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HomeMy WebLinkAboutAgenda Packet 04/09/2013VI. Information Only Items: VIII. Adjournment Utility Advisory Committee Jack Pittis Room Port Angeles, WA 98362 April 9, 2013 3:00 PM AGENDA I. Call To Order II. Roll Call III. Approval Of Minutes For March 12, 2013 IV. Late Items V. Discussion Items: A. NPDES Phase II Stormwater Annual Report B. Cost of Service Studies Consultant Agreement A. Port Angeles Power Sales Agreement Contract No. 09PB -13093 B. Wireless Mobile Data System (WMDS) Broadband Technologies Opportunities Program (BTOP) Grant Update VII. Next Meeting Date: May 14, 2013 N: \UAC\MEETINGS \UAC2013 \UAC040913 I. Call To Order Chairman Dan DiGuilio called the meeting to order at 3 :00 p.m. II. Roll Call UAC Assigned Councilmembers Present: Other Councilmembers Present: Other Councilmembers Absent: Utility Advisory Committee Members Present: Utility Advisory Committee Members Absent: Staff Present: Others Present: III. Approval of Minutes Utility Advisory Committee Jack Pittis Conference Rooms Port Angeles, WA 98362 March 12, 2013 3:00 p.m. Dan Di Guilio, Cherie Kidd, Sissi Bruch Brad Collins, Brooke Nelson, Max Mania, Patrick Downie Dean Reed, Paul Elliot, Murven Sears II Michael Jacobs Dan McKeen, Glenn Cutler, Bill Bloor, Byron Olson, Kathryn Neal, Phil Lusk, Ernie Klimek, Rick Hostetler (3:56) Arnold Schouten Public Herrera Environmental Consultants Various via telephone Jennifer Garcelon Clallam County (3:02) Bob Jenson Capacity Provisioning, Inc. (3:02) Paul Gottlieb Peninsula Daily News (3:07) Chairman Dan Di Guilio asked if there were any corrections to the minutes of February 12, 2013. Dean Reed moved to approve the minutes. Murven Sears seconded the motion, which carried unanimously. IV. Late Items: NWPPA Safety Award Winner 1 V. Discussion Items: A. Landfill Bluff Stabilization Agreement Kathryn Neal, P.E., Engineering Manager discussed the erosions of the marine bluffs is threatening to expose municipal solid waste and allow the waste to spill onto the beach. An amendment is needed to develop permits and design in order to resolve the problem. There was a lengthy discussion. Dean Reed moved to recommend City Council to approve and authorize the City Manager to sign Amendment 3 to the 2011 On -Call Landfill Cell Stabilization Professional Services Agreement with Herrera in an amount not to exceed $1,171,121, which will increase the contract amount to $1,567,771, and to make minor modifications to the agreement if necessary. Murven Sears seconded the motion, which carried unanimously. B. Solid Waste Comprehensive Plan Amendment Resolution Kathryn Neal, P.E., Engineering Manager reviewed the draft resolution. The Clallam County Solid Waste Management Plan was last updated in 2006. The plan does not reflect the current events at the closed Port Angeles Landfill and needs to be amended to add provisions and to support the current projects. There was a lengthy discussion. Paul Elliot moved to recommend City Council to approve and authorize the City Mayor to sign a Resolution amending the Clallam County Comprehensive Solid Waste Management Plan Update 2006. Cherrie Kid seconded the motion, which carried unanimously. C. 2012 Water Utility Consumer Confidence Report (info only) Ernie Klimek, Water Superintendent shared the 2012 Water Quality Report. There has been a change for the report as it is now distributed electronically rather than mailing hard copies saving the City around $5,000. A review over the report was given. For information only, no action requested. D. Simple Steps Promotion Agreement Phil Lusk, Deputy Director of Power Telecommunications Systems, discussed a new agreement that was offered to the City for the "Simple Steps Smart Savings" energy efficient product promotion with Fluid Market Strategies. All City expenses under the agreement are eligible for reimbursement under the Bonneville Power Administration's Energy Efficiency Incentive program. There was a discussion. Paul Elliot moved to recommend City Council to authorize the City Manager to sign the agreement and make minor modifications to the agreement, if necessary, as well as to sign any subsequent amendments to the Simple Steps -Smart Solutions Agreement with Fluid Market Strategies through January 2015. Murven Sears seconded the motion, which carried unanimously. 2 VIII. E. Capacity Provisioning Inc. Right -of -Way Agreement Phil Lusk, Deputy Director of Power Telecommunications Systems reviewed the City's license with Capacity Provisioning, Inc. for its telecommunications systems within the City. The Right -Of- Way License Agreement expired on September 8, 2012 and needs to be renewed. There was a brief discussion. VII. Dean Reed moved to recommend City Council to authorize the Public Works and Utilities Director, to renew the Telecommunications Right -Of -Way License with Capacity Provisioning, Inc. for a five -year term. Murven Sears seconded the motion, which carried unanimously. VI. Information Only Items: A. Advanced Metering Infrastructure System Update Information only. No action taken. B. Demand Response Program Update (verbal) Information only. No action taken. C. New and Lapsed Agreements Information only. No action taken. D. Utility Discount Ordinance Update Information only. No action taken. Next Meeting Date: April 9, 2013 Adjournment: 4:55 p.m. Cherie Kidd, Mayor Sondya Wray, Administrative Specialist 3 W A S H I N G T O N U.S.A. Utility Advisory Committee Memo Date: April 9, 2013 To: Utility Advisory Committee From: Jonathan Boehme, P.E., Stormwater Engineer and Program Manager Subject: NPDES Phase II Stormwater Annual Report Summary: The NPDES Phase II Stormwater Annual Report was submitted to the Washington Department of Ecology on March 28. The City's performance was measured by 85 standardized criteria. The City has met all requirements, and is in full compliance with our NPDES Phase II Stormwater Permit. Recommendation: Information only, no action is needed. Background /Analysis: The required NPDES Phase II Stormwater annual report was submitted to Washington Department of Ecology on March 28. The City's performance was measured by 85 standardized criteria. The City has met all requirements, and is in full compliance with our NPDES Phase II Stormwater Permit. This accomplishment reflects well not only on the Stormwater Utility and the City as a whole, but on the staff involved in street operations, spill response (Illicit Discharge Detection and Elimination), public education for residents and businesses, construction inspection, water quality sampling and testing, mapping and facility maintenance (including not only stormwater facilities, but also buildings and parks). It also is a credit to members of the public who are involved in minimizing water pollution. Examples of specific actions the public can take include making sure that runoff from car washing does not flow to a stream, picking up pet waste, keeping vehicles well- maintained, and preventing leaks and spills. In addition to the checklist that is attached, the Annual Report contains detailed information about the implementation and progress of the major elements of the stormwater program. Also included is the City's Stormwater Management Plan (SWMP), which is updated annually. On March 6, a public meeting was held to solicit public input on the SWMP and on ideas to improve the Stormwater Program. The most significant change in the current SWMP is the completion of the 2012 gap analysis and the resulting decision to raise stormwater utility rates, enabling the City to fund the cost of operations, recurring capital projects, and other program elements required to stay in compliance with the NPDES Phase II permit. Staff will give a brief presentation outlining this year's major accomplishments and challenges of the Stormwater Program. The Annual Report and the SWMP are posted on the City's website at www.citvofna.us /Stormwater Attachment: Port Angeles 2012 Annual Report Checklist, Stormwater NPDES Phase II N• \UAC\MEETINGS \UAC2013 \UAC040913 \2012 Stormwater NPDES Phase II Annual Report.doc Question VI. Status Report Covering Calendar Yr: 2012 Jurisdiction Name: City of Port Angeles PLEASE indicate reporting year and your jurisdiction in Line 1, above. PLEASE refer to the INSTRUCTIONS tab for assistance filling out this table. NOTE: For clarification on how to answer questions, place cursor over cells with red flags. NOTE: Please answer all questions. PLEASE review your work for completeness and accuracy. Save this worksheet as you go! 1. Attached annual written update of Permittee's Stormwater Management Program (SWMP), including applicable requirements under S5.A.2 and S9? 2. Attached a copy of any annexations, incorporations or boundary changes resulting in an increase or decrease in the Permittee's geographic area of permit coverage during the reporting period, and implications for the SWMP as per S9.E.3? 3. Implemented an ongoing program for gathering, tracking, maintaining, and using information to evaluate SWMP development, implementation and permit compliance and to set priorities? (S5.A.3) 4. Tracked costs or estimated costs of the development and implementation of the SWMP? (S5.A.3.a) Y /N/ Comments (50 word limit) NA Y NA The most significant update to the SWMP in 2012 a comprehensive analysis of the Stormwater Utility NPDES implementation and capital needs was completed. No annexations, incorporations or boundary changes occurred in the City in 2012 Y The City maintains three spreadsheets for tracking the SWMP, planning and tracking public education and outreach, private facility inspections and development review. IDDE and maintenance activities are tracked used a Cityworks database. Y The City tracks costs of each major component of the SWMP (Public Education, Public Involvement, Illicit Discharge, Construction Site Runoff and Operations and Maintenance) in our arrnunting software program, Sunguard Public Sector Naviline. Page 1 of 14 Name of Attachment Page if applicable Attachment A, SWMPP Attachment K, Stormwater NPDES and Capital Needs Assessment Question 5. SWMP includes an education program aimed at residents, businesses, industries, elected officials, policy makers, planning staff and other employees of the Permittee? (S5.C.1) 6. Number of public education and outreach activities implemented: 7. Provided opportunities for the public to participate in the decision making processes involving the development, implementation and updates of the Permittee's SWMP? (S5.C.2.a) 8. Implemented a process for public involvement and consideration of public comments on the SWMP? (S5.C.2.a) 9. Made the most current version of the SWMP available to the public. (S5.C.2.b) 10. Posted the SWMP and latest annual report on Permittee's website. (S5.C.2.b) 11. NOTE website address in Attachment field: 12. Maintained a map of your MS4, including requirements listed in S5.C.3.a.i -iii? Y /N/ Comments (50 word limit) NA Y The SWMP contains an education program aimed at target audiences. Y The SWMP and contact information are available to the public on the City's website, and at the front counter of the City's Engineering Department. In January 2012 the public was invited to a meeting at City Hall and invited to participate in the program. A City Council presentation was also given in June 2012. Opportunities for involvement and public comment are created through public meetings and through the general availability of the SWMP. Comments made during presentations or received though other means are considered and incorporated in SWMP annual updates as appropriate. The most current version of the SWMP is available to the public on the City's website and at the front desk of the City's Engineering Division. Y Name of Attachment Page if applicable Attachment B, "Outreach and Public Participation Tracking Spreadsheets" hhtp.//www.cityofpa.us/Stormwat er. htm Y The stormwater system map is maintained and continuously updated in the City's GIS system. Page 2 of 14 Question 13. Map has been made available upon request? (S5.C.3.a.iv) 14. Implemented an ordinance or other regulatory mechanism to effectively prohibit non stormwater, illicit discharges into the Permittee's MS4? (S5.C.3.b) 15. Implemented an ongoing program to detect and address non- stormwater illicit discharges, including spills, and illicit connections into the Permittee's MS4? (S5.C.3.c) 16. Implemented field assessment activities, including visual inspection of priority outfalls identified during dry weather, and for the purposes of verifying outfall locations, identifying previously unknown outfalls, and detecting illicit discharges. (S5.C.3.c.ii) 17. Conducted field assessments on at least one high priority water body? (S5.C.3.c.ii) 18. Implemented procedures for characterizing the nature of, and potential public or environmental threat posed by, any illicit discharges found by or reported to the Permittee? (S5.C.3.c.iii) Y /N/ Comments (50 word limit) Name of Attachment NA Page if applicable Y The City's stormwater GIS is available for public access via a dedicated computer station in the City's engineering department. And on the City website http //65. 243.151.72 /PublicWeb /index.html The City passed a comprehensive stormwater ordinance on July 16th, 2009. Y v v °h The City is using the Illicit Discharge Detection Policy included in the SWMP, and Elimination (IDDE) Response Policy Attachment A (promulgated 2/2012). Pollution reporting number is listed on City website. Magnets with reporting number have been distributed at public outreach events. Pollution Prevention Specialist makes regular site visits to businesses. Y Y Y Field assessment was completed on all priority outfalls in September Dry Creek dry weather stream walk was performed in September. The City is using the Illicit Discharge Detection Policy included in the SWMP, and Elimination (IDDE) Response Policy Staff Attachment A training was conducted on November 29th 2012. Page 3 of 14 Question 19. Implemented procedures for tracing the source of an illicit discharge; including visual inspections, and when necessary, opening manholes, using mobile cameras, collecting and analyzing water samples, and /or other detailed inspection procedures? (S5.C.3.c.iv) 20. Implemented procedures for removing the source of the discharge, including notification of appropriate authorities; notification of the property owner; technical assistance for eliminating the discharge; follow -up inspections; and escalating enforcement and legal actions if the discharge is not eliminated? (S5.C.3.c.v.) 21. Provided updated information to public employees, businesses, and the general public of hazards associated with illegal discharges and improper disposal of waste? (S5.C.3.d) 22. Distributed appropriate information to target audiences identified pursuant to S5.C.1? (S5.C.3.d.i) Y /N/ NA Y Comments (50 word limit) I The City is using the Illicit Discharge Detection and Elimination (IDDE) Response Policy. Y The City is using the illicit Discharge Detection and Elimination (IDDE) Response Policy. A IDDE closure form was developed to ensure follow up action was taken and problems resolved. Y In November 2012 IDDE Awareness Training was presented to City staff. From July through December over 100 site visits were made to individual businesses where education concerning illegal discharges and improper disposal of waste was covered. Information was also provided at outreach and public participation events. Installed over 50 CB drain markers Y Information is provided at outreach and public participation events. Partnered with West Sound Stormwater Outreach Group, resulted in distribution flier concerning proper disposal of pet waste and installing Mutt Mitt pet waste stations. Page 4 of 14 Name of Attachment Page if applicable Policy included in the SWMP. Policy included in the SWMP, Attachment A Attachment B, "Outreach and Public Participation Tracking Spreadsheets" Attachment B, "Outreach and Public Participation Tracking Spreadsheets Attachment C Kitsap Co. ILA, "Summary of West Sound Stormwater Outreach Group Activities" Question 23. Publicized and maintained a hotline or other local telephone number for public reporting of spills and other illicit discharges? (S5.C.3.d.ii) 24. Number of hotline calls received: 25. Number of follow -up actions taken in response to calls: 26. NOTE hotline number in Comments field 27. Number of illicit discharges identified (S5.C.3.e): 28. Number of inspections made for illicit connections (S5.C.3.e): 29. Municipal field staff responsible for identification, investigation, termination, cleanup, and reporting of illicit discharges, improper disposal and illicit connections are trained to conduct these activities? (S5.C.3.f.i) Y /N/ NA Y 2 X21 Comments (50 word limit) Using a magnet the hotline number is publicized at almost all outreach and public participation events Hotline number is highlighted at IDDE training for City staff. Partnered with West Sound Stormwater Outreach Group with conducted focus groups on how to make the hotline more effective Only 1 hotline call was received (car wash), however City staff responded to 22 incidents. Follow up was provided, car wash education 360- 417 -4745 IDDE training was provided for municipal field staff on August 30, 2012. IDDE Response and Enforcement training was held for municipal field staff on November 29, 2012. Page 5 of 14 Name of Attachment Page if applicable Attachment B, "Outreach and Public Participation Tracking Spreadsheets" Attachment C, "IDDE Hotline Magnet, Water Pollution Reporting Hotline Promotion" See Attachment G, Illicit Ilicrharna Rannrtc anri Response for 2012" See Attachment G, Illicit Discharge Reports and Response for 2012" See Attachment H. Stormwater Training" Question 30. Implemented an ongoing training program on the identification of an illicit discharge /connection, and on the proper procedures for reporting and responding to the illicit discharge /connection for all municipal field staff, which, as part of their normal job responsibilities, might come into contact with or otherwise observe an illicit discharge or illicit connection to the storm sewer system? (S5.C.3.f.ii.) 31. Applied stormwater runoff program to private and public development, including roads? (S5.C.4) 32. Applied the Technical Thresholds in Appendix 1 to all sites 1 acre or greater, including projects less than one acre that are part of a larger common plan of the development or sale? (S5.C.4) 33. Implemented a regulatory mechanism (such as an ordinance) necessary to address run -off from new development, redevelopment and construction site activities? (S5.C.4.a) 34. Retained existing local requirements to apply stormwater controls at smaller sites or at lower thresholds than required pursuant to S5.C.4? (S5.A.4) 35. Number of exceptions to the minimum requirements in Appendix 1 granted (S5.C.4.a.i and Appendix 1)? Y /N/ NA Y Comments (50 word limit) Name of Attachment Page if applicable IDDE General Awareness refresher training See Attachment H. "Stormwater was held for City staff on November 29, 2012 Training" Applied comprehensive stormwater ordinance and development codes that have been in place since July 16th, 2009. Y See comment for question 31. See comment for question 31. Y Regulatory requirements for small sites were retained. Page 6 of 14 Question 36. Number of variances to the minimum requirements in Appendix 1 allowed (S5.C.4.a.i and Appendix 1)? 37. Implemented a permitting process to address runoff from new development, redevelopment and construction site activities with plan review, inspection, and enforcement capability? (S5.C.4.b) 38. Reviewed Stormwater Site Plans for new development and redevelopment projects that disturb a land area 1 acre or greater, including projects less than one acre that are part of a larger common plan of development or sale? (S5.C.4.b.i) 39. Number of site plans reviewed during the reporting period: 40. Inspected, prior to clearing and construction, all known development sites that have a high potential for sediment transport as determined through plan review based on definitions and requirements in Appendix 7 Determining Construction Site Sediment Potential? (S5.C.4.b.ii and v) 41. Number of qualifying sites inspected prior to clearing and construction during the reporting period: Y /N/ Comments (50 word limit) NA Y Port Angeles Municipal Code Title 13 Stormwater Utility and Regulations, specifically PAMC 13.63.190 Stormwater Design and Construction Requirements" Page 7 of 14 Name of Attachment Page if applicable See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" Question 42. Inspected construction -phase stormwater controls at all known permitted development sites during construction to verify proper installation and maintenance of required erosion and sediment controls? (S5.C.4.b.iii and v) 43. Number of sites inspected during the construction phase for the reporting period: 44. Based on inspections at new development and redevelopment construction projects, enforced requirements related to the proper installation and maintenance of erosion and sediment controls? (S5.C.4.b.iii and vi) 45. Number of enforcement actions taken during the reporting period: 46. Inspected qualifying permitted development sites upon completion of construction and prior to final approval or occupancy to ensure proper installation of permanent stormwater controls such as stormwater facilities and structural BMPs? (S5.C.4.b.iv and v) 47. Number of qualifying sites known during the reporting period: 48. Number of qualifying sites inspected during the reporting period: 49. Verified a maintenance plan is completed and responsibility for maintenance is assigned for qualifying permitted development sites (S5.C.4.b.iv) Y /N/ Comments (50 word limit) Name of Attachment NA Y NA Y Two sites were completed and received final See Attachment E, "Stormwater No enforcement actions were required. approval inspections Page 8 of 14 Page if applicable See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" See Attachment E, "Stormwater Development Review Tracking" Maintenance plan is required as part of project See Attachment F, "Private completion. Stormwater Annual Inspections" Question 50. Enforced regulations to ensure proper installation of permanent stormwater controls? (S5.C.4.b.iv) 51. Number of enforcement actions taken during the reporting period: 52. Implemented a long -term operation and maintenance (O &M) program for post construction stormwater facilities permitted and constructed pursuant to S5.C.4.a. and b.? (S5.C.4.c) 53. Annually inspected all post- construction stormwater controls, including structural RM A c at new µleyelnnmant and rarla�ie lnnmpnt r,... r- projects permitted according to S5.C.4.b. (unless maintenance records justify a different frequency)? (S5.C.4.c.iii) 54. If using reduced inspection frequency, Attached documentation as per S5.C.4.c.iii? 55. Performed timely maintenance of post construction stormwater facilities and BMPs as per S5.C.4.c.ii? 56. Attached documentation of any maintenance delays. (S5.C.4.c.ii) Y /N/ NA NA NA Y NA Comments (50 word limit) Name of Attachment Page if applicable No enforcement actions were required. Long term private operations and maintenance requirements are detailed in the City's stormwater ordinance and development code and are being followed. All eligible new developments and redevelopments were inspected. Not using any reduced inspection frequencies. Enforcement notifications have been sent within 30 days and are being followed up on within preset timelines in maintenance aq reements.. No delays. Page 9 of 14 See Attachment F, "Private Stormwater Annual Inspections" Question 57. Inspected all new stormwater treatment and flow control facilities owned or operated, including catch basins, for new residential developments that are a part of a larger common plan of development or sale, every 6 months during the period of heaviest house construction (i.e., 1 to 2 years following subdivision approval) to identify maintenance needs and enforce compliance with maintenance standards as needed? (S5.C.4.c.iv) 58. Number of facilities inspected during the reporting period: 59. Implemented a procedure for keeping records of inspections and enforcement actions by staff, including inspection reports, warning letters, notices of violations, other enforcement records, maintenance inspections and maintenance activities? (S5.C.4.d) 60. Provided copies of the Notice of Intent for Construction Activity and Notice of Intent for Industrial Activity to representatives of proposed new development and redevelopment? (S5.C.4.e) Y /N/ Comments (50 word limit) Name of Attachment NA Page if applicable Y Six month inspections were performed on the See Attachment F, "Private one eligible site, Maloney Heights A annual inspection spreadsheet is used to track inspections and enforcement. Y_ Copies are provided in the front lobby of the Engineering Division. Page 10 of 14 Stormwater Annual Inspections" See Attachment F, "Private Stormwater Annual Inspections" Question 61. All staff responsible for implementing the program to control stormwater runoff from new development, redevelopment, and construction sites, including permitting, plan review, construction site inspections, and enforcement were trained to conduct these activities? (S5.C.4.f) 62. Performed timely maintenance as per S5.C.5.a.ii 63. Attached documentation of any maintenance .L.i.._.,, roc n c �uciay�. 7J.1 .✓.a.u) 64. Implemented a program designed to annually inspect and maintained all stormwater treatment and flow control facilities (other than catch basins)? (S5.C.5.b) 65. (Number of known facilities: 66. Number of facilities inspected during the reporting period: 67. If using reduced inspection frequency, Attached documentation as per S5.C.5.a.ii? (S5.C.5.b) 68. Conducted spot checks of stormwater facilities after major storms? (S5.C.5.c) 69. (Number of known facilities: 70. Number of facilities inspected during the reporting period: Y /N/ Comments (50 word limit) NA CESCL Training provided for City staff in May 2012. Stormwater Site Plan Development Training was provided for City staff and local consultants in October 2012. Y NA Y All required maintenance activities are being performed in a timely manor. Maintenance actions are being tracked through Cityworks CMMS (Computer Maintenance Management System) No maintenance delays have occurred. Maintenance actions are being tracked through Cityworks CMMS (Computer Maintenance Management System). Contech Storm Filters, Auquaswirl, Vortechs, were inspected in July 2012. Inspections on these facilities also include associated energy dissipaters on the same inspection. No reduced inspection frequencies have been requested or documented No qualifying major storm, defined as the 10 year storm, 3.2" in 24 hours. Page 11 of 14 Name of Attachment Page if applicable See Attachment H, "Stormwater Training" Question 71. Inspected 20% of municipally owned or operated catch basins at least once before the end of the Permit term? (S5.C.5.d and Permit Reference Table) 72. 'Number of known catch basins: 73. 'Number of inspections: 74. 'Number of catch basins cleaned: 75. Implemented practices to reduce stormwater impacts associated with runoff from streets, parking lots, roads or highways owned or maintained by the Permittee, and road maintenance activities conducted by the Permittee? (S5.C.5.f) 76. Implemented policies and procedures to reduce pollutants in discharges from all lands owned or maintained by the Permittee and subject to this Permit, including but not limited to: parks, open space, road right -of -way, maintenance yards, and stormwater treatment and flow control facilities? (S5.C.5.g) 77. Implemented an operations and maintenance (O &M) training program that has the ultimate goal of preventing or reducing pollutant runoff from municipal operations? (S5.C.5.h.) Y /N/ NA Y Y Y Dog waste stations have been installed or maintained at 10 city facilities and parks and 14,000 dog waste bags were used to reduce stormwater pollutants. Corp Yard Waste and Transfer Station SWPPP's are up -to -date and followed. Regular inspections and required maintenance is performed on all city stormwater treatment facilities. Y 12479 11534 11534 Comments (50 word limit) Name of Attachment Page if applicable Within COPA Jurisdiction Inspect all CBs as they are cleaned Maintenance actions are being tracked through Cityworks CMMS (Computer Maintenance Management System). BMP procedures and practices are in place to reduce impacts of stormwater. A regular program is in place to clean curb and gutter lines, alley approaches, and 10,536 miles has been recorded on city sweeping equipment. Proper BMPs are utilized during all construction and maintenance activities. BMP and SWPPP training was held in August See Attachment H. Stormwater 2012. Training" Page 12 of 14 Question 78. Implemented a Stormwater Pollution Prevention Plan (SWPPP) for all heavy equipment maintenance or storage yards, and material storage facilities owned or operated by the Permittee in areas subject to this Permit that are not required to have coverage under the Industrial Stormwater General Permit? (S5.C.5.i) 79. Complied with the specific requirements associated with approved TMDLs identified in Appendix 2? (S7.A and Permit Reference Table) vn A t4 ti a ort „f TI T TDT VV. Al L[ll.11•.11 JLULLAJ 1 V1J V V implementation? (S7.A and Permit Reference Table) 81. Where monitoring was required in Appendix 2, did you conduct the monitoring according to an approved Quality Assurance Project Plan? (S7.A and Permit Reference Table) 82. Notified Ecology immediately in cases where the Permittee becomes aware of a discharge from the Permittees MS4 which may cause or contribute to an imminent threat to human health or the environment? (G3) 83. Took appropriate action to correct or minimize discharges into or from the MS4 which could constitute a threat to human health, welfare, or the environment? (G3) Y /N/ NA Y NA I NA NA Y Y Comments (50 word limit) The SWPPP for the City of Port Angeles Public Works and Utilities Maintenance Facility "Corp Yard was previously documented in the 2010 Annual Report. Transfer Station SWPPP is included as an attachment to this report No TMDLs have been required in Port Angeles All 6 G3 eligible notification events which may cause or contribute to an imminent threat to human health or the environments were made to Ecology. Spill response was performed by City crews When necessary education or violation letters were issued. Page 13 of 14 Name of Attachment Page if applicable See Attachment G, "Transfer Station SWPPP" Question 84. Attached a summary of the status of implementation of any actions taken pursuant to S4.F and the status of any montioring, assessment, or evaluation efforts conducted during the reporting period? (S4.F.3.d) 85. Notified Ecology of the failure to comply with NA any permit term or condition within 30 days of becoming aware of the non compliance? (G20) Y /N/ Comments (50 word limit) NA Y {r °i An S4F1 notification was made to the Department of Ecology on January 4, 2011. Funding constraints have limited the monitoring, but sampling continues when possible on the outfall locations identified in the S4F1. Monitoring data is attached. Analysis has been performed by Herrera Environmental to help the City decide how to proceed. No notifications required. Page 14 of 14 Name of Attachment Page if applicable Attachment J, Fecal Coliform monitoring data, Herrera Water Quality Data Analysis Report, Drainage Contaminant Survey Report C1TY0OF I1f2RT NGELES W A S H I N G T O N U.S.A. Utility Advisory Committee Memo Date: April 9, 2013 To: Utility Advisory Committee From: Phil Lusk, Deputy Director of Power and Telecommunications Systems Subject: Consultant Agreement for Utility Cost of Service Analysis (COSA) Summary: The City has periodically retained a consultant to independently assess the revenue and cash reserve requirements of the eight individual utilities operated by the City. This information is then used to evaluate each utility's cost of service and its rate designs. A full Cost of Service Analysis is scheduled to be completed in 2013 for the electric, solid waste collection, and solid waste transfer station utilities. Revenue requirement studies will also be competed in 2013 for the water and wastewater utilities, with their cost of service and rate design evaluations programmed for completion in 2014. A revenue requirement study for the telecommunications utility is also scheduled in 2014. Recommendation: Forward a favorable recommendation to City Council to approve and authorize the City Manager to sign the Utility Cost of Service Analysis Professional Services Agreement with FCS Group in an amount not to exceed $145,876, ($105,106 will be obligated in 2013 and $40,770 will be conditionally budgeted for spending in 2014) and to make minor modifications to the agreement, if necessa ry. Background /Analysis: The City has traditionally used a consultant every three years to independently assess and evaluate the revenue needs and cash reserve requirements of the eight individual utilities operated by the City. This information is then used to evaluate each utility's cost of service and its rate designs, a practice known as a Cost of Service Analysis (COSA). However, with the exception of the stormwater utility COSA in 2012, the most recent comparable utility COSAs were completed in 2005 for the electric utility and in 2008 for the remaining six utilities (water, wastewater, CSO, stormwater, solid waste collection, and solid waste transfer station). A telecommunications utility was added in 2012 for the City -owned wireless mobile data system. Alternative rate designs for the electric, solid waste collection and solid waste transfer utilities should also be evaluated as a part of the COSA process. For example, due to the Bonneville Power Administration (BPA) Tiered Rates, the electric utility has added revenue risk because the recovery of fixed revenues from customers do not balance to the level of fixed cost expenses to the BPA. Alternative rate designs should be considered to evaluate different ways of allocating fixed and variable charges in a way that minimizes the economic impact on residential electric utility customers. Also, alternative rate designs for the solid waste collection utility may reveal new ways of evaluating service options for customer collections and recycling. N \UAC\ MEETINGS \UAC2013 \UAC040913\2013 -14 Utility COSA docx 2013 Utility Cost of Service Studies April 9, 2013 Page 2 As part of the consultant selection process, staff advertised a Request for Qualifications (RFQ) for utility COSAs. A total of 11 consultant inquiries were received and five consultants submitted their qualifications on the due date of March 1, 2013. The consulting groups included Baker Tilly, EES Consulting, FCS Group, Raftelis Financial Consultants, and SAIC Energy, Environment and Infrastructure. A proposal selection committee consisting of Mayor Cherie Kidd, Utility Advisory Committee Community Representative Dean Reed, Chief Financial Officer Byron Olson, Public Works and Utilities Director Glenn Cutler and myself unanimously determined that FCS Group submitted the most responsive proposal. Staff subsequently negotiated a scope of work and budget for the project. Full COSAs and rate design evaluations are scheduled for completion in 2013 for the electric, solid waste collection, and solid waste transfer station utilities. Revenue requirement studies will also be competed in 2013 for the water and wastewater utilities, with their COSAs and rate design evaluations conditionally budgeted for completion in 2014. A telecommunications utility revenue requirement study is also conditionally budgeted in 2014. Staff therefore proposes that the duration of the new Agreement be through March 31, 2015. The draft Agreement is now being reviewed by the City Attorney. An optional scope of work is separately listed and recommended by staff. The optional scope would review the City's excise tax reporting practices to identify any overpayments or underpayments of state taxes, providing information that the City may use to pursue a refund with the Depaittnent of Revenue or amend its reporting practices (either to take advantage of additional deductions or mitigate any tax liabilities). A similar study was conducted in 2008, which found the City's reporting practices complied with applicable tax laws, but some potential enhancements to those reporting practices could be made. Table 1 outlines the key tasks in the proposed consultant agreement, with costs budgeted for each task. Funding sources are from the approved 2013 budgets for the electric water, wastewater, solid waste collection, and solid waste transfer station utilities. The proposed budget is in excess of the funding approved in the 2013 budget. While the reasons for this will be discussed below, the required additional funding is available within the electric utility's annual budget by offsetting savings in other budget costs to support the proposed 2013 COSA. The current scope of work exceeds the approved budget for a number of reasons: 1) The evaluation of the adequacy of the City's capital improvement program to ensure that renewals and replacements are similar to annual depreciation is already bundled into the fee schedule, rather than treated as an optional item as proposed in the RFQ. Because the COSA results will feed into the City's strategic financial plan, staff strongly supports this inclusion. 2) The original budget did not include a budget for the consultant to meet with policy makers and staff during the development of the COSAs. 3) The complexity of the COSA process has increased significantly since the last studies were completed in 2005 and 2008, especially with the advent of BPA Tiered Rates. It is requested that the Utility Advisory Committee forward a favorable recommendation to City Council to approve and authorize the City Manager to sign the Utility Cost of Service Analysis Professional Services Agreement with the FCS Group in an amount not to exceed $145,876, ($105,106 will be obligated in 2013 and $40,770 will be conditionally budgeted for spending in 2014) and to make minor modifications to the agreement, if necessary. N \UAC\ MEETINGS \UAC2013 \UAC040913\2013 -14 Utility COSA docx TASKS Table 1 Summary of Utility Cost of Service Analysis Scope and Budget FCS Group Task Fee 2013 2013 2013 2014 Approved Budget Supplemental Conditional Budget Required Budget' Budget Electric Utility COSA 52,549 25,000 25,000 27,549 Telecommunications Utility Revenue 5,130 5,130 Requirements Water Utility COSA 29,075 15,000 13,895 15,180 Wastewater Utility COSA 28,705 15,000 14,405 14,300 Solid Waste Collection and Transfer Station 24,257 25,000 24,257 Utility COSA Sub -Total 139,716 80,000 77,557 27,549 34,610 Optional Excise 6,160 6,160 Tax Review Grand Total 145,876 80,000 77,557 27,549 40,770 OPTIONAL TASKS NOT RECOMMENDED FCS Group Task Fee 7b. Capital Improvements Renewals and Replacements Bundled in COSA 7c. Water Wastewater System Development Charge 7,370 7d. Municipal Code Title 3 (Fees) Evaluation 7,560 I The required $26,918 will be re- programmed from cost savings already affected in the electric utility's procurement and operating budget for 2013. 2 The condition is that the proposed funding must be contained in the approved 2014 City budget. N \UAC\ MEETINGS \UAC2013 \UAC040913\2013 -14 Utility COSA docx Total Budget 52,549 5,130 29,075 28,705 24,257 139,716 6,160 145,876 AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF PORT ANGELES AND FCS GROUP, INC. RELATING TO: UTILITY COST OF SERVICE STUDIES THIS AGREEMENT is made and entered into this day of 2013, by and between THE CITY OF PORT ANGELES, a non charter code city of the State of Washington, (hereinafter called the "CITY and FCS Group, Inc., a Washington Corporation authorized to do business in the state of Washington (hereinafter called the "CONSULTANT WHEREAS, the CITY desires professional services related to cost of service studies for its electric, telecommunications, water, wastewater, solid waste collection, and solid waste transfer station utilities; and WHEREAS, the CITY desires to engage the professional services and assistance of a qualified consulting firm to perform the scope of work as detailed in Exhibit A, and WHEREAS, the CONSULTANT represents that it is in full compliance with the statutes of the State of Washington for professional registration and /or other applicable requirements, and WHEREAS, the CONSULTANT represents that it has the background, experience, and ability to perform the required work in accordance with the standards of the profession, and WHEREAS, the CONSULTANT represents that it will provide qualified personnel and appropriate facilities necessary to accomplish the work; NOW, THEREFORE, in consideration of the above representations and the terms, conditions, covenants, and agreements set forth below, the parties hereto agree as follows: I SCOPE OF WORK The scope of professional services to be performed and the results to be achieved by the CONSULTANT shall be as detailed in the attached Exhibit A and shall include all services and material necessary to accomplish the work. The CITY may review the CONSULTANT'S work product, and if it is not satisfactory, the CONSULTANT shall make such changes as may be required by the CITY. Such changes shall not constitute "Extra Work" as related in Section XII of this Agreement. The CONSULTANT agrees that all services performed under this Agreement shall be in accordance with the standards of the profession and in compliance with applicable federal, state and local laws. The Scope of Work may be amended upon written approval of both parties. PW 0410_01 Professional Services Agreement Page 1 of 7 Revised [05/12/06] II OWNERSHIP OF DOCUMENTS Upon completion of the work, all documents, exhibits, photographic negatives, or other presentations of the work shall become the property of the CITY for use without restriction and without representation as to suitability for reuse by any other party unless specifically verified or adapted by the CONSULTANT. H owever, any alteration of the documents, by the City or by others acting through or on behalf of the City, will be at the City's sole risk. III DESIGNATION OF REPRESENTATIVES Each party shall designate its representatives in writing. The CONSULTANT'S representative shall be subject to the approval of the CITY. IV TIME OF PERFORMANCE The CONSULTANT may begin work upon execution of this Agreement by both parties and the duration of the Agreement shall extend through March 31, 2015. The work shall be completed in accordance with the schedule set forth in the attached Exhibit C. V PAYMENT The CITY shall pay the CONSULTANT as set forth in this section of the Agreement. Such payment shall be full compensation for work performed, services rendered, and all labor, materials, supplies, equipment and incidentals necessary to complete the work. A. Payment shall be on the basis of the CONSULTANT'S standard billing rates as set forth in Exhibit B multiplied by the actual hours worked, cost for actual labor, overhead and profit plus CONSULTANT'S direct non -salary reimbursable costs as set forth in the attached Exhibit B. B. The CONSULTANT shall submit invoices to the CITY per schedule in Exhibit B. Invoices shall detail the work, hours, employee name, and hourly rate; shall itemize with receipts and invoices the non -salary direct costs; shall indicate the specific task or activity in the Scope of Work to which the costs are related; and shall indicate the cumulative total for each task. C. The CITY shall review the invoices and make payment for the percentage of the project that has been completed less the amounts previously paid. D. The CONSULTANT invoices are due and payable within 30 days of receipt. In the event of a disputed billing, only the disputed portion will be withheld from payment. E. Final payment for the balance due to the CONSULTANT will be made after the completion of the work and acceptance by the CITY. F. Payment for "Extra Work" performed under Section XII of this Agreement shall be as agreed to by the parties in writing. PW 0410_01 Professional Services Agreement Page 2 of 7 Revised [05/12/06] VI MAXIMUM COMPENSATION Unless otherwise agreed to in writing by both parties, the CONSULTANT'S total compensation and reimbursement under this Agreement, including labor, direct non -salary reimbursable costs and outside services, shall not exceed the maximum sum of $145,876. The budget for each task is as set forth in the attached Exhibit B. Budgets for task(s) may be modified upon mutual agreement between the two parties, but in any event, the total payment to CONSULTANT shall not exceed $145,876, and of which $105,106 will be obligated in 2013 and $40,770 will be conditionally budgeted for spending in 2014. VII INDEPENDENT CONTRACTOR STATUS The relation created by this Agreement is that of owner independent contractor. The CONSULTANT is not an employee of the City and is not entitled to the benefits provided by the City to its employees. The CONSULTANT, as an independent contractor, has the authority to control and direct the performance of the services to be provided. The CONSULTANT shall assume full responsibility for payment of all Federal, State, and local taxes or contributions imposed or required, including, but not limited to, unemployment insurance, Social Security, and income tax. VIII EMPLOYMENT Employees of the CONSULTANT, while engaged in the performance of any work or services under this Agreement, shall be considered employees of the CONSULTANT only and not of the CITY, and claims that may arise under the Workman's Compensation Act on behalf of said employees while so engaged, and any and all claims made by a third party as a consequence of any negligent act or omission on the part of the CONSULTANT'S employees while so engaged, on any of the work or services provided to be rendered herein, shall be the sole obligation and responsibility of the CONSULTANT. In performing this Agreement, the CONSULTANT shall not employ or contract with any CITY employee without the City's written consent. IX NONDISCRIMINATION The CONSULTANT shall conduct its business in a manner, which assures fair, equal and non discriminatory treatment of all persons, without respect to race, creed or national origin, or other legally protected classification and, in particular: A. The CONSULTANT shall maintain open hiring and employment practices and will welcome applications for employment in all positions, from qualified individuals who are members of minorities protected by federal equal opportunity /affirmative action requirements; and, B. The CONSULTANT shall comply with all requirements of applicable federal, state or local laws or regulations issued pursuant thereto, relating to the establishment of non discriminatory requirements in hiring and employment practices and assuring the service of all persons without discrimination as to any person's race, color, religion, sex, Vietnam era veteran status, disabled veteran condition, physical or mental handicap, or national origin. PW 0410_01 Professional Services Agreement Page 3 of 7 Revised [05/12/06] X SUBCONTRACTS A. The CONSULTANT shall not sublet or assign any of the work covered by this Agreement without the written consent of the CITY. B. In all solicitation either by competitive bidding or negotiation made by the CONSULTANT for work to be performed pursuant to a subcontract, including procurement of materials and equipment, each potential subconsultant or supplier shall be notified by the CONSULTANT of CONSULTANT'S obligations under this Agreement, including the nondiscrimination requirements. XI CHANGES IN WORK Other than changes directed by the CITY as set forth in Section I above, either party may request changes in the scope of work. Such changes shall not become part of this Agreement unless and until mutually agreed upon and incorporated herein by written amendments to this Agreement executed by both parties. XII EXTRA WORK The CITY may desire to have the CONSULTANT perform work or render services in connection with this project, in addition to the scope of work set forth in Exhibit A and minor revisions to satisfactorily completed work. Such work shall be considered as "Extra Work" and shall be addressed in a written supplement to this Agreement. The CITY shall not be responsible for paying for such extra work unless and until the written supplement is executed by both parties. XIII TERMINATION OF AGREEMENT A. The CITY may terminate this Agreement at any time upon not less than ten (10) days written notice to the CONSULTANT. Written notice will be by certified mail sent to the CONSULTANT'S designated representative at the address provided by the CONSULTANT. B. In the event this Agreement is terminated prior to the completion of the work, a final payment shall be made to the CONSULTANT, which, when added to any payments previously made, shall compensate the CONSULTANT for the percentage of work completed. C. In the event this Agreement is terminated prior to completion of the work, documents that are the property of the CITY pursuant to Section 11 above, shall be delivered to and received by the CITY prior to transmittal of final payment to the CONSULTANT. XIV INDEMNIFICATION /HOLD HARMLESS CONSULTANT shall defend, indemnify and hold the CITY, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or resulting from the negligent acts, errors or omissions of the CONSULTANT in performance of this Agreement, except for injuries and damages caused by the sole negligence of the CITY. PW 0410_01 Professional Services Agreement Page 4 of 7 Revised [05/12/06] The CITY agrees to indemnify the CONSULTANT from any claims, damages, losses, and costs, including, but not limited to, attorney's fees and litigation costs, arising out of claims by third parties for property damage and bodily injury, including death, caused solely by the negligence or willful misconduct of the CITY, CITY's employees, or agents in connection with the work performed under this Agreement. If the negligence or willful misconduct of both CONSULTANT and CITY (or a person identified above for whom each is liable) is a cause of such damage or injury, the Toss, cost, or expense shall be shared between the CONSULTANT and the CITY in proportion to their relative degrees of negligence or willful misconduct and the right of indemnity shall apply for such proportion. Should a court of competent jurisdiction determine that this Agreement is subject to RCW 4.24.115, then, in the event of liability for damages arising out of bodily injury to persons or damages to property caused by or resulting from the concurrent negligence of the CONSULTANT, the CITY, and the officers, officials, employees, and volunteers of either, the CONSULTANT'S liability hereunder shall be only to the extent of the CONSULTANT'S negligence. It is further specifically and expressly understood that the indemnification provided herein constitutes the CONSULTANT'S waiver of immunity under Industrial Insurance, Title 51 RCW, solely for the purposes of this indemnification. This waiver has been mutually negotiated by the parties. The provisions of this section shall survive the expiration or termination of this Agreement. However, the CONSULTANT expressly reserves its rights as a third person set forth in RCW 51.24.035. XV INSURANCE The CONSULTANT shall procure and maintain for the duration of the Agreement, insurance against claims for injuries to persons or damage to property which may arise from or in connection with the performance of the work hereunder by the CONSULTANT, its agents, representatives, employees or subcontractors. No Limitation. CONSULTANT'S maintenance of insurance as required by the agreement shall not be construed to limit the liability of the CONSULTANT to the coverage provided by such insurance, or otherwise limit the CITY'S recourse to any remedy available at law or in equity. Failure on the part of the CONSULTANT to maintain the insurance as required shall constitute a material breach of contract, up which the City may, after giving five business days notice to the CONSULTANT to correct the breach, immediately terminate the Agreement, or, at its discretion, procure or renew such insurance and pay any and all premiums in connection therewith, with any sum so expended to be repaid to the City on demand, or at the sole discretion of the City, offset against funds due the CONSULTANT from the City. A. Minimum Scope of Insurance CONSULTANT shall obtain insurance of the types described below: 1. Automobile Liability insurance covering all owned, non owned, hired and leased vehicles. Coverage shall be written on Insurance Services Office (ISO) form CA 00 01 or a substitute PW 0410_01 Professional Services Agreement Page 5 of 7 Revised [05/12/06] form providing equivalent liability coverage. If necessary, the policy shall be endorsed to provide contractual liability coverage; and, 2. Commercial General Liability insurance shall be written on ISO occurrence form CG 00 01 and shall cover liability arising from premises, operations, independent contractors, and personal injury and advertising injury. The City shall be named as an insured under the CONSULTANT'S Commercial General Liability insurance policy with respect to the work performed for the City; and, 3. Workers' Compensation coverage as required by the Industrial Insurances laws of the State of Washington; and 4. Professional Liability insurance appropriate to the CONSULTANT'S profession. B. Minimum Amounts of Insurance CONSULTANT shall maintain the following insurance limits: 1. Automobile Liability insurance with a minimum combined single limit for bodily injury and property damage of $1,000,000 per accident. 2. Commercial General Liability insurance shall be written with limits no Tess than $1,000,000 each occurrence, $2,000,000 general aggregate. 3. Professional Liability insurance shall be written with limits no less than $1,000,000 per claim and $1,000,000 policy aggregate limit. C. Other Insurance Provisions The insurance policies are to contain, or be endorsed to contain, the following provisions for Automobile Liability, Professional Liability and Commercial General Liability insurance: 1. The CONSULTANT'S insurance coverage shall be primary insurance as respect the City. Any insurance, self- insurance, or insurance pool coverage maintained by the City shall be excess of the CONSULTANT'S insurance and shall not contribute with it. 2. The CONSULTANT shall provide the City and any additional insureds with written notice of any policy cancellation, within two business days of their receipt of such notice. 3. Any payment of deductible or self- insured retention shall be the sole responsibility of the CONSULTANT. 