NEW Water, the brand of the Green Bay Metropolitan Sewerage District Wastewater Fixed Charge Alternatives Support

Transcription

1 NEW Water, the brand of the Green Bay Metropolitan Sewerage District Wastewater Fixed Charge Alternatives Support Customer Advisory Group Workshop #2 Minutes Date: March 27, 2018 Time: 9:00-11:00 AM CST Location: NEW Water, Daniel J. Alesch Training Center Attendees: See sign-in sheet attached as Appendix A. Minutes: Presentation Workshop #2 began with a review of what was discussed in Workshop #1, including a description of the current fixed charge methodology and a proposed alternative. Next, a review of NEW Water responses to Parking Lot questions captured during Workshop #1 was presented and discussed. Finally, next steps in the fixed charge methodology review process were detailed including the agenda for the March 28 Commission Meeting and the plan to make a final decision for the FY2019 fixed charge at the April Commission Meeting. Parking Lot A new parking lot was established to identify questions that might require further discussion or exploration within or beyond Workshop # Customers requested that NEW Water respond to these items. The minutes below summarize these questions: 1. It was requested that NEW Water calculate rate and fixed charge impacts for all customers in a hypothetical scenario where Expera and US Paper begin pre-treatment to eliminate their TSS and BOD loading units from the system (see Attachment B). It was asked when the evaluation of a true-up would be completed? a. NEW Water confirmed that evaluating a true-up was outside the scope of the current study and would not be implemented for the FY2019 budget year given the timing of that budget process and the need to further define what a true-up would involve specifically. b. NEW Water committed to mentioning customer interest in a true-up at the March Commission Meeting and considering it as an option for the FY2020 budget period. It was asked if it might be feasible to use a rolling average (including the most recent available period) of fixed asset investment for capital allocations to flow and loading parameters? a. NEW Water clarified during the meeting that it is required to re-visit these allocations every five years, or when it moves forward with a project of substantial size ($10 million). NEW Water and Arcadis will work on addressing all of these Parking Lot questions prior to the April Commission Meeting. 1 of 5

2 APPENDIX A 2 of 5

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4 APPENDIX B 4 of 5

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6 FIXED CHARGE METHODOLOGY CUSTOMER WORKSHOP #2 Prepared for NEW Water by Arcadis and Raftelis March 27, 2018

7 Agenda 1. 3/27/2018 2

8 Workshop #1 In the prior workshop we discussed the current and proposed fixed charge methodology, including projected impacts for each customer. Parking Lot questions were gathered and will be discussed today. Minutes have been issued as a review of Workshop #1: We are happy to revisit any specific slides from workshop #1 or to discuss the notes section of the issued minutes before we go through the Parking Lot. 3/27/2018 3

9 Illustration of Current Methodology Total Capital Cost (FY2018) $18,264,000 (46% of Total Costs) A. Portion Recovered From Volume and Loading Charges 35% or $6,393,000 B. Portion Recovered From Fixed Charges 65% or $11,872,000 (30% of Total Costs) 1/31/2018 4

10 Illustration of Current Methodology A. Portion From Volume & Loading Charges 35% or $6,393, Adjust for GP, Mill Charges and Other Revenues Remaining portion = $2,814,000 Allocate costs to Parameters based on Fixed Asset Allocation Customer Flow BOD TSS Phos TKN ALL 16.0% 38.7% 38.4% 0.8% 6.0% ALL $0.45M $1.09M $1.08M $0.02M $0.17M Divide by Flows and Loadings to Calculate Unit Rate and Bill Based on Actual Flows and Loadings Customer Flow BOD TSS Phos TKN ALL $ $ $ $ $ Customer X X MG X LBS X LBS X LBS X LBS Customer X Portion = ($ x X MG Flow) + ($ x X LBS BOD etc) 1/31/2018 5

11 Illustration of Current Methodology B. Portion from Fixed Charge 65% or $11,872, Distribute fixed charge to Customers based on Average of Flow / Strength Contributions Customer Flow BOD TSS Phos TKN Customer X 7% 6.2% 9% 5.0% 6.5% Average = 85% Customer X Portion = 85% x $11,872,000 1/31/2018 6

12 Alternatives Status Quo - No change to the current methodology Alternative - Allocate Fixed Charge (i) first to cost parameter, and (ii) then to customer 1/31/2018 7

13 Illustration of Alternative Methodology B. Portion from Fixed Charge 65% or $11,872,000 * Method results in the same customer allocation as if there was no fixed charge, and the costs were recovered through the variable rates 1. Allocate Fixed Charge to Parameters based on Fixed Asset Allocation Customer Flow BOD TSS Phos TKN ALL 16.0% 38.7% 38.4% 0.8% 6.0% ALL $1.90M $60M $56M $0.09M $0.72M Distribute Fixed Charge to Customers based on Flow / Strength Contributions Customer Flow BOD TSS Phos TKN Customer X 7% 6.2% 9% 5.0% 6.5% Customer X Portion = (7% x $1.90M) + (6.2% x $60M) + etc... 1/31/2018 8

14 Considerations Description Status Quo (Current Methodology) Alternative Methodology Level of Simplicity Simple to calculate More complex calculation Consistency Relation to Costs Inconsistent with how other capital costs are recovered Less related to how costs are incurred Consistent with how other capital costs are recovered More related to how costs are incurred Customer impacts No change Some anticipated bill impacts to customers 1/31/2018 9

