Water and Wastewater Systems

Rate Proposal 2013 through 2016

March 18, 2013

Water Wastewater

Water and Wastewater Rate Proposal

2

Purpose today: • Share information and staff recommendation • Seek confirmation from Board on next steps Covering today: • Staff recommendation on rate adjustment • Review of the rate-setting timeline • Meeting dates and next steps

Strategic Planning

3

Rate recommendation supports District financial policies, guiding principles and customer priorities

• Keeps water and wastewater systems on track to close

financial gaps • Meets customer priorities; modest, predictable increases

over time • Aligns with the cost of service • Full implementation of postage stamp rates • Multi-year rate increase supports long-term planning

5 Source Black & Veatch June 13, 2012

Top Utility System Issues Nationwide

0 5 4 3 2 1

Water and Wastewater

National trends for utility rates: 2010, 50 largest US cities average annual increase in

typical residential water bills was approximately 5.3 percent from 2001 through 2009, while the increase in typical residential sewer bills was approximately 5.5 percent.

Source: Black and Veatch

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Water/Wastewater Rate History

7

1.0

1.2

1.4

1.6

1.8

2.0

1998 2000 2002 2004 2006 2008 2010 2012 2014

Cum

ulat

ive

incr

ease

Year

Average annual increase = 5.31%

Chelan County PUD Water/Wastewater System Overview

Wenatchee

Ollala Canyon

Dryden Water

Dryden WW

Peshastin WW

Lk Wenatchee WW

Chelan Ridge

Wastewater System (500 Connections) Water System (5,600 Connections)

$0

$10

$20

$30

$40

$50

$60

2012 Monthly rate for 7,500 gallons

Residential Water Rate Comparison

$0

$10

$20

$30

$40

$50

$60

$70

$80

Wenatchee Entiat Leavenworth Chelan PUD Cashmere

2012 basic monthly rate

Residential Wastewater Rate Comparison

Factors Affecting PUD Cost of Service

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• Aging infrastructure

• Highly regulated small rural systems

• Multiple systems serving a relatively low number of connections

• Reliable service provided 24 hours per day/7 days per week

Peshastin wastewater treatment facility

Water Business Plan

Reduced capital spending projected Staff reductions (2003 = 15 FTEs now 2013 = 9 FTEs)

- Workforce planning to evaluate sustainability Increased operational efficiency through revised

staff assignments Capacity available to meet the demands of future

growth

12

Wastewater Business Plan

Shared cost allocation reductions incorporated into forecasts

– Approximately $14/month per connection which offsets cost increases

Increased regulatory requirements Seek grants to reduce future debt service requirements

13

Rate Committee Recommendation

Yearly increase for 2013-2016 (reviewed annually)

• Water 5% per year 2013 thru 2016 – 4.6% residential; 6% commercial to align with cost of service – Moves Dryden to the postage stamp rates by 2014 – Squilchuck $6.55 per month debt service is ending

• Wastewater 15% per year 2013 thru 2016 – 15% average increase across rate classes – Align base and volume charges with cost of service

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Forecasted Financial Indicators - Water

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(Includes recommended 5% rate increase)

-0.2% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

2013 2014 2015 2016 2017

Rate of Return (min)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2013 2014 2015 2016 2017

Debt Leverage Ratio (max)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2013 2014 2015 2016 2017

Debt Coverage Ratio (min)

Actual Target

0 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000

2013 2014 2015 2016 2017

Unrestricted Liquidity (000's)

Actual Target

Forecasted Financial Indicators - Wastewater

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(Includes recommended 15% rate increase)

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

2013 2014 2015 2016 2017

Rate of Return (min)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2013 2014 2015 2016 2017

Debt Leverage Ratio (max)

-4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00

2013 2014 2015 2016 2017

Debt Coverage Ratio (min)

Actual Target

0

200

400

600

800

1,000

1,200

2013 2014 2015 2016 2017

Unrestricted Liquidity (000's)

Actual Target

Residential Rate Proposal

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Wenatchee, Dryden, Ollala & Chelan Ridge (Water Systems) Current

2013 Proposed

2016 Proposed

Basic Monthly Charge (5/8") $28.25 $29.75 $36.00

First 3,000 gallons per month $2.30 $2.40 $2.65

3,001 to 10,000 gallons per month $3.15 $3.25 $3.50

Over 10,000 Gallons per month $4.00 $4.10 $4.40

Lake Wenatchee, Dryden & Peshastin (Wastewater Systems) Current

2013 Proposed

2016 Proposed

Basic Monthly Charge $61.80 $71.00 $107.70

Commercial Rate Proposal

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Wenatchee, Dryden & Chelan Ridge Water Systems Current 2013

Proposed 2016

Proposed

Basic Monthly Charge (5/8") $47.50 $52.00 $67.00

Charge per 1,000 Gallons per month $2.86 $3.00 $3.45

Lake Wenatchee Wastewater System Current 2013

Proposed 2016

Proposed

Medium General Service Basic Monthly Charge (up to 20,000) $361.75 $415.00 $625.00

Charge per 1,000 Gallons per month (over 20,000) $17.25 $19.75 $30.00

Peshastin Wastewater System Current 2013

Proposed 2016

Proposed

Commercial 1 $129.10 $150.00 $225.00

Charge per 1,000 Gallons per month $2.35 $2.70 $4.15

Commercial 2 per unit $93.50 $108.00 $164.00

Examples of Water Rate Impacts

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Average monthly residential bill

Category Current 2013 2014 2015 2016

5/8” meter (3,000 gals) $35.15 $36.95 $39.50 $41.65 $43.95

5/8” meter (7,500 gals) $49.53 $51.58 $54.58 $56.95 $59.70

5/8” meter (25,000 gals) $109.33 $113.08 $117.58 $121.45 $125.70

Senior/Disabled - Low Income Discount

($8.00) ($8.50) ($9.00) ($9.50) ($10.00)

Future Considerations

• System growth projections – Lower than projected growth resulting in lower revenue

• Rate review to meet financial targets – Higher than projected resulting in increased revenue

• Rate review to meet financial targets

• Unforeseen regulations or expenses – Capital improvements

• Potential revenue impacts dependent upon financing package (i.e. loan terms, grant funding)

– Operation and Maintenance • Will have a direct impact on delivery costs and rates

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Timeline

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• Water and wastewater financial policies approved • Recommended multi-year (2013-2016) rate

increases to close the operating gaps • 6% per year for water and 15% per year for

wastewater

June 2012

• 2012 District budget approved • Included 6% water and 15% wastewater placeholders

for rate increases December 2012

• Staff recommendation • Set information meetings and public hearing

dates March 2013 (today)

• Hold public information meetings April 2013

• Rate hearing – May 6 (proposed) • Rates effective - June 1 (If approved) May/June 2013

Proposed dates April 16 & April 24

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Water Wastewater

39 Years of Public Service