CONTRA COSTA WATER DISTRICT. Treated and Untreated Water Rate Study

Transcription

1 CONTRA COSTA WATER DISTRICT Treated and Untreated Water Rate Study Final Report / December 2018

2 December 21, 2018 Mr. Jerry Brown General Manager Contra Costa Water District 1331 Concord Avenue Concord, CA Subject: Treated and Untreated Water Rate Study Report Dear Mr. Brown, Raftelis Financial Consultants, Inc. (Raftelis) is pleased to provide this report to the Contra Costa Water District (District) for the Treated and Untreated Water Rate Study. This report presents the analyses, rationales, and methodologies utilized in the study to determine cost of service-based water rates that meet the requirements of California Constitution Article XIII D, Section 6 (commonly referred to as Proposition 218 ). The study involved a comprehensive review of the District s current rate structure and cost requirements, a cost of service analysis to fairly and equitably allocate costs, and a rate design process to determine proposed rates for the treated and untreated water systems that are in line with the District s policy objectives. The main objectives that informed the study include:» Adequately recovering all costs to maintain the District s financial sufficiency» Fairly and equitably allocating costs between the treated and untreated water systems» Simplifying the rate structure for ease of understanding and administration We are confident that the proposed rates developed during this study are fair and equitable for the District s treated and untreated water customers and are compliant with Proposition 218. It was a pleasure working with you and your team, and we wish to express our gratitude for the support you, Ms. Desiree Castello, Ms. Celia Cheung, and other District staff provided to us during the study. If you have any questions, please do not hesitate to call me at Sincerely, Raftelis Financial Consultants, Inc. Sanjay Gaur Vice President Nancy Phan Consultant 445 S. Figueroa Street, Suite 2270 Los Angeles, CA

3 Table of Contents Executive Summary...1 Study Background...1 Water System Overview...2 Current Water Rates...2 Legal Framework...8 Process and Approach...8 Results and Recommendations Revenue Requirement Total Revenue Requirement O&M Expense Allocation Debt Service Allocation Capital Project Allocation Wholesale Treated Water Revenue Offsets Allocation Other Revenue Offsets Allocation Adjustments to Revenue Requirement Revenue Requirement Allocation Treated Water Cost of Service and Rates Process and Approach Cost Functionalization Cost Component Allocation Unit Cost Development Revenue Requirement Distribution Rate Design and Calculation Customer Impacts Untreated Water Cost of Service and Rates Process and Approach Cost Functionalization Cost Component Allocation Unit Cost Development Revenue Requirement Distribution Rate Design and Calculation Customer Impacts CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT

4 List of Tables Table 1-1: Timeline of Major Events...1 Table 1-2: Current Treated Water Service Charges...4 Table 1-3: Current Treated Water Usage and Energy Charges...5 Table 1-4: Current Treated Water Public Fire Protection Charges...5 Table 1-5: Current Treated Water Backflow Prevention Surcharges...6 Table 1-6: Current Untreated Water Service Charges...7 Table 1-7: Current Untreated Water Usage charges...7 Table 1-8: Current Untreated Water Demand Charges...7 Table 1-9: Proposed Treated Water Service Charges Table 1-10: Proposed Treated Water Usage and Energy Charges Table 1-11: Proposed Treated Water Backflow Prevention Surcharges Table 1-12: Proposed Untreated Water Rates Table 2-1: Total Revenue Requirement Table 2-2: Proportion of 5-Year Average Water Usage Table 2-3: Proportion of Current Year Water Usage Table 2-4: Proportion of Customer Accounts Table 2-5: Allocated O&M Expenses Table 2-6: Allocated Debt Service Table 2-7: Capital Project Cost Allocation Methodology Table 2-8: Joint Asset Allocation Table 2-9: Allocated Capital Project Costs Table 2-10: Revenue Offset Allocation Percentages Table 2-11: Allocated Revenue Offsets Table 2-12: Treated Water Revenue Requirement Table 2-13: Untreated Water Revenue Requirement Table 3-1: Treated Water Operating Cost Functions Table 3-2: Treated Water Capital Asset Functions Table 3-3: Treated Water Cost Component Allocation Table 3-4: Treated Water System-Wide Peaking Factors Table 3-5: Treated Water Cost Allocation Percentages Table 3-6: Treated Water Revenue Offset Allocation Table 3-7: Treated Water Revenue Requirement by Component (Non-Adjusted) Table 3-8: Treated Water Revenue Requirement by Component (Adjusted) Table 3-9: Treated Water Equivalent Fire Lines Table 3-10: Treated Water Backflow Prevention Costs Table 3-11: Treated Water Revenue Requirement by Component Table 3-12: Treated Water Units of Service Table 3-13: Treated Water Estimated FY 2019 Usage Table 3-14: Treated Water Equivalent Meters (SFR Lifeline) Table 3-15: Treated Water Equivalent Meters (All Other Classes) CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT

5 Table 3-16: Treated Water Backflow Cost Equivalents Table 3-17: Treated Water Unit Costs Table 3-18: Treated Water Allocation of Pumping Revenue Requirement Table 3-19: Treated Water Energy Zone Usage Distribution Table 3-20: Treated Water Pumping Unit Costs by Zone Table 3-21: Treated Water Revenue Requirement by Rate Component Table 3-22: Treated Water Service Charge Calculation Table 3-23: Treated Water SFR Lifeline Service Charge Calculation Table 3-24: Treated Water Usage Charge Calculation Table 3-25: Treated Water Energy Charge Calculation Table 3-26: Treated Water Backflow Prevention Surcharge Calculation Table 3-27: Proposed Treated Water Service Charges Table 3-28: Proposed Treated Water Usage and Energy Charges Table 3-29: Proposed Treated Water Backflow Prevention Surcharges Table 3-30: Treated Water SFR Customer Impacts Table 4-1: Untreated Water Operating Cost Functions Table 4-2: Untreated Water Capital Asset Functions Table 4-3: Untreated Water Cost Component Allocation Table 4-4: Untreated Water System-Wide Peaking Factors Table 4-5: Untreated Water Cost Allocation Percentages Table 4-6: Untreated Water Revenue Offset Allocation Table 4-7: Untreated Water Revenue Requirement by Component (Non-Adjusted) Table 4-8: Untreated Water Revenue Requirement by Component (Adjusted) Table 4-9: Untreated Water Units of Service Table 4-10: Untreated Water Estimated FY 2019 Usage Table 4-11: Untreated Water 3-Year Average Maximum Month Usage Table 4-12: Untreated Water Connections Table 4-13: Untreated Water Unit Costs Table 4-14: Untreated Water Revenue Requirement by Customer Class Table 4-15: Untreated Water Revenue Requirement by Rate Component Table 4-16: Untreated Water Service Charge Calculation Table 4-17: Untreated Water Usage Charge Calculation Table 4-18: Untreated Water Agricultural 3-Year Phase-In Approach Table 4-19: Untreated Water Demand Charge Calculation Table 4-20: Proposed Untreated Water Rates Table 4-21: Untreated Water Customer Impacts CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT

6 List of Appendices Appendix A: Detailed System Allocations Appendix B: Detailed Treated Water Allocations Appendix C: Detailed Untreated Water Allocations Appendix D: Map of Energy Zones Technical Appendix 1: Treated Water Backflow Cost Equivalent Calculation Technical Appendix 2: Untreated Water System Peaking Factor Calculation Technical Appendix 3: Untreated Water Unmetered Landscape Irrigation Usage Calculation CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT

7 1 Executive Summary Study Background In late 2016, the Contra Costa Water District contracted Raftelis to conduct a cost of service and rate study for its treated and untreated water systems. The District s last major rate study, which developed the current treated and untreated water rate structure, was performed in 1992 and reviewed in In the current study, the District seeks to explore an alternative rate structure that adequately, fairly, and equitably recovers costs for providing service to the two water systems. Since the District s last rate study and review, in 1992 and 2015 respectively, the landscape of the water utility industry and the District s financial circumstance have undergone significant changes. The major events during this time include the expansion of the District s water system and the most recent California drought. Table 1-1: Timeline of Major Events Year Event or Change in Circumstance 1992 Randall-Bold Water Treatment Plant is completed 1998 Los Vaqueros Reservoir Project is completed, can store up to 100,000 acre-feet (AF) of water 1999 Bollman Water Treatment Plant is upgraded to a capacity of 75 million gallons per day (MGD) 2003 Pipeline from Randall-Bold Water Treatment Plant to Central County is installed 2007 Randall-Bold Water Treatment Plant is upgraded to a capacity of 50 MGD 2009 Statewide drought restriction imposed, customers reduce water usage by 20 percent 2010 Middle River Intake and Pipeline completed 2012 Los Vaqueros expansion to 160,000 AF capacity completed 2015 Driest year in California history, customers reduce water usage by 37 percent from 2013 levels 2016 District rescinds drought restrictions 2017 Wettest year in California history, Los Vaqueros is filled to its highest level ever at 156,000 AF In the period between 1992 to 2017, three new facilities were added to the District s water system and three facilities were expanded, resulting in a significant increase in capacity. Moving forward, however, the District does not require any major facility expansion in the near future. The shift of focus and consequently, funding from expansion to maintenance necessitates an updated analysis of the District s cost requirements to ensure that costs are allocated accurately in light of these changes. The most recent California drought, lasting from 2011 to early 2017, brought upon mandated statewide water usage restrictions. The District s customer base responded by exceeding the reduction amounts by 12 percent. The restrictions mandated a 25 percent reduction; the District s customers reduced their water usage by 37 percent. Although the drought restrictions were rescinded in 2016 and California experienced its wettest year in history in 2017, the drought brought upon a cultural shift in consumption patterns towards increased water conservation. The amplified focus on conservation poses a unique challenge for the District: while ongoing conservation is beneficial for long-term sustainability (and mandated by California Constitution Article X, Section 2), the District requires revenue from water sales to adequately recover costs. Since the last rate study was performed, California came into and out of a major drought, which has potentially lasting effects on water consumption patterns. The purpose of this study is to ensure that water rates adequately cover all costs and align with the costs of providing service, taking into consideration the changes in expenses and water consumption patterns. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 1

8 The study s policy objectives, which were determined based on discussion with District staff and Board of Directors (Board), include:» Adequately recovering costs to ensure financial sufficiency and stability» Providing affordable water for essential uses» Allocating costs fairly and equitably between the treated and untreated systems» Encouraging efficient water use» Enhancing customer understanding and staff administration of the rate structure through simplifying and standardizing rate components The proposed water rates were determined using the principles established by the American Water Works Association s (AWWA) Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices M1, Sixth Edition (M1 Manual) and are compliant with Proposition 218 requirements. This study presents the revenue requirements, cost allocations, and resulting water rates for treated and untreated customers for implementation in February Water System Overview The District provides treated and untreated water service to central and eastern Contra Costa County in Northern California. Its customer base currently consists of approximately 500,000 people some of which are served indirectly through water deliveries to nearby agencies and includes both wholesale and retail water customers. The District directly serves treated water to approximately 250,000 people in the cities of Clayton, Clyde, Concord, Pacheco, Port Costa, and parts of Martinez, Pleasant Hill, and Walnut Creek. The remaining 250,000 people in the District s customer base are served by the cities of Antioch and Brentwood, the Golden State Water Company (GSWC) in Bay Point, and the Diablo Water District (DWD) in Oakley for treated water and the cities of Antioch, Martinez, and Pittsburg for untreated water. The District operates and maintains a vast system of water facilities. Untreated water facilities include four untreated water reservoirs (Contra Loma, Mallard, Martinez, and Los Vaqueros Reservoirs), the 48-mile Contra Costa Canal, and four pumping stations and related conveyance facilities. Water is diverted from the Delta through four screened intakes located at Rock Slough, Old River, Middle River, and Mallard Slough. Treated water facilities include three water treatment plants and over 800 miles of treated water pipelines and related distribution facilities. The Bollman Water Treatment Plant in Concord has a capacity of 75 MGD and serves the District s treated water customers in Central County and by contract to Bay Point. The Randall-Bold Water Treatment Plant in Oakley is owned and operated under a Joint Powers Authority (JPA) agreement between the District and Diablo Water District (DWD). The Randall-Bold Water Treatment Plant, with a capacity of 50 MGD, provides treated water to DWD under the JPA, to the Cities of Brentwood and Antioch by separate agreements, and to GSWC in Bay Point. The City of Brentwood Water Treatment Plant in Oakley, which is has a capacity of 16.5 MGD, is operated by the District for the City of Brentwood to serve its customers outside of the District s service area. Current Water Rates This section of the Executive Summary outlines the District s current treated and untreated water rate structures and their corresponding cost components. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 2

9 Treated Water The District s current treated water rate structure consists of the following components:» Service charge by meter size for all customer classes 1 including Single Family Residential (SFR)» Multi-Family Residential (MFR) service charge by connection and dwelling units» Private Fire service charge by fire line meter size» Usage charge per hundred cubic feet (hcf) of water (equivalent to approximately 748 gallons)» Excess use charge per hcf of water» Energy charge per hcf of water in Zones 1 through 8 and for Temporary Service» Public fire protection charge by meter size for all customer classes» MFR public fire protection charge by dwelling unit» Backflow prevention surcharge by meter size for double check valve or air gap system or reduced backflow prevention devices The following tables (Table 1-2, Table 1-3, Table 1-4, Table 1-5) show the current treated water service charges, usage and energy charges, public fire protection charges, and backflow surcharges for all customer classes, respectively. 1 Customer classes include Single Family Residential, Commercial, Industrial, Public Authority, Residential Irrigation, Commercial and Industrial Irrigation, Public Authority Irrigation, and Temporary Service. Multi-Family Residential customers are charged based on connection and dwelling units. Single Family Residential Lifeline customers are charged a service charge at a discount of 50 percent. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 3

10 Table 1-2: Current Treated Water Service Charges Service Charge Components Current Rates Service Charge ($/day) 5/8 inch $ /4 inch $ /4 inch (SFR w/ inside sprinklers) $ inch $ inch (SFR w/ inside sprinklers) $ /2 inch $ inch $ inch $ inch $ inch $ inch $ inch $ inch $ Dual 1 1/2 inch $ Dual 2 inch $ SFR Lifeline Service Charge ($/day) 5/8 inch $ /4 inch $ /4 inch (SFR w/ inside sprinklers) $ inch $ inch (SFR w/ inside sprinklers) $ MFR Service Charge ($/day) Per connection $ Per dwelling unit $ Private Fire Service Charge ($/day) 2 inch $ inch $ inch $ inch $ inch $ inch $ inch $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 4

11 Table 1-3: Current Treated Water Usage and Energy Charges Usage and Energy Charge Components Current Rates Usage Charge ($/hcf) All Classes $ Excess Use Charge ($/hcf) All Classes $ Energy Charge ($/hcf) Zone 1 $ Zone 2 $ Zone 3 $ Zone 4 $ Zone 5 $ Zone 6 $ Zone 7 $ Zone 8 $ Temporary Service $ Table 1-4: Current Treated Water Public Fire Protection Charges Public Fire Protection Charge Components Current Rates Public Fire Protection Charge ($/day) 5/8 inch $ /4 inch* $ /4 inch (SFR w/ inside sprinklers) $ inch* $ inch (SFR w/ inside sprinklers) $ /2 inch $ inch $ inch $ inch $ inch $ inch $ inch $ inch $ Dual 1 1/2 inch $ Dual 2 inch $ Multi-Family Public Fire Protection Charge ($/day) Per dwelling unit $ *SFR public fire protection charges are the same for 5/8 to 1 meters CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 5

12 Table 1-5: Current Treated Water Backflow Prevention Surcharges Backflow Prevention Surcharge Components Current Rates Double Check Valve or Air Gap System ($/day) 5/8 inch $ /4 inch $ inch $ /2 inch $ inch $ inch $ inch $ inch $ inch $ inch $ inch $ Dual 1 1/2 inch $ Dual 2 inch $ Reduced Pressure Backflow Prevention Device ($/day) 5/8 inch $ /4 inch $ inch $ /2 inch $ inch $ inch $ inch $ inch $ inch $ inch $ inch $ Dual 1 1/2 inch $ Dual 2 inch $ Untreated Water The District s current untreated water rates consist of the following components:» Monthly or annual service charge per customer» Annual service charge per acre for Agricultural Irrigation customers» Usage charge per 1,000 gallons (kgal) of water» Usage charge per AF of water for Agricultural Irrigation customers» Excess Use charge per kgal of water for Landscape Irrigation customers» Monthly or annual demand charges based on gallons per minute (gpm) of peak demand The following tables (Table 1-6, Table 1-7, and Table 1-8) show the current untreated water service charges, usage charges, and demand charges, respectively. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 6

13 Table 1-6: Current Untreated Water Service Charges Service Charge Components Current Rates Monthly Service Charge (per connection) Wholesale Municipal $ Industrial $ Landscape Irrigation $29.25 Temporary Service $28.89 Annual Service Charge Agricultural Irrigation - Livestock $66.16 Agricultural Irrigation (per acre) $24.95 Table 1-7: Current Untreated Water Usage Charges Usage Charge Components Current Rates Usage Charge ($/kgal) Wholesale Municipal $ Industrial $ Landscape Irrigation (metered) $ Temporary Service $ Usage Charge ($/AF) Agricultural Irrigation $ Excess Use Charge ($/kgal) Landscape Irrigation $ Table 1-8: Current Untreated Water Demand Charges Demand Charge Components Current Rates Monthly Demand Charges ($/gpm) Wholesale Municipal - Recording Meter Maximum Day $ Maximum Hour $ Wholesale Municipal - Non-Recording Meter Maximum Month $ Industrial - Recording Meter Maximum Day $ Maximum Hour $ Industrial - Non-Recording Meter Maximum Month $ Landscape Irrigation Maximum Month $ Temporary Service Maximum Month $ Annual Demand Charges ($/0.05 acres) Landscape Irrigation - Unmetered $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 7

14 Legal Framework 2 The rate-making process, especially for water agencies in California, begins with reviewing the legal requirements and framework currently in place. The major legal requirements include Proposition 218 and Article X, Section 2 of the California Constitution, which are outlined in the following sections. California Constitution Article XIII D, Section 6 (Proposition 218) Proposition 218 was enacted by voters in 1996 to ensure, in part, that fees and charges imposed for ongoing delivery of a service to a property ( property-related fees and charges ) are proportional to, and do not exceed, the cost of providing service. Water service fees and charges are property-related and subject to the provisions of Proposition 218. The principal requirements, as they relate to public water service fees and charges, are as follows: 1. Revenues derived from a property-related charge imposed by a public agency shall not exceed the costs required to provide the property-related service. 2. Revenues derived by the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed. 3. The amount of the fee or charge imposed upon any parcel shall not exceed the proportional cost of service attributable to the parcel. 4. No fee or charge may be imposed for a service unless that service is actually used or immediately available to the owner of property. 5. A written notice of the proposed fee or charge shall be mailed to the record owner of each parcel not less than 45 days prior to a public hearing, when the agency considers all written protests against the charge. As stated in the M1 Manual, water rates and charges should be recovered from classes of customers in proportion to the cost of serving those customers. Proposition 218 requires that water rates cannot be arbitrary and capricious, meaning that the rate-setting methodology must establish a clear nexus between costs and the rates charged. California Constitution Article X, Section 2 Article X, Section 2 of the California Constitution was established in 1976 and states the following: It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare. Article X, Section 2 of the California Constitution institutes the need to preserve the State s water supplies and to discourage the wasteful or unreasonable use of water by encouraging conservation. As such, public agencies are constitutionally mandated to maximize the beneficial use of water, prevent waste, and encourage conservation. Process and Approach The process and approach Raftelis utilized in the study is informed by the major events that changed the District s circumstance since the prior rate study, the study policy objectives, the District s current water system and rates, 2 Raftelis does not practice law nor does it provide legal advice. The above discussion provides a general review of apparent state institutional constraints and is labeled legal framework for literary convenience only. The District should consult with its legal counsel for clarification and/or specific review of any of the above or other matters. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 8

15 and the legal requirements in California (namely, Proposition 218). The resulting cost of service analysis and rate design process take all factors into consideration and follow four key steps, outlined below, to determine proposed rates that fulfill the District s policy objectives, meet industry standards, and comply with Proposition 218. Step 1: Revenue Requirement Calculation The rate-making process begins by determining the revenue requirement for the base year, also known as the ratesetting year. The base year for this study is fiscal year (FY) The revenue requirement should sufficiently fund the utility s operation and maintenance (O&M) costs, annual debt service, capital project expenses, and reserve funding as projected in the District s FY 2019 budget. The total revenue requirement determined in this study is then further allocated between the treated and untreated water systems. Step 2: Cost of Service Analysis The annual cost of providing water service, or the revenue requirement, is then distributed among customer classes commensurate with their use of and burden on the system. A cost of service analysis involves the following steps: 1. Functionalize costs the O&M expense budget is categorized into functions such as supply, treatment, pumping, transmission and distribution (T&D), etc. 2. Allocate to cost components the functionalized costs are then allocated to cost components such as supply, delivery, peaking, conservation, etc. 3. Develop unit costs unit costs for each cost component is determined using appropriate units of service for each component. 4. Distribute cost components the cost components are allocated to each customer class using the unit costs in proportion to their demand and burden on the system. A cost of service analysis considers both the average water demand and peak demand. Peaking costs 4 are incurred during peak periods of consumption, most often coinciding with summertime usage. There are additional capacityrelated 5 costs associated with designing, constructing, operating, maintaining, and replacing facilities to meet peak demand. These peaking costs must be allocated to the customer classes whose water consumption patterns generate additional costs for the utility, proportionate to their burden on the peaking-related facilities. Step 3: Rate Design and Calculation After allocating the revenue requirement to each water system and its corresponding customer classes, the rate design and calculation process can begin. Rates do more than simply recover costs; within the legal framework and industry standards, properly designed rates should support and optimize for the District s policy objectives. Rates may also act as a public information tool in communicating these policy objectives to customers. This process also includes a rate impact analysis to all customer classes and sample customer bill impact analysis. 3 FY 2019 is the period starting July 1, 2018 to June 30, Collectively, maximum month, maximum day, and maximum hour costs are known as peaking costs. 5 System capacity is the system s ability to supply water to all delivery points at the time when demanded. The time of greatest demand is known as peak demand. Both the operating and capital costs incurred to accommodate peak flows are generally allocated to each customer class based upon the relative demand during the peak month, day, and hour event. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 9

