HomeMy WebLinkAboutWater Rate Study 4 !
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PROPOSAL
Conduct a Water Rate Study
Truckee Donner Public Utility District
JUNE 2004
June 2,2004
' Via U.S.Mail
Mr.Peter Holzmeister
' General Manager
Truckee Donner Public Utility District
P.O.Box 309
Truckee, California 96160
Subject: Proposal to Conduct a Water Rate Study
Dear Mr. Holzmeister:
Water purveyors face many challenges in their goal to provide fair and equitable rates to their customers.
' Such challenges can prove to have a large impact on customers. We know that Truckee Donner Public
Utility District's (the District or TDPUD) goals include creating conservation incentives, developing a fair
cost recovery plan for both permanent and non-permanent residents, and implementing a transition to
' water meters for all customers over time. It is R.W. Beck, Inc.'s desire to work with TDPUD in the
development of a Water Rate Study in order to make these goals reality.
Our project approach focuses on criteria that must occur in order for objectives to be met. The strategies
we have identified include:
■ Analyzing the cost of service to ensure that costs are properly allocated to each customer
class.
■ Evaluating rate alternatives that include conservation incentives, addition of water meters to
existing accounts, and recovery of the cost of new connections.
■ Developing rate alternatives that make TDPUD financially whole.
Due to relevant project experience and understanding of the TDPU )'s goals, the project team we have
identified is well-suited to work with the District on this study. We look forward to the opportunity to
' work with you.
Sincerely,
R.W.BECK,INC.
' Michael Kenneth . Mellor,PE
Principal Senior Director of Consulting
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' Encl.
60412-0001 1119136 ! P:yMiarketing\proposalsv2004',P0333 Truckee Donner PUDA02 Letter.doe _
2710 Gateway Oaks Drive Suite 300 South Sacramento,CA 95833 Phone(916)929-3653 Fax(916)929-1710 C
TABLE OF CONTENTS
' Letter of Transmittal
SECTION
ProjectTeam.........................................................................................................1
' Scope of Work......................................................................................................2
Project Experience................................................................................................3
Schedule...............................................................................................................4
ProjectFee ...........................................................................................................5
APPENDIX
Resumes...............................................................................................................A
' 0 Copyright 2004,R.W.Beck,Inc.,All Rights Reserved
' SECTION#1
PROJECT TEAM
SECTION 1
PROJECT TEAM
' R.W. Beck's proposed team is comprised of personnel with experience
in the following areas:
• Developing rate structure options
• Conducting cost of service studies
• Presenting results to governing bodies
• Participating in public outreach, including meetings with community
groups and customers
Throughout the project, the project team will be available to meet with
the District. Additionally R. W. Beck will meet with the District at the
execution and completion of each task.
Project Personnel
Greg Broeking— Project Manager
Mr. Broeking has over 20 years of experience providing advanced
finance, accounting, and auditing services. He has helped utilities
achieve long-term,predictable, and stable rates by analyzing the cost of
capital and financial requirements. His experience includes developing
and implementing competitive electric,water, and solid waste rate
strategies; and conducting cost/benefit analysis of major projects.
' Responsibilities
In addition to overall project management, Mr.Broeking's
responsibilities will include assisting and developing the new water rate
structures, evaluating TDPUD's revenue streams, developing the water
rate model, preparing the report, acting as liaison with TDPUD staff,
' presenting the final study to the Board, and providing outreach to
community groups and customers, as needed.
Relevant Experience
• Rate Design and Reserve Studies and 5-Year Financial Forecast
Rincon del Diablo Municipal Water District/Escondido, California
• Financial Participation Charges Review
Eastern Municipal Water District/Perris,California
• Water and Sewer Rate Study
Mission Springs Water District/Desert Hot Springs, California
P0333_0604 t_t
' PROJECT TEAM
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' Kenneth J. Mellor, PE
Ken Mellor is a Senior Director of Consulting in R.W.Beck's Sacramento office,with 41 years of
experience in the utility industry. He spent 23 of these years in engineering and management positions
with a large publicly-owned utility,including 10 years as the Chief Financial Officer.
Mr.Mellor served as Chairman of the American Public Power Association Rate Committee for two
years. He has worked with a number of utilities on strategic rate design and competitive positioning, and
is the Firm's foremost expert on electric industry restructuring. Project work he has completed includes
rate unbundling, market pricing, and the development of competitive changes to service rules and
regulations.
Responsibilities
Mr.Mellor's responsibilities on this project will include attending the kick-off meeting. He will also
attend the Board meetings and participate in any presentations made to the Board. Mr. Mellor will also
assist with developing the draft and final reports.
