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City of Pleasanton Water Rate Scenarios Technical Memo Page 2 evaluated for rate impacts, based on recommendations made by City staff and the Pleasanton Water Advisory Group (PWAG): • 75% of Zone 7 fixed costs recovered on fixed charges • 100% of Zone 7 fixed costs to be recovered on fixed charges VARIABLE CHARGE RATE STRUCTURE The City’s current variable charge rate structure consists of a four-tiered variable charge for single family residential customers and a uniform charge for all other customer classes based on usage. Recent court cases have highlighted potential legal risks associated with tiered rate structures for different customer classes. The main takeaway from these recent court cases is that tier definitions must be cost-justified and specific to the agency. This means that breakpoints between different tiers must be justified based on agency specific customer usage characteristics and that the agency must be able to prove, based on its cost structure, that it is more expensive to provide water service at each ascending tier of water usage. Typically, this is justified based on the number of supply sources available and their costs, conservation costs, or offsets from revenue sources that are not related to service (of which the City has none). For example, usually local groundwater production tends to be less costly than importing water so the available water supply from groundwater is used first to meet demand needs in lower tiers followed by imported water for any residual demand in higher tiers. Considering that the City currently has one source of supply and is projecting to not have any groundwater supply within the study period, WRE recommends moving away from the City’s current four tiered structure and implementing a uniform variable charge for all customers, including single family residential. PROPOSED RATES 75% of Zone 7 Fixed Costs Recovered on Fixed Charge The table below shows the current proposed four-year water rates with 75% of Zone 7 fixed costs recovered on the fixed charge. Proposed Water Rates Current 1/1/2025 Proposed 1/1/2026 Proposed 1/1/2027 Proposed 1/1/2028 Proposed 1/1/2029 Bi-Monthly Fixed Charge 5/8"$24.01 $46.37 $53.33 $57.60 $62.21 3/4"$34.30 $66.15 $76.08 $82.17 $88.75 1"$60.06 $105.72 $121.58 $131.31 $141.82 1 1/2"$127.01 $204.64 $235.34 $254.17 $274.51 2"$168.21 $323.34 $371.85 $401.60 $433.73 3"$466.94 $699.23 $804.12 $868.45 $937.93 4"$817.14 $1,253.17 $1,441.15 $1,556.45 $1,680.97 6"$1,445.48 $2,578.67 $2,965.48 $3,202.72 $3,458.94 8"$3,608.59 $5,546.20 $6,378.13 $6,888.39 $7,439.47 10"$5,668.70 $8,315.91 $9,563.30 $10,328.37 $11,154.64 Variable Charge ($/ccf) Single Family $6.30 $7.25 $7.83 $8.46 Tier 1 $6.15 Tier 2 $7.26 Tier 3 $7.89 Tier 4 $8.39 Multi-Family $6.13 $6.30 $7.25 $7.83 $8.46 Commercial/Industrial $6.28 $6.30 $7.25 $7.83 $8.46 Potable Irrigation $7.28 $6.30 $7.25 $7.83 $8.46 Page 212 of 249