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2020 Utility Rate Study

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1. How will these changes affect my residential water and sewer bills?

1. Sewer – Since we are proposing a major overhaul of the Non-residential category, and because the sewer utility is in a good position financially to meet operations and capital needs over the next 5 years, there are no planned increases for the utility overall. Sewer bills will be unchanged from FY2020 at $53.35 per month.
2. Water – The water utility has significant capital project needs that were not present in the last rate study. In order to generate the funds needed to maintain current operations and required upgrades plus future project planning, a 5% increase over FY2020 is planned. FY2021 residential monthly rates will be:

Base fee: $36.10 (a $1.72 increase)
Volume charges in cubic feet (cf):

Tier 1 (0-700 cf): $2.69/100 cf (a $0.13 increase)
Tier 2 (701-2000 cf): $3.30/100 cf (a $0.15 increase)
Tier 3 (2001 cf +): $5.14/100 cf (a $0.36 increase)

At these rates, the monthly water bill for a customer who uses 700 cf will be $54.93, an increase of $2.36.

2. What is the estimated/possible impact for a specific customer?

Staff will gladly discuss the specifics of the rate study as it applies to any individual customer concerning projected financial effects upon request. A benefit of the proposed update to the sewer rate structure is that it will necessitate and incentivize a review of activities to determine appropriate categorization, so that billing will more accurately reflect contribution. City staff will work with all interested customers to identify uses, and opportunities to conserve.

3. Is the Phase 5 for the Water Reuse & Reclamation Facility (WRRF) the phase that deals with effluent temperature reduction?

If so, does the rate study include the additional cost of electricity to run the chillers as part of the rate input costs? 

1. The City of Moscow is starting a facility plan study update that will evaluate different alternatives to address temperature reduction. It is anticipated that a design will be accepted upon completion of that study. As noted in the presentation, the City plans to begin construction of Phase 5 improvements in FY2024. It is expected that the next rate study will consider O&M cost associated with the upgrades to the WRRF.
2. Operating Cost impacts related to any capital improvement plan (CIP) items are not incorporated in the current rate study.

   
   

4. How do car washes fit into the scheme?

1. The California guidelines used to inform classification throughout this study identify car washes are low in BOD/TSS strength.

5. Should there be some consideration of the more commercial aspects of “churches” that extend beyond their primary use?

Churches get a blanket rate for both water and sewer.  However, churches are frequently used during the “non-church hours” as daycare or other uses.  Should there be some consideration of the more commercial aspects of “churches” that extend beyond their primary use?

1. The City will be conducting an Industrial Users Survey this summer, which will help identify user contributions from each commercial customer. This will help us to classify these customers by strength of the account, not only as a type of business. Under the strength-based rate structure, an account pays based on its concentration of flow, not type of business.

6. Do the water rate computations include the capital costs of maintenance and/or replacement of the reservoirs/water towers?

I know we have been looking at the NW water tower up on Residence St. for a while.  As I recall, there was discussion of the fact that the booster stations may obviate the need for that reservoir. If water reservoirs are to be continued, we need some capital accumulation to deal with that - and any additional reservoirs that may be necessary in the future due to city expansion. 

1. Although Capital Improvement Plans do not specifically include reservoir rehab or replacement in the next five years covered by this study, rates currently are assumed to fund system reinvestment/depreciation, which can be used for all assets including reservoirs. The construction of a new reservoir is planned within the next 20-year planning horizon.

7. Some explanation of how water use and sewer use are going up 0.85 and 0.75% per year when the population growth is a pretty steady 1.0 - 1.2% per year. This does not, on the surface, make sense.

1. Growth rates were based on historical (2016-2019) actual general facility charge (GFC – new account connections) revenue for each utility. Data provided indicates estimated growth of 0.8%-0.9% for water and 0.7%-0.8% for sewer. The midpoint of those estimates was used. As more low-flow and other conservations devices are used, it is anticipated that the growth factor for the utilities will be slightly less than the population growth rate.

