Go Goleta Water D r Distri rict Cost of Service and Rate Design - PowerPoint PPT Presentation

Go Goleta Water D r Distri rict Cost of Service and Rate Design Study Admin in C Commit ittee ee Meet eetin ing– March 25 25, 20 2020 20 ITEM 1 PRESENTATION

AGEN ENDA • Financial Plan options review • Cost of Service › Methodology › Assumptions › Customer class cost of service • Rate Design › Rate scenarios › Proposed modifications to residential tiers › Fixed charges › Commodity rates › Customer bill impacts • Neighboring Agency bill comparison • Project schedule 2

RATE M MODEL OPTIONS % of Fixed/Variable Revenue Current Modified - Higher Overall Rate Increases - Higher Overall Rate Increases Current - No Improvement In Revenue Stability - Enhanced Revenue Stability - No Multi-Generational Cost - No Multi-Generational Cost Apportionment Apportionment Debt - Lower Overall Rate Increases - Lower Overall Rate Increases Refi with Proceeds - No Improvement In Revenue Stability - Enhanced Revenue Stability - Multi-Generational Cost - Multi-Generational Cost Apportionment Apportionment 3

CHANGES ES S SINCE E LAST STUDY • New Normal for Water Demand › 20% reduction in baseline demand for FY 2020 relative to historical demand • Structural Changes in Operating Costs • Increased capital spending due to drought, regulatory requirements, and deferred repair and replacement • Rescinding of drought declaration and associated drought surcharges ($9M in revenue in FY 201 9) • Reserve policy target increased from $6 million to $1 1 .5 million • Increased costs and decreased revenues equals reliance on cash reserves 4

FINANCIAL A ASSU SSUMPT PTIONS • Expenses Consistent with 5-Y ear Expenditure Forecast › O&M Budget › Adopted IIP • Required debt coverage of 1 .25 times annual debt service › Net revenue / debt service • Reserve targets: › Operating Reserve: 30 days of O&M costs – Excludes debt service & depreciation › T otal Reserve target: $1 1 .5M unrestricted cash • Maintain revenue split: 30% fixed/ 70% variable 5

FINA NANC NCIAL PLAN N SCENA NARIO O 1 : NO R NO REFI Descrip iptio ion FY 2 2021 21 FY 2 2022 22 FY 2 2023 23 FY 2 2024 24 FY 2 2025 25 Revenue Shortfall $6,459,423 $10,969,257 $15,155,098 $19,726,308 $24,757,554 Required Increase 19.0% 11.0% 9.0% 9.0% 9.0% • All expenditures funded through rates. • Incorporates a baseline demand of 1 0,056 AF of potable water with 0.5% annual growth. • Achieves Reserve Policy Target of $1 1 .5M in FY 2025. 6

FINA NANC NCIAL PLAN N SCENA NARIO O 2: REFI W W/ N NEW P PROCEED EDS Descrip iptio ion FY 2 2021 21 FY 2 2022 22 FY 2 2023 23 FY 2 2024 24 FY 2 2025 25 Revenue Shortfall $5,439,514 $11,020,531 $12,021,496 $13,020,975 $14,052,483 Required Increase 16.0% 14.0% 2.0% 2.0% 2.0% • Refinance in FY 2023 with estimated $30M in proceeds. • Incorporates a baseline demand of 1 0,056 AF of potable water with 0.5% annual growth. • Achieves Reserve Policy Target of $1 1 .5M in FY2024. 7

Cost of S f Ser ervice 8

CO COST OF SERVICE CE • Cost of service allows the matching of rates charged with the costs of serving each class and tier of customer • The total “revenue requirement” is recovered equitably across users based on their specific requirements and use of the water system • Revenue requirement = cost of service › O&M expenses › Capital expenses (IIP) › Debt Service › Reserve Funding

COS OST OF OF SERVICE A ALLOC OCATION ON PR PROCESS SS • Identify annual revenue requirement by function • Allocate functional costs to appropriate cost components • Determine customer class characteristics • Develop unit costs of service for each cost component • Distribute (allocate) costs to customer classes 1 0

BASE SE-EXTRA CAPACITY M Y METHOD AWWA MANUAL M1 7TH EDITION SUPPLY BASE PEAKING METER CUSTOMER FIRE DELIVERY MAINTENANCE SERVICE

DISTR TRIBUTE TE COST T COMPONENTS TO CUSTOMER ER CLASSES ES SUPPLY BASE/ PEAKING METER CUSTOMER FIRE Annual DELIVERY Peaking Factors or SERVICE SERVICE Fire Demand COSTS Meter Cap Ratios Meter # of Bills in Each Connection Annual Replacement Class Size / Fire Demand Costs Hydrants CUSTOMER CLASSES (Cost to Serve Each Class) (Single Family, Urban, Rec. Irrigation, etc.)

