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18
City of Pleasanton
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2023
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071823 SPECIAL
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7/13/2023 4:31:44 PM
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CITY CLERK
CITY CLERK - TYPE
AGENDA REPORT
DOCUMENT DATE
7/18/2023
DESTRUCT DATE
15Y
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. Cost of Service Analysis3 <br /> This section of the Report describes the COS analysis. The purpose of a COS is to proportionately allocate costs to <br /> the various customer classes and tiers based on their cost burden on the water system. Numbers shown in the tables <br /> of this section are rounded. Therefore, hand calculations based on the displayed numbers, such as summing or <br /> multiplying, may not equal the exact results shown. <br /> 3.1. Process and Approach <br /> The COS analysis was developed using the principles established by the AWWA's M1 Manual, using the Base- <br /> Extra Capacity methodology, and are in line with industry standards and align with legal requirements for water <br /> rate-setting (namely, Proposition 218). The Base-Extra Capacity methodology allocates costs consistent with <br /> demand patterns of each customer class and for tiered rates, the demand patterns of each tier. <br /> The purpose of a COS analysis is to align the annual cost of providing water service with the customer classes and- <br /> tiers commensurate with their service requirements. A COS analysis involves the following steps: <br /> 1. Determine Revenue Requirement: The first step in the COS analysis is determining the adequate and <br /> appropriate level of funding for the water utility. This is referred to as determining the "revenue <br /> requirement" for the base year, which for this Study is FY 2024. This analysis considers the short-term and <br /> long-term service objectives of the water utility over a given planning horizon, including capital facilities, <br /> O&M, and financial reserve policies to determine the adequacy of a utility's existing rates to recover its <br /> costs. <br /> 2. Categorize Costs into System Functions: Utilizing an agency's approved budget, financial reports, <br /> operating data, engineering data, and CIP, a rate study generally categorizes(i.e., functionalizes) the <br /> operating and capital costs of the water system among major system functions. Examples of system <br /> functions include but are not limited to water supply, storage, treatment, pumping, and transmission and <br /> distribution. Since the City operates a water distribution system, most of the system costs other than water <br /> purchase costs are related to transmission and distribution. <br /> I Allocate Functionalized Costs to the Appropriate System Cost Components: Cost components represent <br /> the major pieces of a water system that the agency incurs specific costs related to, with one or more <br /> functions attributable to one or more system components. For example, distribution costs(system function) <br /> are allocated to base and maximum hour(cost components) since distribution lines are sized to <br /> accommodate maximum day(peak) demands. The City's water system cost components include recycled <br /> water,base delivery, maximum day, maximum hour, meter servicing, and customer service. <br /> 4. Determine Units of Service and Unit Costs for Cost Components: Each cost component is associated <br /> with a specific unit of serviceā¢, costs within each component are divided by the total units of service to <br /> determine the unit cost. For example, customer service costs are associated with the total number of <br /> customer accounts. Dividing total annual costs by total customer accounts yields the unit cost of customer <br /> service. <br /> 5. Distribute Cost Components to Customer Class: The cost of the system, allocated by system component <br /> unit costs, are distributed to customer classes and tiers in proportion to their respective demands and <br /> burdens on the system using the units of service and unit costs for each component. <br /> 32 CITY OF PLEASANTON <br />
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