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21 May 2012

COST OF SERVICE STUDY & PUBLIC OUTREACH

CITY OF SAN DIEGO PUBLIC UTILITIES
INDEPENDENT RATES OVERSIGHT COMMITTEE MEETING

OVERVIEW
INTRODUCTIONS COS STUDY & PUBLIC OUTREACH QUESTIONS & DISCUSSION
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Who is the Project Team?

Goals Approach & Process Schedule

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PART 1 INTRODUCTION
PROJECT TEAM Black & Veatch, Katz & Associates

21 May 2012

Core Strengths
Responsive Collaborative Knowledgeable
CITY OF SAN DIEGO | PUBLIC UTILITIES

YOUR PROJECT TEAM

CITY OF SAN DIEGO Public Utilities

PROJECT DIRECTOR
PROJECT TEAM

PROJECT MANAGER

Ann Bui

Brian Jewett

PRINCIPAL IN CHARGE

John Kersten

PROJECT MANAGEMENT

PROJECT EXECUTION

SENIOR RATE DESIGN ADVISOR

PUBLIC OUTREACH

Keith Barber
ANALYTICAL SUPPORT

Katz & Associates

QAQC

WATER LOSS/MITIGATION

Alberto Morales

Andrew Chastain-Howley

W/WW ENGINEERING ADVISOR

James Strayer, PE

= Local San Diego Staff

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PART 2 COST OF SERVICE STUDY & PUBLIC OUTREACH

GOALS APPROACH & PROCESS SCHEDULE

21 May 2012

WATER AND WASTEWATER RATES

Financial Metrics

CITY OF SAN DIEGO | PUBLIC UTILITIES

Perform a comprehensive cost of service and rate study that accomplish the following:
Establish an operating financial plan that fully supports on-going O&M, replacement, capital improvements (portion) and debt service Analyze cost allocations that allow for equitable rates among the customer classifications

City Policies

Meet City policies and legal requirements associated with Proposition 218
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COST OF SERVICE FOCUS AND KEY ISSUES

Principle:
To match the costs of providing service to customer classes and to design rates to equitably recover costs

Considerations:
Maintain Revenue Adequacy Use Fair and Equitable Cost Allocations Use Practical Rate and Billing Formats Minimize Customer Impacts Maximize Customer Understanding and Acceptance
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21 May 2012

COST OF SERVICE APPROACH

FINANCIAL PLANNING
Project Revenues Review

COST OF SERVICE ANALYSIS

Allocate Costs

RATE DESIGN

Review

CITY OF SAN DIEGO | PUBLIC UTILITIES

Pro-Forma Project Revenue Requirements Scenario Planning

Develop Units of Service

Unit Costs

Develop COS Rates

Scenario Planning

Develop Capital Financing Plan

% Rev Adjustments

Distribute Allocated Costs Based on Service Requirements

Develop Practical Rates Proposed Rates

Implementation Support Review Capital Requirements

FINANCIAL PLANNING AND RATE MODEL

Rigorous, methodical and transparent analysis leads to defensible rates

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FACTORS THAT AFFECT COST - WATER

Volume Customer

Avg Use Peak Use

Adequate Fire Flow

FACTORS THAT AFFECT COST - WASTEWATER

Volume Customer

Contributed Infiltration / Inflow

Strength

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FUNCTIONAL COST COMPONENTS

Costs
Operating Expenses

Functional Cost Components

Volume

Operation and Maintenance Additions to Operating Reserve

Base / Max Day / Max Hour

Customer

Capital Costs

Billing Meters

Debt Service Cash Financing of Improvements

Direct Costs

Fire Protection Recycled Water

Base

Max Day/Hr

Customer

Fire

COMPLIANCE WITH PROPOSITION 218

Water and wastewater rates must meet substantive & procedural requirements of CA Const Article XIIID (Prop 218) Prop 218 considerations
Agency can charge different rates to different customer classes so long as justification through COS analysis Tiered rates are valid assuming justification through COS analysis and compliance with AB 2882 Document everything in the administrative record can be scrutinized Noticing procedures 45 days, notice language requirements, inflation, pass throughs, up to 5 years of rates

Common challenges: procedure, general fund transfers, substantive issues/documentation (e.g. City of Palmdale v. PWD)
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21 May 2012

CAPACITY FEES
New Development

Perform a capacity fee analysis that accomplishes the following:

Establish a capital financial plan that fully supports capital improvements Develop fees that allow new development or redevelopment to pay its fair share of new and existing system infrastructure Reduce the burden on rate adjustments Meet City ordinance & policies and relevant legal requirements associated with Govt Code 66000 et seq & Govt Code 54999 et seq
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CITY OF SAN DIEGO | PUBLIC UTILITIES

Capital Improvement

21 May 2012

COMMUNICATION PLAN
Strategic Public Outreach Plan

CITY OF SAN DIEGO | PUBLIC UTILITIES

Develop Informational Materials Speaker Workshops

Committee / City Council Briefings

Develop Messages Develop Easy-toUnderstand Presentations Identify Key Audiences

Multicultural Outreach

Community Meetings

Website and Social Media

Transparent Cost of Services Study!

Consistent messaging through City and B&V Collaboration

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PUBLIC OUTREACH
Department is committed to robust public outreach throughout the Cost of Service Study (COSS) process
CITY OF SAN DIEGO | PUBLIC UTILITIES

Outreach structured in manner conducive to transparency and legitimate stakeholder input Currently scheduling the Cost of Service overview meetings and workshop w/Stakeholders Will identify additional workshop dates as COSS progresses

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21 May 2012

PUBLIC OUTREACH
Department will engage:
City Council (Individual meetings to provide COSS 101) NR&C Committee workshop (to be scheduled by the Chairman)
CITY OF SAN DIEGO | PUBLIC UTILITIES

IROC Todays COSS overview Additional opportunities to provide feedback at regularly scheduled meetings Utility customer representatives stakeholder group Representatives for taxpayers, businesses (individual and organizations), economic development, academia, think tanks, and representatives from all of our customer classes Group is very familiar with the Departments workshop approach as they were instrumental in our efforts to develop a strategy for the drought restrictions in 2010
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21 May 2012

PROJECT SCHEDULE
Initial Meeting & Ongoing 4 to 6 months 2 to 3 months (Strategies will
be developed earlier in process) Task 4 Public Outreach

TBD

CITY OF SAN DIEGO | PUBLIC UTILITIES

Task 2 Task 1 Project Initiation & Management Finalize Goals Scheduling Quality Assurance Data Request Detailed Data Review Capacity Fee Development Task 3 Rate & Customer Allocation Development

Task 5 Additional Services

ONGOING COMMUNICATION BETWEEN CITY AND B&V TEAM

PROJECT KICK-OFF KEY MEETINGS KEY MEETINGS FINAL BUY-IN

We will meet your schedule and have the resources to commit to your project

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PART 3 QUESTIONS & DISCUSSION

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