4. The CONSULTANT'S insurance shall contain a clause stating that coverage shall apply separately to each insured against whom claim is made or suit is brought, except with respects to the limits of the insurer's liability. PW 0410_01 Professional Services Agreement Page 6 of 7 Revised [05/12/06] D. Acceptability of Insurers Insurance is to be placed with insurers with a current A.M. Best rating of not less than A:VII. E. Verification of Coverage CONSULTANT shall furnish the City with original certificates and a copy of the amendatory endorsements, including but not necessarily limited to the additional insured endorsement, evidencing the insurance requirements of the CONSULTANT before commencement of the work. XVI APPLICABLE LAW This Agreement shall be construed and interpreted in accordance with the laws of the State of Washington, and in the event of dispute the venue of any litigation brought hereunder shall be Clallam County. XVII EXHIBITS AND SIGNATURES This Agreement, including its exhibits, constitutes the entire Agreement, supersedes all prior written or oral understandings, and may only be changed by a written amendment executed by both parties. The following exhibits are hereby made a part of this Agreement: Exhibit A Scope of Work Exhibit B Budget Costs for Each Task Exhibit C Schedule for the Work IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. CITY OF PORT ANGELES APPROVED AS TO FORM: DAN MCKEEN, CITY MANAGER WILLIAM E. BLOOR, CITY ATTORNEY FCS GROUP, INC. ATTEST: ANGIE SANCHEZ VIRNOCHE, PRINCIPAL JANESSA HURD, CITY CLERK PW 0410_01 Professional Services Agreement Page 7 of 7 Revised [05/12/06] City of Port Angeles Utility Cost of Service Studies EXHIBIT A SCOPE OF WORK The following scope of services has been agreed upon by the City or Port Angeles and FCS GROUP for the Utility Cost of Service Studies. The scope of services has been separated into tasks proposed to be completed in 2013 and tasks anticipated to be completed in 2014 if contained in the City's approved budget. SCOPE OF WORK TO BE COMPLETED IN 2013 ELECTRIC UTILITY Revenue Requirement Budget 2013 and projected 2014 2016 Customer statistics validation of rate revenue Customer class load projection (include new TOU customer classes) Power cost projection Budget revenue and expenses (O &M, taxes, debt service and capital from rates) Evaluate if facility replacement fund contributions should continue Capital funding plan (2 scenarios: debt /cash split and annual depreciation funding Annual rate strategy (2014 -2016) Up to two rate strategy sensitivity analyses Cost of Service Review functionalization, classification and allocation Adjust power cost classification and allocation as appropriate Rate Design Evaluate fixed and variable charges Up to two alternative rate options Bill comparisons Update pole attachment fees 1 City of Port Angeles Utility Cost of Service Studies WATER UTILITY Revenue Requirement Budget 2013 and projected 2014 2016 Customer statistics validation of rate revenue Budget revenue and expenses (O &M, taxes, debt service and capital from rates) Evaluate adequacy of transfer from water treatment plant fund to offset operating costs Capital funding plan (2 scenarios: debt /cash split and annual depreciation funding) Annual rate strategy (2014 -2016) Up to two rate strategy sensitivity analyses WASTEWATER UTILITY Revenue Requirement Budget 2013 and projected 2014 2016 Include CSO financing plan 2014 -2016 Customer statistics validation of rate revenue Budget revenue and expenses (O &M, taxes, debt service and capital from rates) Capital funding plan (2 scenarios: debt /cash split and annual depreciation funding) Annual rate strategy (2014 -2016) Two rate strategy sensitivity analyses (harbor clean -up liability) SOLID WASTE (COLLECTION AND TRANSFER STATION) Revenue Requirement Budget 2013 and projected 2014 2016 Customer statistics validation of rate revenue Review contracts and apply appropriate indices per contract Budget revenue and expenses (O &M, taxes, debt service and capital /equipment) Evaluate post closure maintenance fund 2 City of Port Angeles Utility Cost of Service Studies Annual rate strategy (2014 -2016) Two rate strategy sensitivity analyses s Cost of Service Review functionalization, classification and allocation Evaluate cost of minimum fee, rate waiver /reductions, allocation of costs to entities and self haulers, co- composting operations, impacts of change in pick- up frequency s Rate Design Two alternative rate option (cost of service or phase -in cost of service) SCOPE OF WORK TO BE COMPLETED IN 2014 TELECOMMUNICATIONS s Revenue Requirement Budget 2014 and projected 2015 2017 Evaluate ability to transfer funds to general fund Evaluate sufficiency of funds to cover costs WATER UTILITY s Cost of Service Review functionalization, classification and allocation Calculate fire cost liability s Rate Design Evaluate effectiveness of conservation rate structure (need customer statistics) Evaluate fixed and variable charges Up to two alternative rate op Lion Bill comparisons WASTEWATER UTILITY s Cost of Service Review functionalization, classification and allocation 3 City of Port Angeles Utility Cost of Service Studies Review cost of service to septic haulers Rate Design Evaluate fixed and variable charges Two alternative rate option (commodity rate structure for WW and CSO) Bill comparisons EXCISE TAX REVIEW Review the City's current methodology for calculating state excise taxes and how revenues are categorized for tax reporting purposes. Review supporting tax worksheets to determine potential areas of overpayment and underpayment. Review applicable legal references within the Revised Code of Washington (RCW) and Washington Administrative Code (WAC). 4 City of Port Angeles Utility Cost of Service Studies EXHIBIT B BUDGET BY TASK Task H000l Rol Task 1 Data Collection Task 6 1 Revenue Requirement 01 Load Projection Customer Stales ics 82- Power Cost Projection Task C I Cost 04 Service (new customer classes /power dasYRcalion /allocation) Task D 1 Rate Design D 2- Update Pole Alt achment Fees Total Electric UBidy Task A 1 Data CdlecHOn Task 6 1 Revenue Requirement Total Telecommunications TaskA 1 Data Collection Task 6 I Revenue Requirement 8 1 Customer Statistics Vabdatlon TaskC 1 Cosi o5 Service Task El 1 Rate Design Total Water U6Uty Wastewater Utility TaskA 1 Data Collection Task 6 1 Revenue Requirement 6 1 Customer Statistics Validation 8 2- CSO 89095181 Plan Task C 1 Cost ot Service task D 1 Rate Design (commodity rate option) Total Wastewater u16ty 4 $4e( $480. $0 Staid W asie(Collection i Transfer Staff 1 Task 1 Data Collection Task 01 Cost d Service Task D 1 Rate Design 1 Tota1 Solid Waste UB1Hy TOTAL TECHNICAL ANALYSIS Process Elements Presentations 14) Moreno! Development *Meeting Draft and Final Report Total Process Elements TOTAL LABOR ALL Technology Charge Travel Two 141 Onsde meetings I mieoge and I erry) Total Expenses Total Project Labor and Expenses Optional Services Excise Tax Review 1 Techocal review only) 1 T9401 Project Labor and Expenses City of Port Angeles Utility Cost of Service Studies Task 61 Revenue Requirement 44 6160 6160 81- Customer Statistics Valldatlon 32 5 50 5 5o 748 $124410 $89800 $34610 a� (AR..F 6 5810 $811 40 748( 7 4 56 980( 980C 40 688( 688( 64 II 56( 11 56( 36 6440 644( 22 3 26( 3 260 264 $46 o. 544,2 4 $370 $0 34 4 760 6 36 30 5060 5060 52 32 156 525 01071. 5151 6 28 28 3 96 4 730 16 1 76( 42 7 590 38 6710 0 6710 36 660( 6606 6 1321 5216001 521 38 44 82 1.18. tax•. ,s. awry, $810 484( 9 46( 573 $810 Rf0904 581( 484( $810 3 960 4 730 1 76( 2860 2860 $7 190 67190 $7340 $734( $1453( $14530 5138 640 5104,330 Expenses $c $776 1776 $7761 $776 1 $139,7161 $105,1061 80 $370 4760 IC 946C 573 08 7590 $0 0 $34,6101 $61N$ $6160 1 $145,8761 $105,1061 $40,770 City of Port Angeles Utility Cost of Service Studies EXHIBIT C SCHEDULE Section 8. (page 5 of 8) of the Request for Qualifications identified the key milestones and schedule for the study. City Council acceptance of agreement and notice to proceed Consultant submits draft spreadsheet models reports Consultant submits draft rate study presentation Consultant presentation to senior management Consultant presentation to Joint Solid Waste Advisory Board Consultant presentation to Utility Advisory Committee Consultant presentation to City Council City Council considers proposed rate ordinance amendments Consultant delivers final reports and electronic files 6 April 16, 2013 August 23, 2013 September 6, 2013 September 20, 2013 To be determined October 8, 2013 October 15, 2013 November 5, 2013 November 30, 2013 „i4i -4 :9 9-9- 7 ,i' ,,,r.,:s•-• r i;•,.', .4 Pg@p@K=I WcE@GD 11 20T 9Ittelig Os book wtRP. Titgil galgts. licom el uclin p op° a in& won binding re dilly post-eonsumer recy table JJ 2„. ufgoggfck oat olt4 Maw Efol. amar. Rgv@bA climb badimo dilv CcA df Un7ke aude. Offliomo4i !lot 0 a 114 .0.<0.> GROUP CEw d &Hge CI 'Y'N's7 cwoupocom •:o> F S GROUP Solutions- Oriented Consulting Firm Headquarters Redmond Town Center 7525 166 Ave NE Suite D -215 Redmond, Washington 98052 Serving the Western U.S. and Canada since 1988 Washington 1 425 867.1802 Oregon 1 503 841 6543 California 415 445 8947 March 1, 2013 Director of Public Works Utilities City of Port Angeles 321 East Fifth Street PO Box 1150 Port Angeles, WA 98632 Subject: City of Port Angeles Utility Cost of Service Studies Dear Mr. Cutler and proposal review and selection committee: Thank you for the opportunity to propose on the City of Port Angeles (City) comprehensive utility cost of service studies project. As requested, our proposal includes details concerning our company experience, key personnel and their qualifications, project examples, and our approach. As the proposed study manager for this engagement, I wanted to begin by introducing you to some of our team highlights: FCS GROUP has worked with the City since 2008 when it executed the previous comprehensive utility cost of service study. I have worked with the City since the late 1990s. We most recently completed a small electric utility tax project in 2012. Benefit: We know the City. We have completed over 1,250 independent utility rate studies, nearly 800 of which are in Washington State. Benefit: We have substantial local /regional utility rate experience. Among those 800 projects, a significant percentage of those have been for cities of a similar size and /or demographic as compared to Port Angeles. Although each utility has its own unique complexities, we can draw from our experience with cities like Centralia, Bainbridge Island, Camas, Port Townsend and Bremerton to support your needs. Benefit: We apply our experience with similar systems. Founded in 1988, FCS GROUP is celebrating its 25 year in supporting city governments. As an objective and independent finance focused firm. We help establish practical, sustainable utility rates and charges. Benefit: We are established, independent and focused. Our key staff includes a team of individuals with the availability and capacity to quickly address all of your utility needs inclusive of electric, water, wastewater, and solid waste. Benefit: We have an unrivaled depth and breadth of Northwest -based technical resources. Time and again, our project team has worked with citizen groups and city Councils on highly technical and politically sensitive studies and achieved positive results. Benefit: Our commitment to effective communication builds consensus and gets positive results. We look forward to a possible interview and the opportunity to continue our relationship with the City. Please do not hesitate to contact us at (425) 867 -1802 x 230 or angies @fcsgroup.com. Sincerely, FCS GROUP S ;tn/t.r:t Angie Sanchez Virnoche Study Manager 1 1 LETTER OF INTEREST AND INTRODUCTION City of Port Angeles Utility Cost of Service Studies 2 1 QUALIFICATIONS AND PRIOR PERFORMANCE STAFF EXPERIENCE After successfully completing the previous 2008 -2009 comprehensive utility rate studies for the City of Port Angeles, Angie Sanchez Virnoche will again anchor our FCS GROUP team as the study manager. Exhibit 1 lists our proposed key staff, inclusive of our core staff (Angie, Karyn and Sergey), and their experience with the anticipated scope of work. The final column identifies their experience with our two highlighted projects. Angie Sanchez Virnoche I Karyn Johnson Sergey Project Tarasov Consultant Andy Technical Evancho Advisor Catherine Often Analyst Chris Gonzalez Nathan Reese City or Port Angeles (PA) City of Centralia Exhibit 1 I Staff Experience with Anticipated Scope of Work Study Manager Principal Tax Specialist Cost Allocation Specialist 2008 -2012 MI III 1995 -2012 2 Karyn Johnson Angie Sanchez Virnoche Sergey Tarasov Principal -In- Charge Study Manager Project Consultant O 0 0 ;FCS GROUP Port Angeles, Centralia Centralia Port Angeles, Centralia Port Angeles Centralia Senior -level experience Mid to Project Consultant -level experience 0 Junior -level with requisite experience COMPREHENSIVE RATE STUDY EXPERIENCE FCS GROUP, established in 1988, is celebrating its 25th anniversary of delivering sound financial, economic and management consulting solutions to public agency challenges. In that time we have completed over 2,200 engagements, including over 1,250 electric, water, wastewater, solid waste and stormwater utility rate studies. Exhibit 2 summarizes experience on two Washington State comprehensive utility rate studies, both of which were completed within the past 3 -5 years. The last column identifies key proposed staff who were involved. Appendix A includes Centralia report examples. Resumes for key proposed staff are included in Appendix B. Exhibit 2 1 Summary of Comprehensive Rate Studies ASV, ST, CG ASV, KJ, ST, NR 1 City of Port Angeles Utility Cost of Service Studies City of Port Angeles Electric, Rate Stu D ater, Wastewater, and Solid Waste Utility les References Glen Cutler, Director of Public Works (360) 417 -4800 ph Phil Lusk, Deputy Director of Power and Telecommunication Systems (360) 417 -4703 ph Larry Dunbar, Ellensburg Energy Services Director (formerly with the City of Port Angeles) (509) 962 -7124 ph Angie Sanchez has worked with the City since the late 1990's on water, wastewater, solid waste and electric utility rate study issues. Most recently, Angie completed a comprehensive rate study for the City's water, wastewater, and solid waste utilities in 2008- 2009. Subsequently, Angie completed a 2009 comprehensive electric cost of service rate study and a 2012 electric utility tax review. Specific elements included the following: Electric Six year financial plan and rate strategy. Forecast of BPA purchased power costs changes and scenario development to determine effects of changing power costs. Forecasted load data based on historical year and anticipated growth rates by customer class. Projected revenue and power costs based on load data forecast. Reviewed pole attachment fees. Reviewed public utility codes for improvements and simplification. Reviewed the state utility excise tax returns for accuracy. Held multiple meetings with the Utility Advisory Committee and City staff to review results, assumptions, and recommendations. Water and Wastewater Developed a six -year financial plan. Evaluated adequacy of target fund balances. Developed a capital funding plan for $54.3 million in capital projects. 3 Key Personnel Involved Angie Sanchez Virnoche Study Manager Sergey Tarasov Project Analyst Chris Gonzalez Project Analyst •FCS GROUP h�artr srro Naste aria Soho ;fir Col5e ,vrce Rate S'ua Fin Report s r ite GROLIP Evaluated the adequacy of customer class distinctions. Phased -in cost of service results by class. Updated and phased -in water and sewer SDCs increases over three years. Updated water and sewer connection charges Developed a three -block residential conservation rate structure to comply with House Bill 1338 water efficiency rule. Created a separate irrigation class composed of both commercial and residential customers to take advantage of state excise tax exemption. Solid Waste Collections and Transfer Developed an independent financial plan and rate strategy for the solid waste collections and transfer station operations. The transfer station study included recalibrating costs to account for actual tonnage and ticket data previously estimated. Completed a forecast of costs based on fuel and consumer price indices related to the Waste Connections contract. Provided scenarios to evaluate impacts of volatile fuel costs. Incorporated assumptions for the recent down City of Port Angeles Utility Cost of Service Studies turn of the economy that included reduced tonnage and revenue (due to housing slowdown). Set yard waste rates to encourage this waste stream thereby deferring the need to ship bio- solids out at a cost to the transfer station entity. Rates were set for: municipal solid waste, asbestos, contaminated soils, metals and white goods recycling, WWTP bio- solids and compost. City of Centralia Electric, Water and Wastewater Utility Rate Studies and Cost Allocation Study References Kahle Jennings, Public Works Director (360) 417 -7512 ph Water and Wastewater Rates Randi Leach, Financial Officer (360) 417 -7512 ph Water and Wastewater Rates Ed Williams, PE, General Manager (Retired) (360) 740 -4434 (home), 360- 807 -3127 (cell) Electric Rates Bradley Ford, Lewis County PUD (former Centralia Finance Director) (360) 748 -9261 ph Cost Allocation Study w iTRALtA R Ittrifr4 The City of Centralia first engaged FCS GROUP in 1998 to develop a Other Factors comprehensive water and wastewater rate study. Since then, we have continued providing on -call consulting services for those utilities in addition to supporting the City with other financial analyses such as the stormwater utility formation and an appraisal assessing the potential impacts to electric customers of selling the City owned electric utility to Public Utility District #1 of Lewis County. See Appendix A for example reports from Centralia. Electric Angie has worked with the City on electric rate and cost of service studies in 2006, 2008, 2009 and most recently 2012. Developed a 6 -year revenue requirement forecast and rate transition plan. 4 The cost of service incorporated the results of the first weight study completed by the City. Reviewed public utility codes for improvements and simplification and state utility excise tax returns for accuracy. Held multiple meetings with the Utility Advisory Committee and City staff to review results, assumptions and. recommendations before presentation to Council. Key Personnel Involved Karyn Johnson Managing Principal for Water and Wastewater Angie Sanchez Virnoche Managing Principal for Electric Sergey Tarasov Project Analyst for Electric Nathan Reese Project Consultant for Cost Allocation FCS GROUP Projected power costs for the City's own hydroelectric facility, under the BPA Tiered Rate Methodology and incorporating the recent revisions to the transmission rate methodology. Developed a capital funding plan for $40.5 City of Port Angeles Utility Cost of Service Studies million in capital needs and provided rate impact scenarios based on priority ranking of capital projects. Conducted 36 sensitivity analyses evaluating different capital funding levels, project timing, project costs, and debt service coverage impacts. Prepared an issue paper on the role of long -term debt in capital financing. Conducted a cost of service analysis to equitably allocate system costs to specific customer classes. Developed new allocation factors to align with the Tiered Rate Methodology. Developed two alternative customer classes from the existing large general service based on a detailed customer statistics and bill frequency analysis. Developed a tiered rate methodology for the residential class. Developed four alternative rate increases assuming different levels of fixed cost recovery. Evaluated financial impacts of a new large single load on the system under different cost sharing approaches. Compared sample customer bills for each rate option proposed and to neighboring systems. Held three work sessions with the City Council. Developed Q &A Water and Wastewater In 2010 FCS GROUP and Karyn Johnson updated the sewer rate study initially performed in 2004, completed a water rate study, and developed capital facilities charges for both utilities. Updated financial policies to incorporate phase in strategies for system reinvestment funding; a change in practice from use of capital facilities charges for debt service to capital project funding only; and incorporation of debt management policies. 5 >FCS GROUP Updated capital facilities charges to reflect current and planned infrastructure and system capital. Developed a phase -in strategy to reach full cost recovery over a three -year period, incorporating inflationary adjustments. Evaluated four (4) alternative capital programs, funding levels, and associated rate impacts. Evaluated cost of service by customer class and developed phase -in strategies to achieve full cost of service within three years, while mitigating customer impacts and promoting economic development. Designed alternative rate structures to meet City pricing objectives. For the water utility class specific rates were developed for each customer class to recognizing differing service requirements (single family residential, multi- family residential, commercial /industrial, and irrigation. A three tiered conservation rate structure was developed for single family residential customers. Updated outside city wastewater rates to incorporate an outside city multiple, consistent with the water utility. Calculated miscellaneous utility charges to recover unique utility costs that are not applicable to all customers on the system. Other Factors In 2010 FCS GROUP and Nathan Reese prepared a full -cost allocation plan for the City. The study was initiated to update its cost allocation plan and improve its cost allocation practices. The approach and scope of work involved defining the uses and goals for the plan; identifying indirect services, their costs, and allocation factors; developing a flexible and adaptable allocation model; and preparing the written plan. City of Port Angeles Utility Cost of Service Studies 3 1 PROPOSED STAFF Angie Sanchez Virnoche Study Manager Karyn Johnson Principal Sergey Tarasov Project Consultant Andy Evancho Technical Advisor Analyst Chris Gonzalez Tax Specialist Nathan Reese Cost Allocation Specialist ABM Active APWA Member and Conference Presenter 20 301 9 Active AWC Member and Contributor wastewater and solid waste studies Project consultant with special expertise in cost allocation, city government organizational issues, and >50 cost and fee studies. O te AWWA AWWA National Rates and Charges Committee 6 NaMwast Public Power Asaoeiatton NWPPA Associate Member SWANA Evergreen Chapter Board of Directors •FCS GROUP Exhibit 3 summarizes the years of experience (and with FCS GROUP) possessed by staff in addition to notes on their local and relevant experience. Appendix B resumes include additional project information for each. Exhibit 3 1 Proposed Staff Summary of Experience and Years with FCS GROUP Summary of Local and Relevant Experience Proposed Key Staff Total Yrs Exp 1 and Project Role Yrs w FCS GROUP >200 utility rate and financial studies. Managed prior Port Angeles rate studies Serves as the FCS GROUP expert on electric and solid waste utility rates and has extensive water and sewer utility experience. Oversees Sergey, Andy, Catherine, and Chns. >200 utility rate and financial studies. FCS Group Director responsible 28 i 11 for example Centralia project and has extensive water, sewer and solid waste rate experience. Oversees Nathan. Nearly 100 utility rate and financial studies including previous Port 8 1 Angeles rate study. Broad experience in water, wastewater, electric, and solid waste 30 years of public industry experience including 27 years spent at Tacoma Public Utilities where he managed power and water rates Catherine Otten 8 1 2 Utility rate studies throughout Western Washington including >20 water, Project manager with special experience in excise taxes including 10 1 10 recent Port Angeles electric excise tax and >100 utility rate and financial studies for water, wastewater and stormwater. FCS GROUP personnel and management are active members, participants, contributors and leaders within the professional associations that establish the standards for the effective management of resources and set the guidelines for achieving fiscally sustainability utilities including the American Public Works Association (APWA), Association of Washington Cities (AWC), American Water Works Association (AWWA), Northwest Public Power Association (NWPPA), Solid Waste Association of North America (SWANA), and Washington Finance Officers Association (WFOA). FCS GROUP'S staff actively gives back to the cities and utilities that support our communities! Active WFOA Member, Committee Participant and Presenter City of Port Angeles Utility Cost of Service Studies 4 1 UNDERSTANDING OF CITY NEEDS The utility cost of service studies requested by the City is comprehensive in its requirements. The services will be accomplished through completion of a comprehensive rate study process that includes a revenue requirement, cost of service and rate design evaluation. The deliverables will inform the 2013 Strategic Financial Plan through evaluation of existing rate levels, development of a capital funding plan, formation of a multi -year rate strategy and establishment of equitable and cost of service based rates. The studies will serve as a tool for maintaining financially sustainable ui ilities now and into the future. KEY ANALYTICAL TASKS d Project Relevance 1 1 Revenue Requirement Analysis WHAT Establishes a sustainable, multi -year (2014 -2016) rate strategy that meets the projected total financial needs of each utility through the generation of sufficient ongoing revenue with minimal reliance on reserves. HOW Analyzes cash flow needs by identifying capital improvement needs, expenses incurred to operate and manage the system, new and existing debt repayment obligations and fisca;. policy achievement. 2 I Cost of Service Analysis WHAT Establishes a defensible basis for assigning "cost shares" and establishing "equity" for system customers. HOW The COSA develops a series of functional allocations that distribute cost pools to classes of customers linked to a proportionate share of costs required to serve their demand. 3 I Rate Design WHAT Rate design determines how the target level of revenue will be generated (fixed v. variable charges). HOW Rate design considers both the level (amount of revenue that must be generated) and structwe (how the revenue will be collected or bill assessed). Each developed rate design alternative should generate sufficient revenue to meet the revenue requirement forecast and begin to address any material inequities identified in the COSA findings. In addition, rate designs will be consistent with the City s fiscal policies, billing system capabilities, and goals. 7 ••>FCS GROUP Offers the City the tool to evaluate and analyze future changes in the economic environment and craft a rate strategy to meet its short and long- term objectives. Results will inform the City's Strategic Financial Plan regarding projected revenue and expense levels, capital funding plan, use of reserves, identification of new debt requirements, and the annual rate strategy required to meet each system's total needs independently. Establishes the necessary amount of annual revenue to be recovered from the rates for each class. Identifies any warranted shifts in cost burden that could improve equity between customers from the existing rate structure. Identifies the guidelines for unit cost recovery from each cost category (monthly fixed fee and variable charges fee). Allows for innovative approaches to cost recovery and can be a tool for sending the appropriate price signals to meet the City objectives. Due to the increased revenue volatility over the last few years, fixed and variable costs will be evaluated and aligned to better reflect how costs are incurred. Rate design process will aim to balance the priorities of promoting conservation and preserving revenue stability, and liquidity. Proposed rates will be split into the portion related to operating costs and the portion related to capital costs. City of Port Angeles Utility Cost of Service Studies IMPORTANT RATE STUDY ISSUES FOR CONSIDERATION Electric The most significant issue for the electric cost of service is to incorporate the Bonneville Power Administration (BPA) Tiered Rate Methodology. The last cost of service study was conducted under the old melded BPA methodology. The City's power costs are now incurred differently with the majority of costs now fixed. The study will need to establish new cost allocations for the new power and transmission billing determinants. A change in the allocation approach for power and transmission may result in significant changes to the last cost of service study completed. Evaluate if there is sufficient AMI information available to evaluate changes in time of use rate periods. Lack of data may require that this evaluation be moved to a future date. Water The 2010 and 2011 time period has experienced declining demand in the region. Recalibrating anticipated revenue levels for future projections is critical. This recalibration will consider factors such as economic conditions, weather, demographics, effects of conservation pricing and the City's conservation goals to mitigate volatility and stabilize revenue. Review the City's detailed customer statistics to determine if recalibration will be necessary. The cost of service indicated increases to the irrigation and the industrial class that were not implemented. This study may again show cost of service adjustments may be warranted. Determine the City's approach to compliance with Lane v. Seattle. The 2008 ruling held that "providing fire hydrants is a government responsibility for which the general government of the area must pay." The court case applies to Cities. The City must calculate the fire protection liability for the water utility and identify the level of transfer from the general fund to pay for public fire protection. Alternatives to recovering this fire cost will include exploring an increase to the excise tax and imposing charges on third party general governments. Note, there is proposed legislation to adopt a statute that would, in part, change the Lane case impact. 8 FCS GROUP Wastewater Evaluate cost of service phase -in progress from the last rate study. Evaluate the combined sewer overflow revenues and costs independently and determine its impact on wastewater rates. Review the tax rate applied to CSO revenue. Create tool for evaluating the possible financial implications of the Harbor Clean -up Mandate litigation. Identify if sufficient customer data is available to evaluate a commodity (volume based) rate structure. Solid Waste Collection The last study did not move to cost of service for the Commercial 90 and 300 container sizes until additional weight survey information is gathered. Incorporate findings from weight studies, if completed Conduct sensitivity analysis to evaluate rate impacts of varying fuel prices and operational changes resulting from offering curbside collection of recyclable The transfer station rate analysis should be completed first since the collection system rates will need to incorporate changes to disposal costs. Solid Waste Transfer Station Analyze actual tonnage trends to determine a realistic forecast of revenue. The analysis should consider Economic and market considerations that may affect tonnage. Evaluate sensitivity of fuel price changes. Optional Tasks Several optional issues could be addressed as part of this study including: state excise tax, capital renewal and replacement evaluation, system development fees, connection fee update and review of miscellaneous fees. Each of these services was provided as part of the 2009 study for the City. FCS GROUP is able to deliver the necessary experience, expertise and resource to meet the City's needs in these areas. City of Port Angeles Utility Cost of Service Studies PROJECT MILESTONES The City's milestones and schedule allows for 4 months to complete the Utility Cost of Service Studies. This is a very ambitious schedule for the comprehensive nature of the request. The City has stated it would like to complete the solid waste rate studies first before authorizing additional work. Typically, all rate studies would be started concurrently for efficiency. This approach would leave approximately 3 months to complete the remaining studies. FCS GROUP believes it can meet this schedule due to the depth of available resources so long as both parties work together to ensure tirnely receipt of requested data /information; the quality of data received is sufficient; meetings are scheduled in a timely manner; and the ability of the City to provide policy direction for the study to move forward at key study milestones. It is important for all parties to recognize that due to the expedited schedule there is little room for schedule slip on any of the tasks or planned review meetings. We are willing to work collaboratively to develop a schedule that meets the City's time constraints. An overview of the key milestones for completion of the technical analysis is summarized below. w d 6, o, c c o d April a C c o d C N H N a, u c c 0 0 A: Notice to Proceed 4/16 Complete Solid Waste Study 5/20 Solid Waste Rate Stu ti (Collection/Transter) Kick off Meeting Engineering /Planning Documents Comprehensive Planning Data. Recent water and wastewater plans /drafts. Growth Estimates. Estimates for new developments. Financial Data Fixed Asset Listing. Plant in service for water, wastewater and electric Cash Balances. 2012 year end. Budget Revenue and Expense Reports. Detailed 2013 revenues and expenses. Exhibit 4 1 Project Timeline June iis Water, Wastewater and Electric Study Meeting to Review Revenue Requirements 9 Technical Analysis Complete 8/23 July August 1 1 I Meeting to Review Cost of Service >FCS GROUP Proceed )ftth Presentatrons Meeting to Finalize Rate Designs CONCERNS REGARDING THE PROFESSIONAL SERVICES AGREEMENT Citing our previous work with the City, and providing that there are no significant differences, we have no concerns regarding the professional services agreement. DATA NEEDS REQUEST In addition to documents already on your FTP, we will need detailed and /or supporting information. Our brief data needs request that imparts specifics for the listed items below, is included in Appendix C. Debt Service Repayment Schedules. Long- term debt obligations. Purchased Power /Power Supply. Various details required. Customer Data Detailed Water Customer Billing Data Detailed Wastewater Customer Billing Data Detailed Electric Customer Billing Data Detailed Solid Waste Data Other Waste Management Contracts City of Port Angeles Utility Cost of Service Studies 5 1 STAFF AVAILABILITY Exhibit 5 shows our staff availability both as a percent of involvement against your project, as well as within the context of total project load. Angie, Sergey, and Catherine (dark highlight) represent a majority of the assigned project hours. Citing that FCS GROUP has extensive breadth and depth within the region for utility rate studies, we maintain the necessary staff to address any capacity concerns and to facilitate the work in a timely manner after notice to proceed. AE 1 Technical Advisor 6 1 PROJECT MANAGEMENT Our proposed study manager is Angie Sanchez Virnoche. Angie is an FCS GROUP principal with 20 years of experience providing financial services in a variety of capacities for water, sewer, stormwater, solid waste and electric utilities. Her project work includes multi -year financial planning, cost -of- service studies, rate design restructuring, capital/ infrastructure planning, funding alternatives, cost benefit analyses, reserve analysis, and community education and involvement. Prior to joining FCS GROUP, Angie had an ongoing working relationship with the City of Port Angeles and has continued to work with the City since 2008. As a member of the American Water Works Association (AWWA), Washington Finance Officers Association (WFOA), Partnership for Water Conservation, Washington Public Utility District Association (WPUDA) and Northwest Public Power Association (NWPPA), Angie's significant industry knowledge and involvement are defined by the qualifications featured in her resume and summarized to the right. Establish project schedule with key milestones to help keep tasks on schedule. Project review meetings with City management staff at critical points throughout the study process. These meetings will review work in progress, obtain feedback on critical issues, highlight potential challenges, and determine next steps. Provide meeting summaries outlining follow 10 ASV 1 Study Manager KJ 1 Principal ST 1 Project Consultant CO 1 Analyst Exhibit 5 1 Staff Availability CG 1 Specialist NR 1 Specialist WFOA Education Committee e ms A r., ..7. 0'54 f •FCS GROUP 25 1 30 7 1 10 34 1 34 4 1 n/a 26130 2 1 as needed 2 1 as needed Angie Sanchez Virnoche Contributing author to the "Business Practices for Operation and Management AWWA, G410 -09 AWWA Rates and Charges Subcommittee and the Standards Committee 4. Angie has given presentations that focus on the emerging trends in water, wastewater, and electnc utility industries, including the following Electric Cost of Service and Rate Setting, 2012 Staffing and Funding for Collection Systems, 2012 Correctly Calculating Rates and Connection Charges, 2011 Trends in Water Rate Making, 2011 Conservation Based Rate Considerations, 2011 Comprehensive Financial Master Planning Setting a Roadmap for Long -Term Strategic Management, 2010 Rate Relief During Economic Hard Times, 2010 PROJECT MANAGEMENT /COMMUNICATION APPROACH We anticipate a collaborative and interactive process in communicating with the City to facilitate an open approach and keep the project on schedule and within budget. Key elements in communicating with the City will include: up items and any assigned tasks. Schedule standing weekly project status calls. Monthly invoicing with detailed progress reports to allow for regular tracking of project deliverables to budget. GoToMeeting project review meetings when possible to minimize budget. City of Port Angeles Utility Cost of Service Studies APPENDIX A CENTRALIA STUDY REPORTS WATER AND SEWER RATE STUDY FINAL REPORT, 2009 Karyn Johnson, Managing Principal ELECTRIC UTILITY COST OF SERVICE RATE STUDY, 201 1 Angie Sanchez Virnoche, Managing Principal Appendix A Centralia Reports •.;>FCS GROUP Consulting Services Provided by: FCS GROUP 7 525 166th Avenue NE, Suite D -215, Redmond, WashinE,ton 98052 P 425 867 -1802 F 425 -867 -1937 www fcsgroup core [his enure is made of teaddt recyclable materials, including the bto tee wire binding and the front and back Lover, which are made from post- consumer recycled plastic bottle, City of Centralia, Washington Water and Sewer Rate Study FINAL REPORT March 2009 UTILITY RATES CHARGES STUDY: WATER AND WASTEWATER SYSTEMS PREPARED FOR THE CITY OF CENTRALIA, WASHINGTON CONSULTING SERVICES PROVIDED BY A FCS CR UP Solutions Oriented Consulting 7525 166` Ave. NE, Suite D -215 Redmond, Washington 98052 (425) 867 -1802 fax (425) 867 -1937 www.fcsgroup.com FCS GROUP Solutions- C)rrcnted Consulting March 18, 2009 Ms. Randi Leach, Financial Officer City of Centralia, Utilities 1100 N. Tower Ave. Centralia, WA 98451 TRANSMITTAL OF DRAFT STUDY REPORT: UTILITY RATES CHARGES STUDY FOR THE WATER AND WASTEWATER SYSTEMS Dear Ms. Leach, Redmond Town Center 7525166' Ave NE, Suite D -215 Redmond, V/ashington 98052 T 425 8671802 F 425 8671937 225 Bush Street Suite 1825 San Francisco, California 94104 T 415 445 8947 F 415 3981601 14020 SE Johnson Road Suite 205 Milwaukie, Oregon 97267 T 503 353 7440 F 503 353 7442 FCS GROUP is pleased to submit our final report describing findings and recommendations of the Water and Wastewater Rates Charges Study, which we have prepared for the City of Centralia. This study began in February 2008, with substantial completion and delivery of our draft report in January 2009. City comments were incorporated into this final study report. We would like to acknowledge and thank you for your diligent efforts in managing this important study for the City. It has been a pleasure working with you and City staff, as well as with the City Council members. It is important to note that due to the timing of this rate study, the rate analysis presented herein does not address the recent (October 2008) ruling of the Washington State Supreme Court for Lane v. Seattle, regarding the recovery of costs in water rates related to fire hydrants. In terms of water rates and related costs, the breadth of the implication of this ruling is not yet clearly defined from our perspective. As FCS GROUP does not practice law, it is imperative that you consult with your own legal counsel on how best to respond to this issue. Any questions or commentary regarding this report can be directed to me at (425) 867 -1802, ext. 241, or send email to karvniafcsgrouD.com. Sincerely, Karyn Johnson Samantha Holert Principal Project Consultant REPORT CONTENTS Section 1 Study Framework 1 A. Introduction 1 B. Methodology 1 C. Report Organization 2 Section 2 Policy Development 3 A. Fund Accounting 3 B. System Reinvestment Funding 5 C. Debt Service Coverage 6 D. Use of Capital Facilities Charges for Debt Service 7 E. Capital Program Funding Debt Management 8 F. Cumulative Impact of Fiscal Policies 9 Section 3 Capital Facilities Charges 10 A. Methodology 10 B. Results 13 Section 4 Revenue Requirements 16 A. Methodology 16 B. Results 20 C. Implementation 26 Section 5 Cost of Service Analysis 27 A. Methodology 27 B. Results 29 Section 6 Rate Design 39 A. Methodology 39 B. Results 44 C. Implementation 57 Technical Appendices Water System Technical Analyses Appendix A Wastewater System Technical Analyses Appendix B Technical Memorandum Miscellaneous Utility Fees Review Appendix C A. INTRODUCTION B. METHODOLOGY FCS GROUP SECTION 1 STUDY FRAMEWORK In early 2008, the City of Centralia authorized FCS GROUP to complete a Utility Rates Charges Study for its Water and Wastewater Systems. The purpose of this comprehensive rate study was to assist the City in maintaining financially stable utilities and to promote a fair and equitable allocation of costs to customers. The scope of this study included the following major elements: Data collection validation Fiscal policy evaluation Capital facilities charge development Capital financial planning analysis Revenue requirement forecast Cost of service rate structure evaluation Miscellaneous utility fees review Meetings documentation These scope elements are addressed throughout each section described in this report. In analyzing and determining rate and charge structures, there are four fundamental analyses performed: a Capital Facilities Charge Analysis, a Revenue Requirement Analysis, a Cost of Service Analysis; and the Rate Design. The methods used to complete our work are based on analytical principals that are generally accepted and widely followed throughout the industry rates and charges must generate enough revenue to maintain self supporting and financially viable utilities without undue discrimination toward or against any customer. This study process, which evolved over a period of about one year, involved several iterations of data analyses and the development of scenarios for rate and charge increase strategies and customer class rate structures. Several rneetings were held with City staff to validate input parameters, review interim findings, arid receive policy direction. In addition, several workshops were held with the City Council to evaluate findings and arrive at rate and charge implementation strategies consistent with City policy objectives. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 1 C. REPORT ORGANIZATION The following sections provide an overview of the major analytical methods employed by FCS GROUP to complete this work, as well as study findings and recommendations. The remainder of this report provides separate sections for Policy Development (Section 2); Capital Facilities Charges (Section 3); Revenue Requirements (Section 4); Cost of Service Analysis (Section 5); and Rate Design (Section 6). The Technical Appendix contains the analytical detail supporting the analysis for each utility, as well as a supplemental technical memorandum prepared to support our review of miscellaneous utility fees. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 2 4) FCS GROUP The purpose of establishing financial polices for the City's utility enterprises is to promote the financial integrity and stability of the utilities and help ensure the sustainability of essential utility services. These policies form the foundation of utility management and, with routine application, can act as overarching guidelines for consistent decision making. Some financial policies are literally imposed by outside influence (minimum debt service coverage, bond reserves, and regulatory guidelines) while other policies are specific to the agency and its utilities (discretionary reserve levels, reinvestment protocols, use of debt). In an attempt to provide consistency to rates and the rate setting process in the future, our study provides recommended policies that should help the City achieve financial and rate stability from year -to- year. In developing the financial plans, we have incorporated the following fiscal policies. A. FUND ACCOUNTING SECTION 2 POLICY DEVELOPMENT From an industry and financial management perspective, cash balances are a necessary and appropriate part of prudent utility management practices. Within each utility enterprise, appropriate segregation of monies should be established and maintained to provide adequate controls as to the sources and uses of funds. This practice helps to ensure that funds raised through each utility are applied to the appropriate purposes, and that equity attained through rate and charge structures is maintained in application. Above all, the City should establish and maintain a financial structure that provides for adequate and predictable revenues to meet the forecasted needs and operational, legal, and policy objectives of the water and wastewater systems. The City currently maintains a separate fund for each utility: Water Fund (402) and Wastewater Fund (403). Separate accounts have been established within each fund to recognize segregation of operating, capital, and restricted reserve activities. The rate management strategy presented in this study presumes that each utility will continue to operate as a self supporting enterprise fund. This means, utility- specific rates and charges have been designed to recover the forecasted costs and financial obligations of each utility without subsidy between the two utilities, and without subsidy from other City general fund revenue sources, such as property taxes. 1. Operating Reserves An operating reserve is designed to provide a liquidity cushion to help ensure financial viability of the utilities despite short -term variability in revenues and expenses, primarily caused by CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 3 seasonal fluctuations in billings and receipts, unanticipated cash operating expenses, or lower than expected revenue collections. Target funding levels are generally expressed in number of days' operating and maintenance (O &M) expenses, with the minimum requirement varying with the expected risk of unanticipated needs or revenue volatility. For this study, operating reserve targets have been established at 60 to 90 days for the water utility and 45 to 60 days of O &M for the wastewater utility. Consistent with industry practice, the higher target for the water utility is to safeguard against the increased variability in revenue collections resulting from discretionary water use in the summer period. Conservation -based rate structures can increase revenue instability due to a greater reliance on revenues from the volume charge component which is more susceptible to changes in customer use and weather patterns. The Operating Reserve target should be as of December 31" of each calendar year, with the balance expected to vary during the course of the year. Generally, in any year where operating reserves exceed the maximum target, we recommend using the excess cash to help pay for capital projects. This can be accomplished by calculating the target balance at year end (e.g. 90/365 x actual O &M expense for the year) and comparing it against the actual ending cash balance. If the actual balance is greater than the target, transfer the difference to the respective utility Capital Account. The operating reserve includes cash held in the following accounts: "cash and cash equivalents petty cash and "the working capital reserve." The rate management strategy presented herein complies with the above established target balance threshold for each utility. It is important to note that City policy direction was to use a portion of cash reserves over and above the minimum targeted threshold to buy -down annual rate increases for both utilities in years 2008 and 2009. Thus, critical to achieving the rate management strategy presented in this study is the carry- forward of annual cash balances within each utility's respective operating accounts to be used as a supplemental resource to meet annual planned expenditures in years 2008 and 2009. To illustrate for 2008, cash balances of$652, 000 (water) and $664,000 (wastewater) are planned to be used to supplement the projected 2008 revenue shortfall. Should actual cash balances fall short of projections, rates might need to increase in addition to the adjustments presented herein. As a point of reference, as of December 31, 2008, the operating reserve was $1.4 million for the water utility, reducing to about $758,000 by the end of the six -year study period. For the wastewater utility, the reserve began at $1.9 million, reducing to about $733,000 by the end of the study period. 2. Capital Contingency Reserves A Capital Contingency Reserve is an amount of cash set aside in case of an emergency, should a major piece of equipment or a portion of the utility's infrastructure fail unexpectedly. Additionally, the reserve could be used for other unanticipated capital needs or capital cost FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 4 overruns. These reserves are not intended to cover the cost of system -wide failures resulting from catastrophic events; a more common practice is to carry property and casualty insurance for such purposes. The Capital Account holds debt proceeds, capital facilities charge revenues, system reinvestment funding from rates, and any transfers of cash reserves from the Operating Account. For this study, we assume that cash from rates for system reinvestment funding and surplus cash from the Operating Account (not being used to buy -down rates) will be transferred to the Capital Account at year's end and become available for capital use in subsequent years. Common industry practice is to maintain a minimum balance in the Capital Account equal to 1% to 2% of system fixed assets. The capital reserve includes cash held in the following accounts: "capital facilities" and "equipment reserve." The rate management strategy presented herein complies with the above established target balance threshold for each utility. Based on the current fixed assets and planned capital additions for the utilities over the study period, the recommended contingency reserve for the water utility is forecasted to reduce from $2.5 million to $914,000 by the end oFstudy period, and from $903,000 increasing to $1.3 million by the end of the study period for the wastewater utility well within industry standards. 3. Restricted Debt Reserves When issuing revenue bonds (and some other types of debt), underwriters require the municipality to establish and maintain a restricted cash reserve for the utilities through the term of debt repayment. The purpose of a debt reserve is to provide one safeguard for bondholders, in the event the utilities have insufficient funds to meet annual debt service (i.e., scheduled principal and interest payments). This reserve is generally equal to one year's debt service payment for each bond issue. The reserve can be used to fund the last year's debt service payment for each issue. The City historically has issued revenue bonds and taken out State Revolving Fund (SFR) loans and Public Works Trust Fund (PWTF) loans to finance utility system capital needs. Revenue bonds always require a debt reserve and the City's current wastewater SRF loans require a debt reserve. PWTF loans do not require a debt reserve. The rate management strategy presented in this study conservatively presumes that the City will use revenue bonds for any future debt financing needs; thus, additional reserves have been incorporated for each future bond issue (assumed to be funded with debt proceeds equal to one year's principal and interest payment). The City will continue to pursue the lower cost state loans to reduce future bond financing requirements. B. SYSTEM REINVESTMENT FUNDING The phrase "system reinvestment funding" refers to the practice of setting aside cash revenues from rates each year to help provide for the replacement of aging system facilities to ensure sustainability of the system for ongoing operations. A common approach of municipal utilities is FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 5 to establish a policy of system reinvestment funding through rates using depreciation expense as the benchmark for the appropriate level of funding. Annual depreciation is a non -cash expense intended to recognize the consumption of utility assets over their useful lives, using original cost. Collecting the amount of annual depreciation expense through rates provides a funding source for capital expenditures, especially those related to repair and replacement of existing utility plant. Further, funding depreciation through rates helps to ensure that existing ratepayers pay for the use of the assets serving them (rate equity), with the cash flow funding at least a portion of the eventual replacement of those assets. It is important to note that depreciation is not equal to the future replacement cost of the utility systems, but serves simply as a starting point for addressing long -term replacement needs. Actual system replacement costs will be significantly higher than the cost originally incurred to build the systems. As an alternative to full depreciation funding, depreciation funding net of outstanding debt principal is sometimes used as a relatively moderate replacement funding strategy. Using this approach, the full funding of depreciation is seen as having two uses: first, reducing liabilities by paying debt principal as due, and second, generating a cash asset for system reinvestment. Debt reduction, cash accumulation, or both thereby offset depreciation. This "net debt funding" benchmark is roughly equivalent to "break- even" performance from a balance sheet perspective. The annual funding is assumed to be transferred from the operating account to the capital account at year -end, and available to help pay for capital expenditures in the following year. Based on City staff direction, the rate management strategy presented in this study provides for system reinvestment funding for each utility as follows: Water Utility Phase in to 100% depreciation funding over five years, in 20% annual increments. Water system annual depreciation expense is currently about $405,000, reaching $547,000 by the end of this study period. First year funding is planned at $83,000, increasing annually until full funding is achieved. Wastewater Utility Due to the substantially higher debt load for the wastewater utility, fund 100% of annual depreciation expense net of annual debt principal payments. This serves to avoid overly burdening existing ratepayers with the payment of debt and funding for future asset replacement at the same time. Wastewater system annual depreciation expense is currently $2.0 million, reaching $2.3 million by the end of this five -year study period. Funding depreciation net of debt principal payments will vary from year to year, ranging from $85,000 to $180,000. C. DEBT SERVICE COVERAGE REQUIREMENTS When a municipality issues revenue bonds (and other types of debt instruments), it agrees to certain terms and conditions related to the repayment of those bonds. One of those terms is referred to as bond coverage. Simply put, the agency agrees to collect enough in annual revenues 4> FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 6 to meet all operating expenses (net of internal utility taxes) and not only pay debt service, but actually collect an additional multiple of that debt service. Bond coverage ratios typically range from 1.10 to 1.50, meaning that the agency would collect expenses plus 1.10 to 1.50 times revenue bond debt service as a minimum legal level of revenues. The stated coverage factor is a minimum requirement meaning anything less than this level would be a technical default of the bond covenant. The City's current minimum debt service coverage requirement on the outstanding water revenue bonds is 1.25 times annual debt service. Per the bond covenant, capital facilities charge (CFC) revenue collections can be included in the definition of net revenues. To ensure compliance, many utilities establish a more stringent internal policy for coverage. As a more conservative internal policy, the rate management strategy presented for this rate study applies a coverage test of 1.25, excluding the use of CFC revenues. Revenue generated above cash needs to comply with coverage requirements may be used for capital purposes, and thus reduce future borrowing needs. D. USE OF CAPITAL FACILITIES CHARGES FOR DEBT SERVICE Capital facilities charges are derived from new development rather than from the existing customer base, and are thus subject to wide fluctuations. The City should estimate and budget CFC revenues based on long -term growth estimates, recent growth experience, and the scale of known development planned or underway. The purpose is to establish a reasonable and conservative estimate of potential CFC revenue collections. CFC revenue should be deposited in the Capital Account of each utility and made available for capital purposes only. CFCs can legally be used in two ways they can be applied to project costs directly (reducing the amount of debt issued), or they can be applied toward annual debt service payments. FCS GROUP recommends that, as a general policy, CFC revenues be used to directly fund capital expenditures. In times of significant rate increase projections, as a tool for transition, CFC revenue could be budgeted as available to repay debt service. However, we strongly recommend that no more than 50% of projected annual CFC revenues be used for debt service this mitigates the risk of not being able to meet committed debt service obligations if growth does not occur as planned. After the transition period, CFC revenues should be used 100% for capital expenditures. To mitigate near -term rate increases for the water utility, City policy direction for this rate study was to apply 50% of annual CFC revenues toward paying annual debt service for the water utility only for years 2009 and 2010. Thus, critical to achieving the rate management strategy presented in this study is the actual collection offorecasted water CFC revenues. Should actual collections fall short of projections, wa ter rates might need to increase in addition to the FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 7 adjustments presented herein. After the transition period, 100% of CFCs are used directly to pay capital expenditures. E. CAPITAL PROGRAM FUNDING DEBT MANAGEMENT In conjunction with establishing or planning its capital program, the City should develop a corresponding capital financing plan that supports execution of that program. This program should incorporate system replacement and rehabilitation, system upgrade and improvement, and system expansion. The policy intent is to establish an integrated capital funding strategy that considers best management practices for debt management. 