HomeMy WebLinkAboutAgenda Bill PresentationPart4 11/1/2010WATER AND WASTEWATER
Future Adjustments to Water Rates
Two automatic adjustments are proposed for the City's water rates to help cover the costs of
providing water service to customers for the next five years.
Automatic Water Rate,Adjustments for Changes in SCWA Costs
The City. obtains most of its water supplies from the _Sonoma County Water Agency. SCWA
typically increases its wholesale water rates (including the rate charged to the City) in the spring of
each year, with:the rates'effective in July of each year. In the spring of 2010 the rate applicable to
'the City's water purchases 'increased by nearly 7 percent, and the two prior year increases
exceeded 10 percent. SCWA has indicated that future annual water rate'increases of 10 percent
are anticipated for'the next five years..
For. FY'1;0 -11, it is estimated that the City will purchase about 7,175 AF of water from the SCWA.
SCWA's increase. water rate will result in increased costs to the City of about $446,000 in FY 10
.11. This cost'increase was not fully anticipated in 2007 when the City adopted its five -year rate
plan, nor were other prior large rate increases imposed by the 'SCWA. The City has been able to
absorb part of'the impact of higher wholesale water costs, in part, through greater utilization of
groundwater, as�well as lower overall water demands.
u
In the fall of 2008, the Governor signed into law Assembly Bill (AB) 3030. AB 3030 authorizes the
City to, adopt water rate schedules that authorize automatic adjustments that pass through
increases in wholesale charges for water and /or inflation. It is recommended that the City adopt
procedures for implementing automatic adjustments to water rates based on SCWA water
charges, as,allowed by AB 3030. Automatic adjustment procedures may be adopted for up to five
years, and then need to be re- approved.
THE REED GROUP, INC.
DRAFT — 10/27/2010 PAGE 41
CITY OF PETALUMA
FINANCIAL PLAN AND:RATE STUDY
Exhibit III -8;
City of Petaluma -- Department
of Water Resources and Conservation
Water Bill lm "acts for Representative
Customers 1
Previously
% Change
Monthly
Approved
Proposed
Due to
Water Use
Water Rates
. Water Rates
Restruc.
he
Jan. 2011
Jan. 2011
1
Single- Family Residential
•
•Low Use
6
$ 23 .33
$ 22.82
-2.2%
Typical' Use
10
$ 35.56
$ 34.73
-2.3%
High Use
18
$ 62.84
$ 61.13
-2.7%
Very High Use
50
$ 21.4.26
$ 230.67
7.7%
Non- Residential
20 -unit Apt. Bldg. (2" mtr.)
100
$ 333.46
$ 335.09
0.5%
0.5%
Office Bldg. (2" mtr;)
80
$ 270.66
$ 272.09
Restaurant (1" mtr.)
60
$ 195:47
$ 196.84
0.7%
Landscape Irrig. (1 1%2" mtr..)
50
$ 169.40
$ 170.90
0.9%
Notes:
(1) Proposed rates are revenue neutral, overall,.
to the previously approved water rates for .
®
January 2011.
Future Adjustments to Water Rates
Two automatic adjustments are proposed for the City's water rates to help cover the costs of
providing water service to customers for the next five years.
Automatic Water Rate,Adjustments for Changes in SCWA Costs
The City. obtains most of its water supplies from the _Sonoma County Water Agency. SCWA
typically increases its wholesale water rates (including the rate charged to the City) in the spring of
each year, with:the rates'effective in July of each year. In the spring of 2010 the rate applicable to
'the City's water purchases 'increased by nearly 7 percent, and the two prior year increases
exceeded 10 percent. SCWA has indicated that future annual water rate'increases of 10 percent
are anticipated for'the next five years..
For. FY'1;0 -11, it is estimated that the City will purchase about 7,175 AF of water from the SCWA.
SCWA's increase. water rate will result in increased costs to the City of about $446,000 in FY 10
.11. This cost'increase was not fully anticipated in 2007 when the City adopted its five -year rate
plan, nor were other prior large rate increases imposed by the 'SCWA. The City has been able to
absorb part of'the impact of higher wholesale water costs, in part, through greater utilization of
groundwater, as�well as lower overall water demands.
u
In the fall of 2008, the Governor signed into law Assembly Bill (AB) 3030. AB 3030 authorizes the
City to, adopt water rate schedules that authorize automatic adjustments that pass through
increases in wholesale charges for water and /or inflation. It is recommended that the City adopt
procedures for implementing automatic adjustments to water rates based on SCWA water
charges, as,allowed by AB 3030. Automatic adjustment procedures may be adopted for up to five
years, and then need to be re- approved.
