HomeMy WebLinkAboutWater Cost of Service and Rate Design Study Draft Report - 07-28-2022
Water Cost of Service and Rate Design Study
Draft Report / July 28, 2022
Otay Water
District
445 S Figueroa St, Suite 1925
Los Angeles CA 90071 www.raftelis.com
August 18, 2022
Mr. Joe Beachem
Chief Financial Officer
Otay Water District
2554 Sweetwater Springs Blvd.
Spring Valley, CA 91978
Subject: Water Cost of Service and Rate Design Study
Dear Mr. Beachem,
Raftelis is pleased to provide this Water Cost of Service and Rate Study Report to the Otay Water District. The
study’s purpose was to review and update the District’s potable and recycled water rates. This report provides a
detailed cost of service analysis that reasonably allocates cost to District customers and proposes a water rate
schedule that recovers the cost to serve those customers.
It has been a pleasure working with you and we thank you, Kevin Koeppen and other District staff for the support
provided to Raftelis during this study.
Sincerely,
Steve Gagnon, PE (AZ)
Sr. Manager
WATER COST OF SERVICE AND RATE DESIGN STUDY
Table of Contents
1. EXECUTIVE SUMMARY................................................................................................................... 1
1.1. Study Overview ................................................................................................................................. 1
1.2. Proposed Rate Structure Changes ................................................................................................... 1
1.2.1. Revised SFR and MFR Tier Definitions ............................................................................................ 1
1.2.2. Creation of Distinct Commercial and Public Customer Classes ....................................................... 2
1.2.3. Creation of Construction Customer Class ......................................................................................... 2
1.3. Proposed Water Rates ...................................................................................................................... 2
1.4. Bill Impacts ........................................................................................................................................ 6
2. INTRODUCTION ............................................................................................................................... 7
2.1. Agency Overview ............................................................................................................................... 7
2.2. Study Overview ................................................................................................................................. 7
2.3. Current Water Rates .......................................................................................................................... 7
2.4. Proposed Rate Structure Changes ................................................................................................... 9
2.4.1. Revised SFR and MFR Tier Definitions ............................................................................................ 9
2.4.2. Creation of Distinct Commercial and Public Customer Classes ..................................................... 10
2.4.3. Creation of Construction Customer Class ....................................................................................... 10
3. LEGAL REQUIREMENTS .............................................................................................................. 11
4. RATE-SETTING METHODOLOGY ................................................................................................ 11
4.1. Rate Setting Process ....................................................................................................................... 11
4.2. Cost of Service Analysis .................................................................................................................. 12
4.2.1. Peaking and Maximum Day Water Use .......................................................................................... 12
4.2.2. Peaking Factor Calculation ............................................................................................................. 13
5. POTABLE COST OF SERVICE ANALYSIS .................................................................................. 15
5.1. Units of Service ............................................................................................................................... 15
5.1.1. Water Use and Peaking Units ......................................................................................................... 15
5.1.2. Customer Units ................................................................................................................................ 16
5.1.3. Fire Protection Units ........................................................................................................................ 18
5.1.4. Units of Service Summary ............................................................................................................... 20
5.2. Revenue Requirement..................................................................................................................... 21
5.3. Functionalization and Allocation of Expenses ................................................................................. 21
5.3.1. O&M Expense Allocation ................................................................................................................. 22
5.3.2. Capital Allocation ............................................................................................................................. 25
5.3.3. Revenue Offset Allocation ............................................................................................................... 27
5.4. Cost of Service Allocation ............................................................................................................... 29
OTAY WATER DISTRICT
5.4.1. Preliminary Cost of Service Allocation ............................................................................................ 29
5.4.2. Adjustments to Cost of Service ....................................................................................................... 30
5.4.3. Final Cost of Service Allocation ....................................................................................................... 30
5.5. Unit Cost Development.................................................................................................................... 31
5.6. Customer Class Costs ..................................................................................................................... 32
5.7. Customer Class Comparison .......................................................................................................... 33
6. PROPOSED POTABLE WATER RATES ...................................................................................... 35
6.1. Proposed Fixed Charges ................................................................................................................. 35
6.1.1. Proposed System Fees ................................................................................................................... 36
6.1.2. Proposed CWA / MWD Charges ..................................................................................................... 37
6.1.3. Proposed Private Fire Line Charges ............................................................................................... 37
6.2. Proposed Volume Rates ................................................................................................................. 39
6.2.1. Commodity Rate Component .......................................................................................................... 39
6.2.2. Demand Rate Component ............................................................................................................... 40
6.2.3. Tax OFfset Rate Component .......................................................................................................... 42
6.2.4. Total Proposed Volume Rate .......................................................................................................... 44
6.2.5. Energy Surcharge ............................................................................................................................ 44
6.3. Monthly Bill Impacts ......................................................................................................................... 44
7. RECYCLED COST OF SERVICE ANALYSIS ............................................................................... 47
7.1. Units of Service ............................................................................................................................... 47
7.1.1. Water Use and Peaking Units ......................................................................................................... 47
7.1.2. Customer Units ................................................................................................................................ 47
7.1.3. Units of Service Summary ............................................................................................................... 50
7.2. Revenue Requirement..................................................................................................................... 51
7.3. Functionalization and Allocation of Expenses ................................................................................. 51
7.3.1. O&M Expense Allocation ................................................................................................................. 52
7.3.2. Capital Allocation ............................................................................................................................. 55
7.3.3. Revenue Offset Allocation ............................................................................................................... 57
7.4. Cost of Service Allocation ............................................................................................................... 59
7.4.1. Preliminary Cost of Service Allocation ............................................................................................ 59
7.4.2. Adjustments to Cost of Service ....................................................................................................... 59
7.4.3. Final Cost of Service Allocation ....................................................................................................... 59
7.5. Unit Cost Development.................................................................................................................... 61
7.6. Customer Class Costs ..................................................................................................................... 62
7.7. Customer Class Comparison .......................................................................................................... 63
8. PROPOSED RECYCLED WATER RATES.................................................................................... 64
WATER COST OF SERVICE AND RATE DESIGN STUDY
8.1. Proposed Fixed Charges ................................................................................................................. 64
8.1.1. Proposed System Fees ................................................................................................................... 64
8.2. Proposed Volume Rates ................................................................................................................. 65
8.2.1. Commodity Rate Component .......................................................................................................... 65
8.2.2. Demand Rate Component ............................................................................................................... 66
8.2.3. Total Proposed Volume Rate .......................................................................................................... 66
8.3. Monthly Bill Impacts ......................................................................................................................... 66
OTAY WATER DISTRICT
List of Tables
Table 1-1: Proposed Residential and Multi-Residential Tier Changes ......................................................................... 2
Table 1-2: Proposed Rates ........................................................................................................................................... 3
Table 2-1: Current FY 2022 System Fees .................................................................................................................... 8
Table 2-2: MWD / CWA Fixed Charges ........................................................................................................................ 8
Table 2-3: FY 2022 Volume Rates ............................................................................................................................... 9
Table 2-4: Proposed Tier Changes ............................................................................................................................. 10
Table 4-1: Peaking Factors ......................................................................................................................................... 14
Table 5-1: Water Use and Peaking Units ................................................................................................................... 16
Table 5-2: Customer Accounts ................................................................................................................................... 17
Table 5-3: Equivalent Meter Ratios ............................................................................................................................ 17
Table 5-4: AWWA Capacity Equivalent Meters .......................................................................................................... 18
Table 5-5: Cost Equivalent Meters ............................................................................................................................. 18
Table 5-6: Fire Protection Requirements .................................................................................................................... 19
Table 5-7: Public and Private Fire Connections ......................................................................................................... 19
Table 5-8: Units of Service Summary ......................................................................................................................... 20
Table 5-9: FY 2023 Projected Revenue Required from Rates ................................................................................... 21
Table 5-10: Summary of O&M Expenses by Functional Category ............................................................................. 23
Table 5-11: Allocation of O&M Expenses to Cost Causation Components ............................................................... 24
Table 5-12: Summary of Capital Assets by Functional Category ............................................................................... 25
Table 5-13: Allocation of Functionalized Capital Assets to Cost Causation Components\ ........................................ 26
Table 5-14: Allocation of Capital Costs to Cost Causation Components ................................................................... 26
Table 5-15: Non-Rate Revenue Allocations ............................................................................................................... 28
Table 5-16: Cost of Service Allocation ........................................................................................................................ 29
Table 5-17: Fire Cost Reallocation ............................................................................................................................. 30
Table 5-18: Development of Unit Costs ...................................................................................................................... 31
Table 5-19: Customer Class Cost of Service .............................................................................................................. 32
Table 5-20: Public Fire Reallocation ........................................................................................................................... 33
Table 5-21: Cost of Service Comparison .................................................................................................................... 34
Table 6-1: Fixed Charge Components ........................................................................................................................ 35
Table 6-2: System Fees .............................................................................................................................................. 36
Table 6-3: Public Fire Protection................................................................................................................................. 36
Table 6-4: Total System Fees ..................................................................................................................................... 37
Table 6-5: CWA / MWD Charges ................................................................................................................................ 37
Table 6-6: Private Fire Charges .................................................................................................................................. 38
Table 6-7: Commodity Rate Component .................................................................................................................... 39
Table 6-8: Demand Rate Component ......................................................................................................................... 42
Table 6-9: Tax Offset Rate Component ...................................................................................................................... 43
Table 6-10: Total Proposed Volume Rates ................................................................................................................. 44
Table 6-11: Energy Surcharge .................................................................................................................................... 44
Table 6-12: SFR Bill Impacts ...................................................................................................................................... 45
Table 6-13: MFR Bill Impacts...................................................................................................................................... 45
Table 6-14: Commercial Bill Impacts .......................................................................................................................... 45
Table 6-15: Commercial Irrigation Bill Impacts ........................................................................................................... 45
Table 6-16: Construction Bill Impacts ......................................................................................................................... 46
Table 6-17: Temporary Construction Bill Impacts....................................................................................................... 46
Table 6-18: Public Bill Impacts .................................................................................................................................... 46
Table 6-19: Public Irrigation Bill Impacts .................................................................................................................... 46
Table 7-1: Water Use and Peaking Units ................................................................................................................... 47
WATER COST OF SERVICE AND RATE DESIGN STUDY
Table 7-2: Customer Accounts ................................................................................................................................... 48
Table 7-3: AWWA Capacity Equivalent Meters .......................................................................................................... 48
Table 7-4: Cost Equivalent Meters ............................................................................................................................. 49
Table 7-5: Units of Service Summary ......................................................................................................................... 50
Table 7-6: FY 2023 Projected Revenue Required from Rates ................................................................................... 51
Table 7-7: Summary of O&M Expenses by Functional Category ............................................................................... 52
Table 7-8: Allocation of O&M Expenses to Cost Causation Components .................................................................. 54
Table 7-9: Summary of Capital Assets by Functional Category ................................................................................. 55
Table 7-10: Allocation of Functionalized Capital Assets to Cost Causation Components\ ........................................ 56
Table 7-11: Allocation of Capital Costs to Cost Causation Components ................................................................... 56
Table 7-12: Non-Rate Revenue Allocations ............................................................................................................... 58
Table 7-13: Cost of Service Allocation ........................................................................................................................ 60
Table 7-14: Development of Unit Costs ...................................................................................................................... 61
Table 7-15: Customer Class Cost of Service .............................................................................................................. 62
Table 7-16: Cost of Service Comparison .................................................................................................................... 63
Table 8-1: Fixed Charge Components ........................................................................................................................ 64
Table 8-2: System Fees .............................................................................................................................................. 65
Table 8-3: Commodity Rate Component .................................................................................................................... 65
Table 8-4: Demand Rate Component ......................................................................................................................... 66
Table 8-5: Total Proposed Volume Rates ................................................................................................................... 66
Table 8-6: Recycled Bill Impacts................................................................................................................................. 66
Table 8-7: Public Recycled Bill Impacts ...................................................................................................................... 67
Table 8-8: Recycled Commercial Bill Impacts ............................................................................................................ 67
List of Figures
Figure 1-1: SFR Bill Impacts ......................................................................................................................................... 6
Figure 6-1: Pipe Sizes Required for Average, Max Day and Max Hour Flows ........................................................... 41
OTAY WATER DISTRICT
This page intentionally left blank to facilitate two-sided printing.
WATER COST OF SERVICE AND RATE DESIGN STUDY 1
1. Executive Summary
1.1. Study Overview
Public water agencies in California typically conduct cost-of-service and rate studies to ensure there is a strong
nexus between rates charged to customers and costs incurred to provide service, as required by Proposition 218.
The District engaged Raftelis in 2021 to conduct this Water Cost of Service and Rate Design Study to establish a
proposed water rate structure based on FY 2023 test data. Note that the rates in this report do not include an
annual revenue adjustment (or rate increase) for FY 2023. The proposed rates herein will be updated at a later date
by District staff according to the revenue adjustment approved by the District Board of Directors.
1.2. Proposed Rate Structure Changes
After reviewing the District’s current rates and cost structure, Raftelis recommends several changes to the proposed
rate structure. All proposed changes to the rates and rate structure are revenue neutral. In other words, the
proposed rates detailed in this report are designed to collect the same revenue as the currently effective rates.
1.2.1. REVISED SFR AND MFR TIER DEFINITIONS
Raftelis conducted a detailed review of the District’s billing data for all customer classes, with a special emphasis
on single family residential (SFR) and multifamily residential (MFR) customers in FY 2019, which staff considers
to be a typical year with normal usage patterns before the pandemic altered commercial and residential use.
Raftelis and the rate study team proposes to update the tier breakpoints to those shown in Table 1-11. The
volumetric rate tier breakpoint for MFR is per dwelling unit, not per account, while the MFR system fee is per
account. The billing data analysis showed that the average monthly water used by the combined SFR and MFR
classes on an annual basis is 9 Ccf. Tier 1 is set at the average residential use. The average monthly bill during the
summer months (June, July, and August) is 12 Ccf per month. Tier 2 is set at this maximum summer use. Thus
the tiers were set at the average use and maximum summer use which is correlates with the Commodity Demand
method in which costs are separated into costs to serve water during average flows and maximum (peak) flows. All
additional use will be charged in the third tier.
1 The SFR and MFR residential classes were combined because census data for Spring Valley, CA shows that the
housing density (people per home or apartment) for MFR and SFR have similar number of people per home or
apartment and therefore should not be treated differently for the purpose setting tier breakpoints. Furthermore, most
MFR accounts have separate irrigation meters for outdoor water use.
2 OTAY WATER DISTRICT
Table 1-1: Proposed Residential and Multi-Residential Tier Changes
1.2.2. CREATION OF DISTINCT COMMERCIAL AND PUBLIC CUSTOMER
CLASSES
The District currently has one rate for commercial and public customers. However, there is an additional
government surcharge of 42 cents per Ccf applied to water used by public accounts to recognize that public entities
do not pay property taxes while all other customers do (the District receives a share of property taxes); the
surcharge is intended to equalize the overall revenue (rate and property tax revenue) collected between public and
non-public customers. Raftelis recommends eliminating the government surcharge; however, public customers will
not receive a tax revenue offset, yielding rates that are slightly higher than the commercial classes. This
recommendation also applies to the separation of commercial and public irrigation accounts within the currently
combined irrigation and commercial agriculture rate.
1.2.3. CREATION OF CONSTRUCTION CUSTOMER CLASS
Water used by permanent construction accounts is currently charged the irrigation rate, while water used by
temporary construction accounts is charged two times the irrigation rate. Raftelis recommends creating a new
Construction customer class that encompasses both types of customers and proposes a separate rate based on their
own water use characteristics.
1.3. Proposed Water Rates
Table 1-2 shows the proposed rate schedule, arranged by customer class. All potable customers are subject to the
proposed MWD/CWA fixed charges.