' Relevant Experience
• Revenue Plan and Water Rate Analysis
' San Diego County Water Authority/San Diego, California
• Cost-of-Service and Rate Studies
City of Banning, California
• Rate Studies
Imperial Irrigation District/Imperial, California
• Utility Restructuring—Competitive Positioning
Los Angeles Department of Water and Power/Los Angeles, California
• Glendale Water and Power/Glendale, California
' . Pasadena Water and Power/Pasadena, California
' Michael A. Bell
With more than 25 years of experience, Mr. Bell has detailed knowledge and experience with the
preparation and implementation of electric and water rates. Additionally, Mr.Bell has managed financial
reporting and forecasting,resource allocation, and debt issuance and restructuring to meet competitive
market pressures.
' Responsibilities
Mr.Bell's responsibilities on this project will include being in charge of quality assurance and quality
control. He will review and approve the draft and final reports, and be available for public meetings,if
necessary.
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' R.W.Beck,Inc. 1-2
SECTION #2
SCOPE OF WORK
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' SECTION 2
SCOPE OF WORK
Our approach to the design of water rates is based upon the cost-of-
service analysis and the TDPUD's rate setting objectives. Key goals
include creating rates that are fair and equitable to all parties while
balancing sometimes competing principles of cost-of-service analysis
and the organization's goals and objectives.
To ensure the ultimate defensibility of rates,R.W. Beck uses industry
standard approaches to cost-of-service analyses and rate design, such as
those published by the American Water Works Association and the Water
Environment Federation.
The specific steps that we propose are outlined in the Scope of Work
section below.
Scope of Work
R.W. Beck has developed the following proposed scope of work to assist
the TDPUD in the completion of a cost-of-service and water rate study
based upon our understanding of the TDPUD's needs. Modifications
may be made to this scope of work and related schedule and budget for
us to ensure the TDPUD's needs are met.
Task 1 Initial Data Review and Additional Data Request
Task Objective. To collect the necessary data for the study.
Methodology. R.W. Beak will have an initial discussion with TDPUD
staff of likely issues to be considered in this study. A data request
listing the operational and financial data needed for the study will
' then be prepared and provided to the TDPUD.
■ Deliverable. Initial data request to be provided prior to the kick-off
meeting.
' Task 2 Kick-Off Meeting
' . Task Objective. To clarify project goals and objectives and to review
initial data request.
• Methodology. The kick-off meeting will cover the following items:
' . Project goals and objectives
Stakeholder issues and concerns
Communication protocol between stakeholders,TDPUD staff, and
R.W.Beck
' . Use of key assumptions in the analysis
' P0333 0604 2-1
SCOPE OF WORK
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Review of requested data items
Final schedule and budget for the project I
' Deliverable. Revised data request, as necessary.
Task 3 Review Water Operations
• Task Objective. To define the basis for cost-of-service differences among TDPUD's customers.
• Methodology. TDPUD will provide available system data relevant to cost-of-service issues. This data
would include peaking characteristics, seasonal use characteristics, customer data,available facilities I
descriptions, and definitions of budgetary line items. R. W. Beck will review this data and discuss
with TDPUD the aspects of TDPUD's rate structures that require changing and the aspects that do not
require changing.
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• Deliverable. The results of this task will be incorporated into Task 6,Draft and Final Reports.
Task 4 Water Utility Rate and Connection Fee Analysis
Task 4A Develop Revenue Requirement Projections for 2005-2009 Study Period
• Task Objective. To develop projections of revenues and expenditures over the five-year planning
period.
• Methodology. R.W. Beck will determine overall revenue requirements of TDPUD's water utility for I
the five-year study period 2005-2009. The analysis will project customers,water sales, and revenues
under existing rate schedules, non-rate revenue sources, operation and maintenance expenses, capital
' expenses, debt service requirements,and any other cash obligations. We will work with TDPUD staff
in developing residential sales and water system losses. R.W. Beck will provide two revenue
requirement scenarios. This analysis will be closely integrated with Tasks 4B and 4C below.
In response to R. W. Beck's data request,TDPUD will provide available revenue and expense
projections, and budgetary assumptions used by TDPUD in financial forecasts. Available capital
improvement financial plans will also be provided by TDPUD, as well as copies of applicable debt
' issuance ordinances. R. W.Beck will work with TDPUD to establish operating and capital reserve
recommendations as necessary.
■ Deliverable. Tables showing revenue requirement projections to be included in Task 6,Draft and Final
' Reports.
Task Q Develop Cost-of-Service Analysis for 2005-2009 Study Period
' ■ Task Objective. To identify the cost-of-service to ensure equitable allocation of cost responsibility
among TDPUD's customer classes.
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' ■ Methodology. Based on input and data from TDPUD, R. W.Beck proposes to use either the Base-Extra
Capacity or the Commodity-Demand methodology described in American Water Works Association
publications. The cost-of-service analysis will include a definition of customer classes,analysis of
average and peak use data provided by TDPUD, functionalization, classification, and cost allocation.
A single cost-of-service analysis will be completed using one of the two revenue requirement
scenarios developed in Task 4A and based on the determined test year.
' Deliverable. Cost-of-service analysis tables; written documentation of the cost-of-service analysis(will
be included in Task 6,Draft and Final Reports).
