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Page |2 2. Cost of Services SPRWS performed a base extra capacity analysis in 2017 and in 2019. The first study completed in November of 2017 was a “Cost of Services Study for Wholesale Customers Cities of Little Canada and Roseville”. The second was completed in November 2019 and was a Cost of Services Study for Wholesale Customers Cities of Little Canada and Roseville November 2017 and Incorporating Cost Of Service Study for University Of Minnesota November 2019”. • Baker Tilly performed a cost-of-service study as part of this water rate study. Our cost-of-service study followed the processes incorporated in the two previous studies to provide consistency. However, we carefully reviewed the two previous studies and the widely accepted methodology provided in the American Water Works Association (AWWA) “Principles of Water Rates, Fees, and Charges Manual M1”, to ensure we agreed with the methodology used. The cost-of-service study is based on a large amount of data related to utility assets, water consumption, methods of operation and other related data. The data provided for this analysis included: o Wholesale water consumption data for 2017 through 2021 o Asset report for 12/31/2020 o 2022 budget data Assumptions incorporated into the cost-of-service analysis from the previous two studies and from our own experience include: • Assets that serve each of the wholesale customers (the same as in the 2017 & 2019 study) • The 2022 cost per foot of distribution piping serving each wholesale customer was estimated based on the 2017 cost in the previous studies inflated to 2022 by the long-term average increase in the American and City Municipal Construction cost index • The 2022 cost of preparing and collecting a bill including meter reading was estimated by inflating the 2019 costs by the change in operating costs from 2019 to 2022 • The 2022 administration and engineering design base percentages were the same as in the 2019 study • The present worth of the assets was determined by inflating the current book value from the asset report by the long-term average increase in the American and City Municipal Construction cost index • Assets that were not readily identifiable to a particular functional classification were assumed to be in the same functional classification as in the 2019 study. New assets were assigned to the most logical classification based on the type. • A 5% return on investment as was used as in the 2017 and 2019 studies