THE REED GROUP, INC.
DRAFT — 10/27/2010 PAGE 41
WATER AND WASTEWATER
CITY OF PETALUMA FINANCIAL PL A ND'RATESTUDY
Exhibit 111-8 includes a worksh. eef that could be used to calculate the automatic rate adjustments
for changes in SCWA water charges on an, annual basis. The worksheet shows the calculation .for
hypothetical 10 percent water rate increase by SCWA for' FY 1 . 1 -12: The worksheet, .however,
could be used for any future in SCWA';s .wholesale water rate to the. City. The adjustment
to the City's water rates would only affect water usage rates. Monthly,service charges would not
be impacted. In the example provided,. a 10 percent increase in SCWA's water rate to the City
would result in a 4.4 percent increase in th&City's water usage charge to customers in FY 11 -12.
In effect,, any change in the rates charged by SCWA for wholesale water purchases could be
reflected in the City's wafer :rates as,soon at SCWA rates go into effect. Thi's`would help keep the
water utility financially ,w hole.. In addition, the automatic adjustment procedure avoids, the 'need to
annually go through a rate hearing process to adjust water rates in response to SCWA rate
changes. Italso avoids the need to anticipate SCVVAs future rate actions.
Exhibit 1 -8
`City of 'Petaluma -- Departmentof Water Resources and Conservation
Samole Calculation.of Automatic Rate ,Adjustment „for. FY 11 -12
SCWA Water Charges
Petaluma Aqueduct
Current Rate (FY 10 -11.) $ 603:92 /AF
Estimated Future Rate (FY 11. -12) 1 $ 664:31 ` JAF
Change $ 60.39 /AF
10.00%
Estimated SCWA Water Purchases (annual)
SCWA Water''Purchase Volume '7,296 AF-
Impact of SCWA Cost Change S 440;612'
Petaluma Water Usage Rate'lmpact
Est. Annual Water Usage Revenue (2)
Impact of`SCWA,CostChange
Petaluma Water Usage Rates
Single Family Residential
Tier 1
Tier 2
Tier 3
Tier4
MF; Comm:, Inst., Indus, & Irrig.
$ 10,119,000
in ScwA water ena
.4.4%
City's 21111
Water Usage
Pass - Through.
Rates
Adjustrhent (3)
$' 2.87
/hcf
$ 0.12
/hcf
$' 3.30
/hcf;
$ 0.14
/hcf
$ • 4.12
/hcf:
$ 0.18
/hcf
"$ 5.57
/hcf
$ 0:24
/hcf
S. 3. -15
/hcf
$ 0,14
/hcf
() thaproposed
mated ann sales.
WA FY 11-12 rate increase'of`'1Q' percent.
2 Based on rates
(3) Pass through adjustments would be added to the then current water usage rates.
Legend:
Data r input fields>
Resulting rate adjustments > Bold
THE REED'GROUP', INC.-
DRAFT — 10/2712010-
PAGE 42
WATER AND,WASTEWATER
CITY OF'PETALUMA FINANCIAL PLAN AND RATE STUDY
The City is, required to ga through the' formal water rate setting process, including 45-day
notification to all customers, w hen 'adopting the pass- through formula: It is recommended that this
be included in the action to approve the proposed new water rate structure.
Automatic Water Rate Adjustments for General Inflation
Wholesale water costs represent the single largest operating cost of the water utility, and currently
represents about 44 percent of :operating costs and about 39 percent of current water rate.
"revenues: While the automatic adjustment for wholesale water costs will provide means for
recovering $CWA water purchase costs, other cost changes will necessitate periodic increases In
the City's water; rates.
At present (and with the SCWA automatic adjustment), the City's water'utility is financially stable.
To maintain this stability, it is recommended that the City annually adjust. water rate based' on the
changes in general inflation. While changes in water utility costs are not directly aligned with
changes in general inflation, this method of indexing water rates should be adequate for several
years (periodic review of the utility's financial situation is recommended):
Consistent with the requirements of AB 3030, which allows for inflationary adjustments to water
and wastewater rates, the City should adopt a formula for annually adjusting water rates (in
January of each year) based, on the change in the San Francisco consumer price index (CPI).
This indexing would.,begin in January 2012. The financial plan presented in Section dI of this report
reflects this :indexing'recommendation.
