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City of Pleasanton <br />2025 Water Rate Study <br /> <br />Water Resources Economics <br />17 <br />Figure 1-6 shows the impacts in Table 1-16 in a graphical format. <br /> <br />Figure 1-9: Proposed Single Family Customer Impacts (Stage 3 Shortage, Year 1) <br /> <br />1.11 PROPOSED WATER CONNECTION FEES <br />New customer connections to the City’s water system are subject to a water connection fee, which is <br />necessary to ensure that existing users are not unfairly burdened by costs incurred to provide capacity for <br />new users. The overall purpose of a connection fee is to equitably recover capital costs incurred by the <br />agency to provide system capacity to new users. Water connection fees in California are typically <br />developed based on one of three common methodologies outlined by the AWWA in its M1 Manual. <br /> <br />The three methodologies include: <br />1. Buy-In Method: The Buy-In Method establishes connection based on the value of the system’s <br />existing capital assets and is typically most appropriate when a system’s current capacity is <br />sufficient to serve both short-term and long-term projected demands. The rationale underlying <br />the Buy-In Method is that new customers should pay to “buy-in” to existing system capacity <br />funded by past and current users. <br />2. Incremental Cost Method: The Incremental Cost Method establishes connection fees based on <br />the cost of planned capital expenditures required to expand system capacity and is typically most <br />appropriate when a system’s current capacity is already fully utilized by existing users. The <br />rationale underlying the Incremental Cost Method is that new users should fund planned capital <br />projects that are necessary to accommodate growth. <br />3. Hybrid Method: The Hybrid Method establishes capacity charges based on a combination of the <br />Buy-In Method and the Incremental Cost Method. The Hybrid Method is typically most <br />appropriate when some existing capacity is available to new users, but capacity expansion is still <br />necessary to accommodate long-term demands. <br /> <br />WRE recommends the Hybrid Method for the City’s water connection fees. The existing system has some <br />remaining capacity to serve new customers, and the City will be investing in additional capacity over the <br />next several years.