16 Step 4: Administrative Record Preparation and Rate Adoption The final step in a cost of service and rate study is to develop the administrative record in preparation for the rate adoption process. The administrative record, also known as the study report, documents the rate study results and presents the methodologies, rationale, justifications, and calculations utilized to determine the proposed rates. A thorough and methodological administrative record serves two important functions: maintaining defensibility in a stringent legal environment and communicating the rate adoption process to customers and important stakeholders. Results and Recommendations The results and recommendations that Raftelis developed, in collaboration with District staff and Board members, include the following:» Proposed revenue adjustments of 6.0 percent for both the treated and untreated water systems» Eliminated excess use charge for treated and untreated water customers» Combined service charge and public fire protection charge for treated water customers» Updated the energy charge by zone and used non-rate revenues to offset portion of energy charge increases for 2019, the first year of implementation» Standardized service, usage, and demand charges for untreated water customers» Developed approach to phase-in untreated water Agricultural rates over three years to reduce customer impacts using non-rate revenues to offset the difference in revenues collected The proposed revenue adjustment for the rate-making year, FY 2019, is 6.0 percent for both systems. The revenue adjustment, or percentage increase of total revenues for each water system, is based upon factors affecting the revenue requirement and thus the water rates. The two main factors are O&M expenses and capital project funding. The 6.0 percent revenue adjustment covers only a portion of the District s increased costs in FY 2019; the remainder of costs are funded by reserves to reduce impacts to customers. The District s budgeted O&M expenses increased 3.5 percent from FY 2018 to FY 2019, which is comparable to the Consumer Price Index increase of approximately 3.6 percent seen in the 2018 calendar year. The amount of rate funded capital project costs is $18.2 million and $10.6 million for the treated and untreated water systems, respectively. The main capital project costs for the study year involves critical improvements to or maintenance of the Los Vaqueros watershed, treated and untreated water facilities, treated water pipelines, fleet vehicles and heavy equipment, and the Contra Costa Canal. The capital costs fund crucial replacement and repair of aging infrastructure and allow the District to maintain a safe and reliable water system for all customers. Treated Water The following tables present the proposed service charges, usage and energy charges, and backflow prevention surcharges for treated water customers in Table 1-9, Table 1-10, and Table 1-11, respectively. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 10

17 Table 1-9: Proposed Treated Water Service Charges Service and/or Public Fire Charges ($/day) All Classes SFR Lifeline Private Fire Meter or Fire Line Size 5/8 inch $ $ /4 inch $ $ /4 inch (SFR w/ inside sprinklers) $ $ inch $ $ inch (SFR w/ inside sprinklers) $ $ /2 inch $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ Dual 1 1/2 inch $ Dual 2 inch $ Table 1-10: Proposed Treated Water Usage and Energy Charges Usage and Energy Charges ($/hcf) All Classes Usage Charge $ Energy Charge Zone 1 $ Zone 2 $ Zone 3 $ Zone 4 $ Zone 5 $ Zone 6 $ Zone 7 $ Zone 8 $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 11

18 Untreated Water Table 1-11: Proposed Treated Water Backflow Prevention Surcharges Backflow Prevention Surcharge ($/day) Double Check Valve or Air Gap System Reduced Pressure Backflow Device Meter Size 5/8 inch $ $ /4 inch $ $ inch $ $ /2 inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ Dual 1 1/2 inch $ $ Dual 2 inch $ $ Table 1-12 presents the proposed service charges, usage charges, and demand charges for untreated water customers. Table 1-12: Proposed Untreated Water Rates Untreated Water Rates Proposed Rate Service Charges Metered Customers ($/month) $8.27 Unmetered Customers ($/year) $66.16 Usage Charge Metered Customers ($/kgal) $2.13 Unmetered Customers ($/0.05 acres) $ Demand Charges* Metered Customers ($/kgal of max month usage) $3.24 Unmetered Customers ($/0.05 acres) $32.76 *Demand charges are charged based on a three-year rolling average of maximum month usage for all customers, except Agricultural CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 12

19 2 Revenue Requirement Determining the revenue requirement is the first step in the cost of service and rate study. The total revenue requirement is divided between the treated and untreated water systems based on the allocation methodologies presented in this section of the report. Total Revenue Requirement Raftelis received the District-wide budget for FY 2019 from District staff at the beginning of the study. The total budget for both water systems includes the revenue requirements (costs), revenue offsets (non-rate revenues), and adjustments to determine the total revenue required from rates (equal to current revenues plus additional revenue adjustments). The total revenue requirement, shown in Table 2-1, is split between two categories: operating and capital. Each line item in the table is apportioned to either operating or capital based on its function or use. Generally, operating costs and revenues, such as O&M expenses, pumping and treatment revenues, and operating cost reimbursements, are assigned to operating; capital costs and revenues, such as debt service, capital project spending, capital reimbursements, and facility reserve charges (FRCs, which are also known as connection fees), are assigned to capital. Some revenue offsets and adjustments, such as property tax, interest income, and other miscellaneous revenues, are not assigned to a specific function and can be apportioned to operating or capital at the District s policy discretion. The allocation of each line item to either operating or capital affects all customer classes equally. The revenue requirements (Lines 1-8), or expenses, include O&M expenses, a transfer to the drought reserve, existing and proposed debt service, and capital project expenses. The debt service (Line 4) includes all current and projected debt service payments and is partially offset by a transfer from the District s other funds (Line 23), such as the FRC reserves, which fund the District s Multi-Purpose Pipeline (MPP), and the land levy taxes collected to fund improvements to the District s Shortcut Pipeline (SCPL). The capital project expenses (Lines 5-7) are divided into three components: rate funded, other funded, and restricted reserve funded. Other funded capital projects (Line 6) are projects that benefit the District s wholesale customers based on preexisting agreements between those customers and the District, which include payments received from DWD for shared obligations related to the jointly owned Randall-Bold Water Treatment Plant. Those costs are fully reimbursed to the District (Line 22) by the agencies that benefit from other funded capital projects and do not impact rates. Restricted reserve funded capital projects (Line 7) are funded through a transfer from the District s restricted reserves (Line 21) and do not impact rates. For example, FRC contributions from developers with planned projects located near open portions of the Contra Costa Canal are used to fund the canal s encasement to implement safety for local residents. Rate funded capital projects (Line 5), which do impact rates, make up the remainder of capital project costs. The revenue offsets (Lines 9-25) include payments from Brentwood and GSWC for pumping, treatment, and conveyance services; FRC revenues; property tax revenues; operating cost reimbursements; transfers for debt service and capital projects; interest income; and other miscellaneous revenues. Revenue offsets are non-rate revenues that are used to offset the revenue requirements. Brentwood and GSWC are treated wholesale municipal customers that pay untreated water rates and costs associated with treatment and delivery (Lines 10-15). The revenues that the District collects for these services are CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 13

20 used to offset the O&M expenses (Line 2) in the revenue requirements, which include the operating costs of the pumping and treatment facilities for the entire system. These revenues are essentially reimbursements that Brentwood and GSWC pay to the District to use pumping and treatment facilities; these agencies do not pay treated water rates, which are meant to recover costs associated with these facilities. The FRC revenues (Line 16) represent the portion of fees that new connections pay to buy into the system, which pays for pumping, pipelines, treatment plant, water supply and storage facilities. The funded facilities for untreated water include the Los Vaqueros Reservoir, the MPP, and the Middle River Intake and for treated water include storage tanks and reservoirs, pump stations, pipelines, and the Randall-Bold Water Treatment Plant. The operating cost reimbursements (Line 18) are reimbursements from Brentwood and DWD. Brentwood reimburses the District for the cost of operating the Brentwood Water Treatment Plant, which solely serves Brentwood s customers outside of the District s service area. A portion of the Brentwood reimbursement covers use of untreated water facilities to convey water to the Brentwood plant. DWD reimburses the District for its portion of the debt service and operating expenditures of the Randall-Bold Water Treatment Plant, in proportion to capacity ownership and facility usage. The Brentwood capacity buy-in component (Line 20) is payment for the City of Brentwood s capacity in the Rock Slough conveyance facility. Property tax revenues (Line 17) and interest income (Line 25) are not tied to specific costs, unlike certain cost reimbursements or FRC revenues. Other miscellaneous revenues (Line 19) include revenues from wind power royalties, property and cell site leases, recreation program fees, and late fees, etc. Treated water leases and royalties revenue is separated from other miscellaneous revenues (Line 21). Adjustments (Lines 27-30) are made to the revenue requirements to account for cash flow changes and mid-year rate increases. The adjustment for cash balance and reserves (Line 28) represents the amount of reserve drawdown, if positive, or additional reserve funding, if negative. For FY 2019, the cash balance adjustment is positive, signifying that the District is drawing from reserves to partially fund its costs. The adjustment for mid-year increase (Line 29) recognizes that the District will not collect the full amount of revenue required if a revenue adjustment is adopted in the middle of a fiscal year. For this study, revenue adjustments are adopted in February; the adjustment from reserves for the mid-year increase accounts for the loss of revenue from July (when the fiscal year starts) to February (when the rates are adopted). The District s expected treated and untreated water sales based on current rates (Column E, Line 32) include revenues from treated and untreated customers and the untreated portion of revenues for wholesale treated customers (Brentwood and GSWC). The total revenue required from rates (Column E, Line 31) is equal to the revenue requirements (Column E, Line 8) less revenue offsets (Column E, Line 26) and adjustments (Column E, Line 30). The total revenue required from rates is also equal to the current water sales revenues (Column E, Line 32) increased by 6.0 percent, or the total amount of revenue adjustments for the entire system. Revenue required from rates = Revenue requirements - Revenue offsets - Adjustments = Current revenues x Revenue adjustment The values shown in Table 2-1 represent the revenue requirement for the entire system. The following sections show the allocation of the revenue requirement between the treated and untreated water systems, resulting in the total revenue required from rates for each system. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 14

21 Table 2-1: Total Revenue Requirement A B C D E Line FY 2019 Revenue Requirement (All Systems) Operating Capital Total 1 Revenue Requirements 2 O&M Expenses $84,776,177 $0 $84,776,177 3 Transfer to Drought Reserve $1,000,000 $0 $1,000,000 4 Debt Service $0 $46,205,100 $46,205,100 5 Rate Funded Capital Projects $0 $28,854,000 $28,854,000 6 Other Funded Capital Projects $0 $12,560,000 $12,560,000 7 Restricted Reserve Funded Capital Projects $0 $1,885,000 $1,885,000 8 Total - Revenue Requirements $85,776,177 $89,504,100 $175,280,277 9 Revenue Offsets 10 Brentwood CVP Credit ($118,813) $0 ($118,813) 11 Brentwood Pumping $67,277 $0 $67, Brentwood Admin $1,875 $0 $1, Brentwood Treatment $521,063 $0 $521, GSWC Conveyance $122,896 $0 $122, GSWC Treatment $401,232 $0 $401, Facility Reserve Charges $0 $3,920,700 $3,920, Property Tax $2,958,200 $0 $2,958, Cost Reimbursements $6,864,000 $0 $6,864, Other Miscellaneous $1,944,550 $0 $1,944, Brentwood Capacity Buy-In $1,670,620 $0 $1,670, Treated Water - Leases and Royalties $415,704 $0 $415, Transfer (Restricted Reserve Funded Capital Projects) $0 $1,885,000 $1,885, Reimbursement (Other Funded Capital Projects) $0 $12,560,000 $12,560, Transfer (Debt Service from Other Funds) $0 $1,574,171 $1,574, Interest Income $2,840,223 $0 $2,840, Total - Revenue Offsets $17,688,827 $19,939,871 $37,628, Adjustments 28 Adjustment for Cash Balance/Reserves $0 $15,618,763 $15,618, Adjustment for Mid-Year Increase ($4,956,570) $0 ($4,956,570) 30 Total - Adjustments ($4,956,570) $15,618,763 $10,662, Revenue Required from Rates $73,043,920 $53,945,466 $126,989, Current Revenue Projected $119,801, % Difference 6.0% O&M Expense Allocation The O&M expenses (Table 2-1, Line 2) are allocated between each system based on the function of each cost. A detailed allocation is provided in Appendix A of this report. Costs are allocated based on one of six methodologies, outlined as following: CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 15

22 1. Proportion of 5-year average water usage 2. Proportion of current year projected water usage (FY 2019) 3. All to treated water system 4. Proportion of customer accounts 5. Historical cost split 6. Indirect expenses allocation Proportion of 5-Year Average Water Usage This methodology uses a five-year average of water usage (prior years to the current base year) to account for potential fluctuations in water demand due to drought conditions and conservation efforts. The costs that are allocated using this methodology are ongoing costs that are related to water service but do not necessarily fluctuate with the amount of water demanded. O&M expenses allocated using this methodology include ongoing maintenance costs of water facilities such as the Los Vaqueros Reservoir and the pipeline connected to it, the Contra Costa Canal, untreated water pumps and facilities, etc. and the costs of the water use efficiency (or conservation) program. Other expenses include fish monitoring, watershed land and marina recreation management, etc. Untreated water facilities are utilized by both treated and untreated water customers and are allocated to both systems based on the five-year average. Table 2-2 shows the historical and projected water demand for both systems and the resulting allocation percentage. The five-year average (Line 6) is the average of water demand for each system from FY 2015 to FY The percentage allocation (Line 7), which is used to allocate these specific O&M expenses to each system, is calculated as such: Treated water allocation = Treated water average / Total average Untreated water allocation = Untreated water average / Total average Table 2-2: Proportion of 5-Year Average Water Usage A B C D E Line Fiscal Year Treated Water (AF) Untreated Water (AF) Total Demand (AF) ,940 57,514 85, ,454 52,238 74, ,166 52,197 77, ,938 54,210 82, ,707 54,639 83, Year Average 26,441 54,160 80,601 7 Percentage 32.8% 67.2% 100.0% Proportion of Current Year Water Usage O&M expenses that vary directly with estimated FY 2019 usage, including purchased water and energy costs, are allocated by a portion of current year water usage. The District will only purchase enough water and energy to service its customers for that year. The percentage allocation is shown in Table 2-3. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 16

23 Table 2-3: Proportion of Current Year Water Usage A B C D E Line Fiscal Year Treated Water (AF) Untreated Water (AF) Total Demand (AF) ,707 54,639 83,346 2 Percentage 34.4% 65.6% 100.0% All to Treated Water System Treatment-related expenses are allocated entirely to the treated water system. These expenses include treated water pump station maintenance and energy costs, MPP operating energy costs, water treatment plants operating costs, cross connection testing and leak detection costs, and treated water mains and hydrants maintenance costs. Brentwood fully reimburses the District for the operating and capital costs of the Brentwood Water Treatment Plant, which is operated by the District. Untreated water customers do not utilize these facilities and therefore are not required to recover the costs associated with them. Proportion of Customer Accounts The only expenses that are allocated based on the proportion of customer accounts are the customer service expenses associated with billing, answering customer phone calls, etc. which are related to the number of accounts in each system. The methodology utilized to allocate customer service costs acknowledges that it generally costs the same amount of money to bill a large, wholesale municipal untreated customer as it does to bill a smaller, residential customer. The proportion of water accounts and the resulting percentage allocation is shown in Table 2-4. District staff provided the number of accounts in each system for FY 2017; the actual count for FY 2018 to FY 2019 was not available at the time of this study. Historical Cost Split Table 2-4: Proportion of Customer Accounts A B C D E Line Fiscal Year Treated Water Untreated Water Total Accounts , ,911 2 Percentage 99.4% 0.6% 100.0% This allocation methodology apportions costs between the two systems based on the historical percentage allocation. The expenses allocated using this methodology include water quality lab and field services, corrosion control, and water meter maintenance. Based on the historical expense results, water quality expenses are allocated two-thirds to treated water and one-third to untreated water. Corrosion control is allocated 99 percent to treated water and 1 percent to untreated water based on historical expense trends. Water meter maintenance is allocated 99.8 percent to treated water and 0.2 percent to untreated water based on the historical proportion of metered accounts. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 17

24 Indirect Expenses Allocation The indirect expense allocation methodology divides costs between the systems based on the previously allocated direct expenses. The costs that are allocated in this manner are general costs that are not tied to a specific water system. Examples include District fleet maintenance, general facilities costs, administrative staff salaries and benefits, safety program, and other miscellaneous costs. This methodology allocates general costs based on the direct expense allocations. After allocating all direct expenses based on the five previous methodologies, the total allocated operating costs for each system is divided by the total operating budget (less general costs) to determine the percentage for indirect expense allocation. For FY 2019, the indirect expense allocation percentage is 68.3 percent for treated water and 31.7 percent for untreated water. Table 2-5 shows the allocated O&M expenses by allocation methodology and water system. The detailed O&M expense allocation between the treated water and untreated water system is included in Appendix A of this report. Table 2-5: Allocated O&M Expenses A B C D E Line Allocation Methodology Treated Water Untreated Water Total O&M 1 Proportion of 5-Year Average Water Usage $5,792,587 $11,865,018 $17,657,605 2 Proportion of Current Year Water Usage $2,167,742 $4,125,913 $6,293,655 3 All Treated Water System $22,254,286 $0 $22,254,286 4 Proportion of Customer Accounts $2,403,013 $15,587 $2,418,600 5 Historical Cost Split $3,690,241 $828,558 $4,518,799 6 Indirect Expenses Allocation $21,612,186 $10,021,046 $31,633,232 7 Total $57,920,055 $26,856,122 $84,776,177 The transfer to the District s drought reserve (Table 2-1, Line 3), which helps to mitigate against financial risk associated with drought conditions, is allocated according to the indirect expenses allocation. Debt Service Allocation The District allocates its debt service obligations (Table 2-1, Line 4) based on the projects that are funded by debt proceeds. The allocation methodologies for existing debt service are similar to the O&M expense allocations: proportion of five-year average water usage, all to treated, all to untreated, proportion of current year expenses, and historical cost split. Debt-funded capital projects that directly relate to water storage and T&D facilities, such as the Los Vaqueros facilities, the Middle River Intake, and the Contra Costa Canal, are allocated according to the proportion of fiveyear average water usage. Debt incurred for water treatment plant improvements and the District s share of debt related to the Contra Costa Water Authority (the JPA formed by the District and DWD to construct the Randall-Bold Water Treatment Plant) are allocated entirely to the treated water system. SCPL improvements, which benefit only untreated water users, are allocated entirely to the untreated water system and funded by land levy taxes. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 18

25 The District Center building improvements, which is an administrative building, is allocated to each system based on the total O&M expense allocation. The indirect expense allocation for operating costs is equal to the O&M expense allocation. The debt service associated with the MPP and the Bisso Lane administrative building together are allocated according to a composite historical cost split of 20 percent and 80 percent treated and untreated water, respectively. The historical composite is based on the total O&M expense allocation for the Bisso Lane administrative building debt service and based on an allocation of 77 percent to future untreated water customers (collected through FRCs), 9 percent to existing untreated water customers, and 14 percent to existing treated water customers for the MPP. Although the MPP conveys treated water, its use frees up capacity in the Canal for untreated water deliveries. Therefore, the majority of the MPP capital costs are allocated to untreated water customers. In the event of a major emergency, the MPP can also pump untreated water. Table 2-6 shows the allocated existing debt service by allocation methodology and water system. The detailed debt service allocation between the two systems is included in Appendix A of this report. Table 2-6: Allocated Debt Service A B C D E Line Allocation Methodology Treated Water Untreated Total Debt Water Service 1 Proportion of 5-Year Average Water Usage $11,023,024 $22,578,575 $33,601,599 2 All Treated $5,213,453 $0 $5,213,453 3 All Untreated $0 $268,103 $268,103 4 Proportion of Current Year Expenses $192,545 $89,278 $281,823 5 Historical Cost Split $1,368,024 $5,472,098 $6,840,122 6 Total $17,797,046 $28,408,054 $46,205,100 Capital Project Allocation District staff provided the FY 2019 capital project budget for treated water, untreated water, and joint-funded projects by funding type. The three funding types include rate funded, other funded, and restricted reserve funded capital projects (Table 2-1, Lines 5-7). Table 2-7 shows the allocation methodology for all capital project costs in FY Treated water projects (Lines 1-4), which benefit only treated water customers, are allocated entirely to treated water. Untreated water projects (Line 5-8) benefit both treated and untreated water customers and are allocated according to the proportion of fiveyear average water usage. The rationale behind this is that treated water must first come from untreated water. Joint-funded projects are allocated according to the joint asset allocation, shown in Table 2-8. The percentage allocation (Line 10) is calculated by dividing the total asset value for each system (Columns C and D, Line 9) by the total joint asset value (Column E, Line 9). The initial asset allocation between untreated and treated is determined when the asset is added to the system and the methodology is further described in the District s Capital Improvement Program. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 19

