2011 03-07 Water Rate Study UpdateSOUTH TAHOE PUBLIC UTILITY DISTRICT
NOTICE OF BOARD WORKSHOP
Monday, March 7, 2011
9:00 A.M. — 12:00 P.M.
District Board Room
1275 Meadow Crest Drive, South Lake Tahoe, California
Richard Solbrig, General Manager Paul Sciuto, Assistant General Manager
Dale Rise, President
James R. Jones, Director
BOARD MEMBERS Mary Lou Mosbacher, Vice President
Eric W. Schafer, Director Chris Cefalu, Director
While a quorum of the South Tahoe Public Utility District Board of Directors may be attending this
Workshop to discuss the item listed below, there will be no action taking place on their behalf.
AGENDA
1. WATER RATE STUDY UPDATE
2. ADJOURNMENT
The meeting location is accessible to people with disabilities. Every reasonable effort will be made to
accommodate participation of the disabled in all of the District's public meetings. If particular accommodations
for the disabled are needed, please contact the Clerk of the Board at (530) 544 -6474, extension 6203, at least 24
hours in advance of the meeting.
South Tahoe Public Utility District • 1275 Meadow Crest Drive • South Lake Tahoe, CA 96150
Phone 530.544.6474 • Facsimile 530.541 -0614 • www.stpud.us
• Discuss Draft Results of the Revenue Requirement
✓ Review Development of Revenue Requirement
✓ Review Key Assumptions /Issues
• Discuss Draft Results of the Cost of Service
✓ Review Development of Cost of Service
✓ Review Key Assumptions /Issues
• Review Draft Rate Options
✓ Across the board adjustments
✓ Cost of Service adjustments with minor metered rate
revisions
✓ Additional Single family rate alternatives
2
Revenue Requirement
Compares the revenues of the utility
to its expenses to determine the
overall level of rate adjustment
Cost of Service
Rate Design
Equitably allocates the revenue
requirements between the various
customer classes of service
Design rates for each class of
service to meet the revenue needs
of the utility, along with any other
rate design goals and objectives
3
Revenue Requirement
Key Assumptions
c.
w
2011 -12 Draft Budget (to be approved)
• Current 10 Year Capital Plan
• Revenue Bonds were assumed to fund future
capital projects (no meter implementation)
✓ 2012 -13 $5 million @ 5.5% For 20 Years
✓ 2015 -16 $6 million @ 5.5% For 20 Years
✓ 2018 -19 $4 million @ 5.5% For 20 Years
• Capacity Fee revenue are more conservative
estimates
✓ Lower than the current Draft Budget
4
Revenue Requirement
Key Assumptions Cont.
• Heavenly Valley snow making revenue was included as
a miscellaneous revenue
✓ Contract determines rate paid by Heavenly Valley
✓ The Heavenly Valley rate will be adjusted at the average
overall system rate adjustment
• Rate Stabilization Fund Balance Requirement
Changed from 1 Years Consumption Revenue to 10%
of Rate Revenue
• The District may be able to secure State Revolving
Loans which would lower the cost of borrowing
The Engineering Department is funded through capital
funding analysis
5
Capital Project Funding Plan
Capital Improvement Plan /Funding Plan (in thousands)