1. Capital Funding Utilities can typically draw funds for capital projects from a variety of sources: Grants Developer contributions Capital Facilities Charges System Reinvestment Funding Direct Funding from Rates Other Capital Revenues Debt Given all of these potential funding sources, utilities often find themselves having to choose between funding sources when establishing a capital financing plan. While grants and developer contributions would logically be applied to project costs first, the next choice in the funding "hierarchy" is not necessarily apparent. The specific decision regarding whether to fund projects by cash or debt is an important policy decision that will likely be driven by a number of considerations. Cash funding might be cheaper in the long -run because there is no interest, but debt funding could be the more practical option since it allows for the payment of project costs over an extended period of time. In addition, using debt to spread the cost over time will help ensure that future customers pay for their fair share of system costs. Finding the appropriate balance of cash debt financing requires an evaluation of debt management policies discussed below. 2. Debt Management The City does not have a formal debt management policy, but historically has funded capital projects through a combination of "pay -as- you -go" cash funding (cash reserves, capital facilities charges, rates) and debt issuance. Excessive use of debt is unfavorable for a utility, and can damage the utility's credit rating, reducing its ability to acquire low -cost debt in the future. On 4 FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 8 the other hand, "pay -as- you -go" funding might create excessive burdens for existing customers, raising questions of practicality and equity between current and future customers. Industry standards (and bond underwriter's preference) suggest that municipalities should maintain a debt -to -equity ratio (total debt divided by the sum of total debt and equity) of no greater than 50% debt and 50% equity (cash). The City's current debt -to -equity ratio on a combined basis for the water and wastewater utilities is 49% debt and 51% equity right in line with the industry standard. To assist the City in maintaining the target ratio, we suggest that the City limit debt funding of future capital improvements to 50% to 75 This should be measured over a rolling timeframe, such as a five -year period, to avoid issues related to short -term cash flow and project scheduling. Even so, a provision allowing higher use of debt for exceptionally large capital outlays would remain a prudent safeguard. The rate management strategy presented for this rate study presumes the City will fund its capital programs first, with available capital cash resources (generated from CFCs, system reinvestment funding, and transfers from the operating account in excess of minimum balance thresholds) and next with the use of debt. As a point of reference, capital programs are forecasted to be funded over the six -year study period as follows: Water Utility 63% cash 37% debt; Wastewater Utility 46% cash 54% debt well within debt management best practices. F. CUMULATIVE IMPACT OF FISCAL POLICIES Satisfying all of these policy objectives (might seem daunting at first, but the outcome is that multiple benchmarks overlap, resulting in the simultaneous achievement of multiple objectives within the same level of rates. For exarnple, the cash requirement for system reinvestment funding through rates may assure adequate debt service coverage, while also helping to maintain an appropriate debt -to -equity ratio. Each criterion provides a different perspective on how much revenue is appropriate, and satisfying them all generally results in a higher rate than if only a single standard is considered. However, this approach reduces financial risk and increases financial stability any near term increases that result will help to ensure more stable, and lower, long -term rates. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 9 SECTION 3 CAPITAL FACILITIES CHARGES A connection charge or capital facilities charge (CFC), as provided for by RCW 35.92.025, is a charge imposed on new development as a condition of connection to the utility systems or when increasing the capacity of an existing connection. In general, the purpose of a CFC is to mitigate the impact of growth on the utility systems, or to compensate for investments already made to provide available capacity to serve future growth. A. METHODOLOGY Revenues generated from CFCs can be used to directly fund capital projects or to pay debt service incurred to finance capital projects but can not be used to pay operating and maintenance costs. There are several documented approaches used in the industry to establish CFCs. Within the range of legally defensible approaches, the choice of the costs the City targets is a matter of policy. It is important, however, that the City follow a methodical and rational approach to consistently determine and implement cost -based CFCs. To that end, this study used the approach that combines elements of the "equity" method and "incremental" method for calculating the charge (described in the American Water Works Association Rates and Charges, M1 Manual). In short, this approach is based on the original cost of non contributed plant investment, plus planned capital improvement projects (excluding replacements), spread over the total customer base (existing and future). A description of the components included in the calculation of the charge follows. 1. Existing Cost Basis Utilities most often design and build infrastructure with the capacity to serve more customers than are currently connected to the system. The existing cost basis component of the CFC is intended to recover an equitable share of the current system(s). Legal interpretations of connection charge statutes have provided guidelines for CFCs, which suggest that such charges should reflect the actual original cost of the utility system and can include interest on that cost at the rate of interest applicable at the time of construction (up to a 10 -year period, not to exceed 100 percent of the construction costs). This cost is net of donated facilities and non utility cash payments, whether from grants, developers or through Local Improvement District assessments. This method most accurately reflects what utility customers paid for the system. Until future customers connect to the system, existing customers will have to cover the costs of "excess capacity" available to serve growth. This obligation essentially represents a loan from existing FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 10 customers to future customers. Given This, it is reasonable to expect that future customers will pay for their share of costs when they connect to the system, plus interest. Though not required, some municipalities deduct outstanding debt principal from plant -in- service in recognition that some assets were debt financed. Cash should be netted against the outstanding debt liability for this calculation since cash is an asset generated by existing customers that could be used to buy down existing debt on the system, and thereby reduce debt service payments for all customers. This "net debt" deduction serves to reduce the CFC to better reflect "equity" in the system, and to avoid double charging if new customers will pay their share of debt service through user rates. Plant assets (net of contributed assets) used in the calculations were derived from the City's fixed assets listings as of December 31, 2007, plus current construction work -in- progress. Outstanding debt and cash balances were provided in the 2007 financial reports. 2. Future Cost Basis The future cost basis component of the CFC is intended to recover a fair share of the costs of planned future capital facilities that will serve new customers. Legal interpretations also suggest that the "cost of the system" can include a component for future improvement costs to serve growth, as well as regulatory system improvements (planned for construction and identified in comprehensive system planning documents). Projects directly funded by grants, developer contributions or assessments are not included in the calculation. Repair and replacement projects are most often excluded from the calculation unless needed to upgrade or increase the size of the system, including upsizing of existing inains. The original costs of those assets are already included in the existing cost basis. Further, as a new customer connects and becomes an existing customer, they will pay for their share of repair and replacement project costs through user rates. Double charging would occur if those costs were also recovered in the future cost basis. In the absence of specific regulation for cities, the planning horizon of the CIP to be used in the calculation is debatable. The key consideration in determining an appropriate planning horizon is to maintain consistency between the capital construction (and related costs) that will be incurred and the system capacity that will be available to serve growth commensurate with that capital construction. For calculation of the City's CFCs, a 10 -year CIP was used, which is expected to provide system capacity for growth through the year 2025. 3. Customer Base System Capacity The customer base used in the calculation of the charge is typically expressed in terms of equivalent residential units that can be supported by the system capacity. This concept charges customers based on the potential demand that they will place on the system(s). As stated above, the City estimates that the existing and planned system infrastructure will provide capacity to serve growth through the year 2025. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 11 4. Calculation of Charges The sum of the existing cost basis and the future cost basis is divided by the customer base to determine the maximum allowable CFC. The calculated charge represents the maximum allowable charge the City may choose to implement a charge at any level up to the calculated charge. Revenues generated, as well as equity achieved, will vary depending upon whether or not the full CFC is implemented (e.g., phase -in strategies). The lower the charge and longer the phase -in period, the less revenue will be collected and available to help pay capital- related costs. It is important to note that the calculated CFCs are expressed in terms of current dollars. In other words, the calculated charges will only recover an equitable share of costs from new customers connecting to the system in the first year of implementation. A customer connecting in the following year should pay a CFC that reflects the cumulative system investment at the time they connect. Relative to the calculated (2008) CFCs presented herein, this would include: Assets added to the system during 2008 An extra year of interest accrued Updated costs for the capital improvement program and construction work -in- progress Given these considerations, the calculated charges would not recover a fair share of costs from customers connecting in subsequent years. The City could potentially address this concern in several ways: Recalculate the charges annually, Build a provision for inflation into the connection charges, or Compute CFCs in current dollars and adjust annually for inflation (recommended approach). Calculating the CFCs annually is the most accurate method, but might not be practical given the amount of effort required. FCS GROUP recommends that the City adopt a policy for annual inflationary adjustments to the calculated charges, based on established sources, such as the Engineering News Record's "Construction Cost Index" (ENR CCI). This practice facilitates both appropriate cost recovery and increased equitability. 5. Phase in Strategy In response to concerns about economic development and the burden increased CFCs could place on the development community, a three -year phase -in strategy was developed and evaluated to determine if the burden on growth could be lessened in the near -term without unduly burdening existing ratepayers. The phase -in strategy was accomplished for the wastewater utility with no additional impact to wastewater rates. An additional 1.5% average increase in water rates over the study period was necessary to accommodate the CFC phase -in plan. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 12 B. RESULTS Results of the CFC analysis for each u1 ility are summarized in this section. Additional detail identifying specific assets and eligible capital projects (or portions of projects) is provided in the Technical Appendices. 1. Water Utility The City's current water capital facilities charge is $1,518 per equivalent residential unit (ERU), where one ERU is equal to a 3 /4 -inch meter. The data sources and assumptions relied on in the calculation of the updated CFCs are described herein. As of year end 2007, water utility system assets equal $26.7 million, including construction work-in- progress and net of contributed assets. Ten years of interest accumulation totaling $9.1 million was added to the cost basis. Finally, outstanding debt (net of existing cash balances) of $3.2 million was deducted. The resulting existing cost basis totals $32.6 million. The City has planned for about $15.3 million (current day dollars) of capital projects over the next 10 years. About $8.1 million of this total is for repair and replacement projects, which are excluded from the cost basis. The remaining $7.2 million in future upgrade /expansion projects forms the future cost basis. The total cost basis (existing plus future) for the CFC is $39.8 million. Based on utility billing system records, the water utility currently has 9,964 meter capacity equivalents. Incorporating the City's growth assumption of 0.50% per year, the utility will add 936 meter capacity equivalents by 2025 reaching a total customer base of 10,900. A 2008 water CFC of $3,655 per meter capacity equivalent (3/4 -inch meter) is derived by dividing the total cost basis by the total customer base. The charge increases by meter size based on the American Water Works Association (AWWA) meter capacity ratios. Phase -in Strategy Water CFCs were phased -in over the three -year period (2008 2011) to reach the calculated charge, plus interest, by 2011 ($3,953). Future year increases assume 4% per year. Exhibit 3 -1 presents the proposed schedule of annual water CFCs by meter size. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 13 Exhibit 3 -1: Schedule of Water Capital Facilities Charges 2009 RN0 gipig Nal, 3/4" 2,330 1 3,141 3,953 4,111 4,275 1" 3,890 5,246 6,601 6,865 7,140 1 1/2" 7,758 10,460 13,163 13,690 14,237 2" 12,417 i 16,743 21,069 21,912 22,788 3" 24,857 33,517 42,177 43,864 45,619 4" 38,835 52,365 65,895 68,530 71,272 6" 77,647 104,698 131,750 137,020 142,501 8" 124,239 167,523 210,808 219,240 228,010 2. Wastewater Utility The City's current wastewater capital facilities charge is $4,282 per dwelling unit for residential customers. Non- residential customers are charged based upon the cost of extending sewer service plus the value of treatment capacity used. To simplify the non- residential structure, this study revises the current basis to one by equivalent meter size, similar to the water CFC structure. The data sources and assumptions relied on in the calculation of the updated CFCs are described herein. As of year end 2007, wastewater utility system assets equal $70.5 million, including construction work -in- progress and net of contributed assets. Ten years of interest accumulation totaling $16.4 million was added to the cost basis. Finally, outstanding debt (net of existing cash balances) of $27.8 million was deducted. The resulting existing cost basis totals $59.1million. The City has planned for about $17.3 million (current day dollars) of capital projects over the next 10 years. About $12.6 million of this total is for repair and replacement projects, which are excluded from the cost basis. The remaining $4.7 million in future upgrade /expansion projects forms the future cost basis. The total cost basis (existing plus future) for the CFC is $63.8 million. Based on utility billing system records, the wastewater utility currently has 9,252 equivalent customers. Incorporating the City's growth assumption of 1.0% per year, the utility will add 1,815 customer equivalents by 2025 reaching a total customer base of 11,067. A 2008 wastewater CFC of $5,762 per meter capacity equivalent (3/4 -inch meter) is derived by dividing the total cost basis by the total customer base. The charge increases by meter size based on the American Water Works Association (AWWA) meter capacity ratios. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 14 Phase -in Strategy Wastewater CFCs were phased -in over the three -year period (2008 2011) to reach the calculated charge, plus interest, by 2011 ($6,232). Future year increases assume 4% per year. Exhibit 3 -2 presents the proposed schedule of annual wastewater CFCs by meter size. Exhibit 3 -2: Schedule of Wastewater Capital Facilities Charges 3/4" 4,932 5,582 6,232 i 6,481 6,741 1" 8,236 9,322 10,407 10,824 11,257 1 1/2" 16,424 18,588 20,753 21,583 22,446 2" 26,288 29,752 33,217 34,545 35,927 3" 52,625 59,560 66,496 69,155 71,922 4" 82,217 93,052 103,888 108,043 112,365 6" 164,384 186,048 207,713 216,022 224,663 8" 263,024 297,689 332,354 345,648 359,474 C. IMPLEMENTATION The City Council adopted the three -year schedule of proposed water and wastewater CFCs (December 9, 2008 Council Meeting), effective January 1 of each of the three years, 2009, 2010, and 2011. On January 1" of each year beginning in 2012, CFCs shall be adjusted to reflect the annual percentage increase of the Engineering News Record Construction Cost Index as published for November of the preceding year. Calculation of the change in the index is made by dividing the current index for November by the preceding index for November and subtracting one. The CFCs reflected in the exhibits for years 2012 and 2013 are provided for planning purposes only and assume an increase of 4% per year. We recommend that the City review CFC levels about every 3 to 6 years, perhaps on schedule with the water and wastewater comprehensive system planning updates. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 15 SECTION 4 REVENUE REQUIREMENTS The revenue requirement analysis forms the basis for a long -range financial plan and multi -year rate management strategy for each utility. It also enables the City to set utility rate structures that are rooted in the "costs -of- service" and which fully recover the total costs of operating each utility: capital improvement and replacement, operations, maintenance, general administration, and fiscal policy attainment. Linking utility rate levels to a financial plan such as this helps to enable not only sound financial performance for the City's utility enterprises, but also, a clear and reasonable relationship between the costs imposed on utility customers and the costs incurred to provide them the service. A. METHODOLOGY When FCS GROUP conducts a revenue requirement analysis the financial plan for each utility it includes the following core elements, which together, form a complete portrayal of the financial obligations: utility's Capital Funding Analysis— Defines a strategy for funding the utility systems' capital improvement programs including an analysis of available resources from rate revenues, capital facilities charges, debt financing, and any special resources (e.g., grants, developer participation, etc.). o Operating Forecast— Identifies future annual non capital costs associated with the operation, maintenance, and administration of the utility systems. Sufficiency Testing— Evaluates the sufficiency of utility revenues in meeting all obligations, including cash uses such as operating expenses, debt service, capital outlays, and reserve contributions, as well as any coverage requirements associated with long- term debt. Strategy Development— Designs a forward- looking strategy for adjusting utility resources to fully fund all utility obligations on an annual or periodic basis over the forecast period. Reserve Analysis Forecasts cash flow and fund balance activity in utility reserves. Tests for satisfaction of recommended minimum fund balance policies (as discussed in Section 2 Policy Development). From this foundation, utility rate structures can be adjusted to meet the defined annual and long -term funding targets, as well as the City's pricing objectives. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 16 The financial plans were developed for a six -year planning horizon calendar year 2008 through 2013. The approach used for each core element of the financial plan is described below. 1. Capital Projects and Funding The capital funding analysis aims to identify the costs of capital projects and summarizes funding sources available to help meet those costs. In other words, total sources of funds must at least equal capital expenditures and provide for the targeted level of capital reserve funding. The first step is to estimate current day costs of capital improvements and replacement needs over the study period. City staff provided a listing of annual capital projects and associated costs stated in 2007 dollars. Four alternative capital programs were evaluated for each utility: Option 1 No capital program Option 2 Capital costs associated with legal requirements Water: fire flow requirements Wastewater: Department of Ecology "agreed order" Option 3 Option 2, plus capital costs associated with system improvements and upgrades Option 4 Option 3, plus capital costs associated with growth and expansion (projects to incorporate new service areas) The final capital programs selected for use in this rate study included necessary repair and replacement projects and those projects required to meet legal requirements (Option 2). To account for construction costs increasing over time, annual inflation is applied to escalate current day capital costs to the date of anticipated construction. Historical construction cost inflation has averaged about 4.1 over the last five years.' An inflation rate of 4.0% per year was used for this study. With the system's capital needs defined, the next step is to identify the sources of funding available to help the City meet those needs. Potential sources include grants, developer contributions, reimbursements and capital reserves (including capital facilities charge revenues and system reinvestment funding). Debt can be issued to cover any costs not met by these other funding sources. The capital financing strategy developed for this rate study utilizes the City's preferred hierarchy of funding sources, as follows: Capital project needs are first funded with available capital cash resources generated from capital facilities charges, system reinvestment funding from rates, transfers from the operating account, and interest earnings on capital account balances. Engineering News Record, "Construction Cost Index 2003 through 2007. •:>FCS GROUP CITY OF CENTRALIA, WASHINGTON Unhty Rates Charges Study Water and Wastewater Systems Study Report 17 Capital needs not met from the above cash resources will be funded with debt. The City will regularly pursue low -cost state loans, but unless approved at the time of planning, the financing strategy will assume the issuance of revenue bonds. Debt service payments are assumed to begin in the year debt is issued. Current financing terms assume a 20 -year repayment period; 6.0% rate of interest; 2% issuance cost; and debt service coverage of 1.25 excluding CFC revenues. It is worth reiterating that although the City's bond covenants allow for the use of CFC revenues, the City has established an internal policy to generate revenues sufficient to meet the higher coverage of 1.25 times annual revenue bond debt service, excluding the use of CFC revenues. 2. Operating Forecast The operating forecast focuses on annual expenses incurred to operate, maintain, and manage the utility systems. The forecast used in this study is based on the calendar year 2008 operating budget (plus adjustments provided by City staff to incorporate known or estimated future expenditures for some line item categories). Operating and maintenance (O &M) costs generally go up over time due to inflation. Historical general cost inflation has averaged about 2.9 over the last five years. A general inflation rate of 3.0% per year was used for this study. Employee benefits escalation is assumed at a slightly higher rate of 5% to recognize historical cost increases above the rate of general inflation. Variable costs such as chemicals, printing, and postage costs are forecasted to increase with the size of the customer base in addition to inflationary impacts. 3. Revenue Needs Assessment After forecasting the complete array of obligations facing the utilities, those costs are compared to forecasted revenues comprised primarily by rate revenues at their current levels. Rate revenues are increased over the forecast period by the amount of incremental rate revenues presumed to be generated from potential growth in the service areas. When comparing utility obligations with available resources, we have examined sufficiency from two perspectives: cash sufficiency and debt coverage sufficiency. The "Cash Test "focuses on cash resources against cash obligations. Cash resources in this test include rate revenue, miscellaneous operating revenue, and interest earnings in the Operating Account. The rate management strategy presented for this study also integrates the City's direction to use Operating Account cash reserves (in excess of minimum annual balance thresholds) to supplement annual revenues in years 2008 and 2009. Cash obligations include operating expenses, debt service, system reinvestment funding from rates, direct rate funding of capital projects, and any contributions to the 2 Bureau of Labor Statistics, All Urban Customers, "Consumer Price Index 2003 through 2007. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 18 Water Utility Wastewater Utility Operating Account to achieve minimum balance thresholds. If these cash obligations exceed resources available, a rate increase is required to fully fund the needs of the utilities. The "Coverage Test" refers to the ability of the utilities to meet debt covenants (or established internal policies) which require utility revenue streams to satisfy a specific margin. The coverage test evaluates revenues and expenses somewhat differently than under the cash test. For the coverage test, obligations include operating expenses (net of internal utility taxes), revenue bond debt service, and incremental debt service coverage (25% of annual revenue bond debt service). In addition to the revenues included in the cash test, the coverage test allows for the inclusion of interest earnings from all utility accounts (operating account, capital account, and any restricted reserve accounts), and often allows for annual capital facilities charge revenues (excluded for this study). This test does not allow for the use of cash reserves in meeting annual coverage obligations. In determining the revenue requirements, both the cash and coverage sufficiency tests must be met. If a rate revenue deficiency exists under both tests, the analysis adds the greatest deficiency to the forecasted rate revenue. This yields the total rate revenue requirement for any given year. The analysis uses the revenue requirement to indicate system -wide annual rate revenue adjustments for each utility and to drive the cost of service analysis. 4. Rate Management Strategy FCS GROUP prepared several rate management strategies for City staff review, which provided for alternative capital programs and various approaches for phasing in to recommended fiscal policies and other utility needs over the study period. Exhibit 4 -1 summarizes the initial results presented to the City Council for consideration (May 27, 2008 Council Meeting). Exhibit 4 -1: Initial Water and Wastewater Rate Forecast Rate Forecast 2008 Annual Rate Increases Annual Rate Increases Cumulative Rate Increases FCS GROUP 20.00% Rate Forecast 2008 14.00% 2009 2010 2011 2012 2013 9.00% 9.00% 7.00% 9.00% 3.00% 14.00% 24.26% 32.96% 36.95% 4.00% 3.00% 3.00% Cumulative Rate Increases 20.00% 30.80% 42.57% 55.40% 61.62% 66.47% 2009 2010 2011 2012 2013 3.00% 41.06% 45.29% The City Council adopted a 12% increase for the water utility and a 10% increase for the wastewater utility, effective with the August 2008 billing cycle, and applied "across- the board" to the existing rate structures. Further direction was provided for City staff and FCS GROUP to revisit the analysis following completion of the 2009 budget process and refine the rate forecast CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 19 for the future years 2009 through 2013. The following section presents the updated results for each utility. B. RESULTS Results of the revenue requirement analysis for each utility are summarized in this section. Additional detail can be viewed in the Technical Appendices (e.g., detailed listings of capital projects, budgeted revenue and expense line items, inflows and outflows of fund balances, etc.). 1. Water Utility The water utility financial plan includes a capital funding strategy, operating forecast, revenue needs assessment, rate management strategy, and reserve analysis. Capital Funding Strategy Over the six -year forecast, the water system faces a total of $7.9 million (inflated) in capital program costs: an average of $1.3 million per year. Of this six -year total, 72% is related to replacement projects and 28% is related to system improvements and upgrades (detailed project lists are included in the technical appendix). The capital funding plan presumes that the capital program will be funded through a combination of capital cash resources and debt issuance. Based on our analysis, 63% ($5 million) of the total capital program can be funded with current cash reserves, CFC revenue collections, planned annual contributions for system reinvestment funding, and transfers from the operating account. The remaining 37% of capital needs are assumed to be funded with revenue bond proceeds ($2.9 million), beginning in the year 2011. Exhibit 4 -2 summarizes annual planned capital expenditures, along with assumed funding sources. Exhibit 4 -2: Water Capital Projects and Funding Sources Ga •ital Fundin Total Capital Projects Revenue Bond Proceeds Use of Capital Fund Balance [a] Total Funding Sources FCS GROUP 2008 2009 177,275 177.275 177,275 [a] Includes annual capital facilities charge revenues and system reinvestment funding 1,052,434 1,250,342 1,977,165 1,552,985 1,910,248 836,107 943,825 1,172,038 1.052.434 1.250.342 1.141.058 609.160 738.209 1,052,434 1,250,342 1,977,165 1,552,985 1,910,248 It should be emphasized that this capital funding strategy presumes implementation of the system reinvestment funding policy at the level described in Section 2 Policy Development, and implementation of the proposed level and use of capital facilities charges described in Section 3 Capital Facilities Charges. Furthermore, any changes in the amount of planned annual capital expenditures could impact this strategy. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 20 Operating Forecast EXPENSES Water operating expenses are categorized into six categories: salaries wages; benefits; supplies; other services charges; intergovernmental; and interfund expenditures. Over the six -year planning horizon, the utility's total operating expenditures are forecasted to range from $2.9 million to $3.4 million per year (inclusive of inflation effects). The annual forecast is provided in Exhibit 4 -3. In addition to O &M expenditures, existing and new annual debt service payments are forecast over the planning horizon. Existing debt service payment schedules were provided by City staff, with annual payments of $760,000 in 2008 reducing to $469,000 by the end of study period as existing debt is paid off. Future years' debt service incorporates impacts of the capital funding strategy. Incremental debt service incurred to finance the capital program will begin in 2011 at about $82,000 and reaching 207,000 per year by the end of the study period. REVENUES Water operating revenues are categorized as rate revenues and non -rate revenues. The revenue forecast relied on a combination of hiss orical expenditures, budgeted line items, customer growth, and cost escalation. The annual forecast is provided in Exhibit 4 -3. In summary: RATE REVENUES UNDER EXISTING RATES: The forecast of rate revenues under the existing level of rates reflect actual 2007 billing system and financial records, plus estimated customer growth over the study period. City staff provided estimated customer growth of 0.50% per year. NON —RATE REVENUES: Non -rate revenues include late penalties, latecomer assessments, miscellaneous utilities fees, rents, and other miscellaneous revenues. The forecast of non -rate revenues relies on the 2008 budget, escalated in proportion to customer growth, general cost escalation, or some combination depending upon the type of revenue. As part of this study, FCS GROUP evaluated the City's existing schedule of water and wastewater miscellaneous utility fees, and provided updated charges to better reflect the cost of services provided by the utility. A Technical Memorandum summarizing the analysis is provided in Technical Appendix C. Revenue Needs Assessment The water utility faces $25.5 million in total cash obligations over the six -year planning period, including operating expenses; existing and new debt service; system reinvestment funding; and contributions to reserves. Rate revenues under existing levels and other available revenues (excluding the use of cash reserves) are forecasted at $18.5 million over the same time period FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 21 yielding a deficit of $7 million over the next six years. Based on our review, it appears that the City has historically relied on cash reserves and /or CFC revenue collections to help pay annual operating expenses (inclusive of debt service payments). As these reserves are drawn down and growth continues to slow, rate increases are required to meet the current and forecasted annual financial obligations of the water utility. The cash test drives this revenue deficiency. Given the level of cash needs above operating expenses (primarily driven by system reinvestment funding and debt service on loans), additional coverage above cash needs is not required. To eliminate this cash deficiency (with the use of cash reserves), rate revenues would need to increase about 72% above current levels, cumulative over the study period. Rate Management Strategy To reiterate, the selected rate management strategy serves to smooth the rate impacts over the study period by phasing in fiscal policy recommendations and relying on the use of Operating Account cash reserves in 2008 and 2009 to supplement annual obligations. Under this strategy, water rate adjustments are planned as follows: a 12% increase was adopted effective with the August 2008 billing cycle. Future year increases are forecasted at 12.5% for 2009; 11.5% for 2010; 13.5% for 2011; and 4% per year in years 2012 and 2013, for a cumulative increase of 72% over the study period. Future year increases are scheduled to become effective January 1 of each year. Exhibit 4 -3 provides a summary of water utility revenue requirements over the study period. Exhibit 4 -3: Water Revenue Requirements Analysis Revenue Re'•`utreme nts 2008 2009 2010 2011. 2012 2013 Revenues Rate Revenues Under Existing Rates 2,858,705 2,872,999 2,887,364 2,901,800 2,916,309 2,930,891 Non -Rate Revenues 175,488 154,535 150,764 153,144 159,248 164,930 Use of CFCs to Pay Debt Service 58.031 78.640 Total Revenues 3,034,193 3,085,565 3,116,768 3,054,945 3,075,557 3,095,821 Expenses Cash Operating Expenses Existing Debt Service New Debt Service Rate- Funded System Reinvestment Rate- Funded Debt Reserve Total Expenses Annual Surplus (Deficiency) Annual Rate Adjustment Cumulative Rate Adjustment Rate Revenues After Rate Increase Net Cash Flow After Rate Increase No of Days of Cash Operating Expenses Coverage Ratio After Increase FCS GROUP 2,937,350 2,991,972 3,079,162 3,267,640 760,286 747,378 748,842 739,074 81,647 376,020 4,464,381 82,706 168,738 266,436 27.159 3,807,501 3,908,089 4,094,440 3,261,981 728,728 173,813 512,036 0 4,676,558 3,357,829 469,433 206,617 547,354 4,581,233 (773,308) (822,523) (977,672) (1,409,436) (1,601,001) (1,485,412) 12.00 12.50 11.50% 13.50% 4.00% 4.00% 12.00 26.00 40.49% 59.46% 65.83% 72.47% 3,001,640 3,619,978 4,056,457 4,627,099 4,836,244 5,054,842 (651,855) (187,807) 15,718 56,567 30,387 319,331 90 62 62 65 69 90 1 84 3 43 4 28 4 28 3 92 330 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 22 Reserve Analysis A presumed interest earning rate of 3.0% is applied to annual beginning cash balances in the Operating and Capital Accounts. Opelating interest is used to help pay annual operating expenditures, while capital interest is used to offset annual capital expenditures. The cash balance in the water Operating Account is projected to reduce from $1.4 million at the end of 2007 to $758,000 by year end 2013 (consistent with the recommended policy of 60 to 90 days of O &M expense). The Capital Account balance is projected to reduce from $2.5 million at the end of 2007 to $914,000 by year end 2013 (well within the recommended reserve level of 1% to 2% of fixed assets). 2. Wastewater Utility The wastewater utility financial plan includes a capital funding strategy, operating forecast, revenue needs assessment, rate management strategy, and reserve analysis. Capital Funding Strategy Over the six -year forecast, the wastewater system faces a total of $12.1 million (inflated) in capital program costs: an average of $2 million per year. Of this six -year total, 63% is related to replacement projects and 37% is related to system improvements and upgrades (detailed project lists are included in the technical appendix). The capital funding plan presumes that the capital program will be funded through a combination of capital cash resources and debt issuance. Based on our analysis, 46% ($5.6 million) of the total capital program can be funded with current cash reserves, CFC revenue collections, planned annual contributions for system reinvestment funding, and transfers from the operating account. The remaining 54% of capital needs are assumed to be funded with revenue bond proceeds ($6.5 million), beginning in the year 2009. Exhibit 4 -4 summarizes annual planned capital expenditures, along with assumed funding sources. Exhibit 4 -4: Wastewater Capital Projects and Funding Sources Ca•ital Funding 2008 Total Capital Projects Revenue Bond Proceeds 43,776 4,010,390 242,878 2,203,821 Use of Capital Fund Balance [a] 480.575 1,637,904 667.530 524.187 1.107.138 1.161.441 Total Funding Sources 480,575 1,681,680 4,677,920 524,187 1,350,017 3,365,262 [a] Includes annual capital facilities charge revenues and system reinvestment funding It should be emphasized that this capital funding strategy presumes implementation of the system reinvestment funding policy at the level described in Section 2 Policy Development, FCS GROUP 2009 2010 2011 2012 480,575 1,681,680 4,677,920 524,187 1,350,017 3,365,262 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 23 and implementation of the proposed level and use of capital facilities charges described in Section 3 Capital Facilities Charges. Furthermore, any changes in the amount of planned annual capital expenditures could impact this strategy. Operating Forecast EXPENSES Consistent with the water utility, wastewater operating expenses are categorized into six categories: salaries wages; benefits; supplies; other services charges; intergovernmental; and interfund expenditures. Over the six -year planning horizon, the utility's total operating expenditures are forecasted to range from $4.3 million to $5.0 million per year (inclusive of inflation effects). The annual forecast is provided in Exhibit 4 -5. In addition to O &M expenditures, existing and new annual debt service payments are forecast over the planning horizon. Existing debt service payment schedules were provided by City staff, with annual payments of just under $2 million per year. Future years' debt service incorporates impacts of the capital funding strategy. Incremental debt service incurred to finance the capital program will begin in 2009 at about $4,000 and reaching $630,000 per year by the end of the study period. REVENUES Wastewater operating revenues are categorized as rate revenues and non -rate revenues. The revenue forecast relied on a combination of historical expenditures, budgeted line items, customer growth, and cost escalation. The annual forecast is provided in Exhibit 4 -5. In summary: RATE REVENUES UNDER EXISTING RATES: The forecast of rate revenues under the existing level of rates reflect actual 2007 billing system and financial records, plus estimated customer growth over the study period. City staff provided estimated customer growth of 1% per year. In addition, the 5% rate increase implemented at the beginning of 2008 was incorporated into the forecast. NON —RATE REVENUES: Non -rate revenues include late penalties, latecomer assessments, miscellaneous utilities fees, rents, and other miscellaneous revenues. The forecast of non -rate revenues relies on the 2008 budget, escalated in proportion to customer growth, general cost escalation, or some combination depending upon the type of revenue. Revenue Needs Assessment The wastewater utility faces $42.9 million in total cash obligations over the planning period, including operating expenses; existing and new debt service; system reinvestment funding; and FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 24 contributions to reserves. Rate revenues under existing levels and other available revenues (excluding the use of cash reserves) are forecasted at $33.9 million over the same time period yielding a deficit of $9 million over the next six years. Similar to the water utility, the City has relied on cash reserves and /or CFC revenues to help pay annual wastewater operating expenses (inclusive of debt service payments). As these reserves are drawn down and growth continues to slow, rate increases are required to meet the financial obligations of the wastewater utility. The cash test drives this revenue deficiency. Given the level of cash needs above operating expenses, additional coverage above cash needs is not required. To eliminate this cash deficiency (with the use of cash reserves), rate revenues would need to increase about 49% above current levels, cumulative over the study period. Rate Management Strategy The selected rate management strategy serves to smooth the rate impacts over the study period by phasing in fiscal policy recommendations and relying on the use of Operating Account cash reserves in 2008 and 2009 to supplement annual obligations. Under this strategy, wastewater rate adjustments are planned as follows: a 10% increase was adopted effective with the August 2008 billing cycle. Future year increases are forecasted at 11.5% per year in years 2009 and 2010 and 3% per year in years 2011 through 2013, for a cumulative increase of 49% over the study period. Future year increases are scheduled to become effective January 1 of each year. Exhibit 4 -5 summarizes wastewater utility revenue requirements over the study period. Exhibit 4 -4: Wastewater Revenue Requirements Analysis Revenue Requirements 20 Revenues Rate Revenues Under Exishng Rates Non -Rate Revenues Use of CFCs Revenues to Pay Debt Service Total Revenues Expenses Cash Operating Expenses 4,231,870 4,408,868 4,553,329 4,703,170 4,959,899 5,019,851 Existing Debt Service 1,9 35,458 1,962,870 1,960, 282 1,957,693 1,955,105 1,948,242 New Debt Service 4,275 395,894 395,894 419,612 630,543 Rate Funded System Reinvestment 151,696 161,201 85,271 179,855 178,349 129,594 Rate Funded Debt Reserve 167.007 288.206 6.071 3.541 0 Total Expenses 6,379,024 6,704,221 7,282,983 7,242,684 7,516,507 7,728,229 Annual Surplus (Deficiency) (854,761) (1,164,224) (1,685,775) (1,567,956) (1,780,494) (1,932,911) Annual Rate Adjustment [a] Cumulative Rate Adjustment Rate Revenues After Rate Increase Net Cash Flow After Rate Increase No of Days of Cash Operating Expenses Coverage Ratio After Increase [a] 2008 increase needed in addition to 5% adjustment implemented at beginning of year FCS GROUP 2009 2010 2011 2012 1, 2013 5,327,135 5,380,407 5,434,211 5,488,553 5,543,439 5,598,873 1'37,127 159,591 162,997 186,174 192,574 196,445 5,524,263 5,539,998 5,597,208 5,674,727 5,736,013 5,795,318 0.00% 11.50% 11.50% 3.00% 3.00% 3.00% 0.00% 22.65% 36.75% 40.86% 45.08% 49.44% 5,549,099 6,599,069 7,431,541 7,731,033 8,042,593 8,366,710 (663,544) (114,371) 34,885 363,895 372,478 451,525 60 47 49 60 60 60 n/a 676 27 8 91 9 34 8 98 6 35 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 25 Reserve Analysis A presumed interest earning rate of 3.0% is applied to annual beginning cash balances in the Operating and Capital Accounts. Operating interest is used to help pay annual operating expenditures, while capital interest is used to offset annual capital expenditures. The cash balance in the wastewater Operating Account is projected to reduce from $1.9 million at the end of 2007 to $733,000 by year end 2013 (consistent with the recommended policy of 45 to 60 days of O &M expense). The Capital Account balance is projected to increase from $903,000 at the end of 2007 to $1.3 million by year end 2013 (well within the recommended reserve level of 1% to 2% of fixed assets). C. IMPLEMENTATION The City adopted the 2008 water and wastewater rate increases of 12% and 10 respectively, across the -board to the existing rate structures. The cost of service analysis presented in the next section assigns cost recovery by customer class consistent with the rate adjustment strategy for years 2009 through 2013 for each utility. The proposed rates for this five -year period, adopted by City Council, are presented in Section 6 Rate Design. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 26 •:>FCS GROUP The purpose of a cost of service analysis is to provide a rational basis for distributing the full costs of utility service to each class of customer in proportion to the distinct demands they place on the system. Detailed cost allocations, along with appropriate customer class designations, help to sharpen the degree of equity that can be achieved in the resulting rate structure design. A. METHODOLOGY SECTION 5 COST OF SERVICE ANALYSIS The cost of service analysis was perforrned for a selected "test year," corresponding to the year in which new rates will take place. In this case, we used calendar year 2009, with proposed rates planned to be implemented January 1, 2009. Consistent with industry practice, the cost of service analysis includes the following components: Functional Cost Allocation Apportions the annual revenue requirement for the selected test year by major function of utility service. For the water system, functional categories include customer, meters services, base demand, peak demand, and fire protection. For the wastewater system, functional cost pools include those incurred to handle user flows, to treat the volume of user flows, to treat the strength of user flows, and to provide customer service. Customer Classification Cost Allocation Allocates functional cost pools to classes of customers based on their unique demands for service, as defined by system planning documents, industry standards, and recorded user history (from billing system information). Identifies shifts in cost recovery by customer class from that experienced under the existing rate structures. Determines the amount of revenue to be recovered from each class of customer, linked to a proportionate share of costs required to service their demand. Determines whether new or revised classes are warranted, depending on characteristics obtained from detailed customer data and /or City goals for class equity. 1. Functional Allocations The cost of service analysis begins with a functional allocation of utility costs. The purpose of this allocation is to categorize the total annual rate revenue requirement of the utility into functions of service, which can then be examined for cost recovery according to the manner in which different classes of customers use or place demands on the system for those specific categories of service. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 27 Allocation of Capital Costs Capital related costs include debt service payments, system reinvestment funding, and a portion of additions /uses of cash reserves. The most common methodology for assigning the capital portion of the revenue requirement to functional components is to allocate such costs on the basis of each system's existing plant -in- service. The allocations for plant -in- service utilized documented engineering planning criteria from both the City of Centralia and industry standards. In allocating this utility plant -in- service, we used the City's fixed assets listing as of December 31, 2007, organized into major categories for each system. Allocation of Operating Costs Operating costs include O &M expenses and a portion of additions /uses of cash reserves. These costs are allocated to the functions based on a detailed review of line item categories, generally following the cost causation process used in the allocation of plant. For example, customer billing costs are allocated to the "customer" category; maintenance and engineering costs are allocated in proportion to total plant -in- service; administrative costs are allocated in proportion to all other costs, and so on. 2. Customer Class Allocations Once the annual revenue requirement has been categorized into functional cost pools, each cost pool can be further apportioned to the classes of customers who use the utility system. First, existing customer classes need to be either affirmed or modified to more appropriately group like users. To accomplish this, the characteristics and historical demands of each class need to be studied. Then, using those characteristics and demands, each functional cost pool is allocated to each customer class in a manner that reflects each group's use of (or demands on) the utility system. These allocations draw upon account data, historical usage data, or system planning requirements. Ultimately, this element of the analysis defines the total annual revenue that should be generated from each customer class, in order to achieve a reasonably equitable system of cost recovery from rates. Customer Usage Statistics A key component in the distribution of costs to customer classes is testing the reliability and accuracy of customer statistics. This is accomplished through a review of historical billing system data and application of the rate schedule in effect for that year. City staff provided historical billing system records for 2007, including number of accounts and dwelling units, size of meters, and monthly water usage. The total revenue generated from these customer statistics should approximate the actual revenue receipts shown in the financial statements (with minor differences due to the timing of new connections disconnects, delinquencies, etc.). If the FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 28 revenue estimates are with reasonable limits', statistics are determined "valid" and an adjustment factor is applied to the statistics if necessary to account for any minor discrepancies. The results of this analysis indicate that the City's customer statistics are valid and will serve as a reasonable basis for forecasting revenue and allocating system costs to the customer classes. Further, customer usage statistics are evaluated to determine if current customer class designations represent an appropriate grouping of customers, or if revisions are warranted to better reflect customer groupings that exhibit similar usage patterns. This addresses rate equity among customer classes. Distribution of Costs The functionally allocated system -wide costs are distributed to the customer classes to determine "cost shares" based on the relative demands placed on the system by each class. This analysis identifies shifts in cost recovery by customer class from that experienced under the existing rate structure. Through this process, if one customer class places a higher or lower proportional average demand in one functional category, that customer class pays a higher or lower portion of that functional category's costs. B. RESULTS Results of the cost of service analysis for each utility are summarized in this section. Additional detail can be viewed in the Technical Appendices (e.g., detailed cost allocations, customer statistics, etc.). 1. Water Utility The water utility cost of service analysis includes a functional allocation, customer allocation, and a cost of service phase -in strategy. Functional Allocation The rate revenue requirement for the water utility for year 2009 is projected to be 3.6 million (incorporating the proposed 12.5% inc:rease). Using the approach described above, the revenue requirement was allocated to water service functional categories. Exhibit 5 -1 illustrates the breakdown of water utility costs among these functional categories: Customer— These costs are associated with services that do not vary by water consumption, including utility billing, meter reading, and office support. Meters &Services— These costs are associated with installation, maintenance, and repairs of meters and services. 3 As a rule of thumb, 3% or less is an acceptable discrepancy Calculated revenues were within 1.8% and 2.6 respectively, of reported revenues for the water and wastewater utilities within the acceptable range of discrepancy. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 29 Base Demand These costs are associated with the utility's ability to deliver water for average annual levels of demand. These costs tend to vary with the amount of water consumption, such as source of supply, chemical, and power. Peak Demand —These costs are associated with the utility's ability to deliver water during periods of peak consumption, such as summer period irrigation. Fire Protection These costs are associated with the water system's delivery of direct fire protection, including the duration and flow rate of water used for fire suppression. Exhibit 5 -1: Allocation of Water Revenue Requirement to Functional Components FIRE PROTECTION 10% FCS GROUP CUSTOMER 14% PEAK 32% BASE 35% METER SERVICES 9% This distribution was developed using the following assumptions: The water system's ratio of peak day demand to average day demand is 1.83, as documented in the City's water system plan update. This ratio was used to allocate demand related costs between base and peak demands. Allocation of storage facilities is based on storage capacity dedicated to equalizing, emergency (standby) and fire suppression functions as documented in the City's water system plan update. Allocations to pumping and transmission distribution (T &D) facilities are based on professional judgment, with the concurrence of City staff. The analysis assumes that 10 percent of pumping and T &D facilities are allocated to the fire protection component (for over- sizing). The remaining costs are assigned to base and peak demand using the ratio of peak to average day demand. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 30 Meters services costs are directly assigned to the meters services functional component. Hydrant costs are directly assigned to fire protection, and general plant is allocated in proportion to all other infrastructure costs. Operating maintenance costs are allocated based on a detailed review of line items, such as salaries, office and operating supplies, chemicals, power costs, etc., and assigned to functions based on assumed cost causation. After netting non -rate revenues from expenditures, the net revenue requirement to be recovered from water rates ($3.6 million) is allocated to the functional categories as follows: 14% to customer; 9% to meters services; 35% to base demand; 32% to peak demand, and 10% to fire protection. Customer Allocation The City's billing system categorizes customers as: inside city, outside city, and urban growth area (UGA). Within these categories, customers are classified as: single family residential; multi- family residential; commercial; industrial; irrigation; and private fire lines. The City also separately identifies low- income customers. In analyzing these customer classes, comparing actual service requirements and demand patterns and relying on industry practices, FCS GROUP maintained these customer classes for purposes of assessing cost of service and establishing class specific rates, with one exception. In our evaluation, we found no cost -based difference that warrants a distinction in service requirements between commercial and industrial customers for the purpose of setting rates. Water system functional cost pools were distributed to customer classes using the demographics described below. Exhibit 5 -2 illustrates the result of this process: Customer Accounts This statistic relates simply to the number of accounts in each customer class. Customer related costs are allocated to customer classes based on their proportional share of total system number of accounts. Meters Services Equivalents (MSEs) This statistic relates to the number and size of meters included in each customer class. The American Water Works Association (AWWA) has developed a meter service equivalency factor that reflects relative costs for different size meters, using the smallest meter as the baseline. Meters services costs are allocated to customer classes based on proportional shares of total system MSEs. Annual Water Usage This statistic relates to total water usage consumed by the customer classes within a y°ar. Base demand costs are allocated to customer classes in proportion to total system annual water usage. Peak Water Usage This statistic relates to water usage consumed by each customer class within the system's peak period. The peak season is defined as June through FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 31 Meter Capacity Equivalents (MCEs) This statistic also relates to the meter size included in each customer class. A meter capacity equivalency factor has been developed by the AWWA that reflects maximum potential flow for different sized meters. Fire Protection costs are allocated to customer classes based on proportional shares of total system MCEs. Irrigation customers and fire meter customers are not allocated fire protection costs. Irrigation customers do not benefit from fire protection services. Fire meters are only subject to costs associated with providing customer and meters services related costs fire related costs are recovered through the domestic meter. Exhibit 5 -2: Distribution of Costs to Water Customer Classes ca ion :.actor. Single Family Residential Multi- Family Residential Commercial Industnal Irrigation Rrelines TOTAL [a] Based on AWWA meters services cost ratio [b] Based on June September billing records [c] Based on AWWA meter capacity ratios FCS GROUP Number of Meters 83 96 4 25 9.45% 1.31% 1 03% Meter Service Equnralents [a], 66 06% 4 75% 12 29% 1.41% 15 49% as rr- iron` 57.90% 13.33% 26 13% 2 64% 0 00% Peak Season Usage [b] 59 41% 11 48% 23 69% 5 42% 0.00% Meter Capacity Equivalents [c] 7481% 7 55% 17 63% 0 00% 0 00% 100 00% 100 00% 100 00% 100 00% 100 00% The respective percentages are applied to the total costs allocated to each functional component (shown in Exhibit 5 -1) to determine the share of total costs assigned to each class. Exhibit 5 -3 summarizes the customer class distribution of the $3.6 million in revenue required from water rates in 2009. The cost of service analysis has identified that some shifts in cost burden amongst the customer classes is warranted. Referring to the exhibit, customer class percentage adjustments that are less than the system -wide average "total increase of 12.5% indicates current over recovery of customer class cost of service, while percentage adjustments greater than the system -wide average increase indicates a current under recovery of customer class cost of service. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 32 Exhibit 5 -3: Comparison of Water Revenue Distribution by Customer Class Customer Classes Single Family Residential 2,142,570 2,296,643 Multi- Family Residential 293,609 359,709 Commercial Industnal 592,727 743,841 Irrigation 66,479 105,192 Firelines 70,555 56,297 II 8 TOTAL u 3,165,941 I 3,561,683 [a] Includes 12% across- the -board increase, efiective with August billing Customer Classes TOTAL FCS GROUP 2009 Revenue under Current Rates [al Under the current rate structure, the single family residential class (as a whole) and customers with private fire lines are paying more than their share of cost of service; thereby subsidizing all other customer classes. This finding suggests that a shift in cost recovery amongst customer classes would result in a more equitable rate structure than that currently in effect. Phase in Strategy A phase -in strategy was developed to transition commercial industrial rates to their indicated full cost of service over a three -year period. The intent of this strategy was to mitigate near term impacts to these customers for the benefit of economic development. As a whole, the single family residential class will continue to carry the rate subsidy over this transition period. The phase -in strategy was developed such that increases to the commercial industrial classes were set as low as possible, while maintaining a reduction in the monthly bill for inside city low- income customers and single family customers with relatively low water usage (discussed further in the Section 6 Rate Design). Exhibit 5 -4 presents the redistribution of costs for the first year of the phase -in plan 2009. Exhibit 5 -4: Phase -in Plan Water Revenue Distribution by Customer Class 2009 Revenue under Current Rates (a] 1 2009 Cost of Service 2009 Cost of Service Cost of 1 (Decrease) Cost of Service Increase/ (Decrease) 7.19% 22 51% 25.49% 58 23% -20 21% 12.50% Single Family Residential 2,142,570 2,296,643 7 19% 2,326,808 Multi -Family Residential 293,609 359,709 22 51% 359,709 Commeraal Industnal 592,727 743,841 25 49% 699,418 Irrigation 66,479 105,192 58 23% 105,192 Firelines 70,555 56,297 -20 21% 70,555 Phase -tn an 2009 Revenue f Increase l%'= (Decre,ase 8 60% 2251% 18 00% 58 23% I 3,165,941 3,561,683 12.50% 3,561,683 I 12.50% As shown in the exhibit, the commercial /industrial class average increase was reduced from the cost -of- service derived increase of 25.49% to an 18% increase. To accomplish this, the single family class average increase was increased from the cost -of- service derived increase of 7.19% to CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 33 an 8.60% average increase. It is important to note that the class "average" increase will vary by individual customer based on their individual level of water usage and location (inside city, outside city, and UGA). Refer to Section 6, Rate Design, under Customer Bill Impacts for further discussion). This proposed redistribution of costs serves as the revenue target for the design of water rates discussed in Section 6 Rate Design. 2. Wastewater Utility The wastewater utility cost of service analysis includes a functional allocation, customer allocation, and a cost of service phase -in strategy. Functional Allocation The rate revenue requirement for the wastewater utility for year 2009 is projected to be 6.6 million (incorporating the proposed 11.5% increase). Using the approach described previously, this revenue requirement was allocated to wastewater service functional categories. Exhibit 5 -6 illustrates the breakdown of wastewater utility costs amongst these functional categories: Customer— These costs are associated with services that do not vary by wastewater volume or strength, including utility billing, meter reading, and office support. Flow— These costs are associated with the utility's ability through its collection and conveyance system to manage and process total volume of wastewater. Strength— These costs are associated with the utility's ability to treat sewage to required discharge standards. A portion of treatment related costs is influenced by the total volume of sewage processed, which is captured as "flow" cost, while other treatment costs can vary depending on sewage strength, measured by biochemical oxygen demand (BOD) and total suspended solids (TSS). FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 34 Exhibit 5 -6: Allocation of Wastewater Revenue Requirement to Functional Components FCS GROUP FLOW 63% This distribution was developed using the following assumptions: Collection facilities are allocated 100% to the flow component. Treatment costs are allocated to the functional components consistent with the design criteria used for the new wastewater treatment plant (Flow 41.3 BOD 40.5 and TSS 18.2 Customer related facilities are directly assigned to the customer component, and general plant is allocated in proportion to all other infrastructure costs. Operating maintenance costs are allocated based on a detailed review of line items, such as salaries, office and operating supplies, etc., and assigned to functions based on assumed cost causation. After netting non -rate revenues from expenditures, the net revenue requirement to be recovered from wastewater rates ($6.6 million) is allocated to the functional categories as follows: 8% to customer; 63% to flow; 20% to BOD: and 9% to TSS. Customer Allocation The City's billing system categorizes customers as inside city and outside city. Within these categories, customers are classified as: single family residential; multi family residential; commercial /industrial domestic strength; and commercial /industrial high strength. The City also separately identifies low- income customers. In analyzing these customer classes, comparing actual service requirements and demand patterns and relying on industry practices, FCS GROUP maintained these customer classes for purposes of assessing cost of service and establishing class specific rates, with one exception. Based on CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 35 discussions with City staff, there are no high strength customers on the wastewater system; thus, the high strength commercial /industrial class was eliminated. Wastewater system functional cost pools were distributed to customer classes using the demographics described below. Exhibit 5 -7 illustrates the result of this process: Customer Accounts/Units This statistic relates to the number of accounts or dwelling units in each customer class. Customer related costs are allocated to customer classes based on their proportional share of total system number of units. Contributed Wastewater— This statistic relates to the annual volume of wastewater contributed to the plant by each customer class. Since wastewater flow is not measured for individual customers, water usage is commonly used as a proxy for wastewater volume. Annual volume for non residential customers represents that amount of total water usage actually recorded in the utility billing system. Annual volume for residential customers represents the lesser of actual water usage or winter average water usage. Winter water usage refers to water usage observed October through May. This annualized volume as opposed to actual water usage is used to recognize that increased water consumption observed in the peak season of June through September is primarily caused by outdoor uses, which never enters the wastewater system. Flow and strength related costs are distributed to the customer classes based on their proportional share of total contributed wastewater volume. Since all customers on the wastewater system are assumed to exhibit domestic level strength, no distinction in strength in necessary. Exhibit 5 -7: Distribution of Costs to Wastewater Customer Classes TOTAL AY11:05030 t Ailoea on Basis Single Family Multi Family Comm/Indust Domestic 4> FCS GROUP C cw, 7 u a /41BafriD3 Wciteaco 63 79% 27 26% 8 95% 46 99% 18 24% 34 77% a[3D o'ontn o ute Wi ck 46 99% 18 24% 34 77% ontri o uteri WcluRD 46 99% 18 24% 34 77% 100 00% 100.00% 100 00% 100.00% The respective percentages are applied to the total costs allocated to each functional component (shown in Exhibit 5 -6) to determine the share of total costs assigned to each class. Exhibit 5 -8 summarizes the customer class distribution of the $6.6 million in revenue required from wastewater rates in 2009. The cost of service analysis has identified that some shifts in cost burden amongst the customer classes is warranted. Referring to the exhibit, customer class percentage adjustments that are less than the system -wide average "total increase of 11.5% indicates current over recovery of customer class cost of CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 36 service, while percentage adjustments greater than the system -wide average increase indicates a current under recovery of customer class cost of service. Exhibit 5 -8: Comparison of Wastewater Revenue Distribution by Customer Class Single Family Multi- Family Comm/Indust Domestic TOTAL Customer Classes 4 ue Under Existing Rates Single Family Multi -Family Comm/Indust Domestic TOTAL FCS GROUP 2009 R Under Rat 3,106,276 3,186, 687 1,1 26,324 1,249, 700 1,636,057 2,162, 682 5,918,657 6,599,069 11.50% Under the current rate structure, the single family residential class (as a whole) is paying more than its share of cost of service; thereby subsidizing the commercial /industrial customers. The multi family residential class is paying close to cost of service. This finding suggests that a shift in cost recovery amongst customer classes would result in a more equitable rate structure than that currently in effect. Phase in Strategy A phase -in strategy was developed to transition commercial and industrial rates to their indicated full cost of service over a three -year period. The intent of this strategy was to mitigate near term impacts to these customers for the benefit of economic development. The single family residential class will continue to carry the rate subsidy over this transition period; although their class increases was kept well below the system -wide increase of 11.5% (discussed further in the Section 6 Rate Design). Exhibit 5 -9 presents the redistribution of costs for the first year of the phase -in plan 2009. Exhibit 5 -9: Phase -in Plan Wastewater Revenue Distribution by Customer Class 1 009 Cost of Service 3,106,276 3,186,687 1,126,324 1,249, 700 1,686,057 2,162,682 5,918,657 6,599,069 2009 Cost of Service Cost of Service Increaser (Decrease): 2 59% 10 95% 28 27% 11.50% Cost of Service {Decrease) 2.59% 10.95% 28.27% ase- n an Phase-i9 Plan' increase f (Decrease); 3,326,101 1,249,700 2,023,268 6,599,0691 7 08% 10 95% 20 00% 11.50% As shown in the exhibit, the commercial /industrial class average increase was reduced from the cost -of- service derived increase of 28.27% to a 20% increase. To accomplish this, the single family residential class average increase was increased from the cost -of- service derived increase of CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 37 2.59% to 7.08 It is important to note that the class "average" increase will vary by individual customer based on their individual level of water usage and location (inside city and outside city). Refer to Section 6, Rate Design, under Customer Bill Impacts for further discussion). This proposed redistribution of costs serves as the revenue target for the design of wastewater rates discussed in Section 6 Rate Design. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 38 A. METHODOLOGY SECTION 6 RATE DESIGN The rate design element focuses on constructing rate structures, including fixed and variable rate components, for each class of customer to recover the appropriate amount of revenue from each class of customer and to recover the revenue necessary in total to fully fund utility financial obligations. Further, City pricing objectives regarding affordability, equity, and conservation are applied. Prior to this section, our findings rested on financial and technical analyses to derive the total annual revenue need from each utility and the amount that should be collected from each customer class. In this section, we focus more on the art of a utility rate study, which is the design of the pricing structure itself. M uch of this rate design focuses on intended outcomes that carry out desired public policy, such as affordability to the customer, equity considerations, and administrative practicality. The rate design begins with an evaluation of the City's current rate structures. Alternative rate structures are recommended, as warranted, to better achieve the City's desired outcomes. 1. Water Rate Structure Evaluation The rate structure evaluation reviews the existing water rate structure and presents proposed changes for the City's consideration. Existing Rate Structure The City's existing water rate structure consists primarily of two components: a minimum monthly charge (fixed charge) that increases by meter size and a volume charge per 100 cubic feet of water consumption applicable to all residential, multi family, commercial, and irrigation customers. Manufacturing, schools, hospitals, processing, or similar type enterprises using an average greater than 600,000 gallons oEwater per month pay a lower volume charge. Customers categorized as "urban growth area" (UGA) currently pay the same rates as inside city customers. Customers located outside of the UGA, pay a multiplier of 1.5 times inside city rates. Customers located in higher elevation zones where extra pumping is required also pay a booster surcharge per account. The City offers a discounted fixed charge (roughly 84% of the regular rate) to qualified single family residential low- income customers. Finally, a separate schedule of inside city and outside city rates applies for customers with private fire service lines. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 39 Exhibit 6 -1 presents the existing water rate structure, incorporating the adopted 2008 rate levels. Exhibit 6 -1: Existing Water Rate Structure Minimum Monthly Charges Per Meter Size 3/4" 16 69 25.08 1" 1861 27.89 1 1/2" 20 41 30.68 2" 25 57 38.42 3" 63.59 95 48 4" 77.60 116.57 6" 11045 16592 Low Income Outside UGA All Applicable customers FGS GROUP aside. City UGA 1402 21 15 Charge for Water Use Booster Surcharges Ins ide City UGA Fire Service Line Rate Inside City UGA 2" 15 12 4" 61.67 6" 88 92 8" 122.11 Outside UGA 11 98 'i Outside UGA 11.98 Outside UGA 2313 92.51 133 32 183.11 Based on the cost of service analysis, it appears that the current rate structure recovers a disproportionately high share of costs from the single family residential class, and too low a share of costs from commercial and irrigation customers. Further, even though the single family customer class as a whole is paying more than its indicated share of cost of service, the current rate structure is not very strong in sending appropriate pricing signals to encourage water conservation. This suggests that within the single family residential class, low to average water CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 40 users are likely subsiding higher water users. Also, inside city customers are subsidizing customers located in the UGA; from a ratemaking perspective, UGA customers should be subject to the outside city rate multiplier. Proposed Rate Structure Based on the results of the cost of service analysis and discussions with City staff, the following alternative water rate structure was designed: MINIMUM MONTHLY CHARGES Design of class specific minimum monthly charges that increase with the size of meter. This charge recovers customer related costs, meters services costs, fire protection costs, and a portion of peak demand costs. The following components are included: Customer related costs that do not vary by customer class or with the size of meter were assigned a ratio of 1.0, meaning the portion of the charge related to customer costs is the same for all customer classes and all meters sizes. Meters services cost, such as the cost of assembly, repair and maintenance of meters and services were assigned the Meters Services (MS) Cost ratio, documented in the AWWA Rates and Charges Manual (M1). The ratio is the same for all customer classes, but increases with each larger meter size in relationship to its cost compared to that of the smallest meter. Fire protection costs and the portion of peak demand costs (currently established at 20% of peak demand costs) included in the monthly charge was assigned the Meter Capacity (MC) ratio, documented in the AWWA M1 manual. Similar to the MS ratio, this ratio increases with each larger meter size. This component of the charge also varies by customer class incorporating the differing peak demands of each class. As noted previously, the fire protection component of the charge was excluded for irrigation and fire lines customers. WATER USE CHARGES Class specific usage -based charges, designed to recover all base demand costs and the remaining portion of peak demand costs (currently established at 80% of peak demand costs): Single Family Residential (SFR) A three tiered increasing block rate, where the rate per unit of consumption increases above each established threshold of usage; thus, both the incremental and average cost of water to the consumer increases with increased usage. The intent of this rate structure is to promote water conservation (or at least to charge appropriately for peak use). Since the SFR class represents the largest portion of FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 41 total system water usage and has relatively high peak demands on the water system, it is reasonable to target this class for water conservation. Multi- Family Residential (MFR), Commercial /Industrial, and Irrigation A class specific single block usage charge, where a single rate per unit of consumption is applied to all units of consumption. Low Income Discount Maintain the City's existing discount policy. Booster Surcharges No change to existing charges Outside City Multiplier Maintain the City's existing outside City multiplier of 1.5 times inside City rates. Establish a new policy to apply the multiplier to customers in the urban growth area (UGA). 2. Wastewater Rate Structure Evaluation The rate structure evaluation reviews the existing wastewater rate structure and presents proposed changes for the City's consideration. Existing Rate Structure The City's existing wastewater rate structure consists of a class specific monthly base rate and a volume charge per 100 cubic feet of water consumption. The residential volume charge is applied to the lesser of actual water use or the winter cap. The non residential volume charge is applied to actual water usage, with a minimum monthly charge set equal to the single family residential base rate. Customers located outside of city limits pay the same rates as inside city customers. The City offers a discounted base rate (roughly 90% of the regular) to qualified single family residential low income customers. Exhibit 6 -2 presents the existing wastewater rate structure, incorporating the adopted 2008 rate levels. FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 42 Exhibit 6 -2: Existing Wastewater Rate Structure Monthly Charges in le Famil Residential Monthly Base Rate Low Income Usage [a] Multi e-Fami Residential; First Dwelling Unit Each Additional Unit Usage [a] Domestic- Stren•th Commercial Monthly Base Rate Usage per 100 cf Monthly Minimum Hi' h -Stren th Commercial! Monthly Base Rate Usage per 100 cf 50 59 45 50 1.79 1506 8 0; 50 59 1 47.06 41.94 166 48 87 37 58 1 Based on the cost of service analysis, it appears that the current rate structure recovers a disproportionately high share of costs from the single family residential class, and too low a share of costs from commercial customers. Further, even though the single family customer class as a whole is paying more than its indicates[ share of cost of service, inside city customers are subsidizing outside city customers; from a ratemaking perspective, these customers should be subject to an outside city rate multiplier. Proposed Rate Structure Based on the results of the cost of service analysis and discussions with City staff it was determined that the existing structure will be maintained with customer class rates adjusted in accordance with the cost of service results. The only change to the structure itself, was the incorporation of an outside city multiplier of 1.5 times the inside city rates, consistent with the policy for the water utility. As discussed previously, the high strength commercial /industrial class was eliminated. >FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 43 B. RESULTS Results of the rate design for each utility are summarized in this section. Additional detail can be viewed in the Technical Appendices. 1. Water Utility The water utility rate design element includes the rate design and a comparison of customer bill impacts under proposed rates against existing rates. Rate Design Exhibit 6 -3(a) through (f) present the proposed rates for the water utility. Exhibit 6 -3(a) Single Family Residential Monthly Base Charges Meter Size 3/4" 1" 1 1/2" 2" Low Income onthly Volume Charges. Single Family and Low Income Customers Block One (0 6 ccf) Block Two (6 15 ccf) Block Three (Over 15 ccf) Weighted Average >FCS GROUP 2009 2010 2011 2012 2013 M 14 50 15 95 17 60 18 30 19 03 1944 21 43 23 93 24 89 25 89 29 89 32 99 37 28 38 77 40 32 44 35 49 01 55 80 58 03 60 35 12181$ 13 40 2009 2010 2011 14 78 15 37 15 98 2012 I 2013 2 09 2 29 2 62 2 72 2 83 2 75 3 05 3 50 3 64 3 79 341 381 437 454 472 2 42 2 68 3 07 3 19 3 32 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 44 Outside C Meter Size 3/4" 21 75 23 93 26 40 27 46 28 56 1" 2917 32 14 35 89 37 33 38 82 1 1 /2" 44 83 49 49 55 93 58 17 60 50 2" 66 52 73 52 83 70 87 05 90 53 Low Income Monthly Volume Income Customers Single Family and Low Block One (0 6 ccf) Block Two (6 -15 ccf) Block Three (Over 15 ccf) Weighted Average Meter Size 3/4" 1" 1 1/2" 2 Low Income Single Family and Low Income Customers FCS GROUP Monthly, Base Monthly Volume harges 2009 2010 2011 2012 2013 18 27 20 10 22 18 23 07 23 99 Charges 2009 I 2011) 2011 1 2012 I 2013 313 344 394 410 426 412 458 525 546 568 511 571 656 682 709 364 402 461 479 498 harges 2009 2011) 2011 2012 2013 21 75 23 93 26 40 27 46 28 56 2917 32 14 35 89 37 33 38 82 44 83 49 49 55 93 58 17 60 50 66 52 73 52 83 70 87 05 90 53 18 27 20 10 22 18 23 07 23 99 Charges 2009 I 2010 2011 2012 I 2013 Block One (0 6 ccf) 313 3 44 3 94 4 10 4 26 Block Two (6 15 ccf) 412 4 58 5.25 5 46 5 68 Block Three (Over 15 ccf) 511 5 71 6 56 6 82 7 09 Weighted Average 3 64 4 02 4 61 4 79 4 98 DETERMINATION OF BLOCK RATE THRESHOLDS There is no pre established appropriate number of blocks to use in the design of an increasing block rate structure. A common structure includes three blocks, but can be designed with any number of blocks depending on rate structure goals. Each utility's goals and customer usage patterns should be evaluated when determining the number of blocks to establish. Based on discussions with City staff, it was determined that a three -block rate structure would best meet the water system needs. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 45 The recommended thresholds for each of the three blocks were determined based on an evaluation of historical water usage patterns for the single family residential class. The following "rule of thumb" was used in the analysis: Block 1 (0 -6 ccf per month) is set equal to average monthly winter period usage per account for the class. This is assumed to approximate normal indoor usage and a nominal amount of outdoor winter use. On an average annual basis, about 60% of customer bills are expected to remain within this rate block threshold. Block 2 (6 -15 ccf per month) is set roughly equal to two times average annual usage per account. This is assumed to capture the majority of base demand use and a reasonable amount for normal summer use (peak use). About 32% of customer bills fall into the second block. Block 3 (over 15 ccf per month) captures all water usage above the block 2 threshold and is designed to target higher summer use. The third block captures the remaining 8% of customer bills. DETERMINATION OF BLOCK RATE DIFFERENTIALS As with the number of blocks, there is no pre established appropriate rate differential between the block thresholds. Mitigating revenue instability and promoting conservation are the primary factors to be considered. The third block rate is set equal to the calculated cost -of- service based irrigation rate (since usage in this block is assumed to be discretionary irrigation use). The price differential between the blocks was then established to provide for an equal incremental cost amongst the blocks. The City might consider modifying these rate block differentials and /or the proposed block thresholds over time if desired conservation is not achieved. Exhibit 6 -3(b) Multi family Residential Monthly. Base Charges Meter Size o> FCS GROUP 2009 2010 2011 2012 2013 3/4" 15 99 17 77 19 75 20 54 21 36 1" 21 99 24 48 27 52 28 62 29 76 1 12" 35 07 39 11 44 44 46 22 48 07 2" 52 69 58 82 67 26 69 95 72 75 3" 11527 12883 14841 15435 16052 4" 167 23 186 95 215 67 224 30 233 27 6" 307 52 343 84 397 24 413 13 429 66 'Charges' Meat* vol, Charge per ccf j 2009 2010 2011 All Usage 2012 2013 2231$ 2491$ 2861$ 2971$ 309 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 46 Monthly, Base Meter Size Monthly Volume Charge per ccf 2009 I 2010 Monthly, Base Meter Size onthly Volume Charge per ccf All Usage Exhibit 6 -3(c) Commercial Industrial FCS GROUP hares 2009 2010 2011 2012 2013 3/4" 23 98 26 66 29 62 30 80 32 03 1" 32 98 36 72 41 27 42 92 44 64 1 1 /2" 52 60 58 67 66 66 69 33 72 10 2" 79 04 88 24 100 88 104 92 109 12 3" 172 90 193 24 222 61 231 51 240 77 4" 250 84 280 42 323 51 336 45 349 91 6" 461 27 515 77 595 86 619 69 644 48 2011 1 2012 I 2013 All Usage 1 3 35 1 :3 74 1 4 29 1 4 46 1 4 64 harges 2009 2010 2011 2012 2013 3/4" 23 98 26.66 29 62 30 80 32 03 1" 32 98 36 72 41 27 42 92 44 64 1 1/2" 52 60 53 67 66 66 69 33 72 10 2" 79 04 83 24 100 88 104 92 109 12 3" 172 90 193 24 222 61 231 51 240 77 4" 250 84 280 42 323 51 336 45 349 91 6" 461 27 515 77 595 86 619 69 644 48 I n arges 2009 I 2010 2011 I 2012 I 2013 7$ 3 35 1$ 3 74 1 4 29 1$ 4 46 1$ 4 64 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 47 Monthly, Base Charges Meter Sae 3/4" 14 65 17 00 19 23 20 00 20 80 1" 20 03 23 28 26 64 27 71 28 82 1 1/2" 31 70 36 90 42 70 44 41 46 19 2" 47 50 55 35 64 47 67 05 3" 104 30 121 67 142 83 148 54 154 48 4" 150 86 176 03 206 96 215 24 223 85 6" 276 40 322 58 379 82 395 01 410 81 Monthly Volume Charges Charge per ccf All Usage Meter Size Charge per ccf All Usage FCS GROUP 2009 2010 2011 2012 2013 2009 I 2010 2011 2012 2013 2141$ 2491$ 2921$ 3041$ 316 Outside City Monthly Base Charges 2009 2010 2011 2012 2013 3/4" 21 98 25 50 28 84 1" 30 05 34 92 39 96 1 1 /2" 47 55 55 35 64 05 2" 71 26 83 03 96 70 3" 156 45 182 51 214 24 4" 226 30 264 05 31044 6" 414 60 483 87 569 73 29 99 31 19 41 56 43 22 66 61 69 27 100 57 104 59 222 81 231 72 322 86 335 77 592 52 616 22 Monthly Volume Charges 2009 2010 2011 2012 2013 3211$ 3741$ 438 1 4561$ 474 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 48 Monthly Base Meter Size 3/4" 21 98 25 50 28 84 29 99 31 19 1" 30 05 34 92 39 96 41 56 43 22 1 1/2" 47 55 55 35 64 05 66 61 69 27 2" 71 26 83 03 96 70 100 57 104 59 3" 156 45 182 51 214 24 222 81 231 72 4" 226 30 264 05 31044 322 86 335 77 6" 414 60 483 87 569 73 592 52 616 22 Monthly Volume Charge per ccf All Usage i 3211$ 3 74 4 4381$ 4 56 474 Exhibit 6 -3(d) Irrigation 2009 2011) Monthly Base Meter Size Monthly Volume FCS GROUP harges 2009 2011) 2011 2012 2013 Charges 2011 2012 2013 harges 2009 2011) 2011 2012 2013 3/4" 14 86 16 51 18 24 18 97 19 73 1" 2010 22 36 25 00 26 00 27 04 1 1/2" 31 31 34 89 39 42 41 00 42 64 2" 46 68 52 06 59 22 61 59 64 05 3" 103 23 115 30 132 32 137 61 143 11 4" 148 42 165 81 190 54 198 16 206 09 6" 269 92 301 57 347 00 360 88 375 32 Charge per ccf I 2009 I 2011) 2011 All Usage 1 3 41 1 3 81 1 4 37 Charges 2012 2013 4 54 1 4 72 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 49 Monthly Base Charges Meter Size 3/4" 22 29 24 76 27 36 28 45 29 59 1" 3015 33 55 37 50 39 00 40 56 1 1/2" 46 97 52 34 59 13 61 50 63 96 2" 70 02 78 10 88 83 92 38 96 08 3" 154 84 172 95 198 48 206 42 214 68 4" 222 64 248 71 285 81 297 24 309 13 6" 404 87 452 36 520 49 541 31 562 96 Monthly Volume Charges Charge per ccf All Usage Monthly Base Charges Meter Size 3/4" 22 29 24 76 27 36 28 45 29 59 1" 3015 33 55 37 50 39 00 40 56 1 1 /2" 46 97 52 34 59 13 61 50 63 96 2" 70 02 78 10 88 83 92 38 96 08 3" 154 84 172 95 198.48 206 42 214 68 4" 222 64 248 71 285 81 297 24 309 13 6" 404 87 452 36 520 49 541 31 562 96 Monthly Volume Charges Charge per ccf All Usage Exhibit 6 -3(e) Fire Lines Monthly Charges for Fire Service Meter Size FCS GROUP 2009 2010 2011 2012 2013 2009 I 2010 2011 2012 2013 1$ 511 5711$ 6561$ 6821$ 709 2009 2010 2011 2012 2013 I 2009 I 2010 2011 2012 1 2013 1$ 5111$ 5711$ 6561$ 6821$ 709 2009 2010 2011 2012 2013 1 1 /2" 15 12 15 12 15 12 15 12 15 12 2" 1512 1512 1512 1512 1512 4" 6167 6167 6167 6167 6167 6" 88 92 88 92 88 92 88 92 88 92 8" 122 11 122 11 122 11 122 11 122 11 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study: Water and Wastewater Systems Study Report 50 Monthly Charges for Meter Size 1 1/2" 2313 23 13 23 13 23 13 23 13 2" 2313 2313 2313 2313 2313 4" 92 51 92 51 92 51 92 51 92 51 6" 133 32 133 32 133 32 133 32 133 32 8" 18311 183 11 183 11 183 11 183 11 Monthly Charges f Meter Size 112" 2313 2313 2313 2313 2313 2" 2313 2313 2313 2313 2313 4" 92 51 92 51 92 51 92 51 92 51 6" 133 32 133 32 133 32 133 32 133 32 8" 18311 183 11 183 11 183 11 183 11 Exhibit 6 -3(f) Booster Surcharges Monthly Surc All Applicable Customers I 13 48 1 15 03 I 17 06 I 17 74 I 18 45 Monthly Surc FCS GROUP 2009 2011) 2011 2012 2013 2009 2011) 2011 2012 2013 2009 2011) 2011 2012 2013 Fire Service Fire Service arge arge 2009 2010 2011 2012 2013 All Applicable Customers I 13 48 I 15.03 I 17 06 I 17 74 I 18 45 Monthly Sur arge 2009 2010 2011 2012 2013 All Applicable Customers 1 13 48 1 15 03 I 17 06 I 17 74 I 18 45 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 51 Customer Bill Impacts Summaries of monthly water bill impacts for each class are presented in a series of Exhibits below. As an example, an inside city single family residential customer using the "class average" of 6.9 ccf a month, would experience a $0.33 decrease in their monthly bills ($29.83 to $26.50). As water use increases, the monthly bill impact increases. Exhibit 6 -4(a) Single Family Residential Customers 3/4" Single Fa ly Residential, Inside City (4340 Customers) Monthly Bill Monthly Bill Monthly Volume (ccf) At 2008 At 2009 Rates Rates Winter Average 1 5 9 1 27 92 1 26 82 (1 11) -4 0% Annual Average I 6.9 1 29.83 1 29.50 1 (0.33) -1.1 %1 Summer Average 1 8 8 1$ 33 44 1 34 72 1$ 1 27 3 8 %1 Other I 15 0 I 45 25 1 51 75 1 6 50 14 4% I Other I 30 0 1 73 81 1 102 86 I 29 05 1 39 4% 314" Single Family Residential, Outside City (572 Customers) i Monthly Volume (ccf) Winter Average 1 7 2 Annual Average 1 8.9 Summer Average I 12 3 Other 1 15 0 Other 1 30 0 Increase I Increase I (Decrease) (Decrease) ont y i orrt y At 2008 At 2009 Increase I Increase I RatPS Rates (Decrease) (Decrease) I 4564 1 4548 1 (016)1 -0 3% 1 50.50 I 52.49 I 1.99 1 3.9% 6021 6650 1 6 29 1 105% 6792 77 62 1 971 1 143% I 110 76 1 154 29 1 43 53 1 39 3% 3/4" Single Family Residential, IJGA (334 Customers) Monthly Bill Monthly Bill Increase Increase Monthly Volume (ccf) At 2008 At 2009 (Decrease) (Decrease) Rates Rates Winter Average 1 6 0 I 2811 1 40 54 1 12 43 1 44 2 %1 Annual Average I 7.2 30.40 1 45.48 1 15.09 1 49.6% 1 Summer Average 1 9 7 35 16 1 55 78 20 63 58 7% 1 Other 1 15 0 I 45 25 1 77 62 32 38 71 6 %1 1 Other 1 30 0 1 73 81 1 154 29 1 80 48 109 0 %1 Low Income Single Family Residential Inside City (274 Customers) Monthly Bill Monthly Bill Monthly Volume (ccf) At 2008 At 2009 Increase /o Increase Rates Rates (Decrease) (Decrease) Winter Average 1 5 3 I 2411 1 23 24 1 (0 87)1 -3 6% Annual Average 1 5.3 1 24.11 I 23.24 1 (0.87)1 -3.6% 1 Summer Average l 5 4 1 24 30 1 23 45 (0 85)1 -3 5% 1 Other 1 7 0 27 35 27 45 010 1 0 4% Other 1 10 0 33 06 35 69 1 2 63 1 8 0% FCS GROUP CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 52 Low Income Single Family Residential, Out Monthly Volume (ccf) Winter Average Annual Average Summer Average Other Other ow Income Single Family Residential, 1 Winter Average 1 Annual Average 1 Summer Average 1 Other 1 Other 1/2" Multi- Family Residential, Insid Monthly Volume (ccf) Winter Average 1 Annual Average I 1 Summer Average 1 Other 1 Other 1 40 4.1 43 70 100 51 0 52.8 56 3 75 0 100 0 1 112" Multi- Family Residential Monthly Volume (ccf) 1 Winter Average 1 125 4 Annual Average I 130.4 Summer Average i 140 3 Other 1 250 0 Other 1 500 0 FCS GROUP I$ I$ I I$ I$ 58 1$ 71 1$ 97 1$ 150 1 300 1 32 57 1 30 80 1 32.86 I 3'1.11 33 43 1 31 74 1 41 14 1 41 18 1 49 71 1 5354 1 25 06 1 27.54 1 32 49 1 42 58 1 71 14 1 Monthly Bill At 2008 Rates I$ I$ I$ I$ I$ 117 51 120.94 I 12760 1 163211$ 21081 1 388 82 472 12 1 403.10 I 4£18.85 I 431 37 1 521 96 1 1 744 68 1 888 96 1 1 1.458.68 1 1.725 31 1 ide City (13 Customers) Monthly Bill Monthly Bill At 2008 At 201)9 Increase Increase Rates Rates (Decrease) (Decrease) (1 78)1 (1.75)1 (1 70)1 0 04 1 3 83 I UGA (18 Customers) Monthly Bill Monthly Bill Increase I Increase I Monthly Volume (ccf) At 2008 At 2009 Rates Rates (Decrease) (Decrease) 36 43 1 41.59 1 52 30 1 7314 1 150811$ 11 37 1 14.05 I 19 82 1 31 56 79 67 1 Exhibit 6 -4(b) Multi- Family Residential Customers 14881 1 1°2.83 1E063 202 34 25810 1 31 30 1 31.89 I 33 03 3913 47 29 I Monthly Bill Monthly 1ff Increase At 2008 At 2009 (Decrease) Rates Rates 83 30 I 85.75 90 59 14428 1 266 63 1 -5 5% -5.3% -5 1% 01% 7 7% 45 4% 51 0% 61 0% 741% 112 0% City (69 Customers) MonthfTEiff Increase Increase At 2009 (Decrease) (Decrease) Rates 26 6% 26.4% 25 9% 24 0% 224% 2 Customers) Increase I (Decrease) 21 4 %1 21.3% 21 0% 194% 18 3% CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 53 1 1/2" Multi-Family Residential (3 Customers) Monthly Volume (ccf) I Winter Average 1 1 Annual Average Summer Averaae I Other I Other I Exhibit 6 -4(c) Commercial Commercial, Inside City (429 Customers) Monthly Volume (ccf) I Winter Average I Annual Average I Summer Averaae Other Other Monthly Bill Monthly Bill Monthly Volume (ccf) At 2008 At 2009 Rates Rates I Winter Average I 18 3 I 77 34 I 80 70 I Annual Average I 19.8 I 81.63 I 85.51 I Summer Averaae I 22 9 90 48 I 9546 I I Other I 50 0 I 167 88 I 182 41 Other I 75 0 I 239 28 I 262 63 Monthly Volume (ccf) Winter Average Annual Average Summer Averaae Other Other Monthly Volume (ccf) I Winter Average 1 825 0 I I Annual Average 1 918.2 1 I Summer Averaae 1 1.104 5 I Other 1 1,500 0 I Other 1 2,000 0 1 FCS GROUP 83 8 89.6 101 3 250 0 500 0 81 8.7 99 150 30 0 on y 1 ro ont $Increase At 2008 At 2009 Rates Rates (Decrease) 1$ 17817I$ 313.321$ 189211$ 332.73 1 211 49 1 371871$ 1 494 61 I 869 33 I 970 61 1 1,705 68 1 ont y :iI At 2008 Rates 3211 33251 35 54 1 45 25 1 73 81 1 Industrial Customers Month1yfl At 2009 Rates 31 98 3326 35 83 46 74 78 82 Increase (Decrease) 3/4 Commercial, Outsi City (8 Customers) Increase I Increase I (Decrease) (Decrease) 3/4" Commercial, IJGA (10 Customers) Monthly Bill ont y i At 2008 At2009 Rates Rates 89 I$ 33631$ 8.4 I 32.681$ 7 3 I 30 59 150 I 4525 30 0 I 73 81 1 50 53 I 48.93 1 45 40 I 70111$ 11824 I 1,40570 1 2,04120 1,552.03 1 2,240.56 I 1.844 52 I 2.639 09 1 2,46545 I 3,48512 I 3.250 45 1 4.554 70 I Increase I (Decrease) 13515 I 75 9 %1 143.51 I 75.8% 160 38 I 75 8% 374 72 1 75 8% 735 07 I 75 7 °/p (0 13) 0.01 0 29 1 49 5 02 3 35 3.88 4 98 14 53 23 35 Increase (Decrease) 1690 1 16.25 I 1481 I 24 86 I 44 43 I 6" Industrial, Inside City (1 Customer) V ont i r ont y Increase At 2008 At2009 (Decrease) Rates Rates 635 49 1 688.54 1 794 57 I 1,01967 1 1.304 24 1 Increase 1 (Decrease) -0 4% 0.0 %I 0 8 %I 3 3 %I 6 8 %I 4 3% 4.8 %I 5 5 %I 8 7 %I 9 8 %I Increase I (Decrease) 502% 49.7% 484% 54 9 %I 602% Increase (Decrease) 45 2% 44.4% 43 1% 41 4% 40 1%1 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study. Water and Wastewater Systems Study Report 54 Exhibit 6 -4(d) Irrigation Customers 3/4" Irrigation, Inside City (57 Monthly Bill Monthly Volume (ccf) At 2008 Rates Winter Average 1 3 4 1 2316 1 Annual Average 1 11.4 1 38.39 !Summer Average I 27 2 I 68 48 Other 1 50 0 I 111 89 Other 1 75 0 I 159 49 I Exhibit 6 -4(e) Fire Line Customers Firelines, Inside Ci Meter Size 1 1/2" 2" 4" 6" 8" Firelines, Outside C Meter Size No. of Accts 1 1/2" 0 2313 1 2313 1 0 0% 2" 1 1 2313 I 2313 1 0 0% 4" 1 2 1 92.51 1 9251 1 0 0% 6" I 0 —1 __133 32 1 133 32 1 1 0 0% 8" 0 I$ 18311 1$ 18311 1$ 1 0 0 Firelines, UGA No. of Monthly Bill Monthly�if( Increase Increase Accts At 2008 At 2009 (Decrease) (Decrease) Rates Rates 1 1/2" 0 I 1512 1 2313 1 801 I 530% 2" 1 0 1 15 12 1 2313 801 530% 4" 1 0 I 61 67 1 9:2 51 1 30 84 50 0% 6" 1 0 I 88 92 1 133 32 44 41 1 49 9% 8" 1 3 1 12211 1 18311 61 00 1 49 9 Meter Size FCS GROUP Customers) Monthfylifi $Increase At 2009 (Decrease) Rates 2644 1 53.70 I 107 53 1 185221 270 40 1 3 28 15.31 I 39 06 1 73 33 I 11091 1 No of Monthly Bill ront Increase Increase Accts At 2008 At 201)9 (Decrease) (Decrease) Rates Rates 3 I 1512 1 1512 5 1$ 1512I 1512 15 61 67 1 61 67 25 88 92 I 88 92 17 I 122 11 1 122 11 1 Increase I (Decrease) 142% 39.9% 57 0% 65 5% 69 5% 0 0% 0 0% 0 0% 0 0% 0 0% M onthly i ont 11 Increase I %increase I At 2008 At 201)9 Rates Rates (Decrease) (Decrease) CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 55 2. Wastewater Utility The wastewater utility rate design element includes the rate design and a comparison of customer bill impacts under proposed rates against existing rates. Rate Design As previously noted, a new wastewater rate structure was not designed in this study. Class specific cost of service adjustments were applied to the City's current rate structure. Proposed rates are shown in Exhibit 6 -5. Exhibit 6 -5 Proposed Wastewater Rates DE CITY RATES Customer Class Single Family Muttt- Family (per add! unit) [a] Comm /Indust Domestic Monthly Minimum (b] Comm /Indust High Low Income /Senior Wastewater Only [c] OUTSIDE CITY RATES Customer Class Single Family Mufti- Family (per add! unit) [a] Comm/Indust Domestic Monthly Minimum (b] Comm/Indust High Low Income /Senior Wastewater Only [c] 2009 Volume Fixed Charge Ch arge (per per acct) cal 52 92 51 28 45 70 17 79 9 48 59 74 N/A N/A 47 59 1 87 52 92 1 87 2009 Fused Charge Volume (per acct) Charge (per ccfl 79 37 76 93 68 56 26 68 89 62 N/A N/A 7139 281 79 37 2 81 2010 Fixed Charge Volume Fixed Charge Charge (per acct) 1per (per acct) 1 87 52 96 2 01 1 81 55 40 1 96 49 37 21 35 11 38 71 69 N/A N/A 51 22 2 01 56 95 2 01 2010 Fixed Charge (per acct) Volume Charge (per cal 2 81 85 43 3 02 271 8311 293 74 07 14 22 32 02 17 06 10754 N/A N/A 76 84 3 02 85 43 3 02 58 40 5716 50 94 22 12 74 26 N/A 52 52 58 40 [a] Multi- family customers charged for additional units [b] Monthly minimum bill for Domestic-Strength Commercial Industrial customers [c] Wastewater only customers charged based on average Single Family Residential water usage FCS GROUP 2011 Volume Charge (per cal Fixed Charge Volume (per acct) Charge (per ccO 8759 310 85 74 3 02 76 42 3317 1767 111 40 N/A N/A 78 78 310 87 60 3 10 206 6015 2 02 58 87 5247 11 79 22 78 76 49 N/A N/A 2 06 5410 2 06 6015 20 Volume e r Fixed Charge Cher Fixed Charge (per acct) g(pe ccfl (per acct) Fixed Charge (per acct) 212 2 08 12 14 N/A 212 212 201 Volume Fixed Charge Charge (per ccFl (per acct) 9022 319 9293 88 31 311 90 96 78 71 81 07 3417 18 20 35 20 114 75 118 19 N/A N/A N/A 81 14 319 83 57 90.22 319 92 93 Customer Bill Impacts Summaries of monthly wastewater bill impacts for each class are presented in Exhibit 6 -6. Volume Charge (per ccfl 2 18 2 14 61 95 60 64 54 04 23 46 12 51 78 78 N/A N/A 5572 218 61 95 2 18 2011 201 2013 Volume Charge (per ccfl 3 29 3 20 18 75 N/A 3 29 3 29 CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 56 Exhibit 6 -6 Wastewater Bill Impacts INSIDE CITY CU C U C N E p OUTSIDE CITY C Billed No. of Monthly Bill Monthly Bill Volume Units at 2008 Rates at 2009 (ccfl Phased Rates 3 55 96 58 53 2 57 5 59.33 62.05 2.73 15 77 44 81 00 3 56 15 2 113 90 124 12 10 22 25 9 423.55 461.56 38.01 75 30 1,387 82 1,512 37 124 55 15 135 51 160 03 24 52 25 216.42 255.59 39.16 100 818 06 966 09 148 03 Billed Volume (ccfl FCS GROUP N o. of Units Monthly Bill Monthly Bill at 2008 Rates at 2009 Phased Rates OMERS Increase Increase (Decrease) (Decrease) 4 60% 4.60% 4 60% 8 97% 8.97% 8 97% 18 09% 18.09% 18 09% TOMERS Increase (Decrease) Increase (Decrease) 3 55 96 87 80 31 84 56 90% 5 59.33 93.08 33.75 56.90% 15 7744 121 50 44 06 56 90% 15 2 113 90 186 18 72 28 63 46% 25 9 423.55 692.34 268.79 63.46% 75 30 1,38782 2,268 56 880 74 63 46% 15 135 51 240 05 104 54 77 14% 25 216.42 383.38 166.95 77.14% 100 818 06 1,449 13 631 07 77 14% C. IMPLEMENTATION In addition to the adopted 2008 water and wastewater rate increases of 12% and 10 respectively, the City Council adopted the subsequent five -year schedule of proposed water and wastewater rate increases (December 9, 2008 Council Meeting), effective January 1 of each of the five years, 2009 through 2013. On January 1 of each year beginning in 2014, the rates shall be adjusted to reflect the annual percentage increase in the United States Consumer Price index, All Urban Consumers (CPI -U) for November of the preceding year as shown in the release from the Bureau of Labor Statistics. Calculation of the change in the index is made by dividing the current index for November by the preceding index for November and subtracting one. CITY OF CENTRALIA, WASHINGTON Utility Rates Charges Study Water and Wastewater Systems Study Report 57 City of Centralia CEN'TT'RALIA CITY LIGHT ELECTRIC UTILITY COST OF SERVICE RATE STUDY Final Report April 2011 CONSULTING SERVICES PROVIDED BY• >FCS GROUP Solutions Oriented Consulting 7525 166th Ave. NE, Suite D -215 Redmond, WA 98052 T: 425.867.1802 F: 425.867.1937 www.fcsgroup.com This entire report is made of readily recyclable materials, including the bronze wire binding and the front and back covers, which are made from post- consumer recycled plastic bottles The contents are printed on 30% recycled paper GROUP Solutions- Oriented Consulting To: Ed Williams, General Manager; Centralia City Light From: Angie Sanchez Virnoche, Principal; FCS GROUP RE: Final Electric Rate Study Report Date: April 26, 2011 FCS GROUP is pleased to submit our report describing our assumptions, findings and recommendations for the Electric Utility Rate Study for the period of 2010 2014. Although the study provided a rate forecast through 2014, adoption of a three year rate strategy of annual 5.5 percent rate increases for 2010 through 2012 were recommended. The new rates will take effect on the June billing of each year. Since the conclusion of the rate study in April of 2010, some noteworthy events have occurred. These events are different from the assumptions used to develop the rate study results; therefore, we wanted to highlight the areas that should be monitored by the City. If the trends continue to diverge from the assumptions used in the rate study, a rate plan adjustment may be warranted before the scheduled 2012 rate update. The noteworthy events are as follows: 2010 rate revenue is down due to a milder than average winter. It is assumed that 2011 rate revenue levels will return to the levels anticipated in the rate study. The operating fund balance was used to meet the 2010 revenue difference. $1.3 million in capital costs for Yelm rebuild was not planned. An emergency contingency amount was included in the capital plan which should cover this emergency capital cost. The rate study assumed an 8% increase, in BPA generation rates October 1, 2011. This will likely be in the range of the actual increase anticipated for the City. In 2010 the Yelm outage due to rebuild did not allow for operation at full capacity (48,000 MWh in 2010). This means more power was required to be purchased increasing this expense. The rate analysis assumed Yelm operating at high water year capacity (75,000 MWh). The output is susceptible to water year risk. It is likely Yelm output will not meet the assumptions used in the rate study. Future rate assumptions should set Yelm at average water capacity levels (52,000 68,000 MWh) plus anticipate reduced generation for the annual maintenance outage (95 percent availability) to account for potential water year risk and actual operating practice. Additional capital projects have materialized or been accelerated. This may result in additional funding needs for future rate periods. The City will continue monitoring the noteworthy events identified along with operating and capital fund balances. If downward trends continue in revenue and /or upward trends continue in expenses resulting in pressure on fund balances, the City may require a rate plan adjustment. The City is scheduled for a rate update in 2012. City of Centralia Electric Utility Rate Study April 2011 REPORT CONTENTS Section 1: Introduction 1 A. Introduction 1 Section 2: Rate Study Methodology 2 A. Utility Setting Principals and Methodology 2 B. Revenue Requirement Overview and Approach 2 C. Rate Design 3 Section 3: Revenue Requirement 5 A. Introduction 5 B. Operating forecast 5 C. Capital Funding Plan 7 D. Sufficiency Tests 8 E Financial Plan and Rate Strategy 9 F. summary of revenue requirements 10 G. alternative revenue requirement scenarios 11 Section 4: Rate Design 12 A. Introduction 12 B. Existing Electric Rates 12 C. Proposed Electric Rates 13 Summary 15 Page i Cit. of Centralia Electric tUtiliti Rate Study April 2011 A. NRODUCTI I; N SECTION 1: INTRODUCTION In 2009, the City of Centralia authorized FCS GROUP to complete a comprehensive rate study for the electric utility. The key aspect of this study was assisting the City in reviewing the impacts of the Bonneville Power Administration's (BPA) wholesale power rate increase, which went into effect October 1, 2009 and development of a capital funding plan for up to $40 million in major capital improvements identified for the electric system. The results of the study aim to establishing a blueprint for achieving strong financial performance in the future and sustaining efficient and effective electric services to the City's customers. The scope of the project included the following elements: Assess revenue needs for a multi -year period that includes adequate funding for operations and maintenance, capital projects, debt service, and other program activities. Develop a load forecast to assist in establishing appropriate revenue, power purchases from the City's wholesale supplier BPA and forecast the impact of the BPA power cost increase effective October 1, 2009. 4 Project long -term capital needs and incorporate these needs into a long -term funding forecast. Develop and recommend rate structures that generate sufficient revenue to meet the utility's financial obligations on a standalone basis. The methodology, key factors, conclusions and recommendations for each of the key task area of the study are summarized in this executive level report. Page 1 City of Centralia Electric Utility Rate Study April 2011 SECTION 2: RATE STUDY ETHODOLOGY A. UT1LOTY SETTING PRINCIPALS AND METHODOLOGY The methods used to establish utility rates are based on principles that are generally accepted and widely followed throughout the industry. These principles are designed to produce rates that equitably recover costs from each class of customer by setting the appropriate level of revenue to be collected from ratepayers, and establishing a rate structure to equitably collect those revenues. The primary tasks of the rate study are listed below: Revenue Requirements Analysis. This analysis identifies the total revenue required to fully fund the utility on a standalone basis, considering operating and maintenance expenditures, capital funding needs, debt requirements and policy objectives. Rate Design Analysis. This analysis includes the development of rates that generate sufficient revenue to meet the system's revenue requirement forecast and address the City's pricing objectives. C. REVENUE REQUIR M T OVERVIEW AND APPROACH A revenue requirement analysis forms the basis for a long -range financial plan and multi -year rate management strategy for the utility. It also enables the City to set utility rate structures, which fully recover the total costs of operating the system: capital improvement and replacement, operations, maintenance, power generation/purchase costs, general administration, fiscal policy attainment, cash reserve management, and debt repayment. Linking utility rate levels to a financial plan such as this helps to enable not only sound financial performance for the City's electric fund, but also a clear and reasonable relationship between the costs imposed on utility customers and the costs incurred to provide electric service. The revenue requirements analysis includes the following core elements to form a complete portrayal of the utility's financial obligations: o Load Forecast A load forecast is the starting point in developing the revenue requirement analysis. From the load forecast, energy (kWh) and demand (kW) requirements, by class of service, are determined for the projected period. The load forecast is typically used for three primary purposes. First, it determines the amount of power that is required from the Yelm Hydroelectric Plant (Yelm) and the Bonneville Power Administration (BPA) to meet customer needs. Second, it is used to calculate projected rate revenues that will be received from each customer class of service. Third, projected power costs are calculated based on the amount of purchased power required to meet the overall load forecast. O Fiscal Policy Analysis The fiscal policy analysis identifies formal and informal fiscal policies of the City to ensure that current policies are maintained, including reserve levels, capital /system replacement funding and debt service coverage targets. o Capital Funding Plan The capital plan defines a strategy for funding the City's capital improvement program, including an analysis of available resources from rate revenues, debt Page 2 City of Centralia Electric Utility Rate Study April 201 t financing, and any special resources that may be readily available (e.g., grants, developer contributions, etc.). Operating Forecast The operating forecast identifies future annual non capital costs associated with the operation, maintenance, and administration of the utility system. Power Cost Forecast The power cost forecast is based on the load forecast developed for the time period under review. The total power supply projection considers available supply from Yelm with the remainder priced out at the current BPA rates. Power costs are one of the largest expenses the City incurs. Reserve Analysis The reserve analysis forecasts cash flow and fund balance activity in the City's utility reserves. The analysis tests for satisfaction of actual or recommended minimum fund balance policies, including working capital /operating reserves and capital contingency /emergency reserves. Sufficiency Testing The sufficiency tests cover two areas: a test of cash flow and a test of debt service coverage. The cash flow test evaluates the sufficiency of ongoing utility revenues in meeting all annual financial obligations. The debt service test evaluates the sufficiency of revenues in meeting debt service coverage requirements associated with long -term debt. Rate Strategy The rate strategy designs a forward looking plan for adjusting utility rates to fully fund all utility obligations on a periodic or annual basis over the projection period. C. RATE DESIGN Rate design is focused on two areas; level and structure. Level refers to setting rates at a level sufficient to meet the total financial obligations of the system. Structure refers to the fixed and variable components of the rate, which are set commensurate with the cost of providing service. Fixed costs typically attempt to cover costs of the system that do not vary while variable costs vary with a change in user demand. Although the majority of costs are fixed in nature, in general customers prefer more costs tied to the variable charge since changes in their behavior have a direct correlation with the amount of their bill. Exhibit 2.1 provides an overview of the rate design component in a rate study process. Page 3 City of Centralia Electric Utility Rate Study April 2011 FINANCIAL MANAGEMENT H PRACTICES GOALS Exhibit 2.1— Overview of Rate Study Process DEFINE POl C' DRIVERS PARAMETERS REPAIR/ REPLACEMENT IMPROVEMENTS EXPANSION DEBT SERVICE ASSUMPTIONS CUSTOMER STATISTICS FIXED CHARGE H H MULTI -YEAR FINANCIAL PLAN 1 DEVELOP CAPITAL FUNDING PLAN RESERVE TARGETS DEVELOP RATE REVENUE REQUIREMENTS 4 ANN UAL N EEDS ENERGY CH ARGE /kWh) •CASH RESERVES RATE FUND IN DEBT PROCEEDS CONTRIBUTIONS RATE FUNDING LOAD DATA ANALYSIS _1 OPERATING BUDGETS H NON -RATE REVENUES RATE DESIGN H PLANNING PERIOD RATE STRATEGY DEMAND CHARGE /kW) PRICING OBJECTIVES Page 4 City of Centralia Electric Utility Rate Study April 2011 A. NTRODUCf B. SECTION 3: REVENUE REQUIREMENT 0 hl A revenue requirement analysis defines the full -cost required to sustain positive financial performance in the electric fund. The analysis is composed of an operating forecast and capital plan. The revenue requirement will determine whether the existing rates and charges are sufficient to recover the costs the City incurs to operate and maintain the electric system. PI I AT0NG IF G RECAST The operating forecast is developed to include the annual revenue resources and financial obligations of the electric system including: rate revenue, miscellaneous revenue, operating and maintenance expenses, power supply costs, taxes, debt service, capital funding from rate revenue and fiscal policy achievement. The following list highlights the key components that comprise the development of the electric utility operating forecast: Test Period O The revenue requirement forecast was developed for the 2010 through 2014 time period. Load Forecast O The load forecast forms the basis of the rate revenue forecast and power cost projection. The load forecast is based on the monthly customer class kWh and kW (if applicable) totals for calendar year 2008. Reserve Targets O Operating Reserve Target: minimum 90 days of O &M expenses. O Capital Contingency Reserve Target: 2 percent of Plant -in- Service. Operating Revenue Rate Revenue: 2008 load data was used to price out the rate revenue at existing rates. Growth is applied to calculate the future year revenue projections. o Customer Growth Rate Revenue: Based on City provided data. Residential annual increases from 1.6 percent to 1.76 percent. General Service <50 kW decreasing slightly in 2010 and increasing modestly each year thereafter from 0.13 percent to 1 percent. General Service >50 kW increasing 9.5 to 10.0 percent in 2010 followed by annual increases from 1.4 percent to nearly 3 percent. O Miscellaneous Revenue includes service and miscellaneous charges, penalties, temporary services and interest income. o Interest Earnings Rate: 2 percent per year increasing to 3 percent in 2012. Page 5 City of Centralia Electric Utility Rate Study April 2011 BPA repayment settlement $350k per year through 2014. Operating Maintenance (O &M) Expenses Baseline O &M expenses: developed from a combination of the 2009 budget revenues and expenses and 2009 actual information. Future year costs were calculated by applying various escalation factors. General Cost Inflation: 3.32 percent per year (based on analysis of historical Consumer Price Index data and discussion with City staff). Yelm operating and maintenance costs per budget. Increased annually 3 percent. Construction Cost Inflation: 4.43 percent per year (to date of anticipated construction, based on analysis of historical Engineering News Record data and discussion with City staff). Labor Cost Inflation: 4.0 percent per year (based on discussion with City staff). Local /State Excise Taxes: Public utility excise tax rate is 3.873 percent on all electric rate revenues except Street and Yard Lighting. City Tax: The City currently collects a 6.00 percent tax on all utility revenue. State B &O Tax: 1.50 percent on all non -rate revenues. Purchased Power Costs As with most electric utilities, the largest expense that the City incurs is for power supply. The City purchases the majority of its power supply needs from BPA (75 percent). Given the magnitude and importance of this cost, the BPA purchased power costs have been projected on a monthly basis for both 2009 and 2010 using the load forecast developed as part of this study. The current BPA rates went into effect October 1, 2009 (includes a 7.5% rate increase) and remain at this level through October 2011. BPA is currently preparing for a rate structure change effective October 1, 2011. The new tiered rate methodology may have significant impacts on power costs. The actual rates for this new rate period are unknown at this time. This analysis has assumed the following for future power costs: October 2011 8 percent cost increase plus customer growth for generation and transmission; October 2012 increase only for customer growth for generation and transmission October 2013 8 percent cost increase plus customer growth for generation costs and increase only for customer growth for transmission costs. Purchased power costs represent 37 percent of the total revenue requirement of the electric system. Including Yelm, total power costs represent 47 percent of the total revenue requirement. Debt Service Existing debt obligations totaling $1.9 million per year: 1999 Light Revenue Bond last debt payment in 2009, this bond is 100 percent generation. 