26 Table 2-7: Capital Project Cost Allocation Methodology A B C D Line Capital Project Funding Allocation Methodology Total Capital 1 Treated Water Projects 2 Rate Funded All Treated $11,224,000 3 Other Funded All Treated $3,655,000 4 Restricted Reserve Funded All Treated $0 5 Untreated Water Projects 6 Rate Funded Proportion of 5-Year Average Water Usage $14,191,000 7 Other Funded Proportion of 5-Year Average Water Usage $8,905,000 8 Restricted Reserve Funded Proportion of 5-Year Average Water Usage $1,885,000 9 Joint Projects 10 Rate Funded Joint Asset Allocation $3,439, Other Funded Joint Asset Allocation $0 12 Restricted Reserve Funded Joint Asset Allocation $0 13 Total $43,299,000 Table 2-8: Joint Asset Allocation A B C D E Line Joint Assets Treated Water Untreated Water Total Assets 1 Communication Equipment $4,695,312 $210,462 $4,905,774 2 General Plant $29,049,313 $10,948,585 $39,997,898 3 Lab Equipment $1,734,224 $21,009 $1,755,233 4 Office Equipment $12,372,595 $10,384,358 $22,756,954 5 Other General Equipment $327,628 $105,911 $433,538 6 Power Operated Equipment $5,989,273 $3,419,104 $9,408,377 7 SCADA Equipment $7,817,154 $6,562,862 $14,380,016 8 Transmission Equipment $8,508,130 $1,695,582 $10,203,712 9 Total $70,493,628 $33,347,874 $103,841, Percentage Allocation 67.9% 32.1% 100.0% Table 2-9 shows the total allocated capital project costs by funding type and system, determined using the capital project allocation methodology presented in Table 2-7. For example, the treated water portion of rate funded capital projects is calculated as such: Rate funded treated water projects x 100.0% (all treated) + Rate funded untreated water projects x 32.8% (Table 2-2, Line 7) + Rate funded joint projects x 67.9% (Table 2-8, Line 10) CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 20

27 Table 2-9: Allocated Capital Project Costs A B C D E Line Capital Project Funding Treated Water Untreated Water Total Capital 1 Rate Funded $18,213,958 $10,640,042 $28,854,000 2 Other Funded $6,576,290 $5,983,710 $12,560,000 3 Restricted Reserve Funded $618,375 $1,266,625 $1,885,000 4 Total $25,408,624 $17,890,376 $43,299,000 Wholesale Treated Water Revenue Offsets Allocation The wholesale treated water revenue offsets (Table 2-1, Lines 10-15) consist of six items in the revenue requirement: the Brentwood Central Valley Project (CVP) credit, Brentwood pumping, Brentwood administration, Brentwood treatment, GSWC conveyance, and GSWC treatment. The Brentwood CVP credit is equal to the amount that the District credits back to Brentwood for the water purchase cost of CVP water. Brentwood does not receive CVP water; the city has its own source of water from the East Contra Costa Irrigation District (ECCID). Since Brentwood still pays the untreated water rate, which includes costs from the purchase of CVP water, the District credits Brentwood for its portion of the CVP water supply cost. This credit is allocated entirely to untreated water, since CVP water is purchased for the untreated water system. Brentwood pumping cost revenues consist of additional revenues from Brentwood to pump and convey its untreated water. This revenue offset is allocated entirely to the untreated water system. The remainder of the wholesale treated water revenue offsets Brentwood administration, Brentwood treatment, GSWC conveyance, and GSWC treatment are allocated entirely to the treated water system. These revenues represent the wholesale treated water customers reimbursement for utilizing the water treatment plant and conveyance facilities. The GSWC conveyance revenue includes pumping costs associated with the MPP, which transports treated water from the Randall-Bold Water Treatment Plant to GSWC. The MPP O&M costs are fully allocated to treated water as it transports treated water to customers. The operating allocation for the MPP differs from the debt service allocation in which the MPP project costs are allocated to the untreated water system. The operating costs (related to transporting treated water) are different from the capital benefit (freeing up capacity in the Canal for untreated water deliveries), and therefore are allocated differently than the debt service allocation. Other Revenue Offsets Allocation District staff provided the budgeted revenues, divided between the treated and untreated water systems. Table 2-10 shows the non-rate revenues (less wholesale treated water revenue offsets) with the corresponding proportion to each system. The revenue offsets shown in this table include FRCs, interest income, property tax, cost reimbursements, other miscellaneous revenues, Brentwood capacity buy-in revenues, treated water leases and royalties revenue, and transfers in for debt service (shown in Table 2-1 as Line 16, Line 24, Line 17, Line 18, Line 19, Line 20, Line 21, and Line 23, respectively). DWD cost reimbursements consist of operating costs and debt service associated with the Randall-Bold Water Treatment Plant, which is allocated entirely to treated water. The cost reimbursement revenue from Brentwood is divided between the two systems. The Brentwood reimbursements consist of operating costs for the Brentwood Water Treatment Plant (treated water system), conveyance costs through Rock Slough and Old River intakes (untreated water system), and annual road and gate rental to access the Randall-Bold Water Treatment Plant CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 21

28 (treated water system). The allocation to untreated water is equal to 33.8 percent for FY 2019, representing the reimbursement for conveyance costs through the utilization of untreated water facilities. Table 2-10: Revenue Offset Allocation Percentages A B C D Line Revenue Offset Treated Water Untreated Water 1 Facility Reserve Charges 2 Untreated Water 0.0% 100.0% 3 Treated Water 100.0% 0.0% 4 Interest Income 5 Untreated Water 0.0% 100.0% 6 Treated Water 100.0% 0.0% 7 Property Tax 8 Untreated Water 0.0% 100.0% 9 Treated Water 100.0% 0.0% 10 Cost Reimbursements 11 Diablo Water District 100.0% 0.0% 12 City of Brentwood 66.2% 33.8% 13 Other Miscellaneous 14 Untreated Water 0.0% 100.0% 15 Brentwood Capacity Buy-In 0.0% 100.0% 16 Treated Water 100.0% 0.0% 17 Treated Water - Leases and Royalties 100.0% 0.0% 18 Transfers in for Debt Service 19 SCPL Total (Paid by Land Levy) 0.0% 100.0% 20 MPP (Paid by FRCs) 0.0% 100.0% Table 2-11 shows the dollar amount of the revenue offsets allocated to each system based on the percentages shown in Table CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 22

29 Table 2-11: Allocated Revenue Offsets A B C D E Line Revenue Offset Treated Water Untreated Water Total Revenues 1 Facility Reserve Charges 2 Untreated Water $0 $2,758,900 $2,758,900 3 Treated Water $1,161,800 $0 $1,161,800 4 Interest Income 5 Untreated Water $0 $1,620,412 $1,620,412 6 Treated Water $1,219,811 $0 $1,219,811 7 Property Tax 8 Untreated Water $0 $1,286,817 $1,286,817 9 Treated Water $1,671,383 $0 $1,671, Cost Reimbursements 11 Diablo Water District $2,643,000 $0 $2,643, City of Brentwood $2,793,000 $1,428,000 $4,221, Other Miscellaneous 14 Untreated Water $0 $1,093,262 $1,093, Brentwood Capacity Buy-In $0 $1,670,620 $1,670, Treated Water $851,288 $0 $851, Treated Water - Leases and Royalties $415,704 $0 $415, Transfers in for Debt Service 19 SCPL Total (Paid by Land Levy) $0 $206,147 $206, MPP (Paid by FRCs) $0 $1,368,024 $1,368, Total $10,755,986 $11,432,182 $22,188,168 The remaining revenue offsets (Table 2-1, Lines 21-22) consist of transfers and reimbursements for restricted reserve funded and other funded capital projects, respectively. The revenue offset amount for each water system is equal to the allocated capital project costs for the two funding types (Table 2-9, Lines 2-3), since these capital costs are fully reimbursed and do not impact rates. Adjustments to Revenue Requirement The adjustments to the revenue requirement include the adjustment for the cash balance and reserves and the adjustment for the mid-year rate increase. The reserve adjustment is equal to the amount of reserve drawdown the District expects for each system in FY For both the treated and untreated water systems, the District is drawing from reserves to partially fund its costs to reduce impacts to customers. The adjustment for mid-year rate increase accounts for a rate adoption in January 2019 and effective in February 2019; the rate revenues from July to February of FY 2019 will not reflect the 6.0 percent increase. The bills issued to treated water customers will not reflect the rates effective in February 2019 until April due to a bi-monthly billing cycle. The bills issued to untreated water rate customers will reflect the rates beginning in March as the majority of customers receiving untreated water are billed monthly. Revenue Requirement Allocation The various components of the revenue requirement shown in Table 2-1 have been allocated to each water system, using the allocated amounts calculated in Table 2-5, Table 2-6, Table 2-9, and Table The resulting revenue CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 23

30 requirements for both the treated and untreated water systems are later utilized to determine the treated and untreated water rates, respectively. Table 2-12 shows the treated water revenue requirement; Table 2-13 shows the untreated water revenue requirement. The delineation between operating and capital revenue requirements are maintained from Table 2-1 for both systems. Table 2-12: Treated Water Revenue Requirement A B C D E Line FY 2019 Revenue Requirement (Treated Water) Operating Capital Total 1 Revenue Requirements 2 O&M Expenses $57,920,055 $0 $57,920,055 3 Transfer to Drought Reserve $683,211 $0 $683,211 4 Debt Service $0 $17,797,046 $17,797,046 5 Rate Funded Capital Projects $0 $18,213,958 $18,213,958 6 Other Funded Capital Projects $0 $6,576,290 $6,576,290 7 Restricted Reserve Funded Capital Projects $0 $618,375 $618,375 8 Total - Revenue Requirements $58,603,267 $43,205,669 $101,808,936 9 Revenue Offsets 10 Brentwood CVP Credit $0 $0 $0 11 Brentwood Pumping $0 $0 $0 12 Brentwood Admin $1,875 $0 $1, Brentwood Treatment $521,063 $0 $521, GSWC Conveyance $122,896 $0 $122, GSWC Treatment $401,232 $0 $401, Facility Reserve Charges $0 $1,161,800 $1,161, Property Tax $1,671,383 $0 $1,671, Cost Reimbursements $5,436,000 $0 $5,436, Other Miscellaneous $851,288 $0 $851, Brentwood Capacity Buy-In $0 $0 $0 21 Treated Water - Leases and Royalties $415,704 $0 $415, Transfer (Restricted Reserve Funded Capital Projects) $0 $618,375 $618, Reimbursement (Other Funded Capital Projects) $0 $6,576,290 $6,576, Transfer (Debt Service from Other Funds) $0 $0 $0 25 Interest Income $1,219,811 $0 $1,219, Total - Revenue Offsets $10,641,252 $8,356,466 $18,997, Adjustments 28 Adjustment for Cash Balance/Reserves $0 $5,313,501 $5,313, Adjustment for Mid-Year Increase ($3,435,859) $0 ($3,435,859) 30 Total - Adjustments ($3,435,859) $5,313,501 $1,877, Revenue Required from Rates $51,397,874 $29,535,703 $80,933, Current Revenue Projected $76,352, % Difference 6.0% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 24

31 Table 2-13: Untreated Water Revenue Requirement A B C D E Line FY 2019 Revenue Requirement (Untreated Water) Operating Capital Total 1 Revenue Requirements 2 O&M Expenses $26,856,122 $0 $26,856,122 3 Transfer to Drought Reserve $316,789 $0 $316,789 4 Debt Service $0 $28,408,054 $28,408,054 5 Rate Funded Capital Projects $0 $10,640,042 $10,640,042 6 Other Funded Capital Projects $0 $5,983,710 $5,983,710 7 Restricted Reserve Funded Capital Projects $0 $1,266,625 $1,266,625 8 Total - Revenue Requirements $27,172,910 $46,298,431 $73,471,341 9 Revenue Offsets 10 Brentwood CVP Credit ($118,813) $0 ($118,813) 11 Brentwood Pumping $67,277 $0 $67, Brentwood Admin $0 $0 $0 13 Brentwood Treatment $0 $0 $0 14 GSWC Conveyance $0 $0 $0 15 GSWC Treatment $0 $0 $0 16 Facility Reserve Charges $0 $2,758,900 $2,758, Property Tax $1,286,817 $0 $1,286, Cost Reimbursements $1,428,000 $0 $1,428, Other Miscellaneous $1,093,262 $0 $1,093, Brentwood Capacity Buy-In $1,670,620 $0 $1,670, Treated Water - Leases and Royalties $0 $0 $0 22 Transfer (Restricted Reserve Funded Capital Projects) $0 $1,266,625 $1,266, Reimbursement (Other Funded Capital Projects) $0 $5,983,710 $5,983, Transfer (Debt Service from Other Funds) $0 $1,574,171 $1,574, Interest Income $1,620,412 $0 $1,620, Total - Revenue Offsets $7,047,575 $11,583,406 $18,630, Adjustments 28 Adjustment for Cash Balance/Reserves $0 $10,305,262 $10,305, Adjustment for Mid-Year Increase ($1,520,711) $0 ($1,520,711) 30 Total - Adjustments ($1,520,711) $10,305,262 $8,784, Revenue Required from Rates $21,646,046 $24,409,763 $46,055, Current Revenue Projected $43,448, % Difference 6.0% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 25

32 3 Treated Water Cost of Service and Rates This section of the report will document the cost of service analysis and rate design and calculation process for the treated water system. The numbers shown in this section are rounded and may not add up to the exact amounts shown. Process and Approach Section 2 determined the revenue requirement for the treated water system, shown in Table This section will summarize the methodology and framework to develop the cost of service analysis and the resulting treated water rates. Cost of service analyses are tailored specifically to meet the unique needs of each utility. However, there are four distinct steps in the cost of service analysis, as outlined in the M1 Manual, to recover costs from classes of customers in an accurate, fair, and equitable manner: 1. Cost functionalization O&M expenses and capital assets are categorized by their function in the system. For the treated water system, functions include supply, treatment, T&D, storage, meter servicing, customer billing, pumping, and conservation. 2. Cost component allocation The functionalized costs are then allocated to cost components based on their burden on the system. For treated water, the cost components include supply, delivery, maximum use by day or hour (also known as peaking), conservation, meter, fire protection, customer, and general. The revenue requirement for the system is allocated accordingly to the functional cost allocation and will result in the total revenue requirement for each cost component. 3. Unit cost development The revenue requirement for each cost component is then divided by the appropriate unit of service to determine the unit cost for each cost component. 4. Revenue requirement distribution The unit cost is utilized to distribute the revenue requirement for each cost component to either customer classes or rate components. The treated water system consists of 12 customer classes. However, it is more beneficial in this instance to distribute the cost components to the various rate components because the District has opted for a uniform rate structure. The rate components include: a service charge, a public fire protection charge, a private fire service charge, a usage charge, an energy charge, and a backflow prevention surcharge. The rate design and calculation process will utilize the results from the cost of service analysis to determine rates that meet the District s policy objectives of financial sufficiency, providing affordable water for essential use, fairness and equitability, encouraging efficient water use, and ease of understanding and administration. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 26

33 Cost Functionalization Operating costs and capital assets are functionalized, based on input from staff with expertise on the District s treated water system and water utility industry knowledge. Capital assets are utilized in this analysis as opposed to capital project spending, which generally fluctuates from year to year and does not provide an accurate snapshot of the District s treated water system. The functions of the treated water system for both operating expenses and capital assets include:» Supply costs associated with source of water supply» Storage costs associated with storing water (reservoirs)» Pumping costs associated with general pumping and energy use» Zonal Pumping costs associated with pumping to different zones» Treatment costs associated with treatment of water» Canal costs associated with the Contra Costa Canal» T&D costs associated with transmitting and distributing water to customers» Operations costs associated with general operation of the system» Meter/Billing costs associated with servicing meters or customer billing» Conservation costs associated with the conservation program» Fire costs associated with water service for fire protection provided to property and structures» General costs that have an administrative or general function Operating Cost Functionalization Table 3-1 shows the detailed O&M expense budget, the function of each cost, and the total cost allocated to treated water service. The total amount of operating expenses for treated water is equal to the O&M expense revenue requirement (Table 2-12, Line 2). These costs include the allocated share of untreated water operating costs in proportion to usage and the treated water system operating costs. Table 3-1: Treated Water Operating Cost Functions A B C D Line Operating Expenses Function Treated O&M 1 LV Watershed Management Supply $1,441,870 2 Marina Recreation Management Supply $3,281 3 Purchased Water Supply $1,855,685 4 Untreated Water Reservoir Storage $169,889 5 Water Quality Lab/Field Services Supply $1,629,163 6 Water Supply/Quality/Permits Supply $428,051 7 Fish Monitoring Supply $114,214 8 LV Transfer Station Energy Supply $170,586 9 Treated Water Pump Station Maintenance Pumping $2,060, Treated Water Pump Stations Energy Pumping $40, Untreated Water Pump Maintenance Pumping $4, UW Energy (WAPA/MID/Mallard) Pumping $312, Multipurpose Pump Station Energy Pumping $119, Multipurpose Pump Station Energy Zones Zonal Pumping $996, Treated Water Pump Station Energy Zones Zonal Pumping $968, Bollman WTP Highlift Energy Zones Zonal Pumping $412, Bollman Water Treatment Plant Treatment $3,600,045 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 27

34 18 Brentwood WTP Treatment $2,220, RBWTP Treatment $4,454, Bollman WTP Energy Treatment $368, Canal Canal $2,244, Canal - Loop Canal $268, Corrosion Control Operations $1,215, Cross Connection Testing Meter/Billing $876, Hydrants - Maintenance Meter/Billing $102, Leak Detection Meter/Billing $10, LV Pipeline T&D $30, Operations Control Operations $502, Treated Water Facilities T&D $860, Untreated Water Facilities T&D $108, Water Mains Maintenance T&D $5,162, Water Meters - Maintenance Meter/Billing $845, Conservation Conservation $306, Customer Service Meter/Billing $2,403, Board of Directors General/Administrative $310, Contingency Budget General/Administrative $683, District Fleet Maintenance General/Administrative $832, Engineering General/Administrative $1,408, Finance General/Administrative $3,537, General Facilities General/Administrative $218, General Management General/Administrative $1,652, Human Resources General/Administrative $1,844, Information Systems General/Administrative $2,066, Legal Expenses General/Administrative $495, Operations & Maintenance General/Administrative $2,386, Other General District Expenses General/Administrative $111, Planning/Environmental/Land General/Administrative $1,684, Post-employment expenses General/Administrative $2,915, Public Communications General/Administrative $1,135, Safety Program General/Administrative $328, Total $57,920,055 Capital Asset Functionalization Table 3-2 shows capital assets by type and the function and the total replacement cost less depreciation (RCLD) of each asset type. Using RCLD to estimate the District s current capital asset amounts for the treated water system is the most defensible methodology because it accounts for inflation and depreciation. Assets purchased in the past are not the same price as they are presently; assets currently in use have depreciated since the date they were put in use. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 28

35 Table 3-2: Treated Water Capital Asset Functions A B C D Line Capital Assets Function FY 2019 RCLD 1 Source of Supply Supply $1,840,221 2 Pumping Pumping $27,252,559 3 Water Treatment Treatment $47,001,823 4 Transmission & Distribution T&D $826,467 5 General Plant General/Administrative $22,934,390 6 Coll & Imp Reservoirs Storage $4,077,942 7 River & Other Intakes Pumping $0 8 Supply Mains T&D $241,719 9 Other Supply Plant Supply $0 10 Pumping Equipment Pumping $12,618, Other Pumping Plant Pumping $4,068, Water Treatment Equipment Treatment $71,151, Other Water Treatment Plant Treatment $20,347, Reservoir & Tanks Storage $39,690, Transmission & Distribution Mains T&D $121,258, Services Meter/Billing $23,425, Meters Meter/Billing $2,613, Meter Installations Meter/Billing $0 19 Hydrants Fire $7,727, Check Valves/RP Devices Meter/Billing $3,243, Office Equipment General/Administrative $803, Trans Equipment General/Administrative $2,402, Stores Equipment General/Administrative $0 24 Lab Equipment General/Administrative $242, Communication Equipment General/Administrative $1,812, Power Operated Equipment General/Administrative $428, Tools/Shop/Garage General/Administrative $137, Other General Equipment General/Administrative $41, Other Tangible Property General/Administrative $337, SCADA Equipment General/Administrative $1,522, Organization Costs General/Administrative $2,018, Other Intangible Plant General/Administrative $3,084, Land General/Administrative $16,073, Land Rights General/Administrative $355, Canal System Land Supply $0 36 Canal System Structures Canal $0 37 Wells Supply $0 38 Hydrant Meters Fire $16, Assets Acquired from Cal Water General/Administrative $0 40 Total $439,596,034 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 29

36 Cost Component Allocation After the operating costs and capital assets are functionalized, each function is then allocated to the cost components. The cost components for the treated water system include:» Supply represents the costs of purchasing water» Delivery represents the costs of delivering water to customers under average demand conditions» Maximum Day represents the costs of delivering water to customers on the day with the highest demand» Maximum Hour represents the costs of delivering water to customers on the hour with the highest demand on highest day» Fire represents the costs of providing water service for public and private fire protection» Pumping represents the costs of pumping water to each energy zone» Conservation represents the costs of the conservation program» Meter represents the costs of servicing meters and customers» General represents all other costs that have a general or administrative function Table 3-3 shows the methodology utilized to allocate each function to the cost components for operating expenses and capital assets. A detailed list of the allocation methodologies for treated water is included Appendix B of this report. Operating Cost Component Allocation On the operating side, the functionalized costs are allocated to each cost component based on the operating and maintenance expenses incurred during the base year. Supply function costs, which represent base year costs of purchasing water, are allocated entirely to the Supply cost component. Storage function costs, which represent the costs of storing the current year s water supply, is allocated to Supply. Pumping and Treatment function costs are allocated based on Maximum Day (a part of which is allocated to Delivery) because operating and maintaining the pumping and treatment facilities vary based on peak day demand. Zonal Pumping function costs are allocated to the Pumping cost component, which represents the costs associated with pumping water to each of the eight energy zones within the District s treated water service area. Canal function costs, associated with operating and maintaining the Contra Costa Canal, are allocated 95 percent to Delivery and 5 percent to Maximum Day based on input from District staff. The majority of canal maintenance costs do not vary with peak day demand; therefore, the majority of costs are allocated based on average day demand (or Delivery). T&D function costs are allocated based on the average of Maximum Day with and without Fire protection. T&D facilities are generally built to withstand maximum day demand with fire. However, the costs to operate these facilities do not involve fire protection year-round; the average of the two allocation methodologies takes this into consideration. General Operations costs, such as operations and corrosion control, do not vary with peak demand and are allocated entirely to the Delivery cost component. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 30