D
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CITY OF PETALUMA
WATER•AND WASTEWATER
FINANCIAL PLAN AND RATE STU
This section 'of the report describes and presents recommendations for updating the City's
wastewater rates to provide sufficient :revenues `for the utility's ongoing operations„ debt service
obligations, and capital improvement needs.
The annual wastewater rate revenue requirement was presented in Section, 11 of the report as a
result of the development of the 5-year. _ :financial plan. Annual wastewater rate revenue
requirements for ;2011 were. used to . perform; rate analyses and to develop wastewater rate
schedules presented Herein. They reflect a 9 percent increase, overall, relative to the current
(2011) °wastewater rates thus a.4 percent reduction from the wastewater Yates approved in 2007
'scheduled for January. 2011.
The wastewater rate analyses presented herein include 'changes to improve equity across
customer ,classes, .reflect the cost of providing service, and. continue to encourage water
conservation.
Existing' Wastewater`.Rates
Exhibit IV -;1, on the. following ,page, summarizes the current wastewater rates of the City's
wastewater Utility. Vastewater, rates were last adjusted 'in,January 201.0, when, the fourth year of
the previously approved five- vear'rate plan was implemented. Exhibit :IV -1 also shows the; rates for
the .fifth year of the previous rate plan, with a 1''3 - percent increase. The 'rate, schedule ,shown in
Exhibit IV -1., as°well as all rate schedules presented in this report, show "rates ;on a monthly basis.
Utility billing within the City occurs on :a monthly basis with meters currently - read'. bi- monthly until
completion of..the conversion to- Automatic Read Meters (ARM) is achieved.
Single family iand multi- family residential customers are subject to fixed :monthly service charges
plus a usage charge based on winter water .usage. Each year the City monitors water .usage
during the winter (low use) months and determines the minimum usage for each residential
customer. Winter water usage is assumed to be primarily] indoor water usage. In July of each
year, the City calculates a new wastewater bill amount for each residential customer based on the
priorwinter water, °use. do 2010_, because of a cool and wet spring, water use from April /May billing
cycles were also included in the winter water use analysis:
Non- residential, wastewater customers are 'subject, to usage- based rates based „on actual water
usage within each billing cycle. Non - residential customers are assigned to low, medium, or high
strength category depending on the type of business and the strength of wastewater generated
using standard factors, 'for' 800 and TSS. By ,relating wastewater rates to -the strength
characteristics of wastewaterproducedby customers the rates more equitablyrefl Oct the..costs of
providing service. 'Th6rates are determined based :on standard strength characteristics for'each
category' :. Non- residential wastewater rates apply to actual water usage. A'fixed service charge is
also included in non - residential wastewater bills,
The Ciry provides wastewater service to about 30 customers that do not receive water service.
Flat wastewater rates :have been established for these customers based on' average residential
usage. The City also provides wastewater treatment, service Ito Penngrove 'Wastewater charges
are: collected through the county, with the rate based on the: flat rates for residential customers.
There , ,are about 514 equivalent single family dwelling units (ESFDs)' in' Penngrove currently
connected'to the City system.
THE REED GROUP, DRAFT — 10/27/2010 PAGE 44
11
0
WATER AND WASTEWATER
CITY•,OF PETALUMA FINANCIAL PLAN AND RATE STUDY
Exhibit IVA
City of Petaluma -- Department of Water Resources and Conservation
Previously Approved Waste Rates (1
Notes:
(1,) Effective January 1 each year.
(2) 'Includes customers for which wastewater flows are sampled
and "tested to determine appropriate charges.
The, City also provides wastewater service to six large industria'I customers for'which wastewater is
measured and sampled to determine loading characteristics. Monthly wastewater bills are based
on actua[ wastewaterflow and loading for each customer. The City provided data on actual flow
and loadirigs by industrial customers during FY 08 -09. This data is used in rate calculations
-presented hereim
Approxim 'ately, 24; percent of wastewater rate revenue is derived from the monthly service charges.
The charge is -the same for all residential dwellings (including multi - family dwelling units) as.
well as ail` non- residential customers, including industrial 'customers, regardless of demand or
potential demand on the wastewater system (with the exception of unmetered service charges
that, in effect, include a usage charge). The equity of *the current rate structure could be improved
if service charges reflect the capacity associated with each connection. The issue is illustrated with
the following "statistics:
•, Residential customers (including Penngrove) currently generate 72 percent of the
wastewater flow, 53 percent of the BOD loading and 71 percent of the TSS loading, but
generate 77 percent of wastewater rate revenues.
THE REED GROUP, INC. DRAFT — 10/27/2010
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[l
Jan. 2010
Jan. 2011
Monthly Service Charges
Single Family Residential
$
14.85
$
16.78
Unmetered
$
72;08
$.