2007 Light Refunding Revenue Bond has its first payments scheduled in 2009, which is interest only; this bond is 100 percent generation. 2007 Light Revenue Bond; the bond proceeds are allocated 14.9 percent generation and 85.1 percent distribution. New debt proceeds of $10 million anticipated for the study period. Page 6 City of Centralia Electric Utility Rate Study April 2011 Actual debt issue is $11.1 million (including issuance costs and reserve requirements) Annual debt service totals $488 thousand $890 thousand per year The first debt issue is anticipated in 2010 with proceeds of $5.5 million The second debt issue is anticipated in 2013 with proceeds of $4.5 million. The analysis has assumed two debt issues. If the City chooses to consolidate and accelerate the issues the debt service payment structures should be shaped to match the cash flow identified in the revenue requirement. All revenue bond debt issues are assumed to be revenue bonds with a 20 year term, 5.0 percent interest rate and 1.5 percent issuance cost. Depreciation Funding Depreciation funding is to ensure system integrity through reinvestment in the system. Ideally, the minimum funding is set at an amount equal to or greater than depreciation expense. The City's electric system asset value as of year -end 2008 is $64 million. The City's electric utility depreciation expense as of year -end 2008 is $1.4 million. With the addition of $21.4 million in capital project over the time period, annual depreciation increases to $1.9 million The City is currently phasing in annual depreciation funding of $600k to 2.1 million. This study assumes 40 percent of annual depreciation funded through rates in 2009 increasing to 60 percent in 2010, 80 percent in 2011 and finally 100 percent by 2012. C. CAPITAL FUNDING PLAN An updated Comprehensive plan was prepared by Brown and Kysar, Inc. in 2009. The capital plan resulting from this effort identified major improvements needed to the system to provide reliable service, upgrade an aging system and accommodate new customer growth. Approximately $40 million in capital needs was identified to accomplish all system goals. Due to the significant rate impact likely from funding the total $40 million of project needs, City staff brought forth alternative capital funding options for consideration. The options were developed based on a 1 5 priority ranking system. $40.5 million Funds all system goals. $24.1 million Removes $16.6 million of Yelm costs for transmission line rebuild, wiring replacement, generator rewinds, turbine replacement and penstock lining replacement. $20 million Removes priority 4 and 5 projects with the exception of one priority 4 project (B- Street West Rebuild). $15 million Removes all priority 4 and 5 projects, 2 priority 3 projects (Salzer Valley to B- Street Interties /Feeder Upgrades, Stillwaters upgrade) and 1 priority 2 project (Cooks Hill to Fords Prairie Intertie Feeder). $18.9 million —Delay the Salzer Valley substation construction and Salzer Valley to B- Street Interties /Feeder Upgrades to 2015. Emergency contingency in 2012 spread over 2012 and 2013. Council selected the $18.9 million capital plan (2009 dollars) for inclusion in the rate forecast. Inflating these projects by 4.43 percent per year to the date of construction offers a better measure of the actual cash flow needs required on an annual basis. The inflated capital plan totals $21.4 million. The annual average capital funding need is approximately $4.3 million, with 2011 being the highest capital outlay year at $5.3 million. Exhibit 3.1 provides a summary of the electric utility capital funding. Page 7 City of Centralia Electric Utility Rate Study Summa ,of 'Ex.endittires. 2010. :2011 2012 2013 t 14 FUNDIN G SOURCES Total Revenue Exhibit 3.1— Electric Utility Capital Funding Summary Rate Funded Depreciation funding in 2010 assumes funding from the Rate Funded Depreciation Reserve existing balances April 2011 Total TOTAL CAPITAL EXPENDITURES 4,658,431 5,311,693 2,588,342 3,863,486 4,996,835 21,418,786 Grants Developer Donations 200,000 200,000 200,000 200,000 200,000 1,000,000 Rate Funded Depreciation 1,860,544 1,320,000 1,750,000 1,950,000 1,857,321 8,737,865 Equipment Fund 189,000 84,200 462,000 113,000 40,000 888,200 New Debt Proceeds 2,408,887 3,091,113 1,600,486 2,899,514 10,000,000 Capital Fund Balance 616,379 176,342 792,721 TOTAL CAPITAL RESOURCES 4,658,431 5,311,692 2,588,342 3,863,486 4,996,835 I 21,418,786 Notes: Approximately 41 percent of the capital projects will be funded through rate funded depreciation, 47 percent is from new revenue bond issues and the remaining 12 percent will be funded through a combination of grants and /or developer contributions, equipment fund transfers and existing capital fund balances. D. SUFFICIENCY TESTS During the rate study process, two tests are conducted; a cash flow sufficiency test and a debt service coverage sufficiency test. The maximum deficiency of the two tests determines the need for the rate increase. Cash Flow Sufficiency Test The cash flow test evaluates if ongoing annual revenue is sufficient to support the annual ongoing operating and capital expenses of the electric system. Exhibit 3.2 provides a summary of the electric system cash flow sufficiency test. Exhibit 3.2 Cash Flow Sufficiency Test 2010 2011 2012 Revenues Rate Revenues Under Existing Rates 18,370,695 18,616,386 19,001,532 19,406,951 19,821,955 Non -Rate Revenue 717,264 729,519 784,050 791,080 825,350 19,087,959 19,345,904 19,785,582 20,198,031 20,647,305 Expenses Cash O &M Expenses 9,250,766 9,553,063 9,882,778 10,221,808 10,575,120 Purchased Power 6,307,528 6,517,052 7,173,245 7,326,294 8,069,066 Transmission 1,030,139 1,064,358 1,171,527 1,196,523 1,222,110 Existing Debt Service 1,872,013 1,868,213 1,873,013 1,875,263 1,869,213 New Debt Service 487,793 487,793 487,793 886,896 886,896 Rate Funded Depreciation 930,000 1,320,000 1,750,000 1,950,000 2,100,000 Total Expenses 19,878,238 20,810,479 22,338,356 23,456,784 24,722,404 Sutplus (790,279) (1,464,575) (2,552,773) (3,258,754) (4,075,099) Page 8 City of Centralia Electric Utility Rate Study April 2011 The revenue sufficiency test indicates that existing electric system revenue sources are not adequate in 2010 -2014 to meet annual expenses. The revenue deficiency in 2010 is $790 thousand due to the 7.5% rate increase from BPA, the increase of rate funded depreciation and the addition of new debt service to fund capital costs. The deficiency increases to $4.1 million by 2014 if rates remain at their existing level. Debt Service Coverage Sufficiency Test The second test conducted as part of the rate study is a debt service coverage "DSC sufficiency test. This test refers to the ability of the electric fund to meet bond covenant requirements which require revenue streams to satisfy a specific margin. This ratio is particularly important since it is anticipated that the City will need to enter the bond market to fund the capital projects identified. The minimum bond covenant requirements are generally 1.25 which means the utility must generate revenues sufficient to meet annual operating expenses, annual debt service on the bonds and another 25 percent of the year's principal and interest payments. Although the 1.25 is the covenant minimum, it is seen more favorably by the bond rating agencies if the City meets a debt service coverage ratio equal to or greater than 2.0. A higher debt service ratio can translate into favorable interest rates as a result of higher bond ratings which may ultimately translate to lower costs. Exhibit 3.3 provides the debt service coverage calculation before the proposed rate increases. Coverage Sufficiency Test 201 Revenues Rate Revenues Under Existmg Rates Other Revenue Interest Earnings All Funds Total Revenue Exhibit 3.3 Debt Service Coverage Sufficiency (before rate increase) Expenses Cash Operating Expenses Purchased Power (Includes Transmission) Revenue Bond Debt Service Revenue Bond Coverage Requirement at 1 25 2011 2013 2014 2012 18,3'70,695 18,616,386 19,001,532 19,406,951 19,821,955 626,966 636,165 645,668 655,488 665,634 129,158 194,815 182,391 175,632 287,943 19,1 t6,820 19,447,365 19,829,592 20,238,071 20,775,532 9,250,766 9,553,063 9,882,778 10,221,808 10,575,120 7,337,667 7,581,411 8,344,772 8,522,817 9,291,175 2,359,806 2,356,006 2,360,806 2,762,159 2,756,109 5:39,951 589,001 590,201 690,540 689,027 Total Expenses 19,538,190 20,079,481 21,178,557 22,197,324 23,311,431 Surplus (Deficiency) (411,369) (632,116) (1,348,965) (1,959,253) (2,535,900) Coverage Realized (before rate increase) 1 08 0 98 0 68 0 54 0 33 The City's debt service coverage requirement in 2009 is 1.50. The debt service coverage sufficiency test indicates that at existing rate levels the City will not meet the minimum 1.25 DSC ratio requirements with the addition of new debt in 2010 and 2013. E. FINANCIAL PLAN AND RATE STRATEGY The rate increase required is driven by the maximum of the cash flow sufficiency test or the debt service coverage sufficiency test. The results of the tests indicate the rate increases are mainly being driven by cash flow needs to meet the increased power costs from the new BPA rate increase, the Page 9 City of Centralia Electric Utility Rate Study increase in rate funded depreciation and the new annual debt service obligations. Exhibit 3.4 summarizes the rate increases required to meet the electric system cash flow needs and maintain a healthy debt service coverage ratio. Exhibit 3.4 Summary of Proposed Rate Increases Rate Strategy 2010 2011 2012 2013 2014 Annual Rate Adjustment Total Revenue after Increase* Total Expenses* Net Cashflow After Increase 5.50% Coverage After Increase 1.27 *Notes: 2010 rate increase assumes partial year implementation Total revenue includes rate revalue and miscellaneous revenue Total expenses includes additional taxes related to rate increases 5.50% 19,593,153 20,909,913 22,514,833 24,263,178 25,518,603 19,928,116 20,964,894 22,607,815 23,858,136 25,203,347 (334,963) (54,981) (92,982) 405,041 315,256 1.58 1.72 5.50% 3.00% April 2011 3.00% 1.87 1.92 The rate strategy developed balance customer impacts with meeting overall annual financial needs of the electric system. The phased rate increase approach indicates a negative cash flow in 2010, 2011 and 2012 after the rate increase is incorporated. Therefore, fund balance will be required to meet this additional deficiency. After the increases proposed, debt service coverage remains above the 1.25 requirement. F. SUMMARY OF REVENUE REQUIREMENTS The revenue requirement analysis indicates a rate deficiency in each year of the study ranging from $790 thousand in 2010 increasing to $4.1 million by 2014. In order to fund the upcoming capital projects, operating and maintenance requirements and purchased power costs we recommend a 5.5 percent increase in 2010, 2011 and 2012 followed by 3.0 percent per year increases in 2013 and 2004. The 2010 increase assumes 6 month of effective increase. In order to allow a phased -in rate implementation, a total of $493 thousand of fund balance is necessary to fund the annual deficiency remaining in 2010, 2011 and 2012. New debt proceeds of $10 million are required to meet the capital plan identified for 2010 through 2014. Debt service coverage of 1.25 minimum requirements is met after the proposed rate increases. Operating fund balance is below the target of 90 days until 2014. The balance hovers around 80 85 days in 2010, 2011 and 2013, dips to 74 days in 2012 and increases to 90 days by 2014. Capital fund target of 2.0% of plant -in- service is met nearly every year except 2012 when it dips below the target by approximately $200 thousand. We recommend that the City revisit and update economic and capital assumptions every 2 -3 years to make sure assumptions used have not changed significantly. Specifically the City should revisit the power cost assumptions before the implementation of the Tiered Rate Methodology (TRM) by BPA in October 2011. Page 10 City of Centralia Electric Utilit3 Rate Study April 2011 G. ALTERNATBVIE RLEV BRUCE REQMBf°3EMEENT SCCENAIPdOS As part of the rate study process, alternative scenarios were developed that evaluated changes in the timing of projects, the number of specific projects planned, debt funding vs. rate funding and different phasing approaches for rate increase implementation. Over 30 scenarios were developed to help the City evaluate these various considerations. During the rate approval process, the City Council selected the $18.9 million scenario for rate setting. This scenario assumes delay and /or elimination of the capital projects associated with Salzer Valley. These projects are summarized as follows: Salzer Valley Substation Design of $200 thousand moved out two years from 2011 to 2013 Salzer Valley Substation construction of $1.7 million moved out two years from 2013 to 2015 (outside planning period) Salzer Valley Substation construction of $2.661 million moved out one year from 2014 to 2015 (outside planning period) o Salzer Valley B Street Interties /feeder upgrades $863 thousand moved out two years from 2013 to 2015 (outside planning period) Emergency /Contingency of $1 million in 2012, split into two years with $500 thousand in 2012 and $500,000 in 2013 Should it become necessary for the City to build Salzer Valley within the five year time frame due to load growth, the additional projects can be added with minimal rate impact. The changes required to the financial planning approach are: o A total of $15 million in new debt proceeds will be required (additional $5 million). The original issue of 5.5 million in 2010 remains the same. The second issue will need to be $6.0 million vs. $4.5 million and one additional issue of $3.5 million is required in 2014. o The additional debt increases the annual debt service obligations in 2013 and beyond from $887 thousand to $1.33 million. o The 2010, 2011 and 2012 rate increases of 5.5 percent remain unchanged. The rate increase in 2013 and 2014 would need to increase to 4.25 percent per year from the 3.0 percent per year increase in the recommended financial plan. Page 11 City of Centralia Electric Utility Rate Stud3, April 2011 A. INTRODUCTION The principal objective of the rate design stage of this rate study was to implement electric rate structures that collect the appropriate level of revenue. The development of rate design is typically the final step in a rate study process. There are many different rate structure options, but ultimately all of them should reflect the type of costs the utility incurs customer, demand, energy and generate the required levels of revenue. This section will review the existing and proposed electric rates for the City. B. EXISTING ELECTRIC RATES The existing electric rates are composed of a fixed customer charge, an energy charge measured in kilowatt hours (kWh) and a demand charge measured in kilowatts (kW) when applicable. Both the Residential and Small General Service <50kW classes are charged a monthly customer charge and an energy charge per kWh. The Residential rates are differentiated between inside and outside city customers. There is a low- income discount (waiver of customer charge) available for residential customers who qualify as a senior (62 and older) and totally disabled persons with annual household income of $25,000 or less. The Small General Service <50 kW customer charge is differentiated based on single phase or three phase service. The Large General Service 50 +kW customer class is charged a customer charge, energy charge and demand charge. There are also charges for Street and Traffic Light customers based on fixture type. Exhibit 4.1 provides a summary of the current electric utility rate structures: Exhibit 4.1 Summary of Existing Rate Structure Residential Inside Outside Small General Service 50kW 9ngle Phase Three Phase SECTION 4: RATE DESIGN Existing Monthly Rates Customer ;Ener•� Demand' 9.68 0 0573 N/A 10.64 0.0634 N/A 20.67 0.0643 N/A 30.51 0.0643 N/A Large General Service 50+ kW I 51.37 I 0.0507 I 4.17 Street Yard Lighting 150 W Customers 2.18 200 W Customers 2.88 250 W Customers 3.61 400 W Customers 5.77 1000 W Customers 14.44 Traffic Light Customers 72.82 Page 12 City of Centralia Electric Utility Rate Study April 2011 C. PROPOSED ELECTRIC RATES Establishing rates is a blend of "Art" and "Science" and especially so when it comes to the rate levels and structures. Several variables must be balanced to arrive at optimal rates. The rate design process evaluated the City's existing customer classes. As a result of the evaluation of detailed customer statistics and discussion with City staff the existing Large General Service 50 +kW class was split into three separate classes: Medium General Service 50kW -200kW Large General Service 201kW 1,000 kW Very Large General Service >1,000 kW. The proposed electric rate schedules contain no additional structural changes. As discussed in the revenue requirement section of this report, it was determined that the overall required adjustment for 2010, 2011 and 2012 is 5.50 percent per year. The proposed rates will adjust the energy, demand and customer charges to collect the sufficient level of revenue. All proposed rate design options developed collect the overall 5.50 percent rate increase. Four options were developed for the Residential class. Approximately 84 percent of the electric system customers are represented in this class. Option 1 Across the board increases to both the customer charge and energy charge equally by 5.5 percent. Option 2 Customer charge set to a range between Lewis PUD daily rate and the customer charge unit cost from the Centralia cost of service analysis. The energy charge adjusted as needed to collect the remaining target revenue. Option 3 Tied increases to the fixed and variable increased costs. Energy charge increased by proportional increase of BPA costs. Debt service and capital cost increases split 50 percent to the fixed charge and 50 percent to the variable charge. Option 4 All increases captured in the fixed customer charge, no increase to the variable charge. The Council selected rate option 3. The 2010 rate options change the rates to align with the option selected. The 2011 and 2012 proposed rates apply the overall increase equally to both rate components. Two options were developed for the Small General Service <50kW class. Approximately 14 percent of the total customers are included in this class. Option 1 Across the board increases to both the customer charge and energy charge equally by 5.5 percent. Option 2 Customer charge tied to the option 3 residential class customer charge. The existing rate differential is maintained. The Council selected rate option 2. The 2010 rate options changed the rates to align with the option selected. The 2011 and 2012 proposed rates apply the overall increase equally to both rate components. A new customer class is developed for the Medium General Service customers defined as 50 kW 200 kW. This class includes approximately 156 accounts. These customers were previously in the Large General Service class 50kW. Two options were developed: Option 1 Across the board increases to both the customer charge and energy charge equally by 5.5 percent. Page 13 City of Centralia Electric Utility Rate Study April 2011 Option 2 Tie customer charge to unit cost analysis (reduction of existing large general service customer charge), remaining amount split 50 percent to the demand kW charge and 50 percent to the energy kWh charge. The Council selected rate option 2. The 2010 rate options changed the rates to align with the option selected. The 2011 and 2012 proposed rates apply the overall increase equally to both rate components. A revised customer class definition is developed for the Large General Service customers defined as 201 kW 1,000 kW. This class includes approximately 25 accounts. Two options were developed: Option 1 Across the board increases to both the customer charge and energy charge equally by 5.5 percent. Option 2 Customer charge is increased by the overall 5.5 percent, remaining amount to be collected split 50 percent to the demand kW charge and 50 percent to the energy kWh charge. The Council selected rate option 2. The 2010 rate options changed the rates to align with the option selected. The 2011 and 2012 proposed rates apply the overall increase equally to both rate components. A new customer class is developed for Very Large General Service customers defined as 1,000 kW. This class includes approximately 5 accounts. The existing customers in this class were previously in the Large General Service customer class. The rates will continue at the new Large General Service class rates. New customers to this class will require a five year contract with rates developed via a negotiation process. Exhibit 4.2 provides a summary of the proposed 2010 through 2012 rates. Exhibit 4.2 Summary of Proposed 2010, 2011 and 2012 Rates Class Residential Inside Outside Small General Service< 50kW Sngle Phase Three Phase Medium General Service 50kW- 200kW 1 Large General Service 201 kW- 1,000 kW I Very Large General Service 1,000 kW (Existing Customers) Very Large General Service 1,000 kW (NEW Customers) Street Yard Lighting 150 W Customers 200 W Customers 250 W Customers 400 W Customers 1000 W Customers Traffic Light Customers 210 Mones,; Customer Enera thly Rat =Deman•) 2011 Monthly Rates Customer ".;Ever Demand 2012 Monthly Rates Customer ..Energy emand 10 88 0 0599 N/A 11 48 0 0632 11 96 0 0663 N/A 12 62 0 0699 23 23 0 0671 N/A 24 51 0 0708 34 29 0 0671 N/A 36 18 0 0708 44 51 0 0539 54 20 0 0526 54 20 0 0526 230; 3 04 381 609, 1523 76 83 4 43 4 75 4 75 1 Ave Year Contract, Negotiated 46 96 0 0568 57 18 0 0555 57 18 0 0555 Rate Rate 2 43 3 21 4 02 6 42 16 07 81 06 N/A 12 11 0 0667 N/A N/A 13 31 0 0737 N/A N/A 25 86 0 0747 N/A N/A 38 17 0 0747 N/A 4 67 49 54 0 0600 4 93 5 01 I 60 32 0 0585 5 29 5 01 I 60 32 0 0585 5 29 Ave Year Contract, Negotiated Ave Year Contract, Negotiated 2 56 3 39 4 24 6 77 16 95 85 52 Rate Page 14 City of Centralia Electric Utility Rate Study April 2011 SUMMARY The analysis described above concludes the rate study for the electric utility. After performing the rate analysis it was shown that the revenue at current rate levels is not sufficient to fund ongoing utility obligations. As a result a 5.5 percent increase is proposed in 2010, 2011 and 2012 followed by 3.0 percent increases in 2013 and 2014. Although the rate study has provided a financial forecast and a rate transition plan through 2014, the City is proposing the adoption of a 3-year rate plan for 2010- 2012. We recommend that the City informally monitor the financial assumptions used in the plan to actual results. Any significant changes should be incorporated and the rate plan adjusted. A more comprehensive review of rates should be taken every 2 -3 years. Specifically, we recommend that the City revisits the power cost assumptions before the Tiered Rate Methodology goes into effect October 1, 2011. The detailed technical exhibits developed as part of the rate study are included in the Technical Appendices. Page 15 City of Centralia Electric Utility Rate Study April 2011 TECHNICAL ANALYSIS EXHIBITS City of Centralia Electric Utility Rate Study Summary evenue 3d quiremen Revenues Rate Revenues Under Existing Rates Non -Rate Revenues Total Revenues Expenses Cash Operating Expenses Power Transmission Existing Debt Service New Debt Service Rate Funded CIP Rate Funded Depreciation Total Expenses Net Surplus (Deficiency) of Rate Revenue Additions To Meet Coverage Total Surplus (Deficiency) of Rate Revenue Annual Rate Adjustment Rate Revenues After Rate Increase Additional Taxes from Rate Increase Net Cash Flow After Rate Increase Coverage After Rate Increases Sample Monthly Bill (Residential 1,300 kwh) Monthly Increase Sample Monthly Bill (Commercial Small 15,300kwh, 43kw) Monthly Increase Sample Monthly Bill (Commercial Large 293,000kwh, 920kw) Monthly Increase 0 17,568,746 758,000 18,326,746 8,901,860 5,608,547 992,348 1,877,173 599,517 17,979,446 347,301 0.00% 347,301 0.00% 0.00% 347,301 1.50 17,568,746 84.17 1,004 18,743 18,370,695 717,264 19,087,959 9,250,766 6,307,528 1,030,139 1,872,013 487,793 930,000 19,878,238 (790,279) 4.30% (790,279) 4.30% 5.50% 9,553,063 6,517,052 1,064,358 1,868,213 487,793 18,875,889 49,878 (334,963) 1.27 88.80 4.63 1,060 55 19,774 1,031 18,616,386 729,519 19,345,904 1.320.000 20,810,479 (1,464,575) 7.87% (1,464,575) 7.87% 5.50% 20,180,395 154,415 {54,981) 1.58 93.68 4.88 1,118 58 20,861 1,088 9,882,778 7,173,245 1,171,527 1,873,013 487,793 (2,552,773) 13.43% 5.50% 21,730,783 269,459 2012 19,001,532 784,050 19,785,582 1.750,000 22,338,356 (2,552,773) 13.43% (92,982) 1.72 98.84 5.15 1,179 61 22,009 1,147 2013 19,406,951 791,080 20,196,031 10,221,808 7,326,294 1,196,523 1,875,263 886,896 1,950,000 23,456,784 (3,258,754) 16.79% (3,258,754) 16.79% 3.00% 23,472,098 401,352 405,041 1.87 101.80 2.97 1,215 35 22,669 660 2014; 19,821,955 825,350 20,647,305 10,575,120 8,069,066 1,222,110 1,869,213 886,896 2,100,000 24,722,404 (4,075,099) 20.56% (4,075,099) 20.56% 3.00% 24,693,254 480,943 315,256 1.92 104.86 3.05 1,251 36 23,349 680 City of Centralia Electric Utility Rate Study Summary untl;tialance 'Operating: Beginning Balance Net Cash Flow after Rate Increase Transfer of Surplus to Capital Fund Ending Balance Minimum Target Balance S 90 Day Target `Capital Beginning Balance plus: Rate Funded Depreciation plus: Grants Developer Donations Other Outside Sources plus: Existing Bond Proceeds plus: Connection Charges plus: Net Debt Proceeds Available for Projects plus: Interest Earnings plus: Transfer of Surplus from Operating Fund plus: Direct Rate Funding Total Capital Funding Sources less: Capital Expenditures (inflated) Ending Balance Minimum Capital Contingency Target 2,486,260 347,301 (638,581) 2,194,979 2,194, 979 90 832,139 915,685 1,052,000 16,643 638,581 3,455,049 3,455,049 1,283,138 2,481,693 (334,963) 2,146,730 2,281,011 85 1,943,054 1,860,544 389,000 5,500,000 38,861 9,731,459 (4,658,431) 5,073,028 1,376,306 2,146,730 (54,981) 2,091,750 2,355,550 80 5,073,028 1,320,000 284,200 101,461 6,778,689 (5.311,693) 1,466,996 1,482,540 2,091,750 (92,982) 1,998,768 2,436, 849 74 1,466,996 1,750,000 662,000 44,010 3,923, 006 (2,588,342) 1,334,664 1,534,307 20 1,998,768 405,041 2,403,809 2,520,446 86 1,334,664 1,950,000 313,000 4,500,000 40,040 8,137,704 (3,863,486) 4,274,218 2,403,809 315,256 (111,502) 2,607,564 2,607, 564 90 4,274,218 2,100,000 240,000 128,227 111,502 6,853,946 (4,996,835) 1,857,111 1,611,577 1,711,514 City of Centralia Electric Utility Rate Study Summary und-Balan System Replacement Beginning Balance plus: Reserve Funding plus: Interest Earnings less: Use of Reserves for System Replacement Ending Balance Minimum Annual Transfer Target Equipment Reserve Beginning Balance plus: Reserve Funding Yelm plus: Reserve Funding Centralia plus: Interest Earnings less: Use of Reserves Ending Balance 309,969 599,517 6,199 (915,685) 912,298 930,000 18,246 (1,860,544) 1,434,642 1,551,103 907,819 64,710 79,170 25,000 (57,000) 1,019,699 1,042,606 60,000 91,000 20,852 (189.000) 1,025,458 1,320,000 (1.320,000) 1,683,895 1,025,458 61,993 94,023 20,509 (84,200) 1,117,783 2012 1,750,000 (1,750,000) 1,748,604 1,117,783 64,052 97,146 33,533 (462,000) 850,515 1,950,000 2,100,000 (1,950,000) (2,100,000) 1,845,191 1,939,068 850,515 929,584 66,180 68,378 100,373 103,707 25,515 27,888 (113,000) (40,000) 929,584 1,089,557 City of Centralia Electric Utility Rate Study Assumptions Economic Financial Factors 1 General Cost Inflation 3.32% 3.32% 3.32% 3.32% 3.32% 3.32% 2 Construction Cost Inflation 4.43% 4.43% 4.43% 4.43% 4.43% 4.43% 3 Labor Cost Inflation 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4 Residential Growth -1.63% 1.79% 1.75% 1.75% 1.75% 1.75% 5 General Inflation plus Growth 1.64% 5.17% 5.13% 5.13% 5.13% 5.13% 6 Commercial Growth Small 1.37% -0.33% 0.00% 0.50% 1.00% 1.00% 7 City B&O Tax Utility Revenue existing (by statute) 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 8 No Escalation 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 9 Commercial Growth Large -0.08% 9.92% 1.41% 3.00% 3.00% 3.00% 10 Stree Lights Growth 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 11 Cumulative Growth -0.96% 4.56% 1.34% 2.07% 2.13% 2.14% Fund Earnings (5 -year average of the LWGSIP) 2.00% 2.00% 2.00% 3.00% 3.00% 3.00% Local State Excise Tax State B &O Tax 2009 2010 2011 2012 2013 2014 3.8730% 3.8730% 3.8730% 3.8730% 3.8730% 3.8730% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% City of Centralia Electric Utility Rate Study Assumptions Accounting Assumptions 2009 2010 2011 2012 2013 2014 FISCAL POLICY RESTRICTIONS Min. Op. Fund Balance Target (days of O&M expense) 90 90 90 90 90 90 Max. Op. Fund Balance (days of O &M expense) 90 90 90 90 90 90 Minimum Capital Fund Balance Target I Select Minimum Capital Fund Balance Target 1 I Defined as of Plant 1 Defined as of Plant Plant -in- Service in 2009 I $64,156,892 I Minimum Capital Fund Balance of plant assets 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2 Amount al Riyiii S RATE FUNDED SYSTEM REINVESTMENT I Select Reinvestment Funding Strategy I 3 1 User Input Amount of Annual Cash Funding from Rates 1 Equal to Annual Depreciation Expense 2 Equal to Annual Depreciation Expense less Annual Debt Principal Payments 3 Equal to Amount at Right 599,517 930,000 1,320,000 1,750,000 1,950,000 2,100,000 4 Do Not Fund System Reinvestment Depreciation Funding Levels 40.00% 60.00% 80.00% 100.00% 100.00% 100.00% CIP From Rates Estimated Depreciation Level 1,550,000 1,650,000 1,750,000 1,950,000 2,100,000 City of Centralia Electric Utility Rate Study Assumptions Capital Financing Assumptions Capital Related Revenue Select GFC Alternative 1 User Input (Current Charge) 2 Calculated Charge Total Residential Customer Equivalents (Estimate) Capital Related Revenue REVENUE BONDS Term (years) Interest Cost Issuance Cost PWTF LOAN Revenue Bond Coverage Requirement 1.25 1 Current Charge is In use 2009 2010 2011 2012 2013 2014 20 20 20 20 20 20 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% Term (years; 10 year minimum and no more than 20 years) 20 20 20 20 20 20 Interest Cost 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% OTHER LOANS REVENUE- SUPPORTED GENERAL OBLIGATION BONDS [a] Term (years) 20 20 20 20 20 20 Interest Cost 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% Issuance Cost 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% [a] Tax supported general obligation bonds are assumed to be accounted for in the General Fund; terms and annual obligations of such bonds are not factors in this analysis. City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 Revenues FORECAST BASIS Rate revenues Residential 4 Residential Growth $8,075,888 8,212,412 8,348,864 8,495,695 8,645,110 8,797,152 General Service <50KW) 6 Commercial Growth Small 2,583,324 2,578,004 2,581,377 2,595,785 2,621,366 2,647,198 General Service >50 200 KW) 9 Commercial Growth Large 2,250,915 2,465,242 2,499,898 2,573,196 2,648,628 2,726,254 General Service (201+ KW) 9 Commercial Growth Large 4,609,029 5,065,447 5,136,657 5,287,266 5,442,258 5,601,761 StreetNYard Lighting 10 Stree Lights Growth 49,589 49,589 49,589 49,589 49,589 49,589 B No Escalation Total Rate revenue 17,568,746 18,370,695 18,616,386 19,001,532 19,406,951 19,821,955 4.56% Non -rate revenues [a] Sales of Elect -SVC MISC CHGS i General Cost Inflation 48.700 50.318 51.989 53.716 55.501 57.344 SALES OF ELECT- PUBLIC ST LTS 1 General Cost Inflation SALES OF ELECT- ELECT PENALTY 1 General Cost Inflation 211,300 218,319 225,571 233,064 240,806 248,805 SALES OF ELECT-TEMPORARY SVCS 1 General Cost Inflation 8,000 8,266 8,540 8,824 9,117 9,420 Interest Income 1 Calculated 25,000 90,297 93,354 138,381 135,592 159,716 BPA REP SETTLEMENT 8 No Escalation 465,000 350,064 350,064 350,064 350,064 350,064 1 General Cost inflation Total Non -rate revenues 758,000 717,264 729,519 784,050 791,080 825,350 TOTAL REVENUES 18,326,746 19,087,959 19,345,904 19,785,582 20,198,031 20,647,305 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 Expenditures FORECAST BASIS Excise Tax State Tax Excise and B&O Tax Rate 700,500 720,835 730,535 746,270 762,077 778,664 Utility Taxes Utility Tax Rate 1,086,000 1,145,278 1,160,754 1,187,135 1,211,882 1,238,838 YELM ADMINISTRATIVE BONDS 1 General Cost Inflation 80 83 85 88 91 94 CHARGES FOR SVCS /C H BLDG 3 Labor Cost Inflation 4,950 5,148 5,354 5,568 5,791 6,022 EMPLOYEE RECRUITMENT /SELECTION 1 General Cost Inflation 500 517 534 552 570 589 EXTERNAL TAXES 1 General Cost Inflation FICA 3 Labor Cost Inflation 9,990 10,390 10,805 11,237 11,687 12,154 FULL TIME 3 Labor Cost Inflation 135,640 141,066 146,708 152,577 158,680 165,027 GENERAL LIABILITY INSURANCE 1 General Cost Inflation 32,640 33,724 34,845 38,002 37,198 38,434 HEALTH INSURANCE 3 Labor Cost inflation 19,720 20,509 21,329 22,182 23,070 23,992 INTERFUND PROF SVCS /COUNCIL 3 Labor Cost Inflation 6,040 6,282 6,533 6,794 7,066 7,349 INTERFUND PROF SVCS /PERSONNEL 3 Labor Cost Inflation 16,210 16,858 17,533 18,234 18,963 19,722 INTERFUND PROF SVCS -CITY ATTY 3 Labor Cost Inflation 12,540 13,042 13,563 14,106 14,670 15,257 INTERFUND PROF SVCS -CITY CLERK 3 Labor Cost Inflation 3,270 3,401 3,537 3,678 3,825 3,978 INTERFUND PROF SVCS -CITY MGR 3 Labor Cost Inflation 30,710 31,938 33,216 34,545 35,926 37,363 INTERFUND PROF SVCS -COM DEV 3 Labor Cost Inflation 23,000 23,920 24,877 25,872 26,907 27,983 INTERFUND PROF SVCS FINANCE 3 Labor Cost Inflation 33,720 35,069 36,472 37,930 39,448 41,026 INTERGOVERNMENTAL SERVICES 1 General Cost Inflation 36,900 38,126 39,392 40,701 42,053 43,450 LIFE INSURANCE 3 Labor Cost Inflation 270 281 292 304 316 328 LONGEVITY 3 Labor Cost Inflation 110 114 119 124 129 134 MISC- JUDGEMENTS SETTLEMENTS 3 Labor Cost inflation 243,510 253,250 263,380 273,916 284,872 296,267 OPERATING ASSESSMENTS /PERMITS 1 General Cost Inflation 20,000 20,664 21,351 22,060 22,793 23,550 PENSION 3 Labor Cost Inflation 11,070 11,513 11,973 12,452 12,950 13,468 PROFESSIONAL SERVICES 1 General Cost Inflation 327,000 337,862 349,086 360,682 372,663 385,042 PROPERTY INSURANCE 1 General Cost Inflation 11,580 11,965 12,362 12,773 13,197 13,635 TEAMSTER PENSION 3 Labor Cost Inflation 630 655 681 709 737 766 WORKER'S COMP 3 Labor Cost Inflation 2,000 2,080 2,163 2,250 2,340 2,433 8 No Escalation Total ADMINISTRATIVE 982,080 1,018,456 1,056,190 1,095,334 1,135,941 1,178,065 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 MAINTENANCE BLDG REPAIR MAINT MATERIALS 1 General Cost Inflation 6,000 6,199 6,405 6,618 6,838 7,065 CANAL MAINTENANCE SUPPLIES 1 General Cost Inflation 10,000 10,332 10,675 11,030 11,396 11,775 EQUIP VEHICLE MAINT SUPPLIES 1 General Cost Inflation 15,000 15,498 16,013 16,545 17,095 17,662 EQUIPMENT REPAIR MAINTENANCE 1 General Cost Inflation 10,000 10,332 10,675 11,030 11,396 11,775 LUBRICANTS 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 MAINTENANCE CONTRACTS 1 General Cost Inflation 120,000 123,986 128,105 132,360 136,757 141,300 ROAD MATERIALS 1 General Cost inflation 15,000 15,498 16,013 16,545 17,095 17,662 VEHICLE REPAIR MAINTENANCE 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 Total MAINTENANCE 183,000 189,079 195,360 201,849 208,554 215,482 OPERATIONS ADVERTISING PROMOTIONS 331 342 353 T IONS i Gcriciai Cost Mallon .ivv aiv a�u AGRICULTURAL ANIMAL SUPPLIES 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 AUTOMOTIVE FUEL 1 General Cost Inflation 20,000 20,664 21,351 22,060 22,793 23,550 BUILDING MAINTENANCE SUPPLIES 1 General Cost Inflation 2,500 2,583 2,669 2,758 2,849 2,944 CHEMICALS GASES 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 CLOTHING ALLOWANCE 1 General Cost Inflation 3,150 3,255 3,363 3,474 3,590 3,709 COMPUTER HARDWARE /SOFTWARE 1 General Cost Inflation 10,400 10,745 11,102 11,471 11,852 12,246 COPIER COPY EXPENSE 1 General Cost Inflation DATA PROCESSING 1 General Cost Inflation 10,000 10,332 10,675 11,030 11,396 11,775 FICA 3 Labor Cost Inflation 35,960 37,398 38,894 40,450 42,068 43,751 FOOD 1 General Cost Inflation 200 207 214 221 228 235 FULL TIME 3 Labor Cost Inflation 442,090 459,774 478,165 497,291 517,183 537,870 GENERAL EQUIPMENT 1 General Cost Inflation 7,500 7,749 8,007 8,273 8,547 8,831 HEALTH INSURANCE 3 Labor Cost Inflation 98,280 102,211 106,300 110,552 114,974 119,573 INTERFUND EQ RENTAL CHARGES 1 General Cost Inflation 9,550 9,867 10,195 10,534 10,884 11,245 LABORATORY TESTING 1 General Cost Inflation 200 207 214 221 228 235 LIFE INSURANCE 1 General Cost Inflation 1,220 1,261 1,302 1,346 1,390 1,437 LONGEVITY 1 General Cost Inflation MEETING EXPENSES 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 MISC -DUES MEMBERSHIPS 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 OFFICE EQUIPMENT FURNISHINGS 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 OFFICE SUPPLIES 1 General Cost Inflation 2,100 2,170 2,242 2,316 2,393 2,473 OPERATING RENTALS LEASES 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 OPERATING SUPPLIES 1 General Cost Inflation 25,000 25,830 26,688 27,575 28,491 29,437 OVERTIME 3 Labor Cost Inflation 20,000 20,800 21,632 22,497 23,397 24,333 PENSION 3 Labor Cost Inflation 37,670 39,177 40,744 42,374 44,069 45,831 PHOTOGRAPHY EQUIP SUPPLIES 1 General Cost Inflation 200 207 214 221 228 235 POSTAGE MAILING SERVICES 1 General Cost Inflation 300 310 320 331 342 353 PRINTING BINDING 1 General Cost Inflation 400 413 427 441 456 471 PUBLICATIONS SUBSCRIPTIONS 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 RADIOS CELLULAR PHONES 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 SAFETY SUPPLIES AMMUNITION 1 General Cost Inflation 2,000 2,066 2,135 2,206 2,279 2,355 SMALL TOOLS HARDWARE 1 General Cost Inflation 2,500 2,583 2,669 2,758 2,849 2,944 TEAMSTER PENSION 3 Labor Cost Inflation TELEPHONE/TELECOMMUNICATION 1 General Cost Inflation 10,000 10,332 10,675 11,030 11,396 11,775 TEMPORARY FULL TIME 3 Labor Cost Inflation 22,260 23,150 24,076 25,039 26,041 27,083 TRAFFIC CONTROL SUPPLIES 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 UNIFORM PURCHASE /CLEANING SVCS 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 UTILITY SERVICES- ELECTRIC 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 UTILITY SERVICES- NATURAL GAS 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 UTILITY SERVICES -SEWER 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 UTILITY SERVICES -WASTE DISPOSAL 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 UTILITY SERVICES -WATER 1 General Cost Inflation 800 827 854 882 912 942 VEHICLE MAINTENANCE 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 WORKER'S COMP 3 Labor Cost Inflation 15,250 15,860 16,494 17,154 17,840 18,554 8 No Escalation Total OPERATIONS 821,830 853,684 886,778 921,161 956,883 S 993,996 TOTAL YELM 1,986,910 2,061,219 2,138,328 2,218,344 2,301,378 2,387,543 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 NON YELM ADMINISTRATIVE BONDS 1. General Cost Inflation 160 165 171 176 182 188 CHARGES FOR SVCS /C H BLDG 3 Labor Cost Inflation 14,840 15,434 16,051 16,693 17,361 18,055 EMPLOYEE RECRUITMENT /SELECTION 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 EXTERNAL TAXES 1 General Cost Inflation FICA 3 Labor Cost Inflation 28,900 30,056 31,258 32,509 33,809 35,161 FULL TIME 3 Labor Cost Inflation 395,720 411,549 428,011 445,131 462,936 481,454 HEALTH INSURANCE 3 Labor Cost Inflation 58,730 61,079 63,522 66,063 68,706 71,454 INSURANCE- GENERAL LIABILITY 1 General Cost Inflation 55,500 57,344 59,248 61,217 63,250 65,351 INSURANCE PROPERTY 1 General Cost Inflation 6,950 7,181 7,419 7,666 7,921 8,184 INTERFUND PROF SVCS /PERSONNEL 3 Labor Cost Inflation '48,620 50,565 52,587 54,691 56,879 59,154 INTERFUND PROF SVCS -CITY ATTY 3 Labor Cast Inflation 37,610 39,114 40,679 4Z,8O6 43,988 45,758 INTERFUND PROF SVCS -CITY CLERK 3 Labor Cost Inflation 9,800 10,192 10,600 11,024 11,465 11,923 INTERFUND PROF SVCS -CITY MGR 3 Labor Cost Inflation 92,120 95,805 99,637 103,622 107,767 112,078 INTERFUND PROF SVCS -COM DEV 3 Labor Cost Inflation 23,000 23,920 24,877 25,872 26,907 27,983 INTERFUND PROF SVCS COUNCIL 3 Labor Cost Inflation 18,120 18,845 19,599 20,383 21,198 22,046 INTERFUND PROF SVCS FINANCE 3 Labor Cost Inflation 101,170 105,217 109,425 113,802 118,355 123,089 INTERGOVERNMENTAL SERVICES 1 General Cost Inflation 2,000 2,066 2,135 2,206 2,279 2,355 INTRFND TAXES OP ASSESSMENTS 1 General Cost Inflation LIFE INSURANCE 3 Labor Cost Inflation 820 853 887 922 959 998 LONGEVITY 3 Labor Cost Inflation 420 437 454 472 491 511 MISC- CONTRIB TO RURAL ECON DEV FL 3 Labor Cost Inflation 50,000 52,000 54,080 56,243 58,493 60,833 PENSION 3 Labor Cost Inflation 32,300 33,592 34,936 36,333 37,786 39,298 PROFESSIONAL SERVICES 1 General Cost Inflation 259,000 267,604 276,493 285,677 295,167 304,972 TEAMSTER PENSION 3 Labor Cost Inflation 3,600 3,744 3,894 4,050 4,211 4,380 WORKER'S COMP 3 Labor Cost Inflation 1,070 1,113 1,157 1,204 1,252 1,302 8 No Escalation Total ADMINISTRATIVE 1,241,450 1,288,907 1,338,188 1,389,368 1,442,512 1,497,704 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast ADMIN -ENG COMMUNICATIONS COMPUTER HARDWARE /SOFTWARE DATA PROCESSING ENGINEERING SUPPLIES FICA FOOD FUEL CONSUMED FULL TIME HEALTH INSURANCE INSURANCE GENERAL LIABILITY INTERFUND EQ RENTAL CHARGES LIFE INSURANCE MAPS MICROFILM MEETING EXPENSES MISC -DUES MEMBERSHIPS MISC- FILINGiRECORDING/WITNESS FEE MISC PRINTING BINDING MISC PUBLICATIONS SUBSCRIPTIONS. MISC UNIFORM PURCHASE /CLEANING S OFFICE SUPPLIES OFFICE SUPPLIES COPIER COPY EXPI OFFICE SUPPLIES -EQUIP FURNISHING OPERATING SUPPLIES OVERTIME PENSION PHOTOGRAPHY EQUIP SUPPLIES POSTAGE MAILING SERVICES PROFESSIONAL SERVICES REPAIR MAINTENANCE EQUIPMENT SAFETY SUPPLIES AMMUNITION SMALL TOOLS MINOR EQUIPMENT WORKMEN'S COMP General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation Labor Cost Inflation General Cost Inflation General Cost Inflation Labor Cost Inflation Labor Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation Labor Cost Inflation Labor Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation General Cost Inflation Labor Cost Inflation Labor Cost Inflation Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 1,000 1,033 1,068 1,103 1,140 1,177 5,000 5,166 5,338 5,515 5,698 5,887 400 413 427 441 456 471 8,900 9,256 9,626 10,011 10,412 10,828 100 103 107 110 114 118 1,670 1,725 1,783 1,842 1,903 1,966 119,650 124,436 129,413 134,590 139,974 145,573 22,020 22,901 23,817 24,770 25,760 26,791 110 114 117 121 125 130 5,360 5,538 5,722 5,912 6,108 6,311 300 310 320 331 342 353 2,000 2,066 2,135 2,206 2,279 2,355 2,700 2,790 2,882 2,978 3,077 3,179 190 196 203 210 217 224 100 103 107 110 114 118 70 72 75 77 80 82 170 176 181 188 194 200 40 41 43 44 46 47 2,000 2,066 2,135 2,206 2,279 2,355 200 207 214 221 228 235 500 517 534 552 570 589 400 416 433 450 468 487 9,790 10,182 10,589 11,012 11,453 11,911 50 52 53 55 57 59 30 31 32 33 34 35 100 103 107 110 114 118 200 207 214 221 228 235 140 145 149 154 160 165 30 31 32 33 34 35 1,570 1,633 1,698 1,766 1,837 1,910 Total ADMIN -ENG 184,790 192,029 199,553 207,373 215,499 223,946 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 CONSERVATION FICA 3 Labor Cost Inflation 2,280 2,371 2,466 2,565 2,667 2,774 FULL TIME 3 Labor Cost inflation 30,560 31,782 33,054 34,376 35,751 37,181 HEALTH INSURANCE 3 Labor Cost inflation 7,020 7,301 7,593 7,897 8,212 8,541 LIFE INSURANCE 3 Labor Cost Inflation 90 94 97 101 105 109 MISC CONTRIBS TO NON-GOVT-CONS R 1 General Cost Inflation 150,000 154,983 160,131 165,450 170,946 176,625 MISC INTERNAL CONSERVATION PROGI 1 General Cost Inflation 100,000 103,322 106,754 110,300 113,964 117,750 PENSION 3 Labor Cost Inflation 2,490 2,590 2,693 2,801 2,913 3,029 WORKMEN'S COMP 3 Labor Cost Inflation 690 718 746 776 807 839 1 General Cost Inflation Total CONSERVATION 293,130 303,160 313,534 324,266 335,366 346,849 CUSTOMER SERVICE ADVERTISING 1 General Cost Inflation 500 517 534 552 570 589 BUILDING MAINTENANCE SUPPLIES 1 General Cost Inflation 400 413 427 441 456 471 COMMUNICATIONS 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 COMPUTER HARDWARE /SOFTWARE 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 DATA PROCESSING 1 General Cost Inflation 8,000 8,266 8,540 8,824 9,117 9,420 EMERGENCY FOOD 1 General Cost Inflation 40 41 43 44 46 47 EQUIPMENT REPAIR MAINTENANCE '1 General Cost Inflation 100 103 107 110 114 118 FICA 3 Labor Cost Inflation 8,820 9,173 9,540 9,921 10,318 10,731 FILING /RECORDINGIWITNESS FEES 1 General Cost Inflation 100 103 107 110 114 118 FULL TIME 3 Labor Cost Inflation 117,480 122,179 127,066 132,149 137,435 142,932 HEALTH INSURANCE a 3 Labor Cost Inflation 32,980 34,299 35,671 37,098 38,582 40,125 LIFE INSURANCE 3 Labor Cost Inflation 470 489 508 529 550 572 LONGEVITY 3 Labor Cost Inflation 840 874 909 945 983 1,022 MEETING EXPENSES 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 MISC PUBLICATIONS SUBSCRIPTIONS, 1 General Cost Inflation 100 103 107 110 114 118 MISC UNIFORM PURCHASE /CLEANING S 1 General Cost Inflation 980 1,013 1,046 1,081 1,117 1,154 OFFICE SUPPLIES 1 General Cost Inflation 2,200 2,273 2,349 2,427 2,507 2,590 OFFICE SUPPLIES -BANK CHARGES 1 General Cost Inflation 16,610 17,162 17,732 18,321 18,929 19,558 OFFICE SUPPLIES- COPIER COPY EXPI 1 General Cost Inflation OFFICE SUPPLIES -EQUIP FURNISHING 1 General Cost Inflation 600 620 641 662 684 706 OVERTIME 3 Labor Cost Inflation 700. 