37 The remainder of functionalized costs are allocated directly to the cost component in which they support (i.e., Conservation program costs to Conservation cost component, Meter/Billing costs to Meter, etc.). Capital Cost Component Allocation On the capital side, the functionalized assets are allocated to each cost component based on the function of the facility. The term facilities and assets are used interchangeably. Supply facilities are built to serve the source of water supply to customers during average demand and are allocated entirely to the Delivery cost component. Storage facilities, such as reservoirs, are allocated based on the average of Maximum Day and Maximum Hour with Fire. Storage facilities are built to withstand peak demand with fire protection. An average of Maximum Day and Maximum Hour is used to equally divide costs between the two peak demand scenarios. Pumping facilities must operate under peak demand conditions, similarly to Storage facilities, and are allocated based on the average of Maximum Day and Maximum Hour with Fire. Pumping equipment and other miscellaneous pumping assets are allocated to Maximum Day. Treatment facilities do not require increased capacity during fires and are built to withstand peak day demand. These assets are allocated based on Maximum Day. The Contra Costa Canal must be operational under peak day demand conditions but does not require additional capacity for fire protection. These assets are allocated based on Maximum Day. T&D facilities are allocated based on the average of Maximum Day and Maximum Hour with Fire or Maximum Day. The assets allocated to the former include T&D water mains and to the latter include supply mains. T&D facilities must withstand peak day and hour demand and do require additional capacity for fire protection. Supply mains are built to withstand peak day demand. The remainder of functionalized assets are allocated directly to the cost component in which they support. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 31

38 Table 3-3: Treated Water Cost Component Allocation A B C D Line Functions Operating Capital 1 Supply Supply Delivery 2 Treatment Max Day Max Day 3 Storage Supply Average of Max Day/Hour w/ Fire 4 Canal 95% Delivery / 5% Max Day Max Day 5 Operations Delivery 6 T&D 7 Pumping Max Day 8 Zonal Pumping Pumping Average of Max Day w/ and w/o Fire Average of Max Day/Hour w/ Fire OR Max Day Average of Max Day/Hour w/ Fire OR Max Day 9 Fire Fire 10 Conservation Conservation Conservation 11 Meter/Billing Meter Meter 12 General/Administrative General General System-Wide Peaking Factors Table 3-4 shows the allocation for the Delivery, Maximum Day, and Maximum Hour cost components, based on the system-wide peaking factors for the treated water system. As mentioned previously, a part of all costs allocated based on peak demand are also allocated to Delivery (also known as Base Delivery ). This indicates that peak water demand also includes demand for average usage. Raftelis received the peaking factors from District staff based on recorded historical data. The peaking factors (Column C, Lines 1-3) are normalized for average demand conditions; the base delivery peaking factor is equal to The maximum day and maximum hour peaking factors for the system are 1.50 and 1.90, respectively. A 10 percent allocation for fire protection during peak demand is a reasonable estimate of costs and is generally accepted in the industry. The Maximum Day without Fire allocations are calculated using the following equations:» Base Delivery: 67% = (1.00/1.50) x 100%» Maximum Day: 33% = ( )/1.50 x 100% The Maximum Hour without Fire allocations are calculated using the following equations:» Base Delivery: 53% = (1.00/1.90) x 100%» Maximum Day: 26% = ( )/1.90 x 100%» Maximum Hour: 21% = ( )/1.90 x 100% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 32

39 The Maximum Day and Maximum Hour with Fire allocations reduce the allocation percentage (without Fire) equally for each cost component based on the Fire component. For example, Maximum Day with Fire reduces the percentage allocation for Maximum Day without Fire by 10 percent for each component. The Average of Maximum Day with and without Fire (Line 6) is used to allocate operating T&D costs (Table 3-3, Column C, Line 7). The Average of Maximum Day and Maximum Hour with Fire (Line 7) is used to allocate capital storage, pumping, and T&D assets. Table 3-4: Treated Water System-Wide Peaking Factors A B C D E F G H Line Cost Components Peaking Factor Delivery Max Day Max Hour Fire Total 1 Base w/o Fire % 100% 2 Max Day w/o Fire % 33% 100% 3 Max Hour w/o Fire % 26% 21% 100% 4 Max Day w/ Fire 60% 30% 0% 10% 100% 5 Max Hour w/ Fire 47% 24% 19% 10% 100% 6 Average of Max Day w/ and w/o Fire 63% 32% 0% 5% 100% 7 Average of Max Day/Hour w/ Fire 54% 27% 9% 10% 100% Operating and Capital Cost Percentage Allocation The operating expenses and capital assets are functionalized and allocated to each cost component. Table 3-5 shows the total operating costs (Column C) and capital assets (Column E) for each cost component and its resulting allocation percentage (Columns D and F). The resulting percentage is used to allocate the operating and capital revenue requirements calculated in Table 2-12 to each cost component. Detailed operating expense and capital asset allocations are included in Appendix B of this report. Table 3-5: Treated Water Cost Allocation Percentages A B C D E F Line Cost Components Operating Operating Capital Capital Costs Allocation Assets Allocation 1 Supply $5,812,738 10% $0 0% 2 Delivery $16,794,807 29% $209,126,439 48% 3 Max Day $6,470,658 11% $103,643,109 24% 4 Max Hour $0 0% $18,294,187 4% 5 Fire $308,048 1% $27,054,110 6% 6 Pumping $2,377,373 4% $0 0% 7 Conservation $306,701 1% $0 0% 8 Meter $4,237,544 7% $29,282,351 7% 9 General $21,612,186 37% $52,195,837 12% 10 Total $57,920, % $439,596, % Revenue Offset Allocation Revenue offsets (Table 2-12, Lines 9-26) are non-rate revenues that are allocated to each cost component similarly to the operating expenses and capital assets. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 33

40 Brentwood administrative revenues are allocated to the treated water General cost component. Brentwood treatment revenues are allocated to Maximum Day, which is the same for Treatment operating expenses (Table 3-3, Column C, Line 2). GSWC treatment and conveyance revenues are allocated based on Maximum Day, based on the Treatment and Pumping operating allocation methodologies. FRCs are allocated based on Maximum Day because they represent revenues related to pumping, T&D, treatment plant, and storage facilities, which are mainly allocated based on Maximum Day. Property taxes and interest income are allocated to cost components based on the operating allocation percentage in Table 3-5 (Column D). Reimbursements for other funded and restricted reserve funded capital projects and transfers in for debt service are allocated to cost components based on the capital allocation percentage in Table 3-5 (Column F). A portion of other miscellaneous revenues which include rental fees, lease revenues, and other revenues not tied to a specific function in the system may be used as revenue offsets at the District s discretion. These miscellaneous revenues are not charged for a water-related service and can be used to offset designated costs. The District will continue to fund the SFR Lifeline program, which offers a 50 percent discount on service charges for low income residential customers, with a portion of the miscellaneous revenues (approximately 9.0 percent of miscellaneous revenues, excluding leases and royalties revenue). The remainder of other miscellaneous revenues, excluding leases and royalties revenue, is allocated in proportion to the operating allocation percentage in Table 3-5 (Column D). As a result, the offsets are applied equitably in alignment with actual cost distribution in order to reduce the rate impacts for all District customers. The leases and royalties revenue is allocated to the Pumping cost component to offset the energy charge and minimize customer impacts. Table 3-6 shows the resulting amount of revenue offsets by cost component. Detailed revenue offset allocations are included in Appendix B of this report. Table 3-6: Treated Water Revenue Offset Allocation A B C Line Cost Components Revenue Offsets 1 Supply $367,979 2 Delivery $9,581,208 3 Max Day $4,653,571 4 Max Hour $299,413 5 Fire $462,283 6 Pumping $566,205 7 Conservation $19,416 8 Meter $747,511 9 General $2,224, Lifeline Offset $75, Total $18,997,717 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 34

41 Revenue Requirement by Cost Component Table 3-7 shows the revenue requirement by cost component, prior to adjustments. The operating and capital revenue requirements (Columns C and D) are not including revenue offsets and are calculated from Table 2-12: Revenue requirement (Line 8) - Adjustments (Line 30) The operating revenue requirement is allocated to each cost component using the operating percentage allocations (Table 3-5, Column D). The capital revenue requirement is allocated using the capital percentage allocations (Table 3-5, Column F). The revenue offsets are equal to those shown in Table 3-6. Table 3-7: Treated Water Revenue Requirement by Component (Non-Adjusted) A B C D E F Line Cost Components Operating Capital Revenue Offset Total Costs 1 Supply $6,226,120 $0 ($367,979) $5,858,141 2 Delivery $17,989,194 $18,026,219 ($9,581,208) $26,434,205 3 Max Day $6,930,829 $8,933,798 ($4,653,571) $11,211,055 4 Max Hour $0 $1,576,917 ($299,413) $1,277,504 5 Fire $329,955 $2,332,002 ($462,283) $2,199,674 6 Pumping $2,546,443 $0 ($566,205) $1,980,239 7 Conservation $328,513 $0 ($19,416) $309,097 8 Meter $4,538,903 $2,524,071 ($747,511) $6,315,464 9 General $23,149,169 $4,499,161 ($2,224,312) $25,424, Lifeline Offset $0 $0 ($75,821) ($75,821) 11 Total $62,039,126 $37,892,168 ($18,997,717) $80,933,577 Adjustments to Revenue Requirement The first adjustment made to the revenue requirement is the reallocation of General costs. General costs do not have a specific function and thus are allocated based on the proportion of the remaining cost components, less Supply and Pumping costs. Supply and Pumping costs are excluded because they represent actual costs of the current year water supply and pumping to different energy zones, respectively. The revenue requirement is then adjusted by reallocating 45 percent of peaking costs to the Meter cost component. This is done for two reasons: to maintain the percentage between fixed and variable revenue recovery and to most accurately capture peaking costs. The District s treated water system currently collects approximately 27 percent of its treated water revenues through fixed charges, which include service charges, public fire protection charges, and backflow prevention surcharges. This percentage is relatively standard for the water utility industry, where the range of fixed revenue percentage may vary from 20 to 50 percent. Maintaining the current fixed and variable charge revenue recovery sustains the District s revenue stability. The District has opted to maintain a uniform usage charge for all customer classes which does not vary based on individual customer peaking. An industry standard means of recovering peaking costs is on the service charge, based on meter size. The rationale behind this method is that larger meters have a higher capacity to peak and CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 35

42 higher maintenance and replacement costs. Therefore, larger meters should pay for a larger share of the costs associated with system peak. The remaining 55 percent of peaking costs is reallocated to the Delivery cost component to maintain a rate structure with a uniform usage charge for all customers. Peaking costs are not fully allocated to the Meter component to reduce impacts to treated water customers. Table 3-8 shows the adjusted revenue requirement after reallocating General and peaking costs. Adjustments are not made to Offsets. Table 3-8: Treated Water Revenue Requirement by Component (Adjusted) A B C D E F Line Cost Components Non-Adjusted Reallocate Reallocate Costs General Costs Peaking Costs Adjusted Costs 1 Supply $5,858,141 $5,858,141 2 Delivery $26,434,205 $14,075,518 $10,526,114 $51,035,837 3 Max Day $11,211,055 $5,969,591 ($17,180,647) $0 4 Max Hour $1,277,504 $680,237 ($1,957,742) $0 5 Fire $2,199,674 $1,171,268 $3,370,942 6 Pumping $1,980,239 $0 $1,980,239 7 Conservation $309,097 $164,586 $473,682 8 Meter $6,315,464 $3,362,818 $8,612,275 $18,290,557 9 General $25,424,019 ($25,424,019) $0 10 Lifeline Offset ($75,821) ($75,821) 11 Total $80,933,577 $0 $0 $80,933,577 The final adjustment to the revenue requirement involves dividing the Fire and Meter revenue requirement, each into two separate components. The Fire revenue requirement includes costs associated with public and private fire protection, which are recovered through different rates; the cost component is split into Private Fire and Public Fire. The Meter revenue requirement includes costs associated with backflow prevention. A portion of the Meter costs will form the Backflow revenue requirement. The Fire revenue requirement is divided between public and private fire protection costs using the equivalent fire lines for private fire lines and public fire hydrants. Table 3-9 shows the equivalent fire lines for Private and Public Fire. The fire ratio (Column C) is determined using the size of the fire line (Column B) and the principles of the Hazen- Williams equation for flow through pressure conduits, as explained in the M1 Manual. The flow potential, equivalent to the fire ratio, is dependent on the size of the fire line raised to the power of Therefore, the fire ratio for each fire line size is equal to the line size raised to the power of The ratio is multiplied by the number of lines (Column D) to determine the number of lines of equivalent capacity (Column E). The Fire revenue requirement is divided between Private and Public Fire based on the proportion of equivalent fire lines in the entire system. For example, the Private Fire revenue requirement is determined using the following equation: Private fire equivalent lines (Column E, Line 8) / [Private fire equivalent lines + Public fire equivalent lines (Column G, Line 8)] CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 36

43 This results in an allocation of approximately 20 percent of Fire costs to Private Fire and 80 percent of costs to Public Fire. Table 3-9: Treated Water Equivalent Fire Lines A B C D E F G Private Fire Public Hydrants Line Fire Line Size Fire Ratio Number of Lines Equivalent Number of Lines Hydrants Equivalent Lines 1 2 inch inch inch , , inch ,445 5, , inch , inch , inch , Total 1, ,050 5, ,371 District staff provided the budget for backflow prevention device-related costs for FY Backflow prevention devices are installed to prevent contamination from other sources into the drinking water system. The expenses include annual testing, repairs and replacements of these devices. The Meter revenue requirement is reduced by the amount for backflow prevention and reallocated to the Backflow Prevention cost component. Table 3-10 shows the backflow prevention budget for FY Table 3-10: Treated Water Backflow Prevention Costs A B C Line Backflow Costs FY 2019 Budget 1 Labor $771,961 2 Materials $157,700 3 Maintenance Services $10,750 4 Total $940,411 Table 3-11 shows the final revenue requirement by cost component. Table 3-11: Treated Water Revenue Requirement by Component A B C Line Cost Component Revenue Requirement 1 Supply $5,858,141 2 Delivery $51,035,837 3 Private Fire $669,480 4 Public Fire $2,701,462 5 Pumping $1,980,239 6 Conservation $473,682 7 Meter $17,350,146 8 Backflow $940,411 9 Lifeline Offset ($75,821) 10 Total $80,933,577 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 37

44 Unit Cost Development After the revenue requirement for each cost component is determined, the unit cost for each component is calculated. The objective of this step is to determine the best methodology to recover costs for the components. Units of Service Table 3-12 shows the units of service for each cost component. Supply, Delivery, and Conservation costs are recovered through the usage charge based on total usage in hcf, which is equivalent to approximately 748 gallons. Pumping costs are recovered through a pumping charge per hcf of water by zone. Private Fire costs are recovered through a private fire service charge based on the equivalent private fire lines shown in Table 3-9. Public Fire and Meter costs are recovered through a service charge based on meter size. Backflow costs are recovered through a backflow prevention surcharge based on backflow meters. The Lifeline Offset is based on other miscellaneous revenues that are not tied to specific function and provides a funding source for the SFR Lifeline program, which discounts the service charge by 50 percent. Table 3-12: Treated Water Units of Service A B C Line Cost Component Units of Service 1 Supply Total usage in hcf 2 Delivery Total usage in hcf 3 Private Fire Equivalent private fire lines 4 Public Fire Equivalent meters 5 Pumping Total usage in hcf 6 Conservation Total usage in hcf 7 Meter Equivalent meters 8 Backflow Equivalent backflow meters 9 Lifeline Offset Equivalent SFR Lifeline meters Table 3-13 shows the total projected water usage for all customer classes in FY 2019, provided by District staff. The total usage (Line 10) is used for the Supply, Delivery, and Conservation unit costs. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 38

45 Table 3-13: Treated Water Estimated FY 2019 Usage A B C Line Customer Class FY 2019 Projected Usage (hcf) 1 Single Family Residential 7,042,148 2 Multi-Family Residential 2,229,971 3 Commercial 1,508,148 4 Industrial 25,608 5 Public Authority 353,165 6 Irrigation - Residential 568,055 7 Irrigation - Commercial and Industrial 505,801 8 Irrigation - Public Authority 247,365 9 Temporary Service 24, Total 12,504,880 Table 3-14 and Table 3-15 shows the equivalent meters for SFR Lifeline customers and all other customer classes, respectively. The capacity in gpm, or meter capacity, is derived from the M1 Manual 6. The meter ratio is calculated by dividing the meter capacities for all sizes by a base meter, which is the 5/8-inch meter for this study. District staff provided the number of meters for all customer classes; the equivalent meters (Column F) are calculated by multiplying the number of meters in each size (Column E) by the meter ratio (Column D). Table 3-14: Treated Water Equivalent Meters (SFR Lifeline) A B C D E F Line Meter Size Capacity Meter Number of Equivalent (gpm) Ratio Meters Meters 1 5/8 inch /4 inch /4 inch (SFR w/ inside sprinklers) inch inch (SFR w/ inside sprinklers) Total to 12-inch meters are compound meters. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 39

46 Table 3-15: Treated Water Equivalent Meters (All Other Classes) A B C D E F Line Meter Size Capacity Meter Number of Equivalent (gpm) Ratio Meters Meters 1 5/8 inch ,515 53, /4 inch , /4 inch (SFR w/ inside sprinklers) inch ,019 5, inch (SFR w/ inside sprinklers) /2 inch ,446 7, inch , inch , inch , inch 1, , inch 1, inch 4, inch 5, Dual 1 1/2 inch Dual 2 inch , Total 60,134 82,084 Table 3-16 shows the backflow cost equivalents for double check valve or air gap systems and reduced pressure backflow devices. District staff provided the backflow cost ratio based on historical device costs. The cost equivalents for double check valve accounts is calculated by multiplying the number of double check valve accounts (Column D) by the backflow cost ratio (Column C). The cost equivalents for reduced pressure backflow device accounts (Column H) is calculated by multiplying the number of reduced pressure backflow device accounts (Column F) by the backflow cost ratio (Column C) and a multiplier of 1.41, which represents the ratio of the additional costs that the District incurs to service reduced pressure backflow devices as opposed to double check valve or air gap systems, based on historical device costs. The cost equivalents (Column H) are equal to the equivalents (Column G) multiplied by the 1.41 factor and are used to determine the unit cost for each type of backflow prevention customer. The backflow cost multiplier calculation is provided in Technical Appendix 1 of this report. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 40

47 Table 3-16: Treated Water Backflow Cost Equivalents A B C D E F G H Double Check Valve Reduced Pressure Device Line Backflow Meter Backflow Cost Cost Accounts Accounts Equivalents Size Cost Ratio Equivalents Equivalents 1 5/8 inch ,887 5,887 1,164 1,164 1, /4 inch inch ,396 1,536 2, /2 inch ,874 4, inch ,622 3, inch inch ,555 2, inch , ,184 4, inch , ,749 3, inch inch Dual 1 1/2 inch Dual 2 inch ,290 1, Total 7,190 11,558 5,269 18,754 26,442 Unit Costs Table 3-17 shows the unit cost for all components except Lifeline Offset. The Supply, Delivery, Pumping, and Conservation units are from Table The Private Fire units are from Table 3-9 multiplied by 365 days. The Public Fire and Meter units are from Table 3-14 and Table 3-15 (sum of Lifeline and all other classes equivalent meters) multiplied by 365 days. The Backflow units are from Table 3-16 (sum of Column E, Line 14 and Column G, Line 14) multiplied by 365 days. Table 3-17: Treated Water Unit Costs A B C D E F Line Cost Component Revenue Requirement Units Unit Cost Units of Service 1 Supply $5,858,141 12,504,880 $ hcf 2 Delivery $51,035,837 12,504,880 $ hcf 3 Private Fire $669,480 53,673,299 $ equiv. fire line/day 4 Public Fire $2,701,462 30,189,100 $ equiv. meter/day 5 Pumping $1,980,239 12,504,880 $ hcf 6 Conservation $473,682 12,504,880 $ hcf 7 Meter $17,350,146 30,189,100 $ equiv. meter/day 8 Backflow $940,411 11,063,728 $ equiv. meter/day SFR Lifeline Charge The SFR Lifeline Charge offset is determined by calculating the customer class-specific cost of service for the service charge rate component. The equivalent meters for SFR Lifeline customers from Table 3-14 are multiplied by the unit costs for Meter and Public Fire to determine the annual cost of service for SFR Lifeline customers. 626 equivalent meters x ($ for Meter + $ for Public Fire) x 365 days = $151,642 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 41

