Wholesale Water Rates for Fiscal Year 2024-2025 — CleanPowerSF Sfpuc Commission, May 14, 2024

DEPARTMENT

SFPUC Finance

AGENDA NO.

12 MEETING DATE

May 14, 2024

AGENDA ITEM
Public Utilities Commission
City and County of San Francisco

Calendar: Regular Calendar
Project Manager: Matthew Freiberg

Wholesale Water Rates and Charges for Fiscal Year 2024-2025

Summary of
Proposed
Commission Action:

Consider and adopt the proposed Wholesale Water Rates for Fiscal Year 2024-2025, which will become effective for meter readings on or after July 1, 2024. The San Francisco Public Utilities Commission developed the proposed rates in accordance with the terms of the Water Supply Agreement between the City and County of San Francisco and its Wholesale Customers, which t he Commission approved on April 28, 2009, by Resolution No. 09-0069, and amended and restated on January 26, 2021, by Resolution No. 21- 0009, with subsequent approval by the Wholesale Customers . This action constitutes the Approval Action for the Project for the purposes of the California Environmental Quality Act ( CEQA), pursuant to San Francisco Administrative Code section 31.04(h). The Planning Department has determined that this action is exempt from the CEQA.

If the item is approved , the Commission will rely on that determination to make its decision.

Background and
Description of
Proposed Action:

Background
The San Francisco Public Utilities Commission ( SFPUC) sells water to retail customers, who ar e located primarily inside the C ity and County of San Francisco (San Francisco), and 27 wholesale customers in Alameda County, San Mateo County, and Santa Clara County (Wholesale Customers ). T he Wholesale Customers establish local utility rates for the retail water customers t hat they se rve in their respective jurisdictions.

The SFPUC establishes water rates applicable to the Wholesale Customers (Wholesale Water Rates ) in accordance with the terms of the Water Supply A greement (WSA) between San Francisco and the Wholesale Customers, which this Commission approved on April 28, 2009, by Resolution No. 09- 0069, and amended and restated on January 26, 2021, by Resolution No. 21- 0009, with subsequent approval by the Wholesale Customers.

Under the WSA, the Commission must consider annual adjustments to the Wholesale Water Rates, which are based on projected wholesale- related costs and water deliveries to th e Wholesale Customers , in coordination with the SFPUC’s financial planning and budget processes. The WSA also sets forth specif ic procedur es that the SFPUC must follow if it intends to increase Wholesale Water Rates Title: Wholesale Water Rates and Charges for Fiscal Year 2023-2024 Meeting Date: May 14, 2024
Page: 2

during the ensuing fiscal year.

In gen eral, the WSA requires the W holesale Customers to pay operating expenses and capital costs associated with the SFPUC’s “regional” assets, which serve both the Wholesale Customers and the SFPUC’s retail customers, based on proportional water use. The WSA allows the S FPUC to recover a portion of net annual debt service for new regional assets and to recover the Wholesale Customers’ share of revenue-funded regional capital costs. The WSA also authorizes the SFPUC to collect the Wholesale Custo mers’ contribution to meet debt service coverage reserve requir ements. In addition, the WSA directs the SFPUC to consider, when establishing Wholesale Wate r Rates, whether the Balancing Account maintained under the WSA has a positive balance (reflecting an amount that the SFPUC owe s to the Wholesale Customers ) or a ne gative balance (reflecting an amount that the Wholesale Customers owe to the SFPU C), based o n actual costs incurred by the SFPUC and actual amounts of water used by wholesale and retail cust omers in previous fiscal ye ars. The SFPUC may apply an amount from the Balancing Account t
o reduce or
increase Wholesale Water Rates for the immediately ensuing year.

As discussed in further detail b elow, SFPUC Finance staff ’s proposed adjustments for Fiscal Year (FY) 2024-2025 include a new volumetric water rate of $5.67 per CCF (1 CCF = 748 gallons), based on: ( 1) the Wholesale Customers’ portion of the SFPUC Regional Water System’s capital and oper ating costs under the WSA, known as the Wholesale Revenue Requirement ; (2) the application of a Balancing Account repaymen t to the SFPUC ; and (3) water sales assumptions.

This new rate reflects an 8.8% increase from the current rate of $5.21 per CCF. SFPUC Finance staff also proposes a de crease in the Untreated Wholesale Water Rate Di scount applicable to Coastside County Water District, the one Wholesale Customer that receives non- potable water from the SF PUC, rathe r than treated potable drinking water, and treats that water at its own facilities.

In addition, the SFPUC Finance staff recommends adju stments to the Monthly Service Char ge component of the Wholesale Water Rates that is based on the type and size of applicable meters, as discussed in further detail below and in the attached “FY 2024- 25 Wholesale Water Service Charges Final Report.”
In accordance with WSA section 6.03.A, on April 12, 2024, more than 30 days before this C ommission meeting, the SF PUC sent a written notice of the proposed adjustments to the Wholesale Water Rates for FY 2024-2025 to all the Wholesale Customers and the Bay Area Water Sup ply and Conservation Agency ( BAWSCA), which
represents the Wholesale Customers . The SFPUC’s noti ce to the Wholesale Customers and BAWSCA included tabl es and schedules illustrating the calculation of the proposed increase in rates, which would be effect ive on July 1, 2024, more than 30 days after adoption by the Commission.

Title: Wholesale Water Rates and Charges for Fiscal Year 2023-2024 Meeting Date: May 14, 2024
Page: 3

Proposed Volumetric Water Rate Change
SFPUC Finance staff prepared an analysis of the SFPUC Water Enterprise’s projected revenues and revenue requirements for FY 2024-2025. Without the proposed adjustments, the SFPUC woul d collect a total of $333.5 million in revenue from projected Wholesale Customer water sales with (1) the current volumetric water rate applicable to the Wholesale Customers ( $5.21 per CCF), (2) the existing monthly service charges totaling $4.7 million, and (3) revenue losses of $ 2.7 million from the existing Untre ated Wholesale Water Rate Discount applicable to Coastside County Water District.

As shown in the t able below, however, the projected Wholesale Revenue Requirement for FY 2024- 2025 is a significantly higher amount: $360.2 million. The Wholesale Revenue Requirement for FY 2024-2025 is this amount because it includes the Who lesale Customers’ proportionate share of operating expenses, debt service on bonds sold to construct or acquire new regional assets, and revenue funding for new cash-funded regional assets , as well as a $25.9 million payment from the Balancing Account that the Wholesale Customers owe to the SFPUC.

To meet the Wholesale R evenue Requirement for FY 2024- 2025, SFPUC Finance staff recomm ends increasing the volumetric water rate applicable to the Wholesale Customers on or after July 1, 2024, by 8.8%, to $5.67 per CCF, as shown on th e revised Schedule W-25 attached to this agenda item.

Projected FY 2024-25 Wholesale Revenue Requirement
($ millions)
FYE 2025
Operating Costs $155.7
Debt Service 162.2
Capital: Revenue Funded 16.0
Debt Service Coverage 1.4
Less Interest on balancing account and
coverage reserve
(0.9)
Subtotal Wholesale Revenue Requirement $334.3
Balancing Account payments to SFPUC 25.9
Total Wholesale Revenue Requirement $360.2

Projected FY 2024-25 Wholesale Sales 129.3 MGD

Monthly Service Charges
In 2023, the SFPUC W ater Supply and Treatment Division initiated a meter calibration and replacement project, whic h would re place certain Wholesale Customer meters with new met er technologies and sizes over a multi -year period starting in FY 2023- 2024. SFPUC Finance staff determined that the SFPUC needed to develop new charges for the new meter types and sizes that wer e not accounted for Title: Wholesale Water Rates and Charges for Fiscal Year 2023-2024 Meeting Date: May 14, 2024
Page: 4

in the existing Monthly Service Charge component of t he Wholesale Water Rates (set forth in Schedule W- 25), which is based on the type and size of applicable meters. At the same time, staff began a review of the existing monthly service charges and discove red that they had not changed since at least FY 2009- 2010. As a result, the percentage of the Wholesale Revenue Requirement collected annually by the monthly service charges (as opposed to the volumetric water rates) had steadil y declined fro m 3.5% in FY 2009-2010 to 1. 5% in FY 2021-2022. Staff also deter mined that the existing monthly service charges did not follow a clear methodology.

Staff proposes to update the existing monthly service c harges to (1) maintain colle cting 1.5% of the FY 2024- 2025 Wholesale Revenue Requirement from the monthly service charges and (2) allocate those costs across mete r types and sizes based on American Water Works Association’s standardized meter capacities. Staff’s proposal present s an equitable distribution of costs collected via the monthly service charges across the differ ent meter sizes and technologies, and it wil l partially reduce the ne ed to increase the volumetric water rates discussed above.

In accordance with Section 6.04 of the WSA, the SFPUC prepared and distributed to the Wholesale Customers and BAWSCA a n initial report describing its proposed changes to the monthl y service charges, the purpose of the proposed changes, and the estimated financial effect on individual Whol esale Customers. The SFPUC modified its proposal in response to the feedbac k it received from the Wholesale Customers and BAWSCA over a 60- day com ment period, and it developed the FY 2024- 25 Wholesale Water Servi ce Charges Final Report attached to this a genda item detailing staff’s recommended changes for the Commission’s conside ration. The SFPUC’s proposal is designed to (1) minimize cost shifts between different meter sizes and among the Wholesale Customers compared to the current monthly service charges , (2) ensure that there are valid charges for every planned or currently installed meter size and technology, and (3) scale all service charges proportionally off industry-standard factors.

Untreated Wholesale Water Rate Discount Factor
The SFPUC’s April 12, 2024, notice also informed the Wholesale Customers and BAWSCA of a proposed increase in the U ntreated Wholesale Water Rate Dis count Fa ctor applicable to Coastside County Water District ( CCWD) for FY 2024- 2025. Unlike th e SFPUC’s other Wholesa le Customers, who receive treated potable drinking water from the SFPUC, CCWD recei ves non-potable water from the SFPUC, which it treats to drinking water standards at its own facilities.

As required by S ection 8 of the I ndividual Water Sales Contract between the SFPUC and CCWD under the terms of the WSA, SFPUC Finance staff commissioned an independent analysi s in 2010 to evaluate the cost of service for untreated water. The lower contract price of untreated water compared to treated water, which the S FPUC and the Wholesale Customers refer to as a “ discount factor,” is based Title: Wholesale Water Rates and Charges for Fiscal Year 2023-2024 Meeting Date: May 14, 2024
Page: 5

on the unit cost of capital and oper ating expenses for the SFPUC’s Harry Tracy Water Treatment Plant ( HTWTP), which is not used to treat the “raw” water delivered to CCWD.

SFPUC Finance staff recommends increasing the discount factor applicable to CCWD in FY 2024- 2025 to $0.39 per CCF, an increase of $0.01 from th e curren t rate, as shown on Schedule W- 25. The SFPUC calculated this discount factor by divi ding the total projected costs and expen ses for HTWTP in FY 2024 -2025 by the total projected water deliveries to the Wholesale Cust omers in FY 2024- 2025.

Environmental
Review:

On April 30, 2024, the San Francisco Planning Department determined the Project to be statutor ily ex empt from environmental review under the CEQA section 21080(b)(8) and the CEQA
Guidelines section 15273 ( Rates, Tolls, Fares and Charges) (Case Number 2024-003758ENV) related to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, or other charges. The exemption determination can be found here:
https://sfpuc.sharefile.com/public/share/web-
s86608fdc80b3494aba1a31b0bbe21921

This action constitutes the Approval Action for the project for the purposes of the CEQA pursuant to San Francisco Administrative Code section 31.04(h).

Recommendation: SFPUC Finance recommends that the Commission adopt the attached resolution.

Attachments: 1. FY 2024-2025 Wholesale Water Rates Notice

2. FY 2024-25 Wholesale Water Service Charges Final Report

3. Schedule W-25: Wholesale Use with Long-Term Contract

PUBLIC UTILITIES COMMISSION
City and County of San Francisco
Resolution No. ______________

WHEREAS, The San Francisco Public Utilities Commission (SFPUC) sells water to reta il customers, who are located primarily inside the City and County of San Francisco (San Francisco), and 27 wholesale customers in Alameda County, San Mateo County, and S anta Clara County (Wholesale Customers), who in turn establish local utility rates for the retail w ater customers that they serve in their respective jurisdictions; and WHEREAS, The SFPUC establishes water rates applicable to the Wholesale Customers (Wholesale Water Rates) in accordance with the Water Supply Agreement (WSA) between San Francisco and the Wholesale Customers, which this Commission approved on April 28, 2009, by Resolution No. 09- 0069, and amended and restated on January 26, 2021, by Resolution No. 21- 0009, with subsequent approval by the Wholesale Customers; and WHEREAS, The SFPUC propos es to adjust the Wholesale Water Rates for Fiscal Year (FY) 2024-2025 to include a volumetric water rate of $5.67 per CCF, which is a 8.8% inc rease from the current rate of $5.21 per CCF, and an Untreated Wholesale Water Rate Discount Factor of $0.39 per C CF, which is a n increase of $0.01 from the current rate and applies o nly to Coastside County Water District, the only Wholesale Customer which receives non-potable water from the SFPUC; and
WHEREAS, The SFPUC also proposes to adjust the M onthly Service Charge component of the Wholesale Water Rates for FY 2024 -2025 to (1) maintain collecting 1.5% of the FY 2024- 25 Wholesale Revenue Requirement from the monthly service charges and (2) allocate those costs across meter types and sizes based on the American Wat er Works Association’s sta ndardized meter capacities, as described in the FY 2024- 25 Wholesale Water Service Charges Final Report on file with the Commissio n Secretary, which the SFPUC prepared and dist ributed to the Wholesale Customers and the Bay Area Water Supply and C onservation Agency (BAWSCA), in accordance with WSA section 6.04; and
WHEREAS, On April 12, 2024, more than 30 da ys before the Commissi on held its May 14, 2024, public hearing to consider the proposed adjustments to t he Wholesale Water Rates for FY 2024-2025, the SFPUC sent a written notice of the proposed adjustments to all the Wholesale Customers and BAWSCA, in accordance with WSA section 6.03; and WHEREAS, A copy of the WSA, and a copy of the SFPUC’s April 12, 2024, notice to the Wholesale Customers and BAWSCA, which included among its attachments a revised Schedule W-25: Wholesale Use With Long- Term Contract, showing the proposed Wholesale Water Rat es effective July 1, 2024, are on file with the Secretary of the Commission and incorpora ted in this resolution by reference; and
WHEREAS, On April 30, 2024, the San Francisco Planning Department determined the Project to be statutor ily exempt from environmental review under the California Environmental Quality Act (CEQA) section 21080(b)(8) and the CEQA Guidelines section 15273 (Rates, Tolls, Fares and Charges) (Case Number 2024-003758ENV) related to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, or other charges; and WHEREAS, The Commission is securing revenue for purp oses of meeting estimated FY 2024-2025 “Regional” operating and capital costs consistent with Article 5 of the WSA; and WHEREAS, This Commission hereby finds that adoption of this resolution will establis h rates for the purpose of (1) meeting operating expenses, including employee wage rates and fringe benefits; (2) purchasing or leasing supplies, equipment, or materials; (3) meeting financial reserve

needs and requirements, and (4) obtaining funds for capital projects necessary to maintain servic e within existing service areas; now, therefore, be it
RESOLVED, This Commission determines that (1) an increase in the volumetric water rates applicable to the Wh olesale Customers, (2) adjustments to the monthly service charges applicable to the Wholesale Customers, and (3) a decrease in the Untreated Wholesale Water Rate Discount applicable to Coastside County Water District are required for Fiscal Year 2024-2025 and hereby adopts the proposed rates and charges, as enumerated in the revised Sched ule W-25:

Wholesale Use With Long- Term Contract, attached to this Resolution and incorporated by reference as if set forth here in full, for all water delivered to the Wholesale Customers, on or after July 1, 2024.