728 757 787 819 852 PENSION 3 Labor Cost inflation 9,710 10,098 10,502 10,922 11,359 11,814 PHOTOGRAPHY EQUIPMENT 1 General Cost Inflation 1,500 1,550 1,601 1,655 1,709 1,766 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 POSTAGE MAILING SERVICES 1 General Cost Inflation 22,320 23,061 23,827 24,619 25,437 26,282 PRINTING BINDING 1 General Cost Inflation 10,000 10,332 10,675 11,030 11,396 11,775 PROFESSIONAL SERVICES 1 General Cost Inflation 15,450 15,963 16,493 17,041 17,607 18,192 REPAIR MAINTENANCE -MAINT CONTR 1 General Cost Inflation 1,630 1,684 1,740 1,798 1,858 1,919 REPAIR MAINTENANCE -OTHER I General Cost Inflation 1.000 1,033 1,068 1,103 1,140 1,177 TEAMSTER PENSION 3 Labor Cost Inflation 7,800 8,112 8,436 8,774 9,125 9,490 UTILITY SERVICES -WASTE DISPOSAL 1 General Cost Inflation 100 103 107 110 114 118 UTILITY SERVICES- WASTEWATER I General Cost Inflation 270 279 288 298 308 318 UTILITY SERVICES -WATER 1 General Cost Inflation 140 145 149 154 160 165 WORKER'S COMP 3 Labor Cost Inflation 630 655 681 709 737 766 8 No Escalation Total CUSTOMER SERVICE 270,470 280,671 291,260 302,252 313,661 325,503 MAINTENANCE BLDG REPAIR MAINT MATERIALS 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 BUILDING MAINTENANCE SUPPLIES 1 General Cost Inflation 7,000 7,233 7,473 7,721 7,977 8,242 EQUIP VEHICLE MAINT SUPPLIES 1 General Cost Inflation 8,000 8,266 8,540 8,824 9,117 9,420 EQUIPMENT REPAIR MAINTENANCE 1 General Cost Inflation 11,500 11,882 12,277 12,685 13,106 13,541 LABORATORY TESTING 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 LUBRICANTS 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 OTHER REPAIRS MAINTENANCE 1 General Cost Inflation 1,700 1,756 1,815 1,875 1,937 2,002 REPAIR MAINTENANCE -MAINT CONTR I General Cost Inflation 28,200 29,137 30,105 31,105 32,138 33,205 ROAD MATERIALS 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 SUBSTATION MAINTENANCE SUPPLIES 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 VEHICLE REPAIR MAINTENANCE 1 General Cost Inflation 20,000 20,664 21,351 22,060 22,793 23,550 8 No Escalation Total MAINTENANCE 95,400 98,569 101,843 105,226 108,722 112,333 OPERATIONS ADVERTISING PROMOTIONS 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 AGRICULTURAL ANIMAL SUPPLIES 1 General Cost Inflation 2,500 2,583 2,669 2,758 2,849 2,944 CABLE SERVICE 1 General Cost Inflation 1,500 1,550 1,601 1,655 1,709 1,766 CHEMICALS GASES 1 General Cost Inflation 1,500 1,550 1,601 1,655 1,709 1,766 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast Budget Projection Projection Projection Projection Projection 2009 2010 2011 2012 2013 2014 CLOTHING ALLOWANCE 1 General Cost Inflation 8,100 8,369 8,647 8,934 9,231 9,538 COMPUTER HARDWARE /SOFTWARE i General Cost Inflation 115,970 119,822 123,803 127,915 132,164 136,554 CONSTRUCTION CONTRACTS 1 General Cost Inflation 100,000 103,322 106,754 110,300 113,964 117,750 DATA PROCESSING 1 General Cost Inflation 4,000 4,133 4,270 4,412 4,559 4,710 ENGINEERING SUPPLIES 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 EXCESS COMPENSATION 1 General Cost Inflation 31,200 32,236 33,307 34,414 35,557 36,738 FICA 3 Labor Cost Inflation 106,380 110,635 115,061 119,663 124,450 129,428 FOOD 1 General Cost Inflation 600 620 641 662 684 706 FUEL CONSUMED 1 General Cost Inflation 50,400 52,074 53,804 55,591 57,438 59,346 FULL TIME 3 Labor Cost Inflation 1,314,570 1,367,153 1,421,839 1,478,712 1,537,861 1,599,375 GENERAL EQUIPMENT 1 General Cost Inflation 12,000 12,399 12,810 13,236 13,676 14,130 HEALTH INSURANCE 3 Labor Cost Inflation 262,400 272,896 283,812 295,164 306,971 319,250 INTERFUND EQ RENTAL CHARGES 1 General Cost Inflation 14,950 15,447 15,960 16,490 17,038 17,604 LIFE INSURANCE 1 General Cost Inflation 3,440 3,554 3,672 3,794 3,920 4,051 LINE MATERIALS 1 General Cost Inflation 200,000 206,644 213,508 220,600 227,928 235,500 LONGEVITY 3 Labor Cost Inflation MAPS MICROFILM 1 General Cost Inflation 1,000' 1,033 1,068 1,103 1,140 1,177 MEETING EXPENSES 1 General Cost Inflation 37,250 38,487 39,766 41,087 42,452 43,862 MISC -DUES MEMBERSHIPS 1 General Cost Inflation 53,340 55,112 56,943 58,834 60,788 62,808 MISC FILING /RECORDING/WITNESS FEE 1 General Cost Inflation 2,000 2,066 2,135 2,206 2,279 2,355 MISC UNIFORM PURCHASE /CLEANINGS 1 General Cost Inflation 16,500 17,048 17,614 18,200 18,804 19,429 OFFICE EQUIPMENT FURNISHINGS 1 General Cost Inflation 11,730 12,120 12,522 12,938 13,368 13,812 OFFICE SUPPLIES 1 General Cost Inflation 5,700 5,889 6,085 6,287 6,496 6,712 OFFICE SUPPLIES- COPIER COPY EXPI 1 General Cost Inflation OPERATING RENTALS LEASES 1 General Cost Inflation 44,000 45,462 46,972 48,532 50,144 51,810 OPERATING SUPPLIES 1 General Cost Inflation 50,000 51,661 53,377 55,150 56,982 58,875 OVERTIME 3 Labor Cost Inflation 100,000 104,000 108,160 112,486 116,986 121,665 PART TIME 3 Labor Cost Inflation 50,000 52,000 54,080 56,243 58,493 60,833 PENSION 3 Labor Cost Inflation 111,900 116,376 121,031 125,872 130,907 136,143 PHOTOGRAPHY EQUIP SUPPLIES 1 General Cost Inflation 1,000 1,033 1,068 1,103 1,140 1,177 POSTAGE MAILING SERVICES 1 General Cost Inflation 3,000 3,100 3,203 3,309 3,419 3,532 PRINTING BINDING 1 General Cost Inflation 2,020 2,087 2.156 2.228 2,302 2,379 PUBLICATIONS SUBSCRIPTIONS 1 General Cost Inflation 5,100 5,269 5,444 5,625 5,812 6,005 RADIOS CELLULAR PHONES 1 General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 SAFETY SUPPLIES AMMUNITION i General Cost Inflation 5,000 5,166 5,338 5,515 5,698 5,887 City of Centralia Electric Utility Rate Study Operating Revenue and Expenditure Forecast SMALL TOOLS HARDWARE STREET LIGHTING SUPPLIES TEAMSTER PENSION TELEPHONE/TELECOMMUNICATIONS TEMPORARY FULL TIME TRAFFIC CONTROL SUPPLIES UTILITY SERVICES NATURAL GAS UTILITY SERVICES -SEWER UTILITY SERVICES -WASTE DISPOSAL UTILITY SERVICES -WATER WORKER'S COMP Total OPERATIONS TOTAL NON YELM ADDITIONAL FUNDING Reserve Funding Yelm Reserve Funding Centralia Capital Reserve Funding Total ADDITIONAL FUNDING Add O &M from CiP Total Cash O &M Expenditures Depreciation Expense in Depreciation Expense [b] TOTAL EXPENSES Total PURCHASED POWER 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 1 General Cost Inflation 3 Labor Cost Inflation 8 No Escalation 1 General Cost Inflation 1 Genera! Cost Inflation 8 No Escalation 2008 From CIP PURCHASED POWER POWER PURCHASED FOR RESALE BP/ 1 General Cost Inflation TRANSMISSION BY OTHERS BRA 1 General Cost Inflation 1 General Cost Inflation 1,434,642 Budget 2009 10,000 25,000 21,400 43,310 2,000 5,500 1,800 7,200 1,950 39,120 2,899,330 3,009,098 3,123,051 3,241,349 3,364,158 3,491,653 4,984,570 5,172,434 5,367,430 5,569,831 5,779,919 5,997,988 64,710 Projection 2010 10,332 25,830 22,111 44,749 2,066 5,683 1,880 7,439 2,015 40,685 Last years plus annual additions from CIP 1,434,642 1,551,103 10,336,502 10,801,868 From Power $5,608,547 $6,307,528 $992,348 $1,030,139 Projection 2011 10,675 26,688 22,845 46,235 2,135 5,871 1,922 7,686 2,082 42,312 60,000 61,993 79,170 91,000 94,023 Projection 2012 11,030 27,575 23,604 47,771 2,206 6,067 1,985 7,942 2,151 44,005 64,052 8% Bath phis growth Projection 2013 11,396 28,491 24,388 49,358 2,279 6,268 2,051 8,205 2,222 45,765 66,180 Projection 2014 11,775 29,437 25,198 50,997 2,355 6,476 2,119 8,478 2,296 47,595 68,378 97,146 100,373 103,707 143,880 151,000 156,016 161,199 166,553 172,086 8,901,860 9,250,766 9,553,063 9,882,778 10,221,808 10,575,120 1,683,895 1,748,604 1,845,191 1,939,068 11,236,958 11,631,381 12,066,999 12,514,187 8% power only Inflation growth only plus growth on bath 6,517,052 7,173,245 7,326,294 8,069,066 1,064,358 1,171,527 1,196,523 1,222,110 6,600,896 7,337,667 7,561,411 8,344,772 8,522,817 9,291,175 City of Centralia Electric Utility Rate Study Existing Debt Input Existing Debt Service Revenue Bonds 1999 Light Revenue Bond (as revised per 2007 Refunding Bond)_ Annual interest Payment 361,560 Annual Principal Payment Total Annual Payment Use of Debt reserve for Debt Service 2007 Light Refunding Revenue Bond Annual interest Payment Annual Principal Payment Total Annual Payment Use of Debt reserve for Debt Service 2007 Light Revenue Bond Annual Interest Payment Annual Principal Payment Total Annual Payment Use of Debt reserve for Debt Service REVENUE BOND 4 Annual Interest Payment Annual Principal Payment Total Annual Payment Use of Debt reserve for Debt Service REVENUE BOND 5 Annual Interest Payment Annual Principal Payment Total Annual Payment Use of Debt Reserve for Debt Service TOTAL REVENUE BONDS Annual Interest Payment Annual Principal Payment Total Annual Payment Use of Debt reserve for Debt Service Annual Debt Reserve Target on Existing Revenue Bonds 2009 2010 2011 2012 Interest allocation 100% Gen 4:11;67,5 ;:138,475) 360000 370000 390000 410000 430000 211,675 571,675 567,275 572,475 571,025 568,475 interest Allocation: 14.9% Gen 65.17b Ciist 713938$ 690338 665,938 L5 640538 1604238 $i 585738 590 000' 610000 1835,000 660000 700 000 7350OD 1,303,938 1,300,338 1,300,938 1,300,538 1,304,238 1,300,738 Interest allocation 100% Gen 2013 S S S S 942,173 902,013 863,213 823,013 765,263 935.000 970.000 1.005.000 1.050,000 1.110.000 1,877,173 1,872,013 1,868,213 1,873,013 1,875,263 2014 704,213 1.165.000 1,869,213 1,877,173 1,875,988 1,875,988 1,875,988 1,875,988 1,875,988 City of Centralia Electric Utility Rate Study Capital Improvement Program Project Costs and O &M Impacts In Year: J 2009 (Project costs are escalated using Construction Cost Inflation assumptions) For CFC Calculation Annual O &M Upgrade t 0 /0 R &R Specific Funding Source Upgrade I TOTAL No Description Current Cost Year Life In Years t- Enterprise Fund, 2- Grants R &R ESCALATED Impact Expansion Develooer Donations' Expansion COSTS 1 1 Enterprise Fund 2 Yelm Tailrace Erosion 250,000 2010 40 50% 50% 1 Enterprise Fund 125,000 125,000 261.064 3 Arc Flash Study 25,000 2010 40 50% 50% 1 Enterprise Fund 12,500 12,500 26,106 4 B-Street East Rebuild 258,000 2010 40 50% 50% 1 Enterprise Fund 129,000 129,000 269,418 5 3,972,000 2011 40 50% 50% 1 Enterprise Fund 1,986,000 1,986,000 4,331,358 6 Cooks Hilt Feeders 1,297.000 2010 40 50% 50% 1 Enterprise Fund 648,500 648,500 1,354,401 7 Yelm Swltchgear Upgrade 1,057,000 2010 40 50% 50% 1 Enterprise Fund 528,500 528,500 1,103,780 8 Yeim Security improvements 125,000 2010 40 50% 50% 1 Enterprise Fund 62,500 62,500 130,532 9 System Studies 105,000 2010 40 50% 50% 1 Enterprise Fund 52,500 52,500 109,647 10 Yelm Structural and Switchyard Improvements 450,000 2010 40 50% 50% 1 Enterprise Fund 225,000 225,000 469,916 11 180,000 2011 40 50% 50% 1 Enterprise Fund 90,000 90,000 196,285 12 B-St to Zimmerman Feeder Upgrades 33,000 2010 40 50% 50% 1 Enterprise Fund 16,500 16,500 34,460 13 515,000 2011 40 50% 50% 1 Enterprise Fund 257,500 257,500 561,593 14 Cooks Hill to B-St Feeder Upgrade 29,000 2011 40 50% 50% 1 Enterprise Fund 14,500 14,500 31,624 15 402,000 2012 40 50% 50% 1 Enterprise Fund 201,000 201,000 457,771 16 205,000 2013 40 50% 50% 1 Enterprise Fund 102,500 102,500 243,772 17 System Voltage Improvements 85,000 2010 40 50% 50% 1 Enterprise Fund 32,500 32,500 67,877 18 50,000 '2013 40 50% 50% 1 Enterprise Fund 25,000 25,00D 59,457 19 Fords Prairie to Zimmerman Feeder Upgrades 254,000 2012 40 50% 50% 1 Enterprise Fund 127,000 127,000 289,238 20 Cooks Hill to Fords Prairie Intertie Feeder 14,000 2012 40 50% 50% 1 Enterprise Fund 7,000 7,000 15,942 21 190,000 2013 40 50% 50% 1 Enterprise Fund 95,000 95,000 225,935 22 Distribution System Protection 100,000 2011 40 50% 50% 1 Enterprise Fund 50,000 50,000 109,047 23 100,000 2012 40 50% 50% 1 Enterprise Fund 50,000 50,000 113,873 24 Yelm Transmission Line Extraordinary Maintenance 100,000 2010 40 50% '50% 1 Enterprise Fund 50,000 50,000 104,426 25 50,000 2011 .40 50% 50% 1 Enterprise Fund 25,000 25,000 54,524 26 50,000 2012 40 50% 50% 1 Enterprise Fund 25,000 25,000 56,937 27 50,000 2013 40 50% 50% 1 Enterprise Fund 25,000 25,000 59,457 28 50,000 2014 40 50% 50% 1 Enterprise Fund 25,000 25,000 62,088 29 Vein' Powerhouse, Grounds and Canal Improvements 296,000 2010 40 50% 50% 1 Enterprise Fund 148,000 148,000 309,100 30 Selzer Valley Substation Land 400,000 2010 40 50% 50% 1 Enterprise Fund 200,000 200,000 417,703 31 Design 220,000 2013 40 50% 50% 1 Enterprise Fund 110,000 110,000 261,609 32 Construction 1,700,000 2015 40 50% 50% 1 Enterprise Fund 850,000 850,000 2,204,415 33 Construction 2,661,000 2015 40 50% 50% 1 Enterprise Fund 1.330,500 1,330,500 3,450,558 34 Selzer Valley to B-St Inlerges/Feeder Upgrades 61,000 2012' 40 50% 50% 1 Enterprise Fund 30,500 30,500 69,463 35 863,000 2015 40 50% 50% 1 Enterprise Fund 431,500 431,500 1,119,065 36 Stlllwaters Upgrade 190,000 2012 40 50% 50% 1 Enterprise Fund 95,000 95,000 216,359 City of Centralia Electric Utility Rate Study Capital Improvement Program No 37 38 39 40 41 42 43 44 45 46 47 48 49 B-Street West Rebuild Lum Road Underground Alley Underground Hospital Feeder Diversification Emergency Contingency Total Capital Projects Total Upgrade /Expansion Projects Total R &R Projects Projects by Grants Developer Donations Projects by Enterprise Fund Total Project Costs and O &M impacts in Year. Description 2009 24,102,000 Current Cost Year 170,000 2012 1,034,000 2013 2,974,000 2014 25,000 2011 330,000 2012 100,000 2012 500,000 2013 102,000 2012 500,000 2013 500,000 2012 500,000 2013 1,000,000 2014 (Project costs are escalated using Construction Cost InfaUon assumptions) For CFC Calculation i Annual O &M Impact S 24,162,000 Year 2009$ inflated 2010 4,461,000 4,658,431 2011 4,871,000 5,311,693 2012 2,273,000 2,588,342 2013 3,249,000 3,863,486 2014 4,024,000 4.996.835 18.878,000 I 21.418.786 Life in Years 40 40 40 40 40 40 40 '40 40 40 40 Upgrade Expansion 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 100% 50% Specific Funding Source R &R 1- Enterprise Fund, 2- Grants Developer Donations 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 50% 1 Enterprise Fund 0% 1 Enterprise Fund 50% City Assumed Funding Sources Grant CTED /Lewis County Econ Dev Equipment Repl Reserves 189,000 84,200 462,000 113,000 40,000 Upgrade Expansion 85,000 517,000 1,487,000 12,500 165,000 50,000 250,000 51,000 250,000 250,000 250,000 500,000 Developers /Cap Contributions 200,000 200,000 200,000 200,000 200,000 TOTAL R &R ESCALATED COSTS 85,000 193,585 517,000 1,229,561 1,487,000 3,592,989 12,500 27,262 165,000 375,782 50,000 113,873 250,000 594,565 51,000 116,151 250,000 594,565 250,000 569,367 250,000 594,565 500,000 1,241,758 12,051,000 12,051,000 28,192,824 14,096,412 14,096,412 12,051,000 12,051,000 28,192,824 City of Centralia Electric Utility Rate Study Capital Funding Analysis Summary of Expenditures CAPITAL PROJECTS Improvement Upgrades Expansions Repairs and Replacements TOTAL CAPITAL EXPENDITURES Capital Financing Plan Existing PWTF/ Bond Proceeds Project Specific Grants 1 Developer Donations Project to be Funded OTHER FUNDING SOURCES [NOTE Al Equipment Fund PWTF Loan Proceeds Other Loan Proceeds Connection Charges Rate Funded Depreciation CIP Capital Fund Balance Deficiency Capital Fund Balance Capital Fund Balance Deficiency Revenue Bond Proceeds [Note B] 2009 2010 2009 2010 200,000 4,458,431 995,000 57,000;; 2011 2,329,215 2,655,846 2,329,215 2,655,846 4,658,431 5,311,693 2011 :200,000 5,111,693 189,000 84;200 2012 2013 2014 TOTAL 1,294,171 1,931,743 2,498,418 10,709,393 1,294,171 1,931,743 2,498,418 10,709,393 2,588,342 3,863,486 4,996,835 21,418,786 2012 2013 200,000 :.200 000 2,388,342 3,663,486 915,685 1,860,544 1,320,000 1,750,000 1,950,000 2,100,00D (2,408,887) (3,707,493) (176,342) (1,600,486) (2,656,835) 1,943,054 3,707,493 176,342 1,334,664 2,656,835 (465,833) (265,822) 5,500,000 4,500,000' 2014 TOTAL 200,000 1,995,000 4,796,835 20,418,786 462,000' 113;000 40,000 945,200 9,896,229 (10,550,042) 9,818,388 (731,655) 10,000,000 City of Centralia Electric Utility Rate Study Capital Funding Analysis Debt Service Summary EXISTING DEBT SERVICE Annual Interest Payments Annual Principal Payments Total Debt Service Payments Revenue Bond Payments Only NEW DEBT SERVICE Annual Interest Payments Annual Principal Payments Total Debt Service Payments Revenue Bond Payments Only TOTAL DEBT SERVICE PAYMENTS Total Interest Payments Total Principal Payments Total Revenue Bond Payments Only 2009 2010 2011 942,173 902,013 863,213 935.000 970.000 1.005.000 1,877,173 1,872,013 1,868,213 1,877,173 1,872,013 1,868,213 303,949 183.844 487,793 487,793 1,877,173 2,359,806 942,173 1,205,962 935,000 1,153,844 1,877,173 2,359,806 294,757 193.036 487,793 487,793 2,356,006 1,157,970 1,198,036 2,356,006 2012 823,013 1.050.000 1,873,013 1,873,013 285,105 523,656 202.688 363.240 487,793 886,896 487,793 886,896 2,360,806 2,762,159 2,756,109 1,108,118 1,252,688 2,360,806 2013 2014 765,263 704,213 1.110.000 1.165.000 1,875,263 1,869,213 1,875,263 1,869,213 505,494 381.402 886,896 886,896 1,288,919 1,209,707 1,473,240 1,546,402 2,762,159 2,756,109 City of Centralia Electric Utility Rate Study Revenue Requirements Analysis Cash Flow Sufficiency Test EXPENSES Cash Operating Expenses 8,901,860 9,250,768 9,553,063 5 9,882,778 10,221,808 10,575,120 Purchased Power (Includes Transmission) 6,600,896 7,337,667 7,581,411 8,344,772 8,522,817 9,291,175 Existing Debt Service 1,877,173 1,872,013 1,868,213 1,873,013 1,875,263 1,869,213 New Debt Service 487,793 487,793 487,793 886,896 886,896 Rate Funded CIP Rate Funded Depreciation 599,517 930,000 1,320,000 1,750,000 1,950,000 2,100,000 Additions Required to Meet Minimum Op. Fund Balance Total Expenses 17,979,446 19,878,238 20,810,479 22,338,356 23,456,784 24,722,404 REVENUES Rate Revenue 17,568,746 18,370,695 18,616,386 19,001,532 19,408,951 19,821,955 Other Revenue 733,000 626,966 636,185 645,668 655,488 665,634 Operating Fund Debt Reserve Fund Interest Earnings 25 -000 90.297 93.354 138.381 135.502 159.716 Total Revenue 18,326,746 19,087,959 19,345,904 19,705,582 20,198,031 20,647,305 NET CASH FLOW (DEFICIENCY) 347,301 (790,279) (1,464,575) (2,552,773) (3,258,754) (4,075,099) Coverage Sufficiency Test EXPENSES Cash Operating Expenses Purchased Power (Includes Transmission) Revenue Bond Debt Service Revenue Bond Coverage Requirement at 1.25 Total Expenses 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 8,901,860 9,250,766 9,553,083 9,882,778 10,221,808 10,575,120 6,600,896 7,337,667 7,581,411 8,344,772 8,522,817 9,291,175 1,877,173 2,359,806 2,356,006 2,360,806 2,762,159 2,758,109 469.293 589.951 589.001 590.201 090.540 889.027 17,849,222 19,538,190 20,079,481 21,178,557 22,197,324 23,311,431 ALLOWABLE REVENUES Rate Revenue 17,558,746 18.370,695 18,616,386 19,001,532 19,406,951 19,821,955 Other Revenue 733,000 826,966 635,165 645,668 655,488 885,634 Interest Eamings All Funds r ry ^000 j 129.158 194.015 182.391 175 632 287.943 Total Revenue 18,326,746 19,126,820 19,447,365 19,829,592 20,238,071 20,775,531 Coverage Realized 1.50 1.08 0.98 0.68 0.54 0.33 COVERAGE SURPLUS (DEFICIENCY) 477,524 (411,369) (632,116) (1,348,965) (1,959,254) (2,535,900) City of Centralia Electric Utility Rate Study Revenue Requirements Analysis Maximum Revenue Deficiency Sufficiency Test Driving the Deficiency Maximum Deficiency From Tests less: Net Revenue From Prior Rate Increases Revenue Deficiency Pius: Adjustment for State Excise Tax Total Revenue Deficiency Rate Increases Rate Revenue with no Increase Revenues from Prior Rate Increases O.oin.. ,D...: D...f.cro Rot: o ",.c.r.......... n...J ....d..,,.- f.....,,.......q Required Annual Rate Increase Number of Months New Rates Will Be In Effect Info: Percentage increase to Generate Required Revenue Policy Induced Rate increases ANNUAL RATE INCREASE CUMULATIVE RATE INCREASE Impacts of Rate Increases Rate Revenues After Rate Increase Full Year Rate Revenues After Rate Increase Additional State Taxes Due lo Rale Increases Net Cash Flow After Rate Increase Coverage After Rate Increase 17,568,746 18,370,695 18,616,366 1,023,901 17,583,740 18 305 3,5.31207 0.00% 4.77% 3.00% 2009 2010 2011 2012 2013 2014 None Cash Cash Cash Cash Cash 2009 2010 2011 790,279 1,464,575 2,552,773 3,258,754 5 4,075,099 (922.811) (1,935.611) (3,047.639) (3.742.143) 790,279 541,784 617,162 211,115 332,956 $8.571 `@ate 6 I.QQZ 23 x6.473 876,850 S 601,111 684,769 234,241 369,430 0.00% 5.50% 347,301 (334,963) 1.50 1.27 5.50% 2012 5.50% (54,951) (92,982) 1.58 1.72 2013 2009 2010 2011 2012 2013 2014 19,001,532 19,406,951 19,821,955 2,147,648 3,381,494 4,152,077 21,143,10+1 22,703,443 23,074,033 3.24% 1.03% 1.54% 3.00% 3.00% 0.00% 5.50% 11.30% 17.42% 20.95% 24.58% 5,073,028 1,466,996 5 1,334,664 4,274,218 1,857,111 2014 5 17,506,746 18,875,889 20,180,395 21,730,783 23,472,098 24,693,254 17,568,746 19,381,084 20,720,503 22,312,306 23,472,098 24,693,254 49,878 154,415 209,459 401,352 480,943 405,041 315.258 1.87 1.92 City of Centralia Electric Utility Rate Study Fund Activity Funds DPERATING FUND Beginning Balance plus: Net Cash Flow after Rate Increase less: Transfer of Surplus to Capital Fund Ending Balance Minimum Target Balance Maximum Funds to be Kept as Operating Reserves Info: No of Days of Cash Operating Expenses :APITAL FUND Beginning Balance plus: Rate Funded Depreciation plus: Grants Developer Donations Other Outside Sources plus: Existing PWTF Bond Proceeds plus: Capital Contributions plus: Net Debt Proceeds Available for Projects plus: Interest Earnings plus: Transfer of Surplus from Operating Fund plus: Direct Rate Funding Total Capital Funding Sources less: Capital Expenditures Ending Balance Minimum Target Balance DEBT RESERVE Beginning Balance plus: Reserve Funding from New Debt less: Use of Reserves for Debt Service Ending Balance Minimum Target Balance 2009 2;488 ;2 60 347,301 (638.5811 2,1 94,979 2,194, 979 2,194, 979 90 832;'139 f 915,685 1,052,000 2,146,730 ?81`698=' (334,963) 2,281,011 2,281,011 85 5,500,000 38,861 16,643 638,581 3,455,049 9,731,459 (4.658.431) 3,455,049 5,073,028 1,283,138 1,376,306 04;854 2010 2011 µr2a033174= 487,793 2,146,730 2,091,750 (54,981) (92,982) 2,091,750 2,355, 550 2,355, 550 80 (;943054 5,073,028 1,466,996 1,334,664 4,274,218 1,860,544 1,320,000 1,750,000 1,950,000 2,100,000 389,000 284,200 662,000 313,000 240,000 101,461 2012 1,998,768 2,436,849 2,436,849 74 44,010 2013 1,998,768 405,041 2,403,809 2,520,446 2,520,446 86 6,778,689 3,923,006 8,137,704 (5.311.693) (2.588.342) _13.863.4861 1,466,996 1,334,664 4,274,218 1,482,540 1,534,307 1,611,577 2,520,966 2,520,966 2,520,966 399,103 2014 2,403,809 315,256 (111,502) 2,607,564 2,607,564 2,607,564 90 4,500,000 40,040 128,227 111,502 6,853,946 (4.996.835) 1,857,111 1,711,514 2,920,070 2,004,854 2,520,966 2,520,966 2,520,966 2,920,070 2,920,070 1,877,173 2,363,781 2,363,781 2,363,781 2,762,884 2,762,884 City of Centralia Electric Utility Rate Study Fund Activity Funds SYSTEM REPLACEMENT RESERVE Beginning Balance plus: Reserve Funding plus: Interest Earnings less: Use of Reserves for Systme Replacement Ending Balance Minimum Annual Transfer Target EQUIPMENT RESERVE COMBINED Beginning Balance plus: Reserve Funding Yelm plus: Reserve Funding Centralia plus: Interest Earnings less: Use of Reserves Ending Balance 1,434,642 1,551,103 907,819 64,710 79,170 25,000 (57.000) 1,019,699 2009 2010 2011 309,969 $t'g �2298,t 599,517 930,000 1,320,000 6,199 18,246 915,685) •i ('t'. 86D 5 }J (1,320,000) 1 042(6061 1,025,458 60,000 61,993 91,000 94,023 20,852 20,509 (189.0001 1,025,458 2012 1,750,000 (1,750,0001 1,683,895 1,748,604 1,117,783 64,052 97,146 33,533 (64.200) (462.0001 1,117,783 850,515 2013 1,950,000 (1,950,000) 1,845,191 850,515 66,180 100,373 25,515 (113.0001 929,584 2014 2,100,000 (2,100,000) 1,939,068 929,584 68,378 103,707 27,888 (40.0001 1,089,557 Hy of Centralia lectric Utility Rate Study nalysTs of Projected Load Data tenth Jan -10 Feb -10 Mar -10 Apr -10 May -10 Jun -10 Jul -10 Aug -10 Sop-10 Oct -10 Nov -10 Dec -10 Total lours in the Month 744 672 744 720 744 720 744 744 720 744 720 744 esidenlial Kwh Sales at the Meter 16,055,235 15,874,074 12,587,482 12,746,804 9,926,205 7,170,261 6,450.493 5,702,833 6,322,696 7,284,748 9,926.971 12,738,697 122,796,499 Load Factor 22.15 23 01 16.22 18.67 14.70 12.14 11.66 11.00 12.08 13.90 15 39 17.85 Indio. Noncalncident Peak(NCPi(Kw) 97,491 102,641 92,851 94,622 90,733 82,042 74,354 69,696 72,605 70,466 89.589 96,996 102,641 Group Coincidence Factor 0.70 0.55 0.64 0.60 0.60 0.55 0.54 0.50 0.55 0.64 0.65 0.69 NCP at the Meter for the Group (Kw) 68,244 65,717 59,425 56,893 54,440 45,123 49,151 41,820 40,043 45,098 511,233 66,927 65,244 NCP at Primary (Kw) 3.45% 70,599 55,019 61,476 56,857 58,319 46,680 41,537 43,263 41,425 45,655 60,243 69,237 70,599 NGP at Input (Kw) 1.73% 71,817 70210 62,536 59,872 57,291 47,486 42,254 44,009 42,140 47,450 61,282 70,431 71,817 System Coincidence Factor 0,65 0.60 0.63 0.60 0.55 0.50 0.53 0.55 0.55 0.63 0.60 0.69 Coincident Peak (CP) at Input (Kw) 48,681 42,126 39,396 35,923 31,510 23,743 22,394 24,205 23,177 29,900 36,769 45,598 48,598 BPA Generation Coincidence Factor 0.600 0.931 0.955 0.975 0.647 0.670 0.787 0.560 0 687 0.941 0.730 U.879 Contnbutlon to SPA Generation Peak 37,345 39,219 37,664 35,061 20,387 15,908 17,624 20,616 20,558 28,136 26,842 42,717 342,278 SPA Iransmission Coincidence Factor 0.800 0.773 0.798 0.976 0.561 0.818 0.970 0.860 0756 0.693 0.745 1.000 Contribution to BPA Transmission Peak 37,345 32,553 31,440 35,081 17,677 19,422 21,723 20,818 17,522 20,721 27,393 48,598 Kwh at Input Voltage 16,942,250 16,740,683 13,274,667 13,442,687 10,468,104 7,561,706 6,802,643 6,014,166 6,667,869 7,682,442 10,468,912 13,434,137 129,5011,296 tenure' Service (<50KW) Kwh Sates at the Meter 3,579,421 3,532,610 3,123,240 3,270,015 2,695,409 2,431,006 2,447,134 2,291,713 2,470,411 2,449,398 2,808,201 3,066,280 34,264,839 Load Factor 36.39 38.35 32.43 34.58 28.87 27.95 28.25 27.74 29.39 23.96 29.17 29.55 Indiv. Noncolncident Peak(NCP)(Kw) 13,221 14,097 12,944 13,133 12,559 12,079 11,640 11,104 11,574 13,738 13,370 13,947 14,1397 Group Coincidence Factor 0.70 0.70 0.55 0.60 0.57 0.50 0.60 0.70 0.65 0.72 0 65 0.65 NCP at the Meter for the Group (Kw) 9,255 9,858 7,119 7,560 7,153 6,040 6,954 7,773 7,588 9,892 6,690 9,066 9,892 NCP at Primary (Kw) 3.45% 9,574 10,209 7,365 8,152 7,400 6,248 7,225 8,041 7,850 10,233 8,990 9,375 10,233 NCP at Input (Kw) 1.73% 9,740 10,385 7,492 8,292 7,528 6,356 7,350 8,180 7,986 10,410 9,145 0,540 10,410 System Coincidence Factor 0.75 0.55 0.50 D.60 0.57 0.50 0 80 0.65 0.60 0.72 0.65 0.05 Coincident Peak (CP) at input (Kw) 7,305 8,827 3,746 4,975 4,291 3,178 4,410 5,317 4,791 7,495 5,945 5,201 8,827 BPA Generation Coincidence Factor 0.800 0 931 0.956 0,976 13,647 0.670 0.787 0.860 0.587 0.941 0.730 11.579 Contribution to BPA Generation Peak 5,844 8,218 3,551 4,856 2,776 2,129 3.471 4,573 4,250 7,053 4,340 5,451 56,541 BPA l rarrsmission Coincidence Factor 0.800 0 773 0.798 0.976 0.561 0.818 0.970 0 860 0.756 0.693 0.745 1.009 Contribution to BPA l ransmission Peak 5,844 6,823 2,989 4,856 2,407 2.600 4.278 4,573 3,622 5.194 4.429 0,201 Kwh at Input Voltage 3,774,832 3,630,924 3,293,746 3,448,537 2,642,559 2,563,721 2,560,729 2,416,824 2.605,278 2,583,117 2,961,508 3,233,676 36,135,450 leneral Service >50 200 KW) Kwh Sales at the Meter 3,125,672 3,257,037 3,044,954 3,482,267 2,633.555 2,882,813 2,866,507 3,215,280 3,112,150 3.194.412 3,059,814 3,008,843 37,103,616 Load Factor 45.05 49.52 41.82 48.08 39.09 43.16 40,54 48.01 43.32 39.50 43.29 41.22 Indty. Noncolncident Peak(NC'P)(Kw) 9.326 9,787 9,786 10,058 9,743 9,277 9,571 9,001 9,978 10,789 9,817 9,811 10,789 Group Coincidence Factor 0.65 0.63 0.52 0.68 0.68 0.69 0.60 0.70 U 65 0.50 0.56 0.70 NCP at the Meter tor the Group (Kw) 6,062 6,166 6,066 6,540 6,625 6,401 5,743 8,301 5,485 6,473 5,491i 6,868 5,656 NCP at Primary (Kw) 3,45% 6,271 6,379 6,278 7,075 5,854 6,622 5,941 6.518 6,710 5,697 5,667 7,105 7,105 NIP at input (Kw) 1.73% 6,350 6,489 6,386 7,198 5,972 6,736 6,043 6,031 6,825 5,812 5,755 7,227 7,227 System Coincidence Factor 0.60 0.57 0.57 0.67 0.53 0.84 0.55 0.65 0.60 0.57 0.51 0.55 Coincident Peak (CP) at Input (Kw) 3,825 3,599 3.640 4,823 3,695 4,311 3,324 4,310 4,095 3,883 2,951 3,975 4,623 SPA Generation Coincidence Factor 0.800 0 931 0.955 0.976 0.647 0.670 0.787 0.860 0.667 0.941 0.730 0.879 Contribution to BPA Generation Peak 3,062 3,443 3.480 4,707 2,391 2,859 2,616 3,707 3,532 3,654 2,154 3,494 39.228 SPA lransmtssion Coincidence Factor 0.800 0.773 0.795 0.975 0,581 0.816 0.970 0.860 0.755 U.693 0,745 1.000 Contribution to BPA transmission Peak 3,062 2,859 2,905 4.707 2.073 3,527 3,224 3,707 3,096 2,691 2.198 3,975 Kwh at Input Voltage 3,295,311 3,434,848 3,211,187 3,672,373 2,988,247 3,040,194 3,044,406 3,390,811 3,252,061 3,358,804 3,226,856 3,173,104 39,129,204 lenoral Service (201+ KW) Kwh Sales at the Meter 6,325,182 8,130,249 6,708,798 7,501,360 8,543,935 5,828,891 5,964,457 0,471,471 7.054,343 7,029,764 8,920,552 6.530,294 82,099,396 Load Factor 46.37 61.46 52.40 58.50 49.04 55.03 45,66 52.89 56.29 54.05 52.27 45,05 Indrv. Noncotncident Peak(NCP)(Kw) 15,335 19,684 17,438 17,811 17,937 17,234 17,556 16,445 18,810 17,481 18,387 19,484 19,684 Group Coincidence Factor 0.65 0.63 0.62 0.58 0.68 0.59 0.60 0.70 0.65 0.60 0.56 0.70 NCP at the Meter for the Group (Kw) 11,915 12,401 10,811 12,111 12,197 11,892 10,534 11,512 10,926 10,489 10,297 13,639 13,639 NIP at Primary (Kw) 3.45% 12,329 12,829 11,185 12,529 12,618 12,302 10.597 11,909 11,303 10,651 10,652 14,110 14.110 NEW at Input (Kw) 1.73% 12,542 13,050 11,378 12,745 12,836 12,514 11,085 12,115 11,498 11,035 10,836 14,353 14,353 System Coincidence Factor 0,60 0.57 0.57 0,57 0.53 0.64 0.55 0.65 0.60 0.57 0,51 0.55 Coincident Peak (CP) at Input (Kw) 7,525 7,439 6,485 5,539 6,503 8,1319 6,097 7,674 6,599 6,292 5,526 7,894 8,539 SPA Generation Coincidence Factor 0.800 0.931 0.956 0.976 0.647 0.670 0.787 0.860 0.887 0.641 0.730 0.879 Contribution to BPA Generation Peak 5,020 6,926 6,200 5,334 4,402 5,366 4,795 6,772 6,119 5,920 4,034 6,939 71,831 BPA transmission Coincidence Factor 0.800 0.773 0.798 0.976 0.581 0,818 0.970 0.660 0,756 0.693 0.745 1.000 Contribution to BPA 1rensmission Peak 8,020 5,750 5,175 8,334 3,817 6,551 5,914 6,772 5,216 4,360 4,117 7,894 Kwh at Input Voltage 6,670,491 8,574,102 7.169,983 7,910,879 6,901,186 7,201,699 6,290,084 6,824,766 7,439,459 7,413,535 7,298,384 6,886,801 86,551,332 iecurity/Yard Lighting Kwh Sales al the Meter 96,157 96,157 95,106 95,157 95,208 95,205 95,208 95,208 95,208 95,208 95,208 95,208 1,144,241 Load Factor 50 110 50.00 50.09 39.00 55.00 30,00 50.00 50.00 50.00 50.00 50.00 50.00 !rider. Noncoincidenl Peak(NCP)(Kw) 258 266 256 339 233 441 256 256 264 256 264 258 441 Group Coincidence Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1,00 1.00 1.00 1.00 1.00 NCP at the Meter for the Group (Kw) 258 280 256 339 233 441 256 256 264 256 284 256 441 NCP at Primary (Kw) 3.45% 267 296 254 351 241 456 265 265 274 265 274 265 456 NIP at Input (Kw) 1.73% 272 301 269 357 245 464 269 269 278 269 278 269 464 System Coincidence Factor 1.00 1.00 1.00 0.00 0.00 0.00 0.00 0.00 0.09 1.09 1.00 1.00 Coincident Peak (CP) at Input (Kw) 272 301 269 0 0 0 0 0 0 269 278 269 301 SPA Generation Coincidence Factor 0.800 0.931 0.956 0.976 0.647 0.670 0.787 0.560 0.557 0.941 0.730 0.879 Contribution to BPA Generation Peak 218 280 257 0 0 0 0 0 0 253 203 237 1.449 6PAIranomisslon Coincidence Factor 0,800 0.773 0.796 0.976 0.551 0.818 0.970 0.860 0.756 0.693 0.745 1.900 Conlnbution to BPA Transmission Peak 218 233 215 0 0 0 0 0 0 107 207 269 Kwh at input Voltage 101,406 101,406 100,298 100,352 100,406 100,406 100.406 109,405 100,406 100,408 100,400 100,406 1,206,705 City of Centralia Electric Utility Rale Study Summary of Projected Usage System Kwh Q Input Voltage HLH Residential General Service (e-50KW) General Service >50 200 KW) General Service (201+ KW) Security/Yard Lighting Total System Kwh input Voltage LLH Residential General Service (c5DKW) General Service (>50 -200 KW) General Service (201+ KW) Security/Yard Lighting Total Total kWh's Q Input Voltage Heavy Load Hour Breakout Light Load Hour Breakout Heavy Load Hour Energy Light Load Hour Energy Total Allocated Energy System CP Q Input Voltage Residential General Service (<501(W) General Service >50 -200 KW) General Service (201+ KW) Security/Yard Lighting Total Total System CP Input Voltage Jan -10 Peak Capacity Subject to Delivery Charge 100% Feb -1D Mar -10 Aor -10 May -10 Jun -10 Jul -10 Aug 10 Seo -10 Oct -10 Nov -10 Dec -10 Total 10,651,734 10,739,513 8,438,471 8,808,432 6,978,313 5,069,027 4,604,313 3,950,431 4,455,517 5,141,105 6.432,617 8,355,503 63,633.977 2,375,492 2,457,621 2,093,776 2,259,682 1,894,924 1,718,264 1,745,746 1,587,501 1,740,865 1,728.627 1,619,697 2,011,219 23,434,415 2,074,360 2,203,530 2,041,295 2,406,353 1,992,044 2,037,507 2,060,581 2,227,269 2,193,095 2.254,410 1,962,741 1,973,546 25,446,632 4,197,723 5,500,473 4,557,819 5,183,669 4,600,612 4,826,743 4,257,392 4,482,877 4,971,099 4,961.154 4,464,475 4 283 318 56,307,254 63.516 65.054 53,750 65,756 66,933 67,294 67,959 65.052 67.092 67.192 61.694 62.448 784.947 19,373,124 20,966,192 17,195,119 18,723,892 15,532,726 13,717,935 12,736,991 12,314,029 13,427,670 14,152,488 14,781,224 16,686,034 189,507,424 6,280.546 6,001,170 4,836,196 4,634,256 3.489.791 2,403,678 2,198,330 2,053,735 2,212,351 2.541,337 4,036,295 5,076,635 45,856,320 1,399,340 1,373,303 1,199,970 1,188,855 947,634 645,457 833,984 829,323 864,413 654,490 1,141,811 1,222,457 12,701,036 1,221,951 1,231,318 1,169,892 1,266,020 996,203 1,002,587 953,625 1,163,542 1,058,964 1,114,394 1,244,117 1,199,559 13,682,372 2,472,766 3,073,620 2,612,144 2,727,210 2,300,674 2,374,956 2,032,692 2,341,690 2,468,360 2,452,384 2,813,689 2,603,463 30,274,078 37,592 36,352 36,540 34,595 33.473 33,112 32A47 344,454 33,314 33.214 38.711 37.957 421,761 11,412,196 11,715,771 9,854,742 9,850,937 7,767,775 6,749,789 6,081,277 6,432,944 6,567,402 6,995,619 9,274,624 10,142,091 102,945,566 30,795,320 32,681,983 27,049,862 28,574,629 23,300,502 20,467,724 18,818,267 18,746,973 20,095,072 21,148,306 24,056,047 26,628,125 292,552,991 67 -n ;65 88.89b' .88 61.4% 2 8.2% 7.96 .796 di sa:.37d 96- 64,29(1:,..,. 82.996..,. 6 35.896x: 38.4 ,ta ;73 ,4:596 eo« :33 396` +`:j•x. 3 X32356; t: Y- _343g6ir_ 33246'•.:..,'. "-133_196 38.696._.._1 .37.696 19,373,124 20,966,192 17.195,119 18,723,892 15,532,726 13.717,935 12,736,991 12,314,029 13,427,670 14,152,488 14,781,224 16,656,034 189,607,424 11,412,196 11.715.771 9,654.742 9,850,937 7,767,775 6,749,789 6,081,277 5.432.944 6.667.402 6.995.819 9274,824 10.142.091 102.945.556 30,785,320 32,681,963 27,049,662 26,574,829 23,300,502 20,467,724 18,018,267 18,746,973 20,095,072 21,146,306 24,056,047 26,826,125 292,552,991 46,681 42,126 39,398 35,923 31,510 23,743 22,394 24,205 23,177 29,900 36,769 48,598 404,424 7,305 8,627 3,746 4,975 4,291 3,178 4,410 5,317 4,791 7,495 5,945 6,201 66,491 3,828 3,699 3,640 4,623 3.695 4,311 3,324 4,310 4,095 3,883 2,951 3,975 46,533 7,525 7,439 5,485 8,539 5,803 8,009 6,097 7,674 6,899 6,292 5,526 7,894 55,383 272 301 259 0 0 0 0 0 0 269 278 269 1.659 65,611 62,392 53,538 54,261 46,299 39,241 36,225 41,707 38,962 47,839 51,469 66,937 604,481 69,611 62,392 53,538 54,201 46,299 39,241 38,225 41,707 38,962 47,639 51,469 66,937 604,481 EPA Peak Demand Generation Residential 37,345 39,219 37,664 35,061 20,387 15,908 17,624 20,816 20,550 28,136 26,842 42,717 342,278 General Service (<50KW) 5,844 8,218 3,581 4,855 2,776 2,129 3,471 4,573 4,250 7,053 4,340 5,451 56,541 General Service >50 200 KW) 3,062 3,443 3,480 4,707 2,391 2,889 2,616 3,707 3,632 3,654 2,154 3,494 39,228 General Service (201+ KW) 6,020 6,926 6,200 8,334 4,402 5,356 4,796 6,772 8,119 5,920 4,034 6,939 71,831 Secunty/Yard Lighting 218 280 257 0 0 0 0 0 0 253 203 237 1.449 Total 52,489 58,087 51,183 52,959 29,955 26,292 28,509 35,668 34,560 45,016 37,572 56,638 511,326 BPA Peak Demand Transmission Residential 37,345 32,563 31,440 35,061 17,677 19,422 21,723 20,816 17,522 20,721 27,393 48,568 330,250 General Service (<50KW) 6,844 6,823 2,969 4,856 2,407 2,600 4,278 4,573 3.622 5,194 4,429 6,201 53,816 Genaral Service >50 200 KW) 3,062 2,859 2,905 4,707 2,073 3,527 3,224 3,707 3,096 2,691 2,198 3,975 38,023 General Service (201+ KW) 5,020 5,750 5.175 8,334 3,817 6,551 5,914 6,772 5.216 4,360 4,117 7,894 69,921 Security/Yard Lighting 218 233 215 0 0 0 0 0 0 187 207 269 1.328 Total 52,489 48,229 42,724 52,959 25,974 32,099 35,130 35,868 29,456 33,152 38,345 66,937 493,366 Noncoincident Peak (kW) Input Voltage Residential 71,817 70,210 62,536 59,872 57,291 47,486 42,254 44,009 42,140 47,460 61,282 70,431 678,769 General Service (e50KW) 9,740 10,385 7,492 8,292 7,528 6,356 7,350 5,180 7,986 10,410 9,145 9,540 102,404 General Service >50 200 KW) 6,380 6,489 6,366 7,196 6,972 6,736 6,043 6,631 6,825 6,012 5,785 7,227 79,485 General Service (201+ KW) 12,542 13,050 11,378 12,745 12,835 12,514 1 1,065 12.115 11,496 11,038 10,838 14,353 145,991 Security/Yard Lighting 272 301 269 357 245 464 269 269 276 269 278 269 3.542 Total 100,750 100,435 06,061 88,465 84,871 73,556 67,001 71,204 68,727 75,989 87,327 101,621 1,008,210 Total NCP Input Voltage 100,750 100,439 81,081 08,465 84,871 73,556 67,001 71,204 68,727 75,989 87,327 101,821 1,000,210 City of Centralia Electric Utility Rate Study Revenue Jan -10 Feb -10 Mar -10 Apr -10 May -10 Jun -10 Jul -10 Aug -10 Sop -10 Oc1 -10 Nov -10 Dec -10 Total Residential Growth Customers In5ide 1.00% 6,960 6.959 6,923 6,909 6,952 6,940 6,980 6,926 6,932 6,974 6.055 6,906 6.935 Customer Charge f Month 59.68 59.68 59 68 $9.68 59.68 59.66 59 68 59.68 59.68 59 68 59.68 39.68 Total Residential Customer Revenues $67,374 $67,364 $67,019 556,860 $67,295 $67,177 $67,562 $67,048 567,098 $67,512 $66,357 566.651 5805,538 Customers Outside 1.00% 1,509 1,496 1,503 1,494 1,494 1.492 1404 1.501 1,500 1,522 1,512 1,524 1,504 Customer Charge! Month 510.64 510.64 510 64 $10.64 $10.64 $10.64 $10.64 510.64 510,64 $1D.64 $10.64 $10 64 I Total Residential Customer Revenues $16,053 515.923 515,988 515,901 515,901 315,079 515,999 $15,966 $15,955 316,194 516,085 316.216 3192.059 Projected Retail Sales Kwhs 16,065,236 15,674,074 12,587,482 12,746,804 9,926,205 7,170,261 6,450,493 5,702,833 6,322,696 7,284,748 9,926,971 12,738,697 122,796,499 Inside 12,209,579 12,064,296 9,692,361 9,815,039 7,643,178 5,521,101 4,837,869 4,334,153 4.868,476 5,536,408 7,445,228 9,554,023 93,521,712 Outside 3,855,656 3,809,778 2,895,121 2,931,765 2,283,027 1.649,160 1,612,623 1,368,680 1.454,220 1,748,339 2,481,743 3,184,674 29,274,787 Energy Charge All Kwh Inside 50.0573 50.0573 50.0573 $0.0573 30.0573 SO 0573 50.0573 50,0573 SO 0573 SO 0573 50.0573 50.0573 Outside 50.0634 50.0634 50 0634 50.0634 50.0634 50.0534 50,0534 50.0634 S0 0634 50.0634 50 0634 50.0634 Total Residential Energy Revenues $944,057 $932,824 5738.923 5748,276 5582,698 $420,916 $379,450 $335,121 $371,161 $428,061 $583,954 $749,354 $7,214,816 Total Residential Rate Revenues $1,027,485 $1,016,111 5821,929 $831,057 $665,094 $503,972 $463,011 5418,136 $454,214 $511,787 5686,397 5832,420 I $8,212,412 General Service (450KW) Single Phase Customers Inside 0.50% 1,043 1,042 1,037 1,030 1,032 1,028 1,039 1,033 1,031 1,036 1,035 1.031 1.035 Three Phase Customers- Inside 0.50% 148 146 141 140 139 144 146 138 140 140 143 144 143 Total Inside Customers 1,192 1,189 1,179 1,171 1,172 1,173 1,186 1,172 1.172 1.177 1,179 1,176 1,178 Single Phase Charge Month $20.67 520.67 520 67 520.67 $20.67 $20.57 520 67 $20 67 520 67 $20.67 $20,67 $20.67 'Three Phase Charge Month $30 51 $30.51 $30.51 530.51 $30.51 $30.51 $30.51 $30.51 530 51 $30.51 530 51 530.51 Total Customer Charge Revenues 526,095 326,014 525,755 525,578 525,509 $25,660 $25,951 $25,579 325.599 $25,703 $25,775 $25,722 $309,022 Single Phase Customers -Outside 0.50% 240 238 239 239 238 237 235 236 232 236 234 233 237 Three Phase Customers -Outside 0.50% 19 19 19 19 19 19 19 19 19 19 19 19 19 Total Outside Customers 260 258 259 259 258 257 255 256 251 256 254 253 256 Single Phase Charge Month 520.67 520.67 520 67 520.67 $20.67 520.67 $20 67 520.67 520.67 520.67 320.67 $20 67 Three Phase Charge! Month 530,51 530.51 530 51 530.51 530.51 530.51 530.51 530.51 530.51 530.51 530.51 530.51 Total Customer Charge Revenues .55,554 35,513 55,533 35,533 $5,513 $5,492 $5,450 55,471 55,387 $5,471 $5,429 $5,408 $65,754 Projected Retail Sales Kwhs 3,579,421 3,632,610 3,123,240 3,270,018 2,695,409 2,431,006 2,447,134 2.291,713 2.470,411 2,449,398 2,808,201 3,066,280 34,264,839 Energy Charge -All Kwh 60.0643 50.0643 50 0643 50.0543 $0 0643 50.0643 50.0643 50 0643 50 0643 50.0543 60.0643 50.0643 Total Energy Revenues $230,157 $233,577 $200,824 $210,262 5173,315 5156,314 5157,351 $147,357 $156,847 $157,496 $180,567 $197,162 $2,203,229 Total GS <SOKW) Rate Revenues $251,897 $265,103 $232,113 $241,374 $204,416 $187,465 5188,752 $178,407 $189,834 $188,670 $211,771 5226,292 I $2,578,004 General Service >50 200 KW) Three Phase 1.30% 151 150 153 155 154 155 158 158 159 162 161 161 156 City of Centralia Electric Utility Rate Study Revenue Three Phase Charge! Month 351 37 551 37 551.37 551.37 351 37 551.37 551.37 551.37 351.37 551.37 551.37 $51.37 Total Customer Charge Revenues 57,750 57,697 57,855 $7,960 57,908 57,960 $8,119 $8,119 $8,171 58,329 58,277 58.277 $96,421 Projected Total Demand KW's 9,326 9,787 9,788 10,058 9,743 9,277 9,571 9,001 9.978 10,789 9,817 9,811 116,947 Billed Demand Calculated 9,326 9,787 9,788 10,058 9,743 9,277 9,571 9.001 9.978 10,789 9,817 9,611 116,947 Demand Charge $4.17 $4.17 54.17 54.17 54.17 $4.17 $4.17 54.17 $4.17 54.17 34.17 54.17 Total Demand Charge Revenues 538,891 340,812 540,814 $41,943 540.628 536,685 539, 911 $37,536 $41.608 544.990 540,938 $40,911 5487.867 Energy Sales Kwhs 3,125,672 3,257,037 3,044,954 3,482,267 2,833.556 2,882,813 2,886,807 3,215,280 3,112,160 3,194,412 3,059,814 3.008,843 37,103,616 Energy Charge -A11 Kwh $0 0507 $0 0507 30.0507 30.0507 $0 0507 50.0507 50.0507 50.0507 50.0507 50.0507 SO 0507 30.0507 Total Energy Charge Revenue 6158.472 5165,132 5154,379 $176,551 $143,661 $146,159 $146,361 $163,015 $157,786 6161.957 $155.133 5152,548 51,881,153 Total GS (a50 -200 KW) Rale Revenues $205,112 $213,640 $203,048 $226,455 $192,197 $192,604 5194,391 5206.669 $207,566 $215,276 $204,347 $201,737 I $2,465,242 General Service (201+ KW) Three Phase 1.30% 12 12 13 13 13 13 13 13 13 13 13 13 13 Three Phase Charge l Month $51.37 551.37 $51.37 551.37 551.37 551.37 551.37 551.37 $51.37 351.37 551.37 551.37 I Total Customer Charge Revenues 5633 5633 6685 6685 5685 $695 $685 $685 $685 $685 $685 $685 $8,119 Projected Total Demand -KW's 18,335 19,684 17,436 17,811 17,937 17,234 17,556 16,445 16,810 17,481 18,387 19,484 214,603 Billed Demand Calculated 18,335 19,684 17,438 17,811 17,937 17,234 17,556 16,445 16,610 17,481 18,367 19,484 214,603 Demand Charge 54.17 54.17 54.17 54.17 $4.17 $4.17 $4.17 54.17 54.17 $4.17 $4.17 $4.17 Total Demand Charge Revenues 576, 456 $82,084 $72,715 574,270 574,798 571,866 573,208 568,577 570.096 $72,896 $76,675 581,249 5894,894 Energy Sales Kwhs 6,325,182 6,130,249 6,798,798 7,501,360 6,543,935 6,828,891 5,964,467 6,471,471 7,054.343 7,029,764 6,920,552 6,530,294 62,099,306 Energy Charge All Kwh $0 0507 56 0507 50.0507 50 0507 50 0507 50.0507 50.0507 $0 0507 30.0507 50.0507 50.0507 50.0507 Total Energy Charge Revenue 6320,687 6412,204 6344,699 $380,319 $331,777 5348,225 $302,398 5326,104 $357,655 $356,409 $350,872 $331,086 $4,162,435 Total G5 (201 +1(W) Rate Revenues 397, 778 $494,920 $418,100 $455,275 $407,201 5418,777 $376,292 5397,366 $428,437 $429,990 $428,233 $413,020 $5,065,447 City of Centralia Electric Utility Rate Study Revenue Street/Yard Lighting 150 W Customers 0.00% 648 648 648 648 648 648 648 648 648 648 648 648 648 Monthly Charge 52.18 52.18 $2.18 $2.18 52.18 52.18 52.18 52.18 52.18 52.18 52.18 52.18 Total 150 W Revenue 51,413 51.413 51.413 51,413 51.413 51.413 51,413 51,413 51,413 51,413 51,413 51,413 516,952 200 W Customers 0.00% 514 514 514 514 514 514 514 514 514 514 514 514 514 Monthly Charge $2.88 52.88 52.88 52.86 52.88 52.88 52.88 $2.88 $2.88 S2 BB 52.88 52.83 Total 200 W Revenue 51,480 51,480 51,480 51.480 61,480 61,480 61,480 61,480 $1,480 51,480 51,480 $1,480 $17,764 250 W Customers 0.00% 101 101 101 101 101 101 101 101 101 101 101 101 101 Monthly Charge 53.61 53 61 53.61 $3.61 $3.61 53.61 53 61 53 61 53 61 53.61 53.61 $3.61 Total 200 W Revenue 5365 $365 5365 5365 $355 $365 5365 $365 5365 5365 5365 $365 $4,375 400 W Customers 0.00% 134 134 134 134 134 134 134 134 134 134 134 134 134 Monthly Charge 55.77 55.77 55.77 $5.77 55.77 $5.77 55 77 55.77 $5.77 $5.77 55.77 55.77 Total 200 W Revenue $773 $773 $773 $773 $773 $773 $773 $773 $773 5773 $773 $773 $9,278 1000 W Customers 0.00% 2 2 2 2 2 2 2 2 2 2 2 2 2 Monthly Charge 514.44 514 44 514.44 $14.44 514.44 514.44 614.44 $14 44 514 44 514 44 514 44 514.44 Total 200 W Revenue $29 $29 S29 $29 529 $29 529 $29 $29 $29 $29 $29 $347 Traffic Light Customers 0.00% 1 1 1 1 1 1 1 1 1 1 1 1 1 Monthly Charge MGT Pays) $72.82 57212 572.82 572 82 $72.82 572.82 572.82 572.82 572.82 572.82 572 82 572.82 Total Traffic Light Revenue $73 573 573 573 573 $73 573 573 $73 573 573 $73 $874 Total Street Lights $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 $4,132 I $49,589 SUMMARY OF REVENUE PRESENT RATES Jan -10 Feb -10 Mar -10 Apr -10 May -10 Jun-10 Jul -10 Aug -10 Sep -10 Oct -10 Nov -10 Doc -101 Total ResIdential 51.027,485 51,016,111 5821,929 $831,057 $665,894 5503 ,972 5463,011 5418,136 $454,214 $511,787 5666,397 5832,420 58,212,412 General Service (c50KW) 261,807 265,103 232,113 241,374 204,416 187,465 188,752 178,407 189.634 188,670 211.771 228,292 2.578,004 General Service >50 -200 KW) 205,112 213,640 203,048 226,455 192,197 192,804 194,391 208,669 207,566 215,276 204,347 201,737 2,465,242 General Service 1201+ KW) 397,778 494,920 418,100 455,275 407,261 418,777 376,292 397,366 428,437 429,990 428,233 413,020 5,065.447 StreellYard Lighting 4,132 4,132 4.132 4,132 4,132 4,132 4,132 4,132 4,132 4,132 4,132 4.132 49,589 Total $1,896,314 $1,993,907 $1,679,323 $1,758,292 $1,473,901 51,307,150 51,226,577 51,208,710 51,284,183 $1,349,856 $1,514,880 $1,679,602 I $18,370,695 City of Centralia Electric Utility Development of 2010 Purchased Power NT -04 NT -04 ACS -04 ACS -04 ACS-04 ACS -04 ACS -04 ACS -04 ACS -04 GRSP -04 GRSP -04 Power Rates f t HLH Energy ($!kWh) LLH Energy ($ikWh) Load Variance (5/kWh) C &R Discount (5 /kWh) Demand (51kW) Transmission Rates Base Charge (51kW) Load Shaping (5/kW) Ancillary Service Rates SCD NT Long Term Firm (5/kW) GSR NT Long Term Firm (5/KW) Regulation Frequency (5/kWh) Spinning Reserve (5/kWh) Supplemental Reserve (5/kWh) CA Spinning Reserve (5 /kWh) CA Supplemental Reserve (5 /kWh) PFP Lagging /kVAr) PFP Lagging Ratchet (5/kVAr) Total Loads Power Bill Reported kWh Transmission Bill Reported kWh Transmission Bill Reported Yeim Yelm Hydro C&R Discount LB CRAC True UP BPA Purchases Total Energy HLH Energy LLH Energy Total Generation Demand Total Transmission Demand dol Total Transmission Base Charge kW Load Shaping Charge kW Reg Freq Response kWh Spin /Supp Reserves kWh CA Spin /Supp Reserve Req'mt -kWh PFP Lagging kVAr PFP Lagging Ratchet- kVAr Jan -10 Feb -10 Mar -10 Apr -10 May -10 Jun -10 Jul -10 Auq -10 Sep-10 Oct -10 Nov -10 Dec -10 Total ",$0.02998 $0.03031 40: 02812, 50,02839,,' $Q.92294 ,$0.01895:; "$0.02457 50,02878' '50.02970' $0.03141, $0,03350- 50.03496 '$0.021146•, $0;02168 ;.$0.01897, $0,01524 0 :01059' $0,01799:;: ,$0 :02134',;; $0.02304,,;! $0,02301 $0,02443 ''•$0,02585 $0, 00046,{ $0,00049„;',, _$0,00049, ''$0,000492,','$000049 ;,$0.00049_,; 00049 $0, 00049; $0, 00049,,,,',$0: 00049;,' ^$0,00049 $0,00049 (50.00050) ($0.00050) (50.00050) (50.00050) (50.00050) (50 00050) (50.00050) (50.00050) (50.00050) (50.00050) (50.00050) (50,00050) f_ $1.85' 4';$1,7,4', ;_i r.,' $1:44.,., ,-..$1,32: r r .$1.61. ',$1,89; $1 $2.05 ,52.99 '$2:30 1 51:298 $0,367; 7,217,009 7,514,400 '13,072,000 0 48,489 52,489 30,785,320 793,046 5,836 51:298' i '$1,285; 1 :296;. ;$c298;,:, ;;;51298' `$0 :367,'- :$0:367: 0.367' 0 98 0'36 :$0.20300',,,,,_$0,20300„y ;,;$0:24300;; :,;,;,$0,20300 ;$0.20300_', ":$0.20300 ^;`;$0.20300 50.20300 „;$0.20300;,, :50,20300', F '$D,99D26 ?'$Octl0028 50i00028 {.'50,00028 ';;;';$0.00026(' $0.00028 0. 00028`; 50. 00028 ;�$OA0933.,�'$0,00033" $0.09033 50, 00793,, °.50,00793• •,'$0:00793`, ';'50,00793'1" ;50.00793' 50:00783; $0,00793-'; $000793, 50 :00793 '50 :00793 $000793 ',$0,00793;',[ 50.00793) $0,00793' 50.00793, 50.00793 $0,00793 50.00793 50 :00793 ''',.S0.00793 50.00793 $9.00793 50.28000' 50, 28000'„ $0.28000 $0,28000 1 'S028000 50.28000;'., '50.20000' .$6.28000 30,785,320 32,681,963 27,049,862 28,574,829 23,300,502 '30,501',766 31,811,853 28,988,164 28,243,156 22,940,528, 8,278,000 7,442,000 8,987,000 6,787,200 7,514,400 7,272,000 13,072,000. 13,072,000 13,072,000 0 0 0 42,229 48,229 32,881,963 827,108 Q 5,636 36,724 42,724 27,049,882 701,892 5,636 7,198,000 7,514,400 13,072,000 0 23,270,920 25,094;763 ,1035,462' 21;302,829 15,788,102 ;13,195,724, 11,303,867 11,232,573 14,844,331 16,612,055 12,418,340 13,858,854 10,523,430 8,844,075 7,850,930 7,378,163 8,826,589 9,282,708 7,117,114 7,343,975 5,282,672 4,351,649 3,652,937 3,854,410 54489 ,i 58,087' 52 29,955° •26, 292;,' 28,509 35,868; 52,489,'' ;48229 42724„ 52,959 25,974 32,099',,;, 35,139 35,868 0 0 0 0 0 0 0 0 46,959 19,974 52,959 25,974 28,574,829 23,300,502 734,322 596,454 5,836 5,838 511.298'': '$1:298; $0':387&, 50.387 '51.298 $1;298'); 51.298 51:299 50.367'' 50,387 50.387 50.367, 50,28000' $0,28000; 50.28000 ,'$9.28000 20,467,724 18,818,287 18,748,973 20,095,072 21,148,308 24,058,047 26,628,125 292,552,991 20,657,601 18,026,042 16,058,189 17,581,558 ,19,839,765 21,801,033' 28;145;533 280,595,184 7,449,000 6,704,000 4,352,000 4,352,000 7,272,000 7,514,400 7,514,400 7,272,000 13,072,000. 13,072,000 13,072,000 .13,072,000 0 0 0 0 26,099 29,138 32,099 35,138 20,487,724 18,818,287 537,098 468,729 5,938 5,838 29,888 35,868 18,746,973 417,481 0 5,636 12,823,072 6,588,488 4,254,804 '3400 29,458 0 23,456 29,458 20,095,072 457,120 0 5,636 8,037,000 4,884,000 8,899,000 7,514,400 7,272,000 7,514,400 88,478,000 13,072,000 13,072,000 ,13;072,000 0 0 0 13,833,906 16,78047 19,313,726 204,076,991 9,123, 837 10,312,948 12,012,374 4,510,070 6,471,100 7,301,351 45,018''; 37,572 33,152 38,34 0 0 27,152 33,152 21,148,308 515,834 0 5,636 32,345 38,345 24,056,047 588,827 n 5,838 58,838 '88,937 0 511,328 493,368 0 60,937 421,368 66,937 493,388 28,828,125 292,552,991 679,784 7,295,475 0 0 0 5,636 67,832 City of Centralia Electric Utility Development of 2010 Purchased Power Load Variance Total Load Variance Generation Demand Total Generation Demand Transmission Costs Base Charge Load Shaping Total Transmission Costs Jan -10 Feb -10 Mar -10 Apr -10 May -10 Jun -1D Jul -10 Auq -10 Sep -10 Oct -10 Nov -10 Dec -10I Total PF -02 Cot Power Costs Energy Purchases (kWh) Heavy Load Hour Energy 5434,644 $503,511 $349,204 $368,374 $231,936 $178,439 5187,953 $212,344 $254,464 5286,550 $345,484 5419,953 $3,770,935 Light Load Hour Energy 185.127 291.249 148,884 139,315 80.203 48.054 65,716 82.253 101.430 103,777 158,089 187,280 1,497.206 Total Energy Purchases $619,770 5704,760 5495,665 5507,689 $312,140 $222,523 $253,700 5294,597 $355,913 $300,355 $503,573 5807,232 $5,256,142 515.085 $18,014 $13,254 514.002 511.417 $10,029 59,221 59.156 59.547 510,383 511j57 513,145 5143,351 $15,085 518,014 513,254 $14,002 $11,417 $10,029 $9,221 59,156 59,847 $10,363 511,787 $13,146 $143,351 5102,878 5115.592 $94 592.148 543.136 534.705 545.900 567.790 $57,737 592,283 582 5135,327 5974.467 $102,878 5115,592 594,688 592,148 543,136 $34,705 $45,900 $57,790 557,737 $02,283 582,284 $135,327 5974,467 Total Base Power Costs Energy $534,855 5720,775 5508,142 5521,891 $323,557 5232,552 $252,921 5303,783 $365,750 $400,719 $515,380 $620,378 55,411,493 Demand 5102.878 $115,592 594.688 592.148 543.138 $34,705 545.900 587.790 567.737 592.283 582.284 5135.327 5974,467 Totals $737,733 5536,367 5603,830 $613,839 5366,693 $267,257 5306,820 $371,573 $433,497 $493,002 $597,644 $755,705 $6,385,960 C&R Discount '($8.5361 ($6.5361 {$5.5381 (56.536) (56.530 (58.5361 I (56.536) (56.536) 156.S3 ($6.536) ($8,5381 ($9;536) (578.432) Total C&R Discount ($6,536) ($6,536) (58,535) (56,536) ($6,535) (58,536) (58,538) (56,535) ($5,538) (56,536) ($6,538) (58,536) (578,432) Total Energy $628,319 $714,239 $502,606 $515,155 $317,021 $226,016 $256,385 $297,247 $359,224 $394,183 $506,824 $613,842 15,333,061 Total Demand $102,878 $115,592 $94,688 $92,148 $43,136 $34,705 $45,900 $67,790 $67,737 $92,283 $82,284 5135,327 $974,467 Total Energy and Demand $731,197 $829,831 $597,294 $607,303 $360,157 $260,721 $302,284 $365,037 $426,961 $486,466 $591,108 $749,169 $6,307,528 560,342 554,813 $47,687 $60,952 $25,928 $33,877 537,821 536,758 530,445 535,243 541,983 $79,097 $546,936 519.263 517,700 515.660 519.436 59.532 511,780 512.896 513,183 510.510 512.187 514,072 524.566 $181,066 $79,606 572.513 553,347 580,388 535,458 $45,857 $50,717 $51,932 $41,256 $47,410 $56,056 5103,883 5728,002 Ancillary Chartres SCD NT Long Term Firm $9,437 $8,572 $7,455 $9,533 $4,055 $5,295 $5,915 56,063 54,751 55,512 58,555 512,370 $85,535 GSR NT Long Term Firm 50 S0 $0 50 50 50 SO $0 50 $0 $0 50 SD Regulation Freq. Response $8,540 58,907 $7,557 57,908 58,423 $5,784 55,048 $4,495 $4,923 $6,547 $7,194 $8,628 $81,956 Spinning Reserve $6,259 58,559 55,554 55,823 $4,730 $4,259 $3,717 $3,310 $3,625 54,091 $4,495 55,391 $57,653 Supplemental Reserve $6,289 $6,559 $5,584 $5,823 $4,730 $4,259 $3,717 $3,310 $3,625 $4,091 $4,495 55,391 $67,853 CA Spinning Reserve 50 50 SO SO 50 $0 $0 $0 $0 $0 $0 SO $0 CA Supplemental Reserve $0 $0 50 50 $0 $0 $0 50 $0 $0 $0 $0 $0 PFP Lagging $0 $0 $0 50 50 $0 $0 $0 $0 $0 $0 $0 $0 PFP Lagging Ratchet 51.578 $1.578 51,578 $1 51.578 51.578 51.578 $1 51.578 $1,578 51.578 51.578 518.937 Total Ancillary Charges 532,133 $32,176 $27,718 $30,665 521,516 521,179 $19,975 $18,758 $18,512 $21,518 524,328 $33,358 $302,137 Subtotal Transmission $111,739 $104,889 591,085 5111,053 556,974 568,838 $70,892 $70,690 $59,788 $89,228 $80,384 $137,021 $1,030,139 Total SPA Power Costs $842,936 $934,519 $688,358 $718,356 $417,131 $327,556 5372,976 $435,727 $486,729 5555,694 $671,492 $886,190 $7,337,667 City of Centralia Electric Utility Rate Study April 2011 COST OF SERVICE TECHNICAL MEMORANDUM •FCS GROUP Solutions Oriented Consulting To: Ed Williams, General Manager; Centralia City Light From: Angie Sanchez Vimoche; FCS GROUP RE Draft Electric Utility Cost of Service Results A. T OD UCT G N allocated total costs to each customer class of service and Date: June 7, 2010 The methods used to establish utility rates are based on principles that are generally accepted and widely followed throughout the industry. A standard rate study is composed of three interrelated analyses: a revenue requirement analysis, a cost of service analysis and a rate design analysis. o Revenue Requirements Analysis. This analysis identified the total revenue requirement to fully fund the utility on a standalone basis, considering operating and maintenance expenditures, capital funding needs, debt requirements and policy objectives. o Cost of Service Analysis. This analysis developed an allocation of the rate revenue requirement that identifies the functional elements of electric service and distributes those calculated costs to customers based on their demand and use of the system. o Rate Design Analysis. This analysis includes the development of rates that generate sufficient revenue to meet each system's revenue requirement forecast and continue to address the City's pricing objectives (e.g. conservation). The rate study completed for the City in 2010 included all three of the analyses noted. Rates were set based on the revenue requirement results only and did not include class cost of service adjustments due to the changes anticipated with the new Bonneville Power Agency (BPA) Tiered Rate Methodology (TRM) that will take effect October 1, 2011. Power costs under this methodology will be incurred differently than historical power purchases resulting in potential changes to how power costs are passed on to the City's customers. For this particular study, it was determined that the cost of service will be completed in the traditional approach to set the benchmark of the historical cost of service allocations of the City. This benchmark will then be updated with the new BPA rates when the costs are more firmly established. B. COST OF SERVICE A cost of service analysis is concerned with the equitable allocation of the system's total revenue requirements among the customers it serves. The proper allocation of costs establishes a defensible basis for assigning "cost shares" to customer classes. The cost of service results provides two key pieces of information: average unit costs for rate design The allocation of revenue requirement among customer classes enables a fair distribution of revenue obligation, while unit costs ensures that a rate's demand, energy and customer charges reflect the costs incurred by the electric system. While there are many accepted approaches to determining the proper allocation of costs among a utility's customers, most entail the same three -step process; functionalize, classify and allocate. A short description of each step is provided below. City of Centralia Page 2 Cost of Service Technical Memorandum e Step 1— "functionalize" the assets and expenses among the various services provided (i.e., power supply, transmission, distribution). This step is largely accomplished through the City's system of accounts. Step 2 "classify" the assets and expenses to the utility operation (demand, energy, customer) for which the functionalized dollars are spent. Step 3 "allocate" the functionalized and classified costs to the utility's customers based upon their contribution to the factors that drive the utility's costs in the relevant functional cost categories. This is performed through the application of allocation factors developed for the City, based upon City specific data. The utility's allocated costs then serves as a guide for setting rates that collect the desired level of revenues from its customers. The procedure applied and the assumptions used to complete the three -step cost of service process is discussed in detail in the remainder of the report. 