48 $151,642 is the total cost of service for the SFR Lifeline Charge prior to the discount. At a discount of 50 percent, which the District currently applies, the total cost of service is $75,821. This is equal to the Lifeline Offset cost component. Pumping Unit Costs by Zone The Pumping revenue requirement is based on associated energy budget for pumping water to each zone, including Bollman high lift energy, MPP energy, and treated water pump station energy expenses. The amount allocated to the pumping revenue requirement excludes the portion of energy costs associated with flushing for water quality purposes, which is approximately 4 percent of total zonal energy as these costs are considered overall system costs and more appropriately recovered through the usage charge component. The allocation to each zone is in proportion to historical expenses in each zone. Table 3-18 shows the percentage allocation to each zone (Column D) based on the FY 2019 budget. The resulting Pumping costs (from the revenue requirement) for each zone are calculated by multiplying the Pumping revenue requirement (Table 3-11, Line 5) by the percentages. The Pumping costs (Column E) do not equal the exact FY 2019 budget (Column C) because Pumping costs represent the proportion of the total revenue requirement consisting of the Operating and capital revenue requirements and revenue offsets that is allocated to the Pumping cost component. The Pumping revenue requirement is slightly less than the FY 2019 budget due to the allocations of the leases and royalties revenue offsets. Table 3-18: Treated Water Allocation of Pumping Revenue Requirement A B C D E Line Zone FY 2019 Budget Percent of Budget Pumping Costs 1 Zone 1 $957,534 40% $797,580 2 Zone 2 $712,638 30% $593,594 3 Zone 3 $310,008 13% $258,222 4 Zone 4 $161,431 7% $134,464 5 Zone 5 $139,396 6% $116,110 6 Zone 6 $50,792 2% $42,307 7 Zone 7 $34,602 1% $28,822 8 Zone 8 $10,972 0% $9,139 9 Total $2,377, % $1,980,239 The next step in determining the unit cost for each zone is to perform a usage distribution for each energy zone, shown in Table The distribution in Table 3-19 reflects that a portion of the consumption of each zone has passed through the previous zones. For example, water delivered to Zone 3 must be pumped through Zones 1 and 2 before reaching Zone 3. Therefore, Zone 3 is allocated a portion of costs from Zones 1 (10 percent) and 2 (21 percent) in proportion to usage. The costs for Zone 3 are allocated 40 percent directly to Zone 3 (Column F, Line 3) and the remainder is allocated to Zones 4 through 8 as water continues to be pumped from Zone 3 to the higher zones. To calculate the usage distribution for Zone 3, the following equations are used: Zone 1 = Zone 3 usage / total usage = 10% Zone 2 = Zone 3 usage / (total usage - Zone 1 usage) = 21% Zone 3 = Zone 3 usage / (total usage - Zone 2 usage - Zone 1 usage) = 40% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 42

49 The same methodology is utilized to determine the usage distribution for all zones. Table 3-19: Treated Water Energy Zone Usage Distribution A B C D E F G H I J K Line Zone Usage Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8 1 Zone 1 6,225,031 50% 2 Zone 2 3,062,347 24% 49% 3 Zone 3 1,291,926 10% 21% 40% 4 Zone 4 801,036 6% 13% 25% 42% 5 Zone 5 817,881 7% 13% 25% 42% 73% 6 Zone 6 120,622 1% 2% 4% 6% 11% 39% 7 Zone 7 152,534 1% 2% 5% 8% 14% 50% 82% 8 Zone 8 33,504 0% 1% 1% 2% 3% 11% 18% 100% 9 Total 12,504, % 100% 100% 100% 100% 100% 100% 100% The Pumping revenue requirement by zone from Table 3-18 is then multiplied by the usage distribution to calculate the cost of service for each zone. If a portion of water pumped through Zone 1 continues on to the higher zones, then a portion of the revenue requirement for Zone 1 should be paid for by Zones 2 to 8. Under this logic, the revenue requirement is adjusted for the usage distribution in Table The cost allocation (Line 1) is equal to the allocated Pumping revenue requirement (Table 3-18, Column E) and is multiplied by the usage distribution percentages in Table 3-19 to determine the Pumping revenue requirement by zone (Column L). The unit cost is calculated by dividing the total cost per zone (Column L) by the consumption in each zone (Column C). The total Pumping unit cost (Column M, Line 10) is equal to the Pumping unit cost shown in Table A detailed map of the energy zones is included in Appendix D of this report. Revenue Requirement Distribution The final step in the cost of service analysis is the distribution of revenue requirements. Table 3-21 shows the revenue requirement and the corresponding cost components for each rate component. Rate components are the different charges that make up the proposed rate structure. The service charge is equal to the sum of the Meter and Public Fire cost components. The SFR Lifeline charge discount was calculated in a previous section of this report. The usage charge rate component includes the Supply, Delivery, and Conservation cost components. The energy charge rate component consists of the Pumping cost component shown in Table The backflow prevention surcharge rate component is divided between the two types of backflow devices using the proportion of cost equivalents calculated in Table 3-16 (Column E, Line 14 and Column H, Line 14). CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 43

50 Table 3-20: Treated Water Pumping Unit Costs by Zone A B C D E F G H I J K L M Line Zone Consumption Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 Zone 7 Zone 8 Total Unit Cost 1 Cost Allocation $797,580 $593,594 $258,222 $134,464 $116,110 $42,307 $28,822 $9,139 $1,980,239 2 Zone 1 6,225,031 $397,042 $0 $0 $0 $0 $0 $0 $0 $397,042 $ Zone 2 3,062,347 $195,321 $289,464 $0 $0 $0 $0 $0 $0 $484,785 $ Zone 3 1,291,926 $82,401 $122,117 $103,684 $0 $0 $0 $0 $0 $308,202 $ Zone 4 801,036 $51,091 $75,717 $64,287 $55,937 $0 $0 $0 $0 $247,032 $ Zone 5 817,881 $52,166 $77,309 $65,639 $57,113 $84,447 $0 $0 $0 $336,674 $ Zone 6 120,622 $7,693 $11,402 $9,681 $8,423 $12,454 $16,641 $0 $0 $66,294 $ Zone 7 152,534 $9,729 $14,418 $12,242 $10,652 $15,749 $21,044 $23,631 $0 $107,465 $ Zone 8 33,504 $2,137 $3,167 $2,689 $2,340 $3,459 $4,622 $5,191 $9,139 $32,744 $ Total 12,504,880 $797,580 $593,594 $258,222 $134,464 $116,110 $42,307 $28,822 $9,139 $1,980,239 $ Table 3-21: Treated Water Revenue Requirement by Rate Component A B C D Line Rate Component Cost Component(s) Revenue Requirement 1 Service and Public Fire Protection Charge Meter, Public Fire $20,051,608 2 SFR Lifeline Charge Meter, Public Fire, Lifeline Offset ($75,821) 3 Private Fire Service Charge Private Fire $669,480 4 Usage Charge Supply, Delivery, Conservation $57,367,660 5 Energy Charge Pumping $1,980,239 6 Backflow Prevention Surcharge 7 Double Check Valve and Air Gap System Backflow $286,031 8 Reduced Pressure Backflow Device Backflow $654,379 9 Total $80,933,577 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 44

51 Rate Design and Calculation Rate design and calculation is the final step in a cost of service and rate study. The following section outlines the steps performed to determine the proposed rates. Rate Design The District s current treated water rate components were maintained in the treated water rate study and include a service charge, a public fire protection charge, an SFR Lifeline discount of 50 percent for qualified low-income customers, a private fire service charge, a usage charge, an energy charge, and a backflow prevention surcharge. The changes that were made to the rate structure involved standardizing and simplifying the method in which customers are charged. The current service charge for MFR customers is based on number of connections and dwelling units and for all other customers on meter size. The study simplified the service charge by charging all customers, including MFR, based on meter size. The current public fire protection charge is based on number of dwelling units for MFR and for all other customers based on meter size. The public fire protection charge in this study charges all customers based on meter size. In addition, the service charge and public fire protection charge, both of which are based on meter size, were combined for ease of understanding and administration. In turn, the SFR Lifeline discount of 50 percent for service charges was extended to public fire protection charges in this study to maintain consistency and simplicity. The current rate structure has two usage charges: a usage charge for average usage and an excess use charge. The excess use charge is equal to the usage charge and is charged in addition to the usage charge for any excess use. The revenues for the excess use charge in FY 2018 made up less than 1 percent of total treated water revenues. Since historical revenues from excess use charges are minimal, this study does not include excess charge revenues as a source of cost recovery. All consumption-related costs are recovered through the usage charge. Service Charge Calculation Table 3-22 shows the service charge calculation. The service charge is calculated using the meter ratios for each meter size (Table 3-15) and the Meter and Public Fire unit costs in Table The Meter (Column D) and Public Fire (Column E) unit rates are the unit cost for each component multiplied by the meter ratio for each meter size. The total charge is the sum of the unit rates, rounded up to four decimal places. Table 3-23 shows the SFR Lifeline service charge calculation, which discounts the Meter and Public Fire unit rates by 50 percent. The total charge is the sum of the two discounted unit rates, rounded up to four decimal places. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 45

52 Line Table 3-22: Treated Water Service Charge Calculation A B C D E F G Total Meter Meter Size Meter Public Fire Charge Ratio ($/day) Current Charge ($/day) 1 5/8 inch 1.00 $ $ $ $ /4 inch 1.50 $ $ $ $ /4 inch (SFR w/ inside sprinklers) 1.00 $ $ $ $ inch 2.50 $ $ $ $ inch (SFR w/ inside sprinklers) 1.00 $ $ $ $ /2 inch 5.00 $ $ $ $ inch 8.00 $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ Dual 1 1/2 inch $ $ $ $ Dual 2 inch $ $ $ $ Line Table 3-23: Treated Water SFR Lifeline Service Charge Calculation A B C D E F G Total Meter Meter Size Meter Public Fire Charge Ratio ($/day) Current Charge ($/day) 1 5/8 inch 1.00 $ $ $ $ /4 inch 1.50 $ $ $ $ /4 inch (SFR w/ inside sprinklers) 1.00 $ $ $ $ inch 2.50 $ $ $ $ inch (SFR w/ inside sprinklers) 1.00 $ $ $ $ Usage Charge Calculation The usage charge is calculated by adding the Supply, Delivery, Conservation, and Offset unit costs from Table 3-17 and the SFR Lifeline Charge section of the report. Table 3-24 shows the usage charge calculation for all customers. Table 3-24: Treated Water Usage Charge Calculation A B C Line Cost Components Unit Cost 1 Supply $ Delivery $ Conservation $ Total Charge ($/hcf) $ Current Charge ($/hcf) $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 46

53 Energy Charge Calculation The energy charge calculation is equal to the unit costs determined for each zone, shown in Table 3-20, rounded up to four decimal places. Table 3-25 shows the calculation for all zones. Table 3-25: Treated Water Energy Charge Calculation A B C D Line Zone Total Charge ($/hcf) Current Charge ($/hcf) 1 Zone 1 $ $ Zone 2 $ $ Zone 3 $ $ Zone 4 $ $ Zone 5 $ $ Zone 6 $ $ Zone 7 $ $ Zone 8 $ $ Backflow Prevention Surcharge Calculation The backflow prevention surcharge calculation is shown in Table The double check valve or air gap system surcharge is equal to the Backflow unit cost from Table 3-17 multiplied by the backflow ratio. The reduced pressure backflow device is equal to the Backflow unit cost multiplied by the 1.41 cost factor and the backflow ratio. Table 3-26: Treated Water Backflow Prevention Surcharge Calculation A B C D E F G Double Check Valve Reduced Pressure Device Line Meter Size Current Current Backflow Total Charge Total Charge Charge Charge Ratio ($/day) ($/day) ($/day) ($/day) 1 5/8 inch 1.00 $ $ $ $ /4 inch 1.00 $ $ $ $ inch 1.10 $ $ $ $ /2 inch 3.00 $ $ $ $ inch 3.25 $ $ $ $ inch 9.90 $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ inch $ $ $ $ Dual 1 1/2 inch 6.00 $ $ $ $ Dual 2 inch 6.50 $ $ $ $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 47

54 Proposed Rates The following tables show the proposed rates developed in the treated water rate study. Table 3-27: Proposed Treated Water Service Charges Service and/or Public Fire Charges ($/day) All Classes SFR Lifeline Private Fire Meter or Fire Line Size 5/8 inch $ $ /4 inch $ $ /4 inch (SFR w/ inside sprinklers) $ $ inch $ $ inch (SFR w/ inside sprinklers) $ $ /2 inch $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ Dual 1 1/2 inch $ Dual 2 inch $ Table 3-28: Proposed Treated Water Usage and Energy Charges Usage and Energy Charges ($/hcf) All Classes Usage Charge $ Energy Charge Zone 1 $ Zone 2 $ Zone 3 $ Zone 4 $ Zone 5 $ Zone 6 $ Zone 7 $ Zone 8 $ CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 48

55 Table 3-29: Proposed Treated Water Backflow Prevention Surcharges Backflow Prevention Surcharge ($/day) Double Check Valve or Air Gap System Reduced Pressure Backflow Device Meter Size 5/8 inch $ $ /4 inch $ $ inch $ $ /2 inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ inch $ $ Dual 1 1/2 inch $ $ Dual 2 inch $ $ Customer Impacts Table 3-30 shows the calculated customer bill impacts for a typical SFR customer at different usage levels with a 5/8-inch meter in Zone 1. The SFR customer class makes up approximately 56 percent of all total treated water usage. SFR users at the high end of the spectrum will see larger impacts than smaller users. However, the total bill impact to SFR customers, for all levels of usage, is similar to the total revenue adjustment of 6 percent for the treated water system. SFR customers are not expected to incur significant impacts solely as a result of this rate structure. Table 3-30: Treated Water SFR Customer Impacts A B C D E F G Line SFR Bi-Monthly Proposed Difference Difference Current Bill Usage (hcf) Bill ($) (%) 1 15th percentile 6 $64.08 $67.76 $ % 2 35th percentile 10 $81.27 $86.37 $ % 3 Average 17 $ $ $ % 4 70th percentile 18 $ $ $ % 5 95th percentile 42 $ $ $ % CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 49

56 4 Untreated Water Cost of Service and Rates This section of the report will document the cost of service analysis and rate design and calculation process for the untreated water system. The numbers shown in this section are rounded and may not add up to the exact amounts shown. Process and Approach Section 2 determined the revenue requirement for the untreated water system, shown in Table This section will summarize the methodology and framework to develop the cost of service analysis and the resulting untreated water rates. The untreated water cost of service analysis follows the same structure as the treated water cost of service, which includes four distinct steps: 1. Cost functionalization Operating costs and capital assets are functionalized in this step. For the untreated water system, functions include supply, transmission and distribution, storage, meter servicing, customer billing, pumping, and conservation. 2. Cost component allocation For untreated water, the cost components include supply, delivery, maximum month demands (also known as peaking), conservation, meter, customer, and general. The revenue requirement for the system is allocated accordingly to the functional cost allocation and will result in the total revenue requirement for each cost component. 3. Unit cost development The revenue requirement for each cost component is then divided by the appropriate unit of service to determine the unit cost for each cost component. 4. Revenue requirement distribution The unit cost is utilized to distribute the revenue requirement for each cost component to either customer classes or rate components. The untreated water system includes five classes of customers and several subclasses. For example, a customer class is Landscape Irrigation; sub-classes are Metered and Unmetered. The revenue requirement is distributed according to customer class for untreated water. The rate design and calculation process will utilize the results from the cost of service analysis to determine rates that meet the District s policy objectives, including: financial sufficiency, providing affordable water for essential use, fairness and equitability, encouraging efficient water use, and ease of understanding and administration. Cost Functionalization Operating costs and capital assets are functionalized for the untreated water system with input from District staff and general industry standards and guidelines. Capital assets are utilized in this analysis as opposed to current year capital project spending, which can experience annual fluctuations. Current year capital spending also does not provide an accurate snapshot of the District s untreated water system. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 50

57 The functions of the untreated water system for both operating and capital assets include:» Supply costs associated with source of supply» Storage costs associated with storing water (reservoirs)» Pumping costs associated with pumping water to customers» Treatment costs associated with water treatment» Canal costs associated with the Contra Costa Canal» T&D costs associated with transmitting and distributing water to customers» Maintenance costs associated with general maintenance of the system» Meter costs associated with maintaining and installing water meters» Customer costs associated with customer service and billing» Conservation costs associated with the conservation program» General costs that have an administrative or general function Operating Cost Functionalization Table 4-1 shows the detailed FY 2019 O&M expense budget, the function of each cost, and the total cost allocated to untreated water service. Some line items show zero costs for the upcoming year but remain within the rate model to allow for cost recovery, as applicable, in future year revenue analysis. The total amount of operating expenses for untreated water is equal to the O&M expense revenue requirement (Table 2-13, Line 2). Table 4-1: Untreated Water Operating Cost Functions A B C D Line Operating Expenses Function FY 2019 Budget 1 LV Watershed Management Supply $2,953,396 2 Marina Recreation Management Supply $6,719 3 Purchased Water Supply $3,531,970 4 Untreated Water Reservoir Storage $347,985 5 Water Quality Lab/Field Services Supply $814,582 6 Water Supply/Quality/Permits Supply $876,780 7 Fish Monitoring Supply $233,945 8 LV Transfer Station Energy Supply $349,414 9 Treated Water Pump Station Maintenance Pumping $0 10 Treated Water Pump Stations Energy Pumping $0 11 Untreated Water Pump Maintenance Pumping $10, UW Energy (WAPA/MID/Mallard) Pumping $593, Multipurpose Pump Station Energy Pumping $0 14 Multipurpose Pump Station Energy Zones Pumping $0 15 Treated Water Pump Station Energy Zones Pumping $0 16 Bollman WTP Highlift Energy Zones Pumping $0 17 Bollman Water Treatment Plant Treatment $0 18 Brentwood WTP Treatment $0 19 RBWTP Treatment $0 20 Bollman WTP Energy Treatment $0 21 Canal Canal $4,596, Canal - Loop Canal $549, Corrosion Control Operations $12, Cross Connection Testing Meter $0 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 51

58 25 Hydrants - Maintenance Meter $0 26 Leak Detection Meter $0 27 LV Pipeline T&D $61, Operations Control Operations $1,028, Treated Water Facilities T&D $0 30 Untreated Water Facilities T&D $222, Water Mains Maintenance T&D $0 32 Water Meters - Maintenance Meter $1, Conservation Conservation $628, Customer Service Customer Service $15, Board of Directors General/Administrative $143, Contingency Budget General/Administrative $316, District Fleet Maintenance General/Administrative $386, Engineering General/Administrative $653, Finance General/Administrative $1,640, General Facilities General/Administrative $101, General Management General/Administrative $766, Human Resources General/Administrative $855, Information Systems General/Administrative $958, Legal Expenses General/Administrative $229, Operations & Maintenance General/Administrative $1,106, Other General District Expenses General/Administrative $51, Planning/Environmental/Land General/Administrative $780, Post-employment expenses General/Administrative $1,351, Public Communications General/Administrative $526, Safety Program General/Administrative $152, Total $26,856,122 Capital Asset Functionalization Table 4-2 shows the capital assets by type, its function, and the total RCLD value of each asset type. RCLD, as explained previously, is a defensible, industry standard methodology to determine asset value because it accounts for both inflation and depreciation. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 52

59 Table 4-2: Untreated Water Capital Asset Functions A B C D Line Capital Assets Function FY 2019 RCLD 1 Source of Supply Supply $21,360 2 Pumping Pumping $74,056,838 3 Water Treatment Treatment $153,103 4 Transmission & Distribution T&D $73,438,503 5 General Plant General $9,837,274 6 Coll & Imp Reservoirs Storage $257,174,368 7 River & Other Intakes Pumping $98,777,754 8 Supply Mains T&D $142,154,121 9 Other Supply Plant Supply $952, Pumping Equipment Pumping $10,758, Other Pumping Plant Pumping $365, Water Treatment Equipment Treatment $757, Other Water Treatment Plant Treatment $2, Reservoir & Tanks Storage $6,643, Transmission & Distribution Mains T&D $90,283, Services Meter $1,707, Meters Meter $2,764, Meter Installations Meter $68, Hydrants General $40, Check Valves/RP Devices Meter $40, Office Equipment General $767, Trans Equipment General $160, Stores Equipment General $0 24 Lab Equipment General $0 25 Communication Equipment General $0 26 Power Operated Equipment General $192, Tools/Shop/Garage General $0 28 Other General Equipment General $6, Other Tangible Property General $5,186, SCADA Equipment General $133, Organization Costs General $12,897, Other Intangible Plant General $11,814, Land General $367,565, Land Rights General $1,201, Canal System Land Supply $21,835, Canal System Structures Canal $43,834, Wells Supply $0 38 Hydrant Meters General $0 39 Assets Acquired from Cal Water General $0 40 Total $1,235,596,827 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 53

60 Cost Component Allocation After the operating expenses and capital assets are functionalized, each function is then allocated to the following cost components:» Supply represents the costs of purchasing water» Delivery represents the costs of delivering water to customers under average demand conditions» Maximum Month represents the costs of delivering water to customers under peak demand conditions» Conservation represents the costs of the conservation program» Meter represents the costs of servicing and installing meters» Customer represents the costs of customer service and billing» General represents all other costs that have a general or administrative function Table 4-3 shows the methodology used to allocate the functionalized costs to the cost components for operating and capital. A detailed list of the allocation methodologies for untreated water is included in Appendix C of this report. Operating Cost Component Allocation The functionalized operating costs are allocated to each cost component based on the operating and maintenance expenses incurred during the base year. Supply function costs, which represent base year costs of purchasing water, are allocated entirely to the Supply cost component. Storage function costs, which represent the cost of storing the water supply for use in the current year, are also allocated to Supply. Pumping and Treatment function costs are allocated based on Maximum Month because the costs of operating and maintaining pumping and treatment facilities vary with peak demand conditions. Canal function costs, associated with operating and maintaining the Contra Costa Canal, are allocated 95 percent to Delivery and 5 percent to Maximum Month based on input from District staff. The majority of canal maintenance costs do not vary based on peaking, and therefore the majority of Canal costs are allocated to Delivery while maintaining that a small portion of Canal costs are related to peaking. T&D function costs are allocated 95 percent to Delivery and 5 percent to Maximum Month based on input from District staff. Similar to canal maintenance costs, T&D maintenance costs for the untreated water system do not vary with peak demand. The majority of T&D costs are allocated to Delivery as a result. Operations function costs, which represent general O&M functions such as operations and corrosion control, which maintains the water system for periods of average demand, are allocated entirely to Delivery. The remainder of functionalized operating costs are allocated directly to the cost component in which they support: Meter function costs to Meter, Customer function costs to Customer, etc. Capital Component Allocation The functionalized capital assets are allocated to each cost component based on the function of the facility, or asset. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 54

