65B - PROPOSED WATER AND SEWER RATE ADJ

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City of Santa Ana, CA I SEWER RATE STUDY Sewer Utility Cost of Service Allocations • The revenue requirements for a selected Test Year (TY) are allocated to customer classes utilizing a cost causative approach endorsed by the Water Environment Federation (WEF). • Customers are classified to reflect groups of customers with similar service requirements who can be served at similar cost. Each class represents a particular type of service requirement. • In this analysis, there are five primary cost components: (1) base flow or volume costs, (2) strength (Biological Oxygen Demand and Total Suspended Solids), (3) customer meter and billing costs, (4) Lateral Repair Program costs, and (5) Fats, Oils, and Greases Program costs. Proposed Sewer Rates Currently, the Sewer Enterprise recovers costs through a commodity -only rate structure, which can result in a volatile revenue stream. To increase revenue stability, Black & Veatch examined different combinations of fixed /variable rate structures. The purpose of these changes is to provide funds for specific capital or operating activities. For example, the Sewer Enterprise provides lateral repairs to all customers who request this service. Previously, the City provided this service when funds are available. For this rate study, the City provided the average cost for lateral repairs and the proposed alternative rate schedule includes a specific charge intended to fund this program. Black & Veatch is also proposing consideration of a capital recovery charge, intended to provide dedicated funds to address R &R needs. The rate schedule shown in Table ES 4 is for Scenario 1 and reflects the rates over the entire study period for Option A (maintain the same rate structure) and Option B (Proposed alternative structure). Black & Veatch recommends Option B as the preferred alternative. BLACK & VEATCH I Executive Summary [INTENTIONALLY LEFT BLANK] 65B -174 15