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Table 3-14 shows the way that Zone 7 costs were allocated to the proposed Zone 7 Fixed and Variable rates. Zone 7 costs are approximately 40% fixed and 60% variable. In the current rates structure, 100% of Zone 7 costs are being recovered through a variable rate. The City wanted to move a portion of the Zone 7 costs to be recovered through a fixed rate to allow for more revenue stability. Column D shows that 22% of Zone 7 costs will be recovered through a fixed charge, while the remaining 78%will be recovered through the Zone 7 component of the water usage charge. This was done in order to keep the fixed and variable revenue recovery for the water utility as a whole approximately the same as it is under the current rates. The City collects approximately 14% of its revenue through fixed charges. Table 3-14: Zone 7 Cost Allocation Une Zone 7 Costs FY 2023 Cost . . 1 Fixed $9,314,331 42.1% 22.0% 2 Variable $12,795,669 57.9% 78.0% 3 Total $22,110,000 100.0% 100.0% 4 5 Reallocated 6 Fixed $4,864,200 7 Variable $17,245,800 3.9• Revenue Requirement Distribution Table 3-15 shows the distribution of the revenue requirement to each cost component and all reallocation of costs, resulting in the final cost of service by component(Line 5). The operating costs(Column L, Line 1) are equal to the operating revenue requirement less offsets(Table 3-1, Column B,Line 18)multiplied with the%O&M Allocation(Table 3-12, Line 15). The operating costs (Column L, Line 1) also include the reallocated Zone 7 fixed and variable costs(Table 3-14, Column B, Lines 6 and 7). The capital costs(Column L, Line 2) are equal to the capital revenue requirement less offsets(Table 3-1, Column C, Line 18). Recycled water capital expenses (Table 3-2, Column C, Line 4) are allocated to the recycled water surcharge cost component(Column C),with the remaining revenue requirement less offsets(Table 3-2, Column D, Line 17) allocated to the recycled water cost component (Column B). The total cost of service for each cost component is shown in Line 5. 44 CITY OF PLEASANTON