61 Supply facilities are built to serve the source of water supply to customers during average demand and do not represent current year costs of purchasing or supplying water (which is captured in the Supply cost component). These assets are allocated to Delivery. Storage, Pumping, Canal, and T&D facilities are allocated to Maximum Month; these facilities are all built to withstand peak system demand. Treatment assets, for the untreated water system, are miscellaneous facilities that operate under average demand conditions. The Treatment-related assets are allocated to Delivery. The remainder of functionalized capital assets are allocated directly to the cost component that they support. Table 4-3: Untreated Water Cost Component Allocation A B C D Line Functions Operating Capital 1 Supply Supply Delivery 2 Storage Supply Max Month 3 Pumping Max Month Max Month 4 Treatment Max Month Delivery 5 Canal 95% Delivery / 5% Max Month Max Month 6 T&D 95% Delivery / 5% Max Month Max Month 7 Operations Delivery 8 Meter Meter Meter 9 Customer Customer 10 Conservation Conservation 11 General/Administrative General General System-Wide Peaking Factors Table 4-4 shows the allocation for the Delivery and Maximum Month cost components, based on the system-wide peaking factors for the untreated water system. District staff provided historical usage data used to determine the system-wide peaking factors. The peaking factors (Column C) are normalized for average demand conditions, also known as Base Delivery. The average day peaking factor is The maximum month peaking factor for the untreated water system is The untreated water system-wide peaking factor calculation is included in Technical Appendix 2. The Maximum Month allocations are calculated using the following equations: Base Delivery: 75% = (1.00/1.33) x 100% Maximum Month: 25% = ( )/1.33 x 100% Table 4-4: Untreated Water System-Wide Peaking Factors A B C D E Line Cost Peaking Base Max Components Factor Delivery Month 1 Base Delivery % 2 Max Month % 25% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 55

62 All functionalized expenses and assets that are allocated based on Maximum Month will be allocated 75 percent to Delivery and 25 percent to Maximum Month, based on the peaking factors. Operating and Capital Cost Allocation Percentage The operating expenses and capital assets are functionalized and allocated to each cost component based on the information in Table 4-3. Table 4-5 shows the total operating costs and capital assets for each cost component and its resulting allocation percentage. The resulting percentages are utilized to allocate the untreated water operating and capital revenue requirements in Table Detailed operating expense and capital asset allocations are included in Appendix C of this report. Table 4-5: Untreated Water Cost Allocation Percentages A B C D E F Line Cost Operating Capital Operating Costs Capital Assets Components Allocation Allocation 1 Supply $9,114,792 34% $0 0% 2 Delivery $6,652,747 25% $622,450,657 50% 3 Max Month $422,038 2% $198,760,980 16% 4 Conservation $628,219 2% $0 0% 5 Meter $1,694 0% $4,580,500 0% 6 Customer $15,587 0% $0 0% 7 General $10,021,046 37% $409,804,690 33% 8 Total $26,856, % $1,235,596, % Revenue Offset Allocation The next step in the cost of service analysis involves allocating revenue offsets (Table 2-13, Lines 9-26) to each cost component. The Brentwood CVP credit, which is considered a cost to the District and is a negative revenue offset, is issued to reimburse Brentwood for water supply costs. Brentwood has its own source of supply from ECCID and does not utilize the water purchased by the District for its untreated customers; however, Brentwood pays the untreated water rate, which includes costs associated with the purchase of CVP water. The Brentwood CVP credit is allocated to two components: Supply and Brentwood (as an offset). The Brentwood CVP credit amount is used to offset Brentwood s usage charge. To keep the total percentage allocation at a neutral 100 percent not increasing nor decreasing the amount of revenue offsets shown in Table 2-13 the Supply cost component receives a 200 percent allocation, which is spread among all customers, including Brentwood. Ultimately, the objective of the CVP credit and offset is that the total revenue collected from Brentwood for the usage charge in the two scenarios if Brentwood pays the untreated water usage charge and receives a credit, or if Brentwood pays the untreated water usage charge with the CVP offset is effectively equal. Brentwood pumping revenues are allocated to Maximum Month, using the same methodology as shown in Table 4-3. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 56

63 FRC revenues, which fund existing pumping, storage, and T&D facilities, are allocated according to Maximum Month because the facility costs are associated with peak demand. Property tax is allocated based on the operating cost allocation percentage in Table 4-5. Cost reimbursements for the untreated water system include reimbursements from Brentwood for use of untreated water conveyance costs, which are allocated to Delivery and Maximum Month. A portion of other miscellaneous revenues, which include fees and rental revenues, can be used as revenue offsets at the District s discretion. A small percentage (0.6 percent) of other miscellaneous revenues is allocated to an Agricultural Phase-In cost component and is used to fund the three-year phase-in of Agricultural usage charges. The remaining balance of the miscellaneous revenues is allocated to General. The remainder of the other revenue offsets, which include transfers and reimbursements for capital project costs, transfers for debt service, and interest income, are allocated according to the capital allocation percentages in Table 4-5. Table 4-6 shows the resulting revenue offset amounts by cost component. Detailed revenue offset allocations are included in Appendix C of this report. Revenue Requirement by Cost Component Table 4-6: Untreated Water Revenue Offset Allocation A B C Line Cost Components Revenue Offsets 1 Supply $199,112 2 Delivery $10,384,597 3 Max Month $2,821,169 4 Conservation $30,101 5 Meter $38,802 6 Customer $747 7 General $5,031,172 8 Agricultural Phase-In $6,468 9 Brentwood $118, Total $18,630,981 Table 4-7 shows the revenue requirement by cost component for the untreated water system, prior to adjustments. The operating and capital revenue requirements do not include revenue offsets and are calculated from Table 2-13 using the following equation: Revenue Requirement (Line 8) - Adjustments (Line 30) The operating revenue requirement is allocated to each cost component using the operating allocation percentage (Table 4-5, Column D); the capital revenue required is allocated using the capital allocation percentage (Table 4-5, Column F). The revenue offsets are equal to those shown in Table 4-6. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 57

64 Table 4-7: Untreated Water Revenue Requirement by Component (Non-Adjusted) A B C D E F Line Cost Components Operating Capital Revenue Offset Total Costs 1 Supply $9,738,427 $0 ($199,112) $9,539,315 2 Delivery $7,107,929 $18,132,105 ($10,384,597) $14,855,436 3 Max Month $450,914 $5,789,945 ($2,821,169) $3,419,690 4 Conservation $671,202 $0 ($30,101) $641,101 5 Meter $1,809 $133,431 ($38,802) $96,439 6 Customer $16,654 $0 ($747) $15,907 7 General $10,706,687 $11,937,688 ($5,031,172) $17,613,202 8 Agricultural Phase-In $0 $0 ($6,468) ($6,468) 9 Brentwood $0 $0 ($118,813) ($118,813) 10 Total $28,693,621 $35,993,169 ($18,630,981) $46,055,809 Adjustments to Revenue Requirement The first adjustment is the reallocation of General costs to other cost components. General costs are allocated based on the proportion of the other cost components, less Supply costs. Supply costs, which represent current year costs of water supply, are excluded. The revenue requirement is then adjusted by reallocating all Meter costs to Maximum Month. Meter costs are often tied to capacity the larger the meter, the more demand that meter can place on the system. The untreated water rate structure does not include a charge based on meter size; that approach is not flexible and cannot reflect the District s various and diverse untreated water customers. Given the District s customer base and the need to properly recover costs associated with meters based on their corresponding capacity, an alternative approach to take is to reallocate Meter costs to Maximum Month. Demand or capacity-related costs, such as meter or peak demand costs, are recovered based on Maximum Month, which follows the industry standard approach to recover costs based on their function in the system. Table 4-8 shows the adjusted revenue requirement after reallocating General and Meter costs. Table 4-8: Untreated Water Revenue Requirement by Component (Adjusted) A B C D E F Line Cost Components Non-Adjusted Reallocate Reallocate Costs General Costs Meter Costs Adjusted Costs 1 Supply $9,539,315 $9,539,315 2 Delivery $14,855,436 $13,750,470 $28,605,906 3 Max Month $3,419,690 $3,165,329 $185,704 $6,770,722 4 Conservation $641,101 $593,415 $1,234,515 5 Meter $96,439 $89,265 ($185,704) $0 6 Customer $15,907 $14,724 $30,631 7 General $17,613,202 ($17,613,202) $0 8 Agricultural Phase-In ($6,468) ($6,468) 9 Brentwood ($118,813) ($118,813) 10 Total $46,055,809 $0 $0 $46,055,809 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 58

65 Unit Cost Development After the revenue requirement has been allocated to each cost component, the unit cost for the components are calculated. Units of Service Table 4-9 shows the units of service for each cost component. Supply, Delivery, and Conservation costs are recovered through the usage charge, which is based on usage in kgal. Maximum Month costs are recovered through the demand charge, which is based on a three-year average of maximum month usage in kgal. Customer costs are recovered through the service charge, which is based on number of annual bills. The Agricultural Phase-In component funds the phase-in of the Agricultural usage charge in support of local agriculture. The Brentwood component is offset by the CVP credit. Estimated Total Usage Table 4-9: Untreated Water Units of Service A B C Line Cost Components Units of Service 1 Supply Total usage in kgal 2 Delivery Total usage in kgal 3 Max Month Three-year average max month usage in kgal 4 Conservation Total usage in kgal 5 Customer Total annual bills 6 Agricultural Phase-In Agricultural phase-in 7 Brentwood Brentwood usage in kgal Table 4-10 shows the total projected water usage in kgal for all customer classes in FY 2019, provided by District staff. The total usage (Line 9) is used for the Supply, Delivery, and Conservation unit costs. Unmetered Landscape Irrigation customers (Line 7) do not have recorded water usage. The projected usage shown in Table 4-10 is estimated using the following outdoor water budget formula: (Landscape Area (sq. ft.) x Evapotranspiration Weather Data x ET Adjustment Factor) / 1,200 x Outdoor Drought Factor The unmetered Landscape Irrigation customers have a total acreage of acres, which is equal to approximately 2,522,560 square feet. The evapotranspiration (ET) data is from the California Irrigation Management Information System (CIMIS) Concord weather station located within the District s service area. The ET adjustment factor is equal to 1.0, which is equates to average terrain and weather conditions. The outdoor drought factor is equal to 1.0, which assumes no outdoor drought. The total estimated usage for unmetered Landscape Irrigation customers is for the months of April through October; these customers do not take water from the District during wet months. Unmetered Landscape Irrigation customers therefore only use the system for eight months out of the year. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 59

66 Technical Appendix 3 of this report details the usage estimates for unmetered Landscape Irrigation customers. Table 4-10: Untreated Water Estimated FY 2019 Usage A B C Line Customer Class FY 2019 Projected Usage (kgal) 1 Wholesale Municipal 8,960,914 2 Industrial 8,476,472 3 Landscape Irrigation 375,897 4 Temporary Service 0 5 Agricultural Irrigation 6,533 6 Agricultural Irrigation - Livestock 0 7 Landscape Irrigation - Unmetered 63,855 8 Brentwood (Inside) 610,818 9 Total 18,494,489 3-Year Average Maximum Month Usage Table 4-11 shows the three-year average maximum month usage in kgal for all customer classes. The usage represents the average of three years of maximum month usage (FY 2016, 2017, and 2018) for each distinct customer, which is then summed by customer class. Maximum month usage is calculated based on each account, with the exception of municipal and industrial customers who have more than one meter serving the same facility. For example, if a customer has two accounts within the same classification and location, the maximum month usage is the maximum month of the combined usage for both accounts. The three-year average maximum usage for each account will be revised every year based on the most recent three fiscal years usage. This methodology accounts for potential fluctuations in peak water demand from year to year. The City of Brentwood is a Wholesale Municipal customer that pays for untreated water and the additional costs for pumping and treatment (as shown in the revenue offsets). Brentwood utilizes the Brentwood Water Treatment Plant, which is owned by Brentwood but operated by the District, and the Randall-Bold Water Treatment Plant. During off-peak months, the District performs annual maintenance on the Brentwood Water Treatment Plant, removing this plant from service and forcing Brentwood to take water from Randall-Bold during these periods. Due to these constraints, which are at the District s rather than the City s discretion, the three-year average shown for Brentwood is for average month demand. The usage analysis is for usage at the Randall-Bold Water Treatment Plant, not the Brentwood Water Treatment Plant. Since Brentwood must take additional water from Randall-Bold Water Treatment Plant during maintenance periods at the Brentwood Water Treatment Plant, the timing and duration of which are outside of its control, this has likely driven Brentwood s maximum month demand at Randall-Bold Water Treatment Plant to be artificially high. Therefore, the three-year average of Brentwood s average month demand is used in this study to assess the demand charge to account for the District-initiated maintenance activities. Water service provided to Agricultural customers (Lines 5-6) is typically seasonal and interruptible based on District water supply reliability. Therefore, Agricultural customers have historically been exempt from paying demand charges due to seasonality and potential interruptions in service. The proposed methodology for this study recommends the same exemption. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 60

67 The maximum month usage for unmetered Landscape Irrigation customers (Line 7) is estimated using the outdoor water budget formula. The highest month of estimated usage is July, based on weather and acreage data. Table 4-11: Untreated Water 3-Year Average Maximum Month Usage A B C Line Customer Class 3-Year Average Max Month Usage (kgal) 1 Wholesale Municipal 1,100,293 2 Industrial 853,040 3 Landscape Irrigation 73,077 4 Temporary Service 6 5 Agricultural Irrigation 0 6 Agricultural Irrigation - Livestock 0 7 Landscape Irrigation - Unmetered 11,730 8 Brentwood (Inside) 55,469 9 Total 2,093,615 Table 4-12 shows the total number of connections for each customer class, as provided by District staff. Unit Costs Table 4-12: Untreated Water Connections A B C Line Customer Class Number of Connections 1 Wholesale Municipal 8 2 Industrial 18 3 Landscape Irrigation 70 4 Temporary Service 2 5 Agricultural Irrigation 25 6 Agricultural Irrigation - Livestock 2 7 Landscape Irrigation - Unmetered Brentwood (Inside) 1 9 Total 400 Table 4-13 shows the unit costs for all cost components except Offset. The Supply, Delivery, Conservation, and Brentwood units are from Table The Maximum Month units are from Table The Customer units are the number of connections in Table 4-12 multiplied by 8 bills a year for Unmetered Landscape Irrigation customers and 12 months a year for all other customer classes. (274 unmetered x 8 months) + [(400 total customers unmetered) x 12 months] = 3,704 bills per year CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 61

68 Table 4-13: Untreated Water Unit Costs A B C D E F Line Cost Components Revenue Requirement Units Unit Cost Units of Service 1 Supply $9,539,315 18,494,489 $0.52 kgal 2 Delivery $28,605,906 18,494,489 $1.55 kgal 3 Max Month $6,770,722 2,093,615 $3.23 kgal/year 4 Conservation $1,234,515 18,494,489 $0.07 kgal 5 Customer $30,631 3,704 $8.27 bills/month* 6 Agricultural Phase-In ($6,468) 7 Brentwood ($118,813) 610,818 ($0.19) kgal 8 *Unmetered Landscape Irrigation customers are billed for 8 months out of the year Revenue Requirement Distribution The revenue requirement is then distributed to the customer classes based on the cost and rate components. The rate components, which are comprised of the cost component unit costs, include a service charge, usage charge, and demand charge. Table 4-14 allocates the revenue requirements for each cost component for all customer classes based on the unit costs developed in Table 4-13 and the units of service for each class. For example, to find the annual Supply revenue requirement for the Wholesale Municipal class, the following equation is used: Supply unit cost x Wholesale Municipal supply units of service Table 4-15 combines the cost components to allocate the revenue requirements by customer class and rate component. The service charge includes Customer costs; the usage charge includes Supply, Delivery, and Conservation costs; the demand charge includes Maximum Month costs. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 62

69 Table 4-14: Untreated Water Revenue Requirement by Customer Class A B C D E F G H I Line Customer Class Supply Delivery Max Month Conservation Customer Ag Phase-In / Revenue Brentwood Requirement 1 Wholesale Municipal $4,621,971 $13,860,079 $3,558,333 $598,145 $794 $22,639,321 2 Industrial $4,372,099 $13,110,779 $2,758,720 $565,808 $1,786 $20,809,192 3 Landscape Irrigation $193,885 $581,409 $236,330 $25,091 $6,946 $1,043,662 4 Temporary Service $0 $0 $19 $0 $198 $218 5 Agricultural Irrigation $3,370 $10,105 $0 $436 $2,481 ($6,468) $9,924 6 Agricultural Irrigation - Livestock $0 $0 $0 $0 $198 $198 7 Landscape Irrigation - Unmetered $32,936 $98,766 $37,935 $4,262 $18,127 $192,026 8 Brentwood (Inside) $315,055 $944,768 $179,386 $40,772 $99 ($118,813) $1,361,269 9 Total $9,539,315 $28,605,906 $6,770,722 $1,234,515 $30,631 ($125,281) $46,055,809 Table 4-15: Untreated Water Revenue Requirement by Rate Component A B C D E F G Line Customer Class Service Charge Usage charge Demand Charge Ag Phase-In / Revenue Brentwood Requirement 1 Wholesale Municipal $794 $19,080,194 $3,558,333 $0 $22,639,321 2 Industrial $1,786 $18,048,686 $2,758,720 $0 $20,809,192 3 Landscape Irrigation $6,946 $800,385 $236,330 $0 $1,043,662 4 Temporary Service $198 $0 $19 $0 $218 5 Agricultural Irrigation $2,481 $13,911 $0 ($6,468) $9,924 6 Agricultural Irrigation - Livestock $198 $0 $0 $0 $198 7 Landscape Irrigation - Unmetered $18,127 $135,964 $37,935 $0 $192,026 8 Brentwood (Inside) $99 $1,300,596 $179,386 ($118,813) $1,361,269 9 Total $30,631 $39,379,737 $6,770,722 ($125,281) $46,055,809 CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 63

70 Rate Design and Calculation The design and calculation of untreated water rates is the final step in the study. The following sections outline the steps taken to determine the proposed rates. All rates in this section are rounded up to the nearest penny. Rate Design The District s current untreated water rate components were maintained and include a service charge, a usage charge, and a demand charge. Minimal changes were made to the rate structure to reduce impacts to customers and to enhance customer understanding of the rate structure. In the untreated water rate study, the demand charge was standardized to increase ease of understanding and administration. The District s current rate structure includes a demand charge that is assessed based on maximum day, maximum hour, and maximum month factors, differing by each customer class and its impacts on and requirements from the system. The proposed demand charge is assessed by kgal of a three-year average maximum month of usage for FY 2016, 2017, and A three-year average is utilized to provide a stable basis that does not drastically change due to annual fluctuations in demand. A historical average also takes into consideration the most recent capacity requirements for each customer and is an industry standard methodology to recover capacity-related costs. The usage for customers with more than one account for the same type of service and location are combined to determine the demand charge. Service Charge Calculation The monthly and annual service charges for metered and unmetered customers, respectively, is calculated in Table The total cost for unmetered customers (Line 6) is equal to the service charge revenue requirement for unmetered Landscape Irrigation customers (Table 4-15, Column C, Line 7). The total cost for metered customers is the remainder of the service charge revenue requirement. The units of service are from Table The number of metered connections is multiplied by 12 months to determine the number of connections per year. Usage Charge Calculation Table 4-16: Untreated Water Service Charge Calculation A B C D Line Customer Type Value Units 1 Metered 2 Total Costs $12,504 per year 3 Units of Service 1,512 connections/year 4 Service Charge $8.27 per month 5 Unmetered 6 Total Costs $18,127 per year 7 Units of Service 274 connections 8 Service Charge $66.16 per year The usage charge for metered, including Brentwood, and unmetered customers is calculated in Table The total cost for unmetered customers is shown in Table 4-15 for the usage charge rate component. The total cost for CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 64

71 metered customers is the sum of the usage charge revenue requirement in Table 4-15 for all metered customers except Brentwood. Table 4-17: Untreated Water Usage Charge Calculation A B C D Line Customer Type Value Units 1 Metered 2 Total Costs $37,943,176 per year 3 Units of Service 17,819,816 kgal 4 Usage charge $2.13 kgal 5 Brentwood w/ CVP Credit 6 Total Costs $1,181,783 per year 7 Units of Service 610,818 kgal 8 Usage charge $1.94 kgal 9 Unmetered 10 Total Costs $135,964 per year 11 Acreage acres 12 Acreage (0.05 acres) 1, acres 13 Usage charge $ per 0.05 acres The Brentwood with CVP credit rate results in the District collecting the same amount of revenue as it would if Brentwood paid the metered usage charge and received a CVP credit of $118,813 in FY Agricultural Usage Charge Phase-In Approach The study provides a three-year phase-in approach for Agricultural usage charges. The Offset amount allocated to Agricultural Irrigation (Table 4-15, Column F, Line 5) is used to offset the revenue loss in the initial year from phasing in Agricultural customers. The offset is derived from other miscellaneous revenues that include lease income, fees, and penalties that the District can use to offset rates. The phase-in is for FY 2019 through The proposed phase-in usage charge for Agricultural customers in FY 2019 is $1.47 per kgal. This usage charge results in no net impact to the Agricultural Irrigation customer class during the first year, as shown in Table The phase-in usage charge for FY 2021 is equal to the proposed usage charge of $2.13 per kgal. The phase-in usage charge for FY 2020 is average of the FY 2019 and 2021 phase-in charges. Table 4-18 shows the calculated revenue loss from the three-year Agricultural phase-in usage charges. The revenue loss is equal to the total revenue at the full usage charge for $2.13 each year less the revenue at the phase-in rate. The total revenue loss for the three years is $6,468, which is equal to the Agricultural Phase-In component in the revenue requirement for Agricultural customers. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 65