81,.45
Multi - Family Resid. (per DU)
$
14.85'
$
16.78
Non- Residential
Low Strength
$
14.85
$
16.78
Medium Strength
$
14:85
$
16.78
High 'Strength
$
14.85
$
16.78
Metered Industrial (2)
$
14.85
$
16.78
Wastewater Usage Charge ($lhco
Single Family Residential
$
7.04
$
7.96
Multi - Family Residential
$
7.04
$
7.96
Non- Residential
Low Strength
$
7.01
$
7.92
Medium Strength
$
8.34
$
9.42
High Strength
$
10.79
$
12.19
Metered 1ndustrial (2)
Flow ( /hcf)
$
5.22
$
5.90
BOD' ($ /Ib)
$
0.51
$
0:57
TSS ($ /Ib)
$
0.55
$
0.63
Notes:
(1,) Effective January 1 each year.
(2) 'Includes customers for which wastewater flows are sampled
and "tested to determine appropriate charges.
The, City also provides wastewater service to six large industria'I customers for'which wastewater is
measured and sampled to determine loading characteristics. Monthly wastewater bills are based
on actua[ wastewaterflow and loading for each customer. The City provided data on actual flow
and loadirigs by industrial customers during FY 08 -09. This data is used in rate calculations
-presented hereim
Approxim 'ately, 24; percent of wastewater rate revenue is derived from the monthly service charges.
The charge is -the same for all residential dwellings (including multi - family dwelling units) as.
well as ail` non- residential customers, including industrial 'customers, regardless of demand or
potential demand on the wastewater system (with the exception of unmetered service charges
that, in effect, include a usage charge). The equity of *the current rate structure could be improved
if service charges reflect the capacity associated with each connection. The issue is illustrated with
the following "statistics:
•, Residential customers (including Penngrove) currently generate 72 percent of the
wastewater flow, 53 percent of the BOD loading and 71 percent of the TSS loading, but
generate 77 percent of wastewater rate revenues.
THE REED GROUP, INC. DRAFT — 10/27/2010
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[l
CITY OF PET.
WATER AND WASTEWATER
FINANCIAL PLAN AND RATE STUDY
• Non- residential customers currently generate 17 percent of the. wastewater flow, 25
percent of the BOD loading 22 percent of 'the TSS loading,,but`generate 14 percent of
wastewater rate revenues.
• Industrial customers currently generate 11 percent of the wastewater flow, 22 percent of
the 1300 loading and 7 percent'of the TSS loading, but generate 8 percent of wastewater
rate:revenues.
An alternative'way:to assess service charges is to relate them to the :s ze of the water meter (like is
done with water.rates). This approach provides a" means' °of allocating capacity related costs `to the
potential'demand each customer can place on the wastewater system.
Rate Setting Objectives
The development of wastewater rate recommendations has been guided by several rate- setting
objectives:, These objectives were reviewed with City staff and. include:
Rates _should generate sufficient • revenues to meet each utility's financial obligations
related to operations, debt service, capital improvement needs, and rriaihfenance of
prudent, reserves
• Rates :should be. equitable by reflecting the cost of providing service to each customer
class
• Rates should continue to encourage,water conservation and efficient water use
These objectives ; guided the review of and recommendations on wastewater rates and rate
structures.
Customer.Account Data and'Wastewater'Flow and LbMinq Estfimates
Wastewater rate .calculations are based on a number of factors related to the City's customers.
Factors include the number. of customers, :customer classes water usage °and .wastewater flows,
and strength characteristics of wastewater as determined by biochemical oxygen demand (BOD)
and. total suspended solids (TS% Exhibit IV -2{su marizes customer account and water usage
data obtained from the City's utility billing system, as -well as estimates of resulting wastewater flow
and loading characteristics:
Residential wastewater flows are estimated based qn water usage during winter months. Non -
residential "wastewater flows are -based on actual water usage, as most ;non- residential irrigation is
separate ely metered. There are about 312 multifamily residential wastewater accounts comprised
of about 5,081 'dwelling units. Aye rage winter,`water use for single farriily dwellings was about 5.6
hcf per month (about 140 gpd) in FY 09 -1 . The "average winter 'water use- for multi- family
dwellings in FY 09 -10 was about 4.7 hcf (about 116. gpd)', or about 83 percent Of that of single
family, residences.
THE;REED INC.
