1. Average Annual Percent Cost Increase since 1999: EID Water, cost for 1500 cf per month & national CPI-U detail for water, wastewater, & solid waste

2. Total (Cumulative) Percent Cost Increase since 1999: EID Water, cost for 1500 cf per month & national CPI-U detail for water, wastewater, & solid waste

3. Comparison of CPI-U All Items Index with Detail Index for Water and Sewer and Trash Collection Services using index values reported for December of each year Earliest data for the Detail Index is from year 2000. 1996-1999 Detail data is extrapolated from the trend line using quadratic curve fit.

4. Comparison of CPI-U All Items Index with Detail Index for Water and Sewer and Trash Collection Services Quantified as proportion of 1996 value Earliest data for the Detail Index is from year 2000. 1996-1999 Detail data is extrapolated from the trend line using quadratic curve fit.

5. Comparison of CPI-U All Items Index with Detail Index for Water and Sewer and Trash Collection Services Quantified as percentage of 1996 value Earliest data for the Detail Index is from year 2000. 1996-1999 Detail data is extrapolated from the trend line using quadratic curve fit (order 2 polynomial).

6. Comparison of change in CPI-U Detail Index for Water and Sewer and Trash Collection Services with change in EID Water Rates Earliest data for the Detail Index is from year 2000. 1996-1999 Detail data is extrapolated from the trend line using quadratic curve fit (order 2 polynomial).

7. Comparison of change in CPI-U Detail Index for Water and Sewer and Trash Collection Services with change in EID Water Rates 2001: 13.3% rate cut in pumped zone (9.2% cut for entire district) 2009: 5.6% rate cut relative to 2008 pumped rates: Rates changed to use one rate schedule for all customers, rate formulas changed to use 70/30 cost recovery.

8. Comparison of change in EID Total Expenses per water service, EID Water cost for 3,000 cf bimonthly, and CPI-U detail inflation index Costs on this graph are per water customer General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

9. Comparison of change in EID Operating Expenses per water service, EID Water cost for 3,000 cf bimonthly, and CPI-U detail inflation index Costs on this graph are per water customer General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

10. Comparison of change in CPI-U Detail Index for Water and Sewer and Trash Collection Services with change in EID Water Rates and EID Total Cost Growth in Total Costs roughly doubled under budgets & planning by 2001 – 2007 GM

11. Comparison of Change in Total Costs with Change in Total Revenues General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

12. Comparison of Change in Operating Costs with Change in Operating Revenues General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

13. Total Costs & Total Revenues General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

14. Operating Costs & Operating Revenues General Manager: Ane Dyster Interim GM: Tom Gallier General Manager: Jim Abercrombie

15. Comparison of change relative to 1996 in: EID Water Rates: Cost for 3,000 cf bimonthly CPI-U detail index, national average customer cost for water, sewer, & trash EID Operating Expenses per water service [per customer]

16. Change in costs relative to 1996 in inflation-adjusted (constant 1996) dollars: Inflation metric uses CPI-U detail index for water, sewer & trash EID Operating Expenses per water service [per customer] CPI-U detail index, national average customer cost for water, sewer, & trash EID Water Rates: Cost for 3,000 cf bimonthly in pumped zone for year with separate pumped/gravity rates

17. CPI-U all items index, national average consumer costs (urban) EID Water Rates: Cost for 3,000 cf bimonthly in pumped zone for year with separate pumped/gravity rates Change in costs relative to 1996 in inflation-adjusted (constant 1996) dollars: Inflation metric uses CPI-U index for all items EID Operating Expenses per water service [per customer]

18. System analysis needs to begin with scoping the system. One element of analytical scope for EID rate changes is time. At the 2/24/2014 meeting I noted that the need for high water rate increases beginning in the most recent five years was due to artificial restraint of rates from 1996 to 2009. In the latter 13 years the aggregate rate increase in the Pumped Zone was 5.6% while national water cost increased by an average of 82%. Following a break in the meeting Director Prada stated briefly that there were four “rate hikes” In that 13-year period. This demonstrates Director Prada’s overriding focus on “rate hikes”. This neglects two rate decreases in that period, the larger being a 13.3% decrease in 2001 in the Pumped Zone. The important result is what I stated: Understanding need for recent high rate increases must begin with the ultimate cause, freezing and lowering rates while costs increased. Because of Present-Value considerations, what matters is not only how much rates changed but also when they changed. One step down in level of abstraction, the major source of the rate problems was in the first 8 years of the 13. In four of the last five years the board used a 5% annual increase to adjust for cost inflation. If this had begun in 1996 it would have been excessive; beginning in 2004 it was insufficient to make up for the preceding cumulative shortage in Operating Revenues.