I hereby certify that the foregoing resolution was adopted by the Public Utilities Commission at its meeting of May 14, 2024.

Secretary, Public Utilities Commission

SCHEDULE W-25: Wholesale Use with Long-Term Contract

For service to municipalities, water districts and others who, under long-term contracts, purchase water for resale:

First: A Monthly Service Charge based on the type and size of the meter:

Meter
Size

Turbine Meters
(C-701, Class II)

Electronic Meters
(C-715, Class II)

Displacement Meters
(C-700, Class II)

2 in.

- - $143

3 in.

$ 391 $314 -

4 in.

$674

$539 -

6 in.

$1,438

$719 -

8 in.

$2,517

$1,798 -

10 in.

$3,775

$2,697 -

12 in.

$3,596 -

16 in.

$7,012

- -

Second: A charge for water delivered based on one-month’s meter readings:

$2,469.47 per acre-foot or $5.67 per 100 cu. ft.

Third: An Untreated Wholesale Water Rate Discount Factor for Wholesale Customers receiving untreated water, based on one-month’s meter readings:

($169.88) per acre-foot or ($0.39) per 100 cu. ft.

OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.

525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488

April 12, 2024

Ms. Nicole Sandkulla
CEO/General Manager
Bay Area Water Supply & Conservation Agency
155 Bovet Road, Suite 650
San Mateo, CA 94402
Re: Fiscal Year 2024-25 Wholesale Water Rates Notice
Dear Ms. Sandkulla,
The San Francisco Public Utilities Commission (SFPUC) has determined that the Fiscal Year 2024-25 Wholesale Water Rates will be $5.67 per CCF, representing a $0.46 per CCF or 8.8% increase from the current rate for treated wholesale water, effective July 1, 2024. As required by WSA Section

6.03.A, the SFPUC has scheduled a public hearing to consider the adoption of the wholesale water rate, as follows:

May 14, 2024, 1:30 PM
San Francisco City Hall
1 Dr. Carlton B. Goodlett Place, Room 400
San Francisco, CA 94102
The main driver of the rate increase is a partial repayment of the balancing account to SFPUC, which is projected to grow to $28.9 million by the end of FY 2023-24 due to higher-than-projected proportional annual use and cost increases. For FY 2024-25, SFPUC has set rates to recover $25.8 million of the overall balancing account.

The balancing account costs are partially buffered by lower Wholesale Revenue Requirements projected for FY 2024-25 as well as projected increased water sales. The Fiscal Year 2024-25 Wholesale Revenue Requirement, including below-the-line adjustments, is projected to be approximately $4.8 million lower than the prior year. Higher water usage as the region returns to new normal after the impact of the recent drought and COVID- 219 pandemic softens the volumetric rates. Volumes for FY 2024-25 are projected to be 129.3 MGD, based on the latest current-year forecasts and an expected slow recovery from drought conditions over the next three years.

The SFPUC’s proposed volumetric rate is right in the middle of the anticipated range of rates that were presented to BAWSCA in January.

Monthly Meter Charges
As part of the ongoing wholesale meter calibration and replacement project, new meter technologies and sizes are planned to replace certain wholesale meters. To ensure there are monthly service charges for all current meters and planned meters, the SFPUC is updating the W-25 schedule with new FY 2024- 25 monthly meter charges, in accordance with Section 6.04B of the WSA. The attached “FY 2024-25 Wholesale Water Service Charges Final Report” provides details regarding the development and calculation of the proposed charges.

Based on feedback received from BAWSCA and the Wholesale Customers, the updated meter charges have been structured to result in the least structural change to the rates and to minimize the shift between different meter sizes.

The updated charges are set to collect 1.5% of the total Wholesale Revenue Requirement (WRR). The specific charges have been set by proportionately allocating this revenue target using an equivalent meter schedule based on the American Water Works Association standardized meter capacities.

Untreated Wholesale Water Rate Discount Factor
The Fiscal Year 2023-24 Untreated Wholesale Water Rate Discount will be $0.39 per CCF, an increase of $0.01 from the current rate, effective July 1, 2024. The discount factor is equal to the Harry Tracy Water Treatment Plant total projected cost. The discount is calculated by dividing the relevant cost by total wholesale water deliveries.

The San Francisco Public Utilities Commission will hold a public hearing on this rate at its May 14, 2024 meeting.

Fiscal Year 2024-25 Billing
As in prior years, the following charges, unrelated to the Wholesale Revenue Requirement, will be effective July 1, 2024:
• BAWSCA Bond Surcharge: The monthly bills include the February 2013 prepayment of the Pre-2009 Assets surcharge for the repayment of BAWSCA issued bonds. The amounts of the surcharge are proportionate to water consumption and have been adjusted accordingly. The SFPUC bills and collects the surcharge on behalf of BAWSCA and remits these amounts to the trustee.
• Late Fees: Late payment penalties as specified in Schedule W-44 will be in effect. The SFPUC encourages Wholesale customers to sign up for electronic billing and payment services to make timely payments and to avoid late fees. Please sign up with our SFPUC BillPay service at myaccount-water.sfpuc.org to receive and pay your bills online. If you have any questions, please contact customer assistance at (415) 551- 3000.

In addition to the above, we understand that beginning at some time during Fiscal Year 2024-25, BAWSCA will also be assessing a Water Management Charge, which will be added to SFPUC bills. This new charge is anticipated to

begin in late summer or early fall, but the specific date and amounts are not known at this time.

Enclosures
Per WSA Section 6.03.A, supporting documents are required if there is a rate increase. This year, we are also providing various materials associated with the changes to the monthly service charges following WSA Section 6.04.B. We are attaching the following:
• Attachment N-1: Balancing Account/Rate Setting Calculation: A table showing the change in the Wholesale Revenue Requirement and how the wholesale rate was calculated
• Attachment N-3: Schedule of Projected Water Sales, Wholesale Revenue Requirements and Wholesale Rates: A schedule showing projected Wholesale Customer water sales and rates for the proposed rate year and the following four fiscal years
• FY 2024-25 Calculation of Untreated Water Discount Factor • Schedule W-25: Wholesale Use with Long-Term Contract - Proposed Fiscal Year 2024-25 Wholesale Customer water rates
• Fiscal Year 2024-25 BAWSCA Bond Surcharge letter and schedule showing the bond surcharge for each member agency
• FY 2024-25 Wholesale Water Service Charges Final Report: A report recommending changes to the rate structure
• Response to Comments Received on Draft Proposed Changes to Monthly Service Charges

If you have any questions, please contact me at 415-487-5227 or [email protected].

Sincerely,

Erin Corvinova
Financial Planning Director

Enclosures

cc: Dennis Herrera, SFPUC, General Manager
Ronald Flynn, SFPUC, Chief of Staff
Steve Ritchie, SFPUC, Water Enterprise Assistant General Manager Nancy Hom, SFPUC, CFO & Business Services AGM
Laura Busch, SFPUC, Deputy CFO
Matthew Freiberg, SFPUC, Rates Manager

Alison Kastama, SFPUC, BAWSCA & Wholesale Customer Liaison Sheryl Bregman, SF City Attorney
Catherine Malina, SF City Attorney
Christina Tang, BAWSCA, Finance Manager
Wholesale Customer Representatives
Balancing Account / Rate-Setting Calculation Schedule N-1 Reference Section 6.03.A.3
Fiscal Year 2024-25
FY 2022-23 FY 2023-24 FY 2024-25

1. Actual Changes to Balancing Account for FY 2022-23
A. Balancing Account as of June 30, 2022 (unaudited) (30,641,319)$ B. Interest on Balancing Account and Coverage Reserve (882,377)$ C. Wholesale Revenues for Fiscal Year (273,153,247) $
D. Wholesale Revenue Requirement for Fiscal Year 300,159,320$ E. Net Change in Wholesale Revenue Coverage 14,151,740 $ F. Settlement Credits or Other Adjustments 75,000 $
G Balancing Account as of June 30, 2023 (unaudited) 9,709,117$

2. Projected Changes to Balancing Account for FY 2023-24 A. Balancing Account as of June 30, 2023 9,709,117$
B. Interest on Balancing Account and Coverage Reserve (194,787) $ C. Wholesale Revenues for Fiscal Year (322,342,500) $
D. Wholesale Revenue Requirement for Fiscal Year 340,360,191 $ E. Settlement Credits or Other Adjustments - $
F. Balancing Account as of June 30, 2024 27,532,021 $
G. Net Change in Wholesale Revenue Coverage 1,385,905 $ H. Total Revenue Deficiency or (Surplus) 28,917,926$

