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Home My WebLink About04.d. Receive presentation entitled Recycled Water Program Full Cost Recovery Page 1 of 16 Item 4.d. ,0f,rTCj ON SAN FA September 24, 2019 TO: FINANCE COMMITTEE FROM: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER REVIEWED BY: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ROGER S. BAILEY, GENERAL MANAGER SUBJECT: RECEIVE PRESENTATION ENTITLED RECYCLED WATER PROGRAM FULL COST RECOVERY At the April 18, 2019 Board Meeting, the Board requested a staff report on its investigation into the full cost of supplying recycled water. Staff will review the attached presentation during the meeting. Strategic Plan Tie-In GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage costs GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 1 -Augment the region's water supply ATTACHMENTS: 1. Presentation September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 105 of 128 Page 2 of 16 1� A I RECYCLED WATER PROGRAM FULL COST RECOVERY Danea Gemmell Planning & Development Services Division Manager Bryan McGloin Management Analyst Finance Committee Meeting September 24, 2019 RECYCLED WATER (REW) HISTORY RECAP • 1970's Treatment Plant expansion required advanced treatment process (recycled water) and was funded by Environmental Protection Agency (EPA) Clean Water Grant Funds •Zone 1 was established in the mid-1990's to utilize the Filter Plant and promote recycled water use to meet the EPA Settlement Agreement for EPA Grant Funds • 2015 Raftelis Cost of Service Study reaffirmed: • Use of wastewater charges in cost structure due to grant settlement agreement and requirement to implement recycled water program • Recycled water revenue as miscellaneous income CENTRALSAN 1 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 106 of 128 Page 3 of 16 ESTABLISHMENT OF RECYCLED WATER RATES Ordinance0• Ordinance Adopted 121311998 Adopted „ Rates , Established eight rate classes Revised to two rate classes Sent to Recycled Water for Recycled Water Program based on potable water source customers and businesses alternative(treated vs. within 1000 feet of main Initiated after court ruling Established volumetric rate for clarified that recycled water is each class at 80%of competing subject to Prop 218 water source rate 3%annual increase without further Board action CENTRALSAN ' 3 CURRENT RECYCLED WATER RATES • On April 18, 2019, the Board adopted four-year recycled water rates with 3% escalation annually • Zone 1 ReW customers are billed based on measured use $4.50 $4.00 $3.50 3.80 $3.91 $4.03 $4.15 $3.00 $3.38 $3.48 $3.58 $3.69 $2.50 1.81 $1.86 $1.92 $1.98 $2.00 $1.61 $1.66 $1.71 $1.76 $1.50 $1.00 $0.50 $0.00 FY 2015- FY 2016- FY 2017- FY 2018- FY 2019- FY 2020- FY 2021- FY 2022- 2016 2017 2018 2019 2020 2021 2022 2023 (Class I(Former Treated) —h—Class II(Former Untreated) CENTRALSAN1 2 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 107 of 128 Page 4 of 16 CITY OF CONCORD SHARE OF REW EXPENSES AND REVENUES • The City of Concord pays for a wastewater flow-proportionate share of ReW treatment plant and Zone 1 distribution expenses and also receives a proportionate credit from Zone 1 customer revenues. • Concord's annual wastewater flow generally accounts for 30-35% of total treatment plant flow. Concord Flow District Net I Concord Flow (in millions of Influent Percentage gallons) (in millions of 0 gallons) FY 2017-18 4,265 12,513 34.1% • In FY 2017-18, Concord's share of total plant flow was 34.1%.This rate is applied to treatment plant and distribution ReW expenses as well as the revenue received from Zone 1 customers. CENTRALSAN � 5 RECYCLED WATER PROGRAM EXPENSES • Recycled water expenses are captured in their own accounting cost centers on Central San's ledgers • There are five cost centers within the Recycled Water division: • Treatment Plant (costs to produce recycled water) • Distribution (Zone 1) • Residential Fill • Satellite Water Recycling Facility (SWRF) • Recycled Water Exchange • Expenses are posted to the applicable accounting cost center when they are recorded CENTRALSAN 3 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 108 of 128 Page 5 of 16 CENTRAL SAN RECYCLED WATER FY 2017-18 EXPENSES Cost Center 0 .: .: IFapitals Total Treatment $327,286 $245,592 $572,878 $1,284,051 $1,856,929 Plant Distribution $214,562 $78,323 $292,885 $25,703 $318,588 Residential Fill $103,538 $14,893 $118,431 $0 $118,431 Subtotal $645,386 $338,808 $984,194 $1,309,754 $2,293,948 SWRF $15,915 $0 $15,915 $0 $15,915 ReW Exchange $23,649 $0 $23,649 $0 $23,649 Total $697,345 $326,413 $1,023,758 $1,309,754 $2,333,512 Fixed:Salaries, Benefits, Repairs&Maintenance Variable:Chemicals,Utilities,Outside Services,Professional&Legal Services, Materials&Supplies,Other 17 CENTRALSAN SUMMARY 1. Utility water expenses are fully captured in sewer service charges as they relate to wastewater processing. 2. The production and delivery of recycled water for Zone 1 is a requirement set by the Regional Water Quality Control Board and other government agencies. Zone 1 expenses are covered by Zone 1 customers, Central San sewer service charges, and City of Concord as these costs have been determined as wastewater costs. 3. Residential Fill Station expenses are included in sewer service charges as this service is available to all rate payers as well as Concord and Clayton residents. 4. Satellite Water Recycling Facility expenses are reimbursed, consistent with the terms of the Memorandum of Understanding. 5. Business development costs for the Recycled Water Exchange project are included as wastewater expenses because they will help meet anticipated long term permit requirements for nutrient removal and potentially develop a larger recycled water customer base. CIENTRALSAN 4 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 109 of 128 Page 6 of 16 RECYCLED WATER EXPENSES AND CUSTOMER CLASS ALLOCATION Cost Center FY 2017-18 FY 2017-18 Consumption I Expenses Total Gallons:581,600,580 Treatment Plant $1,856,929 Residential Fill Distribution $318,588 station, utilrcy � 0.4% Wat Residential Fill $118,431 62. Zone 1, Total $2,293,948 36.7% ■Utility Water ■Residential Fill Station ❑Zone 1 ReW consumption is measured by flow meters at various locations throughout the distribution system and at the treatment plant CENTRALSAN I 9 FY 2017-18 ALLOCATION OF COST CENTER EXPENSES BY CUSTOMER CLASS Treatment Allocated Non- Total Customer Class Treatment Plant Treatment Plant Treatment Allocated Allocation' Plant Expenses Expenses F "E.pens Utility Water 62.9% $1,168,008 $0 $1,168,008 Zone 1 36.7% $1,856,929 $681,493 $318,588 $1,000,081 Residential Fill 0.4% $7,428 $118,431 $125,859 1.Allocated based on proportion of flow consumed CENTRALSAN1 5 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 110 of 128 Page 7 of 16 RECYCLED WATER REVENUES BY SOURCE AND CUSTOMER CLASS Customer Class Customer Class Revenue Source FY 2017-18 Allocation Revenue Expenses Concord* $398,291 Utility Water $1,168,008 Central San Rate Payers $769,717 Concord* $181,795 Zone 1 $1,000,081 Zone 1 Customers $466,960 Central San Rate Payers $351,326 Concord* $42,918 Residential Fill $125,859 Central San Rate Payers $82,941 Total $2,293,948 $2,293,948 `Concord Proportional Share is 34.1 ' 11 CENTRALSAN CENTRAL SAN RECYCLED WATER REVENUES BY SOURCE FY 2017-18 Revenue Total By Source Revenues Concord $398,291 Utility Water Central San Rate Payers $769,717 2s� 4�p'$623,004 Concord $181,795 Zone 1 Zone 1 Customers $466,960 Rate Payers $351,326 Concord $42,918 Residential Fill Rate Payers $82,941 ■Concord Total $2,293,948 .Zone 1 Customers ■Central San Rate Payers CENTRALSAN1 6 