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Capital Improvement Projects
Underground Repair $117 $120 $114 $129 $134 $126 $119 $137 $150
Pumps 4 5 0 5 12 5 0 5 0
Electrical 53 15 10 15 10 16 12 17 13
Heavy Maintenance 7 0 0 0 0 7 0 0 0
Equipment Repair 32 228 470 629 245 192 80 82 120
Laboratory 55 25 0 0 0 15 6 0 0
Board of Directors 5 0 0 0 5 0 0 0 5
Administration 0 3 0 0 0 0 0 0 0
Human Resources 0 0 0 0 0 0 0 0 0
District Information 0 0 0 0 0 0 0 0 0
Engineering 5,614 3,428 2,094 897 3,324 2,891 2,778 2,640 2,593
Information Services 43 76 89 40 100 69 50 43 106
Customer Service 121 72 83 55 56 68 60 62 93
Finance 0 2 2 0 2 0 2 0 2
Engineering Staff & Expenses 1,151 1,186 1,221 1,258 1,296 1,334 1,374 1,416 1,458
Transfer to Capital Improvement Reserve 0 991 0 0 2,417 0 0 2,199 0
Total Capital Improvement Projects $7,202 $6,150 $4,082 $3,027 $7,600 $4,723 $4,480 $6,600 $4,540
Less: Outside Funding Sources
Operating Reserve Fund $0 $0 $0 $0 $0 $0 $0 $0 $0
Capital Outlay Reserve 549 0 2,782 1,577 0 2,923 2,080 0 1,740
MTBE Reserve 2,258 0 0 0 0 0 0 0 0
Grants 0 0 0 0 0 0 0 0 0
Federal Aid 2,745 0 0 0 0 0 0 0 0
State Aid 500 0 0 0 0 0 0 0 0
Low Interest Loans 0 0 0 0 0 0 0 0 0
Assumed New Revenue Bond 0 5,000 0 0 6,000 0 0 4,000 0
Additional Borrowing Needs 0 0 0 0 0 0 0 0 0
Capital Funded Through Rates $1,151 $1,150 $1,300 $1,450 $1,600 $1,800 $2,400 $2,600 $2,800
6
Summary of Revenue Requirement
11111111111111.11111111111111.11.11PB""' "'"061111r-
Revenue Requirement (in thousands)
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019
FY 2020
Sources of Funds
Rate Revenues
$8,819
$8,841
$8,885
$8,930
$8,974
$9,019
$9,064
$9,110
$9,155
Other Revenues
882
949
945
939
970
1,028
992
1,022
1,047
Total Source of Funds
$9,701
$9,790
$9,830
$9,869
$9,944
$10,047
$10,057
$10,132
$10,202
Application of Funds
Operation & Maintenance Expense
$7,788
$7,952
$8,193
$8,420
$8,676
$8,918
$9,189
$9,447
$9,736
Capital Funded from Rates
1,151
1,150
1,300
1,450
1,600
1,800
2,400
2,600
2,800
Debt Service
1,157
1,160
1,579
1,536
1,263
1,263
1,263
1,599
1,286
Change in Working Capital +/-
0
0
(300)
0
210
0
0
0
0
Total Revenue Requirement
$10,097
$10,262
$10,771
$11,406
$11,748
$11,981
$12,853
$13,646
$13,822
Balance /(Deficiency) of Funds
($396)
($472)
($941)
($1,537)
($1,805)
($1,934)
($2,796)
($3,514)
($3,620)
Balance as % of Rev from Rates
4.5%
5.3%
10.6%
17.2%
20.1%
21.4%
30.9%
38.6%
39.5%
Proposed Rate Adjustment
0.0%
5.0%
5.0%
5.0%
5.0%
4.0%
4.0%
3.0%
3.0%
Summary of Revenue Requirement
1% Adjustment in 2012
Revenue Requirement (in thousands)
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Sources of Funds
Rate Revenues
Other Revenues
$8,819 $8,841 $8,885 $8,930 $8,974 $9,019 $9,064 $9,110 $9,155
882 951 948 943 972 1,028 989 1,016 1,040
Total Source of Funds $9,701 $9,792 $9,833 $9,873 $9,946 $10,047 $10,054 $10,125 $10,196
Application of Funds
Operation & Maintenance Expense $7,788 $7,952 $8,193 $8,420 $8,676 $8,918 $9,189 $9,447 $9,736
Capital Funded from Rates 1,151 1,150 1,300 1,450 1,600 1.800 2,400 2,600 2,800