3. Projected Changes to Balancing Account for FY 2024-25 A. Balancing Account as of June 30, 2024 28,917,926$
B. Interest on Balancing Account and Coverage Reserve (896,835) $ C. Wholesale Revenues for Fiscal Year (362,855,817) $
D. Wholesale Revenue Requirement for Fiscal Year 333,848,194 $ E. Settlement Credits or Other Adjustments - $
F. Balancing Account as of June 30, 2025 (986,532) $
G. Net Change in Wholesale Revenue Coverage 1,396,465 $ H. Total Revenue Deficiency or (Surplus) 409,933$
I. Projected Water Sales in CCF 63,111,217
J. Deficiency or (Surplus) $/CCF 0.01 $
K. Deficiency or (Surplus) CCF as a Percentage of Revenues 0% Schedule of Projected Water Sales, Wholesale Revenue Requirements, and Wholesale Rates Schedule N-3 Reference Section 6.03.A.3
Fiscal Year 2024-25
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
Water Enterprise
Operations & Maintenance Expenses
Source of Supply 25,540,735 $ 26,578,281$ 27,692,095$ 28,617,165$ 29,557,569$ Pumping - $ -$ -$ -$ -$ Treatment 42,303,984 $ 44,022,507$ 45,867,354$ 47,399,579$ 48,957,201$ Transmission & Distribution 22,058,451 $ 22,954,536$ 23,916,490$ 24,715,433$ 25,527,620$ Customer Services 255,461 $ 265,838$ 276,979$ 286,231$ 295,637$ Total Operations & Maintenance Expenses 90,158,630$ 93,821,162$ 97,752,918$ 101,018,409$ 104,338,027$ Administrative & General Expenses
Countywide Cost Allocation Plan (COWCAP) 1,394,916$ 1,451,582$ 1,512,413$ 1,562,936$ 1,614,297$ SFPUC Bureaus 19,858,275 $ 20,664,982$ 21,530,988$ 22,250,243$ 22,981,419$ Compliance Audit 29,102 $ 29,102$ 29,102$ 29,102$ 29,102$ Other Administrative & General 10,356,854 $ 10,773,896$ 11,224,965$ 11,598,244$ 11,978,045$ Total Administrative & General Expenses 31,639,147$ 32,919,562$ 34,297,468$ 35,440,525$ 36,602,863$ Property Taxes 1,322,290 $ 1,348,736$ 1,375,710$ 1,403,225$ 1,431,289$ Capital Cost Recovery
Debt Service on New Assets 170,952,985 $ 181,751,502$ 188,392,213$ 201,929,443$ 205,568,697$ Revenue Credit for BABs Subsidy (13,436,359) $ (13,190,346)$ (12,987,437)$ (12,627,579)$ (12,242,987)$ Revenue Funded Capital 13,626,735 $ 26,672,093$ 45,396,424$ 43,320,479$ 54,676,423$ Total Capital Cost Recovery 171,143,360 $ 195,233,248$ 220,801,200$ 232,622,343$ 248,002,134$ 1 Schedule of Projected Water Sales, Wholesale Revenue Requirements, and Wholesale Rates Schedule N-3 Reference Section 6.03.A.3
Fiscal Year 2024-25
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
Hetch Hetchy Water & Power
Operations & Maintenance Expenses 23,083,793 $ 24,021,531$ 25,028,199$ 25,864,280$ 26,714,220$ Administrative & General Expenses
Countywide Cost Allocation Plan (COWCAP) 573,820$ 597,130$ 622,154$ 642,938$ 664,065$ SFPUC Bureaus 4,173,960 $ 4,343,520$ 4,525,544$ 4,676,722$ 4,830,406$ Other Administrative & General 4,525,163 $ 4,708,990$ 4,906,329$ 5,070,228$ 5,236,843$ Total Administrative & General Expenses 9,272,943$ 9,649,640$ 10,054,027$ 10,389,887$ 10,731,314$ Property Taxes 184,367 $ 188,055$ 191,816$ 195,652$ 199,565$ Capital Cost Recovery
Debt Service on New Assets 4,698,081 $ 4,994,842$ 5,275,935$ 12,626,420$ 21,182,017$ Revenue Funded Capital 2,345,582 $ 5,076,628$ 2,430,817$ 3,661,133$ 2,172,624$ Total Capital Cost Recovery 7,043,663 $ 10,071,470$ 7,706,752$ 16,287,553$ 23,354,641$ Wholesale Revenue Requirement 333,848,194 $ 367,253,404$ 397,208,091$ 423,221,875$ 451,374,054$ Balancing Account as of June 30 (Beginning of Year) 28,917,926$ 3,063,745$ 101,943$ 101,957$ (249,870)$ Balancing Account Deferral (3,063,745)$ (101,943)$ (101,957)$ 249,870$ (69,713)$ Interest on Balancing Account and Coverage Reserve (896,835)$ (1,323,192)$ (1,133,464)$ (1,213,159)$ (1,079,298)$ Revenue Loss to Contract and Untreated Water Rates 2,653,812$ 2,673,928$ 2,774,729$ 2,970,175$ 3,124,228$ Wholesale Debt Service Coverage Reserve 1,396,465$ 3,969,452$ 2,493,650$ 7,436,651$ 4,402,805$ Wholesale Revenues Before Rate Change
Volumetric Charges (328,809,440)$ (369,986,898)$ (382,545,483)$ (396,550,561)$ (427,604,665)$ Excess Use Charges / Minimum Purchase -$ -$ -$ -$ -$ Service Charges (5,015,217)$ (5,548,495)$ (5,978,524)$ (6,441,680)$ (6,820,463)$ Total Wholesale Deficiency or (Credit) 29,031,160$ (0) $ 12,818,984$ 29,775,127$ 23,077,077$ Wholesale Deficiency or (Credit) as a Percent of Volumetric Charges 8.8% 0.0% 3.4% 7.5% 5.4% Projected Water Sales (MGD) 129.3 MGD 133.7 MGD 138.3 MGD 138.3 MGD 139.1 MGD Projected Water Sales (CCF) 63,111,217 65,253,421 67,468,339 67,670,744 67,873,756 Wholesale Deficiency or Credit ($/CCF) $0.46 $0.00 $0.19 $0.44 $0.34 Wholesale Rate ($/CCF) $5.67 $5.67 $5.86 $6.30 $6.64
Projected Service Charge Revenues 5,015,217 $ 5,548,495$ 5,978,524$ 6,441,680$ 6,820,463$ Projected Volume Charge Revenues 357,840,600 $ 369,986,898$ 395,364,467$ 426,325,688$ 450,681,742$ Total Wholesale Revenues After Rate Change 362,855,817$ 375,535,393$ 401,342,992$ 432,767,369$ 457,502,206$ 2 Calculation of Untreated Water Discount Rate for Coastside County Water District Rate-Setting for Fiscal Year 2024-25
Wholesale Share of HTWTP Expenses to be Removed
Operations & Maintenance 11,828,403$
Cash Funded Capital -$
Debt Service 12,793,857$
Total HTWTP Expense to be Removed 24,622,260$
Total Wholesale Water Consumption (CCF) 63,111,217
Untreated Water Rate Discount ($/CCF) 0.39$
Untreated Water Rate Discount ($/acre foot) 169.88$
Impact on Wholesale and Retail Customers
Untreated Water Rate Discount ($/CCF) (0.39)$
Projected Coastside County Water District Annual Consumption (CCF) 791,146 Net Impact of Untreated Water Rate Discount (308,547)$
Wholesale Retail
Proportional Annual Use 68.09% 31.91%
Allocation of Untreated Water Rate Discount (210,089)$ (98,458)$ Projected Annual Treated Water Usage (CCF) 62,320,071 26,441,601 Average Wholesale Rate Impact ($/CCF) (0.0034)$ (0.0037)$

SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Effective July 1, 2024

SCHEDULE W-25: Wholesale Use with Long-Term Contract

For service to municipalities, water districts and others who, under long -term contracts, purchase water for resale:

First: A Monthly Service Charge base on the type and size of the meter:

The service charge for a battery of meters installed on one service in lieu of one meter or for a special type of meter , shall be based on the size of single or multiple standard type meters of equivalent capacity.

Second: A charge for water delivered based on one-month’s meter readings:

$2,469.47 per acre-foot or $5.67 per 100 cu. ft.

Third: An Untreated Wholesale Water Rate Discount Factor for Wholesale Customers receiving untreated water, based on one-month’s meter readings:

($169.88) per acre-foot or ($0.39) per 100 cu. ft.

155 Bovet Road, Suite 650, ⚫ San Mateo, CA 94402 ⚫ ph 650 349 3000 ⚫ fx 650349 8395 ⚫ www.bawsca.org

January 19, 2024

Mrs. Erin Corvinova, Financial Planning Director
San Francisco Public Utilities Commission
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102

Subject: BAWSCA FY 2024-25 Bond Surcharge Schedule

Dear Erin:

Pursuant to Section 3.01 (a) of the Prepayment and Collection Agreement between the Bay Area Water Supply and Conservation Agency (BAWSCA) and the City and County of San Francisco (San Francisco), dated January 1, 2013 (Agreement), BAWSCA shall deliver a written schedule to San Francisco at least 45 days prior to the beginning of each fiscal year showing the amount of the surcharge that BAWSCA seeks to impose for such fiscal year.

Attached is BAWSCA’s FY 2024-25 annual and monthly bond surcharge for each member agency that was adopted by the BAWSCA Board on January 18, 2024.

Pursuant to Section 3.02 (a) of the Agreement, San Francisco shall include the identified monthly surcharge in the first wholesale water bill for the largest amount delivered to BAWSCA’s member agencies each month, effective July 1, 2024.

If you have any questions about the billing of BAWSCA’s surcharges, please contact me at (650) 349-3000.

Sincerely,

Christina Tang
Finance Manager

Attachment: BAWSCA FY 2024-25 Bond Surcharges

cc: Nancy Hom, SFPUC
Laura Busch, SFPUC
Alison Kastama, SFPUC
Nicole Sandkulla, BAWSCA
Allison Schutte, BAWSCA Legal Counsel

Attachment

BAWSCA FY 2024-25 Bond Surcharges

Agency
Annual
Bond
Surcharge
Monthly
Bond
Surcharge
Agency
Annual
Bond
Surcharge
Monthly
Bond
Surcharge
Alameda County WD $2,298,768 $191,564 Mid Pen WD $427,236 $35,603 Brisbane Water $73,536 $6,128 Millbrae $221,388 $18,449 Burlingame $667,968 $55,664 Milpitas $791,844 $65,987
Coastside County WD $38,772 $3,231 Mountain View $1,209,876 $100,823 CWS - Bear Gulch $1,586,292 $132,191 North Coast WD $327,396 $27,283 CWS - Mid Peninsula $2,045,292 $170,441 Palo Alto $1,601,148 $133,429 CWS - South SF $1,320,708 $110,059 Purissima Hills WD $178,668 $14,889 Daly City $590,628 $49,219 Redwood City $1,279,584 $106,632 East Palo Alto WD $263,640 $21,970 San Bruno $231,384 $19,282 Estero Municipal ID $601,416 $50,118 San Jose (North) $721,008 $60,084 Guadalupe Valley $23,916 $1,993 Santa Clara $531,588 $44,299 Hayward $2,297,412 $191,451 Stanford University $293,916 $24,493 Hillsborough $322,728 $26,894 Sunnyvale $1,415,052 $117,921 Menlo Park $439,428 $36,619 Westborough WD $130,632 $10,886 Total $21,931,224 $1,827,602

FY 2024-25 Wholesale Water Service
Charges Final Report
FY 2024-2025
San Francisco Public Utilities Commission
April 12, 2024
FY 2024-25 Wholesale Water Service Charges Final Report 1 Table of Contents
Executive Summary ....................................................................................................................................... 2 SFPUC Background .................................................................................................................................... 2 Process & Timeline .................................................................................................................................... 3 SFPUC Proposed Wholesale Fixed Charges ............................................................................................... 5 Methodology ................................................................................................................................................. 8 Recover 1.5% of the Wholesale Revenue Requirement ........................................................................... 8 Meter Equivalent Units of Service ............................................................................................................ 8 Wholesale Customer Impacts ..................................................................................................................... 11 Conclusion ................................................................................................................................................... 11

FY 2024-25 Wholesale Water Service Charges Final Report 2 Executive Summary
SFPUC Background
The San Francisco Public Utilities Commission owns and operates the Hetch Hetchy Regional Water System, serving 2.7 million residents and thousands of businesses in the City and County of San Francisco, Alameda County, San Mateo County, and Santa Clara County. Services are provided via retail operations in the City of San Francisco and through 27 Wholesale Customers1 outside of the City. When setting wholesale water rates, adjusting rate structures, and developing regional water supply reliability plans, the SFPUC coordinates with the Bay Area Water Supply and Conservation Agency (BAWSCA) – a regional agency representing 26 of the SFPUC’s Wholesale Customers, all listed below:

The SFPUC establishes wholesale water rates and rate structures in accordance with the terms of the Water Supply Agreement (WSA) between the City and County of San Francisco (CCSF) and the Wholesale Customers, which was approved on April 28, 2009 by Commission Resolution No. 09-0069, and amended and restated on January 26, 2021 by Commission Resolution No. 21-0009, with subsequent approval by the Wholesale Customers.

Section 6.04.B of the WSA sets forth the requirements for any changes to the structure of wholesale rates:
“If the SFPUC intends to recommend that the Commission adopt one or more changes to the structure of wholesale rates (currently set forth in SFPUC Rate Schedule W-25), it shall prepare and distribute to the Wholesale Customers and BAWSCA a report describing the proposed change(s), the purpose(s) for which it/they are being considered, and the estimated financial effect on individual Wholesale Customers or classes of customers. Wholesale Customers may

1 Cordilleras Mutual Water Company receives wholesale water and pays the same rates as the other 26 Wholesale Customers, but is not a member of BAWSCA or a signatory to the Water Supply Agreement.

Alameda County Water District
California Water Service Company
City of Brisbane
City of Burlingame
City of Daly City
City of East Palo Alto
City of Hayward
City of Menlo Park
City of Millbrae
City of Milpitas
City of Mountain View
City of Palo Alto
City of Redwood City

City of San Bruno
City of San José
City of Santa Clara
City of Sunnyvale
Coastside County Water District
Estero Municipal Improvement District
Guadalupe Valley Municipal Improvement District
Mid-Peninsula Water District
North Coast County Water District
Purissima Hills Water District
Stanford University
Town of Hillsborough
Westborough Water District
FY 2024-25 Wholesale Water Service Charges Final Report 3 submit comments on the report to the SFPUC for sixty (60) days after receiving the report. The SFPUC will consider these comments and, if it determines to recommend that the Commission adopt the change(s), as described in the report or as modified in response to comments, the SFPUC General Manager shall submit a report to the Commission recommending specific change(s) in the rate structure. Copies of the General Manager’s report shall be sent to all Wholesale Customers and BAWSCA at least thirty (30) days prior to the Commission meeting at which the changes will be considered.”
Section 6.04.A of the WSA further provides:
“The Agreement is not intended and shall not be construed to limit the Commission’s right (a) to adjust the structure of the rate schedule applicable to the Wholesale Customers (i.e., the relationship amount the several charges set out therein) or (b) to add, delete, of change the various charges which make up the rate schedule, provided that neither such charges nor the structure of the rate schedule(s) applicable to the Wholesale Customers shall be arbitrary, unreasonable, or unjustly discriminatory as among said customers. The SFPUC will give careful consideration to proposals for changes in the rate schedule made jointly by the Wholesale Customers but, subject to the limitations set out above, shall retain the sole and exclusive right to determine the structure of the rate schedule.”
In accordance with Section 6.04B, the SFPUC prepared an initial draft report (Initial Report) with a proposal to change the monthly service charge component of the wholesale water rate and distributed it to all the Wholesale Customers and BAWSCA on February 2, 2024, enabling a 60-day comment period.

This revised Final Report presents the SFPUC’s recommended changes to the monthly service charge component of the wholesale water rate for FY 2024-25, after considering the comments received from the Wholesale Customers and BAWSCA by the April 2, 2024 deadline. This report was distributed to the Wholesale Customers and BAWSCA, alongside the FY 2024-25 Annual Rate Notice, 30-days prior to the Commission’s wholesale water rate action scheduled to take place on May 14, 2024.

Process & Timeline
In late summer of 2023, the SFPUC Water Supply and Treatment Division initiated plans to update the Wholesale Customers’ meters and equipment in FY 2023-24 and subsequent fiscal years. This update would include the replacement of existing meters, in some cases, with new meter types and sizes that were not accounted for in the existing wholesale monthly service charges (SFPUC Rate Schedule W-25).

To address this update, SFPUC staff needed to develop new charges and began a review of the existing wholesale fixed charges. Staff discovered that the monthly service charge had not changed since at least Fiscal Year (FY) 2009-10. Since they had never changed, the percentage of the Wholesale Revenue Requirement (WRR)2 collected by the monthly service charges had steadily declined from 3.5% in FY

2 Wholesale Revenue Requirement, as defined in the Water Supply Agreement, represents the Wholesale Customers’ collective share of expenses incurred by the SFPUC in delivering water to them.

FY 2024-25 Wholesale Water Service Charges Final Report 4 2009-10 to 1.5% in FY 2021-22.3 Furthermore, the current monthly meter charges did not follow a clear methodology, and there was no readily available documentation on how they had been developed.

