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City of Pleasanton Water Rate Study Executive Summary adopting subsequent rate increases. Several factors influence the accuracy of the projections. For example, the City's customer billing database is under review to determine that all customers are properly classified. Any reclassifications could affect the revenue received by the City that should be incorporated into the next update. In addition, it is expected that the recommended rate changes will encourage greater water conservation, which will reduce water sales revenue. As a result, the City's reserves may decrease more than projected until the rates are adjusted to account for this "price elastic" effect. If water sales decline in response to the more aggressive price signal, the City may need to make a revenue neutral adjustment to its rates to counteract the lost revenue. Figure ES -1. Cost -of- Service Allocation Summary FY 2010-11 Residential Commercial Irrigation Total A. Current Rates With No Increase Water Sales (HCF) Total 4,473,492 745,905 2,161,022 7,380,419 Consumption Charge Revenue $7,891,661 $1,215,826 $3,785,596 $12,893,082 Average Cost/HCF $1.76 $1.63 $1.75 $1.75 C. Revised Rates With Increase Water Sales (HCF) Total 3,984,393 1,235,004 2,161,022 7,380,419 Consumption Charge Revenue $8,740,339 $2,667,609 $4,948,739 $16,356,688 Average Cost/HCF $2.19 $2.16 $2.29 $2.22 Compared to current rates with no increase Increased Avg Cost $0.43 $0.53 $0.54 $0.47 Percentage Increase 24.3% 32.5% 30.7% 26.9% Note: Water sales changes for the residential and commercial classes vary between current and revised because multi- family residential customers are shifted from the residential to the commercial class under the revised rates. Source: Rev Reqmt 15Mar10.xls,10- Report Tables. March 18, 2010 Page 3 HF &H Consultants, LLC