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 111 of 128 Page 8 of 16 ZONE 1 TOTAL CONSUMPTION 213 Million Gallons in FY 2017-18 ClassII 67% Residential Fill Station 1% Truck Fill 0% Class I 32% ■Class I ■Class II ■Residential Fill Station Truck Fill ' 13 CENTRALSAN CLASS I CUSTOMERS AND CONSUMPTION 68 Million Gallons in FY 2017-18 Pleasant Hill Recreation& Park District Mt.Diablo Un fled School 19% District 24% County Quarry Products 10% Veranda Development 10% 15 Others 2S% City of Pleasant Hill Willowick Business Park 6% 6% CENTRALSAN1 7 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 112 of 128 Page 9 of 16 CLASS II CUSTOMERS AND CONSUMPTION 145 Million Gallons in FY 2017-18 Contra Costa Country Club Golf Course 66% Hilton Hotel Concord 2% Pleasant Hill Recreation& Park District 4% Mt.Diablo Unified School District 4% Diablo Valley College 9% Buchanan Fields Golf Course 15% ' is CENTRALSAN TRUCK FILL CUSTOMERS AND CONSUMPTION 680,000 Gallons in FY 2017-18 Mountain Cascade 74% 10 Others 9% Gan Shalom Cemetery 17% CENTRALSAN1 8 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 113 of 128 ZONE COST OF BASED ON FY 2017-18 ACTUALS Revenue Requirement: $1,000,0, $4.69 per kilogallon (kgal) Consumption: 213 million gallons =CD CENTRALSAN • ` • Ordinance 209 Ordinance 221 1St Prop 218 Notice Adopted 12/3/1998 Adopted 5/9/2002 Rates adopted 6/4/2015 •Established eight rate classes •Revised to two rate classes •Sent to Recycled Water for the Recycled Water Program based on CCWD water source customers and businesses alternative(treated vs. within 1000 feet of main untreated) •Initiated after court ruling I •Established volumetric rate for clarified that recycled water is each class at 80%of competing subject to Prop 218 water source rate • 3%annual increase without further Board action S CENTRALSAN • Page 11 of 16 CCWD'S TREATED WATER RATE CCWD's current treated water rate for commercial irrigation is based on several components, including: Energy Charge per-unit(1 HCF)fee that $0.0638/HCF($0.0853/kgal) 5.12.070.13 varies by designated energy (Rate for CCWD Zone 1) zones Usage Charge per-unit(1 HCF)fee $4.5877/HCF($6.1328/kgal) 5.12.070.0 Service Charge* daily fee assessed to each (e.g.2"meter=$5.3136 per 5.12.070.13 customer based on the size day) of the water meter at the service location Backflow Prevention daily fee based on meter (e.g.2"meter=$0.3107 per 5.12.070.E Charge* size assessed for properties day if using backflow that have more than one prevention device) source of water $6.22 per kgal+Daily fees *Daily Fees are not included in Central San target rate for recycled water CCWD Rate of$6.22 x 80%=Central San target rate of$4.98 for Class I(Treated) ' 19 CENTRALSAN CENTRAL SAN REW CHARGES (IN KGAL) COMPARED TO CCWD'S TREATED RATE $7.00 $6.22 $6.00 $4.98 80%of$6.22 $5.00 $4.69 ------------'-'-'----------- ------------------------ 75%of$6.22 $4.00 •'•' _ $3.80________ 61%of$6.22 $3.00 '.•.•. -------------- $2.00 •'•'•' __--------------- $1.00 $0.00 CCWD 80%Target Rate Cost of Service Central San Treated Class I CENTRALSAN1 10 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 115 of 128 Page 12 of 16 CCWD'S UNTREATED WATER RATE CCWD's current untreated water rate for metered landscape irrigation is based on several components, including: Monthly Service Charge monthly fee for each $8.27 per month 5.20.030.6 metered connection Usage Charge per-unit(1,000 gallons)fee $2.13 per 1,000 gallons 5.20.030.0 Demand Charge annual demand charge $3.24 per 1,000 gallons of 5.20.030.13 based on the maximum calculated use; month usage in each of the 1/121h of the annual charge preceding three fiscal years, assessed each month averaged $0.63 per kgal* Calculated based on review of Central San Class II customer use in FY 2017-18 CCWD Rate of$2.76 x 80%=Central San target rate of$2.21 for Class H(Untreated) '21 CENTRALSAN