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Section 2 <br />Development of the City's Local Sewer Rates <br />2.1 Introduction <br />The final step of the local sewer rate study process is the design of local sewer rates to collect the <br />desired levels of revenues, based upon the results of the revenue requirement analysis. <br />In reviewing sewer rate designs, consideration is given to both the level of the rates and the <br />structure of the rates. Level refers to the amount of revenue to be collected from a specific rate <br />design (i.e., the rate design is intended to collect $2.0 million over a <br />12 month period). In contrast, structure refers to the way in which '7n reviewing sewer <br />the $2.0 million is collected from the customers. This section of the rate designs, <br />report will review the proposed local sewer rate designs for consideration is given <br />Pleasanton. to the level of the rates <br />and the structure of <br />the rata.." <br />It is important to note that this study has reviewed only the local 9 <br />portion of the City's sewer rates. The City also has a regional portion of their sewer rate to pay <br />for the cost of treatment. The regional portion of the City's rates is established through a <br />separate and independent study of the regional costs. The total cost (rate) for sewer service is the <br />combined total of both the applicable local and regional rates. <br />2.2 Rate Design Criteria and Considerations <br />Prudent rate administration dictates that several criteria must be considered in setting rates. <br />Some of these rate design criteria are listed below: <br />Rates which are easy to understand, from the customer's perspective <br />Rates which are easy for the utility to administer <br />Consideration of the customer's ability to pay <br />w Continuity, over time, of the rate making philosophy <br />Policy considerations (encourage conservation, economic development, etc.) <br />Provide revenue stability from month to month and year to year <br />Promote efficient allocation of the resource <br />Equitable and non discriminating (cost based) <br />Many contemporary rate economists and regulatory agencies feel that the last consideration, <br />cost -based rates, should be of paramount importance and provide the primary guidance to <br />utilities on rate structure and policy. HDR also agrees with this position. <br />Development of the Local Sewer Rate Designs 2 1 <br />Ina City of Pleasanton Loral Sewer Rate Stingy <br />