1. Comprehensive Rate Study & Cost Allocation Analysis
Public Workshop #1 | October 9, 2017

2. Cost of Service Approach Changes since last study
Agenda: Today’s focus is to review the study approach, confirm the project schedule, and discuss key issues or challenges
Cost of Service Approach
Changes since last study
Existing rate schedule
Preferred alternatives
Key objectives
Next steps

3. Purpose – Adjusting to the New Normal: Changes to water demands and system costs necessitate review of existing rates and charges
Water Use is down
Expenditures exceed revenues
Revenue Resiliency
Customer Understanding & Acceptance
Identified Challenges
Identify revenue needs
Analyze customer data
Align expenditures with use and revenues
Integrate with Master Plan
Focused Solutions
Legal considerations
Customer impacts
Implementation of July 1, 2018
Additional Considerations?

4. Cost of Service Analysis: Step-by-Step approach to developing sound and defensible rates
Policy & Rate Structure Review
Revenue Requirement Analysis
Demand Analysis
Cost of Service Analysis
Rate-Design Analysis
Public Outreach & Messaging

5. Adjusting to the New Normal: Key considerations and changes to system costs necessitate review of existing rates and charges
Water use reductions
Expenditures exceed revenues
Future funding viability
Customer impacts & understanding
Revenue resiliency
Legal considerations
Ord / Marina Cost Centers

6. Policy and Rate Objectives: High-level direction based on specific District needs and community values
Study Objectives
Financial Stability
Review of Rate Trends and Existing Rates
Cost of Service Pricing
Cost Recovery
Policy Considerations
Financial Resilience
Easily Administered
Fair & Equitable
Proposition 218 & 26 Compliance

7. Revenue Requirement: Forecasts expenditures and defines necessary revenue levels
Aims to bridge potential shortfalls through rate changes
Plan for continued cost recovery in an uncertain demand environment
Must also account for:
Interplay of demands and expenses
Impacts to cash flow
Funding, capital, and other policy goals
Customer impacts
Risk and uncertainty
Revenues vs Expenditures*
Carollo’s Approach
Challenge: Expenditures > Revenues
*Figures for illustration purposes only

8. What is the New Normal: Forecasting future demands will significantly shape our planning of revenues and expenditures
-13% -5% -1% 1% 1% 1% 1% 1% 1% - Marina % Change
-9% -2% 7% 2% 2% 2% 2% 2% 2% - Ord

9. Demand Bounce Back: We will analyze where conservation has occurred and estimate the impact of demand hardening
It is critical to understand specific customer class characteristics, rather than generalized bounce-back

10. Defining Customer Classes: Detailed consumption analysis can reveal seasonal variations across the District’s user groups
Distinct usage patterns are used to define different classes and different costs of service

11. Cost of Service Analysis: Functional cost allocation will categorize how costs are incurred, and how revenues should be recovered
Water System
System Functions
Revenue Categories
Billing & Admin
Storage
Conveyance
Distribution
Water Resources
Meter Size
Usage
Customer

12. 30% fixed / 70% Variable (eliminated due to revenue risk)
Fixed vs Variable: Revenues that more closely reflect expenditures can limit revenue risk
Key Highlights:
Historical BMP was
30% fixed / 70% Variable (eliminated due to revenue risk)
Combination of decoupling and increase to fixed charge can limit potential cost recovery risk

13. System Peaking: Costs are allocated to each customer class based on its use realized demand characteristics
System Capacity
January
December
Peak Demand
Example: Based on the Water Master Plan of a peer agency, 40% of the system is designed to meet Peaking capacity
Base Demand

14. Existing Rates: Will be reviewed for potential adjustments
Marina
Ord
Water Consumption Charge
0-8 hcf
Tier 1
2.70 per hcf
3.40 per hcf
8-16 hcf
Tier 2
3.10 per hcf
5.22 per hcf
16+ hcf
Tier 3
5.47 per hcf
7.03 per hcf
Capital Surcharge  -
20.00 per EDU
Flat Rate
per unit
Size
Fee (Monthly)
5/8" or 3/4"
21.71
37.55 1'
35.02
58.57
1-1/2"
57.22
93.62 2'
83.85
135.66 3'
146.03
233.85 4'
234.77
373.96 6'
456.71
724.39 8'
900.86
1,425.66
 Monthly Wastewater Charge
13.44 per EDU
29.90 per EDU $5.00 Capital Surcharge
Have the assumptions and objectives behind this rate structure changed?
Should they be updated/refined?
What are potential customer Impacts?
What is the potential revenue (financial) risk?

15. Rate Design Analysis: Rate considerations will balance your needs
Prop. 218 Compliance
Equity Across Customer Classes
Affordability at Low Usage
Financial Stability
Economic Uncertainty
Reliable Projections
Sufficient Revenue
Have the assumptions and objectives behind this rate structure changed?
What are potential customer Impacts?
What is the potential revenue (financial) risk?

16. Rate Alternatives: Review to encompass a variety of available alternatives to achieve key objectives
“What are the available alternatives”
“Can Rate Design be meet key objectives?”
Fairness
Encourage Conservation
Equity Across Customer Classes
Affordability at low usage
Financial Stability
Administrative Ease

17. Schedule and Next Steps
Rate Adoption
July 1, 2018
Consideration of Initiating Proposition 218 Process
Q1 CY 2018
Introduction of Draft Results
Board Meeting (December)
Preparation of Draft Results
October - November

18. Q&A