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utility billing, and water conservation and education efforts. This charge is constant regardless of how much water is used. The fixed meter charge for both the City and Zone 7 water will be effective January 1, 2024. Zone 7 Water Agency Wholesale Water Rate The Zone 7 water rate is provided to the City and is a direct pass-through to the Pleasanton customers. Government Code §53756 (AB 3030 [2008]) permits the City to automatically pass-through Zone 7's water rates. The setting of this rate is not within the control of the City and is subject to change at least each January 1. The current Zone 7 rate for Pleasanton customers is $3.93 per CcF, this is a blended rate of Zone 7 fixed and variable rates for the City with 45 percent of Zone 7 costs as fixed costs for FY 2023. The proposed Zone 7 fixed costs will be split between fixed costs that will cover 22 percent of Zone 7 fixed costs and variable costs that cover the remaining 78 percent. This adjustment is a move toward shifting the allocation of the pass-through rates to align with Zone 7's allocation between fixed and variable rates and will reduce the cost burden on low-water users. Distribution Costs by Customer Type Most water delivery fees — that is, distribution costs — vary depending upon the peaks in customer demand for water service. These distribution costs include recycled water surcharge, capacity expansion, and consumption fees as described below. Recycled Water Surcharge In 2015, the City developed a recycled water program for commercial irrigation water for the area between the Dublin San Ramon Services District Wastewater Treatment Plant located on Johnson Drive and the northeast section of Pleasanton. Recycled water benefits all water users by replacing potable water that was being used for irrigation that can now be supplied for domestic water usage. The current recycled water rate for all customers, except Tier 1 of the single-family residential rates, is $0.10 per CcF of added cost for the development of this program. The Recycled Water program is paying for its debt service and operating costs. The proposed recycled water surcharge is $0.01 per CcF for all potable multi-family, commercial, and irrigation customers and $0.06 per CcF for the single-family residential Tier 4 rates. Capacity Expansion The City constructed several water-related projects in the Vineyard Avenue Corridor Specific Plan area to accommodate an increased demand in water volume by large residential customers. Most of these costs will be repaid through fees paid by new housing development in the area. Since the expansion was also related to the high- water consumption of existing citywide residential water customers, the current rate is an additional $0.13 per CcF on the single-family residential Tier 4 rates to cover the expansion cost for the Vineyard Corridor improvements. It was determined that no rate change is needed, and this surcharge on the single-family residential Tier 4 rates will be removed once the loan is paid off. The remaining balance of the Vineyard Corridor improvements loan is approximately $100,000. Page 10 of 19