SFR
1 Tier 1 1 - 10 1 - 9
2 Tier 2 11 - 22 10 - 12
3 Tier 3 > =23 > =13
MFR
4 Tier 1 1 - 4 1 - 9
5 Tier 2 5 - 9 10 - 12
6 Tier 3 > = 10 > =13
Line Customer Class
Current Tiers
(Ccf)
Proposed
Tiers (Ccf)
WATER COST OF SERVICE AND RATE DESIGN STUDY 3
Table 1-2: Proposed Rates
A B C D E F G H
Current Proposed $ Change % Change Current Proposed $ Change % Change
Volume Rate Volume Rate
1 Tier 1 3.52$ 5.03$ 1.51$ 42.9% 1 Tier 1 3.29$ 4.99$ 1.70$ 51.7%
2 Tier 2 6.30 5.46 (0.84) -13.3% 2 Tier 2 5.97 5.41 (0.56) -9.4%
3 Tier 3 8.12 6.08 (2.04) -25.1% 3 Tier 3 7.35 5.60 (1.75) -23.8%
System Fee System Fee
4 5/8" 20.08$ 17.29$ (2.79)$ -13.9% 4 5/8" 44.17$ 15.95$ (28.22)$ -63.9%
5 3/4" 20.08 17.29 (2.79) -13.9% 5 3/4" 44.17 15.95 (28.22) -63.9%
6 1" 28.39 21.50 (6.89) -24.3% 6 1" 62.37 19.27 (43.10) -69.1%
7 1 1/2" 49.11 32.27 (16.84) -34.3% 7 1 1/2" 107.92 27.81 (80.11) -74.2%
8 2" 73.98 45.01 (28.97) -39.2% 8 2" 162.53 37.87 (124.66) -76.7%
9 3" 308.22 79.98 (228.24) -74.1%
10 4" 472.17 134.77 (337.40) -71.5%
11 6" 927.63 264.45 (663.18) -71.5%
12 8" 1,474.12 408.31 (1,065.81) -72.3%
13 10" 2,111.67 626.10 (1,485.57) -70.4%
Line SFR Rates Line MFR Rates
4 OTAY WATER DISTRICT
A B C D E F G H
Current Proposed $ Change % Change Current Proposed $ Change % Change
14 Volume Rate 4.17$ 5.28$ 1.11$ 26.6% 14 Volume Rate 6.09$ 6.09$ -$ 0.0%
System Fee System Fee
15 5/8" 41.61$ 17.43$ (24.18)$ -58.1% 15 5/8" 35.13$ 15.43$ (19.70)$ -56.1%
16 3/4" 41.61 17.43 (24.18) -58.1% 16 3/4" 35.13 15.43 (19.70) -56.1%
17 1" 58.75 21.74 (37.01) -63.0% 17 1" 49.62 18.41 (31.21) -62.9%
18 1 1/2" 101.66 32.74 (68.92) -67.8% 18 1 1/2" 85.86 26.08 (59.78) -69.6%
19 2" 153.11 45.76 (107.35) -70.1% 19 2" 129.28 35.11 (94.17) -72.8%
20 3" 290.34 97.23 (193.11) -66.5% 20 3" 245.19 73.93 (171.26) -69.8%
21 4" 444.76 165.82 (278.94) -62.7% 21 4" 375.63 123.89 (251.74) -67.0%
22 6" 873.81 333.46 (540.35) -61.8% 22 6" 737.94 240.26 (497.68) -67.4%
23 8" 1,388.56 526.62 (861.94) -62.1% 23 8" 1,172.69 366.86 (805.83) -68.7%
24 10" 1,989.08 813.42 (1,175.66) -59.1% 24 10" 1,679.86 560.46 (1,119.40) -66.6%
A B C D E F G H
Current Proposed $ Change % Change Current Proposed $ Change % Change
25 Volume Rate*4.59$ 5.82$ 1.23$ 26.8% 25 Volume Rate* 6.51$ 6.64$ 0.13$ 2.0%
System Fee System Fee
26 5/8" 41.61$ 16.24$ (25.37)$ -61.0% 26 5/8" 35.13$ 15.43$ (19.70)$ -56.1%
27 3/4" 41.61 16.24 (25.37) -61.0% 27 3/4" 35.13 15.43 (19.70) -56.1%
28 1" 58.75 19.75 (39.00) -66.4% 28 1" 49.62 18.41 (31.21) -62.9%
29 1 1/2" 101.66 28.76 (72.90) -71.7% 29 1 1/2" 85.86 26.08 (59.78) -69.6%
30 2" 153.11 39.40 (113.71) -74.3% 30 2" 129.28 35.11 (94.17) -72.8%
31 3" 290.34 83.32 (207.02) -71.3% 31 3" 245.19 73.93 (171.26) -69.8%
32 4" 444.76 140.79 (303.97) -68.3% 32 4" 375.63 123.89 (251.74) -67.0%
33 6" 873.81 277.83 (595.98) -68.2% 33 6" 737.94 240.26 (497.68) -67.4%
34 8" 1,388.56 431.27 (957.29) -68.9% 34 8" 1,172.69 366.86 (805.83) -68.7%
35 10" 1,989.08 662.44 (1,326.64) -66.7% 35 10" 1,679.86 560.46 (1,119.40) -66.6%
* Current Rate Includes Government Surcharge
Line Public Rates Line
Public Irrigation
Rates
Line Commercial
Rates Line Commercial
Irrigation Rates
A B C D A B C D
Current Proposed $ Change % Change Current Proposed $ Change % Change
36 Volume Rate 12.18$ 6.05$ (6.13)$ -50.3% 36 0.063$ 0.068$ 0.005$ 7.9%
System Fee
37 5/8" 35.13$ 15.86$ (19.27)$ -54.9%
38 3/4" 35.13 15.86 (19.27) -54.9%
39 1" 49.62 19.12 (30.50) -61.5%
40 1 1/2" 85.86 27.51 (58.35) -68.0%
41 2" 129.28 37.40 (91.88) -71.1%
42 3" 245.19 78.95 (166.24) -67.8%
43 4" 375.63 132.92 (242.71) -64.6%
44 6" 737.94 260.34 (477.60) -64.7%
45 8" 1,172.69 401.27 (771.42) -65.8%
46 10" 1,679.86 614.94 (1,064.92) -63.4%
Volume Rate,
per 100 ft
Line Construction
Rates Line Potable Energy
Charge
WATER COST OF SERVICE AND RATE DESIGN STUDY 5
E F G H
Current Proposed $ Change % Change
CWA/MWD Fee
47 5/8" 17.00$ 16.49$ (0.51)$ -3.0%
48 3/4" 17.00 16.49 (0.51) -3.0%
49 1" 31.57 27.49 (4.08) -12.9%
50 1 1/2" 71.36 54.97 (16.39) -23.0%
51 2" 121.39 87.94 (33.45) -27.6%
52 3" 258.17 192.37 (65.80) -25.5%
53 4" 413.41 346.27 (67.14) -16.2%
54 6" 846.28 769.48 (76.80) -9.1%
55 8" 1,366.65 1,319.10 (47.55) -3.5%
56 10" 1,967.12 2,088.58 121.46 6.2%
Line CWA/MWD Fees
A B C D A B C D
Current Proposed $ Change % Change Current Proposed $ Change % Change
57 Volume Rate 5.05$ 5.10$ 0.05$ 1.0% 57 Volume Rate 5.48$ 5.20$ (0.28)$ -5.1%
System Fee System Fee
58 5/8" 36.93$ 34.31$ (2.62)$ -7.1% 58 5/8" 36.93$ 34.31$ (2.62)$ -7.1%
59 3/4" 36.93 34.31 (2.62) -7.1% 59 3/4" 36.93 34.31 (2.62) -7.1%
60 1" 52.16 46.46 (5.70) -10.9% 60 1" 52.16 46.46 (5.70) -10.9%
61 1 1/2" 90.25 77.28 (12.97) -14.4% 61 1 1/2" 90.25 77.28 (12.97) -14.4%
62 2" 135.90 113.93 (21.97) -16.2% 62 2" 135.90 113.93 (21.97) -16.2%
63 3" 257.73 249.69 (8.04) -3.1% 63 3" 257.73 249.69 (8.04) -3.1%
64 4" 394.84 435.78 40.94 10.4% 64 4" 394.84 435.78 40.94 10.4%
65 6" 787.55 907.15 119.60 15.2% 65 6" 787.55 907.15 119.60 15.2%
66 8" 1,232.66 1,472.09 239.43 19.4% 66 8" 1,232.66 1,472.09 239.43 19.4%
67 10" 1,765.77 2,294.50 528.73 29.9% 67 10" 1,765.77 2,294.50 528.73 29.9%
Line Recycled Line Recycled Public
A B C D A B C D
Current Proposed $ Change % Change Current Proposed $ Change % Change
68 Volume Rate 3.58$ 4.68$ 1.10$ 30.7% 68 0.063$ 0.082$ 0.019$ 30.2%
System Fee
69 5/8" 43.74$ 34.31$ (9.43)$ -21.6%
70 3/4" 43.74 34.31 (9.43) -21.6%
71 1" 61.76 46.46 (15.30) -24.8%
72 1 1/2" 106.89 77.28 (29.61) -27.7%
73 2" 160.98 113.93 (47.05) -29.2%
74 3" 305.28 249.69 (55.59) -18.2%
75 4" 467.65 435.78 (31.87) -6.8%
76 6" 918.73 907.15 (11.58) -1.3%
77 8" 1,459.97 1,472.09 12.12 0.8%
78 10" 2,091.41 2,294.50 203.09 9.7%
Volume Rate,
per 100 ft
Line Recycled
Commercial Line Recycled
Energy Charge
6 OTAY WATER DISTRICT
1.4. Bill Impacts
Figure 1-1 compares proposed SFR monthly bills with current bills at various water use levels. Many residential
customers will see a bill increase due to the higher Tier 1 volume rate; however, this is partially offset by the
reduction in the fixed meter charge. The average monthly bill for a SFR customer is 11 Ccf; this customer will see a
bill increase of approximately 14.5 percent, before adjusting for the additional cost of service to be collected through the
January 1, 2023 proposed rate increase. Additional bill impacts for other customer classes can be found in Section 5.
Figure 1-1: SFR Bill Impacts
WATER COST OF SERVICE AND RATE DESIGN STUDY 7
2.Introduction
2.1. Agency Overview
Otay Water District is a water, recycled water, and sewer service provider. The State Legislature authorized
the establishment of the Otay Water District in 1956 as a California Special District under the provisions of the
Municipal Water District Law of 1911, Division 20 (commencing with Section 71000) of the Water Code of the
State of California. Otay Water District is a public agency that does not make a profit, where each end user pays
only his or her fair share of the District’s costs to operate and maintain the public water, recycled water, or sewer
facilities.
Five directors, elected by voters to serve respective divisions, set the District’s ordinances, policies, taxes, and rates
for service. Members of the Board of Directors serve four-year terms of office. The Board of Directors typically
meets in open public session on the first Wednesday of each month at 3:30 p.m. at District headquarters. The
public is welcome to attend these meetings.
The District provides water service to customers within roughly 125 square miles of southeastern San Diego
County, California. Its facilities serve the water, recycled water, and the sewer needs of customers residing in the
communities of Spring Valley, La Presa, Rancho San Diego, Jamul, eastern Chula Vista, and eastern Otay Mesa
along the international border with Mexico.
The potable water delivered by Otay Water District is purchased from the San Diego County Water Authority
(CWA) or the Helix Water District through an exchange agreement with Helix and CWA. Imported water is a mix
of waters from the Colorado River and Northern California. Most of the water is originally purchased from the
region’s primary importer, the Metropolitan Water District of Southern California (MWD).
2.2. Study Overview
Public water agencies in California typically conduct cost-of-service and rate studies to ensure that there is a strong
nexus between rates charged to customers and costs incurred to provide service, as required by Proposition 218.
The District engaged Raftelis in 2021 to conduct this Water Cost of Service and Rate Design Study to establish a
proposed water rate structure. Proposed rates presented in this study report may not be implemented until formally
adopted by the District Board of Directors after a public hearing.
2.3. Current Water Rates
District customers are currently subject to two types of charges: 1) fixed monthly System Fees and 2) Volume
Charges per hundred cubic feet (Ccf)2 of water delivered. System Fees vary based on meter size and customer class;
customers with a larger meter pay a higher System Fee each month. Larger meters impose larger demand, are more
expensive to install, maintain, and replace than smaller meters, and require greater capacity within the water
system. The current System Fees are shown in Table 2-1.
2 One HCF equals approximately 748 gallons.
8 OTAY WATER DISTRICT
Table 2-1: Current FY 2022 System Fees
All customers also pay an additional monthly fixed charge to recover certain fixed costs from the District’s
wholesale water provider, shown in Table 2-2. These costs are passed-through directly from MWD/CWA to the
District’s customers.
Table 2-2: MWD / CWA Fixed Charges
Current volume rates are shown in Table 2-3. Single Family Residential customers are subject to a three-tier
structure. The first 10 Ccf used each month is charged at the lowest rate, the next 12 Ccf at an intermediate rate,
and additional use at the highest rate. Multi Family customers have a similar tiered structure with tiers per
dwelling unit, shown below. All other customers pay a uniform volume rate for all units of water used. Currently,
Public customers (such as cities, counties, or schools) are also subject to a government surcharge because these
customers do not pay property taxes, which the District receives a share of. Finally, the District’s energy surcharge
applies to all customers based on their elevation and water use; customers pay 6.3 cents per Ccf for every 100 feet
SFR MFR Commercial Irrigation Construction
Private Fire
Service
System Fee
1 5/8" 20.08$ 44.17$ 41.61$ 35.13$ 35.13$ 24.00$
2 3/4" 20.08 44.17 41.61 35.13 35.13 24.00
3 1" 28.39 62.37 58.75 49.62 49.62 24.00
4 1 1/2" 49.11 107.92 101.66 85.86 85.86 24.00
5 2" 73.98 162.53 153.11 129.28 129.28 24.00
6 3" 308.22 290.34 245.19 245.19 24.00
7 4" 472.17 444.76 375.63 375.63 32.34
8 6" 927.63 873.81 737.94 737.94 32.34
9 8" 1,474.12 1,388.56 1,172.69 1,172.69 32.34
10 10" 2,111.67 1,989.08 1,679.86 1,679.86 32.34
Line Description
Customer Class
MWD / CWA
1 5/8" 17.00$
2 3/4" 17.00
3 1" 31.57
4 1 1/2" 71.36
5 2" 121.39
6 3" 258.17
7 4" 413.41
8 6" 846.28
9 8" 1,366.65
10 10" 1,967.12
Line Description
Current
Rates
WATER COST OF SERVICE AND RATE DESIGN STUDY 9
of elevation of their pumping zone above 450 feet of elevation. There is no energy surcharge for customers below
450 feet of elevation as the District receives water from its wholesale supplier at a pressure capable of delivering
water up to 450 feet of elevation. For customers over 450 feet of elevation; the District incurs additional pumping
charges to deliver water which are reflected in the energy surcharge. See section 6.2.5 for details regarding the
energy surcharge calculation.
Table 2-3: FY 2022 Volume Rates
2.4.Proposed Rate Structure Changes
Raftelis recommends a few changes to the proposed rate structure. All proposed changes to the rates and rate
structure are revenue neutral. In other words, the proposed rates detailed in this report are designed to collect the
same revenue as the currently effective rates.
2.4.1. REVISED SFR AND MFR TIER DEFINITIONS
Raftelis conducted a detailed review of the District’s billing data for all customers, with a special emphasis on
single family residential (SFR) and multifamily residential (MFR) customers in FY 2019, which staff considers to
be a typical year with normal usage patterns. Raftelis and the rate study team proposes to update the tier
breakpoints to those shown in Table 1-13. The volumetric rate tier breakpoint for MFR is per dwelling unit, not per
account, while the MFR system fee is per account. The billing data analysis showed that the average monthly
water used by the combined SFR and MFR classes on an annual basis is 9 Ccf. Tier 1 is set at the average
3 The SFR and MFR residential classes were combined because census data for Spring Valley, CA shows that the
housing density (people per home or apartment) for MFR is more than SFR and thus MFR customers should get an
equal amount of water in Tier 1. Furthermore, most MFR accounts have separate irrigation meters for outdoor water
use.
SFR
1 Tier 1 1 - 10 3.52$
2 Tier 2 11 - 22 6.30
3 Tier 3 > =23 8.12
MFR
4 Tier 1 1 - 4 3.29$
5 Tier 2 5 - 9 5.97
6 Tier 3 > = 10 7.35
7 Commercial / Public Uniform 4.17$
8 Irrigation Uniform 6.09
9 Temp. Construction Uniform 12.18
10 Construction Uniform 6.09
11 Gov. Surcharge Uniform 0.42$
12 Energy Charge Elevation 0.063$
Line Customer Class Tiers (Ccf)
Current
Rates
10 OTAY WATER DISTRICT
residential use. The average monthly bill during the summer months (June, July, and August) is 12 Ccf per month.
Tier 2 is set at this maximum summer use. Thus the tiers were set at the average use and maximum summer use
which is correlates with the Commodity Demand method in which costs are separated into costs to serve water
during average flows and maximum (peak) flows. All additional use will be charged in the third tier.
Table 2-4: Proposed Tier Changes
2.4.2. CREATION OF DISTINCT COMMERCIAL AND PUBLIC CUSTOMER
CLASSES
The District currently has a single, unified set of rates for commercial and public customers. However, there is an
additional government surcharge of 42 cents per Ccf applied to water used by public accounts in recognition of the
fact that public entities do not pay property taxes while all other customers do (the District receives a share of
property taxes); the surcharge is intended to equalize the overall revenue collected between the public and non-
public customers. Raftelis proposes to eliminate the government surcharge; however, public customers will not
receive a tax revenue offset, yielding rates that are slightly higher than other classes. More detail on this calculation
can be found in Section 6.2.3. This recommendation also applies to the separation of commercial and public
irrigation accounts within the currently combined irrigation and commercial agriculture rate.
2.4.3. CREATION OF CONSTRUCTION CUSTOMER CLASS
Water used by permanent construction accounts is currently charged the irrigation rate, while water used by
temporary construction accounts is charged two times the irrigation rate. Raftelis recommends creating a new
Construction customer class that encompasses both of these types of customers and allows them a separate rate
based on their own water use characteristics.
SFR
1 Tier 1 1 - 10 1 - 9
2 Tier 2 11 - 22 10 - 12
3 Tier 3 > =23 > =13
MFR
4 Tier 1 1 - 4 1 - 9
5 Tier 2 5 - 9 10 - 12
6 Tier 3 > = 10 > =13
Line Customer Class
Current Tiers
(Ccf)
Proposed
Tiers (Ccf)
WATER COST OF SERVICE AND RATE DESIGN STUDY 11
3.Legal Requirements
Proposition 218, reflected in the California Constitution as Article XIII D, was enacted in 1996 to ensure that rates
and fees are reasonable and proportional to the cost of providing service. The principal requirements, as they relate
to public water service are as follows:
1. A property-related charge (such as water rates) imposed by a public agency on a parcel shall not exceed the
costs required to provide the property-related service.
2. Revenues derived by the charge shall not be used for any purpose other than that for which the charge was
imposed.
3. The amount of the charge imposed upon any parcel shall not exceed the proportional cost of service
attributable to the parcel.
4. No charge may be imposed for a service unless that service is actually used or immediately available to the
owner of property.
5. A written notice of the proposed charge shall be mailed to the owner of record of each parcel at least 45 days
prior to the public hearing, when the agency considers all written protests against the charge.
As stated in the American Water Works Association’s (AWWA) Principles of Water Rates, Fees, and Charges: Manual
of Water Supply Practices - M1 Seventh Edition (Manual M1), “water rates and charges should be recovered from
classes of customers in proportion to the cost of serving those customers.” Raftelis follows industry standard rate
setting methodologies set forth by the AWWA Manual M1 to ensure this study meets Proposition 218
requirements and establishes rates that do not exceed the proportionate cost of providing water services on a parcel
basis. The methodology in the Manual M1 is a nationally recognized water industry ratemaking standard.
4.Rate-Setting Methodology
4.1.Rate Setting Process
This study was conducted using industry-standard principles outlined by the AWWA Manual M1. The resulting
cost of service analysis and rate design process follows four key steps, outlined below, to determine proposed rates
that meet industry standards and comply with relevant regulations.
