Electric and Water Cost of Service Study January 30, 2019 - - PowerPoint PPT Presentation

Electric and Water Cost of Service Study

January 30, 2019 Presented by:

Angie Sanchez Virnoche, Vice President and Principal Sergey Tarasov, Project Manager

Board of Commissioners Rate Hearing

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Discussion Outline

 Overview of rate study process  Results for electric and water utilities  Water system development fee update  Next steps  Discussion/ Input

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Overview of the Rate Setting Process

RATE DESIGN COST OF SERVICE (COSA)

CUSTOMER BASE

ALLOCATE COSTS TO CUSTOMER CLASSES DEFINE CUSTOMER CLASSES FISCAL MANAGEMENT POLICIES

PEAK M & S FIRE FIXED CHARGES VARIABLE CHARGES

WATER

RATE REVENUE REQUIREMENT

DEFINE CAPITAL NEEDS & FUNDING:

• Contributions
• Reserves
• Rate Funding

OPERATING & POWER COSTS ECONOMIC ASSUMPTIONS CUSTOMER STATISTICS

ELECTRIC

DEMAND ENERGY CUSTOMER

Step 1 Step 2 Step 3

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Legal Authority for Rate Setting

 RCW 54.24.080  (1) The commission of each district which shall have revenue obligations outstanding shall have the power and shall be required to establish, maintain, and collect rates or charges for electric energy and water and other services, facilities, and commodities sold, furnished, or supplied by the district. The rates and charges shall be fair and, except as authorized by RCW 74.38.070 and by subsections (2) and (3) of this section, nondiscriminatory, and shall be adequate to provide revenues sufficient for the payment of the principal of and interest on such revenue obligations for which the payment has not otherwise been provided and all payments which the district is obligated to set aside in any special fund or funds created for such purpose, and for the proper operation and maintenance of the public utility and all necessary repairs, replacements, and renewals thereof.  (3) In establishing rates or charges for water service, commissioners may in their discretion consider the achievement of water conservation goals and the discouragement of wasteful water use practices.

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Key Assumptions

 Study period 2019 – 2024  Projected rate revenue based on customer statistics plus growth – Growth varies by customer class  2019 budget used as baseline – various escalation factors used for future years  New debt – revenue bonds  Power (Electric only) – 5.00% biannual increases starting in FY2020  Fiscal policies: – Operating reserve: 35% of annual O&M & 20% of annual power expense – Capital reserve: target a percentage of original cost of assets

• 1% for Electric & 2% for Water

– System reinvestment: phase-in up to 100% of annual depreciation – Debt service coverage: target of 1.75x, minimum of 1.25x

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Scenarios

 Scenario 1 – Minimize up-front rate increases – Greater reliance on debt  Scenario 2 (recommended) – Phases in system reinvestment funding, up to depreciation, over 5 years – Less reliance on debt  Scenario 3 – Fund system reinvestment at depreciation starting in 2019 – Least reliance on debt – Higher front end rate increase

ELECTRIC UTILITY

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Step 1: Key Components

 $17.8 million in capital projects to be funded by fund balances, rate-funded system reinvestment, new revenue bonds, grants, and tax proceeds  Two new revenue bonds – $1.1M in 2020 – $4.0M in 2022

Electric (2019-2024) Existing Rate Revenue $11.0M - $11.1M O&M Expenses $5.5M - $6.5M Total Power $5.5M - $6.5M Existing Debt Service $0.6M New Debt Service $0.1M - $0.4M Rate-Funded System Reinvestment $0.1 - $1.8M Total CIP (2019 to 2024) $17.8M Description

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Step 1: Revenue Requirement Forecast

Description 2018 2019 2020 2021 2022 2023 2024 Annual Rate Increase 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Sample Residential Monthly Bill - 1,100 kWh 106.24 $ 113.68 $ 121.63 $ 130.15 $ 139.26 $ 145.87 $ 151.71 $ Average Monthly Increase - $ 7.44 $ 7.96 $ 8.51 $ 9.11 $ 6.61 $ 5.83 $

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Step 2: Electric Cost Classification

Energy Demand Customer Costs that vary with the total consumption (flow) of the electricity over a specified period of

• time. Measured in kilowatt-hours (kWh’s)

