Introduction and Background

Transcription

1 Memorandum To: Mr. Robert Nilles Date: March 5, 2012 City of El Mirage, Arizona From: Kevin Burnett, Project Manager Re: City of El Mirage Water-Only Customer Recharge Fee Introduction and Background The City of El Mirage (City) retained Red Oak Consulting (Red Oak) to calculate fees that could be assessed to the City s water-only customers for the value of recharge water that would be recovered through the sewer system if the City provided both water and sewer service to those customers. In 2011, Red Oak completed a Water and Sewer Cost of Service and Sanitation Fee Study (Fee Study) for the City. A component of the Fee Study was the examination of the value of recharge water. The State of Arizona (State) requires the City to recharge water into the State water system based on the amount of water drawn annually. The City s sewer system is projected to discharge water (reclaimed water) back into the ground in an amount roughly equal to 1,960 acre feet (AF) in FY This recharge is based on the estimated volume of the City s water sales that enter or are discharged into the City sewer system. While the City provides both water and sewer within the City it additionally provides water-only service to a portion of the City of Surprise (Surprise) customers. The City must annually recharge its aquifer and recoup costs associated with this activity. The City s water and sewer customers return a portion of their annual water use through the City s sewer treatment plant and are further used to recharge the City s aquifer. As a result, a portion of the aquifer is recharged through this process; however, for water-only customers (in the City and in the City of Surprise) the City must purchase additional recharge credits for any difference between annual recharge requirements outlined by the State and the recharge achieved via the sewer treatment plant. In 2011, the City requested that Red Oak Consulting develop a water recharge credit charge ($ per Kgals) for the City of Surprise in recognition of the water provided to the water-only customers located in Surprise, (water sold to these customers but not recharged to El Mirage, since Surprise provides its own sewer treatment). This analysis was completed in November of In 2012, the City requested a similar analysis for its own customers who are on septic systems and do not discharge into the City sewer system, i.e., the City s water-only customers. The balance of this memorandum discusses the analysis for the City s wateronly customers.

2 City of El Mirage, Arizona Page 2 Methodology A four step process was undertaken in order to develop the cost of and in turn, a recharge fee for the City s water-only customers: 1. Identify water-only customers from City s billing database 2. Identify annual water-only customer sewer flows based on winter water use 3. Identify the acre foot (AF) value of recharge water that is not recovered through the sewer system and therefore lost to the City 4. Determine a flow rate in dollars per 1,000 gallons ($/Kgals) that could be assessed to water-only customers to the reflect the recharge water cost Water-Only Customer Identification and Estimated Sewer Flows A review of City provided billing data indicated that the City provides water-only service to 101 residential and 40 commercial customers as of December 31, There is one multifamily property that falls within the water-only customer classification, but at this time there is not an active account associated with the property. In the future if an active account does become associated with this property it should be treated in the same fashion as the residential and commercial accounts as discussed in the balance of this report. Winter quarter (January, February and March) water use was used to estimate sewer flows for billing purposes. These three months are used with the expectation that there is minimal irrigation use during these months and most if not all water enters the sewer system. As this is the period used by the City to determine monthly sewer bills, this was the water use chosen to form the basis of the amount of lost recharge water for the City. The water use for water-only residential customers for the January through March 2010 period was approximately 2,919,000 gallons or a monthly average of 973,000 gallons. The winter quarter average converted to an annualized estimate of water use (water that enters the sewer system for the entire year) for this customer class is 11,676,000 gallons. Commercial water-only customer use for January through March 2010 was 2,361,000 gallons or an average of 787,000 gallons per month. The winter quarter average converted to annualized use is 9,444,000 gallons. Thus the total annual water use by water-only customers that would enter the sewer system is estimated at 21,120,000 gallons. This approach mirrors the approach taken in the City of Surprise analysis.

3 City of El Mirage, Arizona Page 3 Acre Feet of Recharge Water An AF of water is equivalent to 325,900 gallons of water. The 21,120,000 gallons of discharged water (sewer flows) therefore equates to approximately AF of recharge water. It was necessary to convert the lost sewer flows or potential recharge water to AF because water is sold on the open market in AF and is assigned a dollar value in that measurement. During the Rate Study, the City s Public Works Department provided an estimate for the current open market rate for an AF of water, based on quotes to the City to purchase water on the market by the Central Arizona Groundwater Replenishment District. The rates used in the Rate Study (and in turn this analysis) are summarized in Table 1 below. Table 1 Projected Open Market Rate for Recharge Water (Central Arizona Groundwater Replenishment District Phoenix Active Management Area Assessment Rates) Projected Value of Fiscal Year One Acre Foot of Water $ The projected cost of one AF of water as illustrated in Table, 1 is projected by the Central Arizona Groundwater Replenishment District to be $442 in FY and increase to