72 Table 4-18: Untreated Water Agricultural 3-Year Phase-In A B C D E Line Agricultural Phase-In Phase-In Usage Charge ($/kgal) $1.47 $1.80 $ Estimated annual usage (kgal) 6,533 6,533 6,860 3 Revenue (Full Charge) $13,916 $13,916 $14,611 4 Revenue (Phase-In) $9,604 $11,760 $14,611 5 Revenue Loss $4,312 $2,156 $0 6 Total Three-Year Phase-In $6,468 Demand Charge Calculation Table 4-19 shows the calculation for the metered and unmetered demand charge. The demand charge for metered customers is $3.24 per kgal per year (Line 4). The total costs for metered customers (Line 2) is equal to the demand charge revenue requirement of municipal, industrial, landscape irrigation and temporary customers (Table 4-15, Column E, Lines 1-4 and 8). The units of service (Line 3) is equal to the total three-year average maximum month usage in kgal for municipal, industrial, landscape irrigation customers, and temporary customers. The usage represents the average of three years of maximum month usage (FY 2016, 2017, and 2018) for each distinct customer, which is then summed by customer class (Table 4-11, Lines 1-4 and 8). Maximum month usage is calculated based on each account, with the exception of municipal and industrial customers who have more than one meter serving the same facility. For example, if a customer has two accounts within the same classification and location, the maximum month usage is the maximum month of the combined usage for both accounts. The three-year average maximum usage for each account will be revised every year based on the most recent three fiscal years usage. This methodology accounts for potential fluctuations in peak water demand from year to year. The demand charge for unmetered customers is $32.76 per 0.05 acres per year. The total demand charge cost for unmetered customers (Line 6) is equal to the demand charge revenue requirement for unmetered Landscape Irrigation customers (Table 4-15, Column E, Line 7). Table 4-19: Untreated Water Demand Charge Calculation A B C D Line Customer Type Value Units 1 Metered 2 Total Costs $6,732,788 per year 3 Units of Service 2,081,885 kgal/year 4 Demand Charge $3.24 per kgal/year 5 Unmetered 6 Total Costs $37,935 per year 7 Acreage acres 8 Acreage (0.05 acres) 1, acres 9 Demand Charge $32.76 per 0.05 acres CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 66

73 Proposed Untreated Water Rates Table 4-20 shows the proposed untreated water rates developed in this study. Table 4-20: Proposed Untreated Water Rates Untreated Water Rates Proposed Rate Service Charges Metered Customers ($/month) $8.27 Unmetered Customers ($/year) $66.16 Usage charge Metered Customers ($/kgal) $2.13 Unmetered Customers ($/0.05 acres) $ Demand Charges* Metered Customers ($/kgal of max month usage) $3.24 Unmetered Customers ($/0.05 acres) $32.76 *Demand charges are charged based on a three-year rolling average of maximum month usage for all customers, except Agricultural Customer Impacts Table 4-21 shows the customer impacts to each customer class and rate component. The Agricultural Irrigation customer impacts utilize the FY 2019 phase-in usage charge to reduce the total impact to the class. CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 67

74 Table 4-21: Untreated Water Customer Impacts A B C D E F G Line Customer Class Rate Component Current Annual Proposed Annual Revenue Revenue Difference ($) Difference (%) 1 Wholesale Municipal Service Charge $22,522 $893 ($21,628) -96% 2 Usage charge $21,522,250 $20,271,735 ($1,250,515) -6% 3 Demand Charge $840,935 $3,744,669 $2,903, % 4 Total $22,385,707 $24,017,297 $1,631,590 7% 5 Industrial Service Charge $44,950 $1,786 ($43,163) -96% 6 Usage charge $19,179,455 $18,054,885 ($1,124,570) -6% 7 Demand Charge $682,173 $2,763,850 $2,081, % 8 Total $19,906,577 $20,820,520 $913,943 5% 9 Landscape Irrigation - Metered Service Charge $24,570 $6,947 ($17,623) -72% 10 Usage charge $849,865 $800,660 ($49,205) -6% 11 Demand Charge $43,242 $236,769 $193, % 12 Total $917,677 $1,044,377 $126,699 14% 13 Landscape Irrigation - Unmetered Service Charge $0 $18,128 $18, % 14 Usage charge $0 $135,973 $135, % 15 Demand Charge $107,166 $37,943 ($69,223) -65% 16 Total $107,166 $192,043 $84,878 79% 17 Agricultural Irrigation Service Charge $9,606 $2,481 ($7,125) -74% 18 Usage charge $2,505 $9,604 $7, % 19 Demand Charge $0 $0 $0 0% 20 Livestock Charge $132 $198 $66 50% 21 Total $12,243 $12,284 $41 0% 22 Temporary Service Service Charge $693 $0 ($693) -100% 23 Usage charge $0 $0 $0 100% 24 Demand Charge $0 $0 $0 100% 25 Total $693 $0 ($693) -100% 26 TOTAL $43,330,063 $46,086,521 $2,756,458 6% CONTRA COSTA WATER DISTRICT TREATED AND UNTREATED WATER RATE STUDY REPORT 68

75 APPENDIX A: DETAILED SYSTEM ALLOCATIONS

76 Detailed O&M Expense Allocation A B C D E F Line Operating Budget Allocation Methodology FY 2019 Treated Untreated Budget Water Water 1 LV Watershed Management Proportion of 5-Year Average Water Usage $4,395,266 $1,441,870 $2,953,396 2 Marina Recreation Management Proportion of 5-Year Average Water Usage $10,000 $3,281 $6,719 3 Purchased Water Proportion of Current Year Water Usage $5,387,655 $1,855,685 $3,531,970 4 Untreated Water Reservoir Proportion of 5-Year Average water usage $517,874 $169,889 $347,985 5 Water Quality Lab/Field Services 1/3 UW, 2/3 TW (Based on Historical Cost Split) $2,443,745 $1,629,163 $814,582 6 Water Supply/Quality/Permits Proportion of 5-Year Average Water Usage $1,304,831 $428,051 $876,780 7 Fish Monitoring Proportion of 5-Year Average Water Usage $348,159 $114,214 $233,945 8 LV Transfer Station Energy Proportion of 5-Year Average Water Usage $520,000 $170,586 $349,414 9 Treated Water Pump Station Maintenance All Treated $2,060,836 $2,060,836 $0 10 Treated Water Pump Stations Energy All Treated $40,360 $40,360 $0 11 Untreated Water Pump Maintenance Proportion of 5-Year Average Water Usage $15,000 $4,921 $10, UW Energy (WAPA/MID/Mallard) Proportion of Current Year Water Usage $906,000 $312,056 $593, Multipurpose Pump Station Energy All Treated $119,635 $119,635 $0 14 Multipurpose Pump Station Energy Zones All Treated $996,365 $996,365 $0 15 Treated Water Pump Station Energy Zones All Treated $968,640 $968,640 $0 16 Bollman WTP Highlift Energy Zones All Treated $412,368 $412,368 $0 17 Bollman Water Treatment Plant All Treated $3,600,045 $3,600,045 $0 18 Brentwood WTP All Treated $2,220,859 $2,220,859 $0 19 RBWTP All Treated $4,454,898 $4,454,898 $0 20 Bollman WTP Energy All Treated $368,632 $368,632 $0 21 Canal Proportion of 5-Year Average Water Usage $6,840,695 $2,244,094 $4,596, Canal - Loop Proportion of 5-Year Average Water Usage $817,216 $268,088 $549, Corrosion Control 1% UW, 99% TW (Based on Historical Cost Split) $1,228,258 $1,215,975 $12, Cross Connection Testing All Treated $876,169 $876,169 $0 25 Hydrants - Maintenance All Treated $102,510 $102,510 $0 26 Leak Detection All Treated $10,750 $10,750 $0 27 LV Pipeline Proportion of 5-Year Average Water Usage $92,195 $30,245 $61, Operations Control Proportion of 5-Year Average Water Usage $1,530,741 $502,160 $1,028, Treated Water Facilities All Treated $860,008 $860,008 $0 30 Untreated Water Facilities Proportion of 5-Year Average Water Usage $330,708 $108,489 $222, Water Mains Maintenance All Treated $5,162,211 $5,162,211 $0

77 32 Water Meters - Maintenance 0.2% UW, 99.8% TW (Based on Historical Cost Split) $846,796 $845,102 $1, Conservation Proportion of 5-Year Average Water Usage $934,920 $306,701 $628, Customer Service Proportion of Customer Accounts $2,418,600 $2,403,013 $15, Board of Directors Indirect Expenses Allocation $453,778 $310,026 $143, Contingency Budget Indirect Expenses Allocation $1,000,000 $683,211 $316, District Fleet Maintenance Indirect Expenses Allocation $1,218,608 $832,567 $386, Engineering Indirect Expenses Allocation $2,061,500 $1,408,440 $653, Finance Indirect Expenses Allocation $5,178,130 $3,537,758 $1,640, General Facilities Indirect Expenses Allocation $320,192 $218,759 $101, General Management Indirect Expenses Allocation $2,418,570 $1,652,395 $766, Human Resources Indirect Expenses Allocation $2,700,350 $1,844,910 $855, Information Systems Indirect Expenses Allocation $3,024,350 $2,066,271 $958, Legal Expenses Indirect Expenses Allocation $725,000 $495,328 $229, Operations & Maintenance Indirect Expenses Allocation $3,492,861 $2,386,363 $1,106, Other General District Expenses Indirect Expenses Allocation $163,700 $111,842 $51, Planning/Environmental/Land Indirect Expenses Allocation $2,465,293 $1,684,316 $780, Post-employment expenses Indirect Expenses Allocation $4,267,700 $2,915,742 $1,351, Public Communications Indirect Expenses Allocation $1,662,600 $1,135,907 $526, Safety Program Indirect Expenses Allocation $480,600 $328,351 $152, Total $84,776,177 $57,920,055 $26,856,122

78 Detailed Existing Debt Service Allocation A B C D E F Line Debt Service Allocation Methodology FY 2019 Budget Treated Water Untreated Water 1 LV Original Debt Proportion of 5-Year Average Water Usage $27,753,828 $9,104,659 $18,649,169 2 LVE 160TAF Debt Proportion of 5-Year Average Water Usage $3,540,588 $1,161,492 $2,379,096 3 MP Pipeline/Admin Building 80% UW, 20% TW (Based on Historical Cost Split) $6,840,122 $1,368,024 $5,472,098 4 Middle River Intake Proportion of 5-Year Average Water Usage $2,113,683 $693,395 $1,420,288 5 Canal Replacement Seg 2 Proportion of 5-Year Average Water Usage $193,500 $63,478 $130,022 6 WTP Improvements All Treated $1,435,528 $1,435,528 $0 7 Contra Costa Water Authority All Treated $3,777,925 $3,777,925 $0 8 DC Building Improvements Proportion of Current Year Expenses $281,823 $192,545 $89,278 9 Shortcut Pipeline Improvements All Untreated $268,103 $0 $268, Total $46,205,100 $17,797,046 $28,408,054

79 APPENDIX B: DETAILED TREATED WATER ALLOCATIONS

80 Detailed Treated Water Operating Cost Component Allocation A B C D Line Operating Expenses Function Allocation Methodology 1 LV Watershed Management Supply Supply 2 Marina Recreation Management Supply Supply 3 Purchased Water Supply Supply 4 Untreated Water Reservoir Storage Supply 5 Water Quality Lab/Field Services Supply Supply 6 Water Supply/Quality/Permits Supply Supply 7 Fish Monitoring Supply Supply 8 LV Transfer Station Energy Supply Supply 9 Treated Water Pump Station Maintenance Pumping Max Day 10 Treated Water Pump Stations Energy Pumping Max Day 11 Untreated Water Pump Maintenance Pumping Max Day 12 UW Energy (WAPA/MID/Mallard) Pumping Max Day 13 Multipurpose Pump Station Energy Pumping Max Day 14 Multipurpose Pump Station Energy Zones Zonal Pumping Pumping 15 Treated Water Pump Station Energy Zones Zonal Pumping Pumping 16 Bollman WTP Highlift Energy Zones Zonal Pumping Pumping 17 Bollman Water Treatment Plant Treatment Max Day 18 Brentwood WTP Treatment Max Day 19 RBWTP Treatment Max Day 20 Bollman WTP Energy Treatment Max Day 21 Canal Canal 95% Delivery / 5% Max Day 22 Canal - Loop Canal 95% Delivery / 5% Max Day 23 Corrosion Control Operations Delivery 24 Cross Connection Testing Meter/Billing Meter 25 Hydrants - Maintenance Meter/Billing Meter 26 Leak Detection Meter/Billing Meter 27 LV Pipeline T&D Average of Max Day w/ and w/o Fire 28 Operations Control Operations Delivery 29 Treated Water Facilities T&D Average of Max Day w/ and w/o Fire 30 Untreated Water Facilities T&D Average of Max Day w/ and w/o Fire 31 Water Mains Maintenance T&D Average of Max Day w/ and w/o Fire 32 Water Meters - Maintenance Meter/Billing Meter

81 33 Conservation Conservation Conservation 34 Customer Service Meter/Billing Meter 35 Board of Directors General/Administrative General 36 Contingency Budget General/Administrative General 37 District Fleet Maintenance General/Administrative General 38 Engineering General/Administrative General 39 Finance General/Administrative General 40 General Facilities General/Administrative General 41 General Management General/Administrative General 42 Human Resources General/Administrative General 43 Information Systems General/Administrative General 44 Legal Expenses General/Administrative General 45 Operations & Maintenance General/Administrative General 46 Other General District Expenses General/Administrative General 47 Planning/Environmental/Land General/Administrative General 48 Post-employment expenses General/Administrative General 49 Public Communications General/Administrative General 50 Safety Program General/Administrative General

82 Detailed Treated Water Capital Asset Component Allocation A B C D Line Capital Assets Function Allocation Methodology 1 Source of Supply Supply Delivery 2 Pumping Pumping Average of Max Day/Hour w/ Fire 3 Water Treatment Treatment Max Day 4 Transmission & Distribution T&D Average of Max Day/Hour w/ Fire 5 General Plant General/Administrative General 6 Coll & Imp Reservoirs Storage Average of Max Day/Hour w/ Fire 7 River & Other Intakes Pumping Max Day 8 Supply Mains T&D Max Day 9 Other Supply Plant Supply Delivery 10 Pumping Equipment Pumping Max Day 11 Other Pumping Plant Pumping Max Day 12 Water Treatment Equipment Treatment Max Day 13 Other Water Treatment Plant Treatment Max Day 14 Reservoir & Tanks Storage Average of Max Day/Hour w/ Fire 15 Transmission & Distribution Mains T&D Average of Max Day/Hour w/ Fire 16 Services Meter/Billing Meter 17 Meters Meter/Billing Meter 18 Meter Installations Meter/Billing Meter 19 Hydrants Fire Fire 20 Check Valves/RP Devices Meter/Billing Meter 21 Office Equipment General/Administrative General 22 Trans Equipment General/Administrative General 23 Stores Equipment General/Administrative General 24 Lab Equipment General/Administrative General 25 Communication Equipment General/Administrative General 26 Power Operated Equipment General/Administrative General 27 Tools/Shop/Garage General/Administrative General 28 Other General Equipment General/Administrative General 29 Other Tangible Property General/Administrative General 30 SCADA Equipment General/Administrative General 31 Organization Costs General/Administrative General 32 Other Intangible Plant General/Administrative General

83 33 Land General/Administrative General 34 Land Rights General/Administrative General 35 Canal System Land Supply Delivery 36 Canal System Structures Canal Max Day 37 Wells Supply Delivery 38 Hydrant Meters Fire Fire 39 Assets Acquired from Cal Water General/Administrative General

84 Detailed Treated Water Operating Cost Allocation A B C D E F G H I J K L Line O&M Allocation Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Total 1 LV Watershed Management 100% 100% 2 Marina Recreation Management 100% 100% 3 Purchased Water 100% 100% 4 Untreated Water Reservoir 100% 100% 5 Water Quality Lab/Field Services 100% 100% 6 Water Supply/Quality/Permits 100% 100% 7 Fish Monitoring 100% 100% 8 LV Transfer Station Energy 100% 100% 9 Treated Water Pump Station Maintenance 67% 33% 100% 10 Treated Water Pump Stations Energy 67% 33% 100% 11 Untreated Water Pump Maintenance 67% 33% 100% 12 UW Energy (WAPA/MID/Mallard) 67% 33% 100% 13 Multipurpose Pump Station Energy 67% 33% 100% 14 Multipurpose Pump Station Energy Zones 100% 100% 15 Treated Water Pump Station Energy Zones 100% 100% 16 Bollman WTP Highlift Energy Zones 100% 100% 17 Bollman Water Treatment Plant 67% 33% 100% 18 Brentwood WTP 67% 33% 100% 19 RBWTP 67% 33% 100% 20 Bollman WTP Energy 67% 33% 100% 21 Canal 95% 5% 100% 22 Canal - Loop 95% 5% 100% 23 Corrosion Control 100% 100% 24 Cross Connection Testing 100% 100% 25 Hydrants - Maintenance 100% 100% 26 Leak Detection 100% 100% 27 LV Pipeline 63% 32% 5% 100% 28 Operations Control 100% 100% 29 Treated Water Facilities 63% 32% 5% 100% 30 Untreated Water Facilities 63% 32% 5% 100% 31 Water Mains Maintenance 63% 32% 5% 100% 32 Water Meters - Maintenance 100% 100% 33 Conservation 100% 100% 34 Customer Service 100% 100% 35 Board of Directors 100% 100% 36 Contingency Budget 100% 100%

85 37 District Fleet Maintenance 100% 100% 38 Engineering 100% 100% 39 Finance 100% 100% 40 General Facilities 100% 100% 41 General Management 100% 100% 42 Human Resources 100% 100% 43 Information Systems 100% 100% 44 Legal Expenses 100% 100% 45 Contingency Budget 100% 100% 46 District Fleet Maintenance 100% 100% 47 Engineering 100% 100% 48 Finance 100% 100% 49 Public Communications 100% 100% 50 Safety Program 100% 100% A B C D E F G H I J K L Line O&M Allocation Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Total 1 LV Watershed Management $1,441,870 $1,441,870 2 Marina Recreation Management $3,281 $3,281 3 Purchased Water $1,855,685 $1,855,685 4 Untreated Water Reservoir $169,889 $169,889 5 Water Quality Lab/Field Services $1,629,163 $1,629,163 6 Water Supply/Quality/Permits $428,051 $428,051 7 Fish Monitoring $114,214 $114,214 8 LV Transfer Station Energy $170,586 $170,586 9 Treated Water Pump Station Maintenance $1,373,891 $686,945 $2,060, Treated Water Pump Stations Energy $26,907 $13,453 $40, Untreated Water Pump Maintenance $3,281 $1,640 $4, UW Energy (WAPA/MID/Mallard) $208,037 $104,019 $312, Multipurpose Pump Station Energy $79,757 $39,878 $119, Multipurpose Pump Station Energy Zones $996,365 $996, Treated Water Pump Station Energy Zones $968,640 $968, Bollman WTP Highlift Energy Zones $412,368 $412, Bollman Water Treatment Plant $2,400,030 $1,200,015 $3,600, Brentwood WTP $1,480,573 $740,286 $2,220, RBWTP $2,969,932 $1,484,966 $4,454, Bollman WTP Energy $245,755 $122,877 $368, Canal $2,131,889 $112,205 $2,244, Canal - Loop $254,684 $13,404 $268,088

86 23 Corrosion Control $1,215,975 $1,215, Cross Connection Testing $876,169 $876, Hydrants - Maintenance $102,510 $102, Leak Detection $10,750 $10, LV Pipeline $19,155 $9,577 $1,512 $30, Operations Control $502,160 $502, Treated Water Facilities $544,672 $272,336 $43,000 $860, Untreated Water Facilities $68,710 $34,355 $5,424 $108, Water Mains Maintenance $3,269,400 $1,634,700 $258,111 $5,162, Water Meters - Maintenance $845,102 $845, Conservation $306,701 $306, Customer Service $2,403,013 $2,403, Board of Directors $310,026 $310, Contingency Budget $683,211 $683, District Fleet Maintenance $832,567 $832, Engineering $1,408,440 $1,408, Finance $3,537,758 $3,537, General Facilities $218,759 $218, General Management $1,652,395 $1,652, Human Resources $1,844,910 $1,844, Information Systems $2,066,271 $2,066, Legal Expenses $495,328 $495, Contingency Budget $2,386,363 $2,386, District Fleet Maintenance $111,842 $111, Engineering $1,684,316 $1,684, Finance $2,915,742 $2,915, Public Communications $1,135,907 $1,135, Safety Program $328,351 $328, Total $5,812,738 $16,794,807 $6,470,658 $0 $308,048 $2,377,373 $306,701 $4,237,544 $21,612,186 $57,920, Percentage Allocation 10% 29% 11% 0% 1% 4% 1% 7% 37% 100%

87 Detailed Treated Water Capital Asset Allocation A B C D E F G H I J K L Line Capital Allocation Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Total 1 Source of Supply 100% 100% 2 Pumping 54% 27% 9% 10% 100% 3 Water Treatment 67% 33% 100% 4 Transmission & Distribution 54% 27% 9% 10% 100% 5 General Plant 100% 100% 6 Coll & Imp Reservoirs 54% 27% 9% 10% 100% 7 River & Other Intakes 67% 33% 100% 8 Supply Mains 67% 33% 100% 9 Other Supply Plant 100% 100% 10 Pumping Equipment 67% 33% 100% 11 Other Pumping Plant 67% 33% 100% 12 Water Treatment Equipment 67% 33% 100% 13 Other Water Treatment Plant 67% 33% 100% 14 Reservoir & Tanks 54% 27% 9% 10% 100% 15 Transmission & Distribution Mains 54% 27% 9% 10% 100% 16 Services 100% 100% 17 Meters 100% 100% 18 Meter Installations 100% 100% 19 Hydrants 100% 100% 20 Check Valves/RP Devices 100% 100% 21 Office Equipment 100% 100% 22 Trans Equipment 100% 100% 23 Stores Equipment 100% 100% 24 Lab Equipment 100% 100% 25 Communication Equipment 100% 100% 26 Power Operated Equipment 100% 100% 27 Tools/Shop/Garage 100% 100% 28 Other General Equipment 100% 100% 29 Other Tangible Property 100% 100% 30 SCADA Equipment 100% 100% 31 Organization Costs 100% 100% 32 Other Intangible Plant 100% 100% 33 Land 100% 100% 34 Land Rights 100% 100% 35 Canal System Land 100% 100% 36 Canal System Structures 67% 33% 100%