With a pressing deadline to adopt rates by May 2023, the SFPUC did not have adequate time to conduct and complete a formal study to re-evaluate the wholesale monthly service charge schedule. Instead, SFPUC staff developed a place-holder rate for the one-meter size and technology that was expected to be installed in FY 2023-24 and which did not have an applicable monthly service charge. The FY 2023-24 charge for the 10” Electronic Meter4 was based on the proportional scale of the existing monthly meter charges for the 8” and 12” meters in the same category. The SFPUC notified the Wholesale Customers and BAWSCA of these changes in the April 6, 2023 FY 2023-24 Annual Rate Notice and noted that the SFPUC planned to revisit the issue in the future following the process in WSA Section 6.04.

In September 2023, SFPUC staff began developing the Initial Report. SFPUC staff reviewed industry manuals on service charges and conducted a preliminary survey of alternative fixed charge structures to inform the agency of the most used and industry-accepted methods. This survey found that many California wholesale water suppliers utilized fixed charges to collect a diverse range of costs and distributed those costs through various mediums, both including meter charges as well as other allocation determinants. However, the SFPUC acknowledged that large structural changes to the rate design must be conducted through a comprehensive rate study, with the engagement and coordination of the Wholesale Customers and BAWSCA representatives. These insights ultimately led the SFPUC to forego any structural changes to the fixed charge’s rate design and to propose updated fee amounts which maintained the current structure – based on meter size and type – following methodologies recommended by the American Water Works Association’s (AWWA) M-1 Manual: Principles of Water Rates, Fees, and Charges.

The Initial Report presented the monthly service charge proposal, defined the purposes for these proposed changes, calculated wholesale customer impact estimates, and included the preliminary research conducted by SFPUC staff as background. The report was distributed to BAWSCA and the Wholesale Customers on February 2, 2024.

During the 60-day comment period, the SFPPUC received a total of 14 submitted letters and materials commenting on the initial proposal and Initial Report. BAWSCA and Wholesale Customers’ representatives also shared their feedback with SFPUC staff through various meetings and email correspondence. The SFPUC greatly appreciates the comments, edits, and suggestions provided by BAWSCA and the Wholesale Customers, which informed the SFPUC’s alternative monthly service charges proposal, and this revised Final Report. On April 12, 2024, the SFPUC issued a response letter to BAWSCA and the Wholesale Customers addressing their submitted comments, alongside the annual rate notice and this revised Final Report. The following sections summarizes the SFPUC’s revised methodology and proposals.

3 At the time the Study began, FY 2021-22 was the most recent year of the WRR calculation. 4 In the AWWA M6 Manual, these meters are labeled as “Electromagnetic/Ultrasonic Meters.” The SFPUC will refer to these types of meters as “Electronic” Meters to capture both categories.

FY 2024-25 Wholesale Water Service Charges Final Report 5 SFPUC Proposed Wholesale Fixed Charges
The SFPUC is not proposing structural rate design changes to the Wholesale Customers’ monthly service charges, as further consideration and research are needed to alter the existing fixed charge structure.

However, the SFPUC is proposing to update the existing monthly service charges to an equitable distribution of the costs collected via the monthly service charges across the different meter sizes and technologies.

To limit rate impacts and minimize shifts in cost between Wholesale Customer, the SFPUC is proposing to (1) maintain collecting 1.5% of the FY 2024-25 WRR from the fixed charges and (2) allocate those costs across meter sizes based on American Water Works Association’s standardized meter capacities.

This proposal does not alter the total WRR collected or deviate from the cost allocation methodology set by Article V of the WSA.

Table 1 summarizes the proposed FY 2024-25 monthly service charges and includes rates for current meters, planned meters, and all potential future meters that the SFPUC has contracts in place to purchase. The Crest Meter category that is currently present in Schedule W-25 has been removed because there are no crest meters in service today or planned to be installed, as have all meter sizes within the remaining technology types which are no longer in use. The SFPUC has also altered the meter type names to clearly label the meter types referenced for their meter capacities.

Table 1: Proposed FY 2024-25 Monthly Service Charges
Meter Size Turbine Meters
(C-701, Class II)
Electronic Meters
(C-715, Class II)
Displacement Meters
(C-700, Class II)
2" - - $143
3" $391 $314 -
4" $674 $539 -
6" $1,438 $719 -
8" $2,517 $1,798 -
10" $3,775 $2,697 -
12" - $3,596 -
16" $7,012 - -
Generally, these changes cause the monthly service charges to increase for Wholesale Customers with smaller meters and decrease for Wholesale Customers with larger meters (Table 2). The primary reason for this outcome is the SFPUC’s use of the latest meter capacity ratios to proportionally allocate costs across each meters type. Figure 1 and Figure 2 below demonstrate how the proposed charges follow a much more predictable and linear escalation across each meter type. The shifts in costs between Wholesale Customers with small versus large meters is, however, less substantial than the shift in costs in the SFPUC’s initial proposal due to a simplification of the cost allocation methodology used to solely the AWWA capacities for each meter. For a detailed impact analysis, please refer to the “Wholesale Customer Impacts” Section and the attached Appendix A.

FY 2024-25 Wholesale Water Service Charges Final Report 6 Table 2: Proposed FY 2024-25 Wholesale Monthly Service, Change from Current Charges Type Size
Current
FYE 2024
Charges
Proposed
FYE 2025
Charges
$ Change
(Proposed FYE 2025
vs FYE 2024)
Displacement 2" $79 $143 $64
Electronic 3" - $314 New Rate
Turbine 3" - $391 New Rate
Electronic 4" - $539 New Rate
Turbine 4" $577 $674 $97
Electronic 6" - $719 New Rate
Turbine 6" $1,256 $1,438 $182
Electronic 8" $2,265 $1,798 ($467)
Turbine 8" $1,875 $2,517 $642
Electronic 10" $3,769 $2,697 ($1,072)
Electronic 12" $5,159 $3,596 ($1,563)
Turbine 10" $3,391 $3,775 $384
Turbine 16" $7,215 $7,012 ($203)

Figure 1: Current FY 2023-24 Monthly Meter Charge by Meter Capacity

$7,215
$11
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
0 1000 2000 3000 4000 5000 6000 7000 8000
Meter Charge
Meter Capacity (gpm)
Meter Capacity vs Current Meter Charge
FYE 2024 Turbine Meter Charge
FYE 2024 Electronic Meter Charge
FYE 2024 Displacement Meter Charge
FY 2024-25 Wholesale Water Service Charges Final Report 7 Figure 2: Proposed FY 2024-25 Monthly Meter Charge by Meter Capacity

$7,012
$143
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
0 1000 2000 3000 4000 5000 6000 7000 8000
Meter Charge
Meter Capacity (gpm)
Meter Capacity vs Proposed Meter Charge
FYE 2025 Turbine Meter Charge
FYE 2025 Electronic Meter Charge
FYE 2025 Displacement Meter Charge
FY 2024-25 Wholesale Water Service Charges Final Report 8 Methodology
To develop the proposed rates, staff first determined the total fixed charge revenue collected by distributing 1.5% of the WRR to the monthly service charge and then allocated those costs proportional to each meter’s maximum capacity.

Recover 1.5% of the Wholesale Revenue Requirement
In accordance with the WSA, the SFPUC estimates the annual WRR to update wholesale water rates for the following fiscal year. The WRR is the Wholesale Customers’ collective share of expenses incurred by the SFPUC in delivering water to them and is determined each year under the terms of the WSA. In general, the WSA requires the Wholesale Customers to pay operating expenses and capital costs associated with regional assets, which serve both the Wholesale Customers and the Retail Customers of the SFPUC, based on proportional annual water use. The WSA allows the SFPUC to recover a portion of net annual debt service for new regional assets and to recover the wholesale share of revenue-funded regional capital costs. The WSA also authorizes the SFPUC to collect the Wholesale Customers’ contribution to meet debt service coverage reserve requirements. Finally, the WSA allows for the wholesale rate to include an appropriate adjustment for the Balancing Account, which is used to adjust the WRR based on revenues recovered and actual operating costs in the previous fiscal year.

The calculated FY 2024-25 WRR, which includes the Wholesale Customers’ proportionate share of operating expenses, debt service on bonds sold to construct or acquire new regional assets, and revenue funding for new cash-funded regional assets, totals to $334.3 million (Table 3). To minimize impacts on the Wholesale Customers, staff decided to maintain the collection of 1.5% of the WRR through the monthly service charges. To calculate the total revenue collected by the monthly service charges, staff multiplied the calculated FY 2024-25 WRR by 1.5%, amounting to a total of $5.0 million.

Table 3: Share of WRR Collected via Monthly Service Charges Actual Proposed
FY 2021-22 FY 2024-25
Wholesale Revenue Requirement $289,356,105 $334,347,824 Fixed Service Charges $4,313,683 $5,015,217
% of WRR 1.5% 1.5%

Meter Equivalent Units of Service
Staff used meter capacity ratios to apportion the combined $5,015,217 monthly service charge allocation by meter size. The equivalent meters in this study are based on the AWWA-rated safe operating capacities listed in the AWWA’s “M1 Principles of Rates, Fees and Charges”, 7th Edition and AWWA’s 2018 Addendum to “M6 Water Meters – Selection, Installation, Testing, and Maintenance, Fifth Edition.” Table 4 shows the meter types and sizes, the total number of meters, and the calculated equivalent meter units of service for existing meters.

FY 2024-25 Wholesale Water Service Charges Final Report 9 Table 4: Wholesale Customer Meter Equivalent Ratios5
Wholesale Customer’s Meter Equivalent Ratios
Reference capacity: 1600 gallons per minute (gpm)
Type Size Total Meters Meter Capacity Meter Equivalent Total Meter Equivalents (A) (B) (C) (D) (E) = D ÷ 1,600 gpm (F) = C x E
Displacement 2" 8 160 0.10 0.80
Electronic* 3" 0 350 0.22 0.00
Turbine* 3” 0 435 0.27 0.00
Electronic* 4" 0 600 0.38 0.00
Turbine 4" 40 750 0.47 18.75
Electronic* 6" 0 800 0.50 0.00
Turbine 6" 75 1600 1.00 75.00
Electronic* 8" 0 2000 1.25 0.00
Turbine 8" 37 2800 1.75 64.75
Electronic 10" 1 3000 1.88 1.88
Electronic* 12" 0 4000 2.50 0.00
Turbine 10" 40 4200 2.63 105.00
Turbine 16" 5 7800 4.88 24.38
Total 206 290.55

Staff standardized meter capacity ratios by dividing meter capacity by 1,600 gallons per minute (gpm), which is the safe maximum flow through a Turbine 6-inch meter, the most common meter type and size used for the Wholesale Customers. The meter capacity ratios are then multiplied by the number of water meters at each meter size (Column C x Column E) to determine the total meter equivalent units (Column F).6
Using the total meter equivalents unit of service calculated in Table 4, staff allocated the total monthly service charge revenue to each meter type and size (Table 5). To calculate this, the total fixed charge revenue is first divided by the total meter equivalents amongst all the Wholesale Customers to develop a base allocation.

𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐵𝐵𝐴𝐴𝑖𝑖𝐴𝐴𝑜𝑜 = 𝑇𝑇𝐴𝐴𝐴𝐴𝐵𝐵𝐴𝐴 𝑀𝑀𝐴𝐴𝑜𝑜𝐴𝐴ℎ𝐴𝐴𝑙𝑙 𝑆𝑆𝐵𝐵𝑆𝑆𝑆𝑆𝑖𝑖𝐴𝐴𝐵𝐵 𝐶𝐶ℎ𝐵𝐵𝑆𝑆𝑎𝑎𝐵𝐵 𝑅𝑅𝐵𝐵𝑆𝑆𝐵𝐵𝑜𝑜𝑅𝑅𝐵𝐵 𝑇𝑇𝐴𝐴𝐴𝐴𝐵𝐵𝐴𝐴 𝑀𝑀𝐵𝐵𝐴𝐴𝐵𝐵𝑆𝑆 𝐸𝐸𝐸𝐸𝑅𝑅𝑖𝑖𝑆𝑆𝐵𝐵𝐴𝐴𝐵𝐵𝑜𝑜𝐴𝐴𝐵𝐵 = $5,015,217 290.55 = $17,261

5 For meters marked with *, while no meters of this size and type are currently installed, they are expected in the next few years as part of the SFPUC’s ongoing meter replacement work or are possible meters the SFPUC can purchase. Staff developed proposed fixed charges for these meters to ensure charges will be available if they are installed.
6 The total meters reported represent the latest information on the Wholesale Customers' active meters. This table is subject to change and reliant on ongoing work in the Meter Recalibration and Replacement Project FY 2024-25 Wholesale Water Service Charges Final Report 10 Staff multiplied this base allocation by each individual meter and size combination’s meter equivalent ratio. To illustrate, the equation below shows the calculation for a 2” Displacement Meter as an example:

𝑇𝑇𝐴𝐴𝐴𝐴𝐵𝐵𝐴𝐴 𝐴𝐴𝑜𝑜𝑜𝑜𝑅𝑅𝐵𝐵𝐴𝐴 𝐶𝐶ℎ𝐵𝐵𝑆𝑆𝑎𝑎𝐵𝐵 = 𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐵𝐵𝐴𝐴𝑖𝑖𝐴𝐴𝑜𝑜 × 𝑀𝑀𝐵𝐵𝐴𝐴𝐵𝐵𝑆𝑆 𝐸𝐸𝐸𝐸𝑅𝑅𝑖𝑖𝑆𝑆𝐵𝐵𝐴𝐴𝐵𝐵𝑜𝑜𝐴𝐴𝐵𝐵 = $17,261 × 0.1 = $1,726 This meter charge is then annualized into a monthly charge:
2” 𝐷𝐷𝑖𝑖𝐵𝐵𝐷𝐷𝐴𝐴𝐵𝐵𝐴𝐴𝐵𝐵𝐷𝐷𝐵𝐵𝑜𝑜𝐴𝐴 𝑀𝑀𝐵𝐵𝐴𝐴𝐵𝐵𝑆𝑆′𝐵𝐵 𝑀𝑀𝐴𝐴𝑜𝑜𝐴𝐴ℎ𝐴𝐴𝑙𝑙 𝑆𝑆𝐵𝐵𝑆𝑆𝑆𝑆𝑖𝑖𝐴𝐴𝐵𝐵 𝐶𝐶ℎ𝐵𝐵𝑆𝑆𝑎𝑎𝐵𝐵 = $1,726 12 𝐷𝐷𝐴𝐴𝑜𝑜𝐴𝐴ℎ𝐵𝐵 = $143
Table 5: Proposed Monthly Service Charge Calculation for FY 2024-25 FY 2025 Wholesale Fixed Charge Calculation
Total Fixed Charge Revenue: $5,015,217
$ Meter Equivalent: $17,261
Type Size Meter
Equivalent
Total Annual
Charge
Proposed Monthly
Charge
(A) (B) (C) (D) = C x $17,261 (E) = D ÷ 12
Displacement 2" 0.10 $1,726.11 $143
Electronic* 3" 0.22 $3,775.87 $314
Turbine* 3” 0.27 $4,692.87 $391
Electronic* 4" 0.38 $6,472.92 $539
Turbine 4" 0.47 $8,091.15 $674
Electronic 6" 0.50 $8,630.56 $719
Turbine 6" 1.00 $17,261.12 $1,438
Electronic* 8" 1.25 $21,576.40 $1,798
Turbine 8" 1.75 $30,206.95 $2,517
Electronic 10" 1.88 $32,364.59 $2,697
Electronic* 12" 2.50 $43,152.79 $3,596
Turbine 10" 2.63 $45,310.43 $3,775
Turbine 16" 4.88 $84,147.94 $7,012

FY 2024-25 Wholesale Water Service Charges Final Report 11 Wholesale Customer Impacts
As discussed above, the current monthly service charges have not been updated since at least the effective date of the WSA, at the start of FY 2009-10, and staff does not have sufficient documentation on the source of the existing ratios. Staff recommends aligning the ratios to the industry standard capacity values shown above, which are scaled appropriately for the meters currently installed for the Wholesale Customers. Appendix A of this report specifies the estimated annual financial effect of the proposed monthly service charge update on each Wholesale Customer.