Debt Service 1,157 1,160 1,579 1,536 1,263 1,263 1,263 1,599 1,286
Change in Working Capital +/- 0 0 (300) 0 210 0 0 0 0
Total Revenue Requirement
Balance /(Deficiency) of Funds
Balance as % of Rev from Rates
Proposed Rate Adjustment
$10,097 $10,262 $10,771 $11,406 $11,748 $11,981 $12,853 $13,646 $13,822
($396) ($470) ($938) ($1,533) ($1,802) ($1,934) ($2,799) ($3,520) ($3,626)
4.5% 5.3% 10.6% 17.2% 20.1% 21.4% 30.9% 38.6% 39.6%
4.0%
1.0%
4.5%
4.5%
4.5%
4.5%
4.0%
4.0%
4.0%
8
Revenues vs. Expenses
0
t
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Total Revenue vs Revenue Requirement
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
MI Total Revenue Requirement -Revenue Before Rate Adjustments
FY 2018 FY 2019 FY 2020
Revenue After Rate Adjustments
Ending Fund Balances
N
c
m
0
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Reserve Ending Balances
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
RUM Operating Reserve Fund
num Rate Stabilization Reserve
Capital Outlay Reserve
Target Reserve Levels
MTBE Reserve
Summary of Revenue Requirement Analysis
• Rate Adjustments were
"smoothed" over the test period
• Proposed rate adjustments are
necessary for financing future
debt
• Based on prudent financial
planning criteria
• Provides adequate funding for
utility to operate on a financially
stable basis (0 &M and capital)
Developing the Cost of Service
impr now iv ler
• Purpose of the Costs of Service is to Allocate
Revenue Requirement to Each Customer Class
• A cost of service study is a snapshot in time,
changes in use customer class characteristics
from year to year may change the cost of service
✓ Metering customers over time
• Basis for Allocating Revenue Requirements are:
✓ Commodity (average consumption)
✓ Capacity (peak consumption)
✓ Number of Customer
Fire Protection Requirements
12
Key Assumptions
Costs of Service
• Test Year 2012
• Un- metered customer consumption was
estimated
✓ Average Single Family consumption was 26 CCF per
quarter
✓ Duplex /triplex 75% of SF per living unit
✓ MF 68% of SF per living unit
• System replacement costs were used when
functionalizing and classifying plant in service
13
Cost of Service Results
Expense Allocation (in thousands)
Present Allocated $ %
Classes of Service Revenues Costs Difference Difference
Residential
Multi - Family
Commercial
Total
$5,823
1,424
1,571
$6,096 ($273) 4.7%
1,424 0 0.0%
1,695 (123)
7.9%
$8,819 $9,215 ($396) 4.5%
Expense Classification (in thousands)
Classification Components
Net Revenue % Revenue
Requirement Requirement
Commodity
Capacity
Customer Related
Fire Protection
$2,072 22%
$3,616 39%
$2,608 28%
$919 10%
Revenue Requirement
$9,215 100%
14
Cost of Service Summary
• Minor cost of service adjustments
can be made
• Results are based on the
estimated consumption for un-
metered customers
✓ Customer characteristics will change
as customers are metered
• Rate design revisions can provide
movement towards cost of service
results
✓ May need to transition over time
15
Rate Structure Overview