Costs predicated upon the maximum rate of use required at one point in time. Demand may be coincident or non-coincident to the system peak demand. Demand is measured in kilowatts (kW’s) Fixed costs associated with having a customer on the system. These costs vary with the addition or deletion of customers, and not consumptive use – metering/billing/ account services

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Step 2: Cost of Service Phase-In

 Phase in cost of service from 2019 to 2024 – Residential and General Service Non-Metered increase at a higher rate than

• verall average

– General Service Metered and Large Industrial increase at a lower rate than

• verall average

– Cannabis tied to market rates (BPA Load Shaping)

Note: Yard and street lighting annual rate adjustments set to overall annual rate increase 2019 2020 2021 2022 2023 2024 Residential 9.08% 8.89% 8.72% 8.56% 5.51% 4.37% General Service Non-Metered 11.60% 11.60% 11.60% 11.60% 9.00% 9.00% General Service Metered 2.25% 2.25% 2.25% 2.25% 1.95% 1.95% Large Industrial 3P (Metered) 0.55% 0.55% 0.55% 0.55% 0.45% 0.45% Yard Lighting 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Street Lighting 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Overall Rate Increase 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Cost of Service Phase-In Annual Rate Design Targets

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Step 3: COSA Unit Costs & Rate Design

 Produce sufficient revenue to meet the overall financial requirements of the utility  Cost-based and equitable  Meets the goals and objectives of the utility  Proposed rate design changes – Aligns with class based COSA phase-in – Phase in basic (customer) charges to COSA through 2024

Energy - $/kWh 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ Demand - $/kW 2.94 5.57 4.51 7.67 6.13 5.91 7.06 Customer - $/Month 51.46 76.27 76.27 98.73 98.73 98.73 98.73 Energy - $/kWh 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ Demand - $/kW 4.40 8.16 6.51 11.55 9.05 8.69 10.59 Customer - $/Month 73.59 114.17 114.17 145.39 145.39 145.39 145.39 GS 3P (metered) Large Industrial (metered) Cannabis 2024 2019 Unit Costs Residential GS 1P (non-metered) GS 1P (metered) GS 3P (non-metered)

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Step 3: Proposed Rates

Existing 2019 2020 2021 2022 2023 2024 Residential 22.75 $ 30.00 $ 39.00 $ 49.00 $ 60.50 $ 68.00 $ 73.00 $ General Service Non-Metered - 1Ph 22.75 35.00 49.00 65.00 83.00 99.00 114.00 General Service Non-Metered - 3Ph 34.75 55.00 75.00 95.00 115.00 130.00 145.00 General Service Metered - 1Ph 32.50 47.00 62.00 77.00 92.00 103.00 114.00 General Service Metered - 3Ph 75.75 88.00 100.00 112.00 124.00 134.00 145.00 Large Industrial 3P (Metered) 108.25 115.00 122.00 129.00 136.00 141.00 145.00 Existing 2019 2020 2021 2022 2023 2024 Residential 0.0759 $ 0.0782 $ 0.0796 $ 0.0808 $ 0.0812 $ 0.0821 $ 0.0839 $ General Service Non-Metered 0.0761 0.0772 0.0784 0.0796 0.0810 0.0820 0.0849 General Service Metered 0.0628 0.0634 0.0640 0.0647 0.0654 0.0661 0.0668 Large Industrial 3P (Metered) 0.0533 0.0535 0.0538 0.0540 0.0542 0.0544 0.0545 Existing 2019 2020 2021 2022 2023 2024 General Service Metered - Over 35kW 6.21 $ 6.25 $ 6.30 $ 6.35 $ 6.40 $ 6.45 $ 6.50 $ Large Industrial 3P (Metered) - Over 35kW 6.21 6.25 6.30 6.35 6.40 6.45 6.50 Class Demand Charge - $ per kW Class Class Basic (Customer) Charge - $ per month Energy Charge - $ per kWh

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Step 3: Impacts – Residential