RAFT 10!27/2010 - PAGE 46
WATER AND WASTEWATER
CITY PETALUMA FINANCIAL PLAN AND RATE STUDY
THE REED GROUP, INC.
DRAFT - 10/27/2010
PAGE 47
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THE REED GROUP, INC.
DRAFT - 10/27/2010
PAGE 47
[I
CITY OF PETALUMA
WATER AND' WASTEWATER
FINANCIAL PLAN AND RATE STUDY
Residential flat rate customers (not: receiving water service); including,:the Penngrove area, are
assumed to have higher winter water usage than customers receiving water service. This is
appropriate for rate setting purposes fortwo reasons. First, flat rate customers do not have the
same financial incentive to reduce winter`water use, and therefore can be expected to, have, higher
water demands than those not on flat rates. Second, current winter water use patterns are lower
than historical norms for variety of reasons and a rebound is likely to occur at some point in the
future. Wastewater bills for customers with usage -based rates will self - adjust based on changes in
water usage patterns. That self-adjustment mechanism doesn't lexist for flat rate: customers.
Winter use of'8 hcf per month (about 200 gpd) isassumed for flatratecustomers.
Non- residential wastewater - customersi are classified into user groups with similar wastewater
strength characteristics of BOD and TSS. This rate study did !not include a review of the specific
assignment-of each ,non - residential customer into the 'low{ medium, or high strength categories.
Representative BOD and TSS strength concentrations utilized in a 0rev'iouss rate study for'the City
were also used . in this study, These factors 'had been. based on guidelines published' by the
California State Water Resources Control Board.(SWRCB).
Wastewater Rate; Callculati6ns
There are three steps to determining wastewater rates. These.are:
■ Determine annual wastewater rate:revenue requirements
■ Analyze the cost of providing service to each:customer class
■ Design Wastewater rates to recover costs from.each customer class.
Water Reclamation Rate Revenue'Requirements
The 5 -year financial plan was used to identify the .wastewater rate revenue 'needs for each fiscal
year of the five -year planning per .However;, as described previously, wastewater rates. are
adjusted on a calend'ar°year basis. Wastewater rate calculations presented herein are (based on
the revenue to be generated in 2011 and reflecta recommended overall 4,percent reduction from
the wastewater rates approved in 2007 to be implemented in January 2011. While total annual
wastewater rate revenue sfor FY 1041 and FY 11-12 shown in'the financial plan (see Exhibit 11 -7)
are about .$19.90 million and $21.23 million, respectively, the. revenue need for calendar year 2011
is about- $20.86 million.. This• is the annual. wastewater rate revenue requirement used for
wastewater'rate calculation purposes for 2011.
Cost of Service Analysis
Once the annual wastewater rate ;revenue requirement has, been determined, the next step in the
rate .setting process is to evaluate the cost of providing service. Wastewater rate calculations
contained herein ;are intended to generate the level of revenue commensurate-with the revenue
requirement from the City's wastewater service customers. This includes the' City's general
wastewater customers, industrial customers, and customers in Penngrove. The manner -in .which
each customer'is responsible for the wastewater utility's costs is the subject of the cost of'service
analysis.
To develop equitable wastewater rates, the revenue,requirement is allocated' to various customer
classifications according to 'the services' provided' and the demands placed on th'e `wastewater
system. The City has allocated a majority of wastewater costs on the basis of water usage
THE REED GROUP, INC. DRAFT =10/2714110 PAGE 48
OF PETALUMA
WATER.AND WASTEWATER
FINANCIAL .PLAN ,AND RATE STUDY
(wastewater flows), BOD, and TSS, resulting in usage charges generating about 76 percent of
wastewater rate revenues. Fixed service charges account for about 24 percent of wastewater
revenues., This revenue mix is consistent with the City's water conservation objective, but,also
creates a certain level of revenue volatility and uncertainty as water demands can vary from year to
year. As example, low water use'in the winter and,spring of 2010 has resulted in dower winter
water use being used to calculate residential wastewater bills. The lower use will result in a
reduction in FY 10 -11 wastewater revenue below what had been previously forecast.
Exhibit N3 summarizes how the 2011 wastewater rate revenue requirement was allocated to
fixed charges and well as °to flow, BOD, TSS components that end up in usage:charges. Once
total costs�are. allocated, unit costs were determined by dividing the total cost 'fo,r. each component
by the number of'units' identified in Exhibit IV -2. These unit costs are the basis for then assigning
costs to customer classes.
Exhibit IV -3
City -- Department.of Water Resources and Conservation
Determination of Unit Costs
'Fixed Charq"e, Costs (1).
