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authorizes staff to activate the drought/water shortage rates. This means that rates are not automatically increased as a result of going into Stage 1 or increasing a drought/ water shortage stage, but only when the City Council activates the drought/water shortage rates. There are currently four stages of drought/water shortage rates that align with the Water Shortage Contingency Plan included in the City Council's previously adopted 2015 Urban Water Management Plan. The proposed drought/water shortage rates will have six stages aligning with the Water Shortage Contingency Plan included in the City Council's recently adopted 2021 Urban Water Management Plan. The current and proposed stages are shown in Table 3. Table 3 Target s(20 percentoluntary >50 percent 2021 Plan <_10 percent v ``-30 percent <_40 percent 550 percent (voluntary) (v mandatory) (mandatory) (mandatory) (mandatory) (mandatory) <_20 percent <_20 percent <_35 percent >35 percent 2015 Plan (voluntary) (mandatory) (mandatory) (mandatory) N/A N/A The proposed drought/water shortage rates include a bi-monthly water allotment of 10 CcF exempt from the drought rate surcharge for every customer class. For every customer, the first 10 CcF has a $0.00 drought/water shortage rate surcharge (and just normal water rates apply), then any CcF above 10 CcF would be assessed both regular water rates and the drought/water shortage rate surcharge when, and if, the City Council activates drought/water shortage rates. The proposed drought/water shortage rates are calculated as a percent increase to all commodity rates. The proposed drought/water shortage rate increases effective on November 1, 2023, are included in the public hearing notice, which is provided as Attachment 2. Rates for Recycled Irrigation Water Service The City purchases and delivers recycled irrigation water to commercial customers in limited areas. A summary of the proposed recycled water rates is included in the public hearing notice, which is provided as Attachment 2. The current recycled water rate is based on 90 percent of the potable irrigation rate. Currently, all customers, except Tier 1 of the single-family residential potable water rates, pay $0.10 per CcF of added cost for developing the recycled water program since it increases potable water capacity systemwide. Since the recycled water program has already been developed, it was determined that the cost of the program be calculated independently from the potable water rates and shall be paid by the recycled water customers. The Recycled Water Program is paying for its debt service and operating costs. The proposed three-year water rate study meets the debt service coverage of 1.25 for the existing Recycled Water debt service. Page 13 of 19