Utility Committee Agenda and Packet 2021 05 11

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Mr. Kowar continued saying there are three components that make up the volume charge and two components that make up the base charge and each component is tied to an operational cost. Councilmember Lipton asked what the main Cost of Service issue was in 2014. Mr. Kowar said the Rate Study evaluated the financing plan based on expense needs and how the City would bill customers. The Rate Study was an overall audit of how the Utility would do business. The conclusion was the City was not billing each class of customers equitably, with the commercial class paying more than calculated and thereby subsidizing residents. Councilmember Lipton asked how it was adjusted. Mr. Kowar said in 2015/2016 residential rates were raised 32% and commercial rates were lowered by 27%. Mayor Pro Tern Maloney commented that this follows what the intended purpose of the Rate Task Force was and agrees with this. Mr. Kowar went on to provide more detail on the Cost of Service highlighting how the Operational Budget rounds out to a base volume charge of about $3 per 1,000 gallons. The peak or max day demand is $600 per 1,000 gallons. Mr. Kowar went on to explain service cost and discussed peaking factor, supply, treatment class, transmission, base and max factors as noted in the chart. Mr. Kowar referred to the question asked earlier about billing based on meter size. Staff looked at peaking factors by customer class versus meter size. The graphs on pages 32- 34 show the distribution of each customer on how their base day is versus their max day. Peaking Factors tends to align better when reviewed by customer class which is consistent with industry standards. A closer review of meter size (specifically 3/4") shows peaking does not correlate to meter size and cannot be modelled with accuracy. The resulting staff recommendation is the Cost of Service calculations should remain by Customer Class. Mr. Kowar next went into the rate structure and referred to the Rate Comparison graphs on pages 42 and 43. He explained the effective rate is how the tiered blocks are shaped and how the rates are designed to be low on the bottom end for the majority of the year and then we have an aggressive conservation structure where things ramp up at the higher end use. Louisville rates are shown to increase sharper than the rates of surrounding communities as shown on page 43. Councilmember Lipton asked if staff were proposing a change. Mr. Kowar said staff are not proposing a change but this is area that has more flexibly and could be adjusted now or at a later date if desired. Councilmember Lipton said the only problem he's heard was something on the billing side and it ends up being the usage during a drought and how they get billed. Otherwise he has not getting much citizen feedback so making a change is not seen as a high priority list. Mayor Pro Tern Maloney said he appreciates all the data and work that went into this and his take away is that we are meeting the intended purpose and he reaffirms that the decisions made by the Rate Task Force were the right decisions. Councilmember Fahey agreed with what Mayor Pro Tern Maloney said and has no problems and also thanks staff 5