Elk Grove WD Board Meeting

Water Rates

Habib Isaac – PrincipalGregg Tobler – Task Manager

September 10, 2012

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Meeting Goals• Review timeline to date• Review Rate Design

– Fixed / Variable– Cost components– Variable cost allocation– Residential usage characteristics– Customer impact based on usage levels– Accounts affected by percentage change in bill

• What is the preferred rate structure?

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• Willdan and staff held first meeting with CAC on August 7th– Reviewed existing rate structure and fixed / variable options– Implementation options – (January versus July)– Identified next steps and timeline

• Finance Committee Meeting – (August 13th)– Supported CAC recommendation of January adjustments

• Modest adjustments instead of significant adjustments in future years– Directed staff to assemble finance team for debt restructuring – 40% Fixed / 60% Variable: too significant of a change when compared to current split of existing rate

structure• Willdan and staff held second meeting with CAC on September 4th

– Refined Fixed / Variable options– Fire protection allocation– Preliminary rates

• Board Meeting September 10th

– Refined Fixed / Variable options– Fire protection allocation– Preliminary rates

Water Study Summary

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• Fixed / Variable options: 60% / 40% 55% / 45%– 60% fixed / 40% variable: 2 tiered residential structure – 55% fixed / 45% variable: 3 tiered residential structure

• Fixed revenue– Costs either apportioned over accounts or based on meter size

• Variable revenue– Costs are allocated between customer classes based on usage

• Total water units used• Peak demand placed on utility system• Horizontal equity achieved

– Residential • Further allocated between tiers based on usage characteristics

Refined Fixed / Variable Options

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Scenario 1 – 45% Variable / 55% Fixed Rate Revenue

RequiredBase Max Day

Customer

Account

Meters &

ServicesFire Protection

Percent Allocation 100% 22% 23% 24% 25% 6%

Fiscal Year EndingFYE 2013 14,174,558$ 3,095,052$ 3,280,792$ 3,450,306$ 3,487,598$ 860,810$ FYE 2014 14,599,858$ 3,187,917 3,379,231 3,553,831 3,592,242 886,638 FYE 2015 15,037,758$ 3,283,534 3,480,585 3,660,423 3,699,985 913,231 FYE 2016 15,488,958$ 3,382,054 3,585,019 3,770,252 3,811,001 940,632 FYE 2017 15,953,658$ 3,483,523 3,692,576 3,883,367 3,925,339 968,853

45% 55%

• 25% of Debt is allocated to BASE (variable cost)

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Variable Cost Allocation

Category Description2011/12

Consumption

% of

Consumption

Base Variable

Cost

3095051.787

Non-Residential 477,763 15.2% 471,770

Irrigation 89,597 2.9% 88,473

Residential Metered 1,608,880 51.3% 1,588,697

Residential Flat 958,132 30.6% 946,112

Total 3,095,052$

Category DescriptionPeaking

Factor

Weighted

Peaking

factor

% of PeakPeak Variable

Cost

3280792.275

Non-Residential 1.90 908,180 14.6% 479,469

Irrigation 2.74 245,238 3.9% 129,472

Residential Metered 1.97 3,173,338 51.1% 1,675,346

Residential Flat 1.97 1,887,520 30.4% 996,506

Total 3,280,792$

Rate Revenue Required

Base Max DayMeters &

ServicesFire Protection

Percent Allocation 100% 22% 23% 24% 25% 6%

Fiscal Year EndingFYE 2013 14,174,558$ 3,095,052$ 3,280,792$ 3,450,306$ 3,487,598$ 860,810$ FYE 2014 14,599,858$ 3,187,917 3,379,231 3,553,831 3,592,242 886,638

45%

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Total

Variable

Cost

% of

Variable

Cost

951,238 15%

217,945 3%

3,264,043 51%

1,942,618 30%

6,375,844$ 100%

Category

Description

Non-Residential

IrrigationResidential Metered Residential Flat

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• 3 Tiered Rate Structure

• Residential usage characteristics

Residential Usage Characteristics

Winter

Accounts

% of

Accounts

Water

Usage

% of Total

Water

Tier 1 5,791 83% 44,144 58%

Tier 2 949 14% 19,559 26%

Tier 3 243 3% 12,435 16%

Summer

Accounts

% of

Accounts

Water

Usage

% of Total

Water

Tier 1 2,001 28% 20,839 12%

Tier 2 3,273 46% 72,898 41%

Tier 3 1,794 25% 86,146 48%

Winter Avg Use = 11 HCF Summer Avg Use = 25 HCF

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Scenario 1 – Preliminary Rates

