of service unit costsoAllocated costs to customer class and individual tiers (Residential)oBased on generally accepted industry standards (AWWA M1 Manual)oDeveloped in accordance with Proposition 218 and recent legal decisionsTargets 26 percent through fixed revenue vs. current fixed revenue of 13 percentOverview of the Water Rate Designs702-06-2018 Item 3 - Staff Presentation Pricing of fixed and volume charges are based on cost of service resultsoAllocated costs to customer class and individual tiers (Residential)oBased on generally accepted industry standardsoDeveloped in accordance with Proposition 218’s recent legal decisionTargets 29 percent through fixed revenue vs. current fixed revenue of 11 percentOverview of the Wastewater Rate Designs802-06-2018 Item 3 - Staff Presentation Purpose: Maintain sufficient revenues during times of voluntary or mandatory reductions in consumptionStages tied to Water Shortage Contingency Plan from 2015Urban Water Management PlanDrought rates are in addition to the proposed ratesCustomers that conserve in accordance with the targets should have minimal bill impactsoMonthly bill will remain similar to pre‐conservation levelsEstablishment of Drought Rates902-06-2018 Item 3 - Staff Presentation Provide sufficient revenue to operate and maintain the City’s water and wastewater infrastructure and annual expensesReflect prudent financial planning criteriaoMaintain target debt service coverage ratiooLevel of rate funded capital oMeet target reserve balancesMeet Council rate structure goalsDevelop equitable, cost‐based, and legally defendable ratesPurpose of a Rate Study10IncreasedImproved02-06-2018 Item 3 - Staff Presentation Provides the requirement for setting and implementing property related rates and feesoCalifornia constitution Article XIII DRequires a cost basis for establishing the level of the ratesoFee must not exceed the funds required to provide the property‐related serviceoRevenues from the fee must not be used for any purpose other than that for which the fee is imposedoThe amount of a fee imposed upon any parcel or person… must not exceed the proportional cost of the serviceoThe fee may not be imposed for service unless the service is actually used, or immediately availableProposition 218 Requirements1102-06-2018 Item 3 - Staff Presentation Requires a customer notification process and protest hearingIf no majority protest, the governing body may implement the proposed ratesRecent Legal Decisions (San Juan Capistrano) has resulted in the need for morerigorous documentationProposition 218 Requirements (cont’d)1202-06-2018 Item 3 - Staff Presentation What is “Generally Accepted”?1302-06-2018 Item 3 - Staff Presentation Methodology of Setting Cost‐Based Rates14Rate DesignDesign rates for each class of service to meet the revenue needs of the utility, along with any other rate design goals and objectivesCost of ServiceEquitably allocates the revenue requirement between the various customer classes of serviceRevenue RequirementCompares the revenue of the utility to the expenses to evaluate the level of overall rates02-06-2018 Item 3 - Staff Presentation Based on calculated revenuesoUtilizing recent customer consumption(August 2016 – July 2017)oCharacteristics