Energy Use kWh Existing 2019 2020 2021 2022 2023 2024 300 45.52 $ 53.46 $ 62.88 $ 73.24 $ 84.86 $ 92.63 $ 98.17 $ 600 68.29 76.92 86.76 97.48 109.22 117.26 123.34 900 91.06 100.38 110.64 121.72 133.58 141.89 148.51 1,100 106.24 116.02 126.56 137.88 149.82 158.31 165.29 Average 1,400 129.01 139.48 150.44 162.12 174.18 182.94 190.46 1,700 151.78 162.94 174.32 186.36 198.54 207.57 215.63 2,300 197.32 209.86 222.08 234.84 247.26 256.83 265.97 Energy Use kWh 2019 2020 2021 2022 2023 2024 300 7.94 $ 9.42 $ 10.36 $ 11.62 $ 7.77 $ 5.54 $ 600 8.63 9.84 10.72 11.74 8.04 6.08 900 9.32 10.26 11.08 11.86 8.31 6.62 1,100 9.78 10.54 11.32 11.94 8.49 6.98 Average 1,400 10.47 10.96 11.68 12.06 8.76 7.52 1,700 11.16 11.38 12.04 12.18 9.03 8.06 2,300 12.54 12.22 12.76 12.42 9.57 9.14 Energy Use kWh 2019 2020 2021 2022 2023 2024 300 17.44% 17.62% 16.48% 15.87% 9.16% 5.98% 600 12.64% 12.79% 12.36% 12.04% 7.36% 5.19% 900 10.24% 10.22% 10.01% 9.74% 6.22% 4.67% 1,100 9.21% 9.08% 8.94% 8.66% 5.67% 4.41% Average 1,400 8.12% 7.86% 7.76% 7.44% 5.03% 4.11% 1,700 7.35% 6.98% 6.91% 6.54% 4.55% 3.88% 2,300 6.36% 5.82% 5.75% 5.29% 3.87% 3.56% Total Monthly Charges Increase / (Decrease) to Total Monthly Charges Percent Increase to Total Monthly Charges

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Comparative Residential Monthly Rates

WATER UTILITY - CARSON SYSTEM

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Step 1: Key Components

 $2.9 million in capital projects to be funded by fund balances, rate funding, system reinvestment, and system development fees  $1.4 million in new revenue bond proceeds assumed – 2020: $575k & 2022: $850k  Rate study projects costs through 2038 – Includes $28.4 million from 2025 – 2038

• $12.6 million in 2038

$0.3 $0.4 $0.8 $0.2 $1.0 $0.2 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 2019 2020 2021 2022 2023 2024 Millions Existing Rate Revenue O&M Expenses Existing Debt Service New Debt Service System Reinvestment Total CIP (2019 - 2024) Carson Description (2019 - 2024) $770k - $777k $561k - $612k $207k - $213k $51k - $126k $30k - $214k $2,896,836

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Step 1: Revenue Requirement Forecast

$- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 2019 2020 2021 2022 2023 2024 Cash Operating Expenses Existing Debt Service New Debt Service Rate Funded System Reinvestment Reserve/Additional Capital Funding Total Revenues Before Increases Description 2018 2019 2020 2021 2022 2023 2024 Annual Rate Increase 8.25% 8.25% 8.25% 8.25% 8.25% 8.25% Sample 3/4" Residential Monthly Bill - 7 ccf 52.99 $ 57.36 $ 62.09 $ 67.22 $ 72.76 $ 78.77 $ 85.26 $ Average Monthly Increase - $ 4.37 $ 4.73 $ 5.12 $ 5.55 $ 6.00 $ 6.50 $

Page 19 FCS GROUP Customer, 10% Meters & Services, 3% Base, 36% Peak, 43% Fire, 8%

Step 2: Water Cost Classification

Peak Costs associated with meeting incremental peak demands Base Costs associated with meeting average demands Customer Fixed costs that do not vary with meter size or usage (e.g. utility billing) Fire Costs related to direct fire protection (hydrants) and oversizing facilities for fire flow (mains, reservoirs, etc.)