1. Revenue Requirement Determination: The rate-making process begins by determining the revenue
requirement for the test year, also known as the rate-setting year. The revenue requirement represents the
full cost that the District must recover from ratepayers in order to reliably provide water service. The revenue
requirement includes the District’s operating costs, annual debt service, capital expenditures, and reserve
funding as projected based on the annual budget, including any miscellaneous revenues that offset costs by
reducing the total revenue that must be collected from rates. The test year for this study is FY 2023, using
the projected FY 2023 budget before adjusting for the additional cost of service to be collected through the January 1,
2023 proposed rate increase. The revenue requirement in this study was previously determined through the
District’s internal financial planning process and provided to Raftelis.
2. Cost of Service Analysis: The net annual cost of providing water service, or the revenue requirement, is
then distributed to customer classes and tiers commensurate with their use of and burden on the water
system. More detail on this process is provided below.
12 OTAY WATER DISTRICT
3. Rate Design: After allocating the revenue requirement to each customer class, we design and calculate rates.
This process also includes a rate impact analysis and sample customer bill impacts.
4. Administrative Record Preparation and Rate Adoption: The final step in a rate study is to develop the
administrative record in conjunction with the rate adoption process. This report serves as the administrative
record for this study. The administrative record documents the study results and presents the methodologies,
rationale, justifications, and calculations used to determine the proposed rates. A thorough and
methodological administrative record serves two important functions: maintaining defensibility in a stringent
legal environment and communicating the rationale for revenue adjustments and proposed rates to
customers and key stakeholders.
4.2.Cost of Service Analysis
The framework and methodology utilized to develop the COS analysis and to apportion the revenue requirement to
each customer class and tier is informed by the framework of Proposition 218 and the processes outlined in the
AWWA Manual M1.
COS analyses are tailored specifically to meet the unique needs of each water system. However, there are five distinct
steps in every COS analysis to recover costs from customers in a proportional and defensible manner:
1. Development of Units of Service: Each class has unit demand characteristics that determine their share of
costs in later steps. These units include annual water use, maximum day (peaking) water use, number of
accounts, number of ¾” equivalent capacity meters, number of ¾” equivalent cost meters, and annual water
use weighted by elevation.
2. Cost functionalization: O&M expenses and capital assets are categorized by their function in the system.
Sample functions may include supply, treatment, distribution, transmission, customer service, etc.
3. Cost causation component allocation: Functionalized costs are then allocated to cost causation components
based on their burden on the system. The cost causation components include commodity, demand, meter
service, customer service, amongst others. The revenue requirement is allocated accordingly to the cost
causation components and results in the total revenue requirement for each cost causation component.
4. Unit cost development: The revenue requirement for each cost causation component is divided by the
appropriate units of service to determine the unit cost for each cost causation component. The unit cost for
a given cost component is the same for all customers..
5. Revenue requirement distribution: The unit cost is utilized to distribute the revenue requirement for each
cost causation component to customer classes based on each customer class’s individual service units.
Section 5 of this report provides the full calculation of each of the steps described above.
4.2.1. PEAKING AND MAXIMUM DAY WATER USE
An cost of service study recognitions the fact that water systems are designed to deliver water to customers to meet
both average and peak usage demands. If all customers used the same amount of water each day, evenly
throughout the year, system facilities could be sized to provide exactly that amount of water at any given time.
However, very few customers use water in such a uniform manner. Commercial and industrial customers may
have busier sales or production periods, irrigation customers generally use very little or no water in the winter
months and large quantities of water on the hottest days of the summer, and residential customers may go on
vacation and use no water for a period or may also water their lawns in a similar pattern as irrigation customers.
WATER COST OF SERVICE AND RATE DESIGN STUDY 13
In this way, a water system is analogous to a highway system. Like a highway, a water system must be designed
not only to meet average demands (such as in the middle of the day), but also peak demands (such as during rush
hour traffic). The water system must be designed in such a way that it can reliably supply water to all customers
simultaneously on the single highest demand day of the year (the maximum day). This often means that system
infrastructure must be significantly larger than a system designed to meet average day demand. Larger systems are
more expensive to build and operate... Therefore, max day capacity is an additional cost incurred above and
beyond a system designed for average flows at the same rate every day and throughout the day. Put another way,
if no peak demand existed, a much smaller, less costly system could be built to serve customers.
Given that additional costs are incurred to provide this additional capacity, how should costs be recovered from
the users of the water system. The Commodity-Demand Method assigns costs to users in proportion to both their
average day demands and their peak (max day) capacity demands. An important part of estimating maximum day
use is the peaking factor, which is a ratio relating average day use to maximum day use. For example, a
hypothetical peaking factor of 2.0 for a given customer class means that the maximum day use for that class is two
times higher than the average day use. Peaking factors are used to assign costs to each customer class. The
Demand cost causation component includes all costs related to providing service on the peak day; the units of
service for this component are each class or tier’s maximum day use. The total costs are divided by the total
maximum day use to derive the unit cost, which is then distributed back to the customer classes and tier by
multiplying the unit cost by the unique units of service. More detail on this process is shown in Sections 5.3 and
5.5. The end goal being that each class pays in proportion to their contribution to peaks in water demand (max day
demand). In this way, water users pay their proportionate share of the system upsizing to serve their peak demand.
4.2.2.PEAKING FACTOR CALCULATION
Table 4-1 shows the calculation of the maximum day peaking factor for each customer class and tier. The basis for
this calculation is monthly billing data provided by the District. Column E shows the water volumes in the highest
month of use; this is converted to a daily average for the month in Column F. A preliminary monthly peaking
factor is calculated in Column G by dividing average daily water use in the highest month (Column F) by the
average daily water use in the year (Column D). However, this preliminary factor does not yet represent the highest
day of water use. Industry guidelines require that this factor be scaled up using daily total system water use data.
The highest day of system use in the year is divided by the average daily use in the highest system month of they
year. This factor, shown in Column H, is then applied to each of the monthly class peaking factors to derive the
final maximum day estimate in Column I. The resulting peaking factors are applied to average day use for each
class and tier to derive the estimated maximum day use in Section 4.2.1.
14 OTAY WATER DISTRICT
Table 4-1: Peaking Factors
A B C D E F G H I
Annual Use Avg. Day Max Month
Avg. Day in
Max Month
ADMM / Avg.
Day
System MD /
ADMM
Max Day
Peak
Units Ccf Ccf Ccf Ccf Ratio Ratio Ratio
SFR
1 Tier 1 0 9 3,992,200 10,938 354,993 11,833 1.08 1.16 1.26
2 Tier 2 10 12 701,000 1,921 76,824 2,561 1.33 1.16 1.55
3 Tier 3 13 + 1,798,100 4,926 252,089 8,403 1.71 1.16 1.98
4 Subtotal 6,491,300 17,784 683,118 22,771 1.28 1.16 1.49
MFR
5 Tier 1 0 9 1,611,600 4,415 139,485 4,650 1.05 1.16 1.22
6 Tier 2 10 12 93,600 256 10,045 335 1.31 1.16 1.52
7 Tier 3 13 + 152,700 418 17,808 594 1.42 1.16 1.65
8 Subtotal 1,857,900 5,090 166,755 5,559 1.09 1.16 1.27
9 Commercial 1,132,700 3,103 114,370 3,812 1.23 1.16 1.43
10 Irrigation 1,131,900 3,101 159,448 5,315 1.71 1.16 1.99
11 Construction 286,500 785 39,787 1,326 1.69 1.16 1.96
12 Public 744,900 2,041 77,791 2,593 1.27 1.16 1.48
13 Public Irr.262,700 720 38,027 1,268 1.76 1.16 2.05
14 Recycled Irrigation 834,700 2,287 113,033 3,706 1.62 1.60 2.59
15 Recycled Public 581,700 1,594 83,153 2,726 1.71 1.60 2.73
16 Recycled Commercial 155,900 1.25 1.60 1.99
Water Use Statistics
Uniform
Uniform
Uniform
Uniform
Uniform
Ccf
Uniform
Uniform
Uniform
Line Tier Boundaries
WATER COST OF SERVICE AND RATE DESIGN STUDY 15
5. Potable Cost of Service
Analysis
Section 5 details the cost of service (COS) analysis performed for FY 2023. The COS analysis allocates the overall
rate revenue requirement to customer classes based on their proportion of use of and burden on the District’s water
system. The COS analysis is the basis for the proposed water rates.
5.1. Units of Service
The first step of the cost of service process is to determine the units of service that will be used to assign costs to each
customer class. Each customer class has unique water use characteristics that are quantified and used to assign costs,
ensuring that each class pays their share of costs in proportion to the impacts their water use characteristics place on
the water system.
5.1.1. WATER USE AND PEAKING UNITS
Table 5-1 shows the water use and peaking characteristics for each proposed customer class. The annual use in
Column A is the total water, measured in Ccf, forecast to be purchased in FY 2023. This amount is divided by 365
days in column B to calculate the average daily use. Unique peaking factors shown in Column C are multiplied by
the average daily use to estimate the water use of each customer class on the highest use day of the year. Detail on
the derivation of these peaking factors can be found in Appendix A.
Elevation adjusted volumes were determined for each customer account by analyzing the height above sea level for
each pumping zone. There is no energy surcharge for customers below 450 feet of elevation as the District receives
water from its wholesale supplier at a pressure capable of delivering water up to 450 feet of elevation. For
customers over 450 feet of elevation; the District incurs additional pumping charges to deliver water which are
reflected in the energy surcharge. The District charges the energy surcharge on each unit of water sold for every
100 feet above 450 feet in elevation. For example, a customer at an elevation of 820 feet would have an “elevation
adjustment factor” of four (820-450 /100 = 3.7, rounded to 4). All of this customer’s annual water use is multiplied
by four to determine the elevation adjusted Ccf; this process was repeated for each customer in the District’s billing
data to determine the total elevation adjusted Ccf. The class level results are shown in Column E of Table 5-1.
These units are used to allocate power costs related to pumping water.
16 OTAY WATER DISTRICT
Table 5-1: Water Use and Peaking Units
5.1.2. CUSTOMER UNITS
Customer units include the number of accounts and number of ¾” equivalent meters for each customer class and are
used to develop the District’s monthly System Fees. Table 5-2 shows a forecast of the number of accounts by
customer class for FY 2023, provided to Raftelis.
Table 5-3 shows the meter equivalent ratio calculation, which is used to allocate meter-related costs appropriately
and equitably. Larger meters impose larger demand, are more expensive to install, maintain, and replace than
smaller meters, and require greater capacity within the water system. Equivalent meter units in this study are based
on AWWA-rated hydraulic capacities and are calculated to represent the potential demand on the water system
relative to a base meter size. Capacity ratios are calculated by dividing larger meter capacities by the base meter
capacity. The base meter in this study is a 3/4-inch meter. AWWA capacity ratios (Column B) are calculated by
dividing the capacity of each meter size (Column A) by the capacity of a 3/4-inch meter (Column A, Line 1). Cost
equivalent meter ratios are calculated in a similar way in Column D using the actual cost the District incurs to
purchase a meter of each size, shown in Column C.
The capacity equivalent ratio, developed in Table 5-3 , is multiplied by the number of accounts in Table 5-2 to
determine the number of equivalent meter units in Table 5-4. For example, 1,207 1” SFR accounts (Table 4-2,
Column A, Line 3) are multiplied by the capacity equivalent factor of approximately 1.7 (Table 4-3, Column B,
Line 3) to derive 2,012 ¾” capacity equivalent meters. The process is repeated using cost equivalent ratios shown
in Column D of Table 5-3 to yield the cost equivalent meters shown in Table 4-5.
A B C D E
Annual Use Average Day
Use
Max Day
Peak Factor Max Day Use Elev. Adj. Ccf
SFR
1 Tier 1 3,992,200 10,938 1.26 13,749 14,312,806
2 Tier 2 701,000 1,921 1.55 2,975 2,564,051
3 Tier 3 1,798,100 4,926 1.98 9,763 7,443,277
MFR
4 Tier 1 1,611,600 4,415 1.22 5,402 5,338,420
5 Tier 2 93,600 256 1.52 389 311,241
6 Tier 3 152,700 418 1.65 690 20,578
7 Commercial 1,132,700 3,103 1.43 4,429 4,541,016
8 Irrigation 1,131,900 3,101 1.99 6,175 4,512,290
9 Construction 286,500 785 1.96 1,541 473,143
10 Public 744,900 2,041 1.48 3,013 2,933,246
11 Public Irr.262,700 720 2.05 1,473 719,979
Line Customer Class
WATER COST OF SERVICE AND RATE DESIGN STUDY 17
Table 5-2: Customer Accounts
Table 5-3: Equivalent Meter Ratios
A B C D E F G H
SFR MFR Commercial Irrigation Construction Public Public Irr. Total
Meter Size
1 5/8" - - - - - - - -
2 3/4" 45,412 37 311 111 6 34 9 45,920
3 1" 1,207 190 308 270 4 64 29 2,072
4 1 1/2" 19 249 277 326 3 32 61 967
5 2" 4 267 304 314 1 84 134 1,108
6 3" - 68 30 - - 11 3 112
7 4" - 69 13 2 172 16 3 275
8 6" - 7 3 2 - 6 - 18
9 8" - 3 - - 3 - - 6
10 10" - - - - - 5 - 5
11 Total 46,642 890 1,246 1,025 189 252 239 50,483
12 Percent 92.4% 1.8% 2.5% 2.0% 0.4% 0.5% 0.5% 100.0%
Customer
AccountsLine
A B C D
Capacity Ratio to 3/4" Cost Ratio to 3/4"
Meter Size
1 5/8" 20 1.0 259.01$ 1.0
2 3/4" 30 1.0 259.01 1.0
3 1" 50 1.7 334.23 1.3
4 1 1/2" 100 3.3 543.26 2.1
5 2" 160 5.3 778.43 3.0
6 3" 350 11.7 2,425.90 9.4
7 4" 630 21.0 4,213.39 16.3
8 6" 1,400 46.7 7,277.67 28.1
9 8" 2,400 80.0 9,092.91 35.1
10 10" 3,800 126.7 13,077.31 50.5
Line Meter Equivalency AWWA Hydraulic Capacity Otay Meter Cost
18 OTAY WATER DISTRICT
Table 5-4: AWWA Capacity Equivalent Meters
Table 5-5: Cost Equivalent Meters
5.1.3. FIRE PROTECTION UNITS
Water systems provide two types of fire protection: public fire protection for firefighting (i.e. fire hydrants) and private
fire protection (i.e. fire lines for private structures with sprinkler systems for fire suppression). Raftelis performed a
fire demand analysis to determine Fire Protection peaking units, used to determine the total cost to provide fire
protection service, and analyzed the number of public fire hydrants and private fire connections in order to allocate
the total fire cost between the two. The District provided Raftelis with a count of fire hydrants and private fire line
connections.
5.1.3.1.Fire Protection Demand
Table 5-6 shows a methodology4 used to calculate peaking units of service associated with Fire Protection based on
assumptions regarding the duration and water use rate associated with typical fires. Line 3 of Table 4-6 is
calculated as:
Max Day Requirements (Ccf/day) = Duration of Fire (hrs) × Water Use Rate (gpm) × 60 mins/hr ÷ 748.05 gallons/Ccf
4 Per the AWWA Manual M1.
A B C D E F G H
SFR MFR Commercial Irrigation Construction Public Public Irr. Total
Meter Size
1 5/8" - - - - - - - -
2 3/4" 45,412 37 311 111 6 34 9 45,920
3 1" 2,012 317 513 450 7 107 48 3,453
4 1 1/2" 63 830 923 1,087 10 107 203 3,223
5 2" 21 1,424 1,621 1,675 5 448 715 5,909
6 3" - 793 350 - - 128 35 1,307
7 4" - 1,449 273 42 3,612 336 63 5,775
8 6" - 327 140 93 - 280 - 840
9 8" - 240 - - 240 - - 480
10 10" - - - - - 633 - 633
11 Total 47,508 5,417 4,132 3,458 3,880 2,073 1,073 67,541
12 Percent 70.3% 8.0% 6.1% 5.1% 5.7% 3.1% 1.6% 100.0%
Line Capacity
Equivalent Meters
A B C D E F G H
SFR MFR Commercial Irrigation Construction Public Public Irr. Total
Meter Size
1 5/8" - - - - - - - -
2 3/4" 45,412 37 311 111 6 34 9 45,920
3 1" 1,558 245 397 348 5 83 37 2,674
4 1 1/2" 40 522 581 684 6 67 128 2,028
5 2" 12 802 914 944 3 252 403 3,330
6 3" - 637 281 - - 103 28 1,049
7 4" - 1,122 211 33 2,798 260 49 4,474
8 6" - 197 84 56 - 169 - 506
9 8" - 105 - - 105 - - 211
10 10" - - - - - 252 - 252
11 Total 47,021 3,668 2,780 2,176 2,924 1,220 654 60,443
12 Percent 77.8% 6.1% 4.6% 3.6% 4.8% 2.0% 1.1% 100.0%
Line Cost Equivalent
Meters
WATER COST OF SERVICE AND RATE DESIGN STUDY 19
This study assumes that the water system could need to support fighting two simultaneous fires, corresponding to
the expected firefighting water demand at a typical single-family residential home and a fire at a school or hospital
as defined by the District’s master plan. The total capacity requirement in Column D, Line 3 represents a peak
demand, similar to the maximum day peaking costs for other classes determined in Table 5-1
Table 5-6: Fire Protection Requirements
5.1.3.2. Public and Private Fire Connections
Table 5-7 shows the calculation of equivalent fire demand associated with public hydrants and private fire lines.
Each connection size has a fire flow demand factor similar to the hydraulic capacity factor of a water meter. The
diameter of the connection (in inches) is raised to the 2.63 power to determine the fire flow demand factor (Column
F).5 The fire flow demand factor is multiplied by the number of connections by size (Columns A and C) to calculate
equivalent fire demand (Columns B and D). Total equivalent fire demand is shown for public hydrants and private
fire lines are shown in Lines 11, column D and B, respectively.