Customer Accounts
Equiv. Single Family Dwellings (ESFDs)
Usage Charge O &M Costs for Collection (2)
Flow (MG)
Usage' Charge OBM Costs for Treatment (3)
Flow (MG)
BOD (Ibs)'
TSS (itis)
Usage Charge Capital and Debt Service Costs (4)
Flow, (MG)
BOD (lbs)'
TSS (Ibs)
Total 2011 W astewater`Rate,Rev. Rqmt. (5)
,Category
Allocation
'ercentages
Parameter
Allocation
Percentages
Allocated to
Each
Parameter (6)
Total
Quantities
(Z)
Unit Cost for
Each
Parameter
24%
23 %,
S 1,181,000
23,628
S
49.98
77%
S 3,860,000
24.633.
S
156.70
16%
100%
S 3,369,000
1,530
S
2,202.63
16 ° io
60%
S 2,011,000
1,530
S
1',314.78
20%
S 670,000
3;542,087
S
0.189
20 %
S 670,000
3,062,332
S
0.219
44%
70%
S 6,372,000
1,530
S
4,165.97
15 %,
S 1,365,000
3,542,087
S
0:385
15%
S 1,365,000
3,062,332
S
0.446
$ 20,863,000
(1) Includes . customercosts - aiportion ofadministrative costs and'a' portion ,of SRF debGservlce.
(2) Includes collection, storm drainage; and a portion of administrative costs. Also, reflects cost ofiset.due to non - rate revenues.
(3) Includes wastewater [realment, industrial prelreaLment,�and reclamatiorrcosts. Also reflects costoffsel due to use of rate stabilization fund.
(4) Includes debt'service (except asjn' eluded in fixed charge costs) and capital program transfer.
(5) Revenue regw emenl for CY 2011.,based on financial, plan model presented in Section It, the calendar year straddles two'fiscal years:
(6) Parameter allocations based: on previous_rate:analyses, information provided by City, and rate setting practices.
(7) From ExhibitN2'._
The cost of service analysis for wastewater is more complicated than 'water rate analysis in that
treatment.costs are separated from collection system costs. Collection system costs are allocated
entirely on the basis of flow, whereas treatment costs are allocated on the basis of flow, BOD, and
TSS.
While the City's budget structure does lend itself to the segregation of costs into collection and
treatment components, a more'challenging part of the analysis is the allocation of treatment costs
to flow, BOD and TSS parameters. Wastewater rate analyses performed in 2002 by the City
included, factors ' for -allocating both operating and maintenance costs and capital costs for rate -
setting purposes. This information as well as standard estimating practices used in rate setting has
THE REED GROUP, INC. DRAFT — 10/27/2010 PAGE 49
WATER rAND
CITY OF PETALUMA FINANCIAL PLAN AND RATE,STuDY
been used to allocate costs across flow, BOD, and TSS parameters. Wastewater treatment
operatingand maintenance costs have been allocated 60 percent based on flow,,:20 percent:based
on BOD, and 20 percent based on TSS. While most of the. capital investment is in treatment
facilities, the wastewater system also includes - significant investment in collection and disposal
facilities. For this reason, capital costs were I allocated 70 percent flow,' 1'5'percent'based
.on BOD, and 15 percent based, on TSS. We believe these allocations 'are reasonable, and are
within the ranges found in other wastewater rate analyses..
Unit costs are applied to the annual wastewater flov"s, as well as 130D and TSS loadings
associated - with each customer class to arrive of the allocation of total' costs`to each customer
class. 'Exhiblt'IV- presents the allocation of costs to each user "class.
Exhibit 1V -5 presentss the final wastewater user rates and charges for each customer' class. Rates
..for residential customers include a fixed service, charge for each dwelling unit, plus a usage charge
to be : applied to, Winter water usage. Unmetered, (sewer only) residential accounts will have a. flat
monthly wastewater charge based on average winter water usage. Non.- resideniial'(Iow, medium,
and high) customers are subject1o' a.service charge and •wastewater "usage rates applied to actual
monthly water,usage. Metered industrial customers are subject °to a monthly fixed service charge
as well as wastewater usage: charges 'based on actual sewer flows and individual strength
characteristics.
