OBJECTIVES OF RATE DESIGN EVALUATION

(1)

(2)

2 OBJECTIVES OF

RATE DESIGN EVALUATION

»

Determine whether the City of Gulfport is in compliance with Provision 7(e)

of its service agreement with St. Petersburg set to expire in October 2018:

“It is specifically understood and agreed that Gulfport

will not sell water to its residents or other users at a rate less

than the prevailing rate that St. Petersburg charges its residents.”

»

Determine the rate impact to the City of Gulfport’s retail customers as a

result of the City of St. Petersburg’s anticipated 25% premium increase to its

wholesale rates following contract renewal prior to expiration in October

2018.

»

Identify alternative rate designs which will allow the City of Gulfport to

recover the anticipated 25% premium to wholesale costs, while maintaining

on-going financial sufficiency and can be further evaluated for

(3)

3 CURRENT GULFPORT RATES

AND USAGE OBSERVATIONS

»

The City of Gulfport’s current structure is designed to

encourage water conservation based on the present five

tier inclining block rate structure

1 »

Minimum charge revenues represent 51% of total

revenues.

»

49% of total water retail consumption is consumed at or

below the current monthly minimum usage.

»

The City of Gulfport includes 2,000 gallons of water in the

minimum charge, however, the City of St. Petersburg

does not provide any water within their base charge.

(4)

4 CURRENT GULFPORT

RATE STRUCTURE

1 Assessed per living unit and includes the first 2,000 gallons of monthly metered water usage per living unit. 2 Assessed per 1,000 gallons for all monthly water usage in excess of initial 2,000 gallons. 3 Represents the cost per 1,000 gallons the City of Gulfport pays to the City of Saint Petersburg for wholesale utility services. Proceeds Proceeds

Gulfport Rate Structure Before Before

(5)

5 CITY OF ST. PETERSBURG RATE

STRUCTURE

Monthly Base Charge

1

Sewer

Meter Size

5/8" & 3/4"

$

11.01 $

12.45 1"

$

27.52 $

31.13 1.5"

$

55.04 $

62.25 2"

$

88.06 $

99.60 3"

$

176.13 $

199.20

(6)

6 ST. PETERSBURG

RETAIL RATE COMPARISON

Gulfport St Pete Difference Gulfport St Pete Difference Gulfport St Pete Difference Base rate 13.84 11.01 2.83 17.21 12.45 4.76 31.05 23.46 7.59 0‐1000 ‐ 3.98 (3.98) ‐ 4.77 (4.77) ‐ 8.75 (8.75) 1001‐2000 ‐ 3.98 (3.98) ‐ 4.77 (4.77) ‐ 8.75 (8.75) 13.84 $ $ 18.97 $ (5.13) $ 17.21 $ 21.99 $ (4.78) $ 31.05 $ 40.96 $ (9.91) 2,000 Gallons of Usage 2001‐3000 6.92 3.98 2.94 8.60 4.77 3.83 15.52 8.75 6.77 3001‐4000 7.83 3.98 3.85 9.06 4.77 4.29 16.89 8.75 8.14 28.59 $ $ 26.93 $ 1.66 $ 34.87 $ 31.53 $ 3.34 $ 63.46 $ 58.46 $ 5.00 4,000 Gallons of Usage

(7)

7 SUMMARY OF RESULTS

OF EVALUATION

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The City of Gulfport is in compliance with Provision 7(e) of its service

agreement with the City of St. Petersburg.

»

It is estimated that the City of Gulfport will need approximately

$720k

1

_{in additional annual revenue}

_{to recover the anticipated 25%}

premium increase to wholesale costs following contract renewal with

St. Petersburg in October 2018.

»

The City of St. Petersburg raised their wholesale water rate 2.5%

and wholesale sewer rates 3.2% beginning this year FY2015. We

expect to see similar increases in FY2016 & FY2017.

(8)

8

ALTERNATIVES AND OPTIONS

»

Several alternatives and options to recover the

anticipated 25% premium increase and maintain

on-going financial sufficiency were evaluated as part of our

initial preliminary study (phase I):



Alternative 1: (Simple method) - Implement a fixed

“pass-through” rate.



Alternative 2: (Complex method) - Design a change, or

combination of changes, to the current five tier inclining block rate

structure.

(9)

9 ALTERNATIVE 1:

PASS-THROUGH RATE STRUCTURE

»

Maintain the current rate structure and incorporate

pass-through rates to recover St. Petersburg’s expected 25%

premium

− Option 1:

Implement a fixed “pass-through” rate (per 1,000

gallons of monthly consumption) to all customers, including

the minimum customers.

− Option 2:

Implement a fixed “pass-through” rate (per 1,000

gallons of monthly consumption) recovered solely from

(10)

10 RATE STRUCTURE WITH

PREMIUM PASS-THROUGH

1 Based on FY 2016 budgeted wholesale water and sewer purchases from City of Saint Petersburg.

2 Based on FY 2014 Gulfport customer usage adjusted to recognize usage occurring below the current 2,000 gallon per month minimum allowance which is charged for 2,000 gallons. 3 Excludes all water usage less than 2,000 gallons per month.

Premium Pass‐Through Rate

Water

Wastewater

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11 RATE STRUCTURE WITH

OPTION 1 PREMIUM PASS-THROUGH

Pass‐Through Rate Structure Water Pass‐Through Total Sewer Pass‐Through Total

(12)

12 RATE STRUCTURE WITH

OPTION 2 PREMIUM PASS-THROUGH

Pass‐Through Rate Structure Water Pass‐Through Total Sewer Pass‐Through Total

(13)

13 ALTERNATIVE 2:

ADJUSTED RATE STRUCTURE

»

Adjust the minimum usage allowance

−

Determine additional revenues and customer impacts of

reducing the minimum allowance to a point between 1,000

and 2,000 gallons per month.

»

Create a sixth tier for water use above 20,000 gallons per

month (similar to St. Petersburg’s structure) within the

current water conservation inclining block rate structure

• $17.95 for water (per 1,000 gallons)

(14)

14

1516 Users, Revenue, $479,005 1649 Users, Revenue, $423,522 1833 Users, Revenue, $369,242 2020 Users, Revenue, $316,559 2231 Users, Revenue, $265,566 2449 Users Revenue $216,284 2686 Users Revenue $168,716 2926 Users Revenue $123,214 3189 Users Revenue $79,839 3463 Users Revenue $38,808 $‐ $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000

1000 Gallons 1100 Gallons 1200 Gallons 1300 Gallons 1400 Gallons 1500 Gallons 1600 Gallons 1700 Gallons 1800 Gallons 1900 Gallons

Estimated Revenue and Water Users Below Minimum Allowance

With Each 100 Gallon Decrease to Minimum Allowance

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15 INCREMENTAL INCREASE IN REVENUE

AND WATER USERS EFFECTED WITHIN EACH

100 GALLON DECREASE TO MINIMUM

(16)

16

1230 Users, Revenue, $384,907 1329 Users, Revenue, $339,498 1461 Users, Revenue, $295,055 1601 Users, Revenue, $253,534 1730 Users, Revenue, $213,441 1874 Users Revenue $174,676 _2010 Users Revenue $137,360 _2143 Users Revenue $101,454 _2288 Users Revenue $66,965 2441 Users Revenue $34,008 $‐ $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000

1000 Gallons 1100 Gallons 1200 Gallons 1300 Gallons 1400 Gallons 1500 Gallons 1600 Gallons 1700 Gallons 1800 Gallons 1900 Gallons