' R.W.Beck,Inc. 2.2
SCOPE OF WORK
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Task 4C Review TDPUD's Water Rate Structure and Prepare Three Rate Structure Alternatives
for 2005-2009 Study Period
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• Task Objective. To provide recommendations for changes to TDPLD's rate and connection fee
structures to be consistent with the cost-of-service results,rate design policies, and customer
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requirements.
• Methodology. Using bill frequency analysis, data for metered commercial customers provided by
TDPUD and the cost-of-service analysis results,R.W. Beck will recommend three rate structure
alternatives to meet TDPUD's rate-setting objectives.
In order to arrive at estimated residential class consumption, it is proposed that we start with total
production; work with the District to arrive at a reasonable estimate of system losses; and then back
out commercial metered consumption and an estimate of non-metered commercial use. If the system
condition is such that the District believes that losses differ between classes as a percentage of
consumption,that will be taken into account in the analysis.
Once rates have been designed,typical bill comparisons for each alternative will be prepared for
' representative customer classes and usage patterns. hi addition, we will compare existing and i
proposed rates with neighboring utilities to the extent available. Based on a review of the alternative
rates and typical bill analysis,it may be necessary to develop proposed rates that are different from
cost-of-service levels. If significant adjustments are required to make revenue recovery more
ically propose to implement a phase-in plan to reach the cost-of-service over
equitable, we would typ
a two-to five-year period. This helps to eliminate any`rate shock"that may occur for specific
customer classes, as well as provide for increased revenue stability.
TDPUD has noted a preference for inverted rates. In order to reduce rate shock and to more
accurately set rates to meet revenue requirements, a good transition step for residential customers
would be a customer charge plus a flat commodity charge for each unit of consumption. This may
provide the desired conservation incentive and would provide data that could be used in later rate
adjustments or changes to inverted rates.
Since peak demand occurs in the summer, there could be a higher per unit commodity charge in the
summer to recover the fixed costs associated with the higher summer demand. This might also
address the non-permanent resident issue.
Deliverable. Tables summarizing three rate structure alternatives;revised rate and connection fee
schedules; and typical bill comparisons. The revised rate schedules will incorporate the meter
reading cost of the new technology soon to be installed by TDPUD. The rates will also address the
cost of any pilot program for residential customers.
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' Task 5 Meetings and Presentations
Task Objective. To participate in meetings and workshops with TDPUD staff and others to discuss
' preliminary and final results of the study.
Methodology. In this proposed scope of work, the following seri es of meetings is proposed with
TDPUD staff:
' • Kick-off meeting included as part of Task 1
' • Meeting with staff to include discussion of revenue requirement results and preliminary cost-of-
service analysis results
' R.W.Beck,Inc. 2-3
SCOPE OF WORK
• Meeting with staff to include discussion of cost-of-service analysis results and proposed rate
schedules
• A series of three meetings with the Board of Directors to discuss the proposed rate/fee structures
• Deliverable. Presentation materials and handouts.
Task 6 — Draft and Final Reports
• Task Objective. To provide TDPUD with a concise summary of the key assumptions, methodology,
recommended revenue requirements, cost-of-service analysis, and proposed rates developed in the
rate study.
■ Methodology. Three copies of the draft report will be provided to TDPUD staff for review. After
receiving and incorporating comments, where appropriate,from TDPUD staff; R.W.Beck will
deliver up to 10 copies of the final report approximately 15 days later, along with one electronic copy
of the final report in PDF format.
• Deliverable. Up to three copies of the draft report;and up to 10 copies of the final report.
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' R.W.Beck,Inc. p-q
SECTION #3
PROJECT EXPERIENCE
SECTION 3
PROJECT EXPERIENCE
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The following is a description of projects that represent our experience in
assisting water districts with their rate study needs. Additional project
experience is available upon request.
tRate Design and Reserve Studies, and
5-Year Financial Forecast Project
' Rincon del Diablo Municipal Water District/Escondido,California
Rincon del Diablo retained R. W. Beck to conduct a rate design study
which included identifying the District's future revenue requirements,
conducting a cost-of-service analysis,and designing rate options. Key
issues addressed throughout this study included the amount of revenue to
be collected from fixed charges versus variable charges, conservation
incentives (tiered pricing and a frugal user discount),and reclaimed
water.
Factors considered in developing the reserve levels were other water
utilities reserve levels, industry standards,the specific needs of the
District including its capital improvement program, and the status of the
electric industry in California and its impact on the water industry.
The information from these two studies and the replacement planning
model study were used to develop a five-year financial forecast that
included new debt issues for the expected capital improvement
requirements. Results were presented at a Board of Director's workshop
and a public hearing.
Reference: Annette Hubbell
General Manager
(760) 745-5522
Water and Sewer Rate and Connection Fee Study
Mission Springs Water District/Desert Hot Springs,California
' R. W.Beck was retained by the Mission Springs Water District(District)
to conduct a water and sewer rate and connection fee study. The scope
of work included projecting the revenue requirement, conducting cost-
of-service analysis, and designing rates. In addition, connection fees
were to be reviewed and a revised schedule of water and sewer system
connection fees developed based on either the equity approach,
' incremental approach, or a combination of the two methods.