88 37 Wells 100% 100% 38 Hydrant Meters 100% 100% 39 Assets Acquired from Cal Water 100% 100% A B C D E F G H I J K L Line Capital Allocation Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Total 1 Source of Supply $1,840,221 $1,840,221 2 Pumping $14,630,321 $7,315,161 $2,581,821 $2,725,256 $27,252,559 3 Water Treatment $31,334,549 $15,667,274 $47,001,823 4 Transmission & Distribution $443,682 $221,841 $78,297 $82,647 $826,467 5 General Plant $22,934,390 $22,934,390 6 Coll & Imp Reservoirs $2,189,211 $1,094,605 $386,331 $407,794 $4,077,942 7 River & Other Intakes $0 $0 $0 8 Supply Mains $161,146 $80,573 $241,719 9 Other Supply Plant $0 $0 10 Pumping Equipment $8,412,149 $4,206,074 $12,618, Other Pumping Plant $2,712,253 $1,356,126 $4,068, Water Treatment Equipment $47,434,182 $23,717,091 $71,151, Other Water Treatment Plant $13,564,877 $6,782,439 $20,347, Reservoir & Tanks $21,307,265 $10,653,633 $3,760,106 $3,969,000 $39,690, Transmission & Distribution Mains $65,096,582 $32,548,291 $11,487,632 $12,125,834 $121,258, Services $23,425,349 $23,425, Meters $2,613,683 $2,613, Meter Installations $0 $0 19 Hydrants $7,727,564 $7,727, Check Valves/RP Devices $3,243,319 $3,243, Office Equipment $803,891 $803, Trans Equipment $2,402,578 $2,402, Stores Equipment $0 $0 24 Lab Equipment $242,110 $242, Communication Equipment $1,812,056 $1,812, Power Operated Equipment $428,700 $428, Tools/Shop/Garage $137,761 $137, Other General Equipment $41,377 $41, Other Tangible Property $337,961 $337, SCADA Equipment $1,522,490 $1,522, Organization Costs $2,018,901 $2,018, Other Intangible Plant $3,084,709 $3,084, Land $16,073,554 $16,073,554

89 34 Land Rights $355,359 $355, Canal System Land $0 $0 36 Canal System Structures $0 $0 $0 37 Wells $0 $0 38 Hydrant Meters $16,015 $16, Assets Acquired from Cal Water $0 $0 40 Total $0 $209,126,439 $103,643,109 $18,294,187 $27,054,110 $0 $0 $29,282,351 $52,195,837 $439,596, Percentage Allocation 0% 48% 24% 4% 6% 0% 0% 7% 12% 100%

90 Detailed Treated Water Revenue Offset Allocation A B C D E F G H I J K L M Line Revenue Offsets Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Offset Total 1 Brentwood CVP Credit 100% 100% 2 Brentwood Pumping 67% 33% 100% 3 Brentwood Admin 100% 100% 4 Brentwood Treatment 67% 33% 100% 5 GSWC Conveyance 67% 33% 100% 6 GSWC Treatment 67% 33% 100% 7 Facility Reserve Charges 67% 33% 100% 8 Property Tax 10% 29% 11% 1% 4% 1% 7% 37% 100% 9 Cost Reimbursements 67% 33% 100% 10 Other Miscellaneous 9% 26% 10% 0% 4% 0% 7% 34% 9% 100% 11 Brentwood Capacity Buy-In 67% 33% 100% 12 Treated Water - Leases and Royalties 100% 100% 13 Transfers for Restricted Reserve Funded Capital Projects 48% 24% 4% 6% 7% 12% 100% 14 Reimbursements for Other Funded Capital Projects 48% 24% 4% 6% 7% 12% 100% 15 Transfers in for Debt Service from Other Funds 48% 24% 4% 6% 7% 12% 100% 16 Interest Income 10% 29% 11% 1% 4% 1% 7% 37% 100% A B C D E F G H I J K L M Line Revenue Offsets Supply Delivery Max Day Max Hour Fire Pumping Conservation Meter General Offset Total 1 Brentwood CVP Credit $0 $0 2 Brentwood Pumping $0 $0 $0 3 Brentwood Admin $1,875 $1,875 4 Brentwood Treatment $347,375 $173,688 $521,063 5 GSWC Conveyance $81,931 $40,965 $122,896 6 GSWC Treatment $267,488 $133,744 $401,232 7 Facility Reserve Charges $774,533 $387,267 $1,161,800 8 Property Tax $167,737 $484,643 $186,722 $8,889 $68,603 $8,850 $122,282 $623,657 $1,671,383 9 Cost Reimbursements $3,624,000 $1,812,000 $5,436, Other Miscellaneous $77,824 $224,859 $86,633 $4,124 $31,830 $4,106 $56,735 $289,356 $75,821 $851, Brentwood Capacity Buy-In $0 $0 $0 12 Treated Water - Leases and Royalties $415,704 $415, Transfers for Restricted Reserve Funded Capital Projects $294,176 $145,794 $25,734 $38,057 $41,191 $73,423 $618, Reimbursements for Other Funded Capital Projects $3,128,500 $1,550,485 $273,678 $404,725 $438,060 $780,842 $6,576, Transfers in for Debt Service from Other Funds $0 $0 $0 $0 $0 $0 $0 16 Interest Income $122,418 $353,703 $136,274 $6,488 $50,068 $6,459 $89,244 $455,158 $1,219, Total $367,979 $9,581,208 $4,653,571 $299,413 $462,283 $566,205 $19,416 $747,511 $2,224,312 $75,821 $18,997, Percentage Allocation 2% 50% 24% 2% 2% 3% 0% 4% 12% 0% 100%

91 APPENDIX C: DETAILED UNTREATED WATER ALLOCATIONS

92 Detailed Untreated Water Operating Cost Component Allocation A B C D Line Operating Expenses Function Allocation Methodology 1 LV Watershed Management Supply Supply 2 Marina Recreation Management Supply Supply 3 Purchased Water Supply Supply 4 Untreated Water Reservoir Storage Supply 5 Water Quality Lab/Field Services Supply Supply 6 Water Supply/Quality/Permits Supply Supply 7 Fish Monitoring Supply Supply 8 LV Transfer Station Energy Supply Supply 9 Treated Water Pump Station Maintenance Pumping Max Month 10 Treated Water Pump Stations Energy Pumping Max Month 11 Untreated Water Pump Maintenance Pumping Max Month 12 UW Energy (WAPA/MID/Mallard) Pumping Max Month 13 Multipurpose Pump Station Energy Pumping Max Month 14 Multipurpose Pump Station Energy Zones Pumping Max Month 15 Treated Water Pump Station Energy Zones Pumping Max Month 16 Bollman WTP Highlift Energy Zones Pumping Max Month 17 Bollman Water Treatment Plant Treatment Max Month 18 Brentwood WTP Treatment Max Month 19 RBWTP Treatment Max Month 20 Bollman WTP Energy Treatment Max Month 21 Canal Canal 95% Delivery / 5% Max Month 22 Canal - Loop Canal 95% Delivery / 5% Max Month 23 Corrosion Control Operations Delivery 24 Cross Connection Testing Meter Meter 25 Hydrants - Maintenance Meter Meter 26 Leak Detection Meter Meter 27 LV Pipeline T&D 95% Delivery / 5% Max Month 28 Operations Control Operations Delivery 29 Treated Water Facilities T&D 95% Delivery / 5% Max Month 30 Untreated Water Facilities T&D 95% Delivery / 5% Max Month 31 Water Mains Maintenance T&D 95% Delivery / 5% Max Month 32 Water Meters - Maintenance Meter Meter

93 33 Conservation Conservation Conservation 34 Customer Service Customer Service Customer 35 Board of Directors General/Administrative General 36 Contingency Budget General/Administrative General 37 District Fleet Maintenance General/Administrative General 38 Engineering General/Administrative General 39 Finance General/Administrative General 40 General Facilities General/Administrative General 41 General Management General/Administrative General 42 Human Resources General/Administrative General 43 Information Systems General/Administrative General 44 Legal Expenses General/Administrative General 45 Operations & Maintenance General/Administrative General 46 Other General District Expenses General/Administrative General 47 Planning/Environmental/Land General/Administrative General 48 Post-employment expenses General/Administrative General 49 Public Communications General/Administrative General 50 Safety Program General/Administrative General

94 Detailed Untreated Water Capital Asset Component Allocation A B C D Line Capital Assets Function Allocation Methodology 1 Source of Supply Supply Delivery 2 Pumping Pumping Max Month 3 Water Treatment Treatment Delivery 4 Transmission & Distribution T&D Max Month 5 General Plant General General 6 Coll & Imp Reservoirs Storage Max Month 7 River & Other Intakes Pumping Max Month 8 Supply Mains T&D Max Month 9 Other Supply Plant Supply Delivery 10 Pumping Equipment Pumping Max Month 11 Other Pumping Plant Pumping Max Month 12 Water Treatment Equipment Treatment Delivery 13 Other Water Treatment Plant Treatment Delivery 14 Reservoir & Tanks Storage Max Month 15 Transmission & Distribution Mains T&D Max Month 16 Services Meter Meter 17 Meters Meter Meter 18 Meter Installations Meter Meter 19 Hydrants General General 20 Check Valves/RP Devices Meter Meter 21 Office Equipment General General 22 Trans Equipment General General 23 Stores Equipment General General 24 Lab Equipment General General 25 Communication Equipment General General 26 Power Operated Equipment General General 27 Tools/Shop/Garage General General 28 Other General Equipment General General 29 Other Tangible Property General General 30 SCADA Equipment General General 31 Organization Costs General General 32 Other Intangible Plant General General

95 33 Land General General 34 Land Rights General General 35 Canal System Land Supply Delivery 36 Canal System Structures Canal Max Month 37 Wells Supply Delivery 38 Hydrant Meters General General 39 Assets Acquired from Cal Water General General

96 Detailed Untreated Water Operating Cost Allocation A B C D E F G H I J Line O&M Allocation Supply Delivery Max Month Conservation Meter Customer General Total 1 LV Watershed Management 100% 100% 2 Marina Recreation Management 100% 100% 3 Purchased Water 100% 100% 4 Untreated Water Reservoir 100% 100% 5 Water Quality Lab/Field Services 100% 100% 6 Water Supply/Quality/Permits 100% 100% 7 Fish Monitoring 100% 100% 8 LV Transfer Station Energy 100% 100% 9 Treated Water Pump Station Maintenance 75% 25% 100% 10 Treated Water Pump Stations Energy 75% 25% 100% 11 Untreated Water Pump Maintenance 75% 25% 100% 12 UW Energy (WAPA/MID/Mallard) 75% 25% 100% 13 Multipurpose Pump Station Energy 75% 25% 100% 14 Multipurpose Pump Station Energy Zones 75% 25% 100% 15 Treated Water Pump Station Energy Zones 75% 25% 100% 16 Bollman WTP Highlift Energy Zones 75% 25% 100% 17 Bollman Water Treatment Plant 75% 25% 100% 18 Brentwood WTP 75% 25% 100% 19 RBWTP 75% 25% 100% 20 Bollman WTP Energy 75% 25% 100% 21 Canal 95% 5% 100% 22 Canal - Loop 95% 5% 100% 23 Corrosion Control 100% 100% 24 Cross Connection Testing 100% 100% 25 Hydrants - Maintenance 100% 100% 26 Leak Detection 100% 100% 27 LV Pipeline 95% 5% 100% 28 Operations Control 100% 100% 29 Treated Water Facilities 95% 5% 100% 30 Untreated Water Facilities 95% 5% 100% 31 Water Mains Maintenance 95% 5% 100% 32 Water Meters - Maintenance 100% 100% 33 Conservation 100% 100% 34 Customer Service 100% 100% 35 Board of Directors 100% 100% 36 Contingency Budget 100% 100%

97 37 District Fleet Maintenance 100% 100% 38 Engineering 100% 100% 39 Finance 100% 100% 40 General Facilities 100% 100% 41 General Management 100% 100% 42 Human Resources 100% 100% 43 Information Systems 100% 100% 44 Legal Expenses 100% 100% 45 Operations & Maintenance 100% 100% 46 Other General District Expenses 100% 100% 47 Planning/Environmental/Land 100% 100% 48 Post-employment expenses 100% 100% 49 Public Communications 100% 100% 50 Safety Program 100% 100% A B C D E F G H I J Line O&M Allocation Supply Delivery Max Month Conservation Meter Customer General Total 1 LV Watershed Management $2,953,396 $2,953,396 2 Marina Recreation Management $6,719 $6,719 3 Purchased Water $3,531,970 $3,531,970 4 Untreated Water Reservoir $347,985 $347,985 5 Water Quality Lab/Field Services $814,582 $814,582 6 Water Supply/Quality/Permits $876,780 $876,780 7 Fish Monitoring $233,945 $233,945 8 LV Transfer Station Energy $349,414 $349,414 9 Treated Water Pump Station Maintenance $0 $0 $0 10 Treated Water Pump Stations Energy $0 $0 $0 11 Untreated Water Pump Maintenance $7,567 $2,512 $10, UW Energy (WAPA/MID/Mallard) $445,913 $148,031 $593, Multipurpose Pump Station Energy $0 $0 $0 14 Multipurpose Pump Station Energy Zones $0 $0 $0 15 Treated Water Pump Station Energy Zones $0 $0 $0 16 Bollman WTP Highlift Energy Zones $0 $0 $0 17 Bollman Water Treatment Plant $0 $0 $0 18 Brentwood WTP $0 $0 $0 19 RBWTP $0 $0 $0 20 Bollman WTP Energy $0 $0 $0 21 Canal $4,366,771 $229,830 $4,596, Canal - Loop $521,671 $27,456 $549,128

98 23 Corrosion Control $12,283 $12, Cross Connection Testing $0 $0 25 Hydrants - Maintenance $0 $0 26 Leak Detection $0 $0 27 LV Pipeline $58,853 $3,098 $61, Operations Control $1,028,581 $1,028, Treated Water Facilities $0 $0 $0 30 Untreated Water Facilities $211,108 $11,111 $222, Water Mains Maintenance $0 $0 $0 32 Water Meters - Maintenance $1,694 $1, Conservation $628,219 $628, Customer Service $15,587 $15, Board of Directors $143,752 $143, Contingency Budget $316,789 $316, District Fleet Maintenance $386,041 $386, Engineering $653,060 $653, Finance $1,640,372 $1,640, General Facilities $101,433 $101, General Management $766,175 $766, Human Resources $855,440 $855, Information Systems $958,079 $958, Legal Expenses $229,672 $229, Operations & Maintenance $1,106,498 $1,106, Other General District Expenses $51,858 $51, Planning/Environmental/Land $780,977 $780, Post-employment expenses $1,351,958 $1,351, Public Communications $526,693 $526, Safety Program $152,249 $152, Total $9,114,792 $6,652,747 $422,038 $628,219 $1,694 $15,587 $10,021,046 $26,856, Percentage Allocation 34% 25% 2% 2% 0% 0% 37% 100%

99 Detailed Untreated Water Capital Asset Allocation A B C D E F G H I J Line Capital Allocation Supply Delivery Max Month Conservation Meter Customer General Total 1 Source of Supply 100% 100% 2 Pumping 75% 25% 100% 3 Water Treatment 100% 100% 4 Transmission & Distribution 75% 25% 100% 5 General Plant 100% 100% 6 Coll & Imp Reservoirs 75% 25% 100% 7 River & Other Intakes 75% 25% 100% 8 Supply Mains 75% 25% 100% 9 Other Supply Plant 100% 100% 10 Pumping Equipment 75% 25% 100% 11 Other Pumping Plant 75% 25% 100% 12 Water Treatment Equipment 100% 100% 13 Other Water Treatment Plant 100% 100% 14 Reservoir & Tanks 75% 25% 100% 15 Transmission & Distribution Mains 75% 25% 100% 16 Services 100% 100% 17 Meters 100% 100% 18 Meter Installations 100% 100% 19 Hydrants 100% 100% 20 Check Valves/RP Devices 100% 100% 21 Office Equipment 100% 100% 22 Trans Equipment 100% 100% 23 Stores Equipment 100% 100% 24 Lab Equipment 100% 100% 25 Communication Equipment 100% 100% 26 Power Operated Equipment 100% 100% 27 Tools/Shop/Garage 100% 100% 28 Other General Equipment 100% 100% 29 Other Tangible Property 100% 100% 30 SCADA Equipment 100% 100% 31 Organization Costs 100% 100% 32 Other Intangible Plant 100% 100% 33 Land 100% 100% 34 Land Rights 100% 100% 35 Canal System Land 100% 100% 36 Canal System Structures 75% 25% 100%

100 37 Wells 100% 100% 38 Hydrant Meters 100% 100% 39 Assets Acquired from Cal Water 100% 100% A B C D E F G H I J Line Capital Allocation Supply Delivery Max Month Conservation Meter Customer General Total 1 Source of Supply $21,360 $21,360 2 Pumping $55,599,381 $18,457,457 $74,056,838 3 Water Treatment $153,103 $153,103 4 Transmission & Distribution $55,135,156 $18,303,347 $73,438,503 5 General Plant $9,837,274 $9,837,274 6 Coll & Imp Reservoirs $193,077,859 $64,096,509 $257,174,368 7 River & Other Intakes $74,159,013 $24,618,741 $98,777,754 8 Supply Mains $106,724,529 $35,429,592 $142,154,121 9 Other Supply Plant $952,789 $952, Pumping Equipment $8,077,256 $2,681,426 $10,758, Other Pumping Plant $274,440 $91,107 $365, Water Treatment Equipment $757,652 $757, Other Water Treatment Plant $2,646 $2, Reservoir & Tanks $4,988,077 $1,655,904 $6,643, Transmission & Distribution Mains $67,782,134 $22,501,794 $90,283, Services $1,707,184 $1,707, Meters $2,764,487 $2,764, Meter Installations $68,227 $68, Hydrants $40,745 $40, Check Valves/RP Devices $40,602 $40, Office Equipment $767,768 $767, Trans Equipment $160,919 $160, Stores Equipment $0 $0 24 Lab Equipment $0 $0 25 Communication Equipment $0 $0 26 Power Operated Equipment $192,393 $192, Tools/Shop/Garage $0 $0 28 Other General Equipment $6,935 $6, Other Tangible Property $5,186,289 $5,186, SCADA Equipment $133,327 $133, Organization Costs $12,897,437 $12,897, Other Intangible Plant $11,814,455 $11,814, Land $367,565,720 $367,565,720

101 34 Land Rights $1,201,427 $1,201, Canal System Land $21,835,577 $21,835, Canal System Structures $32,909,684 $10,925,105 $43,834, Wells $0 $0 38 Hydrant Meters $0 $0 39 Assets Acquired from Cal Water $0 $0 40 Total $0 $622,450,657 $198,760,980 $0 $4,580,500 $0 $409,804,690 $1,235,596, Percentage Allocation 0% 50% 16% 0% 0% 0% 33% 100%

102 Detailed Untreated Water Revenue Offset Allocation A B C D E F G H I J K L Line Revenue Offsets Supply Delivery Max Month Conservation Meter Customer General Phase-In Brentwood Total 1 Brentwood CVP Credit 200% -100% 100% 2 Brentwood Pumping 75% 25% 100% 3 Brentwood Admin 100% 100% 4 Brentwood Treatment 75% 25% 100% 5 GSWC Conveyance 75% 25% 100% 6 GSWC Treatment 75% 25% 100% 7 Facility Reserve Charges 75% 25% 100% 8 Property Tax 34% 25% 2% 2% 0% 0% 37% 100% 9 Cost Reimbursements 100% 100% 10 Other Miscellaneous 99.4% 0.6% 100% 11 Brentwood Capacity Buy-In 75% 25% 100% 12 Treated Water - Leases and Royalties 100% 100% 13 Transfers for Restricted Reserve Funded Capital Projects 0% 50% 16% 0% 0% 0% 33% 100% 14 Reimbursements for Other Funded Capital Projects 0% 50% 16% 0% 0% 0% 33% 100% 15 Transfers in for Debt Service from Other Funds 0% 50% 16% 0% 0% 0% 33% 100% 16 Interest Income 0% 50% 16% 0% 0% 0% 33% 100% A B C D E F G H I J K L Line Revenue Offsets Supply Delivery Max Month Conservation Meter Customer General Phase-In Brentwood Total 1 Brentwood CVP Credit ($237,626) $118,813 ($118,813) 2 Brentwood Pumping $50,509 $16,768 $67,277 3 Brentwood Admin $0 $0 4 Brentwood Treatment $0 $0 $0 5 GSWC Conveyance $0 $0 $0 6 GSWC Treatment $0 $0 $0 7 Facility Reserve Charges $2,071,289 $687,611 $2,758,900 8 Property Tax $436,737 $318,768 $20,222 $30,101 $81 $747 $480,161 $1,286,817 9 Cost Reimbursements $1,428,000 $1,428, Other Miscellaneous $1,086,794 $6,468 $1,093, Brentwood Capacity Buy-In $1,254,245 $416,375 $1,670, Treated Water - Leases and Royalties $0 $0 13 Transfers for Restricted Reserve Funded Capital Projects $0 $638,081 $203,752 $0 $4,696 $0 $420,096 $1,266, Reimbursements for Other Funded Capital Projects $0 $3,014,385 $962,553 $0 $22,182 $0 $1,984,589 $5,983, Transfers in for Debt Service from Other Funds $0 $793,013 $253,225 $0 $5,836 $0 $522,098 $1,574, Interest Income $0 $816,307 $260,663 $0 $6,007 $0 $537,434 $1,620, Total $199,112 $10,384,597 $2,821,169 $30,101 $38,802 $747 $5,031,172 $6,468 $118,813 $18,630, Percentage Allocation 1% 56% 15% 0% 0% 0% 27% 0% 1% 100%

103 APPENDIX D: MAP OF ENERGY ZONES

104