include drought impacts (“new normal”)Start with budgeted O&M (FY 2017‐18)oEscalated annually by inflationary factorsoAligned with Fiscal Health Response PlanMaintain strong financial health for the utilitiesoTarget debt service coverage ratio•Legal obligation on existing long‐term debt•Provide financial capability for future debt issuancesoMeet target minimum reserve levels•Target based on industry best practices and the City’s annual expensesOverview of the Revenue Requirement1502-06-2018 Item 3 - Staff Presentation Adequately fund capital improvementsoTarget at minimum annual depreciation expense•Water = ~$3 mil annual depreciation expense•Wastewater = ~$2.5 mil annual depreciation expense•Replacement cost is greater than original costoCapital plan prioritization and fundingExcludes costs allocated to recycled wateroSeparate analysis is being developed for recycled waterRecommend annual inflationary level rate adjustments at a minimum (~3 percent)oTypically based on documented cost indices (e.g., Municipal Cost Index)Overview of the Revenue Requirement (Cont’d)1602-06-2018 Item 3 - Staff Presentation Overview of the Preliminary Revenue Requirement17$18.7 $19.9 $20.9 $22.1 $23.4 $24.6 $15.3 $15.8 $16.7 $17.8 $19.1 $20.5 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.02017-18 (Current)2018-192019-202020-212021-222022-23Current and Projected Water and Wastewater Fund Revenue Requirements (In million $)Wastewater FundWater Fund02-06-2018 Item 3 - Staff Presentation Revenue adjustments are neededoAnnual O&M ($10.0 million in FY 2017‐18)oAdequately fund capital improvement projects•Averages $7.1 million/year over five‐year timeframeoMaintain prudent reserve fund balances•Operating fund target of 90 days (25 percent) of O&M expensesoProvide sufficient debt service coverage•Assumed new debt issuances total $24.8 million (Energy Efficiency Project and Reservoir 2 Replacement)oPrior water rate plan estimates ranged from 3 to 3.5 percentPreliminary Water Revenue Requirement Recommendations18Preliminary Water Rate Transition PlanFY 2018‐19 FY 2019‐20 FY 2020‐21 FY 2021‐22 FY 2022‐235.5% 5.0% 5.0% 5.0% 5.0%02-06-2018 Item 3 - Staff Presentation Revenue adjustments are neededoAnnual O&M ($7.3 million in FY 2017‐18)oAdequately fund capital improvement projects•Average is $28.4 million/year  (Includes WRRF upgrade, pipeline replacement, major equipment)oMaintain prudent reserve fund balances•Operating fund target of 90 days (25%) of O&M expensesoProvide sufficient debt service coverage•Assumed new debt issuances total $140.0 million for WRRF upgradeoPrior wastewater rate plan estimates ranged from 3 to 3.5 percentPreliminary Wastewater Revenue Requirement Recommendations19Preliminary Wastewater Rate Transition PlanFY 2018‐19 FY 2019‐20 FY 2020‐21 FY 2021‐22 FY 2022‐233.0% 5.0% 6.0% 6.5% 6.5%02-06-2018 Item 3 - Staff Presentation Overview of the Cost of ServiceWhat is cost of service?