The results indicated that to meet the District's financial policy targets,
that include 100%recovery of depreciation expense by fiscal year 2009,
water rates and connection fees would need to be increased and the
methodology fore ratecalculating connection fees changed. The projected
average system-wide increase for fiscal year 2005 was ]0% and 9%
for fiscal years 2006 through 2009. For a typical single-family
' P0333_0604 3.7
PROJECT EXPERIENCE
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residence,the connection fee would increase from$2,230 to $3,307. For the remaining customers,the f
connection would be based on the water meter size,rather than on a per-unit or per plumbing fixture unit.
A rate hearing was held on April 19, 2004 at which time the Board of Directors unanimously approved {{
the proposed changes that were outlined in the R. W.Beck report.
Reference: Wayne Nielson j
Director of Finance
(760) 329-6448
Financial Participation Charges Review
Eastern Municipal Water District/Perris,California
R.W. Beck was retained by the Eastern Municipal Water District(District)to review its Financial
Participation Charges (FPCs)/connection fees for the domestic water system, sewer treatment plant
capacity, and the sewer system and recycled water facilities. The purpose of the review was to determine
whether the methodologies used to calculate the charges were"not unreasonable." Based on this
determination,R.W. Beck was asked to provide an opinion as to whether the FPCs are fair,equitable,
and set in accordance with industry standards or practices.
To assist us in the review of the District's FPCs, which were calculated using the system buy-in
methodology,R. W. Beck developed several cost ranges based on acceptable industry practices,within
which the FPCs could fall. In developing the ranges of the acceptable FPC charges,we included
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consideration of the incremental cost pricing methodology, since this approach reflects customers being
charged the cost for new facilities being added to provide service to these customers.
The analysis included using key assumptions and data provided by the District. Our calculations using
the incremental cost pricing methodology indicated that this methodology results in costs that exceed the
current charges. Therefore, we concluded that the FPCs currently in effect were"not unreasonable"and
■■ are fair and equitable from a cost-of-service perspective.
' Reference: Joe Makwinski
Director of New Business Development
(909)928-3777, ext. 4404
' Revenue Allocation by Customer Class
Imperial Irrigation DistrictAmperial,California
Project Manager. Mr. Broeking conducted a study resulting in a report that compared current revenue
by customer class to the cost of providing service to each customer class. A demand factor model was
developed that estimated non-coincident peak and coincident peak demands, Demand information was
then incorporated into the revenue allocation model that unbundled costs among production, !_
transmission, and distribution.
Reference: Robert Fugett
Superintendent General Electric Services
(760)339-9144
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R.W.Beck,Inc. 3-2
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SECTION #4
SCHEDULE
SECTION 4
SCHEDULE
' R. W. Beck envisions a four-month period to complete the project,
allowing for budget preparation. This schedule is based on TDPL'D's
budgeting and rate implementation requirements. Our Scope of Work in
Section 2 is directly linked to the project schedule.
The schedule below depicts the project tasks, as well as the time period
in which they will be completed.
I ID Task Name ----T---
' JuneJull -4August ISe ember !Oct, Ober
Notice to Proceed — s,14 —�'
z Initial Data Request { 614'
' s I Kick-off Meeting 614
! 4 Review of Operations
�5 Develop Revenue Projections
' s I Cost.of Service Analysis,.
7 Prepare Rate Alternatives _
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8 Draft Report with City Staff
' 9 Receive Comments from District Staff
10 i Final Report
..� - ♦ 101
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SECTION #5
PROJECT FEE
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' SECTION 5
PROJECT FEE
R.W. Beck proposes to prepare the Water Rate Study for a not-to-exceed
fee of$34,500. This fee is based on the tasks described in the proposed
Scope of Work and our experience with similar projects.
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P0333_0604. 5-1
® APPENDIX#A
RESUMES
Gregory Broeking
Southern Illinois University,Carbondale
' B.S. in Accounting
Mr. Broeking has over 20 years of advanced finance, accounting, and
auditing experience. He joined R. W. Beck after serving several years as
the Public Utilities Financial Services Manager for the City of Anaheim,
California. Mr.Broeking is a Certified Public Accountant.
' Management
During his career,Mr. Broeking has had administrative responsibility for
electric and water utility functions such as rate development and design,
customer care,information systems, accounting and energy supply. He
has also managed operational audits, financial reporting, and debt
issuance and restructuring to meet competitive pressures.
Finance
Mr. Broeking has detailed knowledge of both short-term and long-term
financing vehicles. He was responsible for restructuring debt at a major
generating plant resulting in the reduction of S41 million in debt service
payments and shortening the payback period by three years. He also
developed a repayment plan to pay off more than$250 million in debt
over five years at a joint venture investment.