Meters & Services

Costs associated with installation, maintenances, and repairs of meters and services

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Step 2: Cost of Service Phase In

 Phase-in cost of service over 5 years – Residential phased-in below average increases – Commercial phased-in above average increases

2019 2020 2021 2022 2023 2024 Residential 6.91% 6.82% 6.71% 6.60% 6.48% 8.25% Commercial 14.79% 14.79% 14.79% 14.79% 14.79% 8.25% Overall Rate Increase 8.25% 8.25% 8.25% 8.25% 8.25% 8.25% Cost of Service Phase-In Annual Rate Design Targets

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Step 3: Proposed Monthly Rates

 Basic meter charges increase with meter size for meters greater than 2”  No more allowance  Uniform usage rate for commercial customers

Existing 2019 2020 2021 2022 2023 2024 Residential $43.75 $46.77 $49.96 $53.32 $56.84 $60.52 $65.51 Commercial 3/4" $43.75 $46.77 $49.96 $53.32 $56.84 $60.52 $65.51 1" 61.25 59.53 63.59 67.86 72.34 77.03 83.38 1 1/2" 74.75 76.54 81.76 87.25 93.01 99.04 107.21 2" 93.75 123.31 131.72 140.57 149.85 159.56 172.72 3" 93.75 467.74 499.64 533.18 568.39 605.22 655.15 4" 93.75 595.31 635.90 678.60 723.40 770.28 833.83 Existing 2019 2020 2021 2022 2023 2024 Tier 1 (0 - 4 ccf) $0.00 $1.00 $1.07 $1.14 $1.22 $1.29 $1.40 Tier 2 (4 - 20 ccf) 3.08 2.25 2.40 2.56 2.73 2.91 3.15 Tier 3 (20 - 50 ccf) 3.39 3.60 3.85 4.10 4.37 4.66 5.04 Tier 4 (50+ ccf) 3.69 5.00 5.34 5.70 6.07 6.47 7.00 Existing 2019 2020 2021 2022 2023 2024 Uniform Rate Tiered $ $3.34 $3.99 $4.75 $5.64 $6.68 $7.23 Usage Charge ($ / ccf) Commercial Usage Charge ($ / ccf) Class Basic Service Charge - $ per month Residential

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Step 3: Residential Monthly Bill Impacts

2019 2020 2021 2022 2023 2024 3 $43.75 $49.77 $53.17 $56.74 $60.48 $64.40 $69.72 5 46.83 53.02 56.64 60.44 64.43 68.61 74.27 7 52.99 57.52 61.45 65.57 69.90 74.43 80.57 Average 25 109.98 104.77 111.92 119.43 127.32 135.57 146.75 50 194.73 194.77 208.05 222.02 236.68 252.02 272.81 75 286.98 319.71 341.51 364.44 388.51 413.68 447.81 100 379.23 444.65 474.97 506.86 540.33 575.34 622.81 150 563.73 694.53 741.89 791.70 843.97 898.66 972.80 200 748.23 944.41 1,008.80 1,076.54 1,147.62 1,221.98 1,322.80 Proposed Monthly Charges Existing Mo. Charges Usage (ccf) 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 3 $6.02 $3.39 $3.57 $3.75 $3.92 $5.31 13.8% 6.8% 6.7% 6.6% 6.5% 8.3% 5 6.19 3.62 3.80 3.99 4.18 5.66 13.2% 6.8% 6.7% 6.6% 6.5% 8.3% 7 4.53 3.92 4.13 4.33 4.53 6.14 8.6% 6.8% 6.7% 6.6% 6.5% 8.3% Average 25 (5.21) 7.14 7.52 7.89 8.25 11.18

• 4.7%

6.8% 6.7% 6.6% 6.5% 8.3% 50 0.04 13.28 13.97 14.66 15.34 20.79 0.0% 6.8% 6.7% 6.6% 6.5% 8.3% 75 32.73 21.80 22.93 24.06 25.17 34.13 11.4% 6.8% 6.7% 6.6% 6.5% 8.3% 100 65.42 30.32 31.89 33.47 35.01 47.47 17.3% 6.8% 6.7% 6.6% 6.5% 8.3% 150 130.80 47.35 49.82 52.27 54.69 74.14 23.2% 6.8% 6.7% 6.6% 6.5% 8.3% 200 196.18 64.39 67.74 71.08 74.36 100.81 26.2% 6.8% 6.7% 6.6% 6.5% 8.3% % Variance from Existing Rates Usage (ccf) $ Variance from Existing Rates

WATER UTILITY - UNDERWOOD SYSTEM

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Step 1: Key Components

 $3.3 million in capital projects to be funded by fund balances, rate funding, system reinvestment, system development fees  $2.6 million in new revenue bond proceeds assumed – $425k in 2020, $625k in 2022, & $1,550k in 2024

