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Table 5 represents the carry forward costs and potential impacts on a rate increase if <br /> the cap at 6 percent or 6.65 percent is employed along with the SB 1383 <br /> implementation costs. These cost increases do not include the cost-based increase for <br /> rate period seven. <br /> Table 5— Rate eriod seven increases excluding cost-based adjustment <br /> Cap Percent Percent of SB Percent Dollar <br /> percentage increase for 1383 increase increases <br /> rates rate period implementation before cost- before cost- <br /> seven before costs based based <br /> cost-based adjustment adjustment <br /> adjustment <br /> 6 percent cap 1.3% 1.62% 2.92% $972,786 <br /> 6.65 percent <br /> cap 0.65% 1.62% 2.27% $765,033 <br /> Based on this analysis, staff does not recommend employing the cap and carrying <br /> forward expenses to rate period seven. Artificially holding rates down will likely result in <br /> a more significant rate increase in the next rate period. Staff is recommending that <br /> actual costs be charged to rate payers in this rate setting cycle. <br /> The City Council may consider smoothing rates by using the PGS reserve special <br /> revenue fund (Fund 171) as a one-time credit against the increased costs seen in the <br /> application for rate period six. This is widespread practice for many cities with reserve <br /> funds that wish to lower the coming rate increase with a one-time payment to lessen <br /> above average increases. This amount would need to be generated through the rates <br /> the following year unless another credit amount is applied. <br /> Table 6 illustrates the impact on residential rates as a result of applying different funding <br /> levels. To reduce the coming rate increase from 7.3 percent to 6 percent, reserves <br /> would need to fund $417,786. To reduce the rate period six increase to 6.65 percent, <br /> reserves would need to fund $210,033. <br /> Table 6— Impact of s oothing on residential rates <br /> Rate Period Five Reserve Funding Net Rate Increase Rate Period Six <br /> Rates Rates <br /> 35-gallon $29.40 $ - 7.3% $31.55 <br /> 96-gallon $51.29 $ - 7.3% $55.04 <br /> 35-gallon $29.40 $417,786 6.0% $31.16 <br /> 96-gallon $51.29 $417,786 6.0% $54.37 <br /> 35-gallon $29.40 $210,033 6.65% $31.36 <br /> 96-gallon $51.29 $210,033 6.65% $54.70 <br /> Page 5 of 7 <br />