Cost of Service Water Rate Study Habib Isaac – Principal Greg Tobler – Task Manager May 14,...
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Transcript of Cost of Service Water Rate Study Habib Isaac – Principal Greg Tobler – Task Manager May 14,...
Cost of Service Water Rate StudyHabib Isaac – PrincipalGreg Tobler – Task ManagerMay 14, 2012
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Project Objectives• Develop water rate structures that:
– Provide adequate revenues in short and long term– Update and incorporate CIP– Strong financial outlook for utility– Minimize revenue adjustments
• Rate Design– Are defensible / equitable across customer classes– Consider ability to pay / affordability– Minimize rate shock
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Additional Considerations
Revenue Requirements
Analysis
• Determine revenue needed to meet utility costs
• Project O&M, capital, and debt expenses
• Analyze reserves
Cost of Service Analysis
• Allocate utility costs by function and customer demand
• Assign revenue required to each customer class in a proportionate manner
Rate Design Analysis
• Develop rate structure for each customer class to collect appropriate level of revenues
• Achieve equity and policy objectives
Revenue Requirements
Analysis
• Determine revenue needed to meet utility costs
• Project O&M, capital, and debt expenses
• Analyze reserves
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• Determine revenue needed to meet utility costs
• Project O&M, capital and debt expenses
• Analyzes reserves
Revenue Requirements Analysis
• Allocate utility costs by function and customer demand
• Assign revenue required to each customer class in a proportionate manner
Cost of Service Analysis • Develop rate structure for
each customer class to collect appropriate level of revenues
• Encourage water conservation
Rate Design Analysis
Holistic Approach to Rate Design
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• Analyzed EGWD Budget– EGWD financials embedded within model– Model may be used as part of budgetary process
• Accounted for specific adjustments– Capital Improvement Plan– Debt Management– 10-year projection – Reserves
• Established financial thresholds• Created multiple scenarios to reach five year goal
Revenue Requirements
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GUIDEComprehensive Modeling Dashboard
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FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020 FYE 2021 FYE 2022Lock Unlock Unlock Unlock Unlock Unlock Unlock Unlock Unlock Unlock Unlock Unlock
Proposed Revenue Increase 0.0% 28.0% 0.0% 0.0% 0.0% 14.0% 8.0% 2.0% 4.0% 0.0% 0.0% 0.0%
Days of Operating Reserves 57.00 91.00 113.00 113.00 112.00 94.00 94.00 92.00 94.00 113.00 113.00 113.00
Calculated Debt Coverage Ratio 145.7% 417.4% 390.2% 210.9% 191.8% 182.6% 200.2% 190.5% 200.0% 291.9% 254.4% 212.9%Net Income (2,623,104)$ 3,387,375$ 5,831,161$ 1,978,783$ 518,916$ (77,899)$ 972,708$ 388,352$ 951,386$ 6,378,571$ 4,125,727$ 1,668,479$
Assumptions / Variables
Conservation Target (gpcd)
Indoor Usage, per capita
Single Family Density
Single-Family (%)
Multi-Family (%)
201,300 Non-Res (%) No Growth (%)33,823 Indoor Allocation (gpd) 267
Average SFR Lot Size
Average SFR BSF
Irrigable Area (sq. ft.)
Usage, per 100 sq. ft. irrigable
area (gpd)Materials & Supplies (%) Treatment (%)
Electric (%) Labor (%) Outdoor Consumption (gpd) 376
Pool Volume # of Pools MWD (%) Price Elasticity20,000 8,245
Total Daily Household, gpd 643 Monthly Household Allocation (hcf) 26
Water Resources & Purchasing Costs
Source of WaterSan Fernando
Wells Verdugo WellsMetropolitan Water District
Recycled Water Total Usage
2005 Usage (AF) 7,800 3,856 20,158 2,010 33,824 Projected Cost (Per AF)
Projected Cost -$ -$ 15,118,500$ -$
Financing Options & Assumptions
Issue New Debt (Yes/No)
R&R Fund Balance Minimum ($1,000)
Operating Reserve Buffer
(%)
Debt Coverage Service Ratio
(%)
Targeted Operating Fund
Balance (days)
Net Income Minimum
Willdan Financial ServicesG.U.I.D.E.