Mr. Brooking has prepared official statements in conjunction with the
financing of capital improvement projects. He has had significant
interaction with investment bankers, outside auditors,bond counsel, and
financial advisors regarding strategic issues facing utilities as well as
extensive interaction with joint venture partners regarding multi-billion
' dollar power projects. Mr. Broeking has also managed department
budgets and financial plans and forecasts.
' Rates
Mr. Broeking has analyzed the cost of capital and other financial
requirements to help utilities achieve long-term,predictable and stable
rates. His experience includes developing and implementing competitive
electric, water, and solid waste rate strategies and conducting costlbenefit
' analysis of major projects.
' R.W.Beck,Inc.
— GREGORY BROEKING
Optimized Commercial Collection Rate Analysis j
City of Sacramento/California
Project Manager. R.W. Beck was retained by the City to evaluate its commercial collection options.
The principal objectives of the review were to estimate the costs and rates that should be charged if the
City were to optimize its roll-off and dumpster collection services, and identify additional opportunities
for expansion of commercial collection services.
Recommendations were made to improve the productivity of the work force, make better use of its
existing assets, and expand revenue. It was also recommended that the Solid Waste Division be granted
' the authorization to enter into contracts that have a pricing structure that is different than the standard
price sheets. A price sheet was developed for frontload service assuming that certain productivity
improvements were implemented.
' Solid Waste Privatization
City of Visalia/California
Project Manager. R.W. Beck was retained by the City of Visalia to estimate the impact of the potential
privatization of the City's Solid Waste Division on the City's Genera] Fund and the City's Internal j
Service Funds. Currently, services are provided to the Division by other City funds for which they are
reimbursed. The impact to these funds of no longer providing service to the Division and thus losing a
source of revenue was evaluated. Our review included an analysis to determine if a reduction in costs
can be obtained to offset the loss in revenue and to quantify the overall impact to the City of
privatization. Where appropriate,recommendations were to be made to the City to address these revenue
shortfalls and any other observations or findings as a result of our review.
The Division's expenses were segregated into direct and allocated(indirect)costs. It was determined
that almost all of the direct expenses would no longer be incurred by the City if privatization was to i.
occur. The allocated costs were split between those that would go away and those that would stay. It
was estimated that$1.8 million of the$4.1 million in allocated costs would remain and be the
' responsibility of other City departments or divisions. The remaining expenses consisted primarily of
street sweeping, in-lieu payments,and general government costs. It was estimated that the City would
have to charge a franchise fee of 17%to recover these costs, if privatization occurred.
At its June 2,2003 meeting, the City Council voted not to pursue privatization of the Division.
' Replacement Planning Model
Rincon Del Diablo Municipal Water District/Escondido,California
Project Manager. R.W. Beck was retained by the Rincon del Diablo Municipal Water District(District)
to develop a Replacement Planning Model that calculates the annual replacement and refurbishment
needs for major capital assets and the potential impact of these needs on the Infrastructure on
Reserve Fund balance.
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' To assist us in the development of the model, we performed several key activities. These activities
included developing the existing system inventory, future system inventory,replacement costs,
refurbishment costs, cost escalation estimates, useful life estimates and refurbishment interval estimates.
These activities result in a database of the District's facilities,replacement cost, and expected life.
The results of the work show the anticipated cash requirements of the District and the necessary reserves
' on a yearly basis over the 50-year study period.
' R.W.Beck,Inc. 3
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' GREGORY BROEKING
Focused Assessment Plan
Montecito Water DistrictlMontecito,California
Management Consultant. The Montecito Water District(MWD)was interested in establishing a road
map to provide a clear,precise direction for the cost-effective operation and the efficient management of
all MWD water system facilities for the next ten years. An immediate objective was to establish along-
range planning tool recommending critical short-term, mid-term, and long-term capital facility
improvements and system additions. j
R. W. Beck produced a"Focused Assessment" or"Report Card"of the critical issues facing the District.
In analyzing these issues, an action plan was developed which identified specific priorities for short-
term,mid-term, and long-term action and financing. Utilizing an intensive field/site visit and workshop
h MWD system with
k team assesse
d the overall strengths and weaknesses of the y
approach,the R.W.Beck g �;
respect to storage, system redundancy,pump station sizing, and tr ansm ssion and distribution assessment.
These issues were analyzed with the output being a prioritized action plan identifying short-term, mid-
term, and long-term actions for improvement. The plan was "grounded"in financial reality,with
realistic cost estimates and alternatives for both pay-as-you-go and debt financing strategies.
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Additional Relevant Experience
Anaheim Public Utilities Department
Anaheim,California
Financial Services Manager. Mr. Broeking was responsible for the controller functions including
business planning,budgeting(S300 million),monthly financial reporting to the business plan,rate
administration,capital financing,and accounting. He also managed the development and implementa-
tion of strategic financial plans and was responsible for financial forecasting. His responsibilities also
included managing 10 employees and a planning process involving 300 employees.