Table 5-7: Public and Private Fire Connections
5 Hazen-Williams equation and AWWA Manual M1
A B C D
Units Fire 1 Fire 2 Total
1 Fire Duration Hours 2 5
2 Flow Rate Gal. / Minute 1,500 5,000
3 MD Capacity Ccf / Day 241 2,005 2,246
Line Fire Service
Requirement
A B C D E F
Units Accounts 6" Eq. Accounts 6" Eq.
Meter Size
1 5/8" - - - 0.003
2 3/4" 2 0.0 - 0.0 0.004
3 1" 7 0.1 - 0.1 0.009
4 1 1/2" - - - 0.026
5 2" 20 1.1 - 1.1 0.056
6 3" 2 0.3 - 0.3 0.162
7 4" 87 30.0 - 30.0 0.344
8 6" 170 170.0 7,131 7,131 7,301.0 1.000
9 8" 488 1,039.9 - 1,039.9 2.131
10 10" 112 429.2 - 429.2 3.832
11 Total 888 1,670.6 7,131 7,131 8,801.6
12 Percent 19.0% 81.0%
Line
Fire Protection
Units of Service Public Hydrants Demand
Factor
Total 6" Eq.
Meters
Private Fire Connections
20 OTAY WATER DISTRICT
5.1.4.UNITS OF SERVICE SUMMARY
Table 5-8 summarizes the units of service developed above and assigns them to each cost causation component. Commodity units in Columns A and J
are from Table 5-1, Column A; public and public irrigation classes are not assigned units in the Tax Offset component (Column J) to avoid giving them
the benefit of property taxes paid by other customers, as discussed in Section 2.4.2. Demand units (Column B) for most classes are from Table 5-1,
Column D. Public and private fire demand units are derived by multiplying the total fire demand (Table 5-6, Column D, Line 3) by the percentages
derived in Table 5-7, Line 12. Accounts (Column C) were previously shown in Table 5-2, cost meters (Column D) in Table 5-5, and capacity meters
(Column E) in Table 5-4. Costs related to CWA/MWD fixed charges (Column F) are also distributed using capacity meters, as discussed in more detail
in Section 5.1.2. Finally, public and private fire equivalent meters (Columns G and H) are from Table 5-7, Line 11.
Table 5-8: Units of Service Summary
A B C D E F G H I J
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Public Fire Private Fire Energy Tax Offset
Ccf Ccf/Day Accounts 3/4" Eq. 3/4" Eq. 3/4" Eq. 6" Eq. 6" Eq. Elev. Adj. Ccf Ccf
SFR
1 Tier 1 3,992,200 13,749 14,312,806 3,992,200
2 Tier 2 701,000 2,975 2,564,051 701,000
3 Tier 3 1,798,100 9,763 7,443,277 1,798,100
4 Customer 46,642 47,021 47,508 47,508
5 Subtotal 6,491,300 26,487 46,642 47,021 47,508 47,508 - - 24,320,134 6,491,300
MFR
6 Tier 1 1,611,600 5,402 5,338,420 1,611,600
7 Tier 2 93,600 389 311,241 93,600
8 Tier 3 152,700 690 20,578 152,700
9 Customer 890 3,668 5,417 5,417
10 Subtotal 1,857,900 6,481 890 3,668 5,417 5,417 - - 5,670,239 1,857,900
11 Commercial 1,132,700 4,429 1,246 2,780 4,132 4,132 4,541,016 1,132,700
12 Irrigation 1,131,900 6,175 1,025 2,176 3,458 3,458 4,512,290 1,131,900
13 Construction 286,500 1,541 189 2,924 3,880 3,880 473,143 286,500
14 Public 744,900 3,013 252 1,220 2,073 2,073 2,933,246 -
15 Public Irrigation 262,700 1,473 239 654 1,073 1,073 719,979 -
16 Public Fire - 1,820 - - - 7,131 -
17 Private Fire - 426 - - - 1,671 -
-
18 Total Units of Service 11,907,900 51,845 50,483 60,443 67,541 67,541 7,131 1,671 43,170,047 10,900,300
19 Units of Service less Fire 11,907,900 49,599 50,483 60,443 67,541 67,541 43,170,047 10,900,300
Line Units of Service
Units
WATER COST OF SERVICE AND RATE DESIGN STUDY 21
5.2. Revenue Requirement
Table 5-9 shows the forecasted rate revenue requirement for FY 2023 (also referred to as the test year or rate-setting
year). The revenue requirement is split into operating and capital categories (Columns A and B), which are later
allocated based on O&M expenses and capital assets respectively. The expenses (Lines 1-3) are equal to FY 2023
forecast expenses. The miscellaneous revenue (Line 5) includes interest earnings, late fees, tax revenue, and other
miscellaneous revenues that are applied as offsets to the final rate revenue requirement. The contribution to reserves
adjustment (Line 6) is equal to FY 2023 projected net cash change and represents the increase in the rate revenue
requirement resulting from a projected addition to reserves in FY 2023. All aforementioned values are from the
District’s internal financial planning forecast for FY 2023 in absence of any additional rate increase. The final rate
revenue requirement (Line 9) is calculated as follows:
Total revenue required from rates (Line 9) = Revenue requirements (Line 4) + Non-Rate Revenue (Line 5) + Adjustments (Line
8)
Table 5-9: FY 2023 Projected Revenue Required from Rates
5.3. Functionalization and Allocation of Expenses
After determining the revenue requirement, the next step of the COS analysis is to first functionalize the O&M
expenses and capital assets and then allocate the functionalized expenses to cost components. Cost
functionalization is required to best allocate costs to the cost components. The cost components are then
distributed to customer classes in proportion to how each class uses the system. This study uses the following
functional categories:
» Supply: Purchased water from Metropolitan Water District (MWD) and San Diego County Water Authority
(CWA), as well as other minor miscellaneous supply costs
» Treatment: costs associated with the District’s water treatment system
» Transmission: costs associated with the District’s water transmission system
A B C
Operating Capital Total
Expenses
1 Operating Expenses 93,437,200$ 93,437,200$
2 Debt Service 8,169,700 8,169,700
3 Rate Funded Capital 10,114,100 10,114,100
4 Subtotal 93,437,200$ 18,283,800$ 111,721,000$
5 Non-Rate Revenue (8,904,123)$ (10,928,100)$ (19,832,223)$
Adjustments
6 Contribution to Reserves -$ 1,157,223$ 1,157,223$
7 Mid-Year Increase - - -
8 Subtotal -$ 1,157,223$ 1,157,223$
9 Total Revenue Required 84,533,077$ 8,512,923$ 93,046,000$
Revenue RequirementLine
22 OTAY WATER DISTRICT
» Distribution: costs associated with the District’s water distribution system
» Pumping: costs related to operating the District’s water pumping stations
» Storage: costs related to the District’s water storage system
» Customer Service: costs of meter reading, billing, and other customer services
» Meters and Services: costs of meter maintenance/repair
» Direct Public Fire: Costs related to maintenance of fire hydrants
» Direct Private Fire: Costs of maintaining backflow devices associated with private fire connections
» Energy: Power purchases associated with operating pumping stations
» General: costs for general administration and operational expenses or any other costs that do not clearly
relate to a specific functional category
After functionalization of costs, we allocate the functionalized costs to cost causation components. Allocating the
functional costs to the cost components recovers costs from classes based on water use behavior. Each cost
causation component is a cost center that is recovered from users based on how they cause the costs in each cost
center. Some cost causation components correspond directly to a functional category listed above. The cost
causation components include:
» Commodity: costs associated with providing water under average water demand conditions, primarily
consisting of volumetric water purchases and overhead related to such things as attending wholesale water
board meetings and general management of water supply issues
» Demand: costs associated with providing water under peak demand conditions, including a small portion of
water supply costs related to the District’s overall peaking characteristics and the sizing of assets such as
water mains and storage facilities to meet peak summer demand
» Customer: directly associated with the Customer functional category
» Cost Meters: directly associated with the Meters functional category
» Capacity Meters: used for a reallocation of some Demand costs in a later step
» CWA/MWD: costs associated with fixed charges levied by CWA on the District
» Public Fire: costs associated with providing water to public hydrants for fire protection purposes
» Private Fire: costs associated with providing water to private fire lines for fire protection purposes
» Energy: directly associated with the Energy function
» Tax Offset: revenues from property taxes levied by the District
» General: directly associated with the General function
5.3.1. O&M EXPENSE ALLOCATION
District staff functionalized FY 2023 forecast operating expenses. Table 5-10 shows the O&M functionalization
results. Functionalizing costs is necessary in order to allocate total O&M expenses to the cost causation
components.
WATER COST OF SERVICE AND RATE DESIGN STUDY 23
Table 5-10: Summary of O&M Expenses by Functional Category
Table 5-11 shows the allocation of functionalized FY 2023 O&M expense forecast to each cost causation
component according to the criteria described above. Total O&M expenses associated with each function (Column
L) were determined in Table 5-10. The total dollar amount allocated to each cost causation component (Line 23) is
determined by adding the values in Lines 2 to 22 for each cost component.
On Line 24, General and Administrative costs, shown in Column K, are reallocated to other cost causation
components proportionally to the component subtotals on Line 23. General and Administrative costs are not
allocated to the Commodity component because overhead costs related to water purchases are already included in
the supply function. Additionally, components related to a pass-through cost (Energy and CWA/MWD) or tax
offset do not receive an allocation of general costs. Note that the reallocation results in a shifting of costs between
cost causation components but does not change the total operating expenses.
The final O&M Allocation is shown in Line 25. The percentages (Line 26) represent the proportion of total O&M
expenses allocated to each cost causation component. These O&M allocation percentages are later used to allocate
some miscellaneous revenues.
24 OTAY WATER DISTRICT
Table 5-11: Allocation of O&M Expenses to Cost Causation Components
A B C D E F G H I J K L
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Dir. Pub. Fire Dir. Priv. Fire Energy Tax Offset General Total
Function
1 Supply 44,650,904$ 792,000$ -$ -$ -$ 13,581,000$ -$ -$ -$ -$ -$ 59,023,904$
2 Water Purchases (CWA) 44,171,000 - - - - - - - - - 44,171,000
3 Water Purchases (CSD) - - - - - - - - - - -
4 Transportation - - - - - - - - - - -
5 Infrastructure Access (CWA) - - - - - 3,128,000 - - - - 3,128,000
6 Customer Service (CWA) - - - - - 1,894,000 - - - - 1,894,000
7 Emergency Storage (CWA) - - - - - 4,947,000 - - - - 4,947,000
8 Reliability Charges (CWA) - - - - - 2,947,000 - - - - 2,947,000
9 Capacity Reservation (MWD) - 792,000 - - - - - - - - 792,000
10 RTS Charges (MWD) - - - - - 665,000 - - - - 665,000
11 Additional Overhead Costs 479,904 - - - - - - - - - 479,904
12 Treatment - 1,588,386 - - - - - - - - - 1,588,386
13 Transmission - 743,917 - - - - - - - - - 743,917
14 Distribution - 5,333,208 - - - - - - - - - 5,333,208
15 Treated Water Pumping - 1,920,921 - - - - - - - - - 1,920,921
16 Distribution Storage - 1,750,363 - - - - - - - - - 1,750,363
17 Customer Service - - 3,186,022 - - - - - - - - 3,186,022
18 Meters and Services - - - 1,084,740 - - - - - - - 1,084,740
19 Direct Public Fire - - - - - - 93,678 - - - - 93,678
20 Direct Private Fire - - - - - - - 36,039 - - - 36,039
21 Energy - - - - - - - - 2,949,000 - - 2,949,000
22 General - - - - - - - - - - 15,727,022 15,727,022
23 Subtotal 44,650,904$ 12,128,795$ 3,186,022$ 1,084,740$ -$ 13,581,000$ 93,678$ 36,039$ 2,949,000$ -$ 15,727,022$ 93,437,200$
24 Reallocation of General 11,540,122$ 3,031,388$ 1,032,092$ -$ 89,132$ 34,289$ (15,727,022)$ -$
25 Total 44,650,904$ 23,668,917$ 6,217,409$ 2,116,832$ -$ 13,581,000$ 182,810$ 70,328$ 2,949,000$ -$ 93,437,200$
26 Percent Allocation 47.8% 25.3% 6.7% 2.3% 0.0% 14.5% 0.2% 0.1% 3.2% 0.0% 0.0%
Line O&M Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 25
5.3.2. CAPITAL ALLOCATION
Capital assets are utilized in COS analyses to allocate the capital revenue requirement to the cost causation
components. The distribution of a short-term capital plan to the cost causation components can be heavily
weighted to specific cost causation components based on the type of projects. Using short-term planned capital
projects to allocate capital costs would cause rates to fluctuate and cause customer confusion. The overall capital
asset base however is considerably more stable in the long-term, and therefore is more representative of long-term
capital investment in the District’s water system. Thus, functionalized capital assets are used to allocate capital
costs.
District staff provided Raftelis with a detailed asset listing that included the original cost less depreciation (OCLD)
of each individual asset. As part of the capital asset analysis, Raftelis and District staff assigned each asset to a
functional category. Total asset value (OCLD) by functional category is shown in Table 5-12.
Table 5-12: Summary of Capital Assets by Functional Category
Table 5-13 shows the allocation of capital assets by function to each cost causation component as well as the
reallocation of General costs in line 12; this is consistent with the methodology used to determine the allocation of
O&M expenses to cost causation components in Table 5-11. The final capital asset allocation percentages (Line 14)
represent the proportion of total capital assets allocated to each cost causation component (Line 13). These
percentages are used to allocate annual capital costs, including debt service, rate funded capital, and reserve
contributions in Table 5-14.
Function
1 Supply 1,676,140$ 0.6%
2 Treatment 1,409,004 0.5%
3 Transmission 68,034,845 22.5%
4 Distribution 115,939,701 38.4%
5 Treated Water Pumping 18,921,442 6.3%
6 Distribution Storage 70,747,830 23.4%
7 Customer Service - 0.0%
8 Meters and Services 6,432,846 2.1%
9 Direct Public Fire 49,872 0.0%
10 General 18,726,044 6.2%
11 Total 301,937,724$ 100.0%
Line Asset Functionalization Results
Percent of
Total
26 OTAY WATER DISTRICT
Table 5-13: Allocation of Functionalized Capital Assets to Cost Causation Components\
Table 5-14: Allocation of Capital Costs to Cost Causation Components
A B C D E F G H I J K L
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Dir. Pub. Fire Dir. Priv. Fire Energy Tax Offset General Total
Function
1 Supply 1,676,140$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 1,676,140$
2 Treatment - 1,409,004 - - - - - - - - - 1,409,004
3 Transmission - 68,034,845 - - - - - - - - - 68,034,845
4 Distribution - 115,939,701 - - - - - - - - - 115,939,701
5 Treated Water Pumping - 18,921,442 - - - - - - - - - 18,921,442
6 Distribution Storage - 70,747,830 - - - - - - - - - 70,747,830
7 Customer Service - - - - - - - - - - - -
8 Meters and Services - - - 6,432,846 - - - - - - - 6,432,846
9 Direct Public Fire - - - - - - 49,872 - - - - 49,872
10 General - - - - - - - - - - 18,726,044 18,726,044
11 Subtotal 1,676,140$ 275,052,821$ -$ 6,432,846$ -$ -$ 49,872$ -$ -$ -$ 18,726,044$ 301,937,724$
12 Reallocation of General 110,827$ 18,186,578$ -$ 425,342$ -$ -$ 3,298$ -$ (18,726,044)$ -$
13 Total 1,786,967$ 293,239,400$ -$ 6,858,188$ -$ -$ 53,170$ -$ -$ -$ 301,937,724$
14 Percent Allocation 0.6% 97.1% 0.0% 2.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Line Asset Allocations
A B C D E F G H I J K L
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Dir. Pub. Fire Dir. Priv. Fire Energy Tax Offset General Total
Expense
1 Debt Service 48,351$ 7,934,344$ -$ 185,566$ -$ -$ 1,439$ -$ -$ -$ -$ 8,169,700$
2 Rate Funded Capital 59,859 9,822,730 - 229,731 - - 1,781 - - - - 10,114,100
3 Contribution to Reserves 6,849 1,123,885 - 26,285 - - 204 - - - - 1,157,223
4 Mid-Year Adjustment - - - - - - - - - - - -
5 Subtotal 115,058$ 18,880,959$ -$ 441,582$ -$ -$ 3,423$ -$ -$ -$ -$ 19,441,023$
6 Reallocation of General -$ -$ -$ -$ -$ -$ -$ -$
7 Total 115,058$ 18,880,959$ -$ 441,582$ -$ -$ 3,423$ -$ -$ -$ 19,441,023$
8 Percent Allocation 0.6% 97.1% 0.0% 2.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Line Capital Cost Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 27
5.3.3. REVENUE OFFSET ALLOCATION
The District has a substantial amount of revenue from sources other than rates that is used to offset the total
revenue requirement. Raftelis and District staff analyzed each non-rate revenue source to determine the most
reasonable allocation basis to the cost causation components. The results are shown in Table 5-15.
All Operating Fund rent and lease revenue, grants, and non-rate revenues earned in the Expansion,
Betterment, Replacement, and New Water Supply funds are allocated on the same basis as assets using the
percentages shown in Table 5-13, Line 14.
Meter and Lateral Fees as well as Backflow Maintenance fees are used to directly offset costs in the Cost
Meters component.
Chula Vista Sewer Collection Fees directly offset customer service costs in the Accounts component.
Property taxes and Availability Fees are separated into the Tax Offset component which is discussed in
Section 5.
All other non-rate revenues in the Operating Fund are allocated using the total O&M allocation
percentages in Table 5-11, Line 26.