$0.3 $0.3 $0.3 $0.6 $0.5 $1.3 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 2019 2020 2021 2022 2023 2024 Millions Existing Rate Revenue O&M Expenses Existing Debt Service New Debt Service System Reinvestment Total CIP (2019 - 2024) Underwood Description (2019 - 2024) $407k - $410k $318k - $346k $115k - $121k $37k - $260k $15k - $177k $3,271,560

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Step 1: Revenue Requirement Forecast

$- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2019 2020 2021 2022 2023 2024 Cash Operating Expenses Existing Debt Service New Debt Service Rate Funded System Reinvestment Reserve/Additional Capital Funding Total Revenues Before Increases Capital Reserve Target Ending Capital Balance

Description 2018 2019 2020 2021 2022 2023 2024 Annual Rate Increase 22.50% 13.00% 13.00% 13.00% 13.00% 13.00% Sample 3/4" Residential Monthly Bill - 10 ccf 85.72 $ 105.01 $ 118.66 $ 134.08 $ 151.51 $ 171.21 $ 193.47 $ Average Monthly Increase - $ 19.29 $ 13.65 $ 15.43 $ 17.43 $ 19.70 $ 22.26 $

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Customer, 10% Meters & Services, 3% Base, 40% Peak, 40% Fire, 6%

Step 2: Water Cost Classification

Peak Costs associated with meeting incremental peak demands Base Costs associated with meeting average demands Customer Fixed costs that do not vary with meter size or usage (e.g. utility billing) Fire Costs related to direct fire protection (hydrants) and oversizing facilities for fire flow (mains, reservoirs, etc.)

Meters & Services

Costs associated with installation, maintenances, and repairs of meters and services

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Step 2: Cost of Service Phase In

 Phase-in cost of service over 5 years – Residential phased-in below average increases – Orchard/Vineyard phased-in above average increases

2019 2020 2021 2022 2023 2024 Residential 20.19% 12.22% 12.18% 12.14% 12.10% 13.00% Orchard/Vineyard 40.00% 18.08% 18.08% 18.08% 18.08% 13.00% Total 22.50% 13.00% 13.00% 13.00% 13.00% 13.00% Cost of Service Phase-In Annual Rate Design Targets

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Step 3: Proposed Monthly Rates

 Basic meter charges increase with meter sizes  No more allowance

Existing 2019 2020 2021 2022 2023 2024 Residential 3/4" $59.00 $70.91 $79.58 $89.28 $100.12 $112.23 $126.82 1" 59.00 90.26 101.29 113.63 127.43 142.84 161.41 Orchard/Vineyard 3/4" $59.00 $82.60 $97.53 $115.17 $135.99 $160.58 $181.46 1" 59.00 105.13 124.14 146.58 173.08 204.38 230.95 1 1/2" 59.00 172.03 203.13 239.86 283.23 334.44 377.91 Existing 2019 2020 2021 2022 2023 2024 Tier 1 (0 - 2 ccf) $0.00 $1.40 $1.57 $1.76 $1.98 $2.22 $2.50 Tier 2 (2 - 10 ccf) 3.34 2.80 3.14 3.53 3.95 4.43 5.01 Tier 3 (10 - 60 ccf) 3.82 4.90 5.50 6.17 6.92 7.75 8.76 Tier 4 (60+ ccf) 4.77 6.15 6.90 7.75 8.69 9.74 11.00 Existing 2019 2020 2021 2022 2023 2024 Tier 1 (0 - 2 ccf) $0.00 $1.40 $1.57 $1.76 $1.98 $2.22 $2.50 Tier 2 (2 - 10 ccf) 3.34 2.80 3.14 3.53 3.95 4.43 5.01 Tier 3 (10 - 60 ccf) 3.82 5.60 6.28 7.05 7.91 8.86 10.01 Tier 4 (60+ ccf) 4.77 6.42 7.86 9.60 11.69 14.20 16.05 Orchard/Vineyard Usage Charge ($ / ccf) Class Basic Service Charge - $ per month Residential Usage Charge ($ / ccf)

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Step 3: Residential Monthly Bill Impacts