• Analysis to equitably allocate the revenue requirement to the various customer classes of serviceWhy cost of service• Generally accepted as “fair and equitable”• Avoids subsidies• Revenues track costs• Meet the intent of Proposition 218 Objectives of Cost of Service• Determine if subsidies exist•Develop average unit costs2002-06-2018 Item 3 - Staff Presentation Overview of the Cost of Service (cont.)21‐ All CustomersWater‐ Residential‐ Multi‐Family‐ Non‐Residential‐ Irrigation‐ Residential‐ Non‐ResidentialWastewater‐ Residential‐ Multi‐Family‐ Non‐Residential‐Cal Poly‐ Industrial / High StrengthPresentProposed02-06-2018 Item 3 - Staff Presentation General Cost of Service Approach22‐ Resource Recovery‐Treatment ‐Conveyance‐ Engineering/ Admin‐Etc.Total ExpensesCommodity / Volume RelatedCapacity / Strength RelatedCustomer RelatedResidentialMulti‐FamilyNon‐ResidentialResidentialMulti‐FamilyNon‐ResidentialResidentialMulti‐FamilyNon‐ResidentialResidential Customers‐Tier 1‐Tier 2‐Tier 3Multi‐Family CustomersNon‐Residential Customers02-06-2018 Item 3 - Staff Presentation Minor cost of service adjustments are recommendedoPrimarily to reflect cost allocation and meet the intent of Prop. 218Based on the most recent customer characteristics and current water system costsProvides the basis for the proposed rates in Year 1 (Prop. 218) oReflects the cost of service analysis customer classes and equitable/proportional allocation of costsPreliminary Water Cost of Service Results2302-06-2018 Item 3 - Staff Presentation Residential Water Rate Comparison24Present Rate StructureFixed Charge $ / Acct.Per Account $12.33Variable Charge $ / CCF0 – 8 CCF $7.278 + CCF 9.08January Rate StructureFixed Charge $ / Acct.Per Account $16.40Variable Charge $ / CCF0 – 5 CCF $6.505 – 12 CCF 7.4512 + CCF 8.60.Preliminary Rate StructureFixed Charge$/ Acct.Per Account $20.80Variable Charge$ / CCF0 – 5 CCF$6.085 – 12CCF6.9712+ CCF12.2102-06-2018 Item 3 - Staff Presentation Water Rate Designs ‐ Residential25Present Rate StructureFixed Charge$/ Acct.Per Account $12.33Variable Charge$ / CCF0 – 8 CCF $7.278 + CCF 9.08Preliminary Rate StructureFixed Charge$/ Acct.Per Account $20.80Variable Charge$ / CCF0 – 5 CCF $6.085 – 12CCF 6.9712+ CCF 12.21Consumption Present Proposed(CCF) Rates Rates $ %Per Account0 $12.33 $20.80 $8.47 68.7%2 26.87 32.96 6.09 22.7%4 41.41 45.11 3.70 8.9%6 55.95 58.16 2.21 4.0%8 70.49 72.10 1.61 2.3%10 88.65 86.04 (2.61) ‐2.9%12 106.81 99.98 (6.83) ‐6.4%16 143.13 148.82 5.69 4.0%20 179.45 197.66 18.21 10.1%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Multi‐Family Water Rate Comparison26Present Rate StructureBase Fee$ / Acct.Per Account $12.33Volume Charge $ / CCF0 – 8 CCF$7.278 + CCF9.08. .Preliminary Rate StructureFixed Charge$/ Acct.¾”$20.801‐Inch34.751.5‐Inch69.252‐Inch110.853‐Inch208.004‐Inch346.756‐Inch693.258‐Inch1,109.25Variable Charge$ / CCFAll Consumption $6.84January Multi-Family Water RatesComponent Basis PricingFixed Charge¾” $16.401” 27.401 ½” 54.602” 87.403” 164.004” 273.406” 546.608” 874.60Variable ChargeAll Use Uniform $7.7502-06-2018 Item 3 - Staff Presentation Water Rate Designs – Multi‐Family27Present Rate StructureFixed Charge$/ Acct.Per Account $12.33Variable Charge$ / CCF0 – 8 CCF $7.278 + CCF 9.08Preliminary Rate StructureFixed Charge$/ Acct.