Overall, the estimated proposed monthly service charges result in increased costs for Wholesale Customers with small-capacity meters and decreased costs for Wholesale Customers with large-capacity meters. While some of the percentage increases and decreases shown in Appendix A are large, it is important to note that the monthly service charges continue to represent only a small percentage of the total costs for each Wholesale Customer. In the impact analysis, we have included a column in the table below that roughly estimates the percentage of the impacts of the proposed fixed charges on each customer’s total monthly bill, assuming FY 2022-23 total volumetric usage for each customer and the proposed FY 2024-25 wholesale rate of $5.67/CCF.7 To review the proposed rate update’s impact on each individual Wholesale Customer, refer to the attached Appendix A.

Conclusion
The proposal presented in this Final Report updates the methodology for calculating the monthly service charge component of the SFPUC’s wholesale water rates (W-25) to better reflect current industry cost allocation principles. This proposal is based on more accurate relative meter capacities and continues to keep the total percentage of the WRR collected from the monthly service charge at 1.5%. Staff will continue to review this area of rate design in future fiscal years to determine if additional changes should be made.

In accordance with Section 6.04.B of the WSA, the SFPUC provided this revised Final Report to the Wholesale Customers and BAWSCA on April 12, 2024, alongside the FY 2024-25 Annual Rate Notice.

SFPUC staff will submit this report to the Commission and presents its recommendations for consideration and adoption at the May 14, 2024 Commission meeting.

7 Because the total Wholesale Revenue Requirement is a set value, which this proposal does not increase, th e increased dollars collected via the service charges (to maintain the fixed 1.5% of the WRR) are offset via a reduction in the volumetric rate. The new service charges collect $687,674 in additional revenue compared to the current charges. This results in a $0.011/ccf reduction in the wholesale volumetric rate vs. what otherwise would have been effective.
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/95/59 /97 /96/75/61/60/68/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/61 /96/60/97/71/68/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255 /33/44/49/40/35/51/42/70/60/95/61 /70 /74/96/99/61/61/68/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/70 /98/96/98/75/61/68/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255/i255 Wholesale
Customer
Meter
Type
Meter
Size
Total
Meters
FY 2024 Current
Fixed Charge
FY 2025 Proposed
Fixed Charges
FYE 2024 Current
Volumetric Charge
FYE 2025 Proposed
Volumetric Charges
Fixed Charge
Impact ($)
Fixed Charge
Impact (%)
Total Bill
Impact ($)
Total Bill
Impact (%)
Purissima Hills Water District 3,029$ 3,865$ 354,750$ 386,071$ 836$ 27.6% 32,157$ 9.0% Turbine 4" 2 1,154 $ 1,348$
Turbine 8" 1 1,875$ 2,517$
Redwood City 26,856$ 25,795$ 1,689,374$ 1,838,532$ (1,061)$ -4.0% 148,097$ 8.6% Turbine 4" 6 2,885 $ 4,044$
Turbine 6" 9 10,048$ 12,942$
Turbine 8" 2 3,750$ 5,034$
Turbine 10" 1 10,173$ 3,775$
San Bruno 12,760$ 14,515$ 249,411$ 271,431$ 1,755$ 13.8% 23,776$ 9.1% Turbine 4" 1 577 $ 674$
Turbine 6" 7 8,792$ 10,066$
Turbine 10" 1 3,391$ 3,775$
San Jose 10,173$ 11,325$ 863,800$ 940,067$ 1,152$ 11.3% 77,418$ 8.9% Turbine 10" 3 10,173 $ 11,325$
Santa Clara 6,782$ 7,550$ 675,549$ 735,195$ 768$ 11.3% 60,413$ 8.9% Turbine 10" 2 6,782 $ 7,550$
Stanford University 9,913$ 11,505$ 312,372$ 339,952$ 1,592$ 16.1% 29,172$ 9.1% Turbine 6" 1 1,256 $ 1,438$
Turbine 8" 1 1,875$ 2,517$
Turbine 10" 2 6,782$ 7,550$
Sunnyvale 22,939$ 27,685$ 1,896,456$ 2,063,897$ 4,746$ 20.7% 172,187$ 9.0% Turbine 8" 5 9,375 $ 12,585$
Turbine 10" 4 13,564$ 15,100$
Town of Hillsborough 12,975$ 15,279$ 506,748$ 551,490$ 2,304$ 17.8% 47,046$ 9.1% Turbine 4" 4 2,308 $ 2,696$
Turbine 6" 7 8,792$ 10,066$
Turbine 8" 1 1,875$ 2,517$
Westborough Water District 1,256$ 1,438$ 133,900$ 145,722$ 182$ 14.5% 12,004$ 8.9% Turbine 6" 1 1,256 $ 1,438$
Monthly Total 371,213$ 417,840$ 27,363,962$ 29,779,974$ 46,627$ 12.6% 2,462,639$ 8.9% Annual Total 4,454,556 $ 5,014,080$ 328,367,543$ 357,359,687$ 559,524 $ 12.6% 29,551,668$ 8.9% 525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488
April 12, 2024
Nicole Sandkulla, CEO/General Manager
Bay Area Water Supply and Conservation
155 Bovet Road, Suite 650
San Mateo, CA 94402
Dear BAWSCA and Wholesale Customers,
On February 2nd, 2024, the San Francisco Public Utilities Commission (SFPUC) distributed the “Wholesale Water Fixed Charge Study” (Initial Report) to the Wholesale Customers and the Bay Area Water Supply and Conservation Agency (BAWSCA), detailing the SFPUC’s proposed adjustments to the monthly service charge component of the wholesale water rates in the SFPUC Rate Schedule W-25. In accordance with Section 6.04.B of the Water Supply Agreement (WSA), the Wholesale Customers and BAWSCA had 60 days to submit comments on the SFPUC’s proposals.

The SFPUC has prepared this letter and its attachments in response to the 14 submitted letters and materials it received by the April 2, 2024, review period deadline. Most concerns raised by BAWSCA and the Wholesale Customers pertain to (1) the process and timeline of the study, (2) the purpose of a fixed charge, and (3) the proposed monthly service charge’s cost allocation methodology. We deeply appreciate the insights shared by the Wholesale Customers and BAWSCA. Your feedback has played a crucial role in developing our revised monthly service charge proposals and associated report, which is distributed alongside this response letter and the FY 2024-25 Annual Wholesale Rate Notice.

Based on your feedback, the SFPUC’s revised proposal retains 1.5% of the total Wholesale Revenue Requirement through the monthly service charges, but eliminates the customer service charge component of the cost allocation that was included in the original proposal. If adopted by the Commission, these recommended charges will proportionally distribute costs associated with meters among the Wholesale Customers based solely on meter capacity. This change 1) ensures the proposed monthly service charges for all meter sizes and technologies are based on quantifiable, industry-standard metrics to ensure fair allocations among the Wholesale Customers, while 2) minimizing as much as possible the changes from the current rate structure (Table 2).

Services of the San Francisco Public Utilities Commission OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.

Table 1: Proposed FYE 2025 Wholesale Monthly Service Charge1 Meter Size Turbine Meters
(C-701, Class II)
Electronic Meters
(C-715, Class II)
Displacement Meters
(C-700, Class II)
2" - - $143
3" $391 $314 -
4" $674 $539 -
6" $1,438 $719 -
8" $2,517 $1,798 -
10" $3,775 $2,697 -
12" - $3,596 -
16" $7,012 - -

Table 2: Revised Proposed FY 2024-25 Monthly Service Charges2

1 As recommended by the SFPUC Water Supply and Treatment Division, the “Disc/Compound Meters” category will be renamed to “Displacement Meters,” as there are no compound meters currently installed, and it is more common to refer to a disc meter as a displacement meter.

The SFPUC has also updated the meter type labels to clearly distinguish the specific AWWA standardized meter and class referenced. Electronic Meters are labeled as “Electromagnetic/Ultrasonic Meters” in the AWWA M6 Manual, but will be referred to as Electronic Meters to capture either category.

2 *Additional meter sizes and types added to schedule to account for any future potential meters that are not currently or planned to be installed, but which the SFPUC has contracts to purchase and install if needed.

Type Size

CURRENT
FYE 2024
Charges

ORIGINAL
Proposed FYE
2025 Charges

REVISED
Proposed FYE
2025 Charges
$ Change
(Original FYE
2025 vs Current
FYE 2024)
$ Change
(Revised FYE
2025 vs Current
FYE 2024)
Displacement 2" $79 $480 $143 $401 $64
Electronic 3" - Not Included* $314 New Rate New Rate
Turbine 3" - Not Included* $391 New Rate New Rate
Electronic 4" - $789 $539 New Rate New Rate
Turbine 4" $577 $894 $674 $317 $97
Electronic 6" - $703 $719 New Rate New Rate
Turbine 6" $1,256 $1,490 $1,438 $234 $182
Electronic 8" $2,265 $1,771 $1,798 ($494) ($467)
Turbine 8" $1,875 $2,333 $2,517 $458 $642
Electronic 10" $3,769 $2,473 $2,697 ($1,296) ($1,072)
Electronic 12" $5,159 Not Included* $3,596 N/A ($1,563) Turbine 10" $3,391 $3,317 $3,775 ($74) $384
Turbine 16" $7,215 $5,843 $7,012 ($1,372) ($203)
2 Furthermore, the SFPUC has simplified the Wholesale Water Fixed Charge Study by removing the survey of other wholesale water suppliers’ fixed charge structures and all discussion regarding cost allocation methodologies. To ensure that there is sufficient time for the SFPUC to complete additional research on rate structure design, evaluate policy and equity considerations of further changes to the wholesale rates structure, and for collaborative discussion with the Wholesale Customers, the SFPUC will not initiate any proposals to further alter the rate structure until FY 2025-26 at the earliest. If the SFPUC decides to revisit this topic – especially if we expect more substantive changes to the rate structure – we will both follow the terms of the WSA and seek additional collaboration and engagement from the Wholesale Customers and BAWSCA to ensure sufficient time for input on any proposals.

The following summarizes the SFPUC’s response to the main comments it received on the initial proposal and Initial Report. In addition, Appendix A includes an index of all comment letters and materials received, which cross-references to the Main Comment Responses below or contains a direct response to the comments received from individual customers.

Main Comment Response 1. The SFPUC’s Process and Timeline Many comments focused on the process and timeframe of the Initial Report and asked for more time or a delay into the process. BAWSCA and the Wholesale Customers noted that “the complex methodology used by the SFPUC requires more than 60 days to review” and have requested that “the result is collaborative, appropriate and satisfactory to Wholesale Customers, and fully consistent with the intent of the WSA.”
The SFPUC followed the procedural requirements set forth in the WSA for any proposed changes to the rate structure and its various charges. Section 6.04.B of the WSA, specifically, provides that the Wholesale Customers shall have 60 days to submit comments after receiving a report that the SFPUC prepares describing proposed changes to the rate structure or its various charges. Section 6.04.A of the WSA provides that “[t]he SFPUC will give careful consideration to proposals for changes made jointly by the Wholesale Customers but, subject to the limitations set out above, shall retain the sole and exclusive right to determine the structure of the rate schedule.”
The SFPUC acknowledges that active engagement and collaboration with BAWSCA and the Wholesale Customers is an essential aspect of setting fair and equitable Wholesale water rates.

We want to assure the Wholesale Customers that the SFPUC has actively communicated and collaborated with BAWSCA through various communications and verbal discussions in advance of and following the distribution of the report, as detailed below. The SFPUC has also modified its proposal in response to the helpful feedback it received from BAWSCA and the Wholesale Customers, and it will continue to actively communicate and collaborate with BAWSCA and the Wholesale Customers on its revised proposal and on any future adjustments to the structure of the rate schedule or addition, deletion, or change to the various charges that make up the rate schedule.
• On April 6, 2023, the SFPUC sent its annual written notice of the proposed FYE 2023-24 Wholesale Water Rates to BAWSCA and the Wholesale Customers, in accordance with WSA Section 6.03A. Within this notice, the SFPUC proposed limited updates to the 3 monthly service charges within Schedule W-25 and notified the Wholesale Customers and BAWSCA that the SFPUC was planning to consider further changes to the structure and amount of the monthly meter charges:
“Monthly Meter Charges
As part of the ongoing wholesale meter calibration and replacement project, new meter technologies and sizes are planned to replace certain wholesale meters. To ensure there are valid monthly service charges for all meters planned to be installed during FY 2023-24, Schedule W-25 has renamed the column “Magnetic Meters” to “Electronic Meters” to capture the broader technology, and added a proportional charge for the 10” electronic meter size based on the relative pricing of the new meters and the existing monthly meter charges for the 8” and 12” meters in the same category.

