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Home My WebLink About07.a. Receive presentation entitled Recycled Water Program Full Cost Recovery Page 1 of 17 Item 7.a. k�*k CENTRAL SAN CENTRAL CONTRA COSTA SANITARY DISTRICT October 17, 2019 TO: HONORABLE BOARD OF DIRECTORS FROM: DANEA GEMME LL, 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 Please see the attached presentation. Strategic Plan Tie-In GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 1 -Augment the region's water supply ATTACHMENTS: 1. Presentation October 17, 2019 Regular Board Meeting Agenda Packet- Page 50 of 82 Item 7.a. (Updated Presentation) r. RECYCLED WATER PROGRAM { FULL COST RECOVERY Danea Gemmell -: Planning & Development Services Division Manager . October 17, 2019 Board Meeting MUM Iff-KIIIIII FINDINGS 1. The cost of producing and distributing recycled water to Zone 1 is 4.69 per kilogallon (kgal) 2. Zone 1 customer revenue accounts for 46.7% of the cost to produce and distribute recycled water to those customers 3. Central San's recycled water rates are (a) lower than the cost of service and (b) lower than the 2002 board-approved target of 80% of Contra Costa Water District(CCWD) rates • Class I rate is at 61%of CCWD treated rate and 81%of Central San cost • Class 11 rate is at 66%of CCWD untreated rate and 39%of Central San cost 4. Increasing recycled water rates to full cost recovery for Zone 1 customers would likely result in significant increases to customer bills (particularly Class II customers) • Significant rate increases may exceed CCWD's untreated rate and be less competitive The cost of producing and distributing all recycled water accounts for$7 of the annual $598 sewer service charge • $2 of the$7 supports the Zone 1 cost of recycled water z CENTRAL SAN 1 RECYCLED WATER (REW) HISTORY • 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 classified as miscellaneous income 3 �r CENTRAL SAN RECYCLED WATER (REW) HISTORY Ordinance 209 Ordinance 221 1st Prop 218 Notice Adopted 1213/1998 Adopted 5/9/2002 Rates adopted 6/4/2015 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 untreated) Initiated after court ruling Established volumetric rate for clarified that recycled water i— each class at 80%of competing subject to Prop 218 water source rate 3%annual increase without further Board action gag -,ga AM i4 CENTRAL SAN 2 RECYCLED WATER RATE SCHEDULE • 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 $3.69 3.80 $3.91 $4.03 $4.15 $3.00 _ $3.38 $3.48 __-$3.58__________- $2.50 - __________________ $2.00 __$1.61 $1.66 $1.71 $1.76 1.81 $1.86 $1.92 $1.98 $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) -.*.-Class II(Former Untreated) 5 CENTR AL SAN 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 6 CENTRAL SAN 3 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 Concord Flow (in millions of Influent Percentage gallons) (in millions of 0 gallons) FY 2017-18 4,265 12,513 34.1% • In fiscal year(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. CENTRAL SAN CENTRAL SAN RECYCLED WATER FY 2017-18 EXPENSES Cost Center Treatment $334,122 $238,756 $572,878 $1,284,051 $1,856,929 Plant Distribution $292,885 $0 $292,885 $25,703 $318,588 Residential Fill $118,039 $392 $118,431 $0 $118,431 Subtotal $745,046 $239,148 $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 $784,610 $239,148 $1,023,758 $1,309,754 $2,333,512 Fixed:Salaries,Benefits,Repairs&Maintenance,Outside Services, Professional&Legal Services,Other Variable:Chemicals,Utilities,Materials&Supplies *Allocations between fixed and variable costs revised after Finance Committee Presentation 8 CENTRAL SAN 4 RECYCLED WATER EXPENSES AND CUSTOMER CLASS ALLOCATION Cost Center FY 2017-18 FY 2017-18 FY 2017-18 Expenses Consumption Flow Proportion (in gallons) Treatment Plant $1,856,929 366,065,858 62.9% Distribution $318,588 213,095,246 36.7% Residential Fill $118,431 2,439,476 0.4% Total $2,293,948 581,600,580 100.0% ReW consumption is measured by flow meters at various locations throughout the distribution system and at the treatment plant 9 CENTRAL SAN FY 2017-18 ALLOCATION OF COST CENTER EXPENSES BY CUSTOMER CLASS Treatment Allocated Non- a Treatmen Treatment -a ot Customer Class Allocatiol Plant Treatment Plant Plant lloratel Expenses Expenses Expenses LExpens 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 Grand E0 1.Allocated based on proportion of flow consumed 10 CENTRAL SAN 5 RECYCLED WATER REVENUES BY SOURCE AND CUSTOMER CLASS r Customer Class Customer Class Revenue Source IFY 2017-18 Allocation Revenue Expenses Concord* $398,291 Utility Water $1,168,008 Sewer Service $769,717 Concord* $181,795 Zone 1 $1,000,081 Zone 1 Customers $466,960 Sewer Service Subsidy $351,326 Concord* $42,918 Residential Fill $125,859 Sewer Service Subsidy $82,941 Total $2,293,948 $2,293,948 Concord Proportional Share is 34.1 11 CENTRAL SAN CENTRAL SAN RECYCLED WATER REVENUES BY SOURCE FY 2017-18 Revenue Total By Source Revenues $434,267 Concord $398,291 89' Utility Water Sewer Service $769,717 Concord $181,795 Zone 1 Zone 1 Customers $466,960 Sewer Service $351,326 Subsidy Concord $42,918 Residential Fill Sewer Service ■Concord Subsidy $82,941 ■Zone 1 Customers ■SewerService Total $2,293,948 ■Sewer Service Subsidy 12 6 ZONE 1 INCREMENTAL COSTS COMPARED TO REVENUES Zonel Revenues