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MUt- :%0-LVWU ,:' 1 / I tofU�3 14: bu; 651 6449446 city of Roseville; Page 2 01/16/03 13:05 FAX 6516419446 HRG 2002 ip.r runes Company January 16, 2003 File,- 813340) -0009 Mr. Duane Schwartz Public Works Director City of Roseville 2660 Civic Center Drive Roseville, MN 55113 RE: WAFER SOURCE STUDY RESPONSE TO SPRWS COMMENTS Dear Mr. Schwartz: As you requested: we are providing further explanation of the analysis of the various options in the Water Source Study- in the latter to Mr. Beets dated December 30, 2002, Saint Paul Regional Water Services (SPRWS) comments specifically about the sensitivity developed for the St. Paul water source options (Options and ). For Options 1 and 2 (wholesale purchase and retail purchase from PRW ), the base analysis assumed an' average annual increase in SPRWS rates of 1.8% over the entire study period (through 2025). This percentage increase was based on data provided to us by the city of Roseville, and represented the average annual increase in the rate charged to the City of Roseville for wholesale water purchase between 1 996 and 2001 t It was assumed that this increase would cover inflationary increases in electrical and chemical costs incurred by the SPRWS system. However, 'in looking at the h istod cal data, the rates actually increased anywhere from zero to five percent in any even years We assumed that other cost factors, such as required improvements elsewhere in the SPRWS system (and not directly related to the Roseville system) might impact the actual rates, Because of the historical fluctuation in the rate increases, and because some of the other factors that might influence the rates will be largely outside of the control of the City of Roseville, we felt it would be important to loom at the impact of higher-than -average rate increases. Accordingly, we presented two sensitivity analyses for options 1 and 2 in addition to the base analysis to reflect a range of rates that might be charged by SPRWS in the future. The two sensitivity analyses examined the cost implications of annual SPRWS rate increases of three and four percent, respectively. It should be noted that the analysis of option 1 and options 3 through 6 assumed an annual inflationary increase in the City's operations and maintenance costs of three percent* i.e, higher than the inflationary increase assumed for SPRWS costs for options I and 2. This was done to account for the inflationary increases ® in ei ectdc, chemical: labor, and other masts that would be incurred by the City of Roseville_ R mY- 011603 -Sch7 ariz 1326 Energy Park Drive Sr. Paul, MN 55108 a, 6511644 -4389 fax 651/644-9446 tall free 886/368 -4389