• Rates are designed to be revenue neutral in 2012
✓ Based on current revenue projections
• Fixed charge vs. consumption charge revenues
• Rate relationship (cost of service /equity)
between customers
• Impacts to individual customers will depend on
actual consumption
✓ May not be the same as the system adjustment
• Provide an overview of the relative rate (bill)
impacts to the customers
16
Calculation of Residential Usage
• Method of estimating residential usage
✓ Existing metered data
✓ Production data less all other metered customers less estimated
losses
• Actual metered use will vary by customer
• Single Family customer average annual use per quarter is
approximately 26 CCF
• Current metered customer average annual use per
quarter is closer to 30 CCF
✓ Only included last quarter of data for the increase in the metered
customers
✓ May vary, decrease, for winter months and seasonality
• Majority of other customers (commercial) consumption is
metered
17
Overview of The Rate Design Options
lay
• Option 1
• ✓ Status Quo
✓ Across the Board Adjustment
• • Option 2
✓ Cost of Service Adjustments
✓ Increase fixed charges
• Option 3 (SF only)
✓ Cost of service
✓ Two tier increasing block rate
structure starting in FY 2013 -14
• Option 4 (SF only)
✓ Cost of service
✓ Three tier increasing block rate
structure starting in FY 2013 -14
1
18
Option 1 Rates
All Customer Classes
Proposed Annual Adjustments
Option 1 - Status Quo
Present Rates
2011 -12
2012 -13
2013 -14
2014 -15
2015 -16
0.0%
5.0% 5.0%
5.0% 5.0%
Flat Rate
Single Family Dwelling $119.89 $119.89 $125.88 $132.18 $138.79 $145.73
Low Income (Discount 20 %) 95.91 95.91 100.71 105.74 111.03 116.58
Duplex 213.16 213.16 223.82 235.01 246.76 259.10
Triplex 289.60 289.60 304.08 319.28 335.25 352.01
Four -Plex and Above Base Charge 123.19 123.19 129.35 135.82 142.61 149.74
Multi - Family Unit Charge 62.86 62.86 66.00 69.30 72.77 76.41
3/4" Business Flat 182.43 182.43 191.55 201.13 211.19 221.74
1" Business Flat 275.29 275.29 289.05 303.51 318.68 334.62
Meter Charge by Size
3/4"
1"
1 1/2"
2"
3"
4"
6"
8"
10"
Consumption
Consumption (CCF)
$63.59 $63.59 $66.77 $70.11 $73.61 $77.29
87.45 87.45 91.82 96.41 101.23 106.30
151.53 151.53 159.11 167.06 175.41 184.19
241.35 241.35 253.42 266.09 279.39 293.36
480.62 480.62 504.65 529.88 556.38 584.20
749.84 749.84 787.33 826.70 868.03 911.44
1,469.52 1,469.52 1,543.00 1,620.15 1,701.15 1,786.21
2,349.98 2,349.98 2,467.48 2,590.85 2,720.40 2,856.42
3,377.41 3,377.41 3,546.28 3,723.59 3,909.77 4,105.26
$2.26
$2.26
$2.37 $2.49
$2.62 $2.75
19
Key Assumptions
Rate Design - Option 2
wow
• 2011 -12
✓ Cost of service adjustments will be implemented
✓ Revenue Neutral (individual customer impacts may
vary, but no additional revenue generated for District)
✓ Un- metered rates were not adjusted
✓ Meter Charges revised to reflect "maximum safe flow
or demand" (AWWA standard)
✓ Proportion of revenue generated through consumption
charges was reduced to reduce revenue volatility
throughout the year
i
20
Key Assumptions
Rate Design - Option 2 Cont.
