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SAIC Energy , Environment and Infrastructure, LLC

SAIC Energy , Environment and Infrastructure, LLC. How to Conduct a Water and Sewer Cost of Service Study for Your Utility. Oklahoma Municipal League, Wednesday September 26, 2012. Dave Yanke (512) 651-6401 david.s.yanke@saic.com . Why Do a Cost of Service Study?.

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SAIC Energy , Environment and Infrastructure, LLC

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  1. SAIC Energy, Environment and Infrastructure, LLC How to Conduct a Water and Sewer Cost of Service Study for Your Utility Oklahoma Municipal League, Wednesday September 26, 2012 Dave Yanke (512) 651-6401 david.s.yanke@saic.com

  2. Why Do a Cost of Service Study? • Determine the Cost for 1,000 Gallons of Water • Determine the Cost of Wastewater Treatment • Allocate Costs to Appropriate Users • Reduce Risk of Potential Disputes

  3. Steps in Developing a Cost of Service Based Rate • Gather Data • Calculate the Revenue Requirement • Cost Allocation • Rate Design • Sell It!

  4. Data Collection • Accounting Data • Budgets • Asset Records • Billing Information • Production Data • Water Production • Water Sales, by Customer Class • Lost and Unaccounted for Water • Other NOTE: Accurate Data is Essential!!!

  5. Revenue Requirement • Cash Basis • O&M Costs • Principal and Interest • Capital Improvements • Revenue Offsets • Utility Basis • O&M Costs • Depreciation Expense • Return on Investment • Revenue Offsets

  6. Revenue Requirement (cont’d) Using a Cash Basis: • O&M Costs • Salaries & EE Benefits • Utilities • Chemicals • Supplies Adjust for: Normalization; Annualization; and Known and Measurable Changes • Principal & Interest • Capital Improvements • Revenue Offsets

  7. Cost Allocation • Determine Customer Classes • Allocation Criteria • Average Usage • Peak Demand • Customer Costs • Allocation of Costs to Customer Classes

  8. Rate Design • Maximize Resources First • Meter Accuracy • Revenue Sources • Operational Efficiencies

  9. Establish Rate Design Goals and Objectives • Equity • Conservation • Financial Stability • Simplicity • Ease of Implementation • Impact on Customers • Socio-Economic Issues

  10. Historic Water Rate Structures • Flat Rate • Declining Block

  11. Other Water Rate Structures • Uniform Volume Rates • Inclining Block Rates • Seasonal Rates • Rates Scheduled by Customer Class • Marginal Cost Pricing ( less common) • Life-Line Rates (phasing out) • Adjustment Clauses

  12. Wastewater Rate Structures • Minimum Bill • Volumetric Rate • Surcharges • BOD • TSS

  13. Gaining Acceptance for New Rates and Rate Structures • Consider Social Issues • Study Advantages – Disadvantages of Rate Designs • Monitor National and Regional Trends • Develop Public Relations Campaign • Give Ample Notice • Educate Your Skeptics

  14. Case Studies • Hobbs, New Mexico • Sugar Land, Texas • Stillwater, Oklahoma • Fort Worth, Texas

  15. Begin Preparing Now • Gather Information • Plan Ahead • Develop Awareness of Outside Forces Influencing Your Operation • Consider Conservation Goals, Objectives and Requirements

  16. Questions Dave Yanke, Vice President SAIC Energy, Environment & Infrastructure, LLC 5806 Mesa Drive, Suite 310 | Austin, Texas 78731 Tel: 512-651-6401 | Email: david.s.yanke@saic.com Visit us at saic.com/EEandI

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