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is subject to change at least each January 1. The total cost of Zone 7 purchased water to the City is currently $2.40 per 100 cubic feet (CCF) and is based on the current rate charged by Zone 7 (effective January 1, 2015) plus the cost of water losses on the system and total purchases from Zone 7. In September 2010 the City set its potable water rates equal to 87.5% of the Zone 7 water rate and is currently $2.10. After reviewing the cost of providing water to its customers, the study indicates that it is necessary to increase the potable water rate to 100% of the Zone 7 rate as of October 15, 2015. This results in the Zone 7 water rate charge increasing from its current level of $2.10 to $2.40. Distribution Costs by Customer Type Most water delivery fees (Distribution Costs) vary, depending upon the peaks in customer demand for water service. These costs fund such items as facility repair and maintenance; daily inspections of water facilities to ensure the health and safety of the water supply; replacement of aging infrastructure and water meters; utility billing; and water conservation and education efforts. These costs are allocated to different customer classes based on the peak demand on the City's water system. The Distribution Costs are also proposed to increase January 1 each year commencing on January 1, 2016 by the increase in the Consumer Price Index (see Annual Consumer Price Index (CPI) Rate Adjustments below. Recycled Water The City is in the process of developing a recycled water program for commercial irrigation water for the area between the DSRSD plant located on Johnson Drive and the northeast section of Pleasanton. Recycled water benefits all water users by freeing up potable water being used for irrigation for domestic water usage. Therefore, it is proposed that the water rates generate approximately $535,000 per year or $.10 per CCF of added cost for the development of this program. It is proposed that this added cost be included in water rates for all customers except Tier 1 of the single family residential rates. Capacity Expansion The City constructed several water related projects in the Vineyard Avenue Corridor Specific Plan area to accommodate an increased demand in water volume by large residential customers. Most of these costs will be repaid through fees paid by new housing development in the area. Since the expansion was also related to the high water consumption of existing residential water customers, it was determined that an additional $.13 per CCF would be included in the fourth tier water rate (single family residential customers only) to cover the expansion cost for the Vineyard Corridor Improvements. Proposed Consumption Rates The tables below provide the proposed consumption charges, if adopted, per CCF (equivalent to 100 cubic feet or 748 gallons), of water consumed by type of water customer effective October 15, 2015. The proposed rates reflect the proposed increase in the Zone 7 rate from 87.5% to 100% of the current Zone 7 rate and the consumption charges adopted January 1, 2015 (distribution costs, recycled water surcharge (except Page 4 of 18