19. Water cost scoping involves geography and industry. Graphs on the next two pages show two points that consumer costs for water, sewer, and trash services have risen much more rapidly than overall consumer costs. This is from national averages reported by the BLS in CPI-U data. A further finding is essential to recognize in analyzing consumer costs:  Inflation in overall consumer costs (the CPI-U “All Items” index) has been growing as a linear function of time. Annual cost growth has been by adding an approximately constant amount.  Inflation in water/sewer/trash costs has been growing as a quadratic function of time. Annual cost growth has been by multiplying the preceding year’s cost by an approximately constant percentage. Similar cost growth is evident in data from multiple rate surveys for the State of California. To date, data are consistent with a hypothesis that cost factors affecting water agencies are common to most water agencies throughout the nation and throughout California. EID directors who campaigned on an argument that “There’s something wrong with EID” need to recognize that EID has been outperforming most of California and most of the United State in restraining cost increases. It’s not possible to fix state and national problems by local action on the EID board.

20. Comparison of national inflation in Water, Sewer, and Trash consumer costs with all consumer costs Quantified as percentage of 1996 costs for both indices Detail cost index in CPI-U tables for “water, sewer, & trash” Overall CPI-U cost index for “all items” Trend line is quadratic (order 2 polynomial) Annual increase is multiplicative Trend line is linear: Annual increase is additive

21. National inflation in Water, Sewer, and Trash consumer costs relative to all consumer costs (CPI-U “All Items”) [graphed with the domain transform to relate to “constant 1996 dollars” for All Items] NATIONAL CPI-U detail cost index for water, sewer, & trash NATIONAL CPI-U index for “All Items”

22. Checking a different region The next page includes a bar graph of average customer rates in Massachusetts, for retail rates set by over 60 cities and agencies. Two subsequent pages merge traces of the MWRA data, the CPI-U data, and EID data. MWRA is the Massachusetts Water Resources Authority, a water wholesaler. Its Advisory Board publishes an annual survey of its customers’ retail water costs for consumption of 1,200 cubic feet per month (2,400 cf bimonthly). In the MWRA survey, this bar graph tracks customer costs since 1991. Two subsequent line graphs combine CPI-U data, MWRA data, and EID data. They show that increases in MWRA retailers’ average customer costs are nearly identical to increases in average customer costs reported by the national CPI-U detail index for water, sewer and trash services. High customer cost growth is measured in Massachusetts and in the nation as a whole: It’s not specifically an EID problem. In fact, EID costs have been held well below the nadional and MWRA indices, gaining on them only since high rate increases began in 2010.

23. MWRA 2012 Water & Sewer Retail Cost Survey with 1991-2012 data history for 1,200 cf water consumption monthly (2,400 cf bimonthly) survey by Massachusetts Water Resources Authority Advisory Board Content to the left is an unmodified image of one page in the MWRA Advisory Board report.

24. Comparison of EID water+sewer annual costs with MWRA retailers water+sewer annual costs and CPI-U water+sewer+trash detail index MWRA: 1,200 cf water monthly [2,400 cf bimonthly], sewage flow not stated in data source [This is approximately equivalent to EID’s “Medium” water usage case; inside usage is similar, Massachussetts has more natural rainfall and less landscape irrigation.] EID: 2,400 cf water bimonthly [1,200 cf monthly], 1,800 cf wastewater bimonthly [900 cf monthly]

25. Change relative to 1996 constant dollars (CPI-U All Items index) for… MWRA: 1,200 cf water monthly [2,400 cf bimonthly], sewage flow not stated by data source [This is approximately equivalent to EID’s “Medium” water usage case; inside usage is similar, Massachussetts has more natural rainfall and less landscape irrigation.] EID: 2,400 cf water bimonthly [1,200 cf monthly], 1,800 cf wastewater bimonthly [900 cf monthly]  MWRA (Massachusetts Water Resources Authority) water + sewer  EID Water + Sewer  EID Water  National CPI-U detail index for water + sewer + trash