2019 2020 2021 2022 2023 2024 4 65.68 $ 79.31 $ 89.01 $ 99.85 $ 111.98 $ 125.53 $ 141.85 $ 6 72.36 84.91 95.29 106.90 119.89 134.39 151.86 8 79.04 90.51 101.58 113.95 127.79 143.25 161.88 10 85.72 96.11 107.86 121.01 135.70 152.12 171.89 Average 25 143.02 169.61 190.35 213.54 239.47 268.44 303.34 40 200.32 243.11 272.83 306.07 343.24 384.76 434.78 55 257.62 316.61 355.32 398.61 447.01 501.09 566.23 70 324.42 402.64 451.85 506.90 568.45 637.22 720.06 85 395.97 494.93 555.42 623.08 698.73 783.25 885.07 Proposed Monthly Charges Usage (ccf) Existing Mo. Charges 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 4 13.63 $ 9.69 $ 10.84 $ 12.12 $ 13.55 $ 16.32 $ 20.8% 12.2% 12.2% 12.1% 12.1% 13.0% 6 12.55 10.38 11.61 12.98 14.50 17.47 17.4% 12.2% 12.2% 12.1% 12.1% 13.0% 8 11.47 11.06 12.38 13.84 15.46 18.62 14.5% 12.2% 12.2% 12.1% 12.1% 13.0% 10 10.39 11.75 13.14 14.69 16.42 19.77 12.1% 12.2% 12.2% 12.1% 12.1% 13.0% Average 25 26.59 20.73 23.19 25.93 28.97 34.90 18.6% 12.2% 12.2% 12.1% 12.1% 13.0% 40 42.79 29.72 33.24 37.16 41.53 50.02 21.4% 12.2% 12.2% 12.1% 12.1% 13.0% 55 58.99 38.70 43.29 48.40 54.08 65.14 22.9% 12.2% 12.2% 12.1% 12.1% 13.0% 70 78.22 49.21 55.05 61.55 68.77 82.84 24.1% 12.2% 12.2% 12.1% 12.1% 13.0% 85 98.96 60.49 67.66 75.65 84.52 101.82 25.0% 12.2% 12.2% 12.1% 12.1% 13.0% % Variance from Existing Rates Usage (ccf) $ Variance from Existing Rates

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Step 3: Orchard/Vineyard Monthly Bill Impacts

2019 2020 2021 2022 2023 2024 7 75.70 $ 99.40 $ 116.39 $ 136.32 $ 159.71 $ 187.17 $ 211.50 $ 15 104.82 135.80 157.24 182.15 211.10 244.78 276.60 35 181.22 247.80 282.93 323.15 369.23 422.03 476.90 Average 45 219.42 303.80 345.77 393.65 448.29 510.66 577.05 60 276.72 387.80 440.04 499.41 566.88 643.60 727.27 75 348.27 484.12 557.95 643.36 742.20 856.64 968.00 150 706.02 965.72 1,147.53 1,363.14 1,618.77 1,921.81 2,171.65 300 1,421.52 1,928.92 2,326.68 2,802.69 3,371.92 4,052.16 4,578.94 500 2,375.52 3,213.20 3,898.88 4,722.10 5,709.46 6,892.62 7,788.66 Usage (ccf) Existing Mo. Charges Proposed Monthly Charges 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 7 23.70 $ 16.99 $ 19.93 $ 23.39 $ 27.46 $ 24.33 $ 31.3% 17.1% 17.1% 17.2% 17.2% 13.0% 15 30.98 21.44 24.91 28.96 33.68 31.82 29.6% 15.8% 15.8% 15.9% 16.0% 13.0% 35 66.58 35.13 40.22 46.08 52.81 54.86 36.7% 14.2% 14.2% 14.3% 14.3% 13.0% Average 45 84.38 41.97 47.88 54.64 62.37 66.39 38.5% 13.8% 13.8% 13.9% 13.9% 13.0% 60 111.08 52.24 59.37 67.48 76.72 83.67 40.1% 13.5% 13.5% 13.5% 13.5% 13.0% 75 135.85 73.83 85.41 98.84 114.44 111.36 39.0% 15.3% 15.3% 15.4% 15.4% 13.0% 150 259.70 181.81 215.61 255.64 303.04 249.84 36.8% 18.8% 18.8% 18.8% 18.7% 13.0% 300 507.40 397.76 476.01 569.23 680.24 526.78 35.7% 20.6% 20.5% 20.3% 20.2% 13.0% 500 837.68 685.69 823.21 987.36 1,183.16 896.04 35.3% 21.3% 21.1% 20.9% 20.7% 13.0% $ Variance from Existing Rates % Variance from Existing Rates Usage (ccf)