¾” & Less $20.801‐Inch 34.752‐Inch 110.85Variable Charge$ / CCFAll Consumption $6.84Consumption Present Proposed(CCF) Rates Rates$ %3/4" & Less Customer5$48.68 $54.99$6.31 13.0%1088.65 89.190.54 0.6%15134.05 123.38(10.67) ‐8.0%20179.45 157.57(21.88) ‐12.2%25224.85 191.76(33.09) ‐14.7%30270.25 225.96(44.29) ‐16.4%35315.65 260.15(55.50) ‐17.6%1" Customer25$224.85 $205.71 ($19.14) ‐8.5%50451.85 376.68(75.17) ‐16.6%75678.85 547.64 (131.21) ‐19.3%100905.85 718.61 (187.24) ‐20.7%1251,132.85 889.57 (243.28) ‐21.5%1501,359.85 1,060.54 (299.31) ‐22.0%1751,586.85 1,231.50 (355.35) ‐22.4%2" Customer50$451.85 $452.78$0.93 0.2%100905.85 794.71 (111.14) ‐12.3%1501,359.85 1,136.64 (223.21) ‐16.4%2001,813.85 1,478.57 (335.28) ‐18.5%2502,267.85 1,820.50 (447.35) ‐19.7%3002,721.85 2,162.43 (559.42) ‐20.6%3503,175.85 2,504.36 (671.49) ‐21.1%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Non‐Residential Water Rate Comparison28Present Rate StructureBase Fee$ / Acct.Per Account $12.33Volume Charge $ / CCF0 – 8 CCF$7.278 + CCF9.08January Non-Residential Water RatesComponent Basis PricingFixed Charge¾” $16.401”27.401 ½”54.602”87.403”164.004”273.406”546.608”874.60Variable ChargeAll Use Uniform$7.90Preliminary Rate StructureFixed Charge$/ Acct.¾”$20.801‐Inch34.751.5‐Inch69.252‐Inch110.853‐Inch208.004‐Inch346.756‐Inch693.258‐Inch1,109.25Variable Charge$ / CCFAll Consumption $8.1602-06-2018 Item 3 - Staff Presentation Water Rate Designs – Non‐Residential29Present Rate StructureFixed Charge$/ Acct.Per Account $12.33Variable Charge$ / CCF0 – 8 CCF $7.278 + CCF 9.08Preliminary Rate StructureFixed Charge$/ Acct.¾” & Less $20.801‐Inch 34.752‐Inch 110.85Variable Charge$ / CCFAll Consumption $8.16Consumption Present Proposed(CCF) Rates Rates$ %3/4" & Less Customer5$48.68 $61.61 $12.93 26.6%1088.65 102.42 13.77 15.5%15134.05 143.229.17 6.8%20179.45 184.034.58 2.6%25224.85 224.84 (0.01) 0.0%30270.25 265.65 (4.60) ‐1.7%35315.65 306.45 (9.20) ‐2.9%1" Customer25$224.85 $238.79 $13.94 6.2%50451.85 442.83 (9.02) ‐2.0%75678.85 646.87 (31.98) ‐4.7%100905.85 850.91 (54.94) ‐6.1%1251,132.85 1,054.95 (77.90) ‐6.9%1501,359.85 1,258.98 (100.87) ‐7.4%1751,586.85 1,463.02 (123.83) ‐7.8%2" Customer50$451.85 $518.93 $67.08 14.8%100905.85 927.01 21.16 2.3%1501,359.85 1,335.08 (24.77) ‐1.8%2001,813.85 1,743.16 (70.69) ‐3.9%2502,267.85 2,151.24 (116.61) ‐5.1%3002,721.85 2,559.32 (162.53) ‐6.0%3503,175.85 2,967.40 (208.45) ‐6.6%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Irrigation Water Rate Comparison30Present Rate StructureBase Fee$ / Acct.Per Account $12.33Volume Charge $ / CCF0 – 8 CCF$7.278 + CCF9.08January Irrigation Water RatesComponent Basis PricingFixed Charge¾” & Less $16.401” 27.401 ½” 54.602” 87.403” 164.004” 273.406” 546.608” 874.60Variable ChargeAll Use Uniform $8.50Preliminary Rate StructureFixed Charge$/ Acct.¾”$20.801‐Inch34.751.5‐Inch69.252‐Inch110.853‐Inch208.004‐Inch346.756‐Inch693.258‐Inch1,109.25Variable Charge$ / CCFAll Consumption $9.8502-06-2018 Item 3 - Staff Presentation Water Rate Designs – Irrigation31Present Rate StructureFixed Charge$/ Acct.Per Account $12.33Variable Charge$ / CCF0 – 8 CCF $7.278 + CCF 9.08Preliminary Rate StructureFixed Charge$/ Acct.