28 OTAY WATER DISTRICT
Table 5-15: Non-Rate Revenue Allocations
A B C D E F G H I J K L
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Dir. Pub. Fire Dir. Priv. Fire Energy Tax Offset General Total
Operating Fund
1 Late Penalties 429,606 227,729 59,820 20,367 - 130,669 1,759 677 28,374 - - 899,000
2 Meter and Lateral Fees - - - 106,000 - - - - - - - 106,000
3 1% Property Tax - - - - - - - - - 4,503,000 - 4,503,000
4 Availability - - - - - - - - - 654,000 - 654,000
5 Interest 207,874 110,191 28,945 9,855 - 63,227 851 327 13,729 - - 435,000
6 Backflow Maintenance Fees - - - 2,000 - - - - - - - 2,000
7 Billable Work Orders 38,230 20,265 5,323 1,812 - 11,628 157 60 2,525 - - 80,000
8 Rents and Leases 9,860 1,618,027 - 37,842 - - 293 - - - - 1,666,023
9 Chula Vista Sewer Collection Fee - - 477,000 - - - - - - - - 477,000
10 Grants 18 2,914 - 68 - - 1 - - - - 3,000
11 Miscellaneous 37,800 20,037 5,263 1,792 - 11,497 155 60 2,496 - - 79,100
12 Subtotal 723,387$ 1,999,163$ 576,352$ 179,736$ -$ 217,021$ 3,215$ 1,124$ 47,124$ 5,157,000$ -$ 8,904,123$
Expansion Fund
13 Transfer from 2010 COP Reserve 432$ 70,897$ -$ 1,658$ -$ -$ 13$ -$ -$ -$ -$ 73,000$
14 Capacity Fee - Restricted 15,210 2,495,963 - 58,375 - - 453 - - - - 2,570,000
15 BAB Subsidy 1,332 218,518 - 5,111 - - 40 - - - - 225,000
16 Interest Income (663) (108,871) - (2,546) - - (20) - - - - (112,100)
17 Subtotal 16,310$ 2,676,507$ -$ 62,597$ -$ -$ 485$ -$ -$ -$ -$ 2,755,900$
Betterment Fund
18 Interest Income 126$ 20,686$ -$ 484$ -$ -$ 4$ -$ -$ -$ -$ 21,300$
19 BAB Subsidy 2,054 337,004 - 7,882 - - 61 - - - - 347,000
20 Availability Fee - Restricted 3,871 635,159 - 14,855 - - 115 - - - - 654,000
21 Subtotal 6,050$ 992,849$ -$ 23,220$ -$ -$ 180$ -$ -$ -$ -$ 1,022,300$
Replacement Fund
22 Transfer from 2010 COP Reserve 5,100$ 836,973$ -$ 19,575$ -$ -$ 152$ -$ -$ -$ -$ 861,800$
23 BAB Subsidy 278 45,646 - 1,068 - - 8 - - - - 47,000
24 Capacity Fee - Restricted 36,605 6,006,820 - 140,486 - - 1,089 - - - - 6,185,000
25 Subtotal 41,983$ 6,889,439$ -$ 161,128$ -$ -$ 1,249$ -$ -$ -$ -$ 7,093,800$
New Water Supply Fund
26 BAB Subsidy 53$ 8,741$ -$ 204$ -$ -$ 2$ -$ -$ -$ -$ 9,000
27 Interest Income 279 45,743 - 1,070 - - 8 - - - - 47,100
28 Subtotal 332$ 54,484$ -$ 1,274$ -$ -$ 10$ -$ -$ -$ -$ 56,100$
29 Total 788,063$ 12,612,443$ 576,352$ 427,956$ -$ 217,021$ 5,140$ 1,124$ 47,124$ 5,157,000$ -$ 19,832,223$
Line Non-Rate Revenue Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 29
5.4.Cost of Service Allocation
Table 5-16 shows the allocation of the total FY 2023 projected rate revenue requirement to the various cost causation components. The preliminary
COS allocations (Line 4) are subject to further adjustments for fire protection costs and revenue stability, Discussed in Section 4.5.2. The totals in Line 7
reflect the total costs that should be recovered in each cost component.
5.4.1. PRELIMINARY COST OF SERVICE ALLOCATION
The results shown in Table 5-16 are calculated as follows based on intermediate results developed in the preceding subsections:
1. Operating Revenue Requirement (Line 1): The total operating revenue requirement consists solely of the District’s O&M expenses. The
allocation of the total operating revenue requirement to each cost causation component was previously determined in Table 5-11, Line 25.
2. Capital Revenue Requirement (Line 2): The total capital revenue requirement consists of capital expenditures and debt service payments. The
allocation of the total capital revenue requirement was shown in Table 5-14, Line 7.
3. Non-Rate Revenue (Line 3): Total revenue offsets were determined in Table 5-15, Line 29.
4. Preliminary Cost of Service Allocation (Line 4): The preliminary COS allocation to each cost causation component equals the sum of Lines 1
through 3. Note that the total preliminary COS allocation (Column K, Line 4) equals the total FY 2023 projected rate revenue requirement
(from Table 5-9, Column C, Line 9).
Table 5-16: Cost of Service Allocation
A B C D E F G H I J K
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Public Fire Private Fire Energy Tax Offset Total
Expenses
1 O&M 44,650,904$ 23,668,917$ 6,217,409$ 2,116,832$ -$ 13,581,000$ 182,810$ 70,328$ 2,949,000$ -$ 93,437,200$
2 Capital 115,058 18,880,959 - 441,582 - - 3,423 - - - 19,441,023
3 Non-Rate Revenue (788,063) (12,612,443) (576,352) (427,956) - (217,021) (5,140) (1,124) (47,124) (5,157,000) (19,832,223)
4 Subtotal Expenses 43,977,900$ 29,937,433$ 5,641,057$ 2,130,457$ -$ 13,363,979$ 181,094$ 69,204$ 2,901,876$ (5,157,000)$ 93,046,000$
5 Fire Reallocation -$ (1,296,844)$ -$ -$ -$ -$ 1,050,692$ 246,151$ -$ -$ -$
6 COS Reallocation -$ (2,577,653)$ -$ -$ 2,577,653$ -$ -$ -$ -$ -$ -$
7 Total Expenses 43,977,900$ 26,062,936$ 5,641,057$ 2,130,457$ 2,577,653$ 13,363,979$ 1,231,786$ 315,356$ 2,901,876$ (5,157,000)$ 93,046,000$
Cost of ServiceLine
30 OTAY WATER DISTRICT
5.4.2.ADJUSTMENTS TO COST OF SERVICE
Raftelis proposes a few adjustments to the preliminary cost of service related to fire protection and demand costs.
5.4.2.1.Reallocation of Public and Private Fire Costs.
The share of Demand (peaking) costs allocated to the public and private fire protection classes is shown in Table
5-17. The total preliminary demand costs (from Table 5-16, Column B, Line 4) and peaking units (from Table 5-8,
Column B) are used to calculate a peaking unit cost, as shown in Line 6. The unit cost is then multiplied by the
public and private fire class peaking units in Lines 2 and 3 to derive the fire protection related peaking cost for each
in Lines 7 and 8.
These fire protection related Demand costs are subtracted from the total Demand cost causation component and
reassigned to the public and private fire cost components in Table 5-16, Line 5. This reassignment is revenue
neutral.
Table 5-17: Fire Cost Reallocation
5.4.2.1.Allocation of Demand Costs to Capacity Meters
Raftelis allocated a portion of Demand costs to what is known as the Capacity Meter cost component. As
discussed above in Section 4.2.1, Demand costs are operation and maintenance costs for facilities that the District
maintains to provide peak capacity. These costs are fixed costs, incurred regardless of water use, and can be
recovered in proportion to meter size; therefore, it is appropriate to collect a portion of these fees through the fixed
charges. This was the basis for a portion of demand costs, as shown in Line 6 of Table 4-16 to be reallocated to the
Capacity Meter component which is collected through the System Fee.
5.4.3. FINAL COST OF SERVICE ALLOCATION
The final allocation of the revenue requirement to the cost causation components (i.e. COS allocation, Line 7 of
Table 5-16) equals the sum of Lines 4, 5, and 6.
1 Demand Costs 29,937,433$
Peaking Units
2 Public Fire 1,820
3 Private Fire 426
4 All Other Customers 49,599
5 Total Peaking Units 51,845
6 Demand Unit Cost 577.44$
Fire Demand Costs
7 Public Fire 1,050,692$
8 Private Fire 246,151
9 Total Fire Demand Costs 1,296,844$
ValueLine Fire Cost Reallocation
WATER COST OF SERVICE AND RATE DESIGN STUDY 31
5.5.Unit Cost Development
Units of service (Table 5-8) are used to convert total adjusted costs allocated to each cost causation component
(Table 5-16) into unit costs, which are directly incorporated into the proposed rate calculations in Section 6. The
unit cost development identifies, for example, the total purchased water cost (Commodity component) per unit of
water sold, or the total customer service cost per customer. Once these units costs are identified, they can be
proportionally assigned to each customer class to reflect their unique characteristics.
Unit costs comprise the constituent parts from which proposed rates are calculated in Section 6. Table 5-18 shows
unit costs for each cost causation component (Column C), which are calculated by dividing the final COS allocation
in Column A (from Table 5-16, Line 7) by the relevant units of service in Column B (from Table 5-8). The units of
service are based on either projected FY 2023 water use, peaking units, or number of accounts/fire lines/equivalent
meter units. Unit costs shown in this Table are rounded to the nearest penny for presentation purposes.
Table 5-18: Development of Unit Costs
A B C D
Cost Component
1 Commodity 43,977,900$ 11,907,900 3.69$ Ccf
2 Demand 26,062,936 49,599 525.47 Ccf/Day
3 Accounts 5,641,057 50,483 111.74 Account/Yr
4 Cost Meters 2,130,457 60,443 35.25 Eq. Meter / Yr
5 Cap. Meters 2,577,653 67,541 38.16 Eq. Meter / Yr
6 CWA/MWD 13,363,979 67,541 197.86 Eq. Meter / Yr
7 Public Fire 1,231,786 7,131 172.74 Eq. Meter / Yr
8 Private Fire 315,356 1,671 188.77 Eq. Meter / Yr
9 Energy 2,901,876 43,170,047 0.067 Adj. Ccf
10 Tax Offset (5,157,000) 10,900,300 (0.47) Ccf
11 Total 93,046,000$
Unit CostDescriptionLineCostUnits of
Service Units
32 OTAY WATER DISTRICT
5.6. Customer Class Costs
Unit costs developed in Table 5-18 are used to distribute costs to each customer class based on their units of service from Table 5-8. The Unit Costs are
multiplied by the service units for each cost causation component to derive the cost to each class for each cost component in Columns A to J, Lines 1 to
17. For example, the Commodity cost of $3.69 per Ccf (Table 5-18, Column C, Line 1) is multiplied by the SFR Tier 1 Commodity units of 3,992,200
(Table 5-8, Column A, Line 1) to derive the cost of $14,743,872 (Column A, Line1). Column L shows the reallocation of public fire costs to the customer
classes as detailed below in Table 5-20. The total cost of service for each class is shown in Column M; this total represents the costs the utility incurs to
provide service to each unique customer class. The constituent pieces of the total are directly used to calculate the proposed rates in Section 6, ensuring
that the rates reflect the costs of the utility and customer characteristics and behaviors.
Table 5-19: Customer Class Cost of Service
A B C D E F G H I J K L M
Commodity Demand Accounts Cost Meters Cap. Meters CWA/MWD Public Fire Private Fire Energy Tax Offset Total Public Fire Adj. Total
SFR
1 Tier 1 14,743,872$ 7,224,486$ -$ -$ -$ -$ -$ -$ 962,102$ (1,888,735)$ 21,041,725$ 21,041,725$
2 Tier 2 2,588,912 1,563,456 - - - - - - 172,355 (331,647) 3,993,075 3,993,075
3 Tier 3 6,640,690 5,130,266 - - - - - - 500,335 (850,692) 11,420,598 11,420,598
4 Customer - - 5,211,857 1,657,373 1,813,121 9,400,222 - - - - 18,082,572 1,059,034 19,141,607
5 Subtotal 23,973,475$ 13,918,207$ 5,211,857$ 1,657,373$ 1,813,121$ 9,400,222$ -$ -$ 1,634,791$ (3,071,075)$ 54,537,971$ 1,059,034$ 55,597,005$
MFR
6 Tier 1 5,951,912$ 2,838,665$ -$ -$ -$ -$ -$ -$ 358,847$ (762,458)$ 8,386,966$ 8,386,966$
7 Tier 2 345,681 204,428 - - - - - - 20,922 (44,283) 526,748 526,748
8 Tier 3 563,948 362,410 - - - - - - 1,383 (72,243) 855,497 855,497
9 Customer - - 99,450 129,295 206,723 1,071,767 - - - - 1,507,235 33,680 1,540,915
10 Subtotal 6,861,541$ 3,405,503$ 99,450$ 129,295$ 206,723$ 1,071,767$ -$ -$ 381,152$ (878,984)$ 11,276,446$ 33,680$ 11,310,126$
11 Commercial 4,183,254$ 2,327,554$ 139,230$ 97,981$ 157,695$ 817,577$ -$ -$ 305,246$ (535,887)$ 7,492,649$ 99,019$ 7,591,669$
12 Irrigation 4,180,299 3,244,931 114,535 76,684 131,959 684,150 - - 303,315 (535,509) 8,200,364 - 8,200,364
13 Construction 1,058,093 809,716 21,119 103,054 148,077 767,715 - - 31,805 (135,545) 2,804,034 20,026 2,824,061
14 Public 2,751,042 1,583,127 28,159 43,019 79,115 410,174 - - 197,172 - 5,091,808 20,026 5,111,834
15 Public Irrigation 970,196 773,897 26,706 23,051 40,963 212,375 - - 48,397 - 2,095,585 - 2,095,585
16 Public Fire - - - - - - 1,231,786 - - - 1,231,786 (1,231,786) -
17 Private Fire - - - - - - - 315,356 - - 315,356 315,356
18 Total Cost of Service 43,977,900$ 26,062,936$ 5,641,057$ 2,130,457$ 2,577,653$ 13,363,979$ 1,231,786$ 315,356$ 2,901,876$ (5,157,000)$ 93,046,000$ -$ 93,046,000$
Class Cost of ServiceLine
WATER COST OF SERVICE AND RATE DESIGN STUDY 33
Public fire costs are reallocated to other customer classes based on their unique fire demands as determined by the
District’s master plan. The total fire requirement for each class in Column D is the product of multiplying the number
of accounts, the required fire flow, and the fire duration in Columns A to C. The percentage distribution of the fire
requirement, shown in Column E, is used to allocate the total public fire revenue requirement from Table 5-19,
Column G, Line 18 to each class as shown in Column F.
Table 5-20: Public Fire Reallocation
5.7.Customer Class Comparison
Table 5-21 compares the total proposed revenue requirement for each class (Table 5-19, Column M) under the
proposed rates to the total revenue that would be collected from each class under the current rates. Note that the
total revenue collected under either rate structure corresponds to the revenue requirement from Table 5-9,
indicating that the proposed rates and rate structure changes are revenue neutral. Distributional impacts to the
various customer classes are a result of the District’s changing cost structure and water use patterns relative to the
prior rate study, and due to refinements to the methodology to maintain adherence to Cost of Service Principles.
As mentioned in Section 4.2.2, the equivalent meters are now based on the ¾-inch meter as the base meter. This a
major reason for the increased cost allocation to SFR.
A B C D E F
Number of
Meters
Required Fire
Flow
Required Fire
Duration
Total Fire
Requirement
Fire
Allocation Fire Allocation
Accounts gal. per min. Minutes 1,000 Gal. % $
1 Public Fire Cost 1,231,786$
Customer Class
2 SFR 46,642 1,500 120 8,395,560 86.0% 1,059,034$
3 MFR 890 2,500 120 267,000 2.7% 33,680
4 Commercial 1,246 3,500 180 784,980 8.0% 99,019
5 Irrigation 1,025 - - - 0.0% -
6 Construction 189 3,500 240 158,760 1.6% 20,026
7 Public 252 3,500 180 158,760 1.6% 20,026
8 Public Irrigation 239 - - - 0.0% -
9 Total 50,483 9,765,060 100.0% 1,231,786$
Units
Line
Public Fire Cost
Reallocation
34 OTAY WATER DISTRICT
Table 5-21: Cost of Service Comparison
Proposed Current Dollars Percent
Customer Class
1 SFR 55,597,005$ 52,722,782$ 2,874,223$ 5.5% 59.8% 56.7%
2 MFR 11,310,126 11,952,634 (642,508) -5.4% 12.2% 12.8%
3 Commercial 7,591,669 7,496,276 95,392 1.3% 8.2% 8.1%
4 Irrigation 8,200,364 9,083,922 (883,558) -9.7% 8.8% 9.8%
5 Construction 2,824,061 4,491,196 (1,667,136) -37.1% 3.0% 4.8%
6 Public 5,111,834 4,616,615 495,219 10.7% 5.5% 5.0%
7 Public Irrigation 2,095,585 2,342,151 (246,566) -10.5% 2.3% 2.5%
8 Private Fire 315,356 340,423 (25,068) -7.4% 0.3% 0.4%
9 Total 93,046,000$ 93,046,000$ -$ 0.0% 100.0% 100.0%
Current
Percent of
Total
Line
Proposed
Percent of
Total
ChangeCost of Service
Summary
Revenue
WATER COST OF SERVICE AND RATE DESIGN STUDY 35
6. Proposed Potable Water
Rates
Section 6 details the proposed water rate calculations. The proposed rates are calculated directly from the results of
the COS analysis (from Section 5).
6.1. Proposed Fixed Charges
Table 6-1 shows the fixed charge component calculations: the System Fee, MWD/CWA charge, and private fire
line charges. Costs for the customer, capacity meter, cost meter, and MWD/CWA components are from Table 5-19,
Line 18. Public fire costs, subcategorized by class, are from Table 5-19, Column L. Private fire costs have been
divided into the Demand (capacity) component and backflow and lateral maintenance costs identified by District
staff. The backflow charges are proportional to meter size while the lateral costs do not vary by meter size. The
costs identified in Column A are divided by the units in Column B to derive the annual charge in column C; this
amount is converted to a monthly charge in Column D by dividing by 12.