Residential Accounts• Tier 1 = $1.51• Tier 2 = $2.50• Tier 3 = $4.53Non-Residential

Accounts• $1.99Irrigation Accounts• $2.43

Existing Structure

• Tier 1 = $1.46• Tier 2 = $1.80

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Scenario 1 – Fixed Charges

J uly 1, 2013

35.19$

40.84

52.14

80.39

114.30

193.40

306.41

588.93

927.95

Meter Charge*

3/4"

6"

8"

4"

1.5"

2"

3"

5/8"

1"

Existing

56.53$

56.53

56.53

73.48

118.71

446.56

565.29

847.93

1,170.14

Difference

(21.34)$

(15.69)$

(4.39)$

6.91$

(4.41)$

(253.16)$

(258.88)$

(259.00)$

(242.19)$

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Customer Impact – Scenario 1

56.53 52.14 56.53 52.14 56.53 52.14

17.52 18.10

37.76 45.16 54.60

87.33

Existing$74.05

Proposed FY2013 $70.24

Existing$94.29

Proposed FY2013 $97.30

Existing$111.13

Proposed FY2013 $139.47

Low - 12 HCF Med - 24 HCF High - 36 HCF

Variable

Base

28.34

3.01

(3.81)

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Scenario 2 – 40% Variable / 60% Fixed

Rate Revenue Required

Base Max DayCustomer

Account

Meters &

ServicesFire Protection

Percent Allocation 100% 16% 23% 30% 24% 6%

Fiscal Year EndingFYE 2013 14,174,558$ 2,331,776$ 3,280,792$ 4,301,593$ 3,399,587$ 860,810$ FYE 2014 14,599,858$ 2,401,739 3,379,231 4,430,660 3,501,590 886,638 FYE 2015 15,037,758$ 2,473,776 3,480,585 4,563,551 3,606,614 913,231 FYE 2016 15,488,958$ 2,548,000 3,585,019 4,700,478 3,714,829 940,632 FYE 2017 15,953,658$ 2,624,445 3,692,576 4,841,502 3,826,281 968,853

40% 60%

• Entire Debt obligation is under Fixed

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Scenario 2 – Preliminary Rates

Residential Accounts• Tier 1 = $1.55• Tier 2 = $3.79

Non-Residential Accounts

• $1.75

Irrigation Accounts• $2.19

Existing Structure

• Tier 1 = $1.46• Tier 2 = $1.80

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Scenario 2 – Fixed Charges

Existing

56.53$

56.53

56.53

73.48

118.71

446.56

565.29

847.93

1,170.14

J anuary 1, 2013

37.23$

43.91

57.25

90.61

130.64

224.05

357.49

691.09

1,091.42

Meter Charge*

3/4"

6"

8"

4"

1.5"

2"

3"

5/8"

1"

Difference

(19.30)$

(12.62)$

0.72$

17.13$

11.93$

(222.51)$

(207.80)$

(156.84)$

(78.72)$

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Customer Impact – Scenario 2

56.53 57.25 56.53 57.25 56.53 57.25

17.52 18.58

37.76 37.16 54.60

69.22

Existing$74.05

Proposed FY2013 $75.83

Existing$94.29

Proposed FY2013 $94.41

Existing$111.13

Proposed FY2013 $126.47

Low - 12 HCF Med - 24 HCF High - 36 HCF

Variable

Base

15.34

0.12

1.78

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Proposed Financial Plan / Rate Structure• January implementation date• Debt restructured to achieve future level payments• Annual revenue adjustments limited to 3%• Selection of fixed / variable percentage split

− 55% / 45%− 60% / 40%

• Fixed cost spread over accounts and meter size• Variable cost allocated to customer classes based on usage

and peaking factors• Residential tiered rate structure tied to fixed / variable split