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HomeMy WebLinkAboutPower Point HDR Water Rate Study Presentation © 2014 HDR, all rights reserved.Study UpdateSummary of the Water Rate September 2, 2020 22 Presentation SummaryStepsNext Review current water rate structuresOverview of Cost of ServiceProvide feedback and direction on preferred capital scenario Review Results of the Water Revenue RequirementProcessof the Rate Setting Overview Purpose of the Water Cost of Service Study 3 Purpose of the Water Study demographics and customer characteristicsTailored to the District’s water system operation and unique Develop the study using generally accepted methodologiestarget reserve balancesMeet Prudent rate funding of capital DSC) ratio(coverageMaintain target debt service criteriaprudent financial planning Reflect Meet the intent of Proposition o ratesbased -Develop equitable and costDistrict’s water systemthe repair and improve operate, maintain, a sufficient level of revenues Provide Developing Cost 4 water ratesCompares the revenue of the utility to the expenses to evaluate the level of overall Revenue Requirement of serviceEquitably allocates the revenue requirement between the various customer classes Cost of Service along with any other rate design goals and objectivesDesign rates for each class of service to meet the revenue needs of the water utility, Rate Design- Revenue Requirement Overview of the 6 basis” methodology Generally accepted method for municipal utilities•alone basis”-“standUtility is analyzed on a Water rates need to support operations and capital•No transfer of funds from other District funds (Electric)•time period Typically a five to ten year period•planning criteriaUses prudent financial Maintaining sufficient ending reserve balances•Adequate funding of renewal and replacements•revenues to expensesCompares utility Determines the level of rate adjustment necessary•Revenue Requirement 777 Overview of the Revenue Requirement capital funding needsDeveloped rate transition plans to meet operating and term borrowing-no new long–funded capital All capital improvements are funded through annual rate Full Capital Funding (Farr West Study)–Scenario 3 Medium Level of Capital Funding–Scenario 2 Baseline, Maintain Current Planned Adjustments–Scenario 1 discussionDeveloped capital funding scenarios for Board input and Assumed annual customer growth of 1.0%Developed a projection of rate revenues at current rate levels(~3.0% annually)Projected through FY 2030 based on historical inflationary increases Based on the FY 2020 and FY 2021 budgeted expenses Revenue Requirement Scenario 3 funds an average of $7.2 million/year in capital Projects $72 million total•Scenario 2 Funds an average of $4.3 million/year in capital projects, $43 million total•Scenario 1 funds an average of $3.4 million/year in capital projects, $34 million total•8 Capital Improvement Plan– Revenue Requirement Summary$22.4mScenario 3, $22.4mScenario 3, $20.3mScenario 2, $20.3mScenario 2, $18.9mScenario 1, $18.9mScenario 1, 4.0%4.0%6.0%15.0%15.0%Cap$7m–3 Scenario %5.0%5.0%5.0%5.0%5.0$4m Cap-2 Scenario 2.5%2.5%2.5%2.5%%3.0$3m Cap (Baseline)-Scenario 1 FY 2025FY 2024FY 2023FY 2022FY 2021 9 Combined Reserve Balance by Scenario $111.53 $107.24 $103.12 $97.28 $84.59 $73.56 Cap$7m–3 Scenario $93.88 $89.41 $85.15 $81.10 $77.24 $73.56 $4m Cap-2 Scenario $83.63 $81.59 $79.60 $77.66 $75.77 $73.56 $3m Cap (Baseline)-Scenario 1 FY 2025FY 2024FY 2023FY 2022FY 2021FY 2020 11 Average Customer Bill Impacts adjustments and/or rate design revisionsnecessary cost of service beforeReflects average customer bill Assumes a 3/4” meter and 5,000 gallons per month Local Average Residential Bill Comparison Board Discussion Transition PlanCapital Funding and Rate – Cost of Service Overview of the Water Utility Cost of Service 15 Develop average unit costs•Determine if subsidies exist•Objectives of Cost of Service Meet the intent of Proposition 218•Revenues reflect costs•Avoids subsidies•Generally accepted as “fair and equitable”•Why cost of service customer classes of serviceAnalysis to equitably allocate the water revenue requirement to the •What is cost of service? 16 Cost of Service Summary prior studies completed for the DistrictSame methodology and customer classes are being used as in customer class impactsLimits the ability to phase in cost of service results and Meter and consumption charges•ratesUnit costs are the basis for the proposed customer classCost of service must demonstrate the cost basis for each Rate Design Overview of the Rate Design 18 and equitablebased -Are costclass of serviceutility, and each revenues of the the target revenues to meet Produce sufficient Districtobjectives of the design goals and Meet the rate analysescost of service requirement and revenue findings of the Reflect the Current Rates as of 01/01/2020 3.60 Zone 73.00 Zone 62.40 Zone 51.80 Zone 41.20 Zone 30.60 Zone 2$0.00 Zone 1gal)1,000 Charge (per Zone $1.91 gal1,000 $/Commercial Consumption 721.16 8"576.93 6"384.62 4"268.81 3"160.58 2"116.80 1 1/2"83.09 1"69.66 3/4"$69.66 5/8" x 3/4"Charge/MonthMeter Commercial0.97 gal+ 8,000 $0.78 8,000 gal–0 Metered Consumption (1,000 gal)83.09 1"69.66 3/4"$69.66 5/8" x 3/4"Charge/MonthMeter Residential 19 20 Rate Design Summary Proposed January 2021 implementationyear period-Proposed rates will be developed for a up to a fiverequirement and cost of service resultsIf no change, rate levels are adjusted based on the revenue Revise rate structure (meter and consumption charge levels)Maintain current rate structureBoard input/direction on proposed rate structure changesConsumption chargeeter chargeM customer classCost of service unit costs provide the cost basis for each 21 Next Steps…(January 2021)Implement adopted rates If no majority protest (<50%)•Adopt proposed rates Hold a public hearing Send customer notification If directed by Board begin Proposition 218 processBoardPresent study final results and recommendations to the Finalize the cost of service analysis and rate designsplan and rate transition planIncorporate Board input and direction on capital funding Thank you for your input!