HomeMy WebLinkAbout04. Wholesale Recycled Water RatesFT
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RAFTELIS
201 S Lake, Suite 301
Pasadena, CA 91101
Ph: (626) 583 -1894
Fax: (626) 583 -1411
Memo
To: Danea Gemmell
From: Sudhir D. Pardiwala
No. of Pages: 4
Date: 5/29/2015
Re: Wholesale Recycled Water Rates
Raftelis Financial Consultants (RFC), Inc. has prepared this memorandum to document the calculation of fiscal
year (FY) 2016 wholesale recycled water rate for Central Contra Costa Sanitary District (District). The cost of
producing the recycled water is $308 per acre foot (AF), or $0.95 per thousand gallons. The proposed rate
includes both O &M expenses of recycled water production as well as a capital component for the treatment
plant facilities. We believe that the recommended rate is proportional to the cost of providing service.
1. Background
The District originally developed the reclamation facilities, which would become the recycled water plant
in the 1970s, in two phases (5A -1 and 5A -II). In the 1980s with grant funding, the District signed an
agreement with the State Water Resources Control Board and US Environmental Protection Agency (EPA)
for the development of a recycled water program. In 1995, the District modified the existing filtration
plant to comply with recycled water production regulations (Title 22). At that time, the District reduced
the production capacity to 3.8 million gallons per day (MGD). The first customers received recycled water
in 1998. The District currently serves recycled water to 35 metered connections, as well as uses recycled
water for wastewater treatment plant processes. The average usage to retailers in 2014 was 0.41 MGD.
The wastewater treatment plant uses 1 MGD leaving unused capacity available for sale. The District is
planning to sell recycled water to the Contra Costa Water District (CCWD) for industrial use on a wholesale
basis. The recycled water would be stored at the plant; CCWD would convey and deliver water to the end
users through its own pipeline.
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2. Current Recycled Rates and Existing Use
The existing recycled water retail rate for FY 2014 is $3.28 per thousand gallons (kgal). The retail rate includes
O &M and capital costs of the distribution system. The District currently does not have a wholesale recycled
rate. In anticipation of sales to a wholesale user, the District engaged RFC determine a rate for wholesale
service - that is to customers who own and maintain their own conveyance equipment and
transmission /distribution lines.
To determine the wholesale rate, RFC used FY 2014 actual values, existing recycled water demand is
approximately 455 AF per year for retail customers and 1,166 AF per year for District use. The District
anticipates a new, large wholesale customer who will demand 560 AF per year beginning in FY 2016. With the
addition of the wholesale customer, the expected annual demand will be 2,181 AF per year as shown in Table
1.
Table 1: Estimated Recycled Water Demand
Retail Demand 455
District Demand 1,166
Wholesale Demand 560
Total Estimated Demand 2,181
I Costs
Recycled water costs include 0 &M and capital costs. Costs presented are determined using historical O &M
expenses at the recycled water plant and original capital costs related to treatment and production of recycled
water.
Operations & Maintenance (O &M): Recycled water production O &M is estimated using a five year average of
costs for the last five years, from FY 2010 to FY 2014. Average O &M expense is estimated to be $178,591 per
year. Average recycled water use over the same five -year period is estimated at 1,749 AF per year, or roughly
1.6 MGD. Per unit cost of the 0 &M component is therefore estimated at $103 per AF or $0.32 per kgal.
Capita Recycled water capital costs are comprised of two components: maintenance and treatment. Capital
maintenance is estimated as an annual dollar value over a 10 -year capital maintenance schedule. Details of
the items included in capital maintenance are shown in Table 2. Annual capital maintenance is estimated at
Wholesale Recycled Water Rate Memo Page 2
$75,000. Given the annual volume of 2,181 AF per year', the cost per AF attributable to capital maintenance is
$35 per AF or roughly $0.11 per kgal.
Table 2: Estimated Capital Maintenance Costs
Media Replacement
$400,000
Clearwell Maintenance
$100,000
Pump Replacement
$250,000
Total Cost (10 years)
$750,000
Annual Cost
$75,000
Original capital costs related to treatment consist of the treatment facility, transmission lines, and filter plant
upgrades. Because wholesale users will maintain their own conveyance equipment (pumping), transmission
and distribution, the transmission /conveyance costs were excluded from the rate calculation. Capital costs are
then estimated at $18,489,079, as shown in Table 3. Capital costs are depreciated over the anticipated life of
the plant of 50 years for an annual cost of $369,782.
Table 3: Capitalized Treatment Facility Costs
gap =.,V- r • .
Original Cost of 5A -II Project $17,578,426
42 -inch Industrial Transmission Line ($3,450,000)
Title 22 Filter Plant Upgrades $4,360,653
Total Capitalized Costs $18,489,079
Annual Cost (depreciated over 50 years) $369,782
1 For calculation of the capital components, FY 2014 actual demand plus estimated wholesale use was used to determine
the per AF cost. Conversely, the 0 &M cost calculation uses a five year historical average and excludes the anticipated
wholesale demand as they did not exist at the time 0 &M costs were incurred.
2 For calculation of the filter plant capital costs, an estimate for the 42 -inch transmission line was made which is
determined at $600 per lineal foot x 5750 feet. This estimated amount was subtracted from the actual capital
costs for the filter plant in determining in the annualized capital cost for the wholesale rate .
Wholesale Recycled Water Rate Memo Page 3
4. Recommended Wholesale Rate
Wholesale rate components are shown in Table 4. RFC proposes a wholesale rate of $308 per AF.
Table 4: Proposed Wholesale Rate
O &M (five -year
average) $178,591 1,749 $103 $0.32
Capital — Maintenance
Capital — Treatment
Total Rate
$75,000 2,181 $35 $0.11
$369,782 2,181 $170 $0.52
$308 $0.95
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