• 2012 -13 Through 2015 -16
✓ Cost of service adjustments started in 2011 -12 will
be continued to reflect results
✓ Un- metered rates will be based on average metered
single family rates
• Average single family quarterly consumption is 26 CCF
(hundred cubic feet)
• Duplex and Triplex based on 75% of un- metered single family
rate per living unit
• Multi - family complexes with 4 units and above will be based
on 68% of un- metered single family rate per living unit
• Base Charge of $123.11 is eliminated for complexes with
4 units and above
21
Option 2 Rates
Proposed Annual Adjustments
Present Rates
2011 -12
2012 -13
2013 -14
2014 -15
2015 -16
Option 2 - Cost of Service Adjusted Meter Weightings
0.0%
5.0%
5.0%
5.0%
5.0%
Flat Rate
Single Family Dwelling $119.89 $119.89 $129.87 $137.58 $146.28 $155.98
Low Income (Discount 20 %) 95.91 95.91 103.90 110.06 117.02 124.78
Duplex 213.16 213.16 194.81 206.37 219.42 233.97
Triplex 289.60 289.60 292.21 309.56 329.13 350.96
Four -Plex and Above Base Charge 123.19 123.19 NA NA NA NA
Multi - Family Unit Charge 62.86 62.86 88.31 93.55 99.47 106.07
3/4" Business Flat 182.43 182.43 235.02 239.65 245.29 251.93
1" Business Flat 275.29 275.29 287.28 297.94 310.28 324.29
Meter Charge by Size
3/4"
1"
1 1/2"
2"
3"
4"
6"
8"
10"
Consumption
Single Family
Multi Family
Commercial
$63.59
87.45
151.53
241.35
480.62
749.84
1,469.52
2,349.98
3,377.41
$2.26
2.26
2.26
$66.00 $78.00 $87.00 $97.00 $108.00
110.22 130.26 145.29 161.99 180.36
219.78 259.74 289.71 323.01 359.64
351.78 415.74 463.71 517.01 575.64
660.00 780.00 870.00 970.00 1,080.00
1,100.22 1,300.26 1,450.29 1,616.99 1,800.36
2,199.78 2,599.74 2,899.71 3,233.01 3,599.64
3,519.78 4,159.74 4,639.71 5,173.01 5,759.64
5,060.22 5,980.26 6,670.29 7,436.99 8,280.36
$2.05
1.95
1.85
$2.00
1.90
1.80
$1.95
1.85
1.75
$1.90
1.80
1.70
$1.85
1.75
1.65
22
Key Assumptions
Rate Desi _ n - Option 3 Cont.
• 2011 -12 through 2012 -13, same as Option 2
• 2013 -14 through 2015 -16
✓ Inverted Two Tier Rate Structure For Single Family
Customers
• Block 1, 0 -26 CCF
• Block 2, 26 CCF and over
✓ Consumption for Blocks 1 and 2 were based on the
last available 3 quarters of consumption
• Block 1 equaled 37% of total Consumption
• Block 2 equaled 63% of total Consumption
• Additional consumption assumed
✓ Flat Rate is based on average single family
consumption with a 3/4" meter
23
Option 3 Rates
Proposed Annual Adjustments
Present Rates
2011 -12 2012 -13
2013 -14 2014 -15
0.0% 5.0%
Option 3 - Single Family 2 Inverted Block Rate, Cost of Service, Adjusted Meter Weightings
5.0% 5.0%
Flat Rate
Single Family Dwelling
Low Income (Discount 20 %)
Meter Charge by Size
3/4"
1"
1 1/2"
2"
Consumption
All Consumption (CCF)
Consumption (0 -26 CCF) /Quarter
Consumption (26 CCF and Oer) /Quarter
$119.89
95.91
$63.59
87.45
151.53
241.35
$2.26
N/A
N/A
$119.89
$95.91
$66.00
110.22
219.78
351.78
$2.05
N/A
N/A
$129.87
103.90
$78.00
130.26
259.74
415.74
$2.00
N/A
N/A
$136.28
109.02
$87.00
145.29
289.71
463.71
N/A
$1.90
$2.00
$144.98
115.98
$97.00
161.99
323.01
517.01
N/A
$1.85
$2.10
2015 -16
5.0%
$153.39
122.71
$108.00
180.36
359.64
575.64
N/A
$1.75
$2.15
Key Assumptions
Rate Desi _ n ption 4 Cont.