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Manager,Operations Analysis and Information Systems. Mr. Broeking was responsible for con-
ducting reviews of the department's operations. He was also responsible for developing information
systems policies and procedures, and maintaining the local area network.
' Electric Utility Department
Austin,Texas
Audit Manager. Mr. Broeking established the internal audit function for the electric utility. He was
responsible for developing the audit manual and training staff. His work resulted in recovery in excess j
of SI million of overbillings.
' San Diego Gas and Electric Company
San Diego,California
Internal Audit Supervisor. Mr. Broeking developed and managed the internal audit annual operating
plan for a staff of nine auditors. He managed budgets in excess of$600,000 and prepared reports and
discussed audit activities with SDG&E's Board of Directors.
' Staff Auditor Positions. Mr. Broeking reviewed the reliability and integrity of financial and operating
information. He assessed the adequacy of the company's policies and procedures,reported findings and
recommendations to correct conditions, improve effectiveness, and reduce costs. His assignments
ncluded reviews of temporary labor, accounts payable,purchased power, fuel suppliers and major
construction projects. Audit work resulted in over$10 million in recoveries.
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' R.W.Beck,Inc. 5
Kenneth J. Mellor, PE
Ken Mellor is a Senior Director of Consulting in R. W. Beck's University of California,Berkeley
Sacramento office. Mr. Mellor has 41 years of experience in the utility B.S.in Electrical Engineering
industry. He spent 23 of these years in engineering and management
positions with a large publicly-owned utility. This included 10 years as Registered Professional Engineer,
the Chief Financial Officer. California
Industry Restructuring
In the past several years, Mr. Mellor has concentrated his efforts on the
restructuring of the electric utility industry and assisted numerous clients
in strategic planning and preparing for competition. He has worked on
restructuring issues in Australia,New Zealand,and throughout the
United States. Recent projects have included competitive assessments,
strategic planning for a competitive environment, alliance formations,
developing a "blueprint" for competition,benehmarking,business and
marketing plan development, strategic tariff development,power supply
contract negotiations (both wholesale and retail), financial restructuring,
governance review,and providing load aggregation services. This
electric industry experience has now translated to the water industry,
where Mr.Mellor has recently been active in governance,privatization
issues, and organization and strategic pricing assignments.
' Strategic and Competition Planning
In his executive role in the utility and while working with R. W. Beck,
Mr.Mellor has been deeply involved in strategic and long-term planning.
He has played a key role in strategic decisions on financial plans,
transmission systems, long-term power contracts,generation resources,
fuel mix, and organization and management processes. He has extensive
experience with electric industry restructuring and assists clients to
prepare for a more competitive electric utility industry.
Since joining R.W.Beck, Mr.Mellor spent over a year in Australia
managing a joint-venture business serving the electricity and gas utilities
' and industrial customers with respect to project feasibility analyses,
utility restructuring, demand-side management, and cogeneration.
' Finance and Rates
Mr. Mellor has had lead responsibility for the issuance of over$1 billion
in long-term revenue bonds, $120 million of intermediate put bonds, and
has established and managed a commercial paper program of
S 125 million. He has negotiated and implemented bank lines of credit
and served as treasurer of three joint-action agencies, one utility district,
and one non-profit agency. He has also had responsibility for investment
of a portfolio averaging in excess of$200 million.
' R.W.Beck,Inc, 1
KENNETH J.MELLOR, RE
' Organizational and operational analysis for a large electric distribution utility in Australia.
• Presentation of seminars in New Zealand and Australia in preparing for privatization and
commercialization.
• Development of a strategic marketing plan for retail competition for an Australian electric utility.
Strategic tariff design for competitive markets.
• Management of an integrated engineering, legal and banking team to determine the economics and
advisability of acquisition of a large investor-owned gas and electric utility by a publicly-owned
wholesale water distributor.
• Presentation of numerous workshops, nationwide, on Direct Access Implementation for the
restructured electric industry.
• System and engineering analysis, including regulatory system advice and system valuation in New
Zealand, leading to the privatization of the electric generation and transmission system owned by the
government.
Financial policy and process review,including revenue stability, cost allocation equity,rate design,
reserve levels and requirements, and risk management for a large Southern California water utility.
• Rate negotiations with large industrial customers.
• Power supply contract negotiations.
• Water transfer analyses and wheeling negotiations.
• Wholesale water system revenue planning and restructuring.
• Assistance in the financial decisions and public involvement in key system design and engineering
for a large Canadian electric utility.
Water wheeling analyses for wholesale water transactions.
• Independent engineering services for financing of a water treatment plant and transmission system for
a large irrigation district in California.
■ Financial and policy review of the potential acquisition of a water distribution system in Nevada by a
multi jurisdictional agency.
• Assistance in negotiating contracts for development of a large waste coal-fired power plant in New
' South Wales,Australia, including fuel supply, construction and financing.
• Served as Assistant General Manager and Chief Financial Officer for a large electric utility in
California.
Served as treasurer of three joint action agencies in California.
