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City of Santa Ana, CA I SEWER RATE STUDY <br />Functional Cost Components <br />In developing an equitable rate structure, revenue requirements are allocated to the various customer <br />classifications according to the cost of service rendered. Allocations of these requirements to customer <br />classes of Wastewater should take into account flow, the number of customers, and other relevant <br />factors. <br />Customers are classified to reflect groups of customers with similar service requirements who can be <br />served at similar cost. Each class represents a particular type of service requirement. For the purposes of <br />the cost of service analysis, the customer classifications in this study include single family and multi- <br />family residential, commercial, industrial, institutional, irrigation, and Outside City. These customer <br />classes were assumed to exhibit similar types of system load characteristics. <br />Allocation to Cost Components <br />As a basis for allocating costs of service among customer classes, costs are first allocated to functional <br />cost components, then allocated to cost categories, and subsequently distributed to customer classes. In <br />this analysis, there are seven primary cost components: (1) base flow, or volume costs, (2) strength (BOD <br />and TSS), (3) customer service (CS) billing costs and administration (CS /Billing), (4) Fats, Oils and Grease <br />(FOG) Program costs, and (5) Lateral Repair Program costs. <br />Each element of cost is allocated to functional cost components on the basis of the parameter or <br />parameters having the most significant influence on the magnitude of that element of cost. <br />For this Study, Black & Veatch reviewed historic data and conducted interviews with staff regarding <br />allocation of time for specific activities. Additionally, Black & Veatch reviewed the City's budgeting <br />process to understand budget line items and internal cost allocation schemes with respect to different <br />operating sections within the Sewer Enterprise. Table 16 summarizes the percentage allocations to the <br />COS factors estimated for the major cost categories. <br />Table 16: Cost of Service Allocation Percentages <br />Collection <br />100.0% <br />0.0% <br />0.0% <br />0.0% <br />0.0% <br />0.0% <br />General Plant <br />75.0% <br />5.0% <br />5.0% <br />15.0% <br />0.0% <br />0.0% <br />Monitoring <br />50.0% <br />25.0% <br />25.0% <br />0.0% <br />0.0% <br />0.0% <br />Net Plant <br />100.0% <br />0.0% <br />0.0% <br />0.0% <br />0.0% <br />0.0% <br />Other <br />80.5% <br />0.0% <br />0.0% <br />0.0% <br />0.0% <br />21.5% <br />Allocation of Operation and Maintenance Expenses <br />The allocation of O &M expense to cost functions is shown in Table 17. The net operation and <br />maintenance expense to be recovered for wastewater sales is derived by deducting funds available from <br />other sources from the total Test Year expense. Net Test Year operation and maintenance expense of <br />BLACK & VEATCH I Sewer Rate Study <br />65B -200 <br />41 <br />