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Sample Monthly Bill Comparison

$33.00 $36.08 $39.30 $39.61 $41.76 $52.99 $54.67 $58.41 $75.70 $90.28 $108.98 $0 $20 $40 $60 $80 $100 $120 North Bonneville, WA (Summer) (N/A) Stevenson, WA (650) North Bonneville, WA (Winter) (N/A) Hood River, OR (3,000) Washougal, WA (5,300) Carson - Existing (1,000) White Salmon, WA (N/A) Carson - 2019 Proposed (1,000) Underwood

• Existing

(350) Underwood

• 2019

Proposed (350) Belfair Water District #1 (550) Note: Number of connections are shown in parenthesis

WATER UTILITY – SYSTEM DEVELOPMENT FEE (SDF)

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System Development Fee (SDF) Overview

 Revised Code of Washington RCW 54.24.080 grants PUD’s the authority to fix rates and charges for connecting to water systems  One time charge imposed on new development or expanded connection to system as condition of service  Based on the cost of system infrastructure – Existing & future  Represents proportionate share of capital investment

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SDF Results

 Charges are “maximum allowable” – By policy may set below maximum allowable – Rates make up the difference – Underwood proposed to be phased in over three years

• 2019 – $15,000
• 2020 – $20,000
• 2021 – $26,000

3/4" 7,500 $ 7,691 $ 191 $ 3/4" 10,000 $ 26,261 $ 16,261 $ 1" 9,000 12,818 3,818 1" N/A 43,768 43,768 1 1/2" 21,000 25,637 4,637 1 1/2" N/A 87,536 87,536 2" 32,000 41,019 9,019 2" N/A 140,058 140,058 3" 60,000 82,037 22,037 3" N/A 280,117 280,117 4" N/A 128,184 128,184 4" N/A 437,682 437,682 Carson Underwood Updated Charge $ Difference Meter Size Existing Charge Meter Size Existing Charge Updated Charge $ Difference

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Costs Behind SDF – Carson

Existing Asset Base 6,369,679 $ 2,945 2,163 $ 28.1% Various Brooks Reservoir 100,000 $ 77.3% 77,290 $ 836 92 $ 1.2% Storage Industrial Well Water Right 15,000 100.0% 15,000 2,283 7 0.1% Supply & Treatment Linde Well Water Right 17,000 100.0% 17,000 2,283 7 0.1% Supply & Treatment Develop Linde Well 350,000 100.0% 350,000 2,283 153 2.0% Supply & Treatment Wind River Intake & WTP Pre-Design Report 100,000 50.3% 50,261 2,283 22 0.3% Supply & Treatment Wind River Water Right 30,000 83.8% 25,130 2,283 11 0.1% Supply & Treatment Water Treatment Plant Rebuild 2,800,000 33.8% 945,492 2,283 414 5.4% Supply & Treatment Wind River Intake & Transmission Line Construction 2,600,000 50.3% 1,306,774 2,283 572 7.4% T&D Water Treatment Plant Expansion 1,000,000 100.0% 1,000,000 2,283 438 5.7% Supply & Treatment New Reservoir 2,000,000 90.0% 1,800,000 836 2,154 28.0% Storage 1,300 feet of 8-inch Main, Glur Road / Wilkinson Street 335,000 57.0% 190,822 2,283 84 1.1% T&D Columbia Heights PRV 80,000 67.5% 54,028 2,283 24 0.3% T&D 3,300 feet of 12-inch Main, Wind River Rd 1,040,000 67.0% 696,946 2,283 305 4.0% T&D 2,600 feet of 12-inch Main, Hot Springs Avenue 846,000 67.0% 566,939 2,283 248 3.2% T&D 2,800 feet of 8-inch Main, Metzger Rd (S-B Rd South) 922,000 57.0% 525,189 2,283 230 3.0% T&D 2,000 feet of 8-inch Main, Metzger Rd (S-B Rd North) 557,000 57.0% 317,278 2,283 139 1.8% T&D 2,100 feet of 8-inch Main, Hot Springs Avenue 568,000 57.0% 323,544 2,283 142 1.8% T&D 1,350 feet of 12-inch Main, Old Detour Road 379,000 67.0% 253,983 2,283 111 1.4% T&D Hydrant Replacement 290,000 6.8% 19,585 2,283 9 0.1% Hydrants Restructuring pressure zones 1,000,000 83.5% 835,070 2,283 366 4.8% T&D Total Future Cost Basis 15,029,000 $ 9,370,331 $ 5,528 $ 71.9% Total SDF per MCE 7,691 $ Note : Allocable MCEs for existing asset base represents the weighted average between the different functions of service $ of SDF % of SDF Function of Service Project Description Total Cost % Expansion/ Upgrade Allocable Cost Basis Allocable MCEs $ of SDF % of SDF Function of Service Project Description Allocable Cost Basis Allocable MCEs

