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Proposed Water Rate Increase Background The City does not own and operate a surface water treatment plant. Instead, the City relies on two primary sources for its water supply to its customers: Local groundwater from four City-owned deep wells accounts for 18 percent or approximately 3 million gallons per day (mgd) of the water system's average daily demand of 17 mgd. Water purchased from Zone 7 of Alameda County Flood Control and Water Conservation District (Zone 7), accounts for the remaining 82 percent or 14 mgd of the average daily demand. The cost of water from Zone 7 and the local groundwater represent approximately 75% of the City's cost to deliver water to its customers. The remaining 25% of the cost of water delivered to a customer includes pumping charges (electricity), the cost of chemicals, repair and replacement costs of the water system infrastructure, unaccounted for water loss charges, and labor costs. These costs have increased annually since the last time the City increased water rates in September 2010. Potable Water Rates Fixed Meter Charge All customers are billed a fixed meter charge based on the size of the water meter. This charge covers a portion of the operations and systems maintenance costs and is constant regardless of how much water is used. This charge is proposed to increase on January 1 each year beginning on January 1, 2016 per the increase in the Annual Consumer Price Index. The following table shows the current water fixed meter charge. Meter Size 5/8 " displacement 3/4 " displacement 1 " displacement 1.5 " displacement 1.5 " turbo 2 " displacement 2 " turbo 3 " turbo 4 "turbo 6 " turbo 8 "turbo 10 "turbo Charge $17.62 26.41 44.04 88.07 88.07 140.91 140.91 308.27 880.78 1,761.55 3,088.72 4,844.27 [1] Present rates adopted January 1, 2015. Page 3 of 18