25B - AGMT WATER AND SEWER COSTS STUDY

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A critical element to evaluating a rate design option is understanding the sensitivity of rate revenue to changes in key variables such as water consumption, the cost of supply water, regulatory requirements, and economic conditions. Stantec's rate design models are adept at running sensitivity analysis because we use comprehensive billing data which allows us to incorporate features such as price elasticity of demand. By combining the concepts of conservation -based tiered rates with affordability concepts, Stantec has been able to lower the monthly bill for low water user, even In the face of general rate revenue increases. Stantec's review of the City rate design will also include an assessment of the current formula that Is utilized to pass-through costs from water purveyors. Stantec will make adjustments as necessary and capture the formula in a "Pass-through adjustment calculator" in MS Excel. Affordability—The City has also requested strategies to provide rates that reduce the economic impact of utility costs on elderly or low-income customers. Stantec leads the industry in our focus on the affordability challenge that is facing water utilities. Stantec has found innovative and legal approaches to rate design that will fiscally reward consumers for conserving water while collecting revenue for the City's conservation program from those who are wasteful. We have also developed a unique approach to evaluating the affordability of your rates — WARlTm for weighted average residential index. This approach allows our clients to examine concerns at micro levels throughout their service area and tailor programs to meet the needs of their low-income residents. Stantec will work with City staff to finalize rate structure decisions during a Rate Design Workshop. Task Il.d - Evaluate Miscellaneous Fees During this portion of the study, we will review the City's existing fees and utility operations to determine if the fees are appropriate and whether any additional fees or charges are warranted to compensate the enterprises for services rendered, based upon our knowledge of accepted national and local practices. Task Il.e - Survey and Benchmarking Stantec will conduct a survey that provides a clear comparison of the existing and proposed rates to the rates being charged by all other utilities within Orange County. In our experience, we have found that such surveys are invaluable for communicating with City Council and the public. As a value -add (and for no additional cost), we propose to conduct a benchmarking analysis that compares key operations metrics to similar utilities in the area based on published and proprietary Industry metrics and researched performance data. Stantec has developed the largest reliable database of utility financial metrics in the United States from over 500 agencies. Called UtilitiWise, we use this data to benchmark our clients' financial performance to industry averages or their peers. These data give our clients perspective on what 'good" looks like in our unique municipal water sector. Utilitiwise also allows us to prepare a comparison of current utility system costs relative to service levels. Benchmarking can be used to assess performance objectively; expose potential areas for improvement; identify effective processes or management strategies, with a view to their adoption; and test whether tactics have been successful. C ty of Soma Ana Cardorma I Water and Sewer Enterprise Cost or Service Study 25B-29 Swim 10