Wastewater Rate Design
It is recommended` that the': wastewater rate structure be modified in one important way. Rather
than charging all ;wastewater customers (and residential ,dwelling units) the same monthly service.
charge,'it is recomrnendedihat monthly'service: charges for non- residentiall,customers be related to
the size of the water meter. This allows ,the charge to each customer'to. reflect the potential.
demand that can be place on the wastewater system. The .current approach. is not as well
balanced as it could be. In addition, it is recommended' that the service charge for multhfamily
dwellings be smaller than for single family dwellings. Average winter water use for..multi- family
dwellings is about 83 percent of the winter water - use: for single family dwellings. Because; mutt~
family dwellings place a smaller demand -oft the wastewater system, the capacity portion of the
service charge should be correspondingly smaller.,
Monthly service charges for industrial customers currently are also. ;identical to residential
customers. It is proposed that fixed monthly service charges for industrial customers be related to
flow capacity associated `with wastewater flow meters: A charge is calculated for various flow
meter sizes.based on capacity co nsid'erations,,
Customers receiving wastewater service, but not water service, from the City (including customers
in Penngrove) should continue to .be charged. for service based on a flat monthly service charge.
The sewer -only residential wastewater rate for single family customers was determined to be
$77:05 per month based on estimated wiriter water use among flat,rate customers.
THE REED GROUP, INC. DRAFT- '10/27/2010'
PAGE 50
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THE REED GROUP, INC. DRAFT = 10/2712010 PAGE 52
CITY OF PETALUMA
t
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WATER AND WASTEWATER
FINANCIAL PLAN RATE STUDY
Proposed,Wastewater Rate Schedule for 2011
Exhibit IVY summarizes wastewater rates approved in 2007 for 2010 and 2011, as well as the.
proposed wastewater rate schedule for 2011. The, previously approved wastewater rates for
January 2011 are 13 percent higher than the current (2010) wastewater rates. The proposed
wastewater rates are, overall, 9 percent higher than the current rates reflecting a reduction of 4
percent from the rates approved in 2007 for January 2011.
Exhibit IV -6
rite nf'Pptaluma -- Department of °Water "Resources and Conservation
Previously Approved and Proposed W astewater 'Rates (1
Notes:
(1) Effective January 1 each year.
(2) Includes customers for which wastewater flows are sampled and tested to
determine.approp.riate charges.
(3) Reflects .an overall increase of 9 percent over the January 2010 (or a 4 percent
decrease relative to the January 2011 rates).
THE REED GROUP, INC. DRAFT - 10/27/2010 PAGE 53
Jan.2010
Jan.2011
Proposed
Structure 3
Mon thl y Zervlce °,Charge
Single, Family Residential.
$
14.85
$
16.78
$
17.22
Unmetered,
$
72.08
$
81.45
$
77.05
Multi- Family `Resid. (per DU)
$
14:85
$
1'6.78
$
15.00
Non - Residential
Up to 3/4" meter
$
14.85
$
16.78
$
17.22
1" meter
$
14.85
$
16.18
$
25.97
111 "'meter
$
14.85
$
16.78
$
47.65
2" meter
$
14.85
$
16.78
$
73.77
3" meter
$
14.85
$
16.78
$
134.75
4" meter
$
14.85
$
16.78
$
221.85
6" meter
$
14.85
$
16.78
$
439.41
Metered. Industrial,
.2" Ultrasonic Meter
$
14.85
$
16.78
$
200.04
10" Ultrasonic Meter
$
14.85
$
16.78
$
439.45
2" Magnetic Meter
$
14.85
$
16.78
$
134.75
3" Magnetic Meter
$
14.85
$
16.78
$
287.10
4" Magnetic Meter
$
14.85
$
16..78
$
439.45
6" Magnetic Meter
$
14.85.
$
16.78
$
1,092.38
Wastewater Usage Charge ($7hCO
Single Family Residential
$
7.04
$
7.96
$
7.45
Multi - Family' Residential
$
7.04
$
7.96
$
7.45
Non - Residential
LbWStrength
$
7:01
$
7.92
$
7:29
Medium Strength
$
8.34
$
9.42
High Strength
$
10.79
$
12.19
$
11.82
Metered Industrial (2)
Flow. ($7hcf)
$
5.22
$
5.90
$
5.75
BOD'($/lb)
$
0.51
$
0;57
$
0.57
TSS ($ /Ib)
$
0.55
$
0.63
$
0.66
Notes:
(1) Effective January 1 each year.
(2) Includes customers for which wastewater flows are sampled and tested to
determine.approp.riate charges.
(3) Reflects .an overall increase of 9 percent over the January 2010 (or a 4 percent
decrease relative to the January 2011 rates).
