CC - Agendas - City Council - REGULAR - 8/14/2018

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9.H.a City of Prescott, Arizona Water and Wastewater Rate Study Rate structure alternatives will be based on the results of the discussions with City staff and City Council during Task 1. We will evaluate the existing water rate structures, including the APF and alternative water surcharge, and up to two (2) alternative water rate structures. We will develop test -year rates for the selected rate structure alternatives and annual rates for a multi -year period for up to three (3) years. We are anticipating the focus of the alternatives to be evaluations of the APF, alternative water surcharge and the base and volume rates, including potential adjustments to tiered volume rates. We anticipate maintaining existing volume allocations for each tier. Changes to customer class rates stem from changes in the overall revenue requirement, class cost -of -service, and changes to the structure. The combination of these changes can have significant impact on customer's bills. In our bill impact analysis, we will generate monthly bills at each level of usage comparing the cumulative impact from the change in revenue requirement, class cost -of -service and any changes in the rate structure to the bills under existing rates. For each alternative will create bill comparison for typical monthly usage and peak season usage. We will also develop a customer bill impact analysis. The bill impact analysis shows the dollar change the percentage change between the alternative structures compared to customer bills under existing rate structures. This task uses detailed billing data from Task 2 to complete this task. Raftelis will also develop a typical bill survey and compare against bills for up to 10 peer water utilities selected during the Task 1 project initiation meeting. TASK 4 Wastewater Utility Cost of Service and Rate Design Analysis The wastewater cost -of -service analysis is a multi -step process and similar to water, is based on industry accepted methodologies completed during the 2014 study. We will follow the principles and guidelines set forth in the Water Environment Federation (WEF) Manual of Practice No. 27, Principles of Financing and Charges for Wastewater Systems. The multi -step process includes: • Allocate the detailed revenue requirements to the appropriate functional cost categories • Allocate functional cost categories to service components of volume, strength categories and customer costs • Develop test -year demand characteristics for each customer class and the overall wastewater system • Calculate the unit cost -of -service components for the system • Allocate the unit costs to each customer class • Compare class cost -of -service to the revenue under existing rates for the test -year The class cost -of -service comparison will show the percentage change in the classes based on the cost -of -service analysis. Costs the wastewater utility incurs are a function of the water quantity discharged by a customer, other costs are associated with addressing wastewater strengths or conveying wastewater effluent. Customer service, billing, and metering costs are generally a function of the number of customers served, and the size and type of meter or service. Using the strength related costs developed in this task, we will calculate the unit cost on a dollar per pound basis for extra -strength customers and/or septage haulers. We will also evaluate separately rate for effluent customers updating a similar analysis for these customers that was completed during the 2014 study. We will compare the class cost -of -service to the revenue projected under existing rates for the test -year. This comparison will show the percentage change in the classes based on the cost -of -service process. Attachment: Raftelis Scope of Work -Prescott DIF and Rate Study (2124 : Rate & Fee Study Contract with Raftelis) RAFTELIS Water and Wastewater Utility Rate Study - Attachment Page 5 Packet Pg. 254