65B - PROPOSED WATER AND SEWER RATE ADJ

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Figure - 7: Water Cost of Service Concepts 6—U Max Day Extra Capacity Annual Average Day Treatment Plant WATER RATE STUDY City of Santa Ana, CA Black & Veatch has allocated each element of cost to functional cost components using the parameter or parameters having the most significant influence on the magnitude of that element of cost. We allocate O &M and general and administrative (G &A) expense items directly to appropriate cost components, while the allocation of capital and replacement costs uses a detailed allocation of related capital investment. The separation of costs into functional components provides a means for distributing such costs to the various classes of customers based on their respective responsibilities for each particular type of service. For volume - related cost allocations, the first step in determining the allocation percentages is to assign system ax Day peaking factors. The Base element is equal to the average uu a capacity Water Mains daily demand (ADD) and assigned a value of 1.0. The City's maximum day (Max Day) demand is estimated to be 1.50 times the ADD. Thus, the Max Day is assigned a value of 1.50. The maximum instantaneous usage is approximated by the maximum hourly (Max Hour) usage and is estimated to be 2.0 times the ADD. Thus, Max Hour is assigned a value of 2.0. These peaking factors are based on a combination of historic billing data and discussions with City staff. Cost components that are solely Base - related, are allocated 100 percent to Base. Cost components that are designed to meet Max Day requirements, such as reservoirs, are allocated to Base and Max Day factors as follows: Base = (1.0/1.50) x 100 = 66.7% Max Day = (1.50 —1.0) /1.50 x 100 = 33.3% Cost components that are designed to meet Max Hour design requirements, such as Distribution, are allocated in a similar fashion, as follows: Base = (1.0/2.00) x 100 = 50.0% Max Day = (1.50 -1.0) /2.00 x 100 = 25.0% Max Hour = (2.00 — 1.50)/2.00x 100 = 25.0% Fire Protection A direct cost to the water system is fire protection. Fire protection consists of those costs associated with having the capability to provide public (municipal fire hydrants) and private (individual fire sprinklers) fire suppression services. While a small amount of water is actually consumed for fire suppression and fire training, the water system is still designed to accommodate relatively large flows of water for short durations at suitable pressure. Therefore, when allocating 0 &M and capital expenses to 42 NOVEMBER 2014 65B -54