COUNCIL WATER COMMITTEE
WASTEWATER RATE STUDY OVERVIEW
AUGUST 8, 2024
Wastewater Rate Study
Today’s Actions
Status update of the RWCF Plant Modifications Project
Provide overview of the Cost of Service analysis and Rate Study preparation Summarize Proposition 218 balloting requirements
Recommend the proposed Rate Schedules and Rate Study to the City Council
RWCF Plant Modifications Project
Pre 2009
Replace or rehabilitate aging treatment facilities
Reduce or eliminate unnecessary treatment processes
Improve working conditions and operations support facilities Improve energy efficiency and reduce reliance on external energy providers 2014 - Comply with new effluent limitations specified in the NPDES permit Compliance deadline of June 2024
Construction started September 2019
New Outfall
SEPTEMBER 2019
JANUARY 2024
Overview of the Presentation
7 Purpose of a Rate Study
Provide an adequate level of rate revenue to operate and maintain the City’s wastewater utility Develop cost-based and proportional wastewater rates
Meet requirements of Proposition 218
Reflect prudent financial planning criteria
Prudent rate funding of capital
Meet target reserve balances
Developed using generally accepted methodologies tailored to the City’s system and customer groups Water Environment Federation Manual of Practice #27
9 Purpose of a Rate Study
Proposition 218 – California constitutional amendment to protect taxpayers.
Limits how taxes, fees and charges can be created.
Proposition 218 is not prescriptive in defining a “cost-based” rate Fees shall not exceed the reasonable cost of providing the service Fees shall not exceed the proportional cost of providing service Cost of service analysis results are the foundation of the proposed rates Nexus between cost to provide service and rates charged 10 Proposition 218 – Establishing Cost Based Rates
11 Developing Cost-Based Wastewater Rates
Revenue Requirement
Revenues independently calculated based on specific customer groups O&M expenses based on FY23-24 and FY24-25 budgets
Capital Funding Plan based on current CIP
Annual debt service
Existing debt service is levelized
No new debt
Target annual rate funding of capital
Increases from $15 million in FY23-24 to $19.5 million in FY28-29 Reserve minimums
Target: 6 months of O&M expenses
13 Wastewater Revenue Requirement - Key Assumptions
Capital Improvement Plan
14 Capital Summary
Annual R&R
Complete RWCF Upgrades
Sewer Line Replacements
14-Mile Slough
Westside Interceptor
Revenue Requirement
15 Proposed rate revenue adjustments are necessary to prudently fund the utility Fund essential capital improvement projects
Maintain strong, legally required, debt service coverage ratios Reflect inflationary increases in annual O&M expenses
Overall revenue adjustment may not reflect individual bill impacts developed in the cost of service and rate design analyses Revenue Requirement Summary
16 FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Average SF Customer Bill
$55.68
$57.91
$60.22
$62.63
$65.14
$67.74
Annual Monthly Change
--
$2.23
$2.32
$2.41
$2.51
$2.61
Cumulative Bill Difference
--
$2.23
$4.54
$6.95
$9.46
$12.06
System Average Rate Adj.
--
4.0%
4.0%
4.0%
4.0%
4.0%
Cost of Service
Provides the basis to meet Proposition 218 requirements Proportional distribution of costs between customer classes Customer classes of service was reviewed
Rates were adjusted based on cost of service results
Revenue requirement distributed proportionally to the customer classes based on:
Volume – average annual flow
Strength – CBOD and SS
Customer – number of customers
Cost of service average unit costs provide basis for proposed rate designs Cost of Service Assumptions
18 Generic Wastewater Cost of Service Methodology
Treatment
Collection
Pumping
Etc.