¾” & Less $20.801‐Inch 34.752‐Inch 110.85Variable Charge$ / CCFAll Consumption $9.85Consumption Present Proposed(CCF) Rates Rates $ %3/4" & Less Customer5$48.68 $70.04 $21.36 43.9%1088.65 119.2830.63 34.5%15134.05 168.5234.47 25.7%20179.45 217.7538.30 21.3%25224.85 266.9942.14 18.7%30270.25 316.2345.98 17.0%35315.65 365.4749.82 15.8%1" Customer25$224.85 $280.94 $56.09 24.9%50451.85 527.1375.28 16.7%75678.85 773.3394.48 13.9%100905.85 1,019.52 113.67 12.5%1251,132.85 1,265.71 132.86 11.7%1501,359.85 1,511.90 152.05 11.2%1751,586.85 1,758.10 171.25 10.8%1.5" Customer50$451.85 $561.63 $109.78 24.3%100905.85 1,054.02 148.17 16.4%1501,359.85 1,546.40 186.55 13.7%2001,813.85 2,038.79 224.94 12.4%2502,267.85 2,531.17 263.32 11.6%3002,721.85 3,023.56 301.71 11.1%3503,175.85 3,515.94 340.09 10.7%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Example Water Drought Rates32Target Reduction Goal0%10% 20% 30%Residential Customer Using 6 CCFAssuming No Change in Use (6 CCF) $58.16 $62.68 $68.33 $75.60Assuming Reduced Usage ‐ Revised CCF Usage6.05.05.04.0Total Monthly Bill$58.16 $54.96 $59.67 $56.74Residential Customer Using 8 CCFAssuming No Change in Use (8 CCF) $72.10 $78.13 $85.67 $95.36Assuming Reduced Usage ‐ Revised CCF Usage8.07.06.06.0Total Monthly Bill$72.10 $70.41 $68.33 $75.60Residential Customer Using 10 CCFAssuming No Change in Use (10 CCF) $86.04 $93.58 $103.00 $115.11Assuming Reduced Usage ‐ Revised CCF Usage10.09.08.07.0Total Monthly Bill$86.04 $85.85 $85.67 $85.48Mandatory Conservation Stage 1Mandatory Conservation Stage 2Mandatory Conservation Stage 3Normal Water ConditionsStage 1 Stage 2 Stage 3Target Savings 10% 20% 30%FY 2018/190 ‐ 5 CCF $6.08 $6.83 $7.77 $8.985 ‐ 12 CCF6.97 7.72 8.67 9.8812 + CCF 12.21 12.96 13.91 15.12Normal ConditionSimilar approach for wastewaterThe City does not use the Stage 1, 2, 3 method of drought declaration, it uses Watch, Warning, etc. The final water and wastewater Drought Rate will reflect the stages identified in the City’s Water Shortage Contingency Plan in the 2015 Urban Water Management Plan.02-06-2018 Item 3 - Staff Presentation Minor cost of service adjustmentsBased on the most recent customer characteristicsProvides the basis for the proposed rates in Year 1 (Prop. 218)oDevelops new customer classes and ratesoCal Poly rates driven by high strength discharge characteristicsoRate structure for higher strength dischargers Preliminary Wastewater Cost of Service Results3302-06-2018 Item 3 - Staff Presentation Residential Wastewater Rate Comparison34Present Rate StructureBase Fee$ / Acct.Per Account$8.57Volume Charge $ / CCFAll Use$9.44January Rate StructureBase Fee$ / Acct.Per Account $13.80Volume Charge $ / CCFAll Use$7.95.Preliminary Rate StructureBase Fee$/ Acct.Per Account $18.43Volume Charge$ / CCFAll Use$7.5902-06-2018 Item 3 - Staff Presentation Wastewater Rate Designs ‐ Residential35Present Rate StructureBase Fee$/ Acct.Per Account $8.57Volume Charge$ / CCFAll Use $9.44Preliminary Rate StructureBase Fee$/ Acct.Per Account $18.43Volume Charge$ / CCFAll Use $7.59Consumption Present Proposed(CCF) Rates Rates$ %Per Account0$8.57 $18.43$9.86 115.1%227.45 33.626.17 22.5%446.33 48.802.47 5.3%665.21 63.99(1.22) ‐1.9%884.09 79.17(4.92) ‐5.8%10102.97 94.36(8.61) ‐8.4%12121.85 109.54(12.31) ‐10.1%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Multi‐Family Wastewater Rate Comparison36Present Rate StructureBase Fee$ / Acct.Per Account$8.47Volume Charge $ / CCFAll Use$9.17January Multi-Family Wastewater RatesComponent Basis PricingFixed Charge¾”$13.801”23.051 ½”45.952”73.553”138.004”230.056”459.958”735.95Variable ChargeAll Use Uniform $7.95Preliminary Rate StructureFixed Charge$/ Acct.