Karyn Johnson, FCS Group presents “Design water rates
to reflect cost of service and water sustainability”
Cost of Service Rate Analysis (COSA)
- Revenue Requirements –
Defining overall needs - Multi year financial
plan - Cash Reserves
- System Reinvestment
Funding - O&M costs
- Capital Regulated
Costs - Used to allocate
costs to users of the system - Forms the basis for
rate design - Used to ensure 100%
of the costs are allocated. - Cost of Service – Equity
Evaluation - Pressure to ensure
that rates are fair - Customers are becoming
more sensitive as rates have increased - System Costs:
- Regulatory
requirements - Sustaining adequate
supply - System replacement
needs - Inflationary
Pressures - Define Utility
Functions – Service Components (Peak Day etc.) - Fire protection
- Meters
- Customer
- Base demand
- Peak demand
- Define plant
components/classify. Why is it needed? Why did we incur this expense? How
did you determine the size? How is the asset used/operated? Allocate
percentages of original cost to Average/Peak/Fire Protection and
Customer. - Source of Supply /
Supply treatment – Ration of Peak Day to Average Day Demand. - Transmission
distribution – Portion of the mains are designed to fire protection;
remainder to peak/average demand. - Storage –
operational, equalization, emergency, fire suppression etc. - Hydrants – Fire
Protection - General
- Costs can be
directly assigned if benefit is to only one customer or group of
customers. - Not all customers
use the system in the same way – system costs should not be recovered
uniformly from all customers… - Define Customer
Classes – - What makes customer
classes distinct? - Distinct service
requirements - Usage levels
- Usage patterns
- Seasonality of use
- Strength of
wastewater - Location
- Type of user –
land use - Common Customer
Classes - Single Family –
largest customer, low usage per dwelling unit, but high peaking, lowest
fire flow requirements - Multifamily –
lower usage than SFR (70%), relatively constant year-round, fire flow
between SFR and Commercial. - Commercial –
Varies depending on business, but relatively constant year-round,
highest fire flow requirement. - Government
- Industrial
- Wholesale
- Parks and
Irrigation – no fire flow requirement, small customer class, peak usage
in peak season. - Develop Unit Cost per
Function - Rate Design – Collecting
the Target Revenues - Target revenue levels
- Cost-based
- Need to reflect policy
objectives such as conservation and revenue stability - Customer
Impacts/affordability - Administrative
Practicality
