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Stabilization Reserve unfunded during this study period. While this is a reasonable approach to reduce customer impacts, it's recommended that the Agency fund water supply reliability projects in the future and review reserve fund requirements and fund reserves based on industry standards and practices. Under these assumptions,two additional scenarios have been developed. The two scenarios are: > Scenario 1 -(3%CPI+$3M for Water Supply Reliability Projects+Fully Funding Three Reserves at Target Levels+3.7%Rate Adjustments) > Scenario 2-(3%CPI+$3M for Water Supply Reliability Projects+Fully Funding Two Reserves at Target Levels and the Drought Contingency at the minimum level+3%Rate Adjustments) All scenarios include gradually increasing the fixed charge component from 35%to 45%by CY 2022. Staff recommends that the Board adopt Scenario 1. Proposed volume-based rates, fixed charge recovery and total fixed charges by Retailer and Direct Customer under Scenario 1 are shown in the tables below. Staff recommends that the Board adopt a four-year rate schedule with target levels met in four years, however the Board reserves the right to adopt a different rate schedule(i.e., 2 or 3 years). Scenario 1 -Proposed Volume-Based Treated Water Rates per CCF Calendar Year 2018 Adopted 2019 2020 2021 2022 Proposed Proposed Proposed Proposed Volume-based Rate per S2.04 $2.01 S2.10 `x'_.06 $2.15 CCF Scenario 1 - Proposed Total Fixed Charges by Retailer and Direct Customer Calendar Year 2018 Adopted 2019 2020 2021 2022 Proposed Proposed Proposed Proposed Fixed Charge Recovery 35% 37.5%' 40% 42.5% 45°o Retailers $15,686,384 $18,834,149 $21,060,643 $25,357,284 $28,323,642 Direct Customers $163,226 $528,949 $437,276 $359,421 $389,819 Total Fixed Charges $15,849,610 $19,363,098 $21,497,919 $25,716,705 $28,713,461 ZONE 7 COST EFFICIENCY MEASURES Over the years the Agency has implemented several cost efficiency measures to reduce or minimize rate increases. The following is a summary of some cost efficiencies implemented by the Agency over the years: Labor Costs ) Continuing of a soft hiring freeze. In fiscal year 2018-19,the Agency added an additional six(6) positions to the soft hiring freeze. This brings the labor cost savings to approximately $3 million annually with a total of 18 positions in soft hiring freeze. ) Zone 7 employees pursuant to their collective bargaining agreement ("MOU") with Alameda County increased their employee share of medical premium from the current 10% to 15% by fiscal year 2021-22. 2