06-04-10 BPU RPT 09 - Laserfiche WebLink

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RIVERSIDE PUBLIC UTILITIES PUBLIC UTILITIES Board Memorandum BOARD OF PUBLIC UTILITIES DATE: June 4, 2010 ITEM NO: 9 SUBJECT: AGREEMENT FOR PROFESSIONAL CONSULTANT SERVICES FOR WATER COST OF SERVICE AND RATE STUDY AND DEVELOPMENT AND MISCELLANEOUS FEES AND CHARGES STUDY ISSUE: That the Board of Public Utilities consider approval of an agreement for a Water Cost of Service and Rate Study and a Development and Miscellaneous Fees and Charges Study for future rate analysis and to comply with local, state and federal goals and regulations. RECOMMENDATION: That the Board of Public Utilities approve a Professional Services Agreement with Raftelis Financial Consultants, Inc., of Pasadena, California, in an amount not to exceed $124,760 for the purpose of conducting a Water Cost-of-Service and Rate Study and a Development and Miscellaneous Fees and Charges Study. BACKGROUND: A current cost of service study is necessary to assist in financial planning, future rate adjustments, and challenges to comply with local, state, and federal regulations. The study will provide a comprehensive review of all rate schedules, project future revenue requirements, and ensure an equitable allocation of costs among customer classes. The Utility faces challenges in determining revenue requirements and designing rates due to the changing water utility environment. Some of those challenges are: • Cost Components — The costs of pumping, transmission, distribution, purchased water, capital improvements, debt service, and contributions to the general fund are all components of rates.These components are bundled together to determine the overall revenue requirement. Due to increased costs in areas such as the cost of pumping water and the need to replace and refurbish portions of Riverside's aging water infrastructure, the cost components should be analyzed through a comprehensive cost of service study. • Cost Allocation Between Customer Rate Classes — It is essential to identify the cost to serve the City's customers and to ensure equitable allocation of cost responsibility among the customer classes. • Conservation of Existing Resources—Information is best conveyed to customers through rates that give the appropriate price signal. Future pricing should be based on anew embedded cost of service study. • Changing Regulatory and Climate Conditions—Changes in the supply and demand of water will need to be considered along with changes in local, state, and federal regulatory requirements.