Table 6-1: Fixed Charge Components
A C D
Cost Annual
Charge
Monthly
Charge
Rate Component
1 Customer 5,641,057$ 50,483 Accounts 111.74$ 9.31$
2 Cap. Meters 2,577,653 67,541 Cap. Eq 38.16 3.18
3 Cost Meters 2,130,457 60,443 Cost Eq 35.25 2.94
4 Public Fire
5 SFR 1,059,034$ 47,508 Cap. Eq 22.29 1.86
6 MFR 33,680 5,417 Cap. Eq 6.22 0.52
7 Commercial 99,019 4,132 Cap. Eq 23.96 2.00
8 Irrigation - 3,458 Cap. Eq - -
9 Construction 20,026 3,880 Cap. Eq 5.16 0.43
10 Public 20,026 2,073 Cap. Eq 9.66 0.81
11 Public Irrigation - 1,073 Cap. Eq - -
12 CWA/MWD 13,363,979$ 67,541 Cap. Eq 197.86 16.49
13 Private Fire
14 Capacity 246,151$ 1,671 6" Eq. 147.34$ 12.28$
15 Lateral 44,522 1,671 6" Eq. 26.65 2.22
16 Backflow 25,806 888 Fire Accounts 29.06 2.42
Fixed Charges UnitsLine
B
36 OTAY WATER DISTRICT
6.1.1. PROPOSED SYSTEM FEES
Table 6-2, Table 6-3, and Table 6-4 show the detailed calculation of proposed System Fees, which are based on
Customer and Equivalent meter unit rates. Customer costs do not vary by connection type or size. Therefore, the
Customer unit rate, previously derived in Table 6-1, Column D, Line 1 is applied uniformly to all System Fees
(Column A). Because Capacity Meters costs vary by meter size based on hydraulic capacity, the unit cost (Table
5-18, Column D, Line 2) is multiplied by the AWWA capacity ratio for each meter size (Table 5-3, Column B). For
example, the AWWA capacity ratio for a 1” meter is 1.67, is multiplied by $3.18 to derive the meter component cost
of $5.30 (Column B, Line 3). The same process is repeated for the cost meters component in Line C. The three fixed
charge components in Columns A, B, and C are added in Column D, showing the subtotal of these components that
all customers pay each month.
Table 6-2: System Fees
Table 6-3 shows the calculation of the monthly public fire protection component of the total System Fee. The unit
cost for each class was shown in Table 6-1, Column D, Lines 5 to 11. These costs are scaled to each meter size using
AWWA capacity ratios in the same manner as described above.
Table 6-3: Public Fire Protection
A B C D
Customer Cap. Meters Cost Meters Subtotal
Meter Size
1 5/8" 9.31$ 3.18$ 2.94$ 15.43$
2 3/4" 9.31 3.18 2.94 15.43
3 1" 9.31 5.30 3.79 18.40
4 1 1/2" 9.31 10.60 6.16 26.07
5 2" 9.31 16.96 8.83 35.10
6 3" 9.31 37.10 27.51 73.93
7 4" 9.31 66.79 47.78 123.88
8 6" 9.31 148.42 82.53 240.26
9 8" 9.31 254.43 103.12 366.86
10 10" 9.31 402.85 148.30 560.46
System Fee
ComponentsLine
A B C D E F G
SFR MFR Commercial Irrigation Construction Public Public Irr.
Meter Size
1 5/8" 1.86$ 0.52$ 2.00$ -$ 0.43$ 0.81$ -$
2 3/4" 1.86 0.52 2.00 - 0.43 0.81 -
3 1" 3.10 0.86 3.33 - 0.72 1.34 -
4 1 1/2" 6.19 1.73 6.66 - 1.43 2.68 -
5 2" 9.91 2.76 10.65 - 2.29 4.29 -
6 3" 21.67 6.05 23.30 - 5.02 9.39 -
7 4" 39.01 10.88 41.94 - 9.03 16.91 -
8 6" 86.69 24.18 93.19 - 20.07 37.57 -
9 8" 148.61 41.45 159.76 - 34.41 64.40 -
10 10" 235.30 65.63 252.95 - 54.48 101.97 -
Line Public Fire
Protection
WATER COST OF SERVICE AND RATE DESIGN STUDY 37
Table 6-4 shows the final proposed System Fee for each class, calculated by adding the subtotal from Table 6-2,
Column D to the corresponding public fire protection component from Table 6-3. These rates are rounded to the
next penny.
Table 6-4: Total System Fees
6.1.2. PROPOSED CWA / MWD CHARGES
The CWA/MWD charges recover wholesale water purchase costs levied by the San Diego County Water
Authority and the Metropolitan Water District. These charges are calculated in a similar way to the System Fees.
The unit cost in Table 6-1, Column D, Line 12 is scaled according to the AWWA capacity ratios in Table 5-3.
Table 6-5: CWA / MWD Charges
6.1.3. PROPOSED PRIVATE FIRE LINE CHARGES
Fixed charges for private fire lines are calculated in the same manner as the fixed charges Table 6-2 All Customers
pay the same unit rate for backflow maintenance, as calculated in Table 6-1, Column D, Line 16. The capacity and
lateral components (Table 6-1, Column D, Lines 14 and 15) are scaled to larger meter sizes using the equivalent
demand factors from Table 5-7, Column F. These components for each meter size are added in Table 6-6, Column
D.
A B C D E F G
SFR MFR Commercial Irrigation Construction Public Public Irr.
Meter Size
1 5/8" 17.29$ 15.95$ 17.43$ 15.43$ 15.86$ 16.24$ 15.43$
2 3/4" 17.29 15.95 17.43 15.43 15.86 16.24 15.43
3 1" 21.50 19.27 21.74 18.41 19.12 19.75 18.41
4 1 1/2" 32.27 27.81 32.74 26.08 27.51 28.76 26.08
5 2" 45.01 37.87 45.76 35.11 37.40 39.40 35.11
6 3" 79.98 97.23 73.93 78.95 83.32 73.93
7 4" 134.77 165.82 123.89 132.92 140.79 123.89
8 6" 264.45 333.46 240.26 260.34 277.83 240.26
9 8" 408.31 526.62 366.86 401.27 431.27 366.86
10 10" 626.10 813.42 560.46 614.94 662.44 560.46
Line System Fees
A
Proposed
Meter Size
1 5/8" 16.49$
2 3/4" 16.49
3 1" 27.49
4 1 1/2" 54.97
5 2" 87.94
6 3" 192.37
7 4" 346.27
8 6" 769.48
9 8" 1,319.10
10 10" 2,088.58
Line CWA/MWD
Passthrough
38 OTAY WATER DISTRICT
Table 6-6: Private Fire Charges
A B C D
Backflow Lateral Capacity Total
Meter Size
1 5/8" 2.42$ 0.01$ 0.03$ 2.46$
2 3/4" 2.42 0.01 0.05 2.49
3 1" 2.42 0.02 0.11 2.56
4 1 1/2" 2.42 0.06 0.32 2.81
5 2" 2.42 0.12 0.68 3.23
6 3" 2.42 0.36 1.98 4.77
7 4" 2.42 0.76 4.23 7.42
8 6" 2.42 2.22 12.28 16.93
9 8" 2.42 4.73 26.17 33.33
10 10" 2.42 8.51 47.06 57.99
Private FireLine
WATER COST OF SERVICE AND RATE DESIGN STUDY 39
6.2. Proposed Volume Rates
Volume Charges are designed to recover the portion of the rate revenue requirement allocated to the following cost
causation components: Commodity, Demand, and Tax Offset.
6.2.1. COMMODITY RATE COMPONENT
Table 6-7 shows the calculation of the Commodity rate component. Billable water volumes from Table 5-1 are
shown in Column A. The cost for each class and tier was previously calculated in Table 5-19, Column A and is
restated in Column B. The Commodity rate component in Column C is the result of dividing Column B by Column
A. All customers pay the same amount per Ccf since commodity costs primarily consist of water purchases.
Table 6-7: Commodity Rate Component
A B C
Billed Ccf Cost Rate
SFR
1 Tier 1 3,992,200 14,743,872$ 3.69$
2 Tier 2 701,000 2,588,912 3.69
3 Tier 3 1,798,100 6,640,690 3.69
4 Subtotal 6,491,300 23,973,475$ 3.69$
MFR
5 Tier 1 1,611,600 5,951,912$ 3.69$
6 Tier 2 93,600 345,681 3.69
7 Tier 3 152,700 563,948 3.69
8 Subtotal 1,857,900 6,861,541$ 3.69$
9 Commercial 1,132,700 4,183,254$ 3.69$
10 Irrigation 1,131,900 4,180,299 3.69
11 Construction 286,500 1,058,093 3.69
12 Public 744,900 2,751,042 3.69
13 Public Irr.262,700 970,196 3.69
14 Total 11,907,900 43,977,900$ 3.69$
Line Commodity
Component
40 OTAY WATER DISTRICT
6.2.2. DEMAND RATE COMPONENT
Table 6-8 shows the calculation of the Demand rate component. Billable water volumes from Table 5-1 are shown
in Column A. The cost for each class and tier was previously calculated in Table 5-19, Column B and is restated in
Column B. The rate component in Column C is the result of dividing Column B by Column A. The demand rate
component is different for each customer class because it reflects a particular classes’ cost that is related to the design,
sizing, and operation of the water system. Each customer class as well as customers in each tier use water in a
different manner – meaning certain customers show little variation in water use throughout the year, while others
vary their use greatly during the year. For example, irrigation customers and customers in Tiers 2 and 3, have higher
water use at certain times of the year (peak times), and therefore are more responsible for the seasonal and daily
water use peaks witnessed by the District6. Peaking factors were derived from District water use data and were shown
in Table 5-1 and peaking factors describe how a class uses water. Commercial customers tend to have less variation
in daily, monthly and yearly water use and thus have a lower peaking factors as shown in Table 5-1. The
infrastructure (pipes, tanks and pumps) required to serve water during peak times of use must be upsized7 compared
to a system that is designed to serve water at average flows8. There is a capital and operational cost associated with
upsizing infrastructure. The demand rates are calculated to recover the capital and operational costs associated with
upsizing infrastructure and charge customers who are more responsible for the upsizing (peaks). Therefore, the
demand rate for Irrigation customers and Tiers 2 and 3 for example, are higher than customers with lower peaking
factors such as commercial customers or Tier 1 customers.
The derivation of unit costs in Section 5.5 and the calculation of class costs in Section 5.6 ensure that each customer
class and tier are treated equally in that the unit costs are the same for each class but are applied in proportion to
water use during peak times of use, therefore allocating slightly more costs to classes/tiers that demonstrate higher
peaking. The District (and most water utilities who set rates according to the guidance provided by the AWWA in
their M1 manual: Principles of Water Rates, Fees and Charges) bills its customers based on total water used per
period (regardless of the day of use). This requires that costs associated with maximum day use be recovered on an
average day basis, resulting in the different Demand Component rates shown in this Table. Ultimately, customers
with a higher peaking factor (Table 5-1, Column C) pay a higher Demand rate. In this way, water users pay their
proportionate share of the system upsizing to serve their peak demand.
Figure 6-1 shows graphically the upsizing of the distribution system (not drawn to scale) to accommodate average
flow, max hour flows and max day flows. The District is setting rates using only max day peaking factors and does
not use max hour. Larger pipes are more expensive to install and maintain than smaller pipes. This also applies to
distribution reservoirs (tanks). Distribution reservoirs designed to meet average flows could be smaller than reservoirs
designed to meet max day flows. Larger tanks are more expensive to construct and maintain than smaller tanks.
That rates shown in Table 6-8, are calculated to charge those that cause the upsizing of the pipes and tanks (as
evidenced by peaking factors) in proportion to their demonstrated max hour water use.
6 All customer classes have variation in use, but certain classes show more variation in use compared to others.
7 This is evidenced by the District’s Water Master Plan prepared by Atkins which discusses how certain functions
(distribution, storage) of the water system are designed/sized to serve water during peak times of use.
8 The Commodity Demand method and the Base-Extra Capacity method are rate setting methods described in the
AWWA M1 Manual, and both seek to separate costs into costs associated with serving water at average flows
(commodity costs or base costs) and costs to serve water during peak times of use (demand costs or extra capacity costs).
These costs are then collected via rates such as those shown in Table 6-8.
WATER COST OF SERVICE AND RATE DESIGN STUDY 41
Figure 6-1: Pipe Sizes Required for Average, Max Day and Max Hour Flows
(Not Drawn to Scale)
42 OTAY WATER DISTRICT
Table 6-8: Demand Rate Component
6.2.3.TAX OFFSET RATE COMPONENT
Table 6-9 shows the calculation of the Tax Offset rate component. Billable water volumes from Table 5-1 are shown
in Column A. The cost for each class and tier was previously calculated in Table 5-19, Column J and is restated in
Column B. The rate component in Column C is the result of dividing Column B by Column A. All customers who
pay property taxes receive the same offset in which lowers their volume rates. Public and public irrigation customers,
who do not pay property taxes, do not receive this rate offset.
A B C
Billed Ccf Cost Rate
SFR
1 Tier 1 3,992,200 7,224,486$ 1.81$
2 Tier 2 701,000 1,563,456 2.23
3 Tier 3 1,798,100 5,130,266 2.85
4 Subtotal 6,491,300 13,918,207$ 2.14$
MFR
5 Tier 1 1,611,600 2,838,665$ 1.76$
6 Tier 2 93,600 204,428 2.18
7 Tier 3 152,700 362,410 2.37
8 Subtotal 1,857,900 3,405,503$ 1.83$
9 Commercial 1,132,700 2,327,554$ 2.05$
10 Irrigation 1,131,900 3,244,931 2.87
11 Construction 286,500 809,716 2.83
12 Public 744,900 1,583,127 2.13
13 Public Irr.262,700 773,897 2.95
14 Total 11,907,900 26,062,936$ 2.19$
Line Demand
Component
WATER COST OF SERVICE AND RATE DESIGN STUDY 43
Table 6-9: Tax Offset Rate Component
A B C
Billed Ccf Cost Rate
SFR
1 Tier 1 3,992,200 (1,888,735)$ (0.47)$
2 Tier 2 701,000 (331,647) (0.47)
3 Tier 3 1,798,100 (850,692) (0.47)
4 Subtotal 6,491,300 (3,071,075)$ (0.47)$
MFR
5 Tier 1 1,611,600 (762,458)$ (0.47)$
6 Tier 2 93,600 (44,283) (0.47)
7 Tier 3 152,700 (72,243) (0.47)
8 Subtotal 1,857,900 (878,984)$ (0.47)$
9 Commercial 1,132,700 (535,887)$ (0.47)$
10 Irrigation 1,131,900 (535,509) (0.47)
11 Construction 286,500 (135,545) (0.47)
12 Public - - -
13 Public Irr.- - -
14 Total 10,900,300 (5,157,000)$ (0.47)$
Line Tax Offset
Component
44 OTAY WATER DISTRICT
6.2.4. TOTAL PROPOSED VOLUME RATE
The proposed volume rates in Table 6-10 are the result of adding each of the constituent components derived in
Table 6-7,
Table 6-8, and Table 6-9. The total rate for each class and tier is shown in Column D.
Table 6-10: Total Proposed Volume Rates
6.2.5.ENERGY SURCHARGE
The proposed energy surcharge in Table 6-11, Column D is the result of dividing the cost in Column B (from
Table 5-19, Column I) by the total elevation adjusted volume units (Table 5-8, Column I).
Table 6-11: Energy Surcharge
6.3. Monthly Bill Impacts
The following Tables show sample monthly bills for each customer class using the most common meter sizes for the
class and a range of water use volumes to provide a representative sample of impacts across many customers.
