Item 5.1 - Visual slideshow presented by Staff at MeetingWATER AND WASTEWATER RATE STUDY AND
PUBLIC WORKSHOP
OCTOBER 15, 2019
•Rate setting overview
•Water
•Residential rate structure options (rate design)
•Recommended changes (cost of service)
•Proposed rates (financial plan)
•Wastewater
•Residential rate structure and collection options (rate design)
•Recommended changes (cost of service)
•Proposed rates (financial plan)
Agenda
Rate Setting Overview
•Consultant: Raftelis Financial Consultants
•Objectives:
•Comply with Proposition 218 and other statutes
•Update data on current customer usage demands
•Ensure sufficient funding for operations
•Provide different rate design options
2020 Rate Setting Framework
Rate
Structure
Sustainability
& Resiliency
Conservation
Affordability
And Equity
Legality and
Administration
Water Rate Design Options, Cost of Service, and
Financial Plan
•City potable rate
•Same as non-residential rate
•Recycled water rate
•Was 90% of non-residential commodity rate
•Now based on cost of service
•Two -year rate cycle
•Adopt rates for calendar year 2020 and 2021
Water Rate Structure: Rate Design
Water Rate Structure: Residential Rate Design Options
Option Residential Tiers Fixed (%)Variable (%)
2a 3 17%83%
2b 3 20%80%
2c 3 25%75%
Option Residential Tiers Fixed (%)Variable (%)
3a 4 17%83%
3b 4 20%80%
3c 4 25%75%
Option Residential Tiers Fixed (%)Variable (%)
1a 2 17%83%
1b 2 20%80%
1c 2 25%75%
Water Rate Design: Fixed/Variable
Water Rate Design: Option 1a Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 199 94%98%
2 >199 6%2%
Avg. usage:37 units Fixed:17%
Avg. summer usage:56 units Variable:83%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 2-tier | 17%/83% F/V
Water Rate Design: Option 1a Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $255.99 $267.83
Change ($)15.39 11.84
Change (%)6.4%4.6%
Water Rate Design: Option 1b Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 199 94%98%
2 >199 6%2%
Avg. usage:37 units Fixed:20%
Avg. summer usage:56 units Variable:80%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 2-tier | 20%/80% F/V
Water Rate Design: Option 1b Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $256.82 $268.66
Change ($)16.22 11.84
Change (%)6.7%4.6%
Water Rate Design: Option 1c Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 199 94%98%
2 >199 6%2%
Avg. usage:37 units Fixed:25%
Avg. summer usage:56 units Variable:75%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 2-tier | 25%/75% F/V
Water Rate Design: Option 1c Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $258.34 $270.06
Change ($)17.74 11.72
Change (%)7.4%4.5%
Option Pros Cons
Opt. 1a:
Two -tier structure with a 17/83
fixed/variable ratio
•Consistent with current rate
structure
•Most users experience a uniform
rate
•Provides good revenue stability
•Less affordable for low volume
customers
•Doesn’t send a strong
conservation signal
Opt. 1b:
Two -tier structure with a 20/80
fixed/variable ratio
•Consistent with current rate
structure
•Most users experience a uniform
rate
•Provides greater revenue stability
•Less affordable for low volume
customers
•Doesn’t send a strong
conservation signal
Opt. 1c:
Two -tier structure with a 25/75
fixed/variable ratio
•Consistent with current rate
structure
•Most users experience a uniform
rate
•Provides greater revenue stability
•Least affordable for low volume
customers
•Doesn’t send a strong
conservation signal
Water Rate Design: Option 1 Pros/Cons
Water Rate Design: Option 2a Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 >56 29%16%
Avg. usage:37 units Fixed:17%
Avg. summer usage:56 units Variable:83%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 3-tier | 17%/83% F/V
Water Rate Design: Option 2a Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $236.74 $247.61
Change ($)($3.86)10.87
Change (%)(1.6%)4.5%
Water Rate Design: Option 2b Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 >56 29%16%
Avg. usage:37 units Fixed:20%
Avg. summer usage:56 units Variable:80%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 3-tier | 20%/80% F/V
Water Rate Design: Option 2b Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $240.14 $251.18
Change ($)($0.46)11.04
Change (%)(0.2%)4.6%
Water Rate Design: Option 2c Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 >56 29%16%
Avg. usage:37 units Fixed:25%
Avg. summer usage:56 units Variable:75%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 3-tier | 25%/75% F/V
Water Rate Design: Option 2c Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $245.46 $256.78
Change ($)$4.86 11.32
Change (%)2.0%4.6%
Option Pros Cons
Opt. 2a:
Three-tier structure with a 17/83
fixed/variable ratio
•Mirrors essential water use,
average use, and high volume
•More affordable for low volume
users
•Stronger conservation signal
•Lesser revenue stability
•Could lead to demand hardening
Opt. 2b:
Three-tier structure with a 20/80