• Led the development of a California joint action agency to finance demand-side management and
conservation activities for electric, water, gas,wastewater and steam utilities.
' Litigation support for various clients.
Project manager for utility alliance formations.
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R.W.Beck,Inc.
KENNETH J.MELLOR, PE
Roseville Electric Department,Roseville,California
Mr.Mellor managed an assignment with Roseville to develop tariff strategies to determine unbundled
costs,to assist in competitive rate design, and to negotiate industrial customer service contracts.
' California Municipal Utilities Association,Sacramento,California
Mr.Mellor has led a number of projects for CMUA, including:
' Competitive Market Assessments
• Stranded Cost Evaluation
• Public Goods Charge Analysis
Creation of a Manual on Demand-Side Management
• Assisting with strategies to influence state legislative and regulatory action and FERC consideration
of industry restructuring.
Northern California Power Agency,Roseville,California
Mr. Mellor has assisted NCPA in a number of competitive assignments, including:
• Strategic Planning for Competition
• Independent Engineering for Bond Issues
• Competitive Assessment for NCPA Members
• Financial Restructuring
• Assistance to members on development of a Competitive Transition Charge
• Coordination of power supply issues with the Western Area Power administration
City of Lodi,Electric Utilities,Lodi,California
Mr,Mellor has worked with the City of Lodi to help them analyze their competitive position, to develop i
and implement competitive strategies.
City of Tallahassee,Electric Department,Tallahassee,Florida
Mr.Mellor has worked with the City to assess electric industry restructuring, to inform key policy
makers of probable impacts, and to develop strategies for competitive positioning.
Massachusetts Municipal Wholesale Electric Company
Mr. Mellor worked as part of a R.W. Beck team to assess and develop stranded cost mitigation strategies
for MMWEC.
City of Banning,Electric Utility,Banning,California
Mr.Mellor has managed a competitive cost-of-service and a rates and restructuring project for the City
of Banning, and currently provides Management Advisory services to the City.
' Southern California Public Power Authority,Pasadena,California
Mr. Mellor has assisted on a number of competition-related projects for SCPPA,including:
• Strategic Planning Presentation
• Utility Merger Intervention
• Metering and Billing System Specification for a Restructured Industry
• Electric Rate Forecasting and Competitive Analysis
' Distributed generation study
Turlock Irrigation District,Turlock,California
' Mr.'Mellor has worked with Turlock on a number of competition-related assignments, including rate
restructuring,Direct Access rate design, strategic positioning, and competitive analysis.
' R.W.Beck,Inc. 5
' KENNETH J.MELLOR, RE
Business plans included review of new generation described above and major new loads, such as
pumping at the proposed Freeport Project. Activities included assistance with public participation in
workshops and energy forums. EBMUD decided to move forward with the facilitation of renewable
resources but determined not to pursue the municipalization of the electric distribution system.
Energy Consulting Services
City of West Hollywood,California
The City of West Hollywood hired R.W.Beck to provide consulting services focusing on whether it was
feasible for the City to become a municipal utility or to consider Spot Municipalization. R.W. Beck
presented a workshop that outlined risks and benefits of municipalization, costs of evaluation and
implementation, political hurdles, industry structure changes, and other aspects of the City's energy
strategy. Based on the workshop discussions, the City decided not to proceed with municipalization.
Spot Municipalization Pre-Feasibility Study
City of Chino,California
The City of Chino established an Energy Advisory Committee to provide input to City Management and
the City Council with regard to energy policy. R. W. Beck provided consulting support for the technical
energy advisory committee that included citizens,staff, and local industry representatives.
The consulting services helped the City formulate a strategic direction with regard to energy policy,
contributing to energy solutions that assist their customers to address the statewide energy dilemma, and
to provide the best energy environment for the citizens and businesses in Chino. As part of this
engagement,R.W.Beck performed an analysis of the potential for spot municipalization.
The findings of the draft report concluded that spot municipalization would be marginally attractive only
if the City or its customers had no obligation for non-bypassable charges. R.W. Beck recommended that
the City follow legislation and regulation as it affects these charges to determine whether a more in-depth
analysis of spot municipalization would be justified. Under the current assumptions regarding Southern
California Edison Company(SCE)rates,projected operating costs,non-bypassable charges and
economic assumptions,spot municipalization did not appear beneficial to potential customers in the new
development area.
Energy Policy Development
East Bay Municipal Utility District,Oakland,California
R.W. Beck provided a variety of services necessary to the development of short-and long-term energy
strategies for the East Bay Municipal Utility District. Business plans included review of new generation
at major new loads. Activities included assistance with public participation in workshops and energy
forums. EBMUD decided to move forward with the facilitation of renewable resources but determined
not to pursue the municipalization of the electric distribution system.