Revenues $466,960 Distribution: O&M Fixed $292,885 Distribution: O&M Variable $0 Distribution: Capital $25,703 Subtotal $318,588 Allocated from Treatment Plant: O&M Variable $87,623 ($238,756 x Flow Proportion of 36.7%) Total Expenses $406,211 Balance $60,749 13 CENTRAL SAN NON-UTILITY RECYCLED WATER CONSUMPTION TOTALS 213 Million Gallons in FY 2017-18 Class II 67.1% Residential Fill Station 1.1% Truck Fill / 0.3% Class I 31.4% ■Class I ■Class II .Residential Fill Station Truck Fill 14 CE NTRAL SAN 7 CLASS I CUSTOMERS AND CONSUMPTION 68 Million Gallons in FY 2017-18 Pleasant Hill Recreation& Park District Mt.Diablo Unified School 19% District 24% County Quarry Products 10% Veranda Development 10% 15 Others 25% City of Pleasant Hill Willowick Business Park 6% 6% CENTRAL SAN 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% 16 CENTRAL SAN 8 TRUCK FILL CUSTOMERS AND CONSUMPTION 680,000 Gallons in FY 2017-18 Mountain Cascade 74% 10 Others 9% Gan Shalom Cemetery 17% 17 CENTRAL SAN ZONE 1 COST OF SERVICE RATE BASED ON FY 2017-18 ACTUALS Revenue Requirement: $1,000,081 • recovery:st', 1 Consumption: • . 213 million gallons 18 9 RECYCLED WATER TARGET RATES VS COMPETING WATER SOURCE RATE Ordinance16 0• Ordinance Fr 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 Initia d after court ruling Established volumetric rate for n that recycled water is each class at 80%of competing bject to Prop 218 water source rate su 3%annual increase without further Board action 19 CENTRAL SAN 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) 5.12.070.1) 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 '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) 20 10 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 - •'•'•'------- --- $4.00 $3M - 34.69 75%of$6.22 $4.00 - - - - -<�An ----------- '•'•'•-------- --- ----------- 61%of$6.22 $3.00 ;•;•; ---- --- $2.00 __- •' —__ $1.00 $0.00 CCWD 80%Target Rate Cost of Service Central San Treated Class I 21 CENTR AL SAN 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.D 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 Use Charge:$2.13 per kgal Demand Charge:Approx $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) 22 CENTRAL SAN 11 CENTRAL SAN REW CHARGES (IN KGAL) COMPARED TO CCWD'S UNTREATED RATE $5.00 $469 170%of$2.76 $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 23 IMPACT TO CENTRAL SAN RATE PAYERS Cost per RUE* Utility Water Sewer Service $769,717 $4.54 Zone 1 Sewer Service Subsidy $351,326 $2.07 Residential Fill Sewer Service Subsidy $82,941 $0.49 Subtotal $1,203,984 $7.10 ReW Exchange Sewer Service $15,585 $0.09 Total $1,219,569 $7.19 *Based on a total of 169,594 Residential Unit Equivalents(RUE) 24 CE NTRAL SAN 12 ALTERNATIVE 0: ZONE 1 NET POSITION CURRENT STATE Customer Class Class I+Truck class 11 Fill (Untreated) 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 I '- ($478,254) *Assumes no change in consumption from FY 2017-18 25 CENTR AL SAN ALTERNATIVE 1 : ZONE 1 NET POSITION 80% OF TARGET OR COST OF SERVICE Customer Class Class I+Truck Class I I Fill (Untreated) (Treated) M 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 FY2017-18 26 CENTRAL SAN 13 ALTERNATIVE 2: ZONE 1 NET POSITION FULL COST RECOVERY RATE Customer Class Class I+Truck Class I 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 I ($642) Assumes no change in consumption from FY 2017-18 27 CENTRAL SAN SUMMARY OF POSSIBLE ALTERNATIVES Alternative 0: Current State a-]w1:4 Ili[q:jE newvery Kate 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% 160% 28 CENTRAL SAN 14 FINDINGS I. The cost of producing and distributing recycled water to Zone 1 is 4.69 per kilogallon (kgal) 2. Zone 1 customer revenue accounts for 46.7% of the cost to produce and distribute recycled water to those customers 3. Central San's recycled water rates are (a) lower than the cost of service and (b) lower than the 2002 board-approved target of 80% of Contra Costa Water District(CCWD) rates • Class I rate is at 61%of CCWD treated rate and 81%of Central San cost • Class 11 rate is at 66%of CCWD untreated rate and 39%of Central San cost 4. Increasing recycled water rates to full cost recovery for Zone 1 customers would likely result in significant increases to customer bills (particularly Class II customers) • Significant rate increases may exceed CCWD's untreated rate and be less competitive 5. The cost of producing and distributing all recycled water accounts for$7 of the annual $598 sewer service charge • $2 of the$7 supports the Zone 1 cost of recycled water z CENTRAL SAN BOARD DISCUSSION ON RECYCLED WATER FULL COST RECOVERY 30 CENTRAL SAN 15 ADDITIONAL INFORMATION h�a CENTRAL SAN 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- Tota'I Customer Class Allocati.ni Plant Treatment Plant Plant locate Expenses Expenses Expensesl JE1xpen Utility Water 62.9% $1,168,008 $0 51,168,008 Zone 1 36.7% $1,856,929 $681,493 $318,588 $1,000,081 Residential Fill 0.4% $7,428 $118,431 $125,859 Grand TotalUM $1,856,929 $476,583 $2,293,948 1.Allocated based on proportion of flow consumed 20 Year Net Present Value=$69 million CENTRAL SAN 16 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 kgal 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 Installation 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 33 CENTR AL SAN 17