Utility Rates Workshop
January 13, 2022
1. Performing periodic cost-of-service rate analyses is a common best practice for local governments
a. Assess cost of service to provide essential services under changing service demands and market conditions
b. Ensure equitable cost allocations among customer classes c. Generate stable and reliable revenue to fund essential services
2. Recommend Preparing 5-Year Utility Rate Plans for
Water, Sewer, and Solid Waste
3. Rate Consultant Agreements:
a. January 27th Council agenda for consideration
Introduction
DPU: Providing Life’s Essential Services
Water
a. 260 water supply wells, three water plants, and approximately 1,900 miles of water mains
b. Produces an average of 110 million gallons of water per day (200 gal/per/day) Wastewater
a. One regional water reclamation facility, two recycled water facilities, 16 lift stations, and approximately 1,500 miles of sanitary sewer lines b. Treats an average of 60 million gallons of raw sewage per day (100 gal/per/day)
Solid Waste
a. Provides Three-Cart Service and Operation Cleanup for 114,000 Residential Accounts
b. Provides Litter Collection Services and Illegal Dumping Response c. Provides Recycling Education and Outreach
Current Utility Rates
Current Utility Bill Charges
Utility Service Utility Charge Rate
Water Use Charge, $/HCF $1.74
Water Meter Charge, $/1-inch
meter $17.90
Sewer Use Charge, $/SFR $25.75
Sewer Pretreatment Charge,
$/SFR $0.06
Solid Waste, 3 can service with
96-gallon gray container $25.37
Solid Waste, 3 can service with
64-gallon gray container $19.20
Current Utility Bill Charges
Utility Service Utility Charge Rate Effective Date for
Current Rate
Water Use Charge, $/HCF $1.74 July 2018
Water Meter Charge, $/1-inch
meter $17.90 July 2018
Sewer Use Charge, $/SFR $25.75 September 2010
Sewer Pretreatment Charge,
$/SFR $0.06 September 2010
Solid Waste, 3 can service with
96-gallon gray container $25.37 September 2009
Solid Waste, 3 can service with
64-gallon gray container $19.20 September 2009
Average Monthly Utility Bill
$96.69
$100.02
$101.93
$103.49
$92.00
$94.00
$96.00
$98.00
$100.00
$102.00
$104.00
$106.00
2018 2019 2020 2021
Average Monthly Utility Bill
Residential Customer Class
3.4%
1.4%
1.5%
Jul 1, 2018, to June 30, 2021
Average Annual CPI Increase = 2.80%
Average Annual Utility Bill Increase = 2.1%
(Annual increase reflects increased water use)
Utility Bill Affordability
Environmental Protection Agency (Water & Wastewater)
EPA considers a combined annual water and wastewater bill of less than 4.5% of median household income (MHI) to be affordable (2.5% for water, plus 2% for wastewater services)
California State Water Board (Water only)
The State Water Board utilized two MHI affordability thresholds. The minimum affordability threshold is 1.5% MHI
and the maximum
affordability threshold was set at 2.5% MHI
There are no published affordability standards for
Solid Waste
Affordability of Current Rates
Utility Service
Current Utility
Bill Cost
(18 HCF)
Water Use Charge, $/HCF $31.32
Water Meter Charge, $/1-inch meter $17.90
Sewer Use Charge, $/SFR $25.75
Sewer Pretreatment Charge, $/SFR $0.06
Solid Waste, 3 can service with 96-gallon gray container $25.37 Total Monthly Utility Bill, $ $100.40
Median Household Income, $ $50,342
% Annual Total Utility Bill/Median Household Income 2.39% Comparative Utility Bill Rates
$216
$146 $174
$137
$82 $62
$97
$62 $46 $54 $49 $27
$149
$79 $42
$52
$50 $69
$42
$43 $40 $26 $26
$22
$34
$136 $137
$118
$51 $46 $23
$23 $34 $24 $25
$36
$399
$360 $353
$308
$182 $177 $162
$128 $121 $105 $100 $86
Water Sewer Solid Waste Total
City of
Fresno
Utility Rate Design
California Constitution, Article XIII D
Assessment and Property-Related Fee Reform
SEC. 6. Property Related Fees and Charges.
(b) Requirements for Existing, New or Increased Fees and Charges. A fee or charge shall not be extended, imposed, or increased by any agency unless it meets all the following requirements:
3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.