Total Expenses
Volume Related
Strength Related
Customer Related
Residential
Commercial
Industrial
Residential
Commercial
Industrial
Residential
Commercial
Industrial
Residential Customers
Commercial / Institutional Customers
Industrial Customers
19 Cost of Service – Distribution Factors
20 Volume
(VOL)
Carbonaceous
Biochemical Oxygen Demand (CBOD)
Suspended Solids
(SS)
Actual Customer
(AC)
Revenue Related
(RR)
Residential
Single Family & Condo
62.5%
56.5%
58.3%
66.5%
62.3%
Multi-Family
5.4%
4.9%
5.1%
6.8%
6.0%
Apartments
13.6%
12.3%
12.7%
23.5%
18.1%
Commercial / Institutional
Low Strength
0.7%
0.6%
0.6%
0.2%
0.4%
Medium Strength
6.6%
7.9%
7.6%
2.5%
5.2%
High Strength
2.4%
4.2%
3.6%
0.3%
2.1%
Schools
1.8%
1.6%
1.7%
0.1%
1.0%
Industrial
7.0%
12.0%
10.4%
0.0%
4.9%
Cost of Service – Results Summary
21 * Cost of service results are implemented in Year 1 only * Cost of service provides the basis for the proposed rates Majority of customer classes are within a reasonable range Exception is high strength and industrial customers
Reflects changes in customer characteristics
Rate Design
Residential
Flat fixed charge
Different charge for each subcategory
Non-Residential
Flat fixed charge with volumetric charge ($/CCF)
Different volumetric charge for each subcategory
Industrial
Administration / Stand-by Charge
Flow ($/MG), BOD ($/1,000 lbs), and SS ($/1,000 lbs)
O&M Charge
Flow ($/MG), BOD ($/1,000 lbs), and SS ($/1,000 lbs)
Rate Design – Current Rates
23 * Non-City Customers have ≈ 10% discount on the fixed charge per agreement *
Present and Proposed Residential Rates
Total Expenses
24 Monthly Fixed Charge
FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Single Family & Condo
City Customer
$55.68
$57.36
$59.65
$62.04
$64.52
$67.10
Non-City Customer
50.77 52.30
54.39 56.57
58.83 61.18
Multi-Family
City Customer
$52.45
$52.86
$54.97
$57.17
$59.46
$61.84
Non-City Customer
47.05 47.42
49.32 51.29
53.34 55.47
Apartments
City Customer
$47.57
$47.57
$49.47
$51.45
$53.51
$55.65
Non-City Customer
41.75 41.75
43.42 45.16
46.97 48.85
Present and Proposed Non-Residential Rates
Total Expenses
25 FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Base Charge
City Customer
$26.83
$26.91
$27.99
$29.11
$30.27
$31.48
Non-City Customer
23.56 23.63
24.58 25.56
26.58 27.64
Consumption Charge
Com / Inst - Low Strength
$2.22
$2.40
$2.50
$2.60
$2.70
$2.81
Com / Inst – Medium Strength
2.70 2.75
2.86 2.97
3.09 3.21
Com / Inst - High Strength
4.54 4.42
4.60 4.78
4.97 5.17
Schools ($ / ADA)
1.30 1.29
1.34 1.39
1.45 1.51
Present and Proposed Industrial Rates
Total Expenses
26 FY
2023-24
FY
2024-25
FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
Admin / Stand-by Charges
Base Charge
$26.83
$26.91
$27.99
$29.11
$30.27
$31.48
Flow
864.80
945.76
983.59
1,022.93
1,063.85
1,106.40
BOD
140.13
153.25
159.38
165.76
172.39
179.29
SS
102.88
112.51
117.01
121.69
126.56
131.62
O&M (Consumption) Charges
Flow
$748.52
$818.59
$851.33
$885.38
$920.80
$957.63
BOD
52.14 57.02
59.30 61.67
64.14 66.71
SS
83.45 91.26
94.91 98.71
102.66
106.77
Comparative Wastewater Rate Survey
27 Finalize technical analysis
Present findings and proposed rates
Set Public Hearing
Hold public hearing
Review / count protests
Council may adopt rates if no majority protest (50% + 1) Next Steps Schedule
August 2024: Water Advisory Group and Council Water Committee presentations on draft study results and recommendations August 20, 2024: Council reviews final study results and recommendations; sets public hearing date September 2024: Public outreach meeting
October 22, 2024: Council holds public hearing to consider new rates December 1, 2024: If approved, new rates go into effect. 28 Recommend the proposed Wastewater Rate Schedules and Rate Study to the City Council Actions
QUESTIONS?