• 2011 -12 Through 2012 -13
• 2013 -14 Through 2015 -16
✓ Inverted Three Tier Rate Structure For Single Family Customers
• Block 1, 0 -26 CCF
• Block 2, 26 -80 CCF
• Block 3, 80 CCF and over
✓ Consumption for Blocks 1, 2 and 3 were based on the last available 3
quarters of metered consumption
• Block 1 equaled 37% of total Consumption
• Block 2 equaled 34% of total Consumption
• Block 3 equaled 29% of total Consumption
• Additional conservation assumed
✓ Flat Rate is based on average single family consumption with a 3/4"
imirpt
meter
25
Option 4 Rates
Proposed Annual Adjustments
Present Rates 2011 -12 2012 -13 2013 -14 2014 -15 2015 -16
0.0%
5.0% 5.0%
Option 4 - Single Family 3 Inverted Block Rate, Cost of Service, Adjusted Meter Weightings
5.0% 5.0%
Flat Rate
Single Family Dwelling
Low Income (Discount 20 %)
$119.89
95.91
$119.89
95.91
$129.87
103.90
$136.28
109.02
$144.98
115.98
$153.39
122.71
Meter Charge by Size
3/4" $63.59 $66.00 $78.00 $87.00 $97.00 $108.00
1" 87.45 110.22 130.26 145.29 161.99 180.36
1 1/2" 151.53 219.78 259.74 289.71 323.01 359.64
2" 241.35 351.78 415.74 463.71 517.01 575.64
Consumption
All Consumption (CCF) $2.26
Consumption (0 -26 CCF) /Quarter NA
Consumption (26 - 80 CCF) /Quarter NA
Consumption (80 CCF and Over) /Quarter NA
$2.05
NA
NA
NA
$2.00
NA
NA
NA
NA
$1.90
2.05
2.15
NA
$1.85
2.05
2.30
NA
$1.75
2.05
2.40
26
Single Family Fixed /Variable Comparison
(Metered Customers Only)
Option 1 - Status Quo
• Fixed
Consumption
Present Rates 2011 -12 2012 -13 2013 -14 2014 -15 2015 -16
52% 52% 52% 52% 52% 52%
48% 48% 48% 48% 48% 48%
Option 2 - Cost of Service Rates
Fixed 52% 55% 60% 63% 66% 69%
Consumption 48% 45% 40% 37% 34% 31%
Option 3 - 2 Inverted Block Rate
• Fixed 52% 55% 60% 64% 67% 70%
• Consumption 48% 45% 40% 36% 33% 30%
Option 4 - 3 Inverted Block Rate
% Meter Charges
% Consumption Charges
52% 55% 60% 64% 67% 70%
48% 45% 40% 36% 33% 30%
27
Residential Flat Rate
and 3/4" Meter w 26 CCF Consumption
Flat Rate Customer
$160
$140
$120
$100
$80
$60
$40
$20
$o
2011 -12
• Present Rates
• Option 1
• Option 2
• Option 3
Option 4
2012 -13
2013 -14
2014 -15
$160
$140
$120
$100
$80
$60
$40
$20
$0
2015 -16
3/4" Customer with 26 CCF per Quarter
2011 -12 2012 -13
2013 -14
2014 -15 2015 -16
Summary of the Rate Design
• All rate options target same revenue
✓ Revenue neutral in 2012
✓ Rate transition plan 2013 - 2016
• Increased the level of revenues collected
through the meter charge
✓ Share the fixed cost among all customers
• Impacts will vary by individual customer
consumption each quarter
• Implemented minor cost of service results
• Revised the rate structure for multi - family
complexes with more than 4 living units
29
Summary of the Rate Study
• Rate adjustments are necessary to prudently
4.0 fund O&M and capital needs
✓ Starting in 12/13 - 15/16
• Cost of service resulted in minor cost differences
✓ Rate structure revisions can move towards cost of
service results
• Developed rate options
✓ Status quo
✓ Cost of service and increased meter ratios
✓ Single family inverted 2 block rate structure
✓ Single family inverted 3 Block rate structure
30
Next Steps
• Finalize analyses
✓ Revenue requirement
✓ Cost of service
✓ Rate designs
• Policy decision needed from Board
✓ Rate transition plan
✓ Preferred rate option
• Determine implementation process
necessary)
mit.s/ Prop 218
31
Questions?