4 City of El Mirage, Arizona Page 4 $608 per AF in FY , at which point, for this analysis, it is projected to remain constant through FY Recharge Water Flow Based Rate The final step of the analysis was to determine what a flow based rate would be for the sewer flows from water-only customers that cannot be recovered by the City and would therefore need to be acquired from another source. The annual flows as previously estimated are 21,120,000 gallons. It is assumed that these flows will remain constant from one year to the next and that there will not be any additional water-only customers connecting to the water system. The estimated water recharge cost by year for wateronly customer sewer flows using annual flows and AF water cost by year is summarized in Table 2 (further detail can be found in the attached appendix). Table 2 Projected Water-Only Customer Recharge Water Cost Fiscal Year Projected Annual Cost of Recharge Water $28, , , , , , , , ,402 The values in Table 2 which range from a low of $28,644 per year (in FY ) to a high of $39,402 per year (for FY and beyond) were converted into a rate per

5 City of El Mirage, Arizona Page 5 1,000 gallons that could be assessed to water-only customers in addition to the fixed charge and volume rates currently being assessed to water-only customers for water service. The cost to the City for the rate study analysis was $19,200, but it was not included in the calculation of the recharge fees. Water Rate Assessment: Winter Quarter Water Use The recharge costs are proposed to be recovered through a rate assessed for water use that is projected to be lost to the City as it does not enter the City s sewer system. In other words, the charge would be based on winter quarter average water use if the City provided sewer service to these customers, and would be consistent across the 12 months of the year. This method provides a known charge for the customer throughout the course of the year and is most closely related to the water that would enter the City s sewer system. The rates by year are summarized in Table 3 below.

6 City of El Mirage, Arizona Page 6 Table 3 Projected Recharge Water Rate (Winter Quarter Average Based) Projected Recharge Water Rate (1) Fiscal Year ($/Kgals) $ (1) Annual cost of recharge water divided by the winter quarter average converted to projected annualized sewer flows of 21,120 Kgals The rates identified in Table 3 represent the projected cost to the City per 1,000 gallons of water that is provided to water-only customers that does not enter the City sewer system and would be used to offset the annual recharge requirements that the City must meet. The rate would be assessed as a uniform rate per 1,000 gallons of average winter quarter water use to water-only customers, and would be updated annually in much the same manner that the City currently assesses rates to their own sewer customers. Using the average use per account per month derived in Appendix A-2, an average residential customer would have a monthly charge in FY of $13.10 ($1.36 X 9.63 Kgals)

7 City of El Mirage, Arizona Page 7 and an average commercial customer would be assessed a monthly charge of $26.76 ($1.36 X Kgals). Note the rates developed in Table 3, match those developed for the City of Surprise analysis. The rates are consistent between the two studies, since an acre foot of recharge water was given the same valuation in this analysis as in the City of Surprise analysis and the methodology for calculating the recharge rate was the same in both studies

8 EL MIRAGE, ARIZONA FILE: EM WRF WATER RECHARGE FEE SCHEDULE: FEE FEE CALCULATION DATE: 03/05/12 RANGE: CITY FEE1 FY FY FY FY FY FY FY FY FY Cost per Acre Foot $442 $487 $550 $608 $608 $608 $608 $608 $608 Acre Feet of Recharge Water Total Cost to Water Only Customers $28,644 $31,560 $35,643 $39,402 $39,402 $39,402 $39,402 $39,402 $39,402 Annualized Flows (kgals) (1) 21,120 21,120 21,120 21,120 21,120 21,120 21,120 21,120 21,120 Water Recharge Cost (per kgals) $1.36 $1.49 $1.69 $1.87 $1.87 $1.87 $1.87 $1.87 $1.87 (1) January through March average usage annualized for assumed 12 month flows representing sewer flows Prepared by Red Oak Consulting A-1

9 EL MIRAGE, ARIZONA FILE: EM WRF WATER RECHARGE FEE SCHEDULE: USE FEE CALCULATION DATE: 03/05/12 RANGE: USE1 Thousands of Gallons Total Average Annualized Average Use Total Customer Type Class Period Year Usage Use Use per Month per Acct Accounts El Mirage Water Only Residential Jan - Mar , , El Mirage Water Only Multifamily Jan - Mar El Mirage Water Only Commercial Jan - Mar , , Total (kgals) 5,280 1,760 21,120 Acre Feet Gals/AF 325, , ,900 Prepared by Red Oak Consulting A-2