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4. RATE DESIGN <br /> The rate design builds on the results of the cost -of- service analysis to derive rates that <br /> will generate the appropriate amount of revenue from the service and consumption <br /> charges and, with respect to the consumption charges, from each customer class. <br /> 4.1. RATE- MAKING OBJECTIVES <br /> The rate design is guided by the prevailing rate making objectives, which for the City <br /> are summarized as follows: <br /> 1. Maintain the current amount of revenue generated by the meter and <br /> consumption charges so customers receive a material reward for efficient water <br /> use and a deterrent for inefficient water, as advised by state -wide guidelines. <br /> 2. Maintain the current graduated set of service charges in which the service charge <br /> for the largest meter (i.e., 10 inch) is about 275 times that of the smallest meter <br /> (5/8 inch); charges for the intervening meter sizes fall within this range. <br /> Multiples of this magnitude are commonly found in service charges. <br /> 3. Modify the current residential three tiered consumption charges to include a <br /> fourth tier to provide a strong price signal to use water efficiently. <br /> 4. Maintain a uniform charge for commercial customers, including the existing <br /> commercial customers plus MFR customers. <br /> 5. Convert the seasonal irrigation rates to a non seasonal, uniform charge to give a <br /> year -round price signal to irrigate efficiently. <br /> These objectives are consistent with industry standards and practices by retail water <br /> agencies in California. <br /> 4.2. RESIDENTIAL CONSUMPTION CHARGES <br /> Designing tiered rates involves two steps: (1) determining the "breakpoints or <br /> volumes of water where the price per tier changes and (2) determining the price or rate <br /> per tier. <br /> 4.2.1. Existing Tiers <br /> In evaluating the residential consumption charges, a representative sample of all of the <br /> customer bills for a recent year (November 2007 through October 2008) was compiled to <br /> produce the bill distribution curves shown in Figure 4 1A. The three curves show <br /> cumulative bills, consumption, and revenue. Also shown are the breakpoints for the <br /> existing three tiers. <br /> For example, Tier 1 includes all bills up to 30 HCF per bi- monthly billing period, which <br /> is 374 gallons per day or less. Water use at 30 HCF is below the 36.8 HCF average but <br /> March 18, 2010 Page 14 HF &H Consultants, LLC <br />