07-26-2023 Council Packet - Laserfiche WebLink

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Page | 3 Cost of Services Return on Rate Base Return on rate base provides a rate of return on the capital investment required to provide water service to SPRWS’ customers. The underlying logic is that SPRWS should receive a return on its invested capital from nonowner customers because they do not share in financing SPRWS’ capital improvements except through the cost of depreciation. The revenue requirements associated with “a return on rate base” are calculated by multiplying the present worth of the asset (the original cost minus accumulated depreciation adjusted to its present worth) by an inflation factor to bring it to its present value. The 2017 and 2019 studies used the Handy Whitman Index to determine the present worth. Neither SPRWS nor Baker Tilly currently subscribe to this index so the long-term average increase in the American and City Municipal Construction cost index was used for the present worth calculations. A spot check of this index against the Handy Whitman Index found negligible differences. The estimated present worth of SPRWS’ assets by functional area were calculated from the asset database provided for this analysis. These present worth costs were then allocated to retail and wholesale customers based on consumption data. The average consumption data for the period 2017 through 2021 was used for this purpose. This data is shown below. The data showed a fairly large reduction for the U of M from the 2019 study average of 153.15 million gallons per year (MGY) to 117.51 MGY for this study. Water Demand (MGY) The average day, max day and max hour relative volumes were determined to be as shown in the table below for each customer. The allocation percentages for the base extra capacity method using the consumption data are shown in the table below. Base Base Extra Capacity Capacity Max Day Max Hour TotalTotal Capacity (MGD)33.79 62.02 186.06 Percent AllocationAvg Day and Max Day 54%46%0%100%Avg Day and Max Hour 18%0%82%100%Avg Day, Max Day and Max Hour 18%33%49%100% Extra Capacity Year Roseville (MGY) Little Canada (MGY) Wholesale U of M Retail (MGY) Total consumption Water (MGY) Total Treated Water (MGY) 2017 1,640.605604 353.181664 10,377.556024 12,371.343292 14,349.124731 2018 1,714.346436 339.788724 10,309.872496 12,364.007656 14,469.866214 2019 1,629.465640 337.297884 9,930.225844 11,896.989368 14,121.936735 2020 1,708.833676 355.041940 105.170296 9,782.851144 11,951.897056 14,005.936735 2021 1,878.726168 383.789076 129.864020 10,337.531292 12,729.910556 14,647.457608 Average 1,714.395505 353.819858 117.517158 10,147.607360 12,262.829586 14,236.716104 Customers MGY MGD % of Total MGDRetail Customers 10,147.61 27.80 82.28%51.03 82.28%153.09 82.28%Roseville 1,714.40 4.70 13.90%8.62 13.90%25.86 13.90%Little Canada 353.82 0.97 2.87%1.78 2.87%5.34 2.87%U of M 117.52 0.32 0.95%0.59 0.95%1.77 0.95% Total 12,333.34 33.79 100.00%62.02 100.00% 186.06 100.00% Average Day Max Day Max Hour