65B - PROPOSED WATER AND SEWER RATE ADJ

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City of Santa Ana, CAI WATER RATE STUDY the cost of service analysis, the customer classifications in this study include single family and multi- family residential, commercial, industrial, irrigation, reclaimed water and fire protection. These customer classes were assumed to exhibit similar types of system load characteristics. The cost -of- service methodology first allocates costs to functional cost components, then to cost categories, and subsequently distributes the costs to customer classes. In this analysis, there are seven primary cost categories: (1) base flow, or volume costs, (2) maximum day cost, (3) peak hour costs, (4) meter services, (5) customer and billing costs, (6) fire protection, and (7) recycled water (RW). Allocation to Cost Components In this report, Black & Veatch analyzes the cost of providing water service by system function in order to properly allocate the costs to the various classes of customers and subsequently design rates. As a basis for allocating costs of service among customer classes, we have separated costs into the following four basic functional cost components: (1) "Base'; (2) "Extra Capacity'; (3) "Customer'; and (4) "Direct Assignment" In order to provide service to its customers at all times, the City must be capable of not only providing the total amount of water used, but also meet peak or maximum rates of demand. • Base costs include the purchase of water, regulatory fees, debt service costs, water treatment, energy, administration, and operating and maintenance costs of the System associated with service to customers to the extent required for a constant, or average annual rate of use. • Extra Capacity costs represent those operating costs incurred in meeting demands in excess of average, and capital related costs for additional plant and system capacity beyond that required for the average rate of use. • Customer costs are those elements that tend to vary in proportion to the number of customers connected to the system. These include meter reading, billing, collecting and accounting, and maintenance and capital costs associated with meters and services. • Directly assigned costs are costs specifically identified as, those incurred to serve a specific customer group(s). The separation of costs of service into these principal categories facilitates allocating such costs to the various customer classes based on the respective service requirements of each class. This Study uses the base -extra capacity allocation method. Figure 6 illustrates some of the base - extra capacity concepts for water systems. BLACK & VEATCH I Water Rate Study 65B -53 41