65B - PROPOSED WATER AND SEWER RATE ADJ

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City of Santa Ana, CAI WATER RATE STUDY In this analysis, there are six primary cost components: (1) base flow, or volume costs, (2) maximum day cost, (3) peak hour costs, (4) customer billing costs, (5) fire protection, and (6) reclaimed water. Proposed Water Rates At the request of the City, Black & Veatch has examined alternative rate schedules based on the proposed CIP. In addition, the City asked Black & Veatch to examine the level of cost recovery through the basic service charge. Under the current rate schedule, the City recovers approximately 8 percent of its revenues through the basic service charge. According to Best Management Practice (BMP) 11 as set forth by the California Urban Water Conservation Council (CUWCC), utilities should strive to have no more than 30 percent of its user charge revenues from the meter charge. Using this guideline, the City requested Black & Veatch to propose a set of rate schedules that would gradually increase the fixed component recovery over a 5 -year period. Black & Veatch conducted its cost -of- service (COS) analysis and determined that the level of costs recovered through the basic service charge is closer to 17 percent. To minimize ratepayer impacts, the proposed rate schedules illustrated a phased approach to reaching the COS levels by FY 18/19. To maintain a rate structure that encourages conservation, Black & Veatch examined the incremental costs associated with Tier 2 levels of service. We are recommending that the City move from a 15 percent rate differential to a 20 percent differential between Tier 1 and Tier 2 rates. The rate schedule shown in Tables ES 4 and ES 5 is for Scenario 1 and reflects the rates for the entire study period. Cost recovery for each year using the proposed rate structure achieves essentially 100 percent for each customer class. BLACK & VEATCH I Executive Summary [INTENTIONALLY LEFT BLANK] 65B -21 7