A B C D
Commodity Demand Tax Offset Total
SFR
1 Tier 1 3.69$ 1.81$ (0.47)$ 5.03$
2 Tier 2 3.69 2.23 (0.47) 5.46
3 Tier 3 3.69 2.85 (0.47) 6.08
MFR
4 Tier 1 3.69$ 1.76$ (0.47)$ 4.99$
5 Tier 2 3.69 2.18 (0.47) 5.41
6 Tier 3 3.69 2.37 (0.47) 5.60
7 Commercial 3.69$ 2.05$ (0.47)$ 5.28$
8 Irrigation 3.69 2.87 (0.47) 6.09
9 Construction 3.69 2.83 (0.47) 6.05
10 Public 3.69 2.13 - 5.82
11 Public Irr.3.69 2.95 - 6.64
Line Volume Charge
A B D E
Energy Surcharge Cost Unit Rate Current
1 Energy Cost 2,901,876$ 43,170,047 Adj. Ccf 0.068$ 0.063$
Line Units
C
WATER COST OF SERVICE AND RATE DESIGN STUDY 45
Table 6-12: SFR Bill Impacts
Table 6-13: MFR Bill Impacts
Table 6-14: Commercial Bill Impacts
Table 6-15: Commercial Irrigation Bill Impacts
System MWD /
CWA Volume Total System
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3/4" 3 20.08$ 17.00$ 10.56$ 47.64$ 17.29$ 16.49$ 15.09$ 48.87$ 1.23$ 2.6%
3/4" 5 20.08 17.00 17.60 54.68 17.29 16.49 25.15 58.93 4.25 7.8%
3/4" 11 20.08 17.00 41.50 78.58 17.29 16.49 56.19 89.97 11.39 14.5%
3/4" 14 20.08 17.00 60.40 97.48 17.29 16.49 73.81 107.59 10.11 10.4%
1" 28 28.39 31.57 159.52 219.48 21.50 27.49 158.93 207.92 (11.56) -5.3%
Current Charges Proposed Charges Change
SFR
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3" 40 308.22$ 258.17$ 131.60$ 697.99$ 79.98$ 192.37$ 199.60$ 471.95$ (226.04)$ -32.4%
1" 18 62.37 31.57 59.22 153.16 19.27 27.49 89.82 136.58 (16.58) -10.8%
2" 45 162.53 121.39 172.17 456.09 37.87 87.94 224.55 350.36 (105.73) -23.2%
1" 35 62.37 31.57 155.35 249.29 19.27 27.49 174.65 221.41 (27.88) -11.2%
1" 36 62.37 31.57 195.18 289.12 19.27 27.49 183.42 230.18 (58.94) -20.4%
Current Charges Proposed Charges Change
MFR
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3/4" 1 41.61$ 17.00$ 4.17$ 62.78$ 17.43$ 16.49$ 5.28$ 39.20$ (23.58)$ -37.6%
3/4" 5 41.61 17.00 20.85 79.46 17.43 16.49 26.40 60.32 (19.14) -24.1%
1" 17 58.75 31.57 70.89 161.21 21.74 27.49 89.76 138.99 (22.22) -13.8%
1 1/2" 55 101.66 71.36 229.35 402.37 32.74 54.97 290.40 378.11 (24.26) -6.0%
2" 305 153.11 121.39 1,271.85 1,546.35 45.76 87.94 1,610.40 1,744.10 197.75 12.8%
Current Charges Proposed Charges Change
Commercial
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3/4" 0 35.13$ 17.00$ -$ 52.13$ 15.43$ 16.49$ -$ 31.92$ (20.21)$ -38.8%
3/4" 6 35.13 17.00 36.54 88.67 15.43 16.49 36.54 68.46 (20.21) -22.8%
1" 43 49.62 31.57 261.87 343.06 18.41 27.49 261.87 307.77 (35.29) -10.3%
1 1/2" 124 85.86 71.36 755.16 912.38 26.08 54.97 755.16 836.21 (76.17) -8.3%
2" 366 129.28 121.39 2,228.94 2,479.61 35.11 87.94 2,228.94 2,351.99 (127.62) -5.1%
Current Charges Proposed Charges Change
Commercial Irrigation
46 OTAY WATER DISTRICT
Table 6-16: Construction Bill Impacts
Table 6-17: Temporary Construction Bill Impacts
Table 6-18: Public Bill Impacts
Table 6-19: Public Irrigation Bill Impacts
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
1" 5 49.62$ 30.45$ 80.07$ 19.12$ 27.49$ 30.25$ 76.86$ (3.21)$ -4.0%
4" 55 375.63 334.95 710.58 132.92 346.27 332.75 811.94 101.36 14.3%
4" 402 375.63 2,448.18 2,823.81 132.92 346.27 2,432.10 2,911.29 87.48 3.1%
Current Charges Proposed Charges Change
Construction
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Use
3/4" 5 35.13$ 60.90$ 96.03$ 15.86$ 16.49$ 30.25$ 46.11$ (49.92)$ -52.0%
4" 10 375.63 121.80 497.43 132.92 346.27 60.50 193.42 (304.01) -61.1%
4" 50 375.63 609.00 984.63 132.92 346.27 302.50 435.42 (549.21) -55.8%
4" 100 375.63 1,218.00 1,593.63 132.92 346.27 605.00 737.92 (855.71) -53.7%
4" 400 375.63 4,872.00 5,247.63 132.92 346.27 2,420.00 2,552.92 (2,694.71) -51.4%
4" 900 375.63 10,962.00 11,337.63 132.92 346.27 5,445.00 5,577.92 (5,759.71) -50.8%
4" 1300 375.63 15,834.00 16,209.63 132.92 346.27 7,865.00 7,997.92 (8,211.71) -50.7%
Current Charges Proposed Charges Change
Temp. Construction
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3/4" 3 41.61$ 17.00$ 13.77$ 72.38$ 16.24$ 16.49$ 17.46$ 50.19$ (22.19)$ -30.7%
3/4" 11 41.61 17.00 50.49 109.10 16.24 16.49 64.02 96.75 (12.35) -11.3%
1" 24 58.75 31.57 110.16 200.48 19.75 27.49 139.68 186.92 (13.56) -6.8%
2" 76 153.11 121.39 348.84 623.34 39.40 87.94 442.32 569.66 (53.68) -8.6%
3" 601 290.34 258.17 2,758.59 3,307.10 83.32 192.37 3,497.82 3,773.51 466.41 14.1%
Current Charges Proposed Charges Change
Public
Fixed MWD /
CWA Volume Total Fixed
MWD /
CWA Volume Total Dollar Percent
Meter Size Ccf
3/4" 0 41.61$ 17.00$ -$ 58.61$ 15.43$ 16.49$ -$ 31.92$ (26.69)$ -45.5%
3/4" 2 41.61 17.00 13.02 71.63 15.43 16.49 13.28 45.20 (26.43) -36.9%
1 1/2" 17 101.66 71.36 110.67 283.69 26.08 54.97 112.88 193.93 (89.76) -31.6%
2" 74 153.11 121.39 481.74 756.24 35.11 87.94 491.36 614.41 (141.83) -18.8%
2" 402 153.11 121.39 2,617.02 2,891.52 35.11 87.94 2,669.28 2,792.33 (99.19) -3.4%
Change
Public Irrigation
Current Charges Proposed Charges
WATER COST OF SERVICE AND RATE DESIGN STUDY 47
7.Recycled Cost of Service
Analysis
Section 6 details the recycled water cost of service (COS) analysis performed for FY 2023. The COS analysis allocates
the overall rate revenue requirement to customer classes based on their proportion of use of and burden on the
District’s water system. This provides the basis for the development of proposed water rates.
7.1. Units of Service
The first step of the cost of service process is to determine the units of service that will be used to assign costs to each
customer class.
7.1.1. WATER USE AND PEAKING UNITS
Table 7-1 shows the water use and peaking characteristics of each of the proposed customer classes. The annual
use in Column A is the total amount of water, measured in Ccf, forecasted to be purchased in FY 2023. This
amount is divided by 365 days in column B to estimate the average daily use. Unique peaking factors shown in
Column C are multiplied by the average daily use to estimate the water use of each customer class on the highest
use day of the year. Detail on the derivation of these peaking factors can be found in Appendix A.
Elevation adjusted volumes were determined for each customer account by analyzing the height above sea level for
each pumping zone. The District charges the energy surcharge on each unit of water sold for every 100 feet above
450 feet in elevation. For example, a customer at an elevation of 820 feet would have an “elevation adjustment
factor” of four (820-450 /100 = 3.7, rounded to 4). All of this customer’s annual water use is multiplied by four to
determine the elevation adjusted Ccf; this process was repeated for each customer in the District’s billing data to
determine the elevation adjusted Ccf. The class level results are shown in Column E of Table 7-1.
Table 7-1: Water Use and Peaking Units
7.1.2. CUSTOMER UNITS
Customer units include the number of accounts and number of ¾” equivalent meters of each customer class and are
used to develop the District’s monthly System Fees. Table 7-2 shows a forecast of the number of accounts by
customer class for FY 2023, provided to Raftelis by the District.
A B C D E
Annual Use
(Ccf)
Avg. Day
(Ccf /day)MD Peak MD Total
(Ccf /day)Elev. Adj. Ccf
1 Recycled Irrigation 834,700 2,287 2.59 5,913 3,344,148
2 Recycled Public 581,700 1,594 2.73 4,350 1,971,123
3 Recycled Commercial 155,900 427 1.99 852 893,880
4 Total 1,572,300 4,308 2.58 11,115 6,209,151
Line Test Year Units of
Service
48 OTAY WATER DISTRICT
The capacity equivalent ratio for each meter size from Table 5-3 is multiplied by the number of accounts in Table
7-2 to determine the number of equivalent meter units in Table 7-3. The process is repeated using cost equivalent
ratios in Table 7-4.
Table 7-2: Customer Accounts
Table 7-3: AWWA Capacity Equivalent Meters
A B C D
Recycled Public Rec. Rec. Comm. Total
Meter Size
1 5/8" - - - -
2 3/4" 7 1 - 8
3 1" 65 59 - 124
4 1 1/2" 214 198 - 412
5 2" 110 96 - 206
6 3" 2 2 - 4
7 4" 5 2 - 7
8 6" 2 - - 2
9 8" - - - -
10 10" - - 1 1
11 Total 405 358 1 764
12 Percent 53.0% 46.9% 0.1%
Customer AccountsLine
A B C D
Recycled Public Rec. Rec. Comm. Total
Meter Size
1 5/8" - - - -
2 3/4" 7 1 - 8
3 1" 108 98 - 207
4 1 1/2" 713 660 - 1,373
5 2" 587 512 - 1,099
6 3" 23 23 - 47
7 4" 105 42 - 147
8 6" 93 - - 93
9 8" - - - -
10 10" - - 127 127
11 Total 1,637 1,337 127 3,100
12 Percent 52.8% 43.1% 4.1%
Capacity Equivalent
MetersLine
WATER COST OF SERVICE AND RATE DESIGN STUDY 49
Table 7-4: Cost Equivalent Meters
A B C D
Recycled Public Rec. Rec. Comm. Total
Meter Size
1 5/8" - - - -
2 3/4" 7 1 - 8
3 1" 84 76 - 160
4 1 1/2" 449 415 - 864
5 2" 331 289 - 619
6 3" 19 19 - 37
7 4" 81 33 - 114
8 6" 56 - - 56
9 8" - - - -
10 10" - - 50 50
11 Total 1,027 832 50 1,909
12 Percent 33.1% 1.6% 61.6%
Line Cost Equivalent Meters
50 OTAY WATER DISTRICT
7.1.3.UNITS OF SERVICE SUMMARY
Table 7-5 summarizes the units of service developed above and assigns them to each cost causation component. Commodity units in Column A are
from Table 7-1, Column A. Demand units (Column B) are from Table 5-1, Column D. Accounts (Column C) were previously shown in Table 7-2, cost
meters (Column D) in Table 7-4, and capacity meters (Column E) in Table 7-3.
Table 7-5: Units of Service Summary
A B C D E F
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy
Ccf Ccf/Day Accounts 3/4" Eq. 3/4" Eq. Adj. Ccf
1 Recycled 834,700 5,913 405 1,027 1,637 3,344,148
2 Public Rec.581,700 4,350 358 832 1,337 1,971,123
3 Rec. Comm.155,900 852 1 50 127 893,880
4 Total Units of Service 1,572,300 11,115 764 1,909 3,100 6,209,151
Line Unit Cost of Service
Units
WATER COST OF SERVICE AND RATE DESIGN STUDY 51
7.2. Revenue Requirement
Table 7-6 shows the rate revenue requirement for FY 2023 (also referred to as the test year or rate-setting year). The
revenue requirement is split into operating and capital categories (Columns A and B), which are later allocated based
on O&M expenses and capital assets respectively. The expenses (Lines 1-3) are equal to FY 2023 forecast expenses.
The miscellaneous revenue (Line 5) includes interest earnings, late fees, tax revenue, and other miscellaneous
revenues that are applied as offsets to the final rate revenue requirement. The contribution to reserves adjustment
(Line 6) is equal to FY 2023 forecast net cash change and represents the increase in the rate revenue requirement
resulting from a projected increase to reserves in FY 2023 in the absence of any additional rate increase. All
aforementioned values are from the District’s internal financial planning forecast for FY 2023. The final rate revenue
requirement (Line 9) is calculated as follows:
Total revenue required from rates (Line 9) = Revenue requirements (Line 4) + Non-Rate Revenue (Line 5) + Adjustments (Line
8)
Table 7-6: FY 2023 Projected Revenue Required from Rates
7.3. Functionalization and Allocation of Expenses
After determining the revenue requirement, the next step of the COS analysis is to allocate O&M expenses and
capital assets to the following functional categories:
» Supply: Purchased water from the City of San Diego as well as other minor miscellaneous supply costs
» Treatment: costs associated with the District’s water treatment system
» Transmission: costs associated with the District’s water transmission system
» Distribution: costs associated with the District’s water distribution system
» Pumping: costs related to operating the District’s water pumping stations
» Storage: costs related to the District’s water storage system
» Customer Service: costs of meter reading, billing, and other customer services
A B C
Operating Capital Total
Expenses
1 Operating Expenses 8,535,500$ 8,535,500$
2 Debt Service 1,233,300 1,233,300
3 Rate Funded Capital 2,000,000 2,000,000
4 Subtotal 8,535,500$ 3,233,300$ 11,768,800$
5 Non-Rate Revenue (756,000)$ (1,476,000)$ (2,232,000)$
Adjustments
6 Contribution to Reserves -$ (193,800)$ (193,800)$
7 Mid-Year Increase - - -
8 Subtotal -$ (193,800)$ (193,800)$
9 Total Revenue Required 7,779,500$ 1,563,500$ 9,343,000$
Revenue RequirementLine
52 OTAY WATER DISTRICT
» Meters and Services: costs of meter maintenance/repair
» Energy: Power purchases associated with operating pumping stations
» General: costs for general administration and operational expenses or any other costs that do not clearly
relate to a specific functional category
After functionalization of costs, we allocate the functionalized costs to cost causation components. Some cost
causation components correspond directly to a functional category listed above. The cost causation components
include:
» Commodity: costs associated with providing water under average water demand conditions, primarily
consisting of volumetric water purchases and overhead related to such things as attending wholesale water
board meetings and general management of water supply issues
» Demand: costs associated with providing water under peak demand conditions, including a portion of water
supply costs related to the District’s overall peaking characteristics and the sizing of assets such as water
mains and storage facilities to meet peak summer demand
» Customer: directly associated with the Customer functional category
» Cost Meters: directly associated with the Meters functional category
» Capacity Meters: used for a reallocation of some Demand costs in a later step
» Energy: directly associated with the Energy function
» General: directly associated with the General function
7.3.1. O&M EXPENSE ALLOCATION
District staff functionalized FY 2023 operating expenses. Table 7-7 shows a summary of the O&M
functionalization results. Functionalizing costs is necessary in order to allocate total O&M expenses to the cost
causation components.
Table 7-7: Summary of O&M Expenses by Functional Category
Function
1 Supply 5,698,041$ 66.8%
2 Treatment 448,294 5.3%
3 Transmission 179,734 2.1%
4 Distribution 371,211 4.3%
5 Recycled Water Pumping 242,660 2.8%
6 Distribution Storage 97,393 1.1%
7 Customer Service 88,129 1.0%
8 Meters and Services 94,807 1.1%
9 Fire Service - 0.0%
10 Energy 562,000 6.6%
11 General 753,231 8.8%
12 Total 8,535,500$ 100.0%
Line Budget Functionalization Results
Percent of
Total
WATER COST OF SERVICE AND RATE DESIGN STUDY 53
Table 7-8 shows the allocation of functionalized projected FY 2023 O&M expenses to each cost causation
component according to the criteria described above. Total O&M expenses associated with each function (Column
H) were determined in Table 7-7. The total dollar amount allocated to each cost causation component (Line 12) is
the sum of values in Lines 1 to 11 for each cost component.
The total General revenue requirement (Column G, Line 12) is fully reallocated to other cost causation
components on a proportional basis. General and Administrative costs are not allocated to the Commodity
component because overhead costs related to water purchases are already included in the supply function.
Additionally, components related to a pass-through cost (Energy) or tax offset do not receive an allocation of
general costs. Note that the reallocation results in a shifting of costs between cost causation components but does
not change the total rate revenue requirement.
The final O&M Allocation is shown in Line 14. The percentages (Line 15) represent the proportion of total O&M
expenses allocated to each cost causation component. These O&M allocation percentages are later used to allocate
some miscellaneous revenues.
54 OTAY WATER DISTRICT
Table 7-8: Allocation of O&M Expenses to Cost Causation Components
A B C D E F G H
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy General Total
Function
1 Supply 5,698,041$ -$ -$ -$ -$ -$ -$ 5,698,041$
2 Treatment - 448,294 - - - - - 448,294
3 Transmission - 179,734 - - - - - 179,734
4 Distribution - 371,211 - - - - - 371,211
5 Recycled Water Pumping - 242,660 - - - - - 242,660
6 Distribution Storage - 97,393 - - - - - 97,393
7 Customer Service - - 88,129 - - - - 88,129
8 Meters and Services - - - 94,807 - - - 94,807
10 Energy - - - - - 562,000 - 562,000
11 General - - - - - - 753,231 753,231
12 Subtotal 5,698,041$ 1,339,292$ 88,129$ 94,807$ -$ 562,000$ 753,231$ 8,535,500$
13 Reallocation of General 662,711$ 43,608$ 46,912$ -$ (753,231)$ -$
14 Total 5,698,041$ 2,002,003$ 131,737$ 141,719$ -$ 562,000$ 8,535,500$
15 Percent Allocation 66.8% 23.5% 1.5% 1.7% 0.0% 6.6% 0.0%
Line O&M Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 55
7.3.2. CAPITAL ALLOCATION
Capital assets are utilized in COS analyses to allocate the capital revenue requirement to the various cost causation
components. The distribution of a short-term capital plan can be heavily weighted to specific cost causation
components based on the type of projects. Using short-term planned capital projects to allocate capital costs would
cause rates to fluctuate and cause customer confusion. The overall capital asset base however is considerably more
stable in the long-term, and therefore is more representative of long-term capital investment in the District’s water
system. Thus, functionalized capital assets are used to allocate capital costs.
District staff provided Raftelis with a detailed asset listing that included the original cost less depreciation (OCLD)
of each individual asset. As part of the capital asset analysis, Raftelis and District staff assigned each asset to a
functional category. Total asset value (OCLD) by functional category is shown in Table 7-9.
Table 7-9: Summary of Capital Assets by Functional Category
Table 7-10 shows the allocation of capital assets by function to each cost causation component as well as the
reallocation of General costs in line 12; this is consistent with the methodology used to determine the allocation of
O&M expenses to cost causation components in Table 7-8. The final capital asset allocation percentages (Line 14)
represent the proportion of total capital assets allocated to each cost causation component (Line 13). These
percentages are used to allocate annual capital costs, including debt service, rate funded capital, and reserve
contributions in Table 7-11.