¾”$18.431‐Inch30.781.5‐Inch61.372‐Inch98.233‐Inch184.304‐Inch307.236‐Inch614.278‐Inch982.88Variable Charge$ / CCFAll Consumption $7.5902-06-2018 Item 3 - Staff Presentation Wastewater Rate Designs – Multi‐Family37Present Rate StructureBase Fee$/ Acct.Per Account $8.57Volume Charge$ / CCFAll Use $9.44Preliminary Rate StructureBase Fee$/ Acct.¾” & Less $18.431‐Inch 30.782‐Inch 98.23Volume Charge$ / CCFAll Use $7.59Consumption Present Proposed(CCF) Rates Rates$ %3/4" & Less Customer5$55.77 $56.39$0.62 1.1%10102.97 94.36(8.61) ‐8.4%15150.17 132.32(17.85) ‐11.9%20197.37 170.28(27.09) ‐13.7%25244.57 208.25(36.32) ‐14.9%30291.77 246.21(45.56) ‐15.6%35338.97 284.17(54.80) ‐16.2%1" Customer25$244.57 $220.59 ($23.98) ‐9.8%50480.57 410.41(70.16) ‐14.6%75716.57 600.23 (116.34) ‐16.2%100952.57 790.04 (162.53) ‐17.1%1251,188.57 979.86 (208.71) ‐17.6%1501,424.57 1,169.68 (254.89) ‐17.9%1751,660.57 1,359.49 (301.08) ‐18.1%2" Customer50$480.57 $477.87($2.70) ‐0.6%100952.57 857.50(95.07) ‐10.0%1501,424.57 1,237.13 (187.44) ‐13.2%2001,896.57 1,616.77 (279.80) ‐14.8%2502,368.57 1,996.40 (372.17) ‐15.7%3002,840.57 2,376.03 (464.54) ‐16.4%3503,312.57 2,755.66 (556.91) ‐16.8%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Non‐Residential Wastewater Rate Comparison38Present Rate StructureBase Fee$ / Acct.Per Account$8.47Volume Charge $ / CCFAll Use$9.17January Non-Residential Wastewater RatesComponent Basis PricingFixed Charge¾”$13.801”23.051 ½”45.952”73.553”138.004”230.056”459.958”735.95Variable ChargeAll Use Uniform $8.15Preliminary Rate StructureFixed Charge$/ Acct.¾”$18.431‐Inch30.781.5‐Inch61.372‐Inch98.233‐Inch184.304‐Inch307.236‐Inch614.278‐Inch982.88Variable Charge$ / CCFAll Consumption $7.9302-06-2018 Item 3 - Staff Presentation Wastewater Rate Designs – Non‐Residential39Present Rate StructureBase Fee$/ Acct.Per Account $8.57Volume Charge$ / CCFAll Use $9.44Preliminary Rate StructureBase Fee$/ Acct.¾” & Less $18.431‐Inch 30.782‐Inch 98.23Volume Charge$ / CCFAll Use $7.93Consumption Present Proposed(CCF) Rates Rates $ %3/4" & Less Customer5$55.77 $58.08 $2.31 4.1%10102.97 97.73 (5.24) ‐5.1%15150.17 137.38 (12.79) ‐8.5%20197.37 177.03 (20.34) ‐10.3%25244.57 216.68 (27.89) ‐11.4%30291.77 256.33 (35.44) ‐12.1%35338.97 295.98 (42.99) ‐12.7%1" Customer25$244.57 $229.03 ($15.54) ‐6.4%50480.57 427.28 (53.29) ‐11.1%75716.57 625.54 (91.03) ‐12.7%100952.57 823.79 (128.78) ‐13.5%1251,188.57 1,022.04 (166.53) ‐14.0%1501,424.57 1,220.30 (204.27) ‐14.3%1751,660.57 1,418.55 (242.02) ‐14.6%2" Customer50$480.57 $494.74 $14.17 2.9%100952.57 891.25 (61.32) ‐6.4%1501,424.57 1,287.75 (136.82) ‐9.6%2001,896.57 1,684.26 (212.31) ‐11.2%2502,368.57 2,080.76 (287.81) ‐12.2%3002,840.57 2,477.27 (363.30) ‐12.8%3503,312.57 2,873.78 (438.79) ‐13.2%DifferencePreliminary02-06-2018 Item 3 - Staff Presentation Finalize water and wastewater rate study technical analysesSingle vs. Multi‐Year Rate ConsiderationDevelop final proposed rates for Proposition 218 processoApril 2018Public hearing on proposed ratesoJune 2018Rate Implementation4002-06-2018 Item 3 - Staff Presentation Questions?02-06-2018 Item 3 - Staff Presentation