fixed/variable ratio
•Mirrors essential water use,
average use, and high volume
•Moderate revenue stability
•Stronger conservation signal
•Less affordable for low volume
users
•Could lead to demand hardening
Opt. 2c:
Three-tier structure with a 25/85
fixed/variable ratio
•Mirrors essential water use,
average use, and high volume
•Good revenue stability
•Stronger conservation signal
•Least affordable for low volume
users
•Could lead to demand hardening
Water Rate Design: Option 2 Pros/Cons
Water Rate Design: Option 3a Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 150 20%13%
4 >150 9%3%
Avg. usage:37 units Fixed:17%
Avg. summer usage:56 units Variable:83%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 4-tier | 17%/83% F/V
Water Rate Design: Option 3a Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $237.62 $248.66
Change ($)($2.98)11.04
Change (%)(1.2%)4.6%
Water Rate Design: Option 3b Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 150 20%13%
4 >150 9%3%
Avg. usage:37 units Fixed:20%
Avg. summer usage:56 units Variable:80%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 4-tier | 20%/80% F/V
Water Rate Design: Option 3b Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $240.65 $251.69
Change ($)$0.05 11.04
Change (%)0.0%4.5%
Water Rate Design: Option 3c Impacts
Tier Tier Breakpoint (Units)% of Water Use % of Bills
1 20 42%49%
2 56 29%35%
3 150 20%13%
4 >150 9%3%
Avg. usage:37 units Fixed:25%
Avg. summer usage:56 units Variable:75%
1.Average single-family household
•Bi-monthly consumption: 37 units
•Meter Size: ¾”
2.Tier Structure:
•Current: 2-tier | 16%/84% F/V
•Proposed: 4-tier | 25%/75% F/V
Water Rate Design: Option 3c Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $240.60 $245.97 $257.29
Change ($)$5.37 11.32
Change (%)2.2%4.6%
Option Pros Cons
Opt. 3a:
Four-tier structure with a 17/83
fixed/variable ratio
•Mirrors essential water use, average
use, high volume, and very high
volume
•More affordable for low volume users
•Strongest conservation signal
•Least revenue stability
•Could lead to demand hardening
Opt. 3b:
Four-tier structure with a 20/80
fixed/variable ratio
•Mirrors essential water use, average
use, high volume, and very high
volume
•Moderate revenue stability
•Strongest conservation signal
•Less affordable for low volume users
•Could lead to demand hardening
Opt. 3c: Four-tier structure with a 25/75
fixed/variable ratio
•Mirrors essential water use, average
use, high volume, and very high
volume
•Moderate revenue stability
•Strongest conservation signal
•Least affordable for low volume users
•Could lead to demand hardening
Water Rate Design: Option 3 Pros/Cons
Option Pros Cons
Opt. 1: two -tier structure with various
fixed/variable options
•Consistent with current rate
structure
•Most users experience a uniform rate
•Provides good to greater revenue
stability
•Less to least affordable for low
volume customers
•Doesn’t send a strong conservation
signal
Opt. 2: three-tier structure with various
fixed/variable options
•Mirrors essential water use, average
use, and high volume
•Good revenue stability
•More affordable for low volume users
•Stronger conservation signal
•Could lead to demand hardening
Opt. 3: four-tier structure with various
fixed/variable options
•Mirrors essential water use, average
use, high volume, and very high
volume
•Moderate revenue stability
•More affordable for low volume users
•Strongest conservation signal
•Could lead to demand hardening
Water Rate Design: Option Summary Pros/Cons
Water Rate Structure: Cost of Service
•Target operating fund
balances
•Minimum reserve: 90 days of
operating expenses
•Target reserve: 180 days of
operating expenses
•Target capital fund balances
•Minimum reserve: 10% of net
capital assets
Water Financial Plan: Policies
Water Financial Plan
Water Financial Plan: Rate Comparison
Wastewater Rate Design Options, Cost of Service,
and Financial Plan
•Government & Membership Organization rate
•Two -year rate cycle
•Adopt rates for calendar year 2020 and 2021
Wastewater Rate Structure: Rate Design
•Option 1:
•Fixed residential rate
•Option 2a:
•Fixed + variable residential rate with 20/80 fixed/variable ratio
•Option 2b:
•Fixed + variable residential rate with 25/75 fixed/variable ratio
•Option 2c:
•Fixed + variable residential rate with 30/70 fixed/variable ratio
Wastewater Rate Structure: Rate Design Options
•Fixed residential rate
Wastewater Rate Design: Option 1
Wastewater Rate Design: Option 1 Impacts
Option Pros Cons
Opt. 1:
Fixed residential rate
•Simple rate structure, all
residential customers pay the
same charge
•Simple to administer and update
•Does not account for the
variation in wastewater flow of
customers
•Less affordable for low volume
customers
Wastewater Rate Design: Option 1 Pros/Cons
•Fixed + variable residential rate
•Mirrors existing rate structure
•Fixed component
•Variable component
•85% of lowest winter water bill for the property averaged over 3 years