Function
1 Supply 1,423,205$ 1.8%
2 Treatment 5,505,372 6.8%
3 Transmission 35,223,822 43.7%
4 Distribution 17,159,176 21.3%
5 Recycled Water Pumping 9,541,998 11.9%
6 Distribution Storage 10,602,163 13.2%
7 Customer Service - 0.0%
8 Meters and Services 345,746 0.4%
9 Fire Service 0.0%
10 Energy 0.0%
11 General 720,001 0.9%
12 Total 80,521,483$ 100%
Line Asset Functionalization Results
Percent of
Total
56 OTAY WATER DISTRICT
Table 7-10: Allocation of Functionalized Capital Assets to Cost Causation Components\
Table 7-11: Allocation of Capital Costs to Cost Causation Components
A B C D E F G H
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy General Total
Function
1 Supply 1,423,205$ -$ -$ -$ -$ -$ -$ 1,423,205$
2 Treatment - 5,505,372 - - - - - 5,505,372
3 Transmission - 35,223,822 - - - - - 35,223,822
4 Distribution - 17,159,176 - - - - - 17,159,176
5 Recycled Water Pumping - 9,541,998 - - - - - 9,541,998
6 Distribution Storage - 10,602,163 - - - - - 10,602,163
7 Customer Service - - - - - - - -
8 Meters and Services - - - 345,746 - - - 345,746
10 General - - - - - - 720,001 720,001
11 Subtotal 1,423,205$ 78,032,531$ -$ 345,746$ -$ -$ 720,001$ 80,521,483$
12 Reallocation of General 12,841$ 704,041$ -$ 3,119$ -$
13 Total 1,436,046$ 78,736,572$ -$ 348,866$ -$ -$ 80,521,483$
14 Percent Allocation 1.8% 97.8% 0.0% 0.4% 0.0% 0.0%
Line Asset Allocations
A B C D E F G H
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy General Total
Expense
1 Debt Service 21,995$ 1,205,962$ -$ 5,343$ -$ -$ -$ 1,233,300$
2 Rate Funded Capital 35,669 1,955,666 - 8,665 - - - 2,000,000
3 Contribution to Reserves (3,456) (189,504) - (840) - - - (193,800)
4 Mid-Year Adjustment - - - - - - - -
5 Subtotal 54,207$ 2,972,124$ -$ 13,169$ -$ -$ -$ 3,039,500$
6 Reallocation of General -$ -$ -$ -$ -$
7 Total 54,207$ 2,972,124$ -$ 13,169$ -$ -$ 3,039,500$
8 Percent Allocation 1.8% 97.8% 0.0% 0.4% 0.0% 0.0%
Line Capital Cost Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 57
7.3.3. REVENUE OFFSET ALLOCATION
The District has a substantial amount of revenue from sources other than rates that is used to offset the total
revenue requirement. Raftelis and District staff analyzed each non-rate revenue source to determine the most
reasonable allocation basis. The results of this process are shown in Table 7-12. All non-rate revenues in the
Expansion, Betterment, Replacement, and New Water Supply funds are allocated on the same basis as assets using
the percentages shown in Table 7-10, Line 14. Meter Fees are used to directly offset costs in the Cost Meters
component. All other revenues in the Operating Fund are allocated using the total O&M allocation percentages in
Table 7-8, Line 26.
58 OTAY WATER DISTRICT
Table 7-12: Non-Rate Revenue Allocations
A B C D E F G H
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy General Total
Operating Fund
1 Reclaim Incentive 445,937 156,680 10,310 11,091 - 43,983 - 668,000
2 Late Fees 22,697 7,975 525 565 - 2,239 - 34,000
3 Meter Fees - - - 5,000 - - - 5,000
4 Interest 32,711 11,493 756 814 - 3,226 - 49,000
5 Subtotal 501,345$ 176,147$ 11,591$ 17,469$ -$ 49,448$ -$ 756,000$
Expansion Fund
6 Capacity Fee - Restricted 5,760 315,840 - 1,399 - - - 323,000
7 BAB Subsidy 2,639 144,719 - 641 - - - 148,000
8 Interest Income 84,781 29,788 1,960 2,109 - 8,362 - 127,000
9 Subtotal 93,181$ 490,347$ 1,960$ 4,149$ -$ 8,362$ -$ 598,000$
Betterment Fund
10 Interest Income 125$ 6,845$ -$ 30$ -$ -$ -$ 7,000$
11 BAB Subsidy 89 4,889 - 22 - - - 5,000
12 Subtotal 214$ 11,734$ -$ 52$ -$ -$ -$ 12,000$
Replacement Fund
13 Interest Income 1,480$ 81,160$ -$ 360$ -$ -$ -$ 83,000$
14 Capacity Fee - Restricted 13,839 758,798 - 3,362 - - - 776,000
15 Subtotal 15,320$ 839,959$ -$ 3,722$ -$ -$ -$ 859,000$
New Water Supply Fund
16 BAB Subsidy 36 1,956 - 9 - - - 2,000
17 Interest Income 89 4,889 - 22 - - - 5,000
18 Subtotal 125$ 6,845$ -$ 30$ -$ -$ -$ 7,000$
19 Total 610,185$ 1,525,032$ 13,551$ 25,423$ -$ 57,810$ -$ 2,232,000$
Line Non-Rate Revenue
Allocations
WATER COST OF SERVICE AND RATE DESIGN STUDY 59
7.4. Cost of Service Allocation
Table 7-13 shows the allocation of the total rate revenue requirement to the various cost causation components.
The preliminary COS allocations (Line 4) are subject to further adjustments based on additional reallocations in
Lines 5 and 6.
7.4.1. PRELIMINARY COST OF SERVICE ALLOCATION
The results shown in Table 5-16 are calculated as follows based on intermediate results developed in the preceding
subsections:
5. Operating Revenue Requirement (Line 1): The total operating revenue requirement consists solely of the
District’s O&M expenses. The allocation of the total operating revenue requirement to each cost causation
component was previously determined in Table 7-8, Line 14.
6. Capital Revenue Requirement (Line 2): The total capital revenue requirement consists of capital
expenditures and debt service payments. The allocation of the total capital revenue requirement was shown
in Table 7-11, Line 13.
7. Non-Rate Revenue (Line 3): Total revenue offsets were determined in Table 7-12, Line 19.
8. Preliminary Cost of Service Allocation (Line 4): The preliminary COS allocation to each cost causation
component equals the sum of Lines 1 through 3. Note that the total COS allocation (Column G, Line 4)
equals the total rate revenue requirement (from Table 7-6, Column C, Line 9).
7.4.2. ADJUSTMENTS TO COST OF SERVICE
Raftelis proposes a few adjustments to the preliminary cost of service related to Demand costs.
7.4.2.1.Allocation of Demand Costs to Capacity Meters
The District collects approximately 10 percent of its non-potable rate revenues from fixed System Fees. It is
common for water purveyors to collect fixed capacity related costs in proportion to meter size; the amount
collected varies greatly by water purveyor. Raftelis allocated a portion of Demand costs to what is known as the
Capacity Meter cost component. Demand costs are operation and maintenance costs for facilities that the District
maintains to provide peak capacity. These costs are fixed costs, incurred regardless of water use, and can be
recovered in proportion to meter size. Therefore, a portion of demand costs, as shown in Line 5 of Table 6-13 were
reallocated to the Capacity Meter component which is collected through the System Fee
7.4.3. FINAL COST OF SERVICE ALLOCATION
The final COS allocation (Line 6) equals the sum of Lines 4 and 5. This is the final adjusted allocation of the total
revenue requirement (from Table 7-6, Column C, Line 9) to the various cost causation components.
60 OTAY WATER DISTRICT
Table 7-13: Cost of Service Allocation
A B C D E F G
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy Total
Expenses
1 O&M 5,698,041$ 2,002,003$ 131,737$ 141,719$ -$ 562,000$ 8,535,500$
2 Non-Rate Revenue (610,185) (1,525,032) (13,551) (25,423) - (57,810) (2,232,000)
3 Capital 54,207 2,972,124 - 13,169 - - 3,039,500
4 Subtotal Expenses 5,142,063$ 3,449,095$ 118,186$ 129,466$ -$ 504,190$ 9,343,000$
5 COS Reallocation -$ (586,346)$ -$ -$ 586,346$ -$
6 Total Expenses 5,142,063$ 2,862,749$ 118,186$ 129,466$ 586,346$ 504,190$ 9,343,000$
Line Unit Cost of Service
WATER COST OF SERVICE AND RATE DESIGN STUDY 61
7.5.Unit Cost Development
Units of service (Table 7-5) are divided into the total costs for each cost causation component (Table 7-13) to
calculate unit costs, which are directly incorporated into the proposed rate calculations in Section 7.
Unit costs comprise the constituent parts from which proposed rates are calculated in Section 7. Table 7-14 shows
unit costs for each cost causation component (Column C), which are calculated by dividing the final COS allocation
in Column A (from Table 7-13, Line 6) by the relevant units of service in Column B (from Table 7-5). The units of
service vary by unit cost and are based on either water use, peaking units, or number of accounts /equivalent meter
units.
Table 7-14: Development of Unit Costs
A B C D
Cost Units of
Service Unit Cost Units
Cost Component
1 Commodity 5,142,063$ 1,572,300 3.27$ Ccf
2 Demand 2,862,749 11,115 257.57 Ccf/Day
3 Accounts 118,186 764 154.69 Account/Yr
4 Cost Eq. Meters 129,466 1,909 67.81 Eq. Meter / Yr
5 Capacity Eq. Meters 586,346 3,100 189.12 Eq. Meter / Yr
6 Energy 504,190 6,209,151 0.081 Adj. Ccf
7 Total 9,343,000$
Line Description
62 OTAY WATER DISTRICT
7.6. Customer Class Costs
Unit costs developed in Table 7-14 are used to distribute costs to each customer classes based on their units of service from Table 7-5. The Unit Costs are
multiplied by the service units to derive the cost to each class for each cost component in Columns A to F, Lines 1 to 3. The total cost of service for each
class is shown in Column G.
Table 7-15: Customer Class Cost of Service
A B C D E F G
Commodity Demand Accounts
Cost Eq.
Meters
Capacity Eq.
Meters Energy Total
1 Recycled 2,729,810$ 1,522,971$ 62,651$ 69,611$ 309,595$ 271,549$ 4,966,187$
2 Public Rec.1,902,397 1,120,371 55,380 56,431 252,795 160,057 3,547,432
3 Rec. Comm.509,857 219,406 155 3,424 23,956 72,584 829,381
4 Total Cost of Service 5,142,063$ 2,862,749$ 118,186$ 129,466$ 586,346$ 504,190$ 9,343,000$
Class Cost of ServiceLine
WATER COST OF SERVICE AND RATE DESIGN STUDY 63
7.7.Customer Class Comparison
Table 7-16 compares the total proposed revenue requirement for each class (Table 7-15, Column G) to the total
revenue that would be collected from each class under the current rates. Note that the total revenue collected under
either COS corresponds to the revenue requirement from Table 7-6, indicating that the proposed rates and rate
structure changes are revenue neutral. Distributional impacts to the various customer classes are a result of the
District’s changing cost structure and water use patterns relative to the prior rate study, and due to refinements to
the methodology to maintain adherence to Cost of Service Principles.
Table 7-16: Cost of Service Comparison
Proposed Current Dollars Percent
Customer Class
1 Recycled 4,966,187$ 4,953,327$ 12,860$ 0.3% 53.2% 53.0%
2 Public Recycled 3,547,432 3,747,649$ (200,217) -5.3% 38.0% 40.1%
3 Recycled Commercial 829,381 642,024$ 187,358 29.2% 8.9% 6.9%
4 Total 9,343,000$ 9,343,000$ -$ 0.0% 100.0% 100.0%
Line Cost of Service
Summary
Revenue Current % of
Total
Proposed %
of Total
Change
64 OTAY WATER DISTRICT
8. Proposed Recycled Water
Rates
Section 7 details the proposed water rate calculations. Proposed rates are calculated directly from the results of the
COS analysis (from Section 6).
8.1. Proposed Fixed Charges
Table 6-1 shows the calculation of the components of each fixed charge: costs for the customer, capacity meter, and
cost meter components are from Table 7-15, Line 4. The costs identified in Column A are divided by the units in
Column B to derive the annual charge in column C; this amount is converted to a monthly charge in Column D by
dividing by 12.
Table 8-1: Fixed Charge Components
8.1.1. PROPOSED SYSTEM FEES
Table 8-2 shows the detailed calculation of proposed System Fees, which are based on Customer and Equivalent
meter unit rates. Customer costs do not vary by connection type or size. Therefore, the Customer unit rate, previously
derived in Table 8-1, Column D, Line 1 is applied uniformly to all System Fees (Column A). Because Meters costs
vary by meter size based on hydraulic capacity, the unit cost (Table 8-1, Column D, Line 3) is multiplied by the
AWWA capacity ratio for each meter size (Table 5-3, Column B). For example, the AWWA capacity ratio for a 1”
meter is 1.67, which is multiplied by $17.18 to derive the meter component cost of $28.63 (Column C, Line 3). The
same process is repeated for the cost meter component in Column B. The three fixed charge components in Columns
A, B, and C are added in Column D, showing the total of these components that all customers pay each month.
A C D
Cost Annual
Charge
Monthly
Charge
Component
1 Customer 118,186$ 764 Accounts 154.69$ 12.89$
2 Cost Eq. Meters 129,466 1,909 5/8" Eq. 67.81 5.65
3 Capacity Eq. Meters 586,346 3,100 5/8" Cap Eq. 189.12 15.76
System Fees UnitsLine
B
WATER COST OF SERVICE AND RATE DESIGN STUDY 65
Table 8-2: System Fees
8.2. Proposed Volume Rates
Volume Charges are designed to recover the portion of the rate revenue requirement allocated to the commodity and
demand cost causation components.
8.2.1. COMMODITY RATE COMPONENT
Table 8-3 shows the calculation of the commodity rate component. Billable water volumes from Table 7-1 are shown
in Column A. The cost for each class and tier was previously calculated in Table 7-15, Column A. The rate
component in Column C is the result of dividing Column B by Column A. All customers pay the same amount per
Ccf for these costs, which primarily consist of water purchases.
Table 8-3: Commodity Rate Component
A B C D
Customer Cost Eq.
Meters
Capacity Eq.
Meters
Total
Proposed
Meter Size
1 5/8" 12.89$ 5.65$ 15.76$ 34.31$
2 3/4" 12.89 5.65 15.76 34.31
3 1" 12.89 7.29 26.27 46.46
4 1 1/2" 12.89 11.85 52.53 77.28
5 2" 12.89 16.98 84.05 113.93
6 3" 12.89 52.92 183.87 249.69
7 4" 12.89 91.92 330.97 435.78
8 6" 12.89 158.77 735.48 907.15
9 8" 12.89 198.37 1,260.82 1,472.09
10 10" 12.89 285.30 1,996.30 2,294.50
Line System Fee
A B C
Billed Ccf Cost Rate
1 Recycled 834,700 2,729,810$ 3.27$
2 Public Rec.581,700 1,902,397 3.27
3 Rec. Comm.155,900 509,857 3.27
4 Total 1,572,300 5,142,063$ 3.27$
Line Commodity
Component
66 OTAY WATER DISTRICT
8.2.2. DEMAND RATE COMPONENT
Table 8-4 shows the calculation of the commodity rate component. Billable water volumes from Table 7-1 are shown
in Column A. The cost for each class was previously calculated in Table 7-15, Column B. The rate component in
Column C is the result of dividing Column B by Column A. This rate component is different for each customer class
and tier due to their unique peaking behaviors and demands on the water system. Customers with a higher peaking
factor (Table 7-1, Column C) pay a higher demand rate.
Table 8-4: Demand Rate Component
8.2.3. TOTAL PROPOSED VOLUME RATE
The proposed volume rates in Table 8-5 are the result of adding each of the constituent components derived in Table
8-3 and Table 8-4. The total rate for each class and tier is shown in Column C.
Table 8-5: Total Proposed Volume Rates
8.3.Monthly Bill Impacts
The following tables show sample monthly bills for each customer class using the most common meter sizes for the
class and a range of water use volumes to provide a representative sample of impacts across many customers.
Table 8-6: Recycled Bill Impacts
A B C
Billed Ccf Cost Rate
1 Recycled 834,700 1,522,971$ 1.82$
2 Public Rec.581,700 1,120,371 1.93
3 Rec. Comm.155,900 219,406 1.41
4 Total 1,572,300 2,862,749 1.82$
Demand ComponentLine
A B C
Commodity Demand Total
1 Recycled 3.27$ 1.82$ 5.10$
2 Public Rec.3.27 1.93 5.20
3 Rec. Comm.3.27 1.41 4.68
Volume ChargeLine
System
Fee Volume Total System Fee Volume Total Dollar Percent
Meter Size Use
3/4" 53 36.93$ 267.65$ 304.58$ 34.31$ 270.30$ 304.61$ 0.03$ 0.0%
3/4" 295 36.93 1,489.75 1,526.68 34.31 1,504.50 1,538.81 12.13 0.8%
3/4" 172 36.93 868.60 905.53 34.31 877.20 911.51 5.98 0.7%
Proposed Charges ChangeCurrent Charges
Recycled Bill Impacts
WATER COST OF SERVICE AND RATE DESIGN STUDY 67
Table 8-7: Public Recycled Bill Impacts
Table 8-8: Recycled Commercial Bill Impacts
System
Fee Volume Total System Fee Volume Total Dollar Percent
Meter Size Use
1 1/2" 27 90.25$ 147.96$ 238.21$ 77.28$ 140.40$ 217.68$ (20.53)$ -8.6%
1 1/2" 243 90.25 1,331.64 1,421.89 77.28 1,263.60 1,340.88 (81.01) -5.7%
1 1/2" 132 90.25 723.36 813.61 77.28 686.40 763.68 (49.93) -6.1%
Current Charges Proposed Charges Change
Public Rec.
System
Fee Volume Total System Fee Volume Total Dollar Percent
Meter Size Use
10" 3,000 2,091$ 10,740$ 12,831$ 2,295$ 14,040$ 16,335$ 3,503$ 27.3%
10" 21,000 2,091 75,180 77,271 2,295 98,280 100,575 23,303 30.2%
10" 12,500 2,091 44,750 46,841 2,295 58,500 60,795 13,953 29.8%
Proposed Charges Change
Rec. Comm.
Current Charges