Page 27 FCS GROUP

Costs Behind SDF – Underwood

Existing Asset Base 3,950,805 $ 538 7,341 $ 28.0% Various Water Rights 10,000 $ 100.0% 10,000 $ 182 55 $ 0.2% Supply & Treatment Galligan Springs PS Replacement 800,000 14.2% 113,811 182 626 2.4% Supply & Treatment Shepherd Tank Replacement - Construction 925,000 22.5% 207,672 182 1,142 4.3% Storage Ternahan Roof Replacement 25,000 0.0%

• 182
• 0.0%

Storage 1,300 LF of eight-inch Main; Cooper Ave Spur to Sooter Road 300,000 53.5% 160,542 182 883 3.4% T&D Survey & Easements of Scoggins Road Phase 2 15,000 58.4% 8,767 182 48 0.2% T&D 3,600 LF of eight-inch Main; Scoggins Road Phase 2… 855,000 58.4% 499,716 182 2,748 10.5% T&D Replace Cooper Ave PRV Stations 80,000 16.9% 13,514 182 74 0.3% T&D 2,500 LF of eight-inch Main; Scoggins PRV to Kollock Knapp… 616,000 53.5% 329,647 182 1,813 6.9% T&D Loop Scooter Road to School House Road 190,000 66.9% 127,096 182 699 2.7% T&D Circle Drive: Replace four-inch Line 433,000 53.5% 231,716 182 1,274 4.9% T&D 1,500 LF of eight-inch Main; Cook Underwood Road… 388,000 45.5% 176,490 182 971 3.7% T&D Highland Orchard Road: Replace two-inch Line 595,000 62.6% 372,643 182 2,049 7.8% T&D Little Buck Creek Road: Replace four-inch Line 703,000 53.5% 376,204 182 2,069 7.9% T&D Evaluation of eight-inch Transmission Main 30,000 45.5% 13,646 182 75 0.3% T&D Cooper Avenue to Highway 14 501,000 62.6% 313,772 182 1,726 6.6% T&D Leak Detection and Replacement 143,000 0.0%

• 182
• 0.0%

T&D Hydrant Replacement 100,000 3.4% 3,379 182 19 0.1% Hydrants System Improvements - General 35,000 0.0%

• 182
• 0.0%

General Waterline upgrade Projects 900,000 53.5% 481,627 182 2,649 10.1% T&D Total Future Cost Basis 7,644,000 $ 3,440,243 $ 18,920 $ 72.0% Total SDF per MCE 26,261 $ Note : Allocable MCEs for existing asset base represents the weighted average between the different functions of service Function of Service % of SDF $ of SDF % of SDF Project Description Allocable Cost Basis Allocable MCEs $ of SDF Function of Service Project Description Total Cost % Expansion/ Upgrade Allocable Cost Basis Allocable MCEs

Page 28 FCS GROUP

Comparative SDF Charges

Note: All charges for 3/4” meter, except Union Hill Water Association, which represents a 1” meter (smallest size available)

$5,287 $6,242 $7,500 $7,691 $7,779 $10,000 $13,800 $16,820 $17,468 $17,631 $26,000 $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000

Page 29 FCS GROUP

Next Steps

 Approve rates February 19, 2019  Rates effective March 1, 2019 – Future increases effective each January  Revisit assumptions throughout the year

Questions/Discussion