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Executive Summary Background of the Agency The Zone 7 Water Agency(Agency)was established in 1957 to provide both untreated water to support agriculture and treated wholesale water to the Livermore-Amador Valley area. In 1961, the Agency contracted for State Water Project(SWP)water deliveries through the South Bay Aqueduct. The Agency's water resources include imported water from the SWP, local groundwater storage,surface water captured in the Del Valle Reservoir,and offsite groundwater banking in Kern County.Historically,the majority of the Agency's water demand has been met by imported water from the SWP;approximately 80 percent of the current water demand is met through SWP water. Through its four retail water suppliers(retailers)—the City of Pleasanton,Dublin San Ramon Services District, California Water Service Company, and City of Livermore—the Agency provides water service to a population of approximately 250,000.The Agency also provides treated wholesale water service to six direct customers— Lawrence Livermore Lab,Livermore Area Recreation and Park District(L.A.R.P.D.),Veterans Hospital,Wente Brothers Vineyard,the State of California Department of Water Resources(California DWR),and the East Bay Regional Park District. Background of the Study In 2018,the Agency engaged Raftelis to conduct a Treated Water Wholesale Rate Study(Study). Like many other utilities in California,the Agency is faced with financial challenges stemming from the water usage reductions due to increased conservation. Historically,water usage projections from retailers and direct customers have been higher than actual water usage. The Agency currently relies on a variable charge per unit of water as its main source of rate revenue,encompassing approximately 65 percent of total rate revenue.The discrepancy between projected versus actual usage causes revenue shortfalls that negatively impact the financial sufficiency of the Agency's treated wholesale water enterprise. The major objectives of the study include the following: • Develop a financial plan for the treated wholesale water enterprise to ensure financial sufficiency, meet operation and maintenance(O&M)costs,fund capital projects, and develop sufficient reserve levels • Develop a four-year rate structure that increases revenue stability while minimizing customer impacts • Develop treated wholesale water rates that are fair and equitable to both the Agency's retailers and direct customers This Executive Summary encompasses the key assumptions and inputs, various fmancial plan scenarios, financial recommendations,and proposed water rates that were developed in the Study. Key Assumptions The Study period uses the fiscal year(FY)2019 budget as the base year. The model projects the financial plan through FY 2022,including calculated rate revenues,projected non-rate revenues and expenses,estimated capital ZONE 7 WATER AGENCY TREATED WATER WHOLESALE RATE STUDY REPORT 2