8.1 Step 1: Functionalize Assets and Expenses To functionalize a utility's assets and expenses is to assign these costs to a particular function or service provided by a utility. For electric utilities, assets are commonly associated with power supply, transmission, distribution or general plant. For this study, the utility's plant investment was categorized into the following basic utility functions: generation, distribution, transmission, general and other (intangible). General plant assets were functionalized as all other direct utility functions. The resulting functionalized assets for the City shows that approximately 38 percent of the City's a ssets are generation related, 1 percent are related to transmission investments and 61 percent are related to distribution plant investment. Table 1: Functionalized Plant Investment (assets) Total Power Transmission Distribution Other Plant Intangible 4,862,082 4,862,082 Generation 19,570,352 19,570,352 Transmission 1,495,017 1,495,017 Distribution 34,559,792 34,559,792 General 3,669,648 1,482,270 90,700 2,096,678 Total Plant $64,156,892 $25,914,704 $1,585,717 $36,656,470 Accumulated Generation (7,531,234) (7,531,234) Transmission (1,051,968) (1,051,968) Distribution (7,856,594) (7,856,594) General (1,116,327) (511,401) (71,433) (533,494) Total Plant $(17,556,123) (8,042,635) (1,123,401) (8,390,088) $0 Net Plant $46,600,769 $17,872,069 $462,316 $28,266,383 $0 %of Total Plant 100% 38% 1% 61% 0% Expenses were functionalized into purchased power, Yelm (administrative, maintenance and operation), non -Yelm; administrative, engineering, conservation, customer service, maintenance and operation, taxes, debt service and depreciation funding. The most significant expenses are related to purchased power and power generation. The total power costs for the City represent 47 percent of total expenses for 2010 (10.7 percent related to Yelm and 36.9 percent for purchased power). City of Centralia Page 3 Cost of Service Technical Memorandum Table 2: Functionalized Expenses 2010 Expenses Total Expenses Total %of Total Yelm 2,121,219 10.7% Non Yelm Purchased Power 7,336,863 36.9% Administrative 1,288,907 6.5% Engineenng 192,029 1.0% Conservation 303,160 1.5% Customer Service 280,671 1.4% Maintenance 98,569 0.5% Operations 3,100,098 15.6% Taxes 1,866,113 9.4% Debt Service 2,359,806 11.9% Depreciation 930,000 4.7% $19,877,434 100.0% B.2 Step 2: Classification of Assets and Expenses To classify assets and expenses is to assign cost drivers to the utility's functionalized costs. The objective of this step of the analysis is to classify costs based on cost causation or the cost drivers. For electric utilities, cost drivers are organized into four broad categories. Energy Costs that vary with the total (average) consumption (flow) of the electricity over a specified period of time. o Demand Costs predicated upon the maximum rate of use required at one point in time. Demand may be coincident or non coincident to the system peak. o Customer Related Costs associated with providing service to customers, regardless of the level of electrical consumption. Direct Assignment Costs directly attributed to benefitting or being incurred for a specific customer or class of customers. The general approach to classification is to first assign the utility's plant investment to the four cost drivers. The test period expenses are then based on the related plant account or directly assigned to one of the four cost drivers. B.3 Classification of Assets (plant in service) As noted previously, the utility's plant investment were functionalized to generation, transmission, distribution and general. Generation The assets listed under this function relate to the production costs associated with the Yelm Hydroelectric plant. Of the $19 million in plant investment for generation, reservoirs /dams and waterways comprise 65 percent of the asset value. There is no water storage capabilities at Yelm, therefore 100 percent of this asset is classified as energy related. City of Centralia Page 4 Cost of Service Technical Memorandum Transmission Transmission systems generally are configured as an integrated network, where power may flow over a number of paths to points on the utility's system. Transmission systems are designed to transmit power from a single point of integration to a single point of delivery. The transmission expenses in this study relate to the transmission assets that are owned by the City. The transmission system of others (e.g. BPA) is treated as a power supply expense. The City's transmission expenses are classified 100 percent demand related. Distribution Distribution facilities reduce high voltage energy from the transmission system and deliver it to the retail loads. Most distribution expenses are attributed to meeting peak demands or are a function of the number of customers served. The classification of distribution costs for the City is as follows: Land /land rights and structures improvements are allocated as 100% demand Substation costs are typically classified a s demand related on the belief that substations are typically built to serve a peak of a certain size 100% demand. Poles, conductors, devices are split between demand and customer classifications. The basis used to allocate costs to demand and customer is often referred to as the "minimum system" or "minimum size" approach. Pole and conductor costs associated with a minimally sized system are considered customer related on the belief that the utility would incur at least this level of cost to stand "ready to serve" its customers, regardless of the size of the load being served. Actual costs in excess of this amount, presumably driven by the utility's need to size these facilities to meet a peak load, are classified as being demand related. Poles, Towers, Fixtures 65% demand, 35% energy; UG conductors /devices 54% demand, 46% energy. Transformers are classified 100% demand related Meters and service drops are typically classified as customer related, since their costs are primarily related to the number of customers served 100% customer meters services. Lighting and installations on customer premises are generally directly assigned to the customer(s) benefiting from these investments 100% direct assignment Other General plant is classified as all other generation, transmission and distribution plant. Accumulated depreciation is classified on the total related plant account (e.g. generation, transmission, distribution). Table 3: Classification of Plant -in- Service (Assets) l% i ®EMAND f3EUTED I 7 EIVERGYAa ailED 1 p 'd∎ GWIt3T ERIREW1TiEt0 Total Net Plant Nom :mm :1(JAN Peak':. nmaN? s Seconda EWER Coincidem system Bemire NCP 1i) (NCP 2)`v (C+P118 $46,600,7681$11,193,578 $9,911,164 $01$11,950,672 $6,488,3211$4,097,178 100 0% 240% 213% 00% 256% 139% 88% 100 0% 45 3% 39 6% eighted We„ MOMS;)w+ i:(RR) $0 $2,947,8881 00% 63% 00% 15 1% 0 0% $0 I $11.968 0 0% 0 0% The summary of the classification of plant in service indicates that the majority of system investment, 45 percent, is related to demand requirements. City of Centralia Page 5 Cost of Service Technical Memorandum B.4 Classification of Expenses Separately, the utility's operating expenses were categorized among the key cost drivers. The first step in classifying the expenses is to assign expenses as the related plant account. Table 4 provides a summary of the plant classification factors used to classify test period expenses. Table 4: Plant Classification Factors Classification Factor Demand Energy Customer Revenue DA Total Generation Plant 34.97% 65.03% 0.00% 0.00% 0.00% 100.00% Transmission Plant 100.00% 0.00% 0.00% 0.00% 0.00% 100.00% Distribution Plant 74.94% 0.00% 25 02% 0.00% 0.04% 100 00% Plant before General Plant 64.64% 21.04% 14.29% 0.00% 0.03% 100.00% General Plant 64.66% 21.04% 14.30% 0.00% 0.00% 100.00% Transmission Distribution 75.98% 0 00% 23.98% 0.00% 0.04% 100.00% Net Plant in Service 66.90% 17.95% 15.12% 0.00% 0.03% 100.00% For those expenses, that do not have a related plant account, a more detailed analysis is undertaken to determine why the cost was incurred. A summary of the classification approach for the key expenses is provided: Power Supply Power supply expenses are driven by the need to meet a utility's energy and demand requirements. Power supply expenses are classified on the basis of cost causation. Power costs have been classified to demand and energy as shown in Table 5. Table 5: Classification of Purchased Power Purchased Power Total Energy Demand Power HLH Energy /kWh) $3,770,935 3,770,935 LLH Energy /kWh) 1,497,206 1,497,206 Load Variance /kWh) 143,351 143,351 C &R Discount /kWh) (78,432) (78,432) Demand /kW) 974,037 974,037 Transmission Base Charge /kW) 546,676 546,676 Load Shaping /kW) 180,993 180,993 Ancillary Service SCD NT Long Term Firm /kW) 85,497 85,497 GSR NT Long Term Firm /kW) Regulation Frequency /kWh) 81,956 81,956 Spinning Reserve /kWh) 57,853 57,853 Supplemental Reserve /kWh) 57,853 57,853 CA Spinning Reserve /kWh) CA Supplemental Reserve /kWh) PFP Lagging /kVAr) PFP Lagging Ratchet /kVAr) 18,937 18,937 Total $7,336,863 5,465,804 1,871,059 City of Centralia Page 6 Cost of Service Technical Memorandum Roughly 75 percent of the City's purchased power costs are classified as being related to meeting energy requirements, with the remaining 25 percent classified as being related to meeting peak load (or demand) requirements. Yelm Expenses The Yelm hydroelectric plant expenses are identified separately in the City's budget. These expenses include costs for administrative, operations and maintenance. Yelm expenses are classified as generation plant; 100 percent energy related. Other Non -Yelm Expenses Non -Yelm expenses include administrative, engineering, conservation, customer service, operations and maintenance expenses. In addition, costs such as taxes, debt service and depreciation funding are included in this category. Non -Yelm costs use either the plant classification factors identified in Table 4 or 100% direct assignments (DA) to classify expense tine items to the four cost drivers. Administrative costs were classified as plant in service before general plant. Some items such as general liability and property insurance were classified as general plant. Conservation costs classified as (DA) which ultimately is based on energy Customer Service costs are classified as weighted customer accounting Maintenance and operations costs as transmission and distribution only since all Yelm generation O &M is included in the Yelm accounts Reserve funding costs for Yelm as generation and for Centralia as transmission and distribution plant Taxes as direct assignment which ultimately is based on revenue generated by customer class Debt service is classified as the related plant account: 2007 refunding 100 percent generation; 2007 revenue bond 14.1 percent generation the remainder to transmission/distribution plant; new future bonds based on the related CIP projects 13.1 percent generation, the remainder to transmission and distribution plant. Depreciation funding from rates is based on total net plant in service Table 6: Classification of Expenses It is important to note that the total values shown in the summary are less purchased power costs. I' C13:61tyOvIgR RELATE p Weighted F or sustome Di re s+ nmentt TotaIliTest Pbnod l DEMAND RELATED 1 ENERGY RELATED Reeenue a w es x ley Yaless P Pnmary ;Secondary;t .,Power 1) +(NCP 1. a 1 $12,044,2211 $1,955,326 100 0 %I 16 2% 100 0% i (NCP 2) ,�w(C 1.5 (EiML170 ,a(E5LLH) AC) (sWCA) aCMS r„ .(RR).7 (DAB) $1,731,310 $01 $3,477,112 $1,887,861 I $665,389 $272,406 $514,9451 $0 1 $1,539,872 1 30 6 0 0%1 28 5% 15 7% 5 5% 12 1% 4 3% 0 0 %I 12 8 %1 The classification of expenses (less purchased power) indicates that nearly 31 percent of costs are related to meeting demand requirements and 44.5 percent are related to meeting energy requirements. B.5 Step 3: Allocation of Costs With the City's costs functionalized and classified, the study now turns to the task of allocating system costs to its customers. As with the previous two steps of the COSA, this step is separated among each of the utility functions. The classification cost pool totals are allocated to customers based on a variety of allocation factors developed based on system specific criteria. The system specific information used for this task includes the historical year 2008 and projected 2010 load data by customer class. The load data City of Centralia Page 7 Cost of Service Technical Memorandum developed includes monthly kWh, kW and load factors for demand metered customers. The specific allocation factors developed include the following for each major customer class. Demand Non Coincident Peak Primary Non coincident peak loads are those peak loads that occur within a certain time frame regardless of the timing of the peaks of other loads on the utility's system. The allocation basis for these costs is the maximum of the 12- monthly non coincident peak (kW) at primary delivery Demand Non Coincident Peak Secondary maximum of the 12- monthly non coincident peak (kW) delivery at the meter (includes maximum losses) Coincident Peak This peak refers to the customer's contribution to the City's monthly system peaks. The allocation basis developed for these costs is the sum of the 12- monthly coincident peaks at input calculated in the load data. Energy Heavy Load Hours (HLH) metered kWh based on HLH factor from BPA bills Energy Light Load Hours (LLH) metered kWh based on LLH factor from BPA bills Customer Actual Actual number of customer accounts, by customer class Customer Weighted Accounting This weighting factor is common to determine the differences in the level of effort in providing customer meter reading, accounting and billing services. These weighting factors typically vary from 1 to 5. Customer Weighted Meters /Services This weighting factor is for determining the differences in the cost of meters and service drops. These weighting factors are typically associated with the actual replacement costs for these types of utility assets. Revenue Related Identifies the amount of revenue generated by each customer class Direct Assignment Direct assignment of costs /revenue to a specific customer class (e.g. street lighting costs are 100 percent directly assigned to street lighting) Table 7 provides a summary of the key allocation factors developed for each customer class of the City. City of Centralia Cost of Service Technical Memorandum Table 7: Demand, Energy, Customer and Revenue Allocation Factors errand Residential Commercial <50kW) Commercial >50 200 kW) Commercial (201+ kW) Street /Yard Lighting Total Residential Commercial <50kW) Commercial >50 200 kW) Commercial (201+ kW) Street /Yard Lighting Total Residential Commercial <50kW) Commercial >50 200 kW) Commercial (201+ kW) Street /Yard Lighting Total Residential Commercial (<50kW) Commercial >50 200 kW) Commercial (201+ kW) Street /Yard Lighting Total B.6 Cost of Service Results D emanc1iGk4 1) 83,633,977 44 11% 23,434,415 12 36% 25,446,832 13 42% 56,307 ,254 29 70% 784,947 0 41% 189,607,424 100.00% Rewnuel e ST Qtal! 8,212,412 44.70% 2,578,004 14 03% 2,45,242 13 42% 5,065,447 27 57% 49,589 0.27% 18,370,695 100.00% 45, 866, 320 12, 701, 036 13, 682, 372 30,274,078 421,761 102,945,566 44 55% 129,500,296 12 34% 36,135,450 13 29% 39,129,204 29 41% 86, 581, 332 0 41% 1,206,708 100.00% 292,552,991 Page 8 TCo_tal`" ;NkWb) 2Total r� (kW!) tTofial 404,424 66.93% 70,599 73 87% 68,244 73.77% 66,481 11.00% 10,233 10 71% 9,892 10.69% 46,533 7 70% 7,105 7 43% 6,868 7.42% 85,383 14 13% 7,227 7 56% 7,105 7 68% 1,418 0 23% 410 0.43% 397 0 43% 604,240 100.00% 95,574 100.00% 92,504 100.00% 44 27% 12 35% 13 38% 29 60% 0.41% 100.00% 8,439 83.89% 8,439 69 38% 661,782 58 00% 1,434 14 25% 2,868 23 58% 335,513 29 41% 156 1 55% 782 643% 132,485 11 61% 13 0 13% 66 0 54% 11,155 0 98% 17 0 17% 9 0.07% 0 0 00% 10,059 100.00% 12,163 100.00% 1,140, 935 100.00% The cost of service results are generated by applying the allocation factors to the classified cost pools. Table 8 presents the test period revenue requirement allocated to each customer group. The total revenue requirements (RR) of the system are allocated as follows: o Residential: 52.5 percent General Service <50 kW: 13 percent General Service 50 -200 kW: 11.5 percent City of Centralia Cost of Service Technical Memorandum General Service 201kW: 22 percent Street Lighting nearly 1 percent (0.5 percent) Table 8: Allocated Cost of Service (2010 Revenue Requirement), by Customer Class Power Purchased Power Heavy Load Hour Energy Light Load Hour Energy Load Vanance Generation Demand C &R Discount Transmission Base Charge Load Shaping SCD NT Long Term Firm Regulation Freq Response Spinning Reserve Supplemental Reserve PFP Lagging Ratchet Total Power DEMAND RELATED Noncoincident Peak Pnmary Secondary Total NCP Coincident Peak System (CP -1) System (CP -2) BPA Generation (CP -3) BPA Transmission (CP-4) Total CP Total Demand Related ENERGY RELATED HLH LLH Total Energy Related CUSTOMER RELATED Actual Customer Weighted for Accounting Weighted for Meters Services Total Customer Related REVENUE RELATED Total equirement DIRECT ASSIGNMENT 1,539,872 TOTAL REVENUE REQUIREMENT m50k1W3) 0914 3,770,935 1,663,323 466,066 1,497,206 667,065 184,720 198,992 143,351 95,996 15,858 11,002 974,037 652,271 107,749 74,757 (78,432) (52,523) (8,676) (6,020) 546,676 366,115 59,655 42,149 180,993 121,213 19,750 13,954 85,497 57,254 9,458 6,562 81,956 36,278 10,123 10,962 57,853 25,609 7,146 7,738 57,853 25,609 7,146 7,738 18,937 12,682 2,066 1,460 7,336,863 3,670,892 881,060 875,383 100.00% 50.03% 12 01% 11.93% 1,955,326 1,444,363 209,355 145,352 147,860 8,396 1,731,310 1,277,248 185,132 128,534 132,970 7,425 3,686,636 2,721,611 394,487 273,886 280,830 15,821 3,686,636 2,721,611 394,487 273,886 280,830 100 00% 73.82% 10 70% 7.43% 7 62% 3,477,112 1,533,720 429,752 466,656 1,032,589 14,395 1,887,861 841,117 232,917 250,913 555,179 7,734 5,364,973 2,374,837 662,669 717,570 $1,587,769 22,129 100 00% 44 27% 12 35% 13 38% 29.60% 0 41% 665,389 558,205 272,406 189,001 514,945 298,686 1,452,740 1,045,892 100 00% 71 99% 356,110 94,842 64,224 151,429 310,495 21.37% WIMP; :.Generar 506,090 $1,119,845 15,611 440,296 6,134 20,146 349 136,887 2,374 (11,022) (191) 77,507 25,661 12,015 24,255 17,122 17,122 2,685 $1,882,519 25 66% Page 9 1,251 414 208 338 239 239 43 27,009 0 37% 15,821 0 43% 10,346 871 1,124 17,516 1,475 190 59,795 5,035 87,657 7,381 1,315 6.03% 0 51% 0 09% 288,146 279,926 580,728 34,963 19,381,084 10,169,342 2,536,856 2,234,422 4,339,226 100 00%1 52.47% 13.09% 11.53% 22 39% 101,237 0 52 %I The allocated costs are compared to the current revenue received by customer class to determine if each customer class is paying their cost of service. City of Centralia Cost of Service Technical Memorandum Table 9: Cost of Service Comparison Reeenues at Present Rates Allocated Rewnue Requirement Balance /(Deficiency) of Funds Change in Present Rates Page 10 18,370,695 8,212,412 2,578,004 2,465,242 5,065,447 49,589 19, 381, 084 10,169, 342 2,536,856 2,234,422 4,339,226 101,237 (1,010,388) (1,956,930) 41,148 230,819 726,221 (51,647) 5.50 %1 23.83% -1.60% 9.36% 14.34% 104.15% The cost of service comparison indicates some interclass discrepancies. The residential class needs to increase by 23.83 percent in order for the existing revenue to generate the appropriate allocated costs. All general service customer classes are over collecting their allocated cost of service. The street /yard lighting class will need further attention in the next cost of service study to ensure the appropriate customers are being captured in this customer grouping. It should be noted that, given the need to make a host of assumptions to complete a cost of service analysis, the margin for error for class specific results is typically considered to be plus -or -minus 10 percent, relative to the system average. When comparing the cost of service results from this study to the last study in 2004, a number of changes are important to note. The City has improved meters that offer more detailed data on customer usage. This additional data has improved on the load factor assumptions for the residential class. The residential class loads which previously could not provide a demand reading, now can. The load factors developed for this analysis used specific meter reading kWh and kW information to calculate a load factor which previously used industry standard methodologies and a reconciliation approach. The actual load factors range from a low of 11 to a high of 23. Past rate studies used a range of 43 to 57. Lower load factors increase the NCP and CP demand allocations to this class. This is one of the main reasons for the large increase in the cost of service for this customer class. The residential class represented nearly 49 percent of the total kWh use during the last study, this study kWh for this class represents 44 percent. The last COSA results indicated that compared to the overall average residential needed to increase slightly over 5 percent, small general service needed to decrease the most at 13.5 percent and large general service could also decrease by nearly 2 percent. It appears that cost of service inter class rate shifts still remain warranted. Street lighting during the last study required a 101 percent increase to reach cost of service. This issue still remains. In addition to the allocated total cost per cuss omer class, the cost of service calculates the average unit costs for demand, energy and customer. The unit costs take the allocated costs of the system and determine how to collect the target level of revenue based on the billing components used in each class' rate schedule. City of Centralia Cost of Service Technical Memorandum Table 10: Average Unit Costs Average Unit Costs Cost of Service Energy Demand Customer Charge 2010 Adopted Rates Page 11 0.0705 0.0616 0.0442 0.0438 N/A N/A 3.56 2.53 10.33 18.05 46.70 46.70 Energy 0.0599 0.0671 0.0539 0.0526 Demand N/A N/A 4 43 4.75 Customer Charge 10 88 23.23 44.51 54 20 As shown by the average unit costs, the residential energy charge needs to be increased by nearly 1.06 cents per kWh to tie to the average unit costs in the cost of service. The general service 50 kW is fairly close to the cost of service. The general service >50 -200 kW indicates that the energy and demand charges could be reduced. The general service 201 (now changed to 201 -1,000 kW) has the largest cost of service discrepancy. All unit costs need to be reduced for this customer class. C. SUMMARY The customer classes, usage characteristics, facility requirements and demands placed on the system are used to equitably allocate costs to each class of customer served by the City's electric system. The results of the cost of service can and will change if there are significant shifts in any of these key metrics (as shown when comparing the 2004 study to this study). Therefore, results of the cost of service should be interpreted and implemented with care, in particular when it has been some time since the last comprehensive study. Any adjustments should be phased -in and results revisited with a future study to verify that results and trends are consistent with the initial findings. We know with good certainty that the rate changes the City will see under the new BPA Tiered Rate Methodology will have an effect on the power cost classifications and allocations that are in use today. Therefore, it was recommended that these cost of service findings be used as a historical benchmark only. The City should complete a cost of service update once the new BPA Tiered Rates are established enough to allow for the development of new power cost classifications and allocations. In the meantime, it will be imperative for the City to begin compiling and validating load data (kWh, kW and load factors) for each of their major customer classes (Residential, Small general service, Medium General Service (50 -200 kW), Large General Service (201 -1,000 kW) and Very Large General Service 1,000 kW) to ensure that the most accurate data is being used in the cost of service update. As indicated by the comparison of the 2004 study results and this study, any major changes in customer load statistics can have a significant impact on the cost of service results and ultimately how rates are adjusted. City of Port Angeles Utility Cost of Service Studies Appendix B Resumes FCS GROUP APPENDIX B RESUMES FC S GROUP Solutions- Oriented Consulting ANGIE SANCHEZ VIRNOCHE Principal B.S., Business Administration and Finance, Oregon State University Angie Sanchez Virnoche is an FCS GROUP principal and shareholder with 20 years of experience providing financial services in a variety of capacities for water, sewer, stormwater, solid waste and electric utilities. Angie's utility rate expertise covers a broad range of areas including, expert review of the rate setting framework and methodology used by clients, reviewing various cost allocation approaches in support of cost of service based utility rates, establishing renewals and replacement capital funding targets, evaluating fund balances, and developing alternative rate structures targeting seasonal use, conservation, increased revenue stability, time -of -use and unbundled rates by service commodity. Angie provides financial services to clients throughout the United States, thereby giving her the ability to offer alternative methodologies to clients suited to their unique needs. In addition to her project management and technical skills, Angie routinely collaborates with bond advisors, attorneys, and engineering partners. She frequently gives presentation of results to different audiences such as citizen rate advisory groups, advisory boards, commissions and councils. Angie is effective in engaging and educating participants in the benefits, costs, and decision making process that will bring consensus and move participants towards the fulfillment of objectives. Finally, Angie has recently conducted several rate setting and financial policy presentations for public utility managers, attorneys, and municipal finance professionals. As the study manager for the proposed Port Angeles Utility Cost of Service Studies, Angie will be in direct communication with the City Angie Sanchez Virnoche Resume Page 1 CAREER SUMMARY 20 years (since 1993) professional municipal rate and fee consulting experience Joined FCS GROUP in 2006 EXPERTISE Cost of Service Utility Rate Studies (Water, Sewer, Stormwater, Solid Waste and Electric) System Development Charges (SDCs) /Connection Charges Comprehensive Plans Financial Elements Rate Design Restructuring Utility Formations Multi -year Financial Planning Capital Infrastructure Planning Funding Alternatives Cost Benefit Analyses Reserve Analysis Community Education and Involvement PROFESSIONAL AFFILIATIONS American Water Works Association National, Rates and Charges Subcommittee; Standards Committee Partnership for Water Conservation Washington Finance Officers Association Northwest Public Power Association Washington Association of Public Utility Districts and will be responsible for the technical direction of each study task. •FCS GROUP Solutions Onented Consulting EXAMPLE PROJECT DETAILS Water, Sewer, and Stormwater Rate Study; City of Lynnwood Angie (managing principal) performed the last two City rate studies for the City of Lynnwood. Key project analysis included establishing fiscal policy targets for reserves and annual system reinvestment, evaluating impacts of different funding and timing for $37 million in capital projects, and a 6 -year cost of service rate transition plan to reach cost of service by class and minimize customer impacts. Additional issues addressed included a single family conservation rate structure, issuing paper on conservation rate structures for multi family /commercial customers, options for senior /low income /disabled discount rate programs, and educating City staff and council on the rate setting process. Comprehensive Water, Wastewater, and Stormwater Rate Study and Revenue Requirement Update; City of Bremerton Angie (study manager) is performing a rate study for the water, sewer, and stormwater utilities along with a benchmark analysis for the water and sewer utilities. The rate study included development of a self supporting six -year financial plan for each utility. Sensitivity analysis were provided that evaluated rate impacts resulting from reduced revenue due to conservation, alternative capital plans, varying levels of system reinvestment and payment in -lieu of tax levels. The benchmarking analysis provided a quantitative comparative assessment of performance to national, regional and specific state agencies. Angie worked extensively throughout the study with a five- member utility advisory committee. In addition, three city council workshops were completed to incorporate input into the analysis. The community was updated on the study through a dedicated rate study website link that included all presentation material, frequently asked questions, comment /feedback section and a bill calculator that allows a customer to enter their specific usage /bill history and calculate bill impacts under the proposed rates under consideration. This has resulted in a level of transparency and involvement that is invaluable by allowing for a diverse community review and outreach effort. Water, Sewer, Solid Waste and Stormwater Rate Study; City of Camas Angie (managing principal) performed the 2008 study for water, sewer, storm, and solid waste. Key project analysis included a 5 -year financial forecast and rate strategy, calculation of SDC for water, sewer and storm for two separate service areas; established fund balance minimum targets, and a capital funding plan for $40.6 million in capital projects. Additional issues addressed included; a rate strategy to fund $30.6 million in new debt, sensitivity analyses for different levels of capital needs, single family rate options included a three -block conservation rate structure and a sewer volume based rate option, an issue paper was provided to address alternative low income /senior rate discount approaches. Electric Utility Rate Design Study; City of Richland The City of Richland Energy Services (RES) Department retained FCS GROUP in April of 2012 to provide professional services related to retail rate design for the City's electric utility. The services requested included a technical review of the City's current electric rates and the development of alternative retail rate designs that better align with the BPA tiered rate methodology. Key project analysis included; an expert review of the RES internally developed revenue requirement and cost of service analysis to confirm the cause of the overall rate change and customer class cost of service shifts, review of newly developed power cost allocations, development of a residential tiered rate options, elimination of the current declining block for all classes, development of bill frequencies to establish the range of bill impacts by class. The City had not adjusted rates for eight years so critical to the analysis was development of a communication and outreach approach to share the results of the study with the public and obtain input and feedback. Meetings were held with the Utility Advisory Committee, Key customers and the City Council. The website kept customers Angie Sanchez Virnoche Resume Page 2 •+FCS GROUP Solutions Oriented Consulting informed on the rate study by posting meeting times and frequently asked questions. Key customers were provided a bill calculator to allow them to determine their individual impact from the proposed rate structure changes. All rate structure changes were approved along with the proposed rate changes of 8.9 percent increase for residential customers; and 7.4 percent to 20 percent non residential customer increases. Electric and Water Utility Study; Cowlitz County PUD #1 Angie (managing principal) prepared an electric rate study and a water utility rate study for Cowlitz County Public Utility District (PUD) #1. FCS GROUP prepared an electric cost of service model update (and developed a new financial forecast module) in 2010 and 2011. The key analytical tasks provided on prior studies included; converted the existing District Lotus 1 -2 -3 cost of service model into Microsoft® Excel, Created a multi -year revenue requirement module incorporating the District's fiscal policy objectives for operating, capital, and rate stabilization funds, Reviewed the District's power resources (Swift Complex, Harvest Wind, Wanapum Priest Rapids, Nine Canyon and White Creek) and the allocation of power resources to demand and energy, Identified rate impact of reduction in lower cost, non federal power that had historically been allocated 95 percent to residential customers, developed a capital funding plan for $74 million of projects, reviewed customer class designations to ensure they were appropriate, updated direct assignments and cost allocation for the District's two largest industrial customers, conducted cost of service analysis that showed that interclass adjustments are warranted, conducted the 2010 -2011 industrial cost allocation review, incorporated into rate model the TEA power cost projections under new BPA rates effective October 1, 2011 In 2006, a comprehensive water rate study was conducted that included a connection charge update that reflected the increased cost of growth related infrastructure. Water, Sewer, and Solid Waste Rate Study; City of Moscow, ID Angie (managing principal) completed the first comprehensive cost of service rate study conducted for the sanitation fund. Key tasks included; development of a 10 -year financial plan and rate strategy for the sanitation fund including costs for contract costs, collection, transfer station, recycling center and compost, forecast of tonnage based on historical 5 -year trends and current market conditions, reconciliation of revenue to tie to forecast tonnage, updated costs for the contract recycling center and compost service, reviewed if annual fund contributions and reserves were sufficient to meet future capital and equipment needs, integrated findings from the operational review and revenue leakage study, reviewed the elimination of "free" tonnage at the transfer station and implementation of a minimum charge, held three workshop with the Citizen Rate Advisory Committee. The last workshop included all members of Council. The water and wastewater studies for the City of Moscow included; review of the City's water and wastewater comprehensive plans is order to update system information and to allocate costs appropriately by function within each utility, development of a 10 -year financial plan and rate strategy for each utility, capital funding plan for $25 million project in costs, reviewed debt service coverage and fund balance targets, evaluated flow and strength factors by customer class and for the University of Idaho, proposed streamline wastewater rate structures from seven commercial rate classifications to three strength classifications, update the wastewater connection charges based on the recently completed comprehensive plan, present results to a Citizen's Advisory Committee for recommendation to Council. Solid Waste Rate Model Development; City of Sacramento, CA Angie (managing principal) updated the solid waste rate model for the City. The rate model included a 50 -year planning horizon and included a variety of analytical features that assist the department head track cash flow, evaluate fund balances, calculate cost of service by commodity type and most importantly create "what-if" scenarios to determine rate impact of various operational changes Angie Sanchez Virnoche Resume Page 3 Angie Sanchez Virnoche Resume Page 4 <+FCS GROUP Solutions- Oriented Consulting under consideration. The City was faced with changes resulting from moving to a 100% containerized green waste service from a loose -in- the streets services, moving to bi- weekly recycling, offering an appointment based neighborhood clean up service. The program was developed in collaboration with the Districts' management team with the ultimate goal of the City taking control of the rate model. A user's manual was developed in support of this effort. Solid Waste Rate Study; City of Tacoma Angie (managing principal) prepared the 2010 solid waste rate update and developed a cost of service rate model for the City of Tacoma's solid waste system. Key analytical tasks included; development of a five year financial and rate plan with focus on a two year rate setting period, cost escalations in line with contract provisions and anticipated increases per year, review and maintenance of operating, rate stabilization and debt service fund balance targets, Capital and equipment funding evaluation (identification if /when new debt may be required), development of allocation factors to allocate costs to customer types /container sizes, unit cost of service based rates by container size, phase -in rates for cost of service volume collection rates, evaluation of alternative discount levels for low income elderly /disabled rates, calculation of cost based landfill tipping fee, presentations to the Environmental Services Commission and the Environmental and Public Works Committee. The modeling included a multi -year forecast and rate strategy, collection costs, and revenue projections based on a tonnage forecast that aligned with the Pierce County waste reduction goals. The project also included the following tasks. Water, Sewer, and Stormwater Rate Study; Town of Friday Harbor Angie (managing principal) provided an update of the previous rate financial plan, rates, and right to connect charges for all three utilities. The Town of Friday Harbor was faced with evaluating funding options and alternatives for over $20.9 million in capital projects from 2008 -2015. Water Rate Study; City of Bellevue The City of Bellevue engaged FCS GROUP to develop alternative water rate structures that would help the City manage recently observed revenue volatility. Angie (study manager) developed a survey comparing rate structure objectives such as revenue stability, conservation, affordability, and administrative simplicity. Utility management completed this survey, providing a relative prioritization of objectives that guided the development of rate structure alternatives. Angie reviewed the City's detailed customer billing statistics and assessed multi -year demand trends, developing alternative structures and a recommendation based on utility management's weighting of the various policy objectives. To aid the City in future budget planning, FCS GROUP recommended revisions to the City's methodology for forecasting future sales revenues and suggested refinements to the formatting of City billing records that would improve their usability and reduce demands on City computing resources by 67% 75 Waste and Wastewater Rate Update; City of Port Townsend Angie has been working with the City of Port Townsend since 2008 on rate setting issues. The City of Port Townsend engaged Angie (managing principal) in 2010 to evaluate if rates were sufficient to meet varying system operating scenarios including; baseline only O &M covered, storage projects, five different treatment type options and replacement funding for the Olympic Gravity Water Line. FCS GROUP is currently working with the City on a water and sewer rate study that addresses rate adjustment needs for the next six year period, development of a capital funding surcharge for upcoming projects, evaluation of the outside City rate multiplier and update of the water and sewer system development charges. EXAMPLE PROJECT EXPERIENCE Washington ALDERWOOD WATER AND WASTEWATER DISTRICT Strategic Planning for Potential City Annexation Water and Wastewater Utility Rate Study /General Facilities Charges (GFC) Update BELLEVUE Water Rate Structures and Revenue Stability Study BELLINGHAM Sewer System Plan and Financial Chapter BENTON COUNTY PUD Electric Cost of Service Analysis, Load Data Review Cost of Service On -Call Services BLAINE Water and Wastewater Rate Update Wholesale Water Rate Support Birch Bay Water and Sewer District BONNEY LAKE Water Sewer Financial Plan and System Development Charges (SDCs) BREMERTON Water, Sewer, and Stormwater Rate Study and Benchmarking CAMAS Water, Sewer, Storm, Sanitation Utility Rate Study On -Call Services CENTRALIA City Light Valuation and Divestiture Feasibility Study Electric Utility Cost of Service Study and model review CLE ELUM Upper Kittitas County Regional WWF Rate Assistance COVINGTON WATER DISTRICT Water Long -Range Financial Plan Water Cost of Service and Capital Facilities Charge (CFC) Update Angie Sanchez Virnoche Resume Page 5 •FCS GROUP Solutions Oriented Consulting Annual financial plan updates and Model Development COWLITZ COUNTY PUD #1 On -Call Electric Financial and Rate Assistance Electric and Water Utility Rate Studies CRYSTAL MOUNTAIN SEWER DISTRICT Wastewater Funding Analysis and Cost Allocation Study FIRGROVE MUTUAL WATER COMPANY Water Utility Financial Plan and Share Charge Analysis FRANKLIN PUBLIC UTILITY DISTRICT #1 Electric Cost of Service Analysis, Rate Design Study, and Update FRIDAY HARBOR Fire Cost Analysis Water System Plan Financial Chapter Water, Sewer, and Storm Water Rates and Right to Connect Charges GRANT COUNTY PUD Electric Cost of Service Study HIGHLINE WATER DISTRICT Water Utility Rate Studies, GFCs, LFCs JEFFERSON COUNTY PUD Water and Sewer Rate Study KING COUNTY WATER DISTRICT #49 Water Rate Study LAKEWOOD WATER DISTRICT Fire Cost Analysis Water On -Call Consulting Services Water Parity Certificate Summit Water Company Wholesale Water Rates Financial Model Water System Replacement and Rehabilitation and Planning LYNNWOOD Water, Sewer, and Stormwater Rate Studies Water System Comprehensive Plan Policy Review of Sewer Connection Charges MARYSVILLE Solid Waste Rate Study and Efficiency Review MCCLEARY Water Utility Financial Plan and Connection Charge Study MERCER ISLAND Water and Sewer Rate and Connection Charge Studies Rate Model Development MUKILTEO WATER AND WASTEWATER DISTRICT Water and Wastewater Rate Study NORTH BEND Retail Water GFC Update and Wholesale Rate and GFC Development Water and Wastewater Rate Study Sewer System GFC Study OLYMPIA Water Rate Update, Wholesale Rate Review PASADENA PARK IRRIGATION DISTRICT #17 Water Rate Study and Capital Facilities Charge Study PORT ANGELES Electric Utility Rate Study Water, Wastewater, and Solid Waste Utility Rate Studies PORT TOWNSEND Water and Sewer Rate and SDC Study Water Supply /Treatment Analysis RICHLAND Electric Utility Rate Design Cost of Service Review ROSLYN Water and Wastewater Utility Rate Study SAMMAMISH PLATEAU WATER AND SEWER DISTRICT Water and Wastewater Financial Consulting Rate Study and GFC Study SAN JUAN COUNTY Stormwater Utility Formation Planning SKAGIT COUNTY PUD Review of Water Supply Agreement, Expert Rate Review, Financial Plan Model Development Angie Sanchez Virnoche Resume Page 6 GROUP Solutions- Oriented Consulting SNOHOMISH Water System Plan Financial Chapter Sewer Treatment Plant Rate Impact Analysis Water and Sewer Connection Charge Study Water Supply Study Water, Sewer. and Stormwater Utility Rate Studies SNOQUALMIE PASS UTILITY DISTRICT Water System Plan Financial Chapter SPOKANE COUNTY Sewer Utility Rate Study Ongoing Rate Consultation SULTAN Water and Wastewater Comprehensive Plan Financial Chapter Water and Wastewater Rate Studies Solid Waste Study TACOMA Solid Waste Rate Development WHATCOM COUNTY Birch Bay Stormwater Funding Analysis WOODINVILLE WATER AND SEWER DISTRICT Water and Sewer Rate Modeling Assistance YELM General Sewer Plan and Rate Study Nisqually Tribe Sewer Treatment Cost of Service Analysis Water and Sewer Financial Plan and Rate Forecasts Oregon ASTORIA Wastewater Treatment Plant Facilities Plan Financial Chapter Water and Sewer Rate Forecast CLACKAMAS RIVER WATER Water Rate Analysis Wholesale Review of SFWB Rate LAKE OSWEGO Water Rate Cost of Service Study Water On -Call Financial Consulting Services Sewer Utility Financial Plan and Rate Review PORTLAND METRO Solid Waste Disposal Charge Review Idaho COEUR D'ALENE Water System Plan Financial Plan and Rate Forecast HAYDEN AREA REGIONAL SEWER BOARD Wastewater Financial Implementation Plan Sewer Capitalization Fee Update Financial Plan and Capacity Fee Update MOSCOW Water, Sewer, and Solid Waste Utility Rate Study POST FALLS Wastewater Financial Plan and Capacity Fee Update HAYDEN Capacity Fee Update PUBLICATIONS /SEMINARS /SPEAKING ENGAGEMENTS Staffing and Funding for Collection Systems, Pacific Northwest Clean Water Association, October 2012 Electric Cost of Service and Rate Setting, February 8 and 9 Public Utility District Workshop, 2012 Correctly Calculating Rates and Connection Charges, Conference on Municipal Utility Law, October 2011 Rate Relief During Economic Hard Times, Washington Public Utility Districts Association (WPUDA), September 2011 and Evergreen Rural Water of Washington, October 2011 Implementing the Supreme Court Ruling on Fire Hydrants, Evergreen Rural Water of Washington, August 2011, Puget Sound Financial Officers, May 2011 and, Washington Operators Workshop, March California LAKE ARROWHEAD COMMUNITY SERVICES DISTRICT Water and Wastewater Comprehensive Financial Master Plan Letter of Determination for SRF Funding Arizona LAKE HAVASU CITY Sewer Capital Improvement Plan (CIP) Financial Evaluation Water Cost of Service Analysis Update BENSON, AZ Water and Sewer Rate Study Canada DISTRICT OF NORTH VANCOUVER Utility Rate Studies Angie Sanchez Virnoche Resume Page 7 •FCS GROUP Solutions-On ented Consulting SASKATOON, S.K. Wastewater Utility Cost of Service Water Cost of Service Model 2011 Conservation Based Rate Considerations, AWWA Pacific Northwest Section Water Conservation Committee Meeting, 2011 Trends in Water Rate Making, Evergreen Rural Water of Washington Annual Conference, 2011 Evaluating and Improving Utility Financial Health, Evergreen Rural Water of Washington Annual Conference, 2011 Comprehensive Financial Master Planning: Setting a Roadmap for Long -Term Strategic Management, Evergreen Rural Water of Washington Annual Conference, Aug. 2010 Setting Conservation -Based Water Rates, Evergreen Rural Water of Washington Annual Conference, 2010 General Facility Charges: Making Growth Pay for Growth, Evergreen Rural Water of Washington Annual Conference, 2010 District Finances Financing Options, Commissioners' Workshop for Washington Association of Sewer and Water Districts, January 2010 Comprehensive Utility Financial Planning During Tough Economic Times, Series of Classes for Evergreen Rural Water of Washington, 2009 Comprehensive Financial Management Planning Setting a Path for Long -Term Strategic Management, Washington Finance Officers Association Annual Conference, 2009 Setting Water Rates to Promote Conservation, Partnership for Water Conservation Workshop, 2009 Fiscal Health in Economic Hard Times, Washington Association of Sewer and Water Districts Workshop, 2009 Fire in the Hole, Vision Magazine, Association of Washington Cities, 2009 Business Practices for Operation and Management, AWWA, G410 -09 Contributing Author, 2009 Utility Rate Studies, Washington Municipal Treasurers Association Conference, April 2008 Utility Rates, Washington Finance Officers Association, One -Day Non Conference Workshop, 2007 Empowering Agencies to Become Financial Stewards of Water Systems, Washington Finance Officers Association, 51st Annual Conference, September 2006 The Rate Process, Washington PUD Association Finance Officers Fall Meeting, 2005 Good Until the Last Drop, APWA, August 2005, Co- Author Chapter 8 Utility Angie Sanchez Virnoche Resume Page 8 •FCS GROUP Solutions- Oriented Consulting Management and Structure; Technical Reviewer Chapter 9 Financial Issues. American Public Works Association. Capital Asset Management: Planning, Funding, Policies and Procedures, Washington Finance Officers Association Non Conference Seminar, June 2005. Overview of Utility Rate Setting, Montana League of Cities and Towns Annual Conference, March 2005. Building Blocks of Successful Asset Management Systems, Oregon Municipal Finance Officers Association Annual Spring Conference, March 2005. Rates for Small Systems: Preparing a Financial Plan, American Water Works Association National Conference, June 2004 Strategic Infrastructure Planning and Financing, Washington Finance Officers Association Non conference Session, April 2004. Indirect Cost Allocation: The What, Why, Who, When and How of Cost Allocation, Oregon Municipal Finance Officers Association Annual Spring Conference, March 2004. M54 Developing Rates for Small Systems "Chapter 2 Preparing a Financial Plan," AWWA, 2004 Utility Rate Strategies and Techniques, Washington Finance Officers Association Non conference Session, March 2004 Low Income Ratemaking, Oregon Municipal Finance Officers Association Northwest Government Finance Institute, October 2003 Asset Replacement Planning: Alternatives to Duct Tape and Paint, Washington Finance Officers Association Annual Conference, September 2003 Karyn Johnson is a principal and FCS GROUP shareholder with 28 years of professional experience, including 20 years as a municipal rate and fee consultant. She specializes in performing a variety of government financial studies including fiscal policy development, capital financial plans, capital connection charges, revenue requirements, cost of service, rate design, and wholesale /regional water supply issues. Her consulting engagements exceed 200 water, wastewater, stormwater, and solid waste utility studies. Karyn has applied American Water Works Association (AWWA) basic utility rate concepts and has tailored them using FCS GROUP's innovative processes to solve the specific and individual issues faced by her clients throughout Washington, Oregon, Alaska, Nevada, Canada, and elsewhere. She is well- versed in alternative rate structure concepts including increasing block and seasonal water rates, full service and interruptible irrigation rates, volume- and strength -based sewer rates, and specialty rates for large or unique customer classes, just to name a few. Karyn is particularly effective in communicating highly technical information during the public process, promoting stakeholder participation, managing staff reviews, and facilitating industry training forums. Within the context of you Port Angeles Utility Cost of Service Studies, Karyn was the principal responsible for the example Centralia Water and Wastewater study. She will provide quality assurance review on this study. ,FCS GROUP Solutions Oriented Consulting KARYN JOHNSON Principal B.S., Business Management Finance Specialty, Franklin University M.B.A., Pepperdine University Karyn Johnson Resume Page 1 CAREER SUMMARY 28 years (since 1985) professional experience Joined FCS GROUP in 2002 EXPERTISE Strategic Utility Financial Planning Utility Cost of Service Rate Studies (Water, Sewer, Stormwater, Reclaimed Water, Solid Waste) Wholesale, Unique and Large Customer Rate Setting and Negotiations System Development Charges /Connection Charges Economic Feasibility Studies Capital Reinvestment /Utility Sustainability Fiscal Health Reviews Policy Evaluation Comprehensive Plans Financial Programs Bond Feasibility Parity Certification Management Studies Utility Valuations, Consolidation, Mergers, and Acquisitions Negotiation Assistance PROFESSIONAL AFFILIATIONS American Water Works Association British Columbia Water and Waste Association Water Environment Federation Eastern Washington Water Alliance RELEVANT PROJECT EXPERIENCE Washington AUBURN Interim Water, Wastewater, and Stormwater Utility Rate Analysis Water, Sewer, and Stormwater Utility Rate Study BAINBRIDGE ISLAND Sewer Rate Study Storm and Surface Water Rate Study and Update Water, Wastewater, Storm, and Surface Water Rate Studies BATTLEGROUND Water System Plan Financial Program CARNATION Comprehensive Water Rate Study and Subsequent Updates Water Billing Audit Water Parity Certificate and Bond Support Water Project Financing Water System Plan Financial Chapter CASHMERE Sewer Financial On -Call Services Sewer Comprehensive Plan Financial Chapter Water and Sewer Rate Study CENTRALIA Stormwater Rate and Policy Development Study and Water and Wastewater Rate Studies and Subsequent Updates DUVALL Stormwater Rate Review Comprehensive Water System Plan and Subsequent Updates EATONVIILE Water Rate and Connection Fee Charge (CFC) Study and Financial Chapter ENUMCLAW Parity Certificate and Supporting Financial Analysis Water and Wastewater Rate and Charge Study Water Financial Chapter Karyn Johnson Resume Page 2 •FCS GROUP Solutions- Oriented Consulting Wholesale Water Connection Charge and Rate Study EVERETT Water, Sewer, and Storm Cost of Service Study Comprehensive Water Plan and Financial Chapter Water /Sewer /Storm Financial Services Studies Parity Certificate Water and Sewer Connection Charge Update and Model Review Wholesale Sewer Connection Fee Charge (CFC) Analysis and Update GIG HARBOR Water Comprehensive Plan Phase 2 and Financial Chapter KARCHER CREEK SEWER DISTRICT WEST SOUND UTILITY DISTRICT Comprehensive Sewer Plan and Rate Update Coverage Sufficiency Test Template Water, Sewer, and Sanitary Sewer Rate Studies and Updates KENT Sanitary Sewer Rate Study Stormwater Rate Study Water Rate Study Water Cost of Production Study KIRKLAND Water and Sewer Rate and General Facilities Charges Study and Subsequent Updates Water /Sewer Comprehensive Plan Financial Program Chapters LACEY Stormwater Comprehensive Plan Financial Program Development and Rate Study Water System Comprehensive Plan Financial Chapter Water Utility Rate and Charge Study LAKE WHATCOM WATER AND SEWER DISTRICT Water and Sewer Rate and Charge Studies and Subsequent Updates LUMMI TRIBAL WATER AND SEWER DISTRICT Phase 1 Sewer Capital Tariff Model /Analysis MANCHESTER WATER DISTRICT Water Financial Chapter and Update MASON COUNTY Sewer Rate and Financial Review Sewerage Financial Plans MONROE Sewer Rate Analysis and Study for the Department of Corrections Water, Sanitary Sewer and Stormwater Rate Study and Subsequent Updates MOUNTLAKE TERRACE Water System Plan and Financial Plan OLYMPIC VIEW WATER SEWER DISTRICT Water Sewer GFC Evaluation ORTING Water, Sewer, and Stormwater Rate and Charge Study PASADENA PARK IRRIGATION DISTRICT #17 Water Rate and Capital Facilities Charge Study REDMOND General Facilities Charge Update RENTON Water, Wastewater, and Surface Water Comprehensive Rate Study and System Development Charge Study SAMMAMISH Stormwater Utility Rate Study SHELTON Wastewater Revenue Requirement Study Water Revenue Requirement Study Sewer Master Plan Financial Program Chapter Water Master Plan Financial Program Chapter SKOKOMISH INDIAN TRIBE Potlatch Sewer Financial and Rate Analysis SKYWAY WATER SEWER DISTRICT Water and Sewer Bond Financing Support Karyn Johnson Resume Page 3 FCS GROUP Solutions Oriented Consulting Water and Sewer Rate Study and Subsequent Updates SPANAWAY WATER COMPANY Water System Financial Plan STANWOOD Large Meter Charge Analysis Water and Sewer Rates and Charges Study and Financial Analysis Water and Sewer Systems Comprehensive Plan Financial Chapters STEILACOOM Water and Sewer Rate Model Update W A PATO Water Rate Study WASHOUGAL Bonding Support Water System Plan Financial Program Chapter Stormwater Rate Study Water and Wastewater Rate and Charge Study WENATCHEE Sewer and Stormwater Utility On -Call Services Water and Sewer Revenue Requirement Updates and Rate Forecasts and General Facilities Charge Analyses Water, Sewer, and Stormwater Parity Certificates and Revenue Requirements and Updates with Related Financial Analysis Comprehensive Water, Sewer, and Stormwater Rate study YAKIMA 2012 Domestic Rate Study Update Domestic Water System Rate and Cost of Service Study and Subsequent Updates Irrigation Capital Improvement Program Financing Options Wastewater Rate and Charge Study Oregon EUGENE WATER ELECTRIC BOARD Water SDC Reviews and Consulting Services Water Rate Reviews and Consulting Services HILLSBORO Large Water User System Development Charge Payment Alternatives Water On -Call Rate Services Utilities Commission Water Rate and SDC Study and Subsequent Updates Water Customer Statistics Analysis KEIZER Water Rate Study, Model Review, and Subsequent Update Assistance ST. HELENS Residential Volume -Based Sewer Rate On- Call Analysis Water, Sewer, and Stormwater Rate Studies and Subsequent Updates Wholesale Water Rate Development and Negotiation Assistance; Subsequent Updates SCAPPOOSE Wastewater Rate Study SHERWOOD Future Water Supply Financial Evaluation Wastewater and Stormwater Rate and System Development Charge Study Water Rate and System Development Charge Study and Financial Chapter Water Revenue Requirement and Rate Forecast Update Alaska ANCHOARGE (MUNICIPALITY) Assessment of Residential Customer Water Test Meter Program DILLINGHAM (CITY) Water and Sewer Rate Study HAINES (BOROUGH) Water and Sewer Master Plan Financial Programs Water and Sewer Revenue Requirements Update and Acquisition Analysis of Crystal Cathedral Water and Sewer Systems (CCWSS) JUNEAU (CITY AND BOROUGH) Water and Sewer Cost Allocation and Rate Design Study Montana Nevada Karyn Johnson Resume Page 4 •FCS GROUP Solutions Oriented Consulting Review of In -House Water and Sewer Rate Updates and Model Review KELOWNA 2010 Water Rate Study Phase 1 KETC H I KAN Preliminary Stormwater Financial Services Water, Wastewater and Storm Drain Cost Allocation and Rate Design Study; Stormwater Utility Formation Ketchikan Pubic Utilities Water /Wastewater /Storm Drain Cost Allocation and Rate Design Study PETERSBURG Water, Wastewater, and Solid Waste Rate Study SITKA (CITY AND BOROUGH) Water System Master Plan Rate Study Sewer System Master Plan Rate Study BILLINGS Water and Wastewater Construction and System Development Fee Studies CLARK COUNTY WATER RECLAMATION DISTRICT Sewer Revenue Requirements and Cost of Service Analysis DOUGLAS COUNTY Water and Sewer Rate Studies and Subsequent Updates Water and Sewer Capital Connection Charge Studies and Subsequent Updates Water Enterprise Funds Consolidation Study and Subsequent Update FERNLEY Water and Sewer Rate and Charge Studies and Subsequent Updates LYON COUNTY Dayton Water and Sewer and Mound House Water Utility Rate Studies and Subsequent Updates SPARKS Sanitary, Storm and Effluent Sewer System Financial Rate Study WASHOE COUNTY Water, Recycled Water, and Wastewater Financial Policy and Funding Study Canada KELOWNA, B.C. Financial Policies Evaluation and Water Rate Strategy Water Rate Study and Subsequent Updates PUBLICATIONS /SEMINARS /SPEAKING ENGAGEMENTS Bench marking as a Tool for Gauging Utility Performance, Washington Finance Officers Association Annual Conference, September 2012 Financial Aspects of Asset Management, BCWWA Annual Conference, Kelowna, B.C., Canada, 2011 The Role of Financial Policies in Setting Cost -Based Rates, BCWWA Annual Conference, Whistler, B.C., Canada, 2010 Water Finance and Rates 101 Workshop; Kelowna Joint Water Commission, Kelowna, British Columbia, Canada, 2009 Implementing Cash Reserves to Promote Stability; WFOA Annual Conference, Bellevue, WA, 2009 Universal Metering What's Next? Implementing an Effective Water Pricing Strategy; BCWWA Annual Conference, Penticton, B.C. Canada, 2009 Designing Water Rates to Reflect Cost of Service and Support Water Sustainability, BCWWA Annual Conference, Whistler, BC, Canada, 2008 Long -Term Financial Rate Planning: Policies, Practices, and Tools for Successful Management, ACWA Spring Conference, Sacramento, CA, 2007 Transitioning to Universal Metering Water Conservation Rates, BCWWA Annual Conference, Whistler, BC, Canada, 2006 Karyn Johnson Resume Page 5 •FCS GROUP Solutions Oriented Consulting and Analyses DISTRICT OF NORTH VANCOUVER, BC Water, Sewer /Drainage, and Solid Waste /Recycling Utilities Rate Studies DISTRICT OF WEST VANCOUVER, B.C. Water and Sewer Rate Study and Subsequent Updates Basics of Cost of Service Rates, WFOA Regional Workshop, Tumwater, WA, 2005; and AWWA Inland Empire Subsection, Spokane, WA, 2002 Large and Unique Customers: Defining Costs and Structures, AWWA CA -NV Section 2005; Los Angeles, CA; and WFOA Annual Conference, Leavenworth, WA, 2004 Financial Forecasting for Water Irrigation Systems, Washington Finance Officers Association (WFOA) Annual Conference, Tacoma, WA, 2006; American Water Works Association (AWWA)Conference Spokane, WA, 2004;Washington State Water Resources Association (WSWRA)Annual Conference, Leavenworth, WA, 2002 Small System Ownership Options, AWWA National Conference Exposition, New Orleans, LA, 2002 Case Study: Evaluation of Water /Sewer Ownership Options, Pacific Northwest Pollution Control Association (PNPCA) Annual Conference, North Bend, OR, 2001 Importance of Long Range Financial Planning, Water Environment Short School, Oregon City, OR, March 1999 Managing Growth Through Implementation of System Development Charges, PNPCA Annual Conference, Portland, OR, October 1998 Wastewater Rates and Pricing Trends in Washington and Oregon, PNPCA Annual Conference, October 1997 Benchmarking for Utilities, AWWA California- Nevada Section Conference, San Jose, CA, April 1997 Alaska Water /Wastewater Rate Survey, December 1997 Oregon Water /Wastewater Rate Study, September 1996, September 1998 Washington Water /Wastewater Rate Study, Karyn Johnson Resume Page 6 4? FCS GROUP Solutions- Oriented Consulting August 1996, October 1998 California Wastewater Rate Study, May 1994, May 1996 California Water Charge Survey, May 1995, April 1993 California Changes Water Rates in Response to Drought, (Co- author) CONSERV93, Las Vegas, NV, December 1993 Sergey Tarasov is a project manager with FCS GROUP specializing in utility rate design and financial feasibility analysis for electric, water, sewer, stormwater and solid waste utilities. His areas of expertise are in customer statistics analysis creating customer specific profiles to aid in detailed load forecasting (electric), revenue requirement analysis, cost of service allocation, rate design analysis and unit cost determination. SERGEY TARASOV Project Manager B.S., Economics, University of Washington Mr. Tarasov is the lead analyst in FCS GROUP's electric utility rate group and has extensive modeling experience which allows for tailoring each model to meet individual client needs and facilitates the generation of sensitivity analysis to make sure the optimum rate strategy is selected. The analysis he develops from customer statistics has allowed clients to develop customized conservation rate structures (water specific) unique to their system characteristics. His work includes projecting purchased power