ATTACHMENT B: System Average Rate Calculation
The system average rate is a calculated unit of measure to define a comparative basis per billing unit of water sold. The system average rate is calculated by dividing the revenue derived from water rates by the number of projected billing units for the fiscal year.
Retail Water Rate Revenues / Projected Billing Units
System Average Rate
PWP staff performs revenue requirements analyses annually to determine the adequacy of existing rates to recover necessary revenues. If the revenue requirement analyses determine that rate adjustments are necessary, the revenue shortfall (if any for each component from existing rates is divided by estimated billing units. The result of this calculation is the system average rate adjustment needed for each component to cover the revenue shortfall. The sum of adjustments for each component equals the overall system average rate adjustment.
FY 2022 PLAN
FY 2022 Baseline FY 2022 Increase
Sales (Million Billing Units) Projected Annual Sales 11.141 Apr - Jun Sales 2.391 System Average
System Average
Dollars (Millions) Dollars (Millions) Rate Increase
Rate (per BU)
(per BU)
Distribution and Customer Charge $27.4 $2.46 $0.3 $0.10 Commodity Charge $26.9 $2.42 $0.7 $0.31
Capital Improvement Charge $11.2 $1.01 $0.0 $0.00
Revenues from Rates $65.5 $5.89 $1.0 $0.41
FY 2022 system
average rate after $6.30
increase
System average rate 7.1%
increase percentage
Distribution and Customer Charge $32.1 $2.88
Commodity Charge $29.3 $2.63
Capital Improvement Charge $15.6 $1.40
Net Revenue Requirement* $77.0 $6.91
Distribufon and Customer Charge (S4.7) ($0.42) ($4.4)
Commodity Charge ($2.4) ($0.21) ($1.7)
Capital Improvement Charge ($4.4) ($0.39) ($4.4)
Shortfall ($11.5) ($1.02) ($10.5)
Funding Sources to address shortfall
Bond Proceeds $8.8
Water Fund Reserves $1.7
Cash Flow $10.5
FY 2023 PLAN
FY 2023 Baseline FY 2023 Increase
Sales (Million Billing Units) Projected Annual Sales 10.555 Jan - Jun Sales 4.200 System Average
System Average
Dollars (Millions) Dollars (Millions) Rate Increase
Rate (per BU)
(per BU)
Distribution and Customer Charge $28.4 $2.69 $0.5 $0.12 Commodity Charge $28.4 $2.69 $0.9 $0.22
Capital Improvement Charge $10.6 $1.01 $0.5 $0.12
Revenues from Rates $67.4 $6.39 $1.9 $0.46
FY 2023 system
average rate after $6.85
increase
System average rate
7.2%
increase percentage
Distribufon and Customer Charge $35.8 $3.39
Commodity Charge $29.7 $2.81
Capital Improvement Charge $16.2 $1.53
Net Revenue Requirement* $81.7 $7.73
Distribution and Customer Charge (S7.4) (S0.70) ($6.9)
Commodity Charge (S1.3) (S0.12) (S0.4)
Capital Improvement Charge ($5.6) (S0.52) ($5.1)
Shortfall (S14.3) ($1.34) (S12.4)
Funding Sources to address shortfall
Bond Proceeds $12.0
Water Fund Reserves $0.4
Cash Flow $12.4
Note: Immaterial differences may occur due to rounding
*Net Revenue Requirement is total revenue requirement less non-operating revenues .
Staff recommendations for rate adjustments may not recover the full revenue shortfalls in a single year, but are frequently based on multi-year adjustments to better align revenues and expenses and to moderate customer bill impacts. Any remaining revenue shortfalls are addressed by the use of eligible alternative funds such as water fund reserves and bond proceeds.