COMMODITY R TY RATE TE D DERIVATI TION SUPPLY DELIVERY EXTRA CAPACITY TOTAL CONSERVATION (Peaking Costs) VOLUMETRIC Water supply Delivery rate Conservation program RATE Peaking rate rate ($ /HCF) ($ /HCF) rate ($ /HCF) ($ /HCF) ($ /HCF) 1 3

COST OF SE SERVICE ASSU SSUMPT PTIONS • Three separate systems › Recycled Water – Purchased water costs and GWD O&M costs › GWC – Interruptible service, no SWP water, no groundwater, no treatment costs › Potable System – Single Family Residential: Tiers treated as a sub-class identifying the cost of service for each tier – Urban Agriculture: Groundwater costs allocated for increased reliability but no state water; no treatment costs – All other classes uniform rate and proportional cost to serve • All classes pay the same schedule of fixed charges by meter size – Fixed charges recover meter maintenance costs, customer service and billing costs, and a share of capacity (peaking) costs 1 4

GWD SYSTEM COST COMPONENTS • Cachuma Supply – allocated to all commodity rates except Recycled • CCWA Supply – allocated to all commodity rates except Recycled, Urban Ag, and GWC • Base Delivery – cost of delivering potable water to meet average daily demand • Peaking – extra capacity costs associated with meeting max day and max hour customer demands • Recycled Water– direct costs associated with the recycled system • GWC – direct costs associated with the GWC system 1 5

SYSTEM C COS OST COM OMPONE ONENT NTS ( (CONT ONT.) • Urban Ag – O&M and capital costs allocated based on the proportional share of water use and metered connections • Fire Protection – costs associated with public fire hydrants and private fire lines • Meters – fixed costs to service and maintain meters • Customer – costs associated with billing & customer service • Conservation – costs associated with conservation/ efficiency programs • General – all other costs not directly associated with other components 1 6

COST COMPONENT R REVISIONS • Share of Cachuma and groundwater to Urban Ag reduced due to declining demand relative to system demand • Urban Ag allocated a share of storage and distribution costs based on connections (0.8% of total) • $423k in Recycled Water costs allocated to Conservation to account for recycled water contracts • Cachuma & CCWA supply costs treated as separate components to differentiate costs within the tiered rates • Updated fire protection analysis 1 7

COST OF SER ERVICE E RES ESULTS BY COST COMPONENT Cost Component $ % Cachuma Supply $4,664,905 11.8% CCWA Supply $9,822,790 24.9% Base $8,902,644 22.6% Max Day $766,372 1.9% Max Hour $102,493 0.3% Recycled Water $863,636 2.2% Fire Protection $8,516 0.0% Meters $10,816,790 27.4% Customer $1,344,217 3.4% Conservation $2,288,770 5.8% GWC $183,810 0.5% Urban Ag $405,500 1.0% Revenue Offsets ($733,965) -1.9% Total $39,436,479 100.0% 1 8

ALLOCATION OF COSTS TO CUSTOMER ER C CLASSES ES Cachuma CCWA Recycled Fire Revenue Description Supply Supply Base Max Day Max Hour Water Protection Meters Customer Conservation GWC Urban Ag Offsets Total ($) Fixed Meter Charges $0 $0 $0 $0 $0 $0 $0 $10,816,790 $1,307,274 $0 $0 $0 $0 $12,124,064 Fixed Fire Line Charges $0 $0 $0 $0 $0 $0 $8,516 $0 $36,943 $0 $0 $0 $0 $45,459 SFR $1,578,115 $4,025,941 $3,766,740 $348,217 $31,909 $0 $0 $0 $0 $774,280 $0 $0 ($231,521) $10,293,681 Urban $1,961,213 $5,283,561 $4,681,140 $318,056 $61,494 $0 $0 $0 $0 $962,241 $0 $0 ($287,724) $12,979,981 Recreation Irrigation $190,528 $513,289 $454,764 $100,100 $9,091 $0 $0 $0 $0 $93,480 $0 $0 ($27,952) $1,333,300 Urban Agriculture $502,315 $0 $0 $0 $0 $0 $0 $0 $0 $246,454 $0 $405,500 ($73,693) $1,080,575 GWC $432,734 $0 $0 $0 $0 $0 $0 $0 $0 $212,315 $183,810 $0 ($63,485) $765,374 Recycled $0 $0 $0 $0 $0 $863,636 $0 $0 $0 $0 $0 $0 ($49,591) $814,046 Total $4,664,905 $9,822,790 $8,902,644 $766,372 $102,493 $863,636 $8,516 $10,816,790 $1,344,217 $2,288,770 $183,810 $405,500 ($733,965) $39,436,479 1 9

COST TO SER ERVE E EA EACH CUSTOMER ER CLASS SS Proposed Proposed Current No Refi Refi Charge/Customer Class COS COS COS Fixed Meter Charges $10,377,970 $12,551,332 $12,124,064 Fixed Fire Line Charges $62,472 $45,777 $45,459 SFR Consumption Charges $8,723,329 $10,527,508 $10,293,681 Urban Consumption Charges $11,291,270 $13,267,231 $12,979,981 Recreation Irrigation Consumption Charges $1,096,461 $1,364,468 $1,333,300 Urban Agriculture Consumption Charges $999,912 $1,112,687 $1,080,575 GWC Consumption Charges $649,116 $778,490 $765,374 Recycled Consumption Charges $796,434 $808,894 $814,046 Total $33,996,964 $40,456,388 $39,436,479 20

Rate D e Des esign 21