15 Parking Lot Items 1. How does NEW Water handle unmetered/unsampled (UMS) customers? How does the impact of a significant loss/gain in flows or loads change the rate setting approach? For example, if a large industrial customer invested in new pretreatment capital projects, how would that impact the municipalities? How would costs redistribute and how would rate setting change if this occurred? Is there a potential to true-up the fixed charge customer allocations with actual flows and loads once the billing year has concluded? Might NEW Water consider recovering all capital rate revenue (~80% of total) as a fixed charge? 3/27/

16 Parking Lot Items 5. Will NEW Water re-convene the customer advisory group when any future changes are made to the percentage of capital costs recovered through the fixed charge? 6. Will NEW Water project forward any known capital cost increases so that customers can evaluate the impact of the current and alternative fixed charge methodologies over time as the CIP is implemented? 7. Will NEW Water provide 2018 monthly fixed charge amounts to each customer, as well as the latest unit Capital Cost? 8. Do the changes to capital cost allocations involved in the alternative require that any associated changes to O&M cost allocations be made? 3/27/

17 #1 Unmetered / Unsampled Customers How does NEW Water handle unmetered/unsampled (UMS) customers? FOLLOW-UP Customers with UMS basins annually provide their respective number of connections, which when multiplied by the per-connection flows and loadings parameters from control sites, provide an estimate of flows and loadings for each UMS. From there, UMS data flows through the same calculations as other customers. Control sites are used to generate per-connection inputs for modeling UMS flows and loads. Control sites provide daily readings, and UMS projections are updated annually. NEW Water performs metering and sampling at two control sites that: a) Do not have industrial influence; b) Are believed to have high data accuracy; and c) Have accurate sewer lateral (or connection) counts. NOTE: a third control site is under consideration to further enhance this information. 3/27/

18 #2 Loss / Gain Flows or Loads How does the impact of a significant loss/gain in flows or loads change the rate setting approach? For example, if a large industrial customer invested in new pretreatment capital projects, how would that impact the municipalities? How would costs redistribute and how would rate setting change if this occurred? FOLLOW-UP If the total projected flows and loads were reduced due to the introduction of pretreatment processes for a large industrial customer, then the budgeted costs would be distributed over a smaller denominator of units, which would increase rates and fixed charges for most customers. Effectively the same capital costs (and likely only slightly reduced variable O&M costs) would be distributed across a smaller denominator, thereby increasing the proportion of cost recovery for most communities. The community in which the large industrial customer operates would likely see a reduction in their share of the fixed charge but variable unit rates would increase for all customers. 3/27/

19 #3 True-Up Is there a potential to true-up the fixed charge customer allocations with actual flows and loads once the billing year has concluded? Implementation of a true-up process is beyond the scope of the current study. NEW Water has recorded this suggestion, and its evaluation will be completed at a later date. FOLLOW-UP 3/27/

20 #4 Increasing Fixed Share of Capital Might NEW Water consider recovering all capital rate revenue (~80% of total) as a fixed charge? Consideration of changes to the portion of the revenue requirements that will be recovered from fixed charges and volumetric rates is beyond the scope of the current study. NEW Water has recorded this suggestion, and it will be considered at a later date. FOLLOW-UP 3/27/

21 #5 Customer Advisory Group Will NEW Water re-convene the customer advisory group when any future changes are made to the percentage of capital costs recovered through the fixed charge? Yes. NEW Water plans to re-convene a customer advisory group when future changes to the cost allocation or rate methodologies are being considered in the future. FOLLOW-UP 3/27/

22 #6 Capital Cost Increases Will NEW Water project forward any known capital cost increases so that customers can evaluate the impact of the current and alternative fixed charge methodologies over time as the CIP is implemented? Yes. NEW Water will provide projections of fixed charges and overall cost impacts to customers as significant future capital costs become known. FOLLOW-UP Typically, as part of the budgeting process, NEW Water prepares a five-year CIP projection, and NEW Water intends to continue to do so in the future. These estimates can inform customers of potential changes in the cost model but they are subject to change, and rate impacts are considered as we review the projection outputs. NEW Water intends to model any significant capital allocation changes as estimates become available. 3/27/

23 #7 Forecast Monthly Bill Impacts Will NEW Water provide 2018 monthly fixed charge amounts to each customer, as well as the latest unit Capital Cost? NEW Water can provide the monthly fixed charge amounts to each municipal customer. The monthly rate = the annual fixed charge / 12 months. FOLLOW-UP Costs could be further categorized into parameter if requested. 3/27/

24 #8 O&M Implications Do the changes to capital cost allocations involved in the alternative require that any associated changes to O&M cost allocations be made? The cost allocation methodology uses cost-specific allocation factors, which are different for capital and O&M. FOLLOW-UP O&M: The O&M allocation factors are based on the usage of labor, materials & supplies, chemicals etc. throughout the system. Capital: The capital allocation factors are based on the investment in the system. The alternative fixed charge allocation method only relates to the allocation of 65% of the fixed capital costs. Therefore, there are no impacts on the O&M cost allocations. 3/27/

25 #8 O&M Implications (cont d) Changes to the fixed charge methodology only impact this column (65% of Capital Costs) Not impacted by the fixed charge methodology 35% of Capital Costs less adjustments 3/27/

26 Following today s meeting Arcadis will present the fixed charge methodology study at Wednesday s Commission Meeting. Arcadis and NEW Water staff will finalize a fixed charge recommendation and present it at the April Commission meeting. Upon the Commission s decision Arcadis will make any required financial model adjustments associated with the selected fixed charge solution in preparation for the FY2019 budget cycle. 3/27/

27 Feedback and Open Please do not hesitate to reach out to NEW Water / Arcadis if you prefer to share any thoughts privately. 3/27/

28 Questions? 3/27/