Graphical User Interface Design Engine
1.00
1.00
Inflation & Growth
0.00
0.00
150 2.67
Water Use
100
4.00
5.00
3.00
4.00
90.00$
5.00
750 0
8.00
125.00 90.00
1,8899,416
No
0 0
25.00
3,764 10
3,000
Run Scenario Save
ResetProposed No
Projected Monthly Bill
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020 FYE 2021 FYE 2022
Total O&M Expenses Debt ServiceCapital Project Funded by Rates Capital Projects - R&R Funded (PAYGO)Total Required Revenue Ending Operating Fund BalanceDesired Fund Balance
Programmed scenarios for quick comparisons
Visualize impacts on revenue & rates
immediately
Variable Assumptions Toggles and Inputs
Financial Thresholds
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Scenarios are quickly run with a push of the “Run Scenario Button”
GUIDE provides the ability to save, name, and compare scenarios to determine the optimal financial plan.
Back to Index
FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018Lock Lock Lock Lock Lock Lock
Proposed Revenue Increase 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Days of Operating Reserves 416 375 344 252 199 160
Calculated Debt Coverage Ratio 151.4% 149.4% 146.6% 143.0% 139.9% 137.7%
Net Income 1,569,921$ 1,669,081$ 1,700,044$ 824,705$ 1,223,539$ 925,889$ Total Reserves 9,523,502$ 9,020,583$ 8,705,627$ 6,690,332$ 5,567,871$ 4,713,761$
Willdan Financial ServicesG.U.I.D.E.
Graphical User Interface Design EngineRun Scenario Save
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Key Variables:
Numerous assumptions that are easy to modify allow for easy and instantaneous, yet complex, scenario planning
AssumptionsInclude: Purchased Water Power Inflation Reserve Policies Debt Management Reserves Funded
Inflation / Escalation FactorsMaterials &
Supplies (%) Treatment (%) Pension (%)Purchased Water (%)
Purchased Power (%) Labor (%)
Other Production (%)
Administration & General (%)
Miscellaneous (%) Elasticity (%)Capitalized Expense (%) Flat
Financing Options & AssumptionsDepreciation
Options CIPR&R Fund Balance Minimum ($1,000)
Operating Reserve Buffer (%)
Debt Coverage Service Ratio (%)
Minimum Operating Fund
Net Income Minimum
Include New Depreciation
Catastophe Fund (Target) CIP Options Issue New Debt?
Capital Investment Funds and Reserves
7.0
8.0 3.0
90120
5.0
4.0 5.0
3.0 3.0
3.0 0.0
200,000.00$ NoYes
3.0 3.0
125.00
Full CIP Program
YesFull Recovery 400 5.00
$1,320,000 $430,000 $340,000 $135,000 $25,000 $9,523,502 $120,000
Unrestricted Meter Retrofit Supply/DistTreatment
Plant BuildingCapital
ReplacementElections /
Studies
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Immediate reflection of impacts to revenues & rates
(40,000,000)
(30,000,000)
(20,000,000)
(10,000,000)
-
10,000,000
20,000,000
30,000,000
FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023
Total Expenses Debt Service Capital Projects - R&R Funded (PAYGO)
Total Revenue Operating Fund Balance Fund Balance Days of O&M
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023Total Expenses Debt Service Capital Projects - R&R Funded (PAYGO)
Total Revenue Operating Fund Balance Fund Balance Days of O&M
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SCENARIOSRevenue Options
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Revenue Adjustments Based on Annual Needs• Reserves allow District to defer two years of increases• 4th and 5th yr adjustments @ 9% and 11%, respectively• Bond covenants maintained and reserves funded• Yearly fluctuations in revenue collection • Rate shock to customers starting in 4th year• Reactive approach to utility’s 5yr/10yr financial plan
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Financial Outlook - ReactiveFYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017
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Proposed Revenue Increase 0.0% 0.0% 4.0% 9.0% 11.0%
Days of Operating Reserves 398 323 267 182 181
Calculated Debt Coverage Ratio 140.8% 128.0% 128.4% 145.7% 172.8%
Net Income 1,160,521$ 838,081$ 980,544$ 935,105$ 2,574,739$
Total Reserves 9,114,102$ 7,780,183$ 6,745,727$ 4,840,832$ 5,069,571$