At this time, the SFPUC is not updating the rate structure or changing any of the existing monthly meter charges. However, with changes to meters upcoming, we expect to revisit this issue in the coming years following the process outlined in WSA Section 6.04.B to consider changes to the structure and amounts of the monthly meter charges.” FY 2023-24 Wholesale Rate Notice Letter
• In accordance with Section 6.04B, the SFPUC prepared the “Wholesale Water Fixed Charge Study Report” to describe the SFPUC’s proposed changes to the monthly service charges, the purpose of its proposed changes, and the impact on individual Wholesale Customers. In September 2023, the SFPUC verbally communicated to BAWSCA representatives that the SFPUC was preparing a “Wholesale Water Fixed Charge Study Report” for FY 2024-25 and offered to meet with BAWSCA to address any preliminary concerns.
• On February 2, 2024, the SFPUC distributed the “Wholesale Water Fixed Charge Study” to the Wholesale Customers and BAWSCA, effectively opening the 60-day review period under WSA Section 6.04B.
• Following issuance, the SFPUC and BAWSCA met to discuss initial concerns and questions about the Initial Report and proposals prior to the SFPUC Annual Wholesale Customer Meeting on February 15, 2024. SFPUC staff explained that the fee proposals did not in any way change or deviate from the Wholesale Revenue Requirement’s (WRR) cost allocation methodology, as set forth in the WSA. SFPUC and BAWSCA staff and counsel met several more times during the month of February to discuss various questions and aspects of the Study.
• On February 15, 2024, the SFPUC gave a presentation to BAWSCA and the Wholesale Customers about the initial proposal and answered Wholesale Customers’ questions at the SFPUC Annual Wholesale Customer Meeting.
• In addition to meetings with BAWSCA, SFPUC staff presented the Initial Report at the March 7, 2024 BAWSCA Water Managers Meeting and addressed Wholesale Customers’ questions. SFPUC staff encouraged submission of edits, comments, and suggestions to the Study for consideration, as well as offered to meet with individual 4 Wholesale Customers. The SFPUC also provided BAWSCA with copies of the study’s calculation models and further details on the methodology on March 8, 2024. • During the month of March, SFPUC staff met with Purissima Hills Water District, Cordilleras Mutual Company, and BAWSCA to discuss questions and concerns. During meetings with BAWSCA, SFPUC staff reviewed and discussed BAWSCA’s alternative charges for 4” electronic meter, 6” electronic meter, and 16” electronic meter, relative to 8” and 10” electronic and turbine meters (The SFPUC’s response to this proposal can be found in Appendix A); shared with BAWSCA representatives a revised proposal based on comments and concerns received; and met a second time to further collaborate on the proposed adjusted charges and revised report.
• On April 2, 2024, the 60-day comment period ended; a summary of the letters and materials received during the 60-day review period is contained in Appendix A. • In advance of the April 4, 2024 BAWSCA Water Managers’ Meeting, the SFPUC shared with the Wholesale Customers their draft revised monthly service charge proposals and each wholesale customer’s monthly bill estimates using the DRAFT revised fixed charges and a FYE 2024 volumetric rate of $5.54. SFPUC staff then attended and presented at the April Water Managers’ Meeting.

While the majority of the above collaboration exceeds the minimum requirements of the WSA, the SFPUC always endeavors to answer questions and solicit feedback from its customers. We appreciate the willingness of the Wholesale Customers’ and BAWSCA’s time to assist our agency in meeting our shared obligations in a timely fashion.

Main Comment Response 2. The Purpose of a Fixed Charge

BAWSCA and the Wholesale Customers had two general comments questioning the purpose of a fixed charge in the context of the wholesale water rates. First, they suggested that the SFPUC’s proposed monthly service charges deviate from the WSA principle of Proportional Annual Use. Second, they suggested that there should not be a monthly service charge component in the wholesale water rates given the existence of the Balancing Account. The SFPUC’s responses to both comments are provided in the sections below.

It’s important to note that completely eliminating the fixed charges, as some commenters proposed, would represent an even greater shift from current cost allocations among the Wholesale Customers than the SFPUC’s proposal. However, the SFPUC also acknowledges that questions about cost allocation among the wholesale customers are important and complex, and should be addressed during a comprehensive rate study analysis that allows sufficient time for customer input and discussion of impacts and policy priorities. As the scope of this specific project is to update the existing monthly service charges, and feedback received has been clear in the goal of making as little change as possible at this time, the SFPUC will revisit these broader concerns with the Wholesale Customers and BAWSCA if a future rate study is planned.

2.1 Comment: The Proposed Monthly Service Charges Deviate from Proportional Annual Use Multiple commenters expressed concern that the proposed Monthly Service Charges “deviate from the key Water Supply Agreement (WSA) principle of allocating costs based on proportional annual use.” While commenters also recognized that “the Monthly Service Charges were carried 5 into the existing WSA from previous agreements,” they nonetheless viewed the SFPUC’s proposal as a deviation from WSA principles requiring greater discussion.

Neither the existing monthly service charges, nor the SFPUC’s initially proposed monthly service charges, deviate from the WSA principle of Proportional Annual Use, as BAWSCA and the Wholesale Customers assert. Proportional Annual Use refers to the shares of deliveries from the Regional Water System used by Retail Customers on the one hand, and the Wholesale Customers collectively on the other hand. It is, accordingly, a principle used to determine how costs incurred by the SFPUC are allocated between Retail Customers on the one hand, and the Wholesale Customers collectively on the other hand. It is not a principle that prescribes how the Wholesale Customers’ collective share of costs is allocated among the individual Wholesale Customers, and the SFPUC’s proposal does not in any way impact the calculation of the WRR under the WSA.

The SFPUC acknowledges the importance of the principle of Proportional Annual Use to the cost allocations of Article 5 of the WSA. However, the principle of Proportional Annual Use does not preclude the use of the existing or initially proposed monthly service charges, or the use of any other fixed charge. First, the existing fixed monthly service charges were in place at the adoption of the WSA, alongside the Article 5.02 principle of Proportional Annual Use. In fact, in FY 2009-10, the first year of the WSA, the SFPUC recovered 3.5% of the WRR through the monthly service charges, more than twice the percentage of the WRR recovered through the monthly service charges today. Fixed charges included in Schedule W-25 for at least the entire life of the WSA do not violate its core principles.

Second, WSA Section 6.04.A states that the SFPUC retains “the sole and exclusive right to determine the structure of the rate schedule,” and that the WSA “is not intended and shall not be construed to limit the Commission’s right (a) to adjust the structure of the rate schedule applicable to the Wholesale Customers (i.e., the relationship among the several charges set out therein) or (b) to add, delete, or change the various charges which make up the rate schedule, provided that neither such charges nor the structure of the rate schedule(s) applicable to the Wholesale Customers shall be arbitrary, unreasonable, or unjustly discriminatory as among said customers.” If the only allowable cost allocation methodology for the wholesale rate structure was a proportional allocation for each customer based on annual CCF water purchases, this section would have no purpose, and there would be a fundamental limitation on the Commission’s rate-setting purview in direct violation of Section 6.04.

The SFPUC assures BAWSCA and the Wholesale Customers that it will not propose for the Commission’s consideration and adoption any charges or adjustments to the rate structure that are “arbitrary, unreasonable or unjustly discriminatory” (WSA Section 6.04.A). The SFPUC has both a contractual and professional interest in ensuring that the rate structure is equitable amongst the wholesale customers and reflects industry best practices. As discussed above, the SFPUC is committed to working closely and collaboratively with BAWSCA and the Wholesale Customers, seeking their input on the rate structures and charges that make sense for the Regional Water System to achieve our mutual policy goals. This discussion should take place within the context of a larger review of rate structures. 6 2.2 Comment: The Existence of a Balancing Account Replaces the Need for Fixed Charges Commenters pointed out that because of the Balancing Account implemented in the WSA, “the SFPUC always collects 100% of the calculated Wholesale Revenue Requirement from BAWSCA member agencies. Even if the fixed cost portion were zero, the SFPUC would still be assured a full cost recovery through annually adjusted volumetric rates.” While we agree that the Balancing Account and fixed charges have some similar features, they do serve different purposes and can work together to achieve policy goals. The Balancing Account only achieves long-run cost recovery. It does not provide the within-year revenue stability that fixed charges do, and it does not provide the certainty in costs and revenues for both the SFPUC and the Wholesale Customers that fixed charges do.

As detailed in WSA Section 6.05, at the close of each fiscal year, a true-up calculation between the WRR and the amount collected from the Wholesale Customers is posted to a Balancing Account. That amount is integrated into the next fiscal year’s wholesale rate setting process as either a positive or negative dollar adjustment to the WRR. This Balancing Account mutually benefits BAWSCA and the SFPUC, as it ensures that the Wholesale Customers are not overcharged the determined Wholesale Revenue Requirement and that the SFPUC does not under-collect it.

The Balancing Account ensures the SFPUC full revenue recovery in the long term; however, it does not protect the SFPUC from revenue volatility caused by fluctuations in volumetric usage in a particular year. This is important because many financial metrics the SFPUC must meet, including Current Debt Service Coverage targets required under its bond indentures and loan requirements, consider only current-year revenues. Fixed charges, like the SFPUC’s monthly service charges that are a component of the wholesale water rate, are a common design in all utility rate structures and serve to provide year by year stability in addition to long-term revenue recovery. Furthermore, in recent years, under- and over-collection of revenue has built up large balances in the Balancing Account. Paying these back can lead to large swings in rates or require the SFPUC to under-collect for several years, which puts additional pressure on its overall financial metrics.

The Balancing Account ultimately serves as an adjustment to the following year’s WRR. It is not a part of the rate structure; it is a part of the rate calculation. In other words, the Balancing Account helps answers the question of “what” amount to bill the Wholesale Customers; it does not pertain to questions of “how” to bill Wholesale Customers. There are advantages to all parties from retaining some type of fixed charges, and the SFPUC looks forward to a more substantive discussion on this topic in the future.

Main Comment Response 3. The Monthly Service Charges’ Cost Allocation Methodology The SFPUC received multiple comments regarding the methodology that staff used to allocate costs for the proposed monthly service charges, particularly its impacts on Wholesale Customers with smaller meters. BAWSCA and Wholesale Customers were especially concerned about the 1.5% recovery rate and the customer service charge component, stating that “setting the fixed price revenue requirement at 1.5% of the projected FY 2024/25 Wholesale Revenue Requirement is arbitrary” and that “the new recommended rate schedule shifts costs 7 from larger to smaller meters because of a newly introduced flat rate called Customer Charge.” Some customers questioned whether allocating costs equally across each meter made sense, and instead suggested an allocation of costs per customer.

We acknowledge that the shifts in costs between larger- and smaller-capacity meters are a change from the current rates and that especially Wholesale Customers facing large percentage increases have reasons for concern. Both the original and revised proposals were structured to reduce this impact, while still ensuring the proposed charges follow a consistent and justifiable methodology. First, the SFPUC set the total annual fixed monthly service charges to recover

1.5% of the total WRR, in alignment with the FY 2021-22 recovery rate. Given the strong interest expressed by the Wholesale Customers in reducing changes from the status quo, selecting the same percentage as the most recent completed fiscal is not arbitrary.

Second, the SFPUC’s final proposal revised the proposed monthly service charges by eliminating the customer service charge component and allocating all fixed charge costs to the meter component. With this change, the only factor driving cost distributions is the capacity threshold of the meter. This achieves two goals: 1) it acknowledges the concern that costs which are equal per customer may not be best allocated in an equivalent per-meter charge, and 2) while the monthly service charges for Wholesale Customers with smaller meters will still increase from their current levels, the shifts in costs across smaller and larger meters are less than in the original proposal. Please refer to the “Wholesale Customer Impact” section of the “Final Wholesale Water Fixed Charge Study” and its attached Appendix A to see the updated impact analysis.

Finally, we agree that which specific costs ought to be allocated to the monthly service charges warrants further investigation, and that any changes from the current levels would be best served by a more comprehensive rate study with robust engagement with BAWSCA and the Wholesale Customers. In the meantime, the SFPUC proposes maintaining the current monthly service charges recover at 1.5% of the WRR. To make it clear that consistency with current practices was the driving factor in this decision, rather than identification of specific costs, the final report will omit all discussion pertaining to allocation methodologies.

Sincerely,

Erin Corvinova,
Financial Planning Director, SFPUC

8 Appendix A

Comments submitted regarding the FYE 2024 Proposed Wholesale Fixed Charge Study Comment ID Commenter Item Submitted Date Received
1 Mid-Peninsula Water District Letter 3/18/2024
2 City of Millbrae Letter 3/21/2024
3 BAWSCA Letter 3/21/2024
4 BAWSCA Edits on Report 3/21/2024
5 BAWSCA Alternative Charges 3/21/2024
6 Westborough Water District Letter 3/26/2024
7 City of Menlo Park Letter 3/27/2024
8 Stanford Letter 3/28/2024
9 Coastside County Water District Letter 3/29/2024
10 Purissima Hills Water District Letter 4/1/2034
11 Cordilleras Mutual Water Company Letter 4/2/2024
12 Cordilleras Mutual Water Company Residents 12 Letters 4/2/2024 13 California Water Service Letter 4/2/2024
14 City of Palo Alto Letter 4/4/2024

9 Comment ID Commenter Comment SFPUC Response

1.1 Mid-Peninsula
Water District
The new recommended rate schedule shifts
costs from larger to smaller meters because
of a newly introduced flat rate called
Customer Charge.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

1.2 Mid-Peninsula
Water District
The complex methodology used by the
SFPUC requires more than 60 days to
review. The SFPUC did not meet with the
Wholesale Customers to discuss the Study
until well into the review period. The Study
does not share the SFPUC’s complete rate
model.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

1.3 Mid-Peninsula
Water District
The other agencies surveyed in the Study do
not have a balancing account mechanism.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

1.4 Mid-Peninsula
Water District
The existing fixed monthly charges are
already a variation from the principle of
Proportional Annual Use. This proposal
further changes the basis on which SFPUC
allocates costs to individual wholesale
customers.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

1.5 Mid-Peninsula
Water District
The Study signals future structural rate
changes and will potentially establish a
precedent for future rate structure changes.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

1.6 Mid-Peninsula
Water District

Request the SFPUC to slow down the
process and ensure that the result is
collaborative, appropriate and satisfactory to
Wholesale Customers, and fully consistent
with the intent of the WSA.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline
10 1.7 Mid-Peninsula
Water District
Supports any forthcoming recommendations
from BAWSCA on how to identify charges for
these limited new meter types/sizes, as a
stopgap.

