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can defend using them as proxies for the relative burden of costs imposed on the system by different user classes. 2. When costs increase, either because new infrastructure is needed or the costs of upkeep of the assets in place have increased, under normal conditions (like a uniform increase in demand across the user types), using the same standard cost allocation method would be fair. 3. However, under such normal conditions, using the same algorithm correctly would lead to proportionate increases in the additional costs across user classes. Just like the mayor, almost none but few believed bill increases for different customers would differ widely from the 30%total targeted revenue increase for the first year. Common sense intuition and rigorous math align with this expected outcome. 4. Since we have confirmed that the city's proposed rate increase plan using the same standard method of cost allocation is leading to a significant disparity in customer impacts across different segments, there are only three logical explanations: a. The previous rates were erroneously calculated. b. The new rates are erroneously calculated. c. The logic of using the same cost allocation method used in the past for justifying differential rates does not apply to allocating the marginal costs, driving the need for revenue or rate increase. 5. Without due diligence, I assume that Raftelis' calculations using the standard allocation algorithm were not in error. Then, we must consider why using the same allocation algorithm to address the city's needs could be flawed. Below is the 11-year data on the city's water revenues, expenses, and consumption obtained from the city's 2021 and 2022 Annual Consolidated Financial Reports. LL.POtl FOP $35.TP CLP 534,Lo ttiP �MgtMPM CALLd,I>HroSP`A,PAY �wA+(#iP!!H1L —.vATM f19HtF As you can see, the city's need for rate increases is not by a significant rise in its operating costs but by a sharp recent decline in revenues, which are caused by a significant drop in water consumption by its residents. The city's decision to rely on volumetric charges to dominate its revenue share (85%) exacerbates the problem. As you described, the peaking factor calculations are based on consumption data. Whether you use the old peaking factors based on earlier consumption data as proxies for the new cost allocation or the new data is unclear. But in either case, applying the old cost allocation method based on peaking factors, etc., doesn't make any economic sense. Filling a revenue gap using rate increases when the 2