8. Has/is the U of I been part of this process? It seems they will be impacted by the sewer rates and assuring they know what’s being contemplated is necessary.

1. The U of I is currently part of the analysis. The current assumptions do not project an increase in U of I contribution or consumption.

9. On slide 19 of the presentation, “multi-family” Is listed as a “non-residential” use. But on slide 24, it seems to reappear as a residential use. I was a bit confused on that - clarification please?

* FCS Group Presentation

1. This is related to classifying them into the Water Non-Residential Class, and keeping them separate for Sewer. On the water side, accounts with individual meters, which are still multi-family, are treated as residential. Accounts on a master-meter are treated as non-residential.

10. Are the rates based on actual cost of service to deal with the biosolids/FOG produced? How did we parse-out those rates?

I would like a bit more emphasis/explanation of how the sewer rates are set as regards the impact of low-medium-high users. Are the rates based on actual cost of service to deal with the biosolids/FOG produced?  How did we parse-out those rates? 

1. The Cost-of-Service Analysis (COSA) looked at cost drivers (customer/flow/strength). The functional allocation and cost classification separates costs by those cost drivers and allocates them to classes of service. This is done by reviewing the design criteria of the plant in service and allocating each expense in alignment with the design of the plant or specific nature of each expense.
2. The cost of service identified the costs associated with strength costs (BOD/SS) based on industry standards.  Slide 18* summarized strength related costs at a total of 34% representing $2.9 million of the annual revenue requirement. Costs are allocated to low/medium/high customers based on slide 24* strength allocation factors.  The differences in strength and resulting cost allocation assign the following factors to determine the proportion of the total strength costs assigned - Low range 200 mg/l, medium 400 and high 600.
3. Slide 25* shows the results of the cost of service analysis. Class cost of service adjustments are not recommended at this time due to the change in rate structure and the potential for customers to change categories and change their use which has potential to change the results of the cost of service. All customer class rates are getting the overall average increase of 2.25% (individual account impacts may vary). This transition period will allow for adjustments to the new structure before a strict COSA application. Otherwise, rates could vary significantly through the settling period.

*FCS Group Presentation Slides

11. Does the study include enough “buffer” to allow for sufficient funds to be generated if users decrease their consumption/output dramatically in order to reduce their costs?

Overall, I am a bit concerned that the study is weighted to reducing base rates, and then providing increasing costs depending on actual flow.  The study is fundamentally based on that to “balance the cost vs service” that we need to maintain.  However, the structure of the rate system encourages conservation (a very good thing), but does the study include enough “buffer” to allow for sufficient funds to be generated if both residential use(rs) (wise scaping/toilet replacement) and commercial use (watering landscaping, in-house water use) decrease their consumption/output dramatically in order to reduce their costs?  I worry that if usage decreases, we will find ourselves in a revenue/capital shortfall.

1. The study currently does not assume elasticity or reduction of use. Moscow already has one of the lowest per-capita water-use rates in the State. While we are confident that we will continue to experience success with our conservation programs, reductions in use within this rate study period are not anticipated to be on a scale that will cause a shortfall with the proposed structure.
2. A higher emphasis can be placed on fixed charges through either a higher fixed fee, or retaining the extra unit charge for master meter accounts.
3. Adding elasticity (i.e. conservation driven revenue reductions) impacts would result in higher rate impacts for all classes.

   
   

12. What if many of the commercial clients ask for, and are granted a reduction in their classification? Has the impact of that on the revenue stream been contemplated?

1. We anticipate the number of reclassifications to be quite low. In the event that this occurs, rates can be adjusted in the following fee schedule to meet funding requirements.

13. The two reserves cited here are ‘one time’ pools of funds, there is not a need to newly replace the reserve in each successive year. Is that right?

Slide 6*:   Perhaps I misheard, but the two reserves cited here are ‘one time’ pools of funds---are they not? It appears we hope to grow them over time (as the value plant and operating costs may increase), but if they remain untapped, there is not a need to newly replace the reserve in each successive year. Is that right?