The SFPUC developed revised rates based
on incorporated feedback from Wholesale
Customers, which can be found summarized
in the response letter and in the updated
report. Prior to these final proposals,
BAWSCA had provided the SFPUC with their
initial alternative suggestion. Their proposal
does not alter any of the existing fees and
adds three "stopgap" rates for the three
unaccounted meters. See SFPUC's
response to BAWSCA's initial "stopgap"
suggestion (Comment ID: 5.1)

2.1 City of Millbrae
The new recommended rate schedule shifts
costs from larger to smaller meters because
of a newly introduced flat rate called
Customer Charge.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

2.2 City of Millbrae The other agencies surveyed in the Study do not have a balancing account mechanism.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

2.3 City of Millbrae
The existing fixed monthly charges are
already a variation from the principle of
Proportional Annual Use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

2.4 City of Millbrae The Study signals future structural rate changes.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

2.5 City of Millbrae
The complex methodology used by the
SFPUC requires more than 60 days to
review. The City of Millbrae requests the
SFPUC to slow down the process and
suspend implementation of the Study to
allow for further review and for collaborative
engagement between Wholesale Customers,
BAWSCA, and the SFPUC
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline
11 3.1 BAWSCA
Requests the SFPUC Suspend
Implementation of Study to allow for further
review.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

3.2 BAWSCA
BAWSCA states that they are concerned that
the proposed monthly service charges are an
explicit deviation from the key Water Supply
Agreement principle of allocating costs
based on proportional annual use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

3.3 BAWSCA
Setting the fixed price revenue requirement
at 1.5% of the projected FY 2024/25
Wholesale Revenue Requirement is
arbitrary.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

3.4 BAWSCA
The proposed changes have caused
BAWSCA to question the appropriateness of
the existing fixed rate component of the
water rates. The SFPUC is assured full
revenue requirement recovery through the
embedded balancing account treatment
within the WSA. The result is that the
magnitude and differences between the
monthly service charge are much more an
issue among the wholesale customers than it
is between the SFPUC and Retail
Customers.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

3.5 BAWSCA
The new Customer Charge introduced within
the rate design is applied to each meter
rather than to each Wholesale Customer
Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

3.6 BAWSCA The impact analysis should include an
impact analysis of the volumetric charge
Noted. Incorporated into the Wholesale
Customer's impact analysis is an estimate of
each Wholesale Customer's volumetric
portion of the bill using our proposed FYE
2025 Volumetric rate and projected FYE
2025 volumes.
12 3.7 BAWSCA
Final version of a mutually agreed Fixed
Charge Study should include additional
explanations.

Noted and incorporated into the Final
Wholesale Water Fixed Charge Study (Final
Report).

3.8 BAWSCA
BAWSCA supports the SFPUC using
extrapolated rates to fill fixed rate gaps for
new meters until new comprehensive rates
can be mutually agreed upon.

See responses to BAWSCA's alternative rate
structure below (Comment ID 5.1) and to the
Final Report for the revised monthly service
charges based on BAWSCA's feedback

4.1 BAWSCA
Though fixed charges are commonly used for
revenue stability with retail rate setting in
particular, fixed charges at just 1.5% of
revenue do not provide revenue stability.

Even so, revenue stability is not needed due
to the Balancing Account treatment
contained in the WSA. Even if the fixed
charges were zero, the SFPUC would still be
assured a full cost recovery through annually
adjusted volumetric rates. The WSA (Section

6.05.B.) provides the SFPUC flexibility in
collecting a balance owed to SF, which could
be applied in the immediately ensuring year
or prorated over multiple years.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

4.2 BAWSCA
BAWSCA views the SFPUC's proposal as a
"structural rate change" because fixed costs
are being shifted from larger to smaller
meters
"Structural change" is not a WSA-defined
term. Structural change, as typically used in
describing rate structures, suggests addition
or subtraction of line items in the tariff
schedule, or basing charges on something
other than the size and type of meter or CCF
volumes, as are currently used. But this is a
semantic difference with no impact.
13 4.3 BAWSCA
The note below the rate table in Schedule W-
25 implies that Customer Service Charge
rates can be added based on the rates in the
table, if a needed rate is not already
included.

This comment pertains to the language in W-
25 surrounding a "battery of meters," which
is outdated and will be removed from the W-

25. Prior to the metering technology that
exists today, large diameter services ( 3”,4”,
6”, 8” ) were metered using a battery of 2”
meters. For example, a 3” service would
have 2-2” meters or a 4” service would have
4-2” meters, and would be billed accordingly.

These types of installations are no longer
used.

4.4 BAWSCA
However, the comparison wholesalers do not
have a Balancing Account treatment, a key
difference from the WSA.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

4.5 BAWSCA
BAWSCA agrees with the opportunity to
explore for alternative rate structures in the
context of the WSA, and would like to enter
collaborative discussions with the SFPUC
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

4.6 BAWSCA
BAWSCA would like to explore further the
costs that are customer specific vs. costs
that are meter specific
Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology
14 4.7 BAWSCA
BAWSCA would like to explore further the
appropriate part of the WRR to be assigned
to the Total Fixed Charge. This is important
because the Total Fixed Charge is the
amount that deviates from proportional
annual use applied evenly to all customers. It
is critically important to BAWSCA that the
methodology in this Study is not precedential
for other rate structure changes within the
WSA, and further for the Total Fixed Cost
allocation to be clearly based on customer
services and metering costs of service that
vary among customers.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

4.8 BAWSCA
Should the distribution of fixed costs across
meters be scaled on meter capacity (a
demand charge factor), or simply based on
the cost of the meter?
It is the SFPUC's recommendation that the
fixed costs be distributed based on meter
capacity per the AWWA guidelines. The cost
of a meter represents the one-time purchase
of the meter; it does not comprehensively
capture the maintenance costs incurred after
purchasing and installing the meter.

4.9 BAWSCA
In Table 6 of the report, the 16" turbine meter
equivalent value should be 5,300/1,600 =

3.31, instead of 4.88. This will change Total
Meter Equivalents marginally.

The maximum water capacity (gpm) for a 16"
turbine meter is incorrect in Table 6 of the
report. Rather than citing 5,300 gpm, it
should reference 7,800 gpm. The meter
equivalent ratio is correct. 7,800/1,600 =

4.88. The SFPUC addressed this comment
with BAWSCA staff at the March 27th
meeting and corrected the error in the Final
Report.
15 4.10 BAWSCA
The Total values in Table 7 are not relevant.

Suggest a more expanded table similar to
the one added at the end of the Study, which
shows integration of rates with revenues.

BAWSCA provided a revised version of
Table 7 to show a full integration of the
customer and meter revenue totals, the
proposed rates, and the resulting revenue
generated by the proposed rates
Agreed. The SFPUC has updated the
"Methodology" section and its associated
tables in the report to showcase each meter
calculation more clearly, as suggested by
BAWSCA in their edits on the report.

4.11 BAWSCA
Even though we do not know the basis for
the existing rates, it is still evident from the
existing cost scaling that the rates follow
meter capacity with rates increasing faster as
the meter size increases
While meters with larger capacity have larger
charges in the current rate schedule, the
existing rates do not follow a proportional
scale based on meter capacity. Please refer
to Figure 1 in the revised report’s “SFPUC
Proposed Wholesale Fixed Charges” section.

Meter capacity may have been one factor in
the existing rates, but we do not have an
explanation for the remaining differences.

4.12 BAWSCA
To be more complete, Table 8 should also
show the benefit of the volumetric rate
component being reduced because of the
increase of $456,189 to the fixed rate
component.

Noted. Addressed in the revised report.
16 5.1 BAWSCA
BAWSCA proposed that the SFPUC keep
the existing W-25 Monthly Fixed Charges
and to add three proportional charges for a
4” electronic meter, a 6” electronic meter,
and a 16” electronic meter relative to the 8”
and 10” electronic and turbine meter
charges. These rates were developed by
applying the average difference between 8"
electronic and 8" turbine meters and 10"
electronic meters and 10" turbine meters to
the 4", 6" and 16" charges.

In FYE 2023-24, the SFPUC developed a
rate for a 10" Electronic meter based on a
similar methodology but acknowledged that
this was not an ideal approach and planned
to revisit these rates. As such, one of the
main drivers for conducting the Wholesale
Water Fixed Charge Study is to ensure we
have equitable and defensible rates that are
based on industry standards. This
methodology calculates rates in relation to
other meter charges and does not consider
the differing meter capacities between meter
types and sizes. We do not support this
proposal as it retains the same issues the
SFPUC identified in FYE 2024 and does not
address the equity concerns identified
between the charges for the existing meter
sizes and types.

6.1 Westborough Water
District
The new recommended rate schedule shifts
costs.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

6.2 Westborough Water
District
The complex methodology used by the
SFPUC requires more time to review.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

6.3 Westborough Water
District
The other agencies surveyed in the Study do
not have a balancing account mechanism.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

6.4 Westborough Water
District
The existing fixed monthly charges are
already a variation from the principle of
Proportional Annual Use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

6.5 Westborough Water
District
The Study signals future structural rate
changes. The WWD has major concerns to
any changes that are not negotiated via
BAWSCA and the WSA.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

6.6 Westborough Water
District
Requests to slow down the process and for
collaborative engagement between
Wholesale Customers, BAWSCA, and the
SFPUC
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline
17 7.1 City of Menlo Park The new recommended rate schedule shifts costs.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

7.2 City of Menlo Park The complex methodology used by the SFPUC requires more time to review.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

7.3 City of Menlo Park The other agencies surveyed in the Study do not have a balancing account mechanism.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

7.4 City of Menlo Park
The existing fixed monthly charges are
already a variation from the principle of
Proportional Annual Use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

7.5 City of Menlo Park The Study signals future structural rate changes.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline 7.6 City of Menlo Park
Requests that the SFPUC hires a third part
financial firm to analyze rates for Wholesale
Customers.

The WSA does not require a third-party
consultant to set wholesale rates, but the
SFPUC appreciates the importance of having
experienced analysts perform this work. The
SFPUC's current rate-setting team includes
multiple staff with over 5-10 years of
experience setting water, power, and sewer
rates for utilities throughout California and
the US. For the current proposed changes,
which have as their explicit goal to remain as
consistent as possible with the current rate
structure and minimize changes, SFPCU
staff are more than qualified to perform the
work. For any future rate studies, we will
consider whether staff augmentation is
appropriate.

7.7 City of Menlo Park
Requests to slow down the process and for
collaborative engagement between
Wholesale Customers, BAWSCA, and the
SFPUC
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline
18 8.1 Stanford University
In this single update, Stanford believes using

1.5% of the Wholesale Revenue
Requirement as the fixed revenue portion,
based on recent proportion of fixed revenue
under the existing fixed charges may be
reasonable for consistency with recent fixed
revenue recovery.

Agreed.

8.2 Stanford University
Requests that any further deviation from that
method and percentage (utilizing 1.5%) of
fixed revenue proportion must undergo a
more detailed rate structure study. Requests
that this and any future rate design or rate
structure study include BAWSCA and the
BAWSCA WMR in developing scope
reviewing progress, and developing and
approving recommended changes
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

9.1 Coastside County
Water District
Supports BAWSCA's request to suspend
implementation of the study until the
BAWSCA team can conduct further analysis
on the implications to the existing WSA.

9.2 Coastside County
Water District
Requests that there be collaborative
engagement between SFPUC and BAWSCA
and the Wholesale Customers in the
development of changes to the rate
structure.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline
19 10.1 Purissima Hills
Water District
Request to apply the customer charge
component per 26 agency rather than on
each meter.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

10.2 Purissima Hills
Water District
The optics of a 36% increase for Purissima
versus larger agencies with larger meters
experiencing decreases in the fixed rate
raises concerning optics. These equity
issues warrant careful consideration and
further analysis
The SFPUC developed revised rates based
on incorporated feedback from Wholesale
Customers, which can be found summarized
in the response letter and in the updated
report. With the new proposed revisions, the
impact on Purissima's monthly fixed charges
decreases from the original proposal's
impact of 36% to 27.6%. Notably, while this
percentage appears high, it represents only a
$836 increase in Purissima's monthly bill,
and because fixed charges remain such a
low percentage of total costs, only a 8.9%
increase in Purissima's estimated annual
charges. See also Main Comment Response

3. The Fixed Charge's Cost Allocation
Methodology.

10.3 Purissima Hills
Water District
Request to delay the implementation of the
study to allow BAWSCA and wholesale
agencies more time to conduct a thorough
analysis and collaborate with SFPUC
Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

11.1 Cordilleras Mutual
Water Company
The fundamental issue underlying the
SFPUC's proposal is whether the fixed
charge is allocated fairly among its
customers commensurate with costs such
customers impose on the system. The
customer service cost component is the most
important cause responsible for the increase
of the fixed charge.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology
20 11.2 Cordilleras Mutual
Water Company
Given the vast difference in size between its
(the SFPUC's) Wholesale Customers, an
equitable distribution of costs does not mean
that each Wholsale Customer pay the same
portion of the total costs of the Water
System, but that each Wholesale Customer
pays a portion of such costs equivalent to the
relative burden it imposes on the Water
System.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

11.3 Cordilleras Mutual
Water Company
The result of SFPUC's rate change are far
from fair. While nearly every Wholesale
Customer except for CMWC will experience
marginal change in its total monthly bill,
ranging from 1.7% increase to a 0.6% price
decrease, the total monthly bill of CMWC will
climb 54.3% as its Fixed Charge skyrockets
five-fold by a whopping 507.6%.