•Capped at 24 ccf
Wastewater Rate Design: Option 2
Wastewater Rate Design: Option 2
Wastewater Rate Design: Option 2a Impacts
Item Amount
Fixed:20%
Variable:80%
Avg. winter wastewater
generation:15 units
1.Average single-family household
•Bi-monthly winter wastewater generation: 15 units
2.Tier Structure:
•Current: 7-tier | 20%/80% F/V
•Proposed: Variable + Fixed | 24 unit variable cap | 20%/80% F/V
Wastewater Rate Design: Option 2a Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $99.79 $92.76 $98.68
Change ($)($7.03)5.92
Change (%)(7.0%)6.3%
Wastewater Rate Design: Option 2b Impacts
Item Amount
Fixed:25%
Variable:75%
Avg. winter wastewater
generation:15 units
1.Average single-family household
•Bi-monthly winter wastewater generation: 15 units
2.Tier Structure:
•Current: 7-tier | 20%/80% F/V
•Proposed: Variable + Fixed | 24 unit variable cap | 25%/75% F/V
Wastewater Rate Design: Option 2b Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $99.79 $92.54 $98.44
Change ($)($7.25)5.90
Change (%)(7.2%)6.3%
Wastewater Rate Design: Option 2c Impacts
Item Amount
Fixed:30%
Variable:70%
Avg. winter wastewater
generation:15 units
1.Average single-family household
•Bi-monthly winter wastewater generation: 15 units
2.Tier Structure:
•Current: 7-tier | 20%/80% F/V
•Proposed: Variable + Fixed | 24 unit variable cap | 30%/70% F/V
Wastewater Rate Design: Option 2c Example Bill
Current Proposed (Mar. 2020)Proposed (Jan. 2021)
Residential1,2 $99.79 $92.33 $98.21
Change ($)($7.46)5.88
Change (%)(7.4%)6.3%
Wastewater Rate Design: Option 2a, 2b, & 2c
Option Pros Cons
Opt. 2a:
Fixed + variable residential rate with a 20/80
fixed/variable ratio
•Bills based on wastewater generation while
also accounting for the fixed costs
•Good revenue stability
•Bill is constant throughout the year once
the wastewater flow is established –easy
for customer to understand
•Need to track winter water use to
estimate wastewater flow
Opt. 2b:
Fixed + variable residential rate with a 25/75
fixed/variable ratio
•Bills based on wastewater generation while
also accounting for the fixed costs
•Greater revenue stability
•Bill is constant throughout the year once
the wastewater flow is established –easy
for customer to understand
•Need to track winter water use to
estimate wastewater flow
Opt. 2c:
Fixed + variable residential rate with a 30/70
fixed/variable ratio
•Bills based on wastewater generation while
also accounting for the fixed costs
•Greatest revenue stability
•Bill is constant throughout the year once
the wastewater flow is established –easy
for customer to understand
•Need to track winter water use to
estimate wastewater flow
Wastewater Rate Design: Option 2 Pros/Cons
Option Pros Cons
Opt. 1:
Fixed residential rate
•Simple rate structure, all residential
customers pay the same charge
•Simple to administer and update
•Does not account for the variation in
wastewater flow of customers
•Less affordable for low volume
customers
Opt. 2:
Fixed + variable residential rate with
various fixed/variable ratio options
•Bills based on wastewater generation
while also accounting for the fixed
costs
•Greater revenue stability
•Bill is constant throughout the year
once the wastewater flow is
established –easy for customer to
understand
•Need to track winter water use to
estimate wastewater flow
Wastewater Rate Design: Option Summary Pros/Cons
Wastewater Collection Method
•Collect residential charges via property tax roll
•Represents 77% of total revenue
•Due to County by Aug. 10
•Cash flow: two primary installments
•Installment 1 due date: Dec. 10
•Installment 2 due date: Apr. 10
Option Pros Cons
Opt. 3:
Collect residential via property tax
rolls
•Reduces bi-monthly bills to
customers
•Less bad debt as property
owners will pay their property
taxes
•Involves some additional costs in
billing
•Requires larger reserve levels due
to cashflow timing
•There may be a perception that
we are not totally transparent –
why collect on tax roll when City
already bills on water bill
Wastewater Collection Method: Pros/Cons
Wastewater Rate Structure: Cost of Service
•Target operating fund
balances
•Minimum reserve: 90 days
of operating expenses
•Target reserve: 180 days of
operating expenses
•Target capital fund
balances
•Minimum reserve: 5 year
average CIP
Wastewater Financial Plan: Policies
Wastewater Financial Plan
Wastewater Financial Plan: Rate Comparison
Workshop 1:
Presentation of options
Oct. 15, 2019
Workshop 2:
Presentation of options
Nov. 19, 2019
Set Public Hearing
Jan. 7, 2020
Mail 218 Notice
By Jan. 17, 2020
Public Hearing
Mar. 3, 2020
Schedule
Year 1: Rates Effective
Mar. 4, 2020
Year 2: Rates Effective
Jan. 1, 2021
Set Public Hearing
Sept. 7, 2021
Mail 218 Notice
By Sept. 17, 2021
Public Hearing
Nov. 2, 2021
Year 1: Rates Effective
Jan. 1, 2022
Year 2: Rates Effective
Jan. 1, 2023First Two-Year Rate PeriodSecond Two-Year Rate Period
Discussion