7C, Utility Rate Study Discussion

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Utility Rate Study 12/10/2012 Page 2 City will have better protection from a wet summer or other lower consumption quarters. It also provides a revenue neutral plan that follows the estimated cash flows from the prior rate study. With the removal of the water from the meter charge we also recommend adding a new tier for 0-10,000 gallons to the billing structure to cover the cost of the gallons of water removed from the meter charge. This tier will be set $2.50/1000gallons.This fee will cover the expense of the water purchased from Roseville. Estimated Fixed Cost Coverage Current System New System Meter Fee $ 38.47 $ 22.50 Cost of 10,000 Gallons of Water (24.00) - Stand By Fee 7.21 7.21 Water Test Fee 1.59 1.59 Amount billed to Cover Fixed Cost $ 23.27 $ 31.30 Residential Accounts 2437 2437 Billing Cycle Per Year 4 4 Total Revenue From Meter Fee's-Residential $ 226,835.96 $ 305,112.40 Total Revenue From Meter Fee's-Commercial 103,586.00 109,000.00 Total Meter Fee Revenue $ 330,421.96 $ 414,112.40 5 Year Average Projecton of Fixed Cost's $ 700,000.00 $ 700,000.00 %of Fixed Cost Covered By Meter Fees 48% 60.0% Sewer Rate The sewer fund, although going negative, we feel will recover with the new meters that have been installed this year. At this moment we recommend waiting until staff can confirm that the new meters are recovering the unaccounted for gallons. As long as we are correctly assuming that the new meters are going to account for the large amount of uncounted for gallons we should recover the fund within 3-4 years. Surface Water The surface water fund will need an adjustment for next year. Since this is a flat fee that is not influenced by consumption we will need to increase the fee for next year. This can be done by increasing the rate from $10.19 this year to $11.71, an increase of$1.52. Then the following year an increase of$1.76 will be required. After these two years we will continue to increase only for inflation. This will allow the fund to continue to cash flow and provide the necessary funds. The last recommendation that the committee has, is that we should take another look at these rates next year. With the installation of the new meters and change in the billing cycles we will have a more accurate picture of seasonal use and more accurate readings. The current study used usage data from 2011,which spanned over 3 separate billing cycles for residential customers. This created an issue when attempting to extracted exact monthly data. There were also a large number of gallons that the City paid for that could not be accounted for from customers' usage.