CENTRAL SAN REW CHARGES (IN KGAL) COMPARED TO CCWD'S UNTREATED RATE $5.00 ------- S4.69 $4.50 -- $4.00 - $3.50 - $3.00 - $2.76 $2.50 - $2.21 $2.00 $1.81 80%of$2.76 ------------ -':':'------------ 66%of$2.76 $1.50 - ------ $1.00 $0.50 $0.00 Cost of Service CCWD 80%Target Rate Central San Untreated Class II CENTRALSAN1 11 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 116 of 128 Page 13 of 16 ALTERNATIVE 0: ZONE 1 NET POSITION CURRENT STATE Customer Class Class I+Truck Class I Fill (Untreat d) Revenue Requirement $1,000,081 Cost Recovery Rates($per kgal) $3.80 $1.81 Consumption(in kgal)* 68,400 144,700 Total Revenue $259,920 $261,907 $521,827 Net Position ($478,254) *Assumes no change in consumption from FY 2017-18 '23 CENTRALSAN ALTERNATIVE 1 : ZONE 1 NET POSITION 80% OF TARGET OR COST OF SERVICE Customer Class Class I+Truck Class 11 Fill (Untreated) ID Revenue Requirement $1,000,081 Cost Recovery Rates($per kgal) $4.69 $2.21 Consumption(in kgal)* 68,400 144,700 Total Revenue $320,796 $319,787 $640,583 Net Position ($359,498) *Assumes no change in consumption from FY 2017-18 CENTRALSAN1 12 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 117 of 128 Page 14 of 16 ALTERNATIVE 2: ZONE 1 NET POSITION FULL COST RECOVERY RATE Customer Class Class I+Truck Class I Fill (Untreated) Revenue Requirement $1,000,081 Cost Recovery Rates($per kgal) $4.69 $4.69 Consumption(in kgal)* 68,400 144,700 Total Revenue $320,796 $678,643 $999,439 Net Position ■w ($642) Assumes no change in consumption from FY 2017-18 '25 CENTRALSAN SUMMARY OF POSSIBLE ALTERNATIVES Alternative 0: Current State Dim Resulting Net Position ($478,254) ($359,498) ($642) Class I Class II Class I Class II Class I Class II Required Rates $3.80 1.81 $4.69 $2.21 $4.69 $4.69 N/A N/A +$0.89 +$0.40 +$0.89 +2.88 Change from Current Rate 0% 0% 23% 22% 23% 170% CENTRALSAN1 13 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 118 of 128 Page 15 of 16 BOARD DISCUSSION ON RECYCLED WATER FULL COST RECOVERY '27 FILTER PLANT PROJECT BUSINESS CASE EVALUATION Upgrade/Replace Electrical Gear New CW Electrical Facility • Replace Switchgear 43 to 480V Add UW Pump • Recycled water Storage: • Two new Above Grade tet. Steel Storage Tanks • Rehab 1 Filter(#3) Upgrade Chemical Feed Upgrade/Replace Electrical Gear New CW Electrical Facility Modify Substation 40-2400V CENTRALSAN1 14 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 119 of 128 Page 16 of 16 BASELINE ALTERNATIVE: MAINTAIN CURRENT REW INFRASTRUCTURE FOR UTILITY WATER • FY 2017-18 Utility Water Allocated Expenses: $1,168,008 • Filter Plant Capital Project (Phase 1A): $35.5 million Treatment Allocated Non- Total Customer Class Treatment Plant Treatment Plant Treatment Allocated Allocation' Expenses Expenses Plant Expense ML Expenses Utility Water 62.9% $1,168,008 $0 $1,168,008 Zone 1 36.7% $1,856,929 $681,493 $318,588 $1,000,081 Residential Fill 0.4% $7,428 $118,431 $125,859 1.Allocated based on proportion of flow consumed 20 Year Net Present Value=$69 million '29 CENTRALSAIN HYPOTHETICAL ALTERNATIVE SCENARIO: DISCONTINUE CENTRAL SAN UTILITY WATER PRODUCTION PURCHASE TREATED WATER FROM CCWD • Purchase 366 Million Gallons per year from CCWD for Plant Utility Water • Estimated Recurring(annual)costs: • CCWD combined treated rate of$6.22 per III x 366,065.858=$2,276,930 • CCWD combined Service Charge and Backflow Prevention Charge of$182.705 per day for a 12"meter=$66,687 per year • Total Recurring(annual)costs:$2,343,617 • Estimated One-Time fees/upgrades: • CCWD Facility Recovery(impact)fees:$5,559,170 • CCWD Service Line Install Costs&required electrical upgrades:$15,250,000 • Cost to decommission existing facilities:$4,200,000 • Total One-Time costs: $25,009,170 20 Year Net Present Value=$89 million CENTRALSAN 15 September 24, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 120 of 128