costs from the Bonneville Power Administration (BPA) under prior existing wholesale rates and the Tiered Rate Methodology. In 2012 he conducted a two day presentation on electric cost of service rate setting to public utility managers in Washington State. Sergey has extensive modeling experience which allows for tailoring each model to meet individual client needs and facilitates the generation of sensitivity analysis to make sure the optimum rate strategy is selected. He routinely works with computer systems and automating rate models. His responsibilities include organizing and validating data and ensure that the right model and applications are applied and seamlessly integrated. As an FCS GROUP project manager, Sergey Sergey Tarasov Resume Page 1 •FCS GROUP Solutions Oriented Consulting CAREER SUMMARY 8 years (since 2005) professional experience 7 years (since 2006) experience in municipal rate and fee consulting Joined FCS GROUP in 2006 EXPERTISE Cost of Service Utility Rate Studies (Water, Sewer, Stormwater, Solid Waste, and Electric) System Development Charges (SDCs) /Connection Charges Comprehensive Plans Financial Elements Cost Benefit Analysis Rate Design Restructuring Utility Formation Multi -Year Financial Planning Capital Infrastructure Planning Funding Alternatives Bond Feasibility Analysis Reserve Analysis PROFESSIONAL AFFILIATIONS Pacific Northwest Clean Water Association Northwest Public Power Association will serve as the lead project consultant in direct support to Angie on this Port Angeles Utility Cost of Service Study. He has prior experience in working with each of the utilities identified in this study. RELEVANT PROJECT EXPERIENCE Washington ALDERWOOD WATER AND WASTEWATER DISTRICT Water and Sewer Utility Rate Study and General Facilities Charges (GFC) Charges Update BELFAIR WATER DISTRICT #1 Water Revenue Requirement Study BENTON COUNTY PUD Electric Consulting Services for Cost of Service Analysis BREMERTON Water, Sewer, and Stormwater Utility Rate Study BONNEY LAKE Water System Delivery Charge (SDC) and Rate Financial Analysis and Financial Plan CAMAS Water, Sewer, and Stormwater Revenue Requirement and SDC for Utility Rate Study CENTRALIA City Light Valuation and Divestiture Feasibility Study Electric Utility Rate Study and Cost of Service Update 2012 Electric Rate Study Update CHEHALIS Industrial Area Annexation Fiscal Impact Study COAL CREEK UTILITY DISTRICT Water and Sewer Rate Study Review and Update and Water Cost of Service Analysis COVINGTON WATER DISTRICT Water Long -Range Financial Plan Water Normalized Year Statistics Water Rate Study, Cost Allocation, Cost of Service, and Capital Facilities Charge (CFC) Update 2012 Water Rate Study Sergey Tarasov Resume Page 2 •FCS GROUP Solutions- Oriented Consulting COWLITZ COUNTY PUD Electric Financial On -Call and Rate Assistance FIRGROVE MUTUAL WATER COMPANY Water Utility Financial Plan and Share Charge Analysis FRANKLIN PUBLIC UTILITY DISTRICT #1 Electric Cost of Service Analysis, Rate Design Study, and Revenue Requirement Update 2012 Rate Analysis Services FRIDAY HARBOR Fire Cost Analysis Water, Sewer, and Stormwater Rates and Right to Connect Charges HIGHLINE WATER DISTRICT Water Utility Rate Studies and Connection Charge Update KING COUNTY WATER DISTRICT #49 Water Rate Study Technical Assistance LAKEHAVEN UTILITY DISTRICT Rate and Financial Services LAKEWOOD WATER DISTRICT Fire Cost Analysis Water On -Call Consulting Services Summit Wholesale Water Rates Water System Replacement and Rehabilitation and Planning LEWIS COUNTY FLOOD DISTRICT Flood District Formation LIBERTY LAKE SEWER AND WATER DISTRICT Sewer Rate and GFC Review LYNNWOOD Water, Sewer, and Stormwater Rate Study and Cost of Service Analysis Policy Review of Sewer Connection Charges MARYSVILLE SPUD Lake Stevens Water System Appraisal Advisory Services MERCER ISLAND Water Financial On -Call and Rate Assistance Water Rate Study and Sewer Connection Charges Update Sewer Rate Model Design MCCLEARY Water Utility Financial Plan and Connection Charge Study MUKILTEO WATER AND WASTEWATER DISTRICT Water and Wastewater Rate Study NORTH BEND Water and Wastewater Rate Study Sewer System GFC Study NORTHERN ECONOMICS Grandis Pond Development Impact PORT ANGELES Water, Wastewater, and Electric Utility Rate Studies RICHLAND Electric Utility Rate Design Cost of Service Review ROSLYN Water and Wastewater Utility Rate Study SNOHOMISH Water and Sewer Connection Fee and Capital Facility Charge (CFC) Update Water System Plan Financial Chapter Water Treatment Plant and Water Supply Study Water, Sewer, and Stormwater Utility Rate Study and Sewer Rate Update SULTAN Water and Wastewater Financial Chapter for Comprehensive Plans Alaska Idaho Sergey Tarasov Resume Page 3 •FCS GROUP Solutions- Onented Consulting Water Utility Rate Study WHATCOM COUNTY Birch Bay Stormwater Funding Analysis YELM Water and Sewer Financial Plan and Rate Forecasts and Updates Water Rate Study and Connection Charges Oregon ASTORIA Wastewater Treatment Plant Facilities Plan Financial Chapter CENTRAL POINT Transportation Utility Formation Study CLACKAMAS RIVER WATER Water Rate Analysis LAKE OSWEGO Water Financial On -call Consulting Services Sewer Utility Financial and Rate Construction Services Water Cost of Service Analysis Update WEST SLOPE WATER DISTRICT Water Cost of Service Rate Analysis and SDC Study KETCHIKAN PUBLIC UTILITIES Water, Wastewater, and Storm Drain Cost Allocation and Rate Design Study MOSCOW Water, Sewer, and Solid Waste Utility Rate Study PUBLICATIONS /SEMINARS /SPEAKING ENGAGEMENTS Electric Cost of Service and Rate Setting, February 8th and 9 Public Utility District Workshop, 2012 Conservation Pricing of H2O, Washington Finance Officers Association Annual Conference, 2010 Setting Conservation -Based Water Rates, Evergreen Rural Water of Washington Annual Conference, 2010 Selling Your Rate Increases, Evergreen Rural Sergey Tarasov Resume Page 4 •FCS GROUP Solutions Oriented Consulting Water of Washington Annual Conference, 2010 Can You Mine The Data Needed AWWA Customer Service /IM Tech Conference, 2010 Setting Water Rates to Promote Conservation, Partnership for Water Conservation Workshop, 2009 ANDY EVANCHO Technical Advisor M.A., Economics, University of Washington, Seattle, 1974 B.A., Economics, University of Washington, Seattle, 1972 Andy Evancho brings 30 years of public industry experience. He actively supported and participated in the public process used to establish rate and financial policies at Tacoma Power. Andy possesses the comprehensive technical knowledge of the electric rate study process, in addition to understanding the sensitivities surrounding political issues and implementation challenges. Andy Evancho has been responsible for the development of retail rates for Tacoma Power and Water while serving as its senior utility economist. These responsibilities included basic rate studies, proposals and oversight of the public rate process. In addition he developed sales and load forecasts for both organizations. He was also responsible for preparing financial and advanced rate design studies used by senior management and policymakers for the development of strategic planning objectiNes for Tacoma Public Utilities. During his 30 year tenure in the public industry, the last 27 spent at Tacoma Public Utilities, Mr. Evancho has managed the rate process for Tacoma Power and Water. He actively supported and participated in the public process used to establish rate and financial policies at Tacoma Power and Water including subsequent revisions of those policies which are used in the preparation of cost -of- service studies and final rate designs for each of the utilities. Other accomplishments included the development of the economic analysis used in the decision to develop Tacoma Water's Second Supply Andy Evancho Resume Page 1 ,FCS GROUP CAREER SUMMARY 30 years professional experience Joined FCS GROUP in 2012 EXPERTISE Rate and Financial Policy Development Rate studies, proposals, and oversight of public rate process Preparation of financial and other special studies for strategic planning Cost -of- service studies and advanced rate design Development of economic analysis Financial models for business plans Load and revenue forecasts Project cost analysis Electric utility deregulation Solutions- Oriented Consulting Project, creation of financial models used in the analysis for Tacoma Power and Water's business plans. In addition for 25 years he developed load and revenue forecasts which provided the basis of the Integrated Resource Plan for Tacoma Power to optimize its resource portfolio as well as the providing the basis for revenue projections used for budgeting at the utility. Mr. Evancho represented Tacoma Power during the Washington State legislative discussions and studies of electric utility deregulation. At FCS, Mr. Evancho assisted in the evaluation and design of advanced rate forms in an effort to assist the City of Richland in managing the impacts of the Bonneville Power Administration tiered rate design. This effort included evaluation of requirements to adequately support time based rate designs. Prior to joining Tacoma Power, from 1978 to 1983, Mr. Evancho worked for the San Diego Gas Electric Company as a senior economist. From 1977 to 1978, he worked for the Convair Andy Evancho Resume Page 2 <+FCS GROUP Solutions- Oriented Consulting Division of the General Dynamics Corporation in their advanced space concepts division. Upon graduation in 1974, Mr. Evancho began his career as an analyst /intelligence officer in Washington, D.C. As a technical advisor to the Port Angeles Utility Cost of Service Studies, Andy will assist Angie on technical elements specific to the electric utility. CATHERINE OTTEN Analyst M.B.A., Leadership Formation, Seattle University B.A., International Relations, Boston University Catherine Otten is a utility rate analyst who provides analytical and technical support on water, sewer, stormwater, and solid waste utilities. Among her recent work, she has created financial plans for Lakewood Water District, the City of Lynnwood, and a number of cities in Idaho. In addition to financial plans, she has worked closely with a number of Idaho cities and their attorneys to develop a legally acceptable methodology for Capacity Fees (GFCs), which are currently a contentious issue in that state. She also worked with a regional wastewater provider in Central Washington to create a model that reconciled capacity allocation between partners, showed how their legal agreement for a wastewater treatment plant affected their historical and future payment schedules and created a worksheet for internal use that calculates their required pre payments and end of the year reconciliations. As the primary analyst for this Port Angeles Utility Cost of Service Study, she will be working directly with both Angie and Sergey to Catherine Otten Resume Page 1 •FCS GROUP Solutions- Oriented Consulting CAREER SUMMARY 8 years professional experience Joined FCS GROUP in 2011 EXPERTISE Financial Planning and Analysis Long -range Planning Sustainable Practices Training Nonprofits Presentation of Results to Stakeholders through Social Media PROFESSIONAL AFFILIATIONS Net Impact, Seattle Chapter Washington State Recycling Association (WSRA) provide analysis on solid waste, water, wastewater and electric utilities. RELEVANT PROJECT EXPERIENCE Washington BELLEVUE Water Rate Structures and Revenue Stability Study BLAINE Water Rate Update Wastewater Rate Update BREMERTON Water, Sewer, and Stormwater Utility Rate Study CLE ELUM Upper Kittitas County Regional WWF Rate Assistance DES MOINES Stormwater Issue Papers and Cost of Service Analysis KING COUNTY CONSERVATION DISTRICT Rate Structure Development LAKEWOOD WSP Financial Chapter LAKEWOOD WATER DISTRICT On Call Consulting Services 2012 LYNNWOOD Comprehensive Water System Plan Chapter Water, Sewer, and Stormwater Rate Study NORTH BEND Water and Wastewater Rate Study OLYMPIA Water Rate Update PIERCE CONSERVATION DISTRICT Rate Development Study PORT TOWNSEND Financial Reporting and Reports Review REDMOND Water and Wastewater GFC Study 2009 -2010 Water and Sewer Rate Study Idaho Catherine Often Resume Page 2 •FCS GROUP Solutions- Onented Consulting RONALD WASTEWATER DISTRICT Finanical plan and Rate Forecast SAMMAMISH PLATEAU WATER AND SEWER DISTRICT Water and Sewer GFC Financial Consulting SPOKANE COUNTY Wastewater Ongoing Rate Consultation YELM Water System Financial Plan Update Oregon ASTORIA Wastewater Treatment Plant Facilities Plan Rate Study Section Update LAKE OSWEGO Wholesale Water Rate Study On -Call Financial Consulting Services for Water and Sewer COEUR D'ALENE Water System Plan Financial Plan and Rate Forecast Stormwater Rate Study HAYDEN AREA REGIONAL SEWER BOARD (HARSB) Cap Fee and Financial Plan Update HAYDEN Sewer Capitalization Fee Update HAYDEN AREA REGIONAL SEWER BOARD Financial Plan and Capacity Fee Update MOSCOW Water, Sewer, and Solid Waste Utility Rate Study POST FALLS Sewer Financial Plan and Capacity Fee Update Chris Gonzalez is an FCS GROUP project manager with 10 years of utility rate and finance experience. His work to date includes standard cost of service rate studies, connection charge studies, and the derivation of specialized rate structures such as interruptible water service rates and wholesale water rates. He is also experienced with Washington State's excise tax rules, having spent a substantial amount of time working with the Washington State Department of Revenue on excise tax audits on behalf of FCS GROUP clients around Washington State. Mr. Gonzalez's modeling experience involves the development of sophisticated, user fri endly rate models that take advantage of innovative dashboard features. The application of his modeling approach facilitates financial scenario review and analysis. Mr. Gonzalez has recently conducted presentations for public water and sewer managers on the topic of addressing rate relief during economic hard times. Chris Gonzalez specializes in developing utility rates and connection charges, having served numerous water and wastewater utilities around Washington and in other western states. He has assisted utilities in their consideration of a variety of fiscal policy and other issues including system reinvestment for long -term asset management, benchmarking and managing reserve levels, wholesale rates (and other differential rate structures based on the level and cost of service), and sensitivity analysis. In recent work with his clients, he has facilitated discussion and prioritization of conceptual rate structure objectives by utility staff and elected CHRIS GONZALEZ Project Manager B.S.E, Operations Research and Financial Engineering, Princeton University Chris Gonzalez Resume Page 1 ,FCS GROUP Solutions Oriented Consulting CAREER SUMMARY 10 years experience in municipal rate and fee consulting Joined FCS GROUP in 2003 EXPERTISE Utility Rate Studies (Water, Sewer) Impact Fees /Connection Charges /SDCs Wholesale Rate Setting Water Supply Economic Analysis Feasibility Studies Excise Tax Audits Revenue Requirements Utility Fiscal Policy Analysis PROFESSIONAL AFFILIATIONS American Water Works Association officials in an interactive workshop format this additional element has provided useful insight in developing rate structure recommendations that align well with client needs and priorities. Chris is also experienced in developing user friendly models as dynamic planning tools that can accommodate changing conditions and assumptions. Chris will be involved in the Port Angeles Utility Cost of Service Studies, as needed, as it relates to optional tasks inclusive of excise tax. As an FCS GROUP project manager, he also provides additional depth to the team in terms of providing back -up to Sergey and Catherine. RELEVANT PROJECT EXPERIENCE Washington AIRWAY HEIGHTS Water and Sewer Rate Development and Cost of Service Updates 2010 Water, Sewer, and Reclaimed Water Cost of Service Rate Study 2011 Water and Wastewater Rate Update 2012 On -Call Financial Consulting Services BELLEVUE Water Rate Structures and Revenue Stability Study Water, Sewer, Drainage Utility Excise Tax Refund Services Wholesale Water Supply Cost Analysis BELLINGHAM Water and Sewer Rate and System Development Charge (SDC) Study and Updates Water and Sewer Rate Study Stormwater Rate Study Special Sewer Rate Issues Analysis Marginal Water Cost Analysis BIRCH BAY WATER AND SEWER DISTRICT Water General Facilities Charge (GFC) Study Water and Sewer Cost of Service and Rate Structure Updates BLAINE 2009 Water Rate Update 2010 Water and Sewer Cost of Service Rate Support 2010 Wholesale Water Rate Support 2011 Wastewater and Water Rate Update 2011 Wholesale Water Rate Support BREMERTON Utility Rate Study CARNATION Comprehensive Water Rate Study Update CASCADE WATER ALLIANCE Water System Financial Plan Ongoing Financial Support Chris Gonzalez Resume Page 2 •FCS GROUP Solutions- Oriented Consulting 2010 General Rate and Financial Support Wholesale Negotiations Support HIGHLAND WATER DISTRICT Water Rate and Connection Fee Update KENNEWICK IRRIGATION DISTRICT Water Cost of Service and Rate Study KING COUNTY WATER DISTRICT #45 Water General Facilities Charge (GFC) Study LAKEWOOD WATER DISTRICT 2012 On Call Consulting Services LIBERTY LAKE SEWER AND WATER DISTRICT 2010 CFC and Sewer Rate Update MUKILTEO WATER DISTRICT Water and Sewer Excise Tax Refund Support OLYMPIA 2009 and 2010 Water Commercial Rate Analysis and Cost of Service Rate Update 2009 Sewer Financial Chapter Update 2011 Water Rate Update 2012 Water Rate Update POINT ROBERTS WATER DISTRICT #4 2009 Water Rate and GFC Updates 2010 Commercial Water Rate Review 2011 Water Rate Update PORT ANGELES 2012 Electric Utility Tax Review PORT TOWNSEND Water and Wastewater Rate Update Water and Sewer Utility Rate Update and Water Supply /Treatment Analysis POULSBO Sewer Utility Financial Chapter REDMOND 2009 Water and Sewer GFC Update and Cost of Service Rate Study 2009 -2010 Water and Sewer Rate Study SALLAL WATER ASSOCIATION Water Rate Study SAMISH WATER DISTRICT 2010 Sewer Cost of Service Rate and GFC Update 2008 Sewer Rate Update SAMMAMISH PLATEAU WATER AND SEWER DISTRICT Water and Sewer Financial Consulting 2012 Assumption Feasibility Support Ames Lake Wholesale and Wheeling Rate Development SEATTLE PUBLIC UTILITIES Water, Wastewater, and Drainage Utilities Connection Charge Study SKAGIT COUNTY SEWER DISTRICT #2 Water Reclamation Cost Allocation Study SPOKANE COUNTY Wastewater Rate Update Wastewater Ongoing Rate Consultation WAPATO Water Rates Study WOODINVILLE WATER DISTRICT Rate Structure Conceptual Review YAKIMA Wastewater Rate and Charge Study California CARLSBAD Water, Recycled Water, Wastewater Cost of Service and Rate Design Study FRESNO Impact Linkage Fee Feasibility Study LAKE ARROWHEAD COMMUNITY SERVICES DISTRICT Comprehensive Financial Master Plan ORANGE COUNTY SANITATION DISTRICT 2008 Wastewater Revenue Program and PUBLICATIONS /SEMINARS /SPEAKING ENGAGEMENTS "Utility Excise Taxes", 2008. Rate Relief During Economic Hard Times, Washington Public Utility Districts Association, 2011 Chris Gonzalez Resume Page 3 •FCS GROUP Solutions- Oriented Consulting Rate Update Wastewater Capital Facilities Connection Charge Update SACRAMENTO COUNTY WATER AGENCY Water Rate Study Zone 41 Western Municipal Water District Financial and Economic On -Call Support Nevada DOUGLAS COUNTY Water and Sewer Cost of Service Rate and Connection Charge Studies for LYON COUNTY Dayton Water and Sewer and Mound House Water Utility Cost of Service Rate Studies WASHOE COUNTY Cost of Service Rate Analysis Truckee River Flood Area Funding Study Idaho MOSCOW Water, Sewer, and Solid Waste Utility Rate Study Arizona SCOTTSDALE Cost of Service Rate Study for the Water and Wastewater Rate Enterprise Funds Colorado WESTMINSTER Sewer Cost of Service Update Montana BILLING HEIGHTS WATER DISTRICT 2011 Resale Water Rate Review NATHAN REESE Project Consultant M.P.A., Maxwell School of Syracuse University B.A., International Politics, Brigham Young University Nathan Reese is a project consultant at FCS GROUP. His focus is on analytical work in support of the firm's management consulting efforts. His previous experience includes positions as a senior budget analyst and management analyst for local government. most recently in the Finance Department for the City of Bellevue, Washington. He has worked with several city departments, including transportation, and has performed various municipal /legal research functions. He has coordinated department budget narratives, prepared and analyzed data, and written various city -wide performance reports. As an intern, he ran city surveys on animal control and police services. His experience includes preparing cost allocation plans and conducting comprehensive development services fee and rate studies. He analyzes the cost of service for each type of fee and compares it with the fee charged, and performs a cost recovery analysis to determine of the cost recovery levels are consistent with cost recovery policies. Nathan has eight years of experience in building flexible, user friendly financial models fot local government for a variety of tasks, such as: Budget development Budget monitoring Revenue forecasting Indirect cost allocation Internal service fund charges Reserve contributions for equipment replacement, etc. Nathan Reese Resume Page 1 •FCS GROUP Solutions Oriented Consulting CAREER SUMMARY 9 years (since 2004) professional experience 5 years (since 2008) experience in municipal rate and fee consulting Joined FCS GROUP in 2008 EXPERTISE Financial Planning and Analysis Government Finance Budgeting Indirect Cost Allocation Plans Cost of Service Benchmarking and Comparative Studies Annexations and Development Analysis PROFESSIONAL AFFILIATIONS Member, Washington Finance Officers Association In addition to developing financial models, also has several years of experience in providing training and training materials to staff so that they can use the modeling tools we have developed for them. Nathan will be involved in the Port Angeles Utility Cost of Service Studies, as needed, as it relates to optional tasks inclusive of cost allocation. RELEVANT PROJECT EXPERIENCE Washington ABERDEEN Ambulance Cost of Service and Rate Study Update AIRWAY HEIGHTS Cost of Library Alternatives Public Safety Cost of Service Analysis AUBURN OMB A -87 Cost Allocation Plan and Model Revenue and Cost of Service Fee Study BLAINE East Maple Ridge Fiscal Analysis BONNEY LAKE Indirect Cost Allocation Plan CENTRALIA Indirect Cost Allocation Plan CLARK REGIONAL WASTEWATER DISTRICT Financial Analysis Services COWLITZ COUNTY Development and Building Permit Cost of Service and Fee Study FRANKLIN PUBLIC UTILITY DISTRICT #1 Electric Cost of Service Analysis and Rate Design Study FRIDAY HARBOR Fire Department Consolidation and Financial Analysis ISLAND COUNTY FIRE DISTRICT #1 Cost of Service and Financial Analysis KENNEWICK Cost Allocation Plan and Comprehensive Development Fee and Rate Study KING COUNTY Auditor's Office Assessment of the Wastewater Treatment Division's Productivity Initiative Evaluation of Local Hazardous Waste Management Program Rate Design KING COUNTY PARKS AND RECREATION Cost Recovery Policy and Fee Update Nathan Reese Resume Page 2 KITSAP COUNTY Indirect Cost Allocation Plan RIDGEFIELD Indirect Cost Plan Review •FCS GROUP Solutions Oriented Consulting MARYSVILLE Central Annexation Solid Waste Cost Benefit Analysis MASON COUNTY PUD #3 Facility Cost Benefit Analysis MERCER ISLAND EMS Cost of Service Study and Rate Update METRO PARKS TACOMA Administrative Performance Audit Facilities Cost Benefit Analysis MOUNTLAKE TERRACE Utility Overhead Analysis OCEAN SHORES Ambulance Cost of Service and Rate Study ORTING Water, Sewer, and Stormwater Rate and Charge Study PIERCE COUNTY Update of CMF Cost Benefit Analysis for Road Operations Wastewater Collections /Transportation Operations Center (WWC /TOC) Facility Cost Benefit Analysis and Update Consolidation of Natural Resource Lands Management PORT ANGELES PenCom Cost of Service and Rate Study PORT TOWNSEND Financial Reporting Process and Reports Review QUADRANT CORPORATION Impact Fee Review of the Proposed 2010 Snoqualmie Valley School District's Capital Facilities Plan SAMMAMISH Fire Services Cost Analysis Update and Briefings Fire Services Evaluation SILVER LAKE WATER AND SEWER DISTRICT Everett Annexation Analysis SPOKANE Comprehensive User Fee Study Update; Full Cost Allocation Plan, Benefit Rates, and Indirect Cost Rates Full Cost Allocation Plan and Indirect Cost Rates for Police Department SPOKANE COUNTY Cost Allocation and Jail Housing Rate Services SPOKANE Comprehensive User Fee Update Full Cost Allocation Plan, Benefit Rates, and Indirect Cost Rates STANWOOD Cost of Service and Financial Analysis Indirect Cost Allocation SUMNER Indirect Full Cost Allocation Plan SUNNYSIDE Ambulance Cost of Service and Rate Study TUKWILA Indirect Cost Allocation Plan Parks and Recreation Cost of Service and Cost Recovery Analysis VANCOUVER Development Review Services Cost of Service Update WASHINGTON STATE AUDITOR'S OFFICE Performance Based Contracting Review WASHINGTON STATE LIQUOR CONTROL BOARD Cost Allocation and Cost of Service Model Update WASHINGTON STATE INSTITUTE FOR PUBLIC: POLICY Wildfire Suppression Cost Study WEST RICHLAND Indirect Cost Allocation Plan Nathan Reese Resume Page 3 YAKIMA City and County Purchasing Merger Implementation Plan Oregon BEND Bend Community Development Fee Study Long -Term Financial Plan CENTRAL SCHOOL DISTRICT 13J Bond Project Performance Review CLACKAMAS COUNTY Review and Updates of Cost Allocation Plan DOUGLAS COUNTY Indirect Cost Allocation Plan •FCS GROUP MARION COUNTY Cost Allocation Plan Services Solutions Onented Consulting FOREST GROVE Water Rate and System Development Charge (SDC) Study HILLSBORO Building and Planning Support Analysis Indirect Cost Allocation Plan Community Development Cost of Service Study METRO PORTLAND Review of Solid Waste Disposal Charges MULTNOMAH COUNTY Land Use Division Fee Study NEWPORT Cost Allocation and User Fee Study OREGON STATE Department of Oregon State Police Administrative Cost Allocation Model SPRINGFIELD Development Review Cost Analysis and Recovery Methodology TIGARD Cost Allocation Plan and Indirect Rate Study Engineering Services Review California CAMPBELL Indirect Cost Allocation Plan and User Fee Study FRESNO Vehicle Impound Fee Analysis for Police Department INDIAN WELLS Business License Cost of Service Study LODI OMB A -87 Cost Allocation Plans and Indirect Cost Rates LOS GATOS Indirect Cost Allocation Plan and User Fee Study FY 2013 OMB A -87 Cost Allocation Plans and Indirect Cost Rates MADERA COUNTY County wide Cost Allocation Plan PALO ALTO Overtime and Staffing Analysis PUBLICATIONS /SEMINARS /SPEAKING ENGAGEMENTS Indirect Cost Allocation Plans, Puget Sound and Eastern Washington Finance Officers Association Seminar, May 2012 Indirect Cost Allocation Methods, Washington Finance Officers Association Annual Conference, Spokane, WA 2011 Nathan Reese Resume Page 4 GROUP Solutions- Onented Consulting POWAY Cost of Service and Fee Model Documentation Indirect Cost Allocation Model and Plan Update SAN FRANCISCO (CITY AND COUNTY) Cost Allocation Plan for the Department of Public Works SANTA PAULA Solid Waste Stranded Cost Analysis Arizona DEWEY HUMBOLDT Indirect Cost Allocation Plan and User Fee Study Nevada WASHOE COUNTY Water, Recycled Water and Wastewater Financial Policy and Funding Study Federal Government U.S. Forest Service Cost Review Panel for FY 2009 Large Fires Indirect Cost Allocation Methods, Washington Finance Officers Association Annual Conference, 2010 Good Management Practices Through Proper Budgeting Techniques, Evergreen Rural Water of Washington, February 2010 City of Port Angeles Utility Cost of Service Studies APPENDIX C DATA NEEDS REQUEST Appendix C Data Needs Request •>FCS GROUP •FCS GROUP Solutions- Oriented Consulting CITY OF PORT ANGELES 2013 Electric, Solid Waste, Transfer Station, Water and Wastewater Cost of Service Rate Study PRELIMINARY DATA NEEDS This preliminary data needs list is provided to allow the City to begin gathering information required for the study. For purposes of organizing the material that you gather for us, it would be helpful if you labeled each item in accordance with the number on this data request (e.g. F -1, F- 2, etc.). Please feel free to provide any additional data that has not been requested but you believe would be useful. Engineering /Planning Documents E -1 Comprehensive Planning Data. Please provide the City's most recent Water and Wastewater comprehensive plans or drafts of plans in progress, for each utility. E -2 Growth Estimates. Please provide growth estimates for new development connections per year; identify if growth estimates are different by utility and customer class (e.g. Water: single family, commercial; Electric: residential, general service, etc.) Financial Data F -1 Fixed Asset Listing. Please provide a listing of all water, wastewater and electric plant in service for most recen year ended (2012). Include: Plant account detail by function. Accumulated depreciation and annual depreciation. Identify any new "dedicated facilities" (e.g. facilities constructed or used for one identifiable customer or group of customers). F -2 Cash Balances. Please provide 2012 ending cash balances designated for each utility operating fund, capital fund, debt service reserves, and any other dedicated funding. F -3 Budget Revenue and Expense Reports. The 2013 preliminary budget was available on the City website by object summary. If possible, please provide the detailed 2013 budget revenues and expenditure line items for each utility. Please specify if the budget includes any planned increases or if there is a planned increase on top of the budget figures. F -4 Debt Service Repayment Schedules. Include records pertaining to long -term debt obligations. Relevant debt service obligations may include revenue bonds, state or federal loans, inter -fund loans, and other debt instruments. Include detail for annual principal and interest payments over the term of the repayment, coverage requirements, and debt reserve requirements. If the loans are combined loans (shared between utilities) please specify the percentage of the loan that each utility is responsible for. F -5 Purchased Power /Power Supply. Please provide the following: Access to the BPA portal. If this is not possible: Copy of monthly purchased generation and transmission power bills for October 2011 through present. Please supply all pages of the bills. Please provide the Utility's billing determinants (rates and billed units) Supply the name of the Utility's BPA account executive and contact 2013 Electric, Solid Waste, Transfer Station, Water and Wastewater Cost of Service! FCS Group 425.867.1802 Page 1 •FCS GROUP Solutions Oriented Consulting information. Please identify distribution system loss levels from transmission voltage to primary and primary to distribution, if known. If the requested voltage level separation is not available, identify expected system losses as a percentage of total purchases. Customer Data If additional rate design alternatives are to be considered, please provide the individual customer data described below. If rate design alternatives are not to be considered, please provide the annual summary by class of the information below. C -1 Detailed Water Customer Billing Data. Please provide an electronic file of detailed customer billing data from January to December 2012. At a minimum, please provide the following data fields for each account and each month: Account Customer class rate codes (residential, commercial, etc.) Meter size Volume billed Dollars billed C -2 Detailed Wastewater Customer Billing Data. Please provide an electronic file of detailed customer billing data from January to December 2012. At a minimum, please provide the following data fields for each account and each Please CC any emailed items to: Sergey Tarasov month: Account •A Customer class rate codes (residential, commercial, multifamily, etc.) Customer location (inside outside City) Volume billed Dollars billed C -3 Detailed Electric Customer Billing Data. Please provide an electronic file of detailed customer billing data from January to December 2012. At a minimum, please provide the following data fields for each account and each month: Account number Contact Information Please direct any questions and /or items collected as a part of this data request to: FCS GROUP Attention: Angie Sanchez Virnoche Redmond Town Center 7525 166 Ave NE, Suite D -215 Redmond, WA 98052 Customer class rate code Monthly billed kWh Monthly billed kW Monthly billed KVA Available time of use information by class C -4 Detailed Solid Waste Data. Please provide an electronic file of detailed customer billing data from January to December 2012. At a minimum, please provide the following data for the calendar year: Number of accounts by size and collection frequency Tonnage by waste type Other 0-1 Waste Management Contracts Tel: (425) 867 -1802, ext. 230 Fax: (425) 867 -1937 Email: angies @fcsgroup.com Email: sergeyt @fcsgroup.com 2013 Electric, Solid Waste, Transfer Station, Water and Wastewater Cost of Service 1 FCS Group 425.867.1802 Page 2 March 28, 2013 In reply refer to: PSW /Seattle Philip D. Lusk, Deputy Director Power and Telecommunications Systems City of Port Angeles P.O. Box 1150 Port Angeles, WA 98362 -0217 Dear Phil: .211 it/vtirtek)K. ,Lk t/►^2_ Shannon K. Greene Power Services Account Executive Enclosure Depeirtment of Energy Bonneville Power Administration Seattle Customer Service Center 909 First Avenue, Suite 380 Seattle, WA 98104 -3636 POWER SERVICES Enclosed is Revision No. 3 to Exhibit C of the City of Port Angeles' (Port Angeles) Power Sales Agreement Contract No. 09PB -13093 (Agreement). The changes in the attached revision are necessary to reflect Port Angeles' Tier 2 purchase amounts for the FY 2014 FY 2015 Rate Period. This Rate Period is unique because it is a combination of the first Purchase Period (FY12 -14) and the second Purchase Period (FY15 -19). Elections for the first Purchase Period were made by November 1, 2009 and elections for the second Purchase Period were made by September 30, 2011. Pursuant to the Agreement, this exhibit revision is unilateral and does not require a signature. Please feel free to contact me at (206) 220 -6775 if you have any questions or concerns. Sincerely, This revision updates section 2.5.2 to add Port Angeles' Tier 2 purchase amounts for the FY 2014 FY 2015 Rate Period. 1. FIRM REQUIREMENTS POWER AT TIER 1 RATES The portion of Port Angeles' purchase obligation that is priced at Tier 1 Rates is established in section 8.1(1) of the body of this Agreement. 2. FIRM REQUIREMENTS POWER AT TIER 2 RATES 2.1 Notice to Purchase Zero Amounts at Tier 2 Rates If Port Angeles elects not to purchase Firm Requirements Power at Tier 2 Rates for a Purchase Period, then by March 31 immediately following the corresponding Notice Deadline, BPA shall update this exhibit to indicate such election by adding an "X" to the applicable cell in the following table. Such election means that for the Purchase Period specified below, Port Angeles shall: (1) purchase zero amounts of Firm Requirements Power at Tier 2 Rates, and (2) serve all of its Above -RHWM Load that is greater than or equal to 8,760 megawatt -hours with power other than Firm Requirements Power. Port Angeles may serve its Above -RHWM Load that is less than 8,760 megawatt -hours with power other than Firm Requirements Power. 1 Zero Tier 2 1 Purchase Period 1 1 FY2012- FY2014 1 I FY 2015 FY 2019 1 FY 2020 FY 2024 1 FY 2025 FY 2028 2.2 Tier 2 Load Growth Rate Revision No. 3, Exhibit C PURCHASE OBLIGATIONS Effective March 31, 2013 2.2.1 First Election Opportunity If Port Angeles elects by the first Notice Deadline (November 1, 2009) to purchase Firm Requirements Power at Tier 2 Load Growth Rates starting October 1, 2011, then in its election Port Angeles shall elect one of the three Tier 2 Load Growth Rate options listed in section 2.2.3 of this exhibit. If Port Angeles elects Option 3, then Port Angeles shall state the amounts to be listed in the table in section 2.2.3.3 of this exhibit and Port Angeles' Tier 2 Short -Term Rate election pursuant to section 2.4.1 of this exhibit. BPA shall amend this exhibit by March 31, 2010, to indicate Port Angeles' election by adding an "X" to the "1st Notice Deadline" box next to the applicable option below. If Port Angeles does not elect to purchase Firm Requirements Power at Tier 2 Load Growth Rates by the first Notice Deadline, then Port Angeles shall not have the right to purchase Firm Requirements Power at Tier 2 Load Growth Rates during the first Purchase Period. 09PB- 13093, Port Angeles 1 of 11 2.2.2 Second Election Opportunity 2.2.2.1 If Port Angeles does not elect to purchase Firm Requirements Power at Tier 2 Load Growth Rates starting the first Purchase Period, then Port Angeles may purchase Firm Requirements Power at Tier 2 Load Growth Rates starting October 1, 2014, provided: (1) any elections of Tier 2 Rate alternatives or additions o F New Resources under this Agreement that extend beyond the initial Purchase Period shall continue to apply for their term, and (2) the Tier 2 Load Growth Rate applicable under this e lection may be different than the Tier 2 Load Growth Rate that was available during the first Purchase Period. 2.2.2.2 If Port Angeles elects by the second Notice Deadline (September 30, 2011) to purchase Firm Requirements Power at Tier 2 Load Growth Rates, then in its election Port Angeles shall elect one of the three Tier 2 Load Growth Rate options listed in section 2.2.3 of this exhibit. In such case, Port Angeles shall purchase Firm Requirements Power at Tier 2 Load Growth Rates under such elected option starting October 1, 2014. 2.2.2.3 If Port Angeles elects Option 3, described in section 2.2.3.3 of this exhibit, then Port Angeles shall state the amounts to be listed in the table in section 2.2.3.3 of this exhibit and Port Angeles' Tier 2 Short -Term Rate election pursuant to section 2.4.1 of this exhibit. If Port Angeles has prior elections of rate alternatives or resource additions that extend beyond the first Purchase Period, then Port Angeles shall not have the right to elect Options 1 or 2 below. In such case, the amounts listed in the table in section 2.2.3.3 of this exhibit shall not be less than the sum of Port Angeles' prior elections for each year. 2.2.2.4 BPA shall amend this exhibit by March 31, 2012, to indicate Port Angeles' election by adding an "X" to the "2nd Notice Deadline" box next to the applicable option below. If Port Angeles does not elect to purchase Firm Requirements Power at Tier 2 Load Growth Rates by the second Notice Deadline, then Port Angeles shall not purchase Firm Requirements Power at Tier 2 Load Growth Rates for the term of this Agreement. 09PB- 13093, Port Angeles 2 of 11 Revision No. 3, Exhibit C, Purchase Obligations 1st Notice Deadline 2nd Notice Deadline 1st Notice Deadline 2nd Notice Deadline 1st Notice Deadline 2nd Notice Deadline 2.2.3 Tier 2 Load Growth Rate Options 2.2.3.1 Option 1 Full Tier 2 Load Growth Rate If Port Angeles elects this option, then Port Angeles shall purchase Firm Requirements Power at Tier 2 Load Growth Rates for all of Port Angeles' Above -RHWM Load. 2.2.3.2 Option 2 Shared Rate Plan (1) Obligation If Port Angeles elects this option, provided that BPA determines Port Angeles qualifies under the limit for the Shared Rate Plan as established in section 7 of the TRM, then Port Angeles shall pay rates under the Shared Rate Plan for Firm Requirements Power purchased under this Agreement. If BPA determines Port Angeles does not qualify under such limit, then Port Angeles shall not have the right to elect this option and Port Angeles shall purchase Firm Requirements Power at Tier 2 Load Growth Rates under Option 1 as established in section 2.2.3.1 of this exhibit. For the second election opportunity stated in section 2.2.2 of this exhibit, availability under the limit for the Shared Rate Plan established in section 7 of the TRM shall equal such limit minus the amounts used by other customers who elected this Option 2 by the first Notice Deadline (2) Terminating Participation Port Angeles may terminate participation in the Shared Rate Plan by providing BPA notice in writing by March 31 of a Forecast Year. In such case, the change shall be effective the next Rate Period. If Port Angeles stops participation in the Shared Rate Plan, then Port Angeles shall not have the right to resume participation. Port Angeles shall continue to purchase Firm Requirements Power priced at Tier 2 Load Growth Rates for all of Port Angeles' Above -RHWM Load. 2.2.3.3 Option 3 Partial Tier 2 Load Growth Rate If Port Angeles elects this option, then Port Angeles shall purchase Firm Requirements Power at Tier 2 Load Growth Rates for all of Port Angeles' Above -RHWM Load minus the amounts stated in the table below that Port Angeles elects are not subject to Tier 2 Load Growth Rates. Port Angeles shall establish such amounts at the time Port Angeles elects this option and such amounts shall not change for the term of this Agreement. Port Angeles may serve such amounts with Dedicated Resources or with Firm Requirements Power 09PB- 13093, Port Angeles 3 of 11 Revision No. 3, Exhibit C, Purchase Obligations purchased at other Tier 2 Rates. BPA shall update the table below by March 31 immediately following Port Angeles' election of this option. Load Amounts Not Subject To Tier 2 Load Growth Rates (aMW) Fiscal Year 1 2012 1 2013 1 2014 1 2015 1 2016 1 2017 1 2018 1 2019 1 2020 Annual aMW Fiscal Year 1 2021 1 2022 1 2023 1 2024 2025 1 2026 1 2027 1 2028 Annual aMW Note: Fill in the table above with annual Average Megawatts rounded to three decimal places. 2.2.4 Modification to Tier 2 Load Growth Rate Election 2.2.4.1 Notice Port Angeles shall have the right to stop purchasing Firm Requirements Power at Tier 2 Load Growth Rates effective the upcoming Rate Period, except for the amount established in section 2.2.4.2 of this exhibit. If Port Angeles chooses to modify its purchases at Tier 2 Load Growth Rates in this manner, then Port Angeles shall notify BPA in writing by October 31 of a Rate Case Year. 2.2.4.2 Continued Purchase Amount For the remaining term of this Agreement, Port Angeles shall continue to purchase at Tier 2 Load Growth Rates the amount of Firm Requirements Power that Port Angeles purchased at Tier 2 Load Growth Rates the year before the modification described above is effective. 2.2.4.3 Obligation to Apply Dedicated Resources If Port Angeles provides notice to modify its purchases at Tier 2 Load Growth Rates under section 2.2.4.1 of this exhibit, then for the remainder of the effective Purchase Period and all of the next Purchase Period, Port Angeles shall apply Dedicated Resources to serve all of its Above -RHWM Load that is in excess of the sum of all Tier 2 commitments 2.2.4.4 Charges to Modify Tier 2 Load Growth Rate Purchase Port Angeles shall be liable for payment of any costs that apply as a result of Port Angeles modifying its Tier 2 Load Growth Rate purchase obligation under this section 2.2.4. Such costs shall be those that BPA: (1) is obligated to pay and will not recover from Port Angeles at Tier 2 Load Growth Rates as a result of the modification, and (2) is unable to recover through other transactions. BPA shall determine such costs, if any, during the 7(i) Process that follows Port Angeles' notice. If BPA determines that Port Angeles owes payment for such costs, then Port Angeles shall pay the entire amount to BPA in no more than 24 equal monthly amounts starting 09PB- 13093, Port Angeles 4 of 11 Revision No. 3, Exhibit C, Purchase Obligations the first month of the upcoming Rate Period. In no event shall BPA make payment to Port Angeles as a result of Port Angeles modifying its Tier 2 Load Growth Rate purchase obligation under this section 2.2.4. 2.2.4.5 Exhibit Update By March 31 following Port Angeles' notice, BPA shall indicate Port Angeles' election to modify its Tier 2 Load Growth Rate purchase by filling in the table below. As established in section 2.2.4.2 of this exhibit, Port Angeles shall continue to purchase the following amounts of Firm Requirements Power at Tier 2 Load Growth Rates: Continuing Tier 2 Load Growth Rates Purchase Obligation Fiscal Year 2012 2013 2014 2015 2016 aMW Fiscal Year 2017 2018 2019 2020 2021 aMW Fiscal Year 2022 2023 2024 2025 2026 aMW Fiscal Year 2027 2028 aMW Note: Fill in the table above with annual Average Megawatts, rounded to three decimal places, for each year that follows Port Angeles' modification beginning with the effective year of modification 2.3 Tier 2 Vintage Rates If Port Angeles elects Option 1 or 2 in section 2.2.3 of this exhibit, then this section shall not apply. Otherwise: 2.3.1 Election Process 2.3.1.1 Right to Convert Subject to the amounts of power BPA makes available at one or more Tier 2 Vintage Rates, Port Angeles shall have the right to convert some or all of the amounts of Firm Requirements Power it has elected to purchase at Tier 2 Short -Term Rates, as stated in section 2.4 of this exhibit, to an equal purchase amount at Tier 2 Vintage Rates. 2.3.1.2 Statement of Intent If Port Angeles elects to purchase Firm Requirements Power from BPA at Tier 2 Vintage Rates, then Port Angeles shall sign a Statement of Intent offered by BPA. "Statement of Intent" means a statement prepared by BPA and signed by Port Angeles that describes the approach and cost structure that will be used for a specific Tier 2 Cost Pool. If BPA establishes a Tier 2 Cost Pool for a Tier 2 Vintage Rate consistent with the Statement of Intent, then Port Angeles agrees to have the portion of its Tier 2 Rate power purchase 09PB- 13093, Port Angeles 5 of 11 Revision No. 3, Exhibit C, Purchase Obligations specified in the Statement of Intent priced at that rate. If BPA is unable to establish the Tier 2 Cost Pool for the specific Tier 2 Vintage Rate, then Port Angeles agrees to purchase such amount of Firm Requirements Power at Tier 2 Short Term Rates, except as stated in section 2.3.1.5 of this exhibit. 2.3.1.3 Insufficient Availability The Statement of Intent shall include procedures to allocate between competing applications for a specific Tier 2 Cost Pool if requests exceed amounts available. 2.3.1.4 Conversion Costs Upon establishment of a Tier 2 Vintage Rate for which Port Angeles signed a Statement of Intent, Port Angeles shall be liable for payment of any outstanding costs under Tier 2 Short -Term Rates that apply to Port Angeles. Such costs shall be those that BPA: (1) is obligated to pay and will not recover from Port Angeles under Tier 2 Short -Term Rates as a result of the conversion, and (2) is unable to recover through other transactions. BPA shall determine such costs, if any, in the first 7(i) Process that establishes the applicable Tier 2 Vintage Rate. In no event shall BPA make payment to Port Angeles as a result of Port Angeles' conversion of purchase amounts at Tier 2 Short -Term Rates to purchase amounts at Tier 2 Vintage Rates. 2.3.1.5 Additional Offerings In addition to the right to convert to Tier 2 Vintage Rates established in section 2.3.1.1 of this exhibit, Port Angeles may have the opportunity to purchase Firm Requirements Power al; Tier 2 Vintage Rates regardless of whether Port Angeles is purchasing at Tier 2 Short -Term Rates if: (1) BPA determines, in its sole discretion, that all requests for service at Tier 2 Vintage Rates by purchasers of Firm Requirements Power at Tier 2 Short -Term Rates are able to be satisfied, and (2) BPA determines, in its sole discretion, to offer Port Angeles a Statement of Intent that would provide Port Angeles the opportunity to purchase Firm Requirements at Tier 2 Vintage Rates. If Port Angeles signs a Statement of Intent offered by BPA pursuant to this section 2.3.1.5, and if BPA is unable to establish the Tier 2 Cost Pool for the applicable Tier 2 Vintage Rate, then Port Angeles' current elections for service to its Above -RHWM Load shall continue to apply. 09PB- 13093, Port Angeles 6 of 11 Revision No. 3, Exhibit C, Purchase Obligations Except as provided in this section 2.3.1, any election by Port Angeles to purchase Firm Requirements Power at Tier 2 Vintage Rates shall not relieve Port Angeles of any obligation to purchase Firm Requirements Power at another Tier 2 Rate. 2.3.1.6 Exhibit Updates By September 15 immediately following the establishment of a Tier 2 Vintage Rate for which Port Angeles signed a Statement of Intent, BPA shall amend this exhibit to show Port Angeles' Tier 2 Vintage Rate purchases and remove Port Angeles' Tier 2 Short -Term Rate purchases by the amounts purchased at the Tier 2 Vintage Rate, if Port Angeles is converting to the Tier 2 Vintage Rate from the Tier 2 Short Term Rate. BPA shall insert applicable tables, terms, and conditions for each Tier 2 Vintage Rate in section 2.3.2 of this exhibit. 2.3.2 Vintage Rate Elections Port Angeles has no Tier 2 Vintage Rate elections at this time. 2.4 Tier 2 Short -Term Rate If Port Angeles elects Option 1 or 2 in section 2.2.3 of this exhibit, then this section shall not apply. Otherwise: 2.4.1 Short -Term Rate Purchases Unless Port Angeles elects, in section 2.1 of this exhibit, not to purchase Firm Requirements Power at Tier 2 Rates for a given Purchase Period, by each Notice Deadline Port Angeles shall elect in writing either alternative (A) or (B) below for the duration of the corresponding Purchase Period. If Port Angeles elects alternative (A) and elects to apply Dedicated Resources to serve its Above -RHWM Load, then Port Angeles shall state the amounts to be listed in the table in section 2.4.1.1(2) of this exhibit. If Port Angeles elects alternative (B), then Port Angeles shall state the amounts to be listed in the table in section 2.4.1.3 of this exhibit. By March 31 immediately following each Notice Deadline, BPA shall update the tables in this section 2.4.1 to show Port Angeles' Tier 2 Short -Term Rate election for the corresponding Purchase Period. 2.4.1.1 Alternative A Customer Planned Load Not Otherwise Served If Port Angeles elects this alternative, then Port Angeles shall purchase Firm Requirements Power priced at Tier 2 Short -Term Rates to serve all of Port Angeles' Above -RHWM Load that Port Angeles has not otherwise agreed to serve with: 09PB- 13093, Port Angeles 7 of 11 Revision No. 3, Exhibit C, Purchase Obligations (1) Firm Requirements Power purchased at other Tier 2 Rates, or (2) the amounts of Dedicated Resources, stated in the table below, that Port Angeles shall apply during the Purchase Period to serve its Above -RHWM Load. If Port Angeles purchases power at Tier 2 Load Growth Rates, then these Dedicated Resource amounts shall not exceed the amounts stated in the table in section 2.2.3.3 of this exhibit. Purchase Period Dedicated Resource Elections Fiscal Year 2012 2013 2014 2015 2016 Election 0.000 0.000 0.000 0.000 0.000 Fiscal Year 2017 2018 2019 2020 2021 Election 0.000 0.000 0.000 Fiscal Year 2022 2023 2024 2025 2026 Election Fiscal Year 2027 2028 Election Note: Insert amounts in Average Megawatts rounded to three decimal places for each year of the applicable Purchase Period. 2.4.1.2 Alternative B Limited Amounts If Port Angeles elects this alternative, then Port Angeles shall purchase Firm Requirements Power at Tier 2 Short Term Rates to serve Port Angeles' Above -RHWM Load that Port Angeles has not otherwise agreed to serve with Firm Requirements Power purchased at other Tier 2 Rates; provided. however, that amounts purchased at Tier 2 Short Term Rates shall not exceed the amounts (including zero amounts) stated in the table in section 2.4.1.3 of this exhibit. Port Angeles agrees to serve any of its remaining Above RHWM Load with power other than Firm Requirements Power. 2.4.1.3 Tier 2 Short -Term Rate Elections If Port Angeles elects alternative (A) above, then BPA shall indicate that election by adding an "X" to the table below for each year of the applicable Purchase Period. If Port Angeles elects alternative (B) above, then BPA shall indicate that election by adding amounts (in Average Megawatts rounded to three decimal places) to the table below for each year of the applicable Purchase Period. 09PB- 13093, Port Angeles 8 of 11 Revision No. 3, Exhibit C, Purchase Obligations Tier 2 Short -Term Rate Table Fiscal Year 2012 2013 2014 2015 Election X X X X Fiscal Year 2017 2018 2019 2020 Election X X X Fiscal Year 2022 2023 2024 2025 Election Fiscal Year 2027 2028 Election 2016 X 2021 2026 2.4.2 Right to Reduce Tier 2 Short -Term Rate Purchase Amounts 2.4.2.1 Notice If Port Angeles notifies BPA in writing by October 31 of a Rate Case Year, then Port Angeles may reduce, in equal amounts for all hours of the year, some or all of the amounts of Firm Requirements Power that Port Angeles is obligated to purchase at Tier 2 Short -Term Rates. The reduction may take effect in either year of the upcoming Rate Period and shall be effective for the remaining duration of the applicable Purchase Period(s). In its written notice, Port Angeles shall state the amount of the reduction and the date the reduction shall take effect. Port Angeles shall replace all reduced Tier 2 Short -Term Rate purchase amounts with amounts of Dedicated Resources applied pursuant to section 3.3 of the body of this Agreement. 2.4.2.2 Charges to Reduce Purchase Amounts Port Angeles shall be liable for payment of any costs that apply as a result of Port Angeles reducing, under section 2.4.2.1 of this exhibit, the amounts of Firm Requirements Power that Port Angeles is obligated to purchase at Tier 2 Short -Term Rates. Such costs shall be those that BPA: (1) is obligated to pay and will not recover from Port Angeles under Tier 2 Short -Term Rates as a result of the reduction, and (2) is unable to recover through other transactions. BPA shall determine such costs, if any, during the 7(i) Process that follows Port Angeles' notice. If BPA determines that Port Angeles owes payment for such costs, then Port Angeles shall pay the entire amount to BPA in no more than 24 equal monthly amounts starting the first month of the upcoming Rate Period. In no event shall BPA make payment to Port Angeles as a result of Port Angeles reducing the amounts of Firm Requirements Power that Port Angeles is obligated to purchase at Tier 2 Short -Term Rates. 2.4.2.3 Exhibit Updates By March 31 following Port Angeles' notice, BPA shall revise this exhibit and Exhibit A to show Port Angeles' reduced 09PB- 13093, Port Angeles 9 of 11 Revision No. 3, Exhibit C, Purchase Obhgations Fiscal Year Tier 2 Short -Term Rate purchase amounts and Port Angeles' Dedicated Resource additions. 2.5 Amounts of Power to be Billed at Tier 2 Rates 2.5.1 Treatment for FY 2012 FY 2013 By March 31, 2010, BPA shall update the table in section 2.5.2 of this exhibit, consistent with Port Angeles' elections, with amounts of Firm Requirements Power which Port Angeles shall purchase at applicable Tier 2 Rates for the FY 2012 FY 2013 Rate Period. 2.5.2 Amounts of Power for Subsequent Rate Periods For each Rate Period after the FY 2012 FY 2013 Rate Period, BPA shall establish for the upcoming Rate Period consistent with Port Angeles' elections: (1) the planned annual average amounts of Firm Requirements Power which Port Angeles shall purchase at applicable Tier 2 Rates, and (2) any remarketed Tier 2 Rate purchase amounts in accordance with section 10 of the body of this Agreement. By March 31, 2013, and by March 31 of each Rate Case Year thereafter, BPA shall update the table below with such amounts for each year of the upcoming Rate Period. Annual Amounts Priced at Tier 2 Rates (aMW) 1 2012 1 2013 1 2014 1 2015 1 2016 1 2017 1 2018 1 2019 1 2020 Tier 2 Short -Term 0.000 0.000 0.000 0.000 Rate Remarketed Amounts 1 Fiscal Year 1 2021 1 2022 1 2023 1 2024 1 2025 1 2026 1 2027 1 2028 1 No Tier 2 at this time Remarketed Amounts Notes: 1. List each applicable Tier 2 rate in the table above. For the first applicable Tier 2 rate replace No Tier 2 at this time with the name of the applicable Tier 2 rate. For each additional Tier 2 rate, add a new row above the Remarketed Amounts row. If Port Angeles elects not to purchase at Tier 2 rates, then leave No Tier 2 at this time in the table and leave the remainder of the table blank. 2. Fill in the table above with annual Average Megawatts rounded to three decimal places. 3. MONTHLY PF RATES Applicable monthly Tier 1 and Tier 2 Rates are specified in BPA Wholesale Power Rate Schedules and GRSPs. 09PB- 13093, Port Angeles 10 of 11 Revision No. 3, Exhibit C, Purchase Obligations 4. REVISIONS BPA shall revise this exhibit to reflect Port Angeles' elections regarding service to its Above -RHWM Load and BPA's determinations relevant to this exhibit and made in accordance with this Agreement. (PSW /Seattle S \PM \CUST_SKG \PORT ANGELES \PSC_2009_PF_Reg.onal Dra10gue \Exhibit C \Exh C_Rev# 3 Tier 2 FY 14 15 \PA33093 20130328 Exh C_Rev#3_Final doc) 03/28/2013 09PB- 13093, Port Angeles 11 of 11 Revision No. 3, Exhibit C, Purchase Obligations