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One Year Delay on Revenue Adjustments• O&M Reserve equals 180 days of O&M• Reserves allow District to defer adjustment for 1 year• Revenue adjustments of 4% , 4%, 4%, 6% for remaining years
– Bond covenants satisfied– District already has three years of 3% adjustments approved– Essentially two years of new increase (Years 4 and 5)– Allows economy to recover– Years 6 through 10 not pro-actively considered
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Financial Outlook - 1st Year DelayFYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017
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Proposed Revenue Increase 0.0% 4.0% 4.0% 4.0% 6.0%
Days of Operating Reserves 398 346 311 219 185
Calculated Debt Coverage Ratio 140.8% 142.0% 142.8% 142.7% 150.9%
Net Income 1,160,521$ 1,383,881$ 1,548,144$ 815,805$ 1,674,839$
Total Reserves 9,114,102$ 8,325,983$ 7,859,127$ 5,834,932$ 5,163,771$
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3% Revenue Adjustments• Revenue adjustments of 3% for next five years
– District already has three years of 3% adjustments approved– O&M Reserve adjusted from 180 days to 120 days – Reserves fully funded – including reserve programs– Bond covenants satisfied – CIP funded with a combination of existing Debt and PAYGO– Higher increases necessary in later years
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Financial Outlook - 3% AdjustmentsFYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017
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Proposed Revenue Increase 3.0% 3.0% 3.0% 3.0% 3.0%
Days of Operating Reserves 416 375 344 252 199
Calculated Debt Coverage Ratio 151.4% 149.4% 146.6% 143.0% 139.9%
Net Income 1,569,921$ 1,669,081$ 1,700,044$ 824,705$ 1,223,539$
Total Reserves 9,523,502$ 9,020,583$ 8,705,627$ 6,690,332$ 5,567,871$
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O&M Reserves Adjusted to 90-Days• District already has three years of 3% adjustments approved• O&M Reserve adjusted from 180 days to 90 days • All five years reflect 3% revenue adjustments• Reserves fully funded – including reserve programs• CIP funded with a combination of existing Debt and PAYGO• Bond covenants satisfied• Funds short-term and long-term needs• Years 6-10 revenue adjustments range between 4%-6%
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O&M Reserves - 90 DaysFYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017
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Proposed Revenue Increase 3.0% 3.0% 3.0% 3.0% 3.0%
Days of Operating Reserves 416 375 344 252 199
Calculated Debt Coverage Ratio 151.4% 149.4% 146.6% 143.0% 139.9%
Net Income 1,569,921$ 1,669,081$ 1,700,044$ 824,705$ 1,223,539$
Total Reserves 9,523,502$ 9,020,583$ 8,705,627$ 6,690,332$ 5,567,871$
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Debt Restructure with 90-Day O&M Reserve• O&M Reserve adjusted from 180 days to 90 days • Debt management allows District to take advantage of current
market conditions— Debt obligation reduced— Bond covenants easier to satisfy
• Reserves fully funded – including reserve programs• CIP funded with a combination of refinanced Debt and PAYGO
— May consider funding certain improvements with debt restructure• Funds short-term and long-term needs• Revenue adjustments in years 6-10 limited to 3%-4%
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Recommended – Debt Restructure; 90-Day O&MFYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017
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Proposed Revenue Increase 3.0% 3.0% 3.0% 3.0% 3.0%
Days of Operating Reserves 421 388 366 285 245
Calculated Debt Coverage Ratio 156.7% 156.7% 156.4% 155.8% 154.8%
Net Income 1,699,599$ 1,851,065$ 1,947,870$ 1,156,924$ 1,619,152$
Total Reserves 9,653,180$ 9,332,246$ 9,265,115$ 7,582,039$ 6,855,191$
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• Incorporate consumption data into model• Review and correlate CIP with depreciation• Rate Design
– Analyze peaking factors and demand characteristics – Set unique rates for each customer class– Discuss tiered structure– Options for residential – Conservation objectives
• Collaborate with EGWD staff throughout rate design process
Next Steps