The SFPUC spoke with CMWC and have
incorporated concerns into the revised
proposal. The new impact on CMWC can be
found in more detail in the Final Report's
"Wholesale Customer Impact" section, but,
generally, CMWC's monthly service charge
will now increase from $79 to $143 (roughly
81%, translating into a $64 monthly
increase).

11.4 Cordilleras Mutual
Water Company
While the Meter Charge is not completely
disconnected from allocating based on
usage, the Meter Charge ratios should also
be revised/determine to more closely reflect
usage, rather than utilizing meter capacity
ratio that allocate costs driven by large WCs
with large meters to small WCs with small
meters.

Allocating costs by usage suggests
eliminating the fixed charges entirely and
using only a $/ccf monthly charge. This
would be an even greater change from the
current rates schedule than the SFPUC's
revised proposal. Based on feedback
received, we have set limiting changes to the
rate structure as one of the top priorities for
this year, and will revist alternative proposals
at a later time when there is more opportunity
for discussion.

11.5 Cordilleras Mutual
Water Company
The proposed rate structure also undercuts
the stability and fiscal planning of Wholesale
Customers within the Water System.

We realize that the large increase in
CMWC's bill for next Fiscal Year may be
challenging. For any future changes to rate
structures, we will endeavor to communicate
the potential impact in advance.
21 11.6 Cordilleras Mutual
Water Company
The SFPUC Report incorrectly identifies the
size of the CMWC meters. The CMWC
system has two 5/8" meters supplying water
to its system, rather than the two 2" meters
reported. Additionally the meter box itself is
just an excavated hole int eh ground with the
two boards and a sheet of plywood laid on
top to act as a cover. It's not complex, nor
should this point of connection be considered
a cost driver for a fixed charge.

The SFPUC has confirmed that CMWC has
two 2" displacement meters. The two 5/8"
meters found in this meter box does not
service CMWC, but two separate suburban
retail houses nearby. The SFPUC has
communicated with CMWC to correct this
misunderstanding.

11.7 Cordilleras Mutual
Water Company
The fixed charge increase proposed for
CMWC is in excess of the benefits received
and not proportional to the annual use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

11.8 Cordilleras Mutual
Water Company
There is a reason that the increase shown in
the Report's table is so dramatic for CMWC.

There are no comparable wholesale water
companies. Although CMWC has a
wholesale water agreement, it's not even a
small water company for the purpose of this
report. CMWC is a micro water company the
scale of a single resident customer with two
5/8" residential water meters.

CMWC's individual water sales contract with
SFPUC incorporates by reference the terms
of the Water Supply Agreement and does not
allow for exclusions from or adjustments to
the rates schedules defined under the WSA.

The SFPUC will continue to collaborate with
CMWC to address unique issues related to
their small customer base.
22 11.9 Cordilleras Mutual
Water Company
CMWC requests SFPUC update its rate
structure in accordable with the arguments
and principles set forth by its public
comments and in furtherance of the
ostensible goals of fairness and stability as
expressed by SFPUC in its Reports. More
specifically, the Commission should allocate
the Customer Service Charges consistent
with the allocation of Meter Charges on a
basis closer in proportion to water usage.

Moreover, the Meter Capacity Ratios should
be revised to more equitable distribute the
Fixed Charge so that costs are not inherently
redistributed from large to smaller meters.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge and Main
Comment Response 3. The Fixed Charge's
Cost Allocation Methodology

11.10 Cordilleras Mutual
Water Company
CMWC would entertain a limited exclusion
from the rate structure for its two 5/8" meters
to mitigate disproportionate price increase
relative to the other meters.

The SFPUC will continue to collaborate with
CMWC to address unique issues related to
their small customer base.

12.1 Cordilleras Mutual
Water Company
Residents
Multiple residents cited that due to their
unique position as a very small water district,
covering only 18 homes, the proposed rates'
impacts are disproportionally unfair to their
small neighborhood.

The SFPUC will continue to collaborate with
CMWC to address unique issues related to
their small customer base.
23 12.2
Cordilleras Mutual
Water Company
Residents
Residents provided personal testimonies on
how the original proposed rates create
financial hardships for their households.

The SFPUC spoke with CMWC and has
incorporated changes to its proposal based
on these concerns. The new impact on
CMWC can be found in more detail in the
revised Final Report's Wholesale Customer
Impact section, but generally, CMWC's
monthly service charge will now increase
from $79 to $143 - roughly 81%, translating
into a $64 monthly increase. The percentage
change may seem significant, but this update
would approximately cost each home (out of
18 homes) an additional $3.55 monthly or
$43 annually. Furthermore, with these
revised monthly service charges and the
proposed FYE 2025 volumetric rate, the
average CMWC resident's FYE 2025
monthly bill is estimated to be $91, which is
below the amount paid by nearby SFPUC
suburban retail customers, which is
approximately $164 per month assuming 13
ccf usage per household.

12.3 Cordilleras Mutual
Water Company
Residents
Residents requested that the SFPUC delay
the implementation of these changes until
the SFPUC can evaluate whether these
propose rate increases are equitable for a
very small, water company.

The SFPUC will continue to collaborate with
CMWC to address unique issues related to
their small customer base.
24 13.1 California Water
Service
The new water fixed charge puts undue
charges on specific Retailers compared to all
Retailers in disagreement with the principle
of proportional annual use as described in
the WSA.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

13.2 California Water
Service
Meters costs are shifting from larger to
smaller meters.

Refer to: Main Comment Response 3. The
Fixed Charge's Cost Allocation Methodology

13.3 California Water
Service
There is not enough time to properly analyze
the direct customer impact of these changes
nor is there any real ability to change the
existing meter size, as the meters are based
on existing infrastructure and current system
customer needs.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

13.4 California Water
Service
Though the other agencies reference in the
Wholesale Water Fixed Charge Study
provide valid comparisons for rate structures,
non of the Agencies included have a
Balancing Account structure similar to what
is included in the WSA with the Retailers.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

13.5 California Water
Service
The intent of the Balancing Account in the
current WSA is to capture unforeseen costs
and to provide that 100% of the revenue
requirement is collected from the Wholesale
Customers in a way that makes the SFPUC
whole.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge
25 13.6 California Water
Service
There is also a concern that this change may
introduce additional fee structure changes in
years to come that will not come with a full
rate impact study.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

13.7 California Water
Service
Increasing the current fee component with
the likelihood of continuous yearly changes
to that component does not allow for stable
rate forecasting and will likely result in more
customer rate fluctuation.

At this time, the SFPUC is not committing to
any rate changes for FYE 2026 and
onwards. Tentatively, we plan to retain the
fixed charges at 1.5% of the forecasted
wholesale revenue requirement. This means
that they would rise by the same percentage
increase as the volumetric charges each
year, which should actually allow for more
stable expense forecasting than the current
methodology where only the volumetric
charges rise. That said, we are open to
additional comments on this concept during
future rate-setting processes.

13.8 California Water
Service
Regardless of past knowledge, or
methodologies, if a new structure is required,
a full rate structure study should be
conducted with time to review by the
Wholesale Customers to set a new direction
going forward.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

13.9 California Water
Service
Cal Water proposes that the existing rate
structure be maintained consistent with WSA
principle of proportional annual use, and that
only the costs of the missing meters be
added to the meter charge table.

The SFPUC developed revised rates based
on incorporated feedback from Wholesale
Customers, which can be found summarized
in the response letter and in the updated
report. Prior to these final proposals,
BAWSCA had provided the SFPUC with their
initial alternative suggestion. Their proposal
did not alter any of the existing fees and
adds three "stopgap" rates for three meters.

See SFPUC's response to BAWSCA's initial
"stopgap" suggestion (Comment ID: 5.1)
26 13.10 California Water
Service
Cal Water also proposed that if the SFPUC
feels that the existing rate structure needs to
be adjusted, then it is recommended that a
full rate impact study be performed that
works collaboratively with the Wholesale
Customers, and that provides adequate time
for review.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

14.1 City of Palo Alto
Palo Alto requests that the SFPUC pause
implementation of these fixed charges to
allow a transparent and thorough process.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

14.2 City of Palo Alto
The fixed charges, if they are continued at
all, should adhere to the principle of the 2009
WSA; most importantly, the concept of
allocating costs based on the wholesale
customer's proportional annual use.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

14.3 City of Palo Alto
SFPUC's proposed fixed charges may not be
necessary, since the 2009 WSA guarantees
that SFPUC will receive its Wholesale
Revenue Requirement, regardless of the
amount of the fixed charges.

Refer to: Main Comment Response 2. The
Purpose of a Fixed Charge

14.4 City of Palo Alto
Palo Alto welcomes the opportunity to
collaborate with SFPUC on how best to
identify and allocate fixed costs, in a manner
that allows sufficient time to engage with all
Wholesale Customers and respects the
objectives of the parties' 2009 WSA.

Refer to: Main Comment Response 1. The
SFPUC's Process and Timeline

1 Cordilleras Mutual Water Company receives wholesale water and pays the same rates as the other 26 Wholesale Customers, but is not a member of BAWSCA or a signatory to the Water Supply Agreement.

2 Wholesale Revenue Requirement, as defined in the Water Supply Agreement, represents the Wholesale Customers’ collective share of expenses incurred by the SFPUC in delivering water to them.

This proposal does not alter the total WRR collected or deviate from the cost allocation methodology set by Article V of the WSA.

Figure 1: Current FY 2023-24 Monthly Meter Charge by Meter Capacity

In accordance with Section 6.04.B of the WSA, the SFPUC provided this revised Final Report to the Wholesale Customers and BAWSCA on April 12, 2024, alongside the FY 2024-25 Annual Rate Notice.

SFPUC staff will submit this report to the Commission and presents its recommendations for consideration and adoption at the May 14, 2024 Commission meeting.

SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Effective July 1, 2024
SCHEDULE W-25: Wholesale Use with Long-Term Contract
For service to municipalities, water districts and others who, under long -term contracts, purchase water for resale:

First: A Monthly Service Charge base on the type and size of the meter:

Meter Size Turbine Meters
(C-701, Class II)
Electronic Meters
(C-715, Class II)
Displacement Meters
(C-700, Class II)
2" - - $143
3" $391 $314 -
4" $674 $539 -
6" $1,438 $719 -
8" $2,517 $1,798 -
10" $3,775 $2,697 -
12" - $3,596 -
16" $7,012 - -
Second: A charge for water delivered based on one-month’s meter readings:
$2,469.47 per acre-foot or $5.67 per 100 cu. ft.

Third: An Untreated Wholesale Water Rate Discount Factor for Wholesale Customers receiving untreated water, based on one-month’s meter readings:
($169.88) per acre-foot or ($0.39) per 100 cu. ft.

May 14, 2024
San Francisco
Public Utilities Commission
Fiscal Year 2024
-
2025 Wholesale
Water Rates
2 Agenda
• Drivers of Wholesale Rate Increase
• Fiscal Year 2024-2025 Wholesale Water Rate
• Updated to Monthly Service Charge
• Historic and Projected Wholesale Rates
3 Drivers of Wholesale Rate Increase

1. Retail Water Sales Volumes Still Low
• Drought impact
• Covid-19 recovery

2. Wholesale Water use is beginning to
Rebound

3. Balancing account due to SFPUC is being
paid off

4. Growth in capital spending
4 Water Sales: Actuals and 10-Year
Financial Plan Projections

5 Balancing Account Impact
• Balancing account owed to wholesale was very high in recent years, allowing for lower rates as SFPUC paid it back
• Projecting full pay-back and money owed to retail by the end of this fiscal year
• No balancing account limits ability to smooth rate increases

Updated Monthly Service Charge
• New meter technologies and sizes are planned to
replace certain wholesale meters.
• Needed to update the Monthly Service Charge
Schedule to accommodate gaps in the rates
• New schedule based on updated meter
equivalents using American Water Works
Association meter capacity data
• New rates set to recover 1.5% of Wholesale Rate
Revenue Requirement
6 7
FY 2023-24 Rate Increase: 9.7%
• Continued low retail sales volumes low and assumed
meeting water conservation budgets
• Slight increase in wholesale sales volumes
• Use of Balancing Account and projected to be repaid in FY 2025-26
• Increased Capital Spending
Wholesale Revenue Requirement − Fixed Fee ± Balancing Account Wholesale Volumes
FYE 2025 Rate =
$334.3𝑀𝑀−$5.0M+$25.8𝑀𝑀
129.3 𝑀𝑀𝑀𝑀𝑀𝑀 = $5.67/𝑐𝑐𝑐𝑐𝑐𝑐
FYE 2025 Rate Increase = 6.5%
8 Historic and Projected Wholesale
Rates
Adopted /
Forecasted Rates $ 4.10 $ 4.10 $ 4.10 $ 4.10 $ 4.10 $ 4.75 $5.21 $ 5.67 $ 5.67 $ 5.86 $ 6.30 $ 6.64 Rate Change 9.3% 0.0% 0.0% 0.0% 0.0% 15.9% 9.7% 8.8% 0.0% 3.4% 7.5% 5.4% Rate w/o
Balancing
Account
$ 3.79 $ 4.32 $ 3.85 $ 4.14 $ 4.56 $ 5.34 $5.53 $ 5.26 $ 5.62 $ 5.86 $ 6.29 $ 6.64

Questions and Discussion
Thank you!
9

CleanPowerSF Sfpuc CommissionMay 14, 2024

CleanPowerSF Sfpuc Commission
May 14, 2024