* FCS Group Presentation

1. We are starting the analysis with $8.9 million in cash. We are funding $1.6-$2.5 in cash every year, and spending $1.6 million per year on average from FY2020 through FY2024 before Phase V. Over 5 years we accumulate the additional funds needed to build the project, and assure compliance with our NPDES Permit. Our projections into the future are sufficient to meet the needs. After the projected increased growth from new accounts, adjustments will be modified. It is likely that they will be even closer to base inflationary numbers of 1.75-2.00%
2. As discussed in the previous answer, the upcoming cost driver is Phase V. Once the City gets through this project, if the annual CIP, besides the two large projects, stays below depreciation levels, depreciation funding may be adjusted and increases reduced. This assumes no need to fund future Phases of the treatment plant. After the 5-year period covered by the study rate adjustments will be re-evaluated, with future CIP taken into consideration.

   
   

14. Slide 24*: Where does the data for flow/BOD/TSS for the various accounts come from? Why are BOD and TSS always the same figure, for a given customer?

*FCS Group Presentation

1. The data used through the study was based on California guidelines. Extensive and comprehensive data was used to form said guidelines, and subsequent work has verified their accuracy for the categorization. What the figures imply is that if you are, as a customer, above one of the thresholds, you will be in that class. Without specific monitoring data for each individual business, the established categorization is the best method to gauge use. We are, however, proposing an appeal process by which a business who feels that their operations do not meet the categorization, can submit monitoring data for consideration of reclassification.

15. Two Classes jump +/- 5% COSA. Does that mean we won’t uniformly apply the 2.25% annual increase to sewage costs to all customers in this rate cycle?

Slide 25*:   I’m confused by differences here…..seem to say the fact that two Classes jump well beyond the industry norm of +/- 5%, we need to reevaluate COSA in next study.   Does that mean we won’t uniformly apply the 2.25% annual increase to sewage costs to all customers in this rate cycle….or that we will……or ?

* FCS Presentation

1. This means Non-Residential Medium and High need to go up more than average, and residential needs to go down. To avoid double stacking (compounding) impacts for Non-Residential we are proposing to increase each class’ revenue by 2.25% (which may vary by individual account) and re-evaluate the results again once the reclassification is completed. The slide shows the results of the cost of service; however, the recommendation is to defer implementing the results until data can be collected under the new rate structure. After a couple of years of data under the new rate structure, cost of service can again be evaluated to determine if the initial cost of service trends exist and the City can begin phasing in results of the cost of service with much more confidence, or if results are showing different results and a recalibrated approach is warranted. The reason for the caution when implementing cost of service under changing conditions is to minimize the risk of rate swinging dramatically from one study to another.

16. What is the total cost UI should expect to pay in the coming years for sewage? With declining enrollment, should volumes be reevaluated?

Slides 28* onward……don’t apply to UI (correct?).   What is the total cost UI should expect to pay in the coming years for sewage?  With ever declining enrollment, should volumes be reevaluated to ensure ‘fair share’ usage is captured?

*FCS Group Presentation

1. Right now, UI is being applied the overall 2.25% increase similar to all other customer classes. Since rates are not being set on COSA, everyone is applied an across-the-board average. Even if we reevaluate the University’s contribution, unless we decide to implement COSA results, it will be based on the overall system average adjustment.

17. Non-Residential - Low, - Medium, - High. Almost identical # of customers, but higher ccf for medium. Confused by difference between flows and % fund allocation for high and medium.

Clarification on slide 24, Non-Residential - Low, - Medium, - High. Almost     identical # of customers, but higher ccf for medium. Confused by difference between flows     and % fund allocation for high and medium.

*FCS Group Presentation

1. The average account in the medium category (84ccf/month/account) contributes more flow per account compared to the high category (56ccf/month/account).
2. Due to this, even though the account allocation is equal at 1.0% the flow allocation is different due to greater per account usage in medium.
3. The reason why the BOD/TSS shift the allocation back to High is that we weigh the flow by a greater concentration (mg/l) for high. Once the greater weighting is applied the weighted flow becomes similar for both classes.