' Utility Litigation Support: Contract Valuation
State of California,Department of Justice/Sacramento,California
The California Attorney General hired R.W.Beck to assist the State in the valuation of Southern
California Edison and Pacific Gas and Electric block forward market electricity contracts that were
seized by Governor Gray Davis when the California Power Exchange was about to liquidate the
contracts.
tR.W. Beck,Inc. 7
KENNETH J.MELLOR, PE
Imperial Irrigation District, Imperial, California
• Bond Financing Assistance
• Planning
' Modesto Irrigation District, Modesto, California
• Independent Engineer—Pipeline Water Treatment Plant Financing
' San Juan Water District, Granite Bay, California
• Organization Assessment
• Governance Study
Friant Power Authority
■ Independent Engineer on Bond Financing
' East Bay Municipal Utility District, Oakland, California
■ Planning
• Power Supply Analyses j
Washoe County, Nevada
• Water Supply Development and Feasibility Analysis
Workshops and Presentations
Mr. Mellor has given numerous presentations and participated in training and workshops in several
states. These activities have focused on electric industry restructuring and competitive initiatives.
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R.W.Beck,Inc. 9
Michael A. Bell
' Michael Bell is a Principal and Senior Director of Client Services at Harvard University
R.W. Beck. He has more than 20 years of technical and managerial Program for Senior Executives
experience in the utility industry. Mr. Bell manages the firm's in State and Local Government
engineering, design,and management consulting services for electric, Pepperdine University
water, wastewater, solid waste, and management advisory practices in Masters of Business Administration
California.
St.Louis University
B.S. in Economics
Relevant Expertise
Management
Mr. Bell has held administrative or executive management responsibility
for electric, water, and telecommunications utility functions, such as rate
development and design, customer care,personnel, data processing,
security,administrative services,public relations and education, systems
and procedures, and accounting. He has also managed financial
reporting and forecasting,resource allocation and debt issuance, and
restructuring to meet competitive pressures.
As manager in charge of R.W. Beck's California practices he oversees
such large capital projects as the Freeport Regional Water Project,
Moreno-Lakeside Pipeline Projects, and San Diego County Water
Authority Desalination Project.
' Finance and Rates
Mr.Bell has detailed knowledge of both long-and short-term financing
vehicles. He has had lead responsibility for the issuance of numerous
debt issues totaling more than $700 million and has acted as pricing
decision-maker in more than $8.5 billion in agency financing. He also
supervises the preparation and implementation of electric and water
rates, department budgets, and financial plans and forecasts.
Mr.Bell is currently working on Engineering Reports for the Silicon
Valley Power Pico Power Plant,Turlock Irrigation District Water and
Energy Center, and a transmission and distribution system financing for
the Imperial Irrigation District.
' Expert Witness and Litigation Support
Mr.Bell provides expert testimony before various public bodies such as
' city councils, utility boards, and participating organizations in
multifaceted business concerns. He is experienced in presenting
testimony in various media.
E.W.Beck,Inc. t
MICHAELA. BELL
Energy Services Study
San Francisco Local Agency Formation Commission/California
Mr. Bell was Co-Project Manager on a project for the San Francisco Local Agency Formation
' Commission to complete an Energy Services Study addressing the risks,benefits,and feasibility of
various municipal or other public agency options for providing electric and other utility services to the
population of the City and County of San Francisco. The study investigated issues associated with rates,
reliability, and local control. The team evaluated generation, transmission, distribution,and alternative
energy services from a policy and risk perspective.
forms of providing gy P Y P P
Financing
Electric Distribution System Development
Merced Irrigation District/California
Mr. Bell was Project Manager for the preparation of the Consulting Engineer's Report on the project
feasibility.R.W.Beck reviewed the market penetration studies and customer commitment letters
inasmuch as the prospective customers are free to choose between their current supplier and Merced's
new system. Using the market analysis,R.W.Beck estimated the number of customers, their loads, and
retail revenues under Merced rates.
R. W. Beck evaluated the economy and reliability of Merced's power supply,Merced's projected electric
operations and maintenance expenses. R.W. Beck prepared pro forma financial statements that
demonstrated the ability of the Merced system to produce sufficient net revenues to pay current and
fixture debt service.
Annual Report of Systems Operations
Turlock Irrigation District/California
Mr. Bell compiled annual operating statistics,reviewed the District's operations, visited the District to
observe the condition of its properties, and discussed new projects that improve District operations with
District staff.R.W.Beck prepared an Independent Engineering Report for the District discussing and
commenting on the operations of the System by the District for the preceding fiscal year,including
recommendations for the future operations of the System by the District,as may be deemed necessary or
appropriate.
' Franchise Agreements
Analysis of SCE Proposed Franchise
City of Long Beach,Energy Department,California
Mr. Bell assisted the City in the negotiation of a Franchise Agreement with Southern California Edison
(SCE) Company. R.W. Beck performed an economic analysis of the franchise to compare it to a system
' purchase alternative.
The SCE franchise proposals were compared against the benefits of acquiring SCE's distribution
facilities in Long Beach. Ultimately the purchase of the system was abandoned and the City successfully
entered into a new franchise with added benefits.
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' R.W.Beck,Inc. 3