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To address the issue of revenue instability,the proposed fixed revenue recovery percentages increase incrementally each year.The current fixed revenue recovery percentage is equal to 35.0 percent.Based on discussions with Agency staff,the fixed revenue percentage will increase to 45.0 percent by the end of the Study period,which is an increase of 2.5 percent each year. This incremental change in fixed revenue recovery will increase revenue stability over time and decrease potential customer bill impacts. By recovering a higher proportion of costs through the fixed charge,the Agency is better protected from fluctuations in water demand. The final objective involves determining fair and equitable rates. The variable charge is divided proportionately between customers based on their water demand projections. The fixed charge is divided to each customer based on their two-year rolling average of water sales. For example,the fixed charge for CY 2019 is determined using the average of FY 2017 and FY 2018 water sales for each customer.Using a two-year rolling average serves to offset any yearly fluctuations in water demand,increase revenue stability for the Agency,and increase rate stability for its customers. Proposed Water Rates The proposed water rates are based on Scenario 3 costs and include the revenue adjustments of 6.5 percent over the 3.0 percent CPI increase.The revenue requirement,or the revenue to be recovered from rates,is equal to the total rate revenue amount in Table 7. The revenue requirement is based on FY,and the resulting rates are for CY. For example,the calculated rates assume that the revenues recovered in the first half of FY 2019 are determined by CY 2018 rates. The remainder of the FY revenue requirement is used to calculate CY 2019 rates based on a half- year amount of demand.Table 8 shows the proposed CY 2019 rates that have a 37.5 percent fixed revenue recovery percentage(an increase of 2.5 percent). Table 8: Proposed Water Rates(CY 2019) Proposed Rates Current Proposed CY 2018 CY 2019 Variable Revenue Recovery 65.0% 62.5% Variable Charge($/ccf) $2.04 $2.07 Fixed Revenue Recovery 35.0% 37.5% Annual Fixed Charge City of Pleasanton $4,748,097 $6,066,782 Dublin San Ramon Services District $4,934,327 $5,903,981 California Water Service Company $3,086,763 $3,906,856 City of Livermore $2,917,197 $3,432,146 Retailers $15,686,384 $19,309,765 Lawrence Livermore Lab $127,329 $473,295 L.A.R.P.D. $708 $1,731 Veterans Hospital $20,552 $41,686 Wente Brothers $11,279 $11,362 State of California DWR $18 $22 East Bay Regional Park District $3,340 $9,261 Direct Customers $163,226 $537,357 Total $15,849,610 $19,847,122 ZONE 7 WATER AGENCY TREATED WATER WHOLESALE RATE STUDY REPORT 12