THE REED GROUP, INC. DRAFT - 10/27/2010 PAGE 53
CITY OF PETALUMA
WATER AND "WASTEWATER
FINANCIAL PLAN AND
Monthly service charges for all residential customers and non- residential' customers with % meters
will '.increase slightly under the proposed rates. Service: charges for non- residential customers with
larger meters will increase in relation_ to capacity provided by the meter. The' increases are
significant, but fully justified based on cost of service principals and rate - setting practices in the
industry. Nearly all usage rates will be reduced under the rate proposal•' Lower' usage rates may
more than offset "service charge increases forsome non - residential customers.
Impact of Proposed Rates on Representative Customer Bills
Exhibit IV -7 summarizes the impact of,'the proposed' wastewater rates relative.to the wastewater
rates - approved in 2007 for 2011- Any rate structure change will result in changes in customer bills,
even when applied. in a revenue neutral ; situation: The, proposed wastewater rates are however,
overall 4, percent lower than the previously approved rates for January 2011.
Most residential wastewater bills will be lower under-the proposed wastewater rates. Typical single
family residential wastewater bills will be reduced'by3`to 5 percent. ' Multi- family residental bills will
likely have larger percentage reductions. These reductions are the result of the more :equitable
allocation of fixed' charges °to customers (based on meter "Industrial customers as well as
nonresidential customemwith large meter sizes will be impacted by the change An. service : charge
calculation. The City's six industrial customers may see annual cost changes ranging from an
estimated -1 to 11 percent as a result of the proposed wastewater rates. However, the changes
are justified on a cost of service basis.
Exhibit °IV -7
City of _Petaluma -- Department of WaterrResources and; Conservation
Wastewater Bill Impacts for Representative Customers (1)
'roposed rates reflect an overall 4 percent reduction from previously approved rates for
January 2011.
THE REED GROUP, INC. DRAFT- 10/27/2010 PAGE54
Monthly
Sewer 'Flow
(hcf).
Previously
Approved - Proposed.
WW Rates WW Rates:
(Jan. 20 11) (2011.)'
% Change
;(1)
Single Family Residential
Low Use
4
$ 48 -.62
$
47.04
=3.3%
Typical Use
6
$ 64.54
$
61.94
-4.0%
High Use
10
$ 96.38
$
9175
-4.8%
Very High Use
15
$' 136.18
$
129,02
-5.3%
Non - Residential
207UnitApartmentBuilding
100
$ 1,131.60
$
1
-7.6 %
Office Bidg. (2" mtr.,'low strength)
B0
$. 650.38
$
657.21
1.1%
Restaurant (1 mtr., high strength)
60
$' 748.18
$
735.08
-1.8%
Metered Industrial
Smalllndustrial
Service
Charge
$ 1.6.78
$
287.1:0
700
hcf
$' 4,180.00
$
4;023':02
1,100
Ibs 5
$ 627.00
$
631,.97
6 50
Ibs TSS
$ 409.50
$. _.
431.94
$' 5,183.28
$
5'
3.7%
Large Industrial
Service
Charge
$ 16.78
$
439,45
4,000
hcf
$ 23,600.00
$
22
13,000
Ibs BOD
$. 7,410.00
$'
7
6,000
Ibs TSS
$ 3,780:06-
$: •
3;9$7,18'
$ 34,806.78
" $ 34
0.2 %
'roposed rates reflect an overall 4 percent reduction from previously approved rates for
January 2011.
THE REED GROUP, INC. DRAFT- 10/27/2010 PAGE54
WATER AND WASTEWATER
FINANCIAL PLAN AND RATE STUDY
Future Adjustments to Wastewater Rates
Anannual automatic adjustment is proposed forthe City's wastewater races to help cover the costs
' of providing wastewater service to customers forthe next five years.
Automatic Wastewater Rate Adjustments for General :Inflation
Similar to
inflation water utility, an. annual adjustment to the City's wastewater.rate based on changes n
is' recommended beginning in January 2012: Based on financial plan analyses
general
in `Section II, following the rate adjustments, in 2011 it, appears that the City°should be
able to limit annual rate increases to the `rate of general inflation, plus 1.5 percent, and meet
financial obligations'for operations and maintenance, debtservice, the current:capital improvement
program, ;a . nd. maintenance of financial reserves.
Indexing wastewater -rates to changes in general inflation plus 1.5,percent should be adequate for
several years (after which a review of the utility's financial situation would again be warranted).
Minimum annual rate increases of at least 2.0 percent are recommended. Therefore, if the San
®.. Francisco CPI is 0 percent, then the annual adjustment would be 2.0, percent.
THE REED GROUP, INC. DRAFT — 10/27/2010 PAGE 55