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City of Pleasanton <br />Sewer Rate Study Report <br /> <br />Water Resources Economics <br />16 <br />of the range, ending substantially higher than DSRSD bills and closer to Livermore bills by FY <br />2030. <br /> <br />Figure 1-7: Single Family Sewer Multi-Year Rate Survey <br /> <br />1.12 CONNECTION FEE METHODOLOGY <br />New customer connections to the City’s sewer system are subject to a sewer connection fee, <br />which is necessary to ensure that existing users are not unfairly burdened by costs incurred to <br />provide capacity for new users. The overall purpose of a connection fee is to equitably recover <br />capital costs incurred by the agency to provide system capacity to new users. Sewer connection <br />fees in California are typically developed based on one of three common methodologies outlined <br />by the American Water Works Association (AWWA) in its Manual of Water Supply Practices M1: <br />Principles of Water Rates, Fees and Charges, Seventh Edition. The three methodologies include: <br />1. Buy-In Method: The Buy-In Method establishes connection based on the value of the <br />system’s existing capital assets and is typically most appropriate when a system’s current <br />capacity is sufficient to serve both short-term and long-term projected demands. The <br />rationale underlying the Buy-In Method is that new customers should pay to “buy-in” to <br />existing system capacity funded by past and current users. <br />2. Incremental Cost Method: The Incremental Cost Method establishes connection fees <br />based on the cost of planned capital expenditures required to expand system capacity and <br />is typically most appropriate when a system’s current capacity is already fully utilized by <br />existing users. The rationale underlying the Incremental Cost Method is that new users <br />should fund planned capital projects that are necessary to accommodate growth. <br />3. Hybrid Method: The Hybrid Method 6 establishes capacity charges based on a combination <br />of the Buy-In Method and the Incremental Cost Method. The Hybrid Method is typically <br /> <br />6 The Hybrid Method is referred to by the AWWA as the “Combined Cost Approach.” <br />Page 168 of 923