UTILITY RATE DESIGN MUST COMPLY WITH STATE LAW
UNIQUE FEATURE OF CALIFORNIA
Utility
Rates
Personnel
Infrastructure
Fleet and
Equipment
Electricity and
Fuel
Operations
and
Maintenance
Contingencies
Debt Service
Regulatory
ComplianceWhat cost-of-service
elements can be
included in the utility
rates?
Principles of Utility Rate Design
OBJECTIVE
Adopt an equitable and legally-compliant five-year rate plan that meets the future needs of residents, businesses, industries and institutions in the City’s service area.
Cost of Service
Considerations
Solid Waste Cost of Service
1. Labor and Fuel
2. Vehicle and Equipment Maintenance
and Purchases
3. Transfer Station Operations
4. Disposal Fees
a. Landfill (trash) disposal fees
b. Recyclable material disposal fees
c. Green waste material disposal fees
5. Changes in Law
a. SB 1383 (organics, food waste)
6. Litter Control Programs (Beautify
Fresno, Operation Cleanup)
7. Landfill Post-Closure Care and
Maintenance
Solid Waste Revenues and Expenditures
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total Annual Operating Revenue
Total Annual Operating Expenditures
Negotiated lower tipping fees for
trash, recyclables and green waste
Convergence
Cost of service analysis recommended to
ensure equity and continuity of service into
the future
Solid Waste Fund Balance Utilization
Capital and Operating Reserves
1. Funds held in reserve to fund emergency-response measures to maintain continuity of operations during service disrupting events. a. Emergency Drought Declarations
b. Treatment Plant Upset Conditions
c. Major Waterline and Sewer Line Breaks
d. Transfer Station or Landfill Upset Conditions
2. Solid Waste is currently utilizing reserve funds to support general operations.
3. At current levels of service, the Solid Waste’s reserve fund balance will be depleted in 36 months.
Path Forward Considerations
1. Normal Escalation in Labor, Energy, and Fuel Costs
(~1.5 to 3.5% per year)
2. Service Area Expansion
3. Volatility of Market Conditions
a. Recyclable Materials Market
b. Vehicle Maintenance and Equipment Purchases
4. Changes in Law
a. Senate Bill 1383 – Organic Material (food waste) Disposal b. Impacts Commercial and Residential Waste Disposal Practices
5. DPU O&M Facilities Loan
a. 5-year loan to recover the Solid Waste’s proportionate share of the acquisition and renovation costs for the DPU O&M Facility Wastewater Cost of Service
1. Labor, Energy, Fuel, and Chemicals
2. Vehicle and Equipment Maintenance
and Purchases
3. System Maintenance and Repair
a. Very Abrasive and Corrosive Environment
b. Wastewater Treatment Plants, Sewer Lift
Stations, Sewer Collection System
4. Changes in Law
a. Salt and nitrate discharge limitations for
wastewater treatment plant
5. Capital Projects
a. Digester Gas Recovery
b. Nitrogen Reduction for Wastewater
Discharge
c. Aging Asset Repair and Replacement
Wastewater Revenues and Expenditures
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total Annual Operating Revenue
Total Annual Operating Expenditures
$160 million Expense
Early Debt Payoff
Divergence
Cost of service analysis recommended to
ensure equity and continuity of service into
the future
Water Cost of Service
1. Labor, Energy, Fuel, and Chemical Costs
2. Vehicle and Equipment Maintenance and
Purchases
3. Water Supply Purchase Costs
4. System Maintenance and Repair
a. Surface Water Treatment Plants
b. Water Supply Wells
c. Water Distribution System
5. Changes in Law
a. Primary Drinking Water Standards
b. Drought Resiliency Requirements
c. Sustainable Groundwater Management Act
6. Pending Litigation
7. Aging Asset Repair and Replacements
Water Revenues and Expenditures
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Total Annual Operating Revenues
Total Annual Operating Expenses
Last rate increase
adopted
1st full year of
rate increase
Convergence
Cost of service analysis
recommended to ensure equity and
continuity of service into the future
The Rate Planning
Process
Proposed Rate Planning Process
1. Council authorizes consultant agreements to conduct Cost-of- Service Analyses (Jan 27, 2022)
2. Administration conducts cost of service analyses and community outreach and engagement (Apr 2022 to Nov 2022).
3. Council Authorizes Proposition 218 Process (Dec 2022)
4. Administration Administers Proposition 218 Process (Dec 2022 to Jan 2023)
5. Council Conducts Public Hearing and Clerk Tabulates Ballots (Feb 2023)
6. Council Adopts Rates (March 2023)
7. New Rates Effective July 1, 2023
QUESTIONS