   
   

18. What have other communities done in response to virus, delay for a year?

1. Majority of the communities are still trying to evaluate the impacts of COVID and acquire enough data. There is typically a lag in information due to timing of billing and consumption. For the Communities that have acted, we have seen the following: 
   1. No change in action.
   2. Deferred rate action several months. This was more in line with municipalities that planned rate action around the March/April timeline.
   3. Considered deferring rate action until the following year.
   4. Because this is so new, the majority of communities are still trying to figure out an appropriate response based on their financial abilities.
   5. There are many factors that go into those decisions as well, in terms of existing financial outlook and performance, bond covenant requirements and System maintenance levels.

      
      

19. Adversely affected customers, will the City be conducting outreach?

1. City staff will absolutely be conducting outreach to our customers, especially those that will see significant increases due to the Non-Residential class restructuring.

20. How does the General Facilities Charge (GFC) apply to existing buildings that are being split?

This question is related to the charges assessed on new meters, specifically the General Facilities Charge (GFC) charge.  For a new meter there is a $2,550.00 GFC charge (5/8” inch meter) for new capacity.  If I have an existing duplex that is served by one meter and I wish to install a new second meter so each unit is served by separate meters it would seem that we are not adding any new capacity to the building. No additional flow will be used to serve the building.  How does the GFC apply to existing buildings that are being split?

On the technical side, and in line with industry standards, water system capacity is certainly increased by adding another meter. But on the functional side the opposite may be true given that individually metered accounts are paid for by individual tenants, leading to increased personal responsibility for water use and therefore decreased water consumption. In this specific case, where building occupancy capacity and use type does not change, we agree that waiving the GFC for the additional meter is appropriate given the increased accountability of tenants for their consumption and the conservation potential. Property owners are still responsible for the cost of the new meter installation itself, and if any future improvements/additions are made to the property that could increase occupancy then the waived GFC would be reinstated.

21. Shouldn’t Multifamily use the same kind of consumption based system as the Non-residential class?

Multifamily (residential) sewer charges are a set monthly fee that is the same for different buildings/unit size, whether it is for one bedroom or four bedrooms. Over time the fixed rate structure is adversely affecting the affordability of lower occupancy units (studio and one bedroom units) impacting a population that is in many cases on a restricted budget. The proposed changes to the Non-residential classes (moving towards more weight on consumption-based charges) are intended to increase equity among customers so that those who contribute more to the system pay more for the services provided. Shouldn’t Multifamily use the same kind of system? Shouldn’t Multifamily use the same kind of consumption based system as the Non-residential class?

1. Equity is definitely increased with consumption-based billing. All residential accounts (Single family and Multi-family) are currently charged a fixed monthly sewer bill. That amount is determined by computing the total flow and associated strength of sewer contributions for the category and the cost to convey and treat it is then spread throughout the number of units. With all of the changes we have made to the commercial sewer rates it would be quite difficult to make this happen in this cycle. The amount of time required to model these changes is significant, and may take more time and resources than we have before we must move forward with the municipal budget process. Additionally, there are several administrative changes that must be considered (e.g. software capabilities, that are different from the Non-residential classes). But it is definitely worth considering. You have highlighted an area of disparity that we were not aware of, and we now have the ability to apply that information. The same type of comment in 2017 started the process that lead us to where we are now with reorganizing the Non-residential classes. These incremental changes can add up to achieving our goals of equity and fairness in the long run, and although it means a slower process overall, it does provide some benefits. Making a few changes at a time allows the City to more easily evaluate the narrow changes that have been made, and the effects it has on our customers, their consumption habits, and how the utility must respond. If the changes are successful, then it becomes easy to take another step in that direction and evaluate again. The City’s current rate is a commonly-used fixed structure for residential sewer bills. Many jurisdictions use this rate structure to improve revenue stability. A movement away from this fixed rate structure would inject uncertainty into the revenue stream and should be made thoughtfully. Additional analysis and evaluation would be required to understand the associated revenue risk.