LRPC October 2021

As we continue working toward firming up cost information related to potential liens against our reserves fund budget, the majority of items have been put on hold. On the emaining USDA project tasks, this is primarily due to the fact that our contractor (Mozingo) is not able to obtain price quotes or place orders on parts since all suppliers are out of stock indefinitely. In addition, we have not received a formal response from CCWD of the cost and terms if we were to purchase increased water capacity. The CCWD office has been closed due to COVID. The good news is our total water usage levels from 2020 to 2021 have been much lower through the summer months at <23% (May), <18% (June), <21% (July) and <38% (August) keeping us well within our maximum capacity levels.

The BLSMWC management & staff has also completed an update of the Asset Management Plan database reflecting replacements and/or repairs in the past year, along with identifying assets not required in the plan or with overstated cost estimates. We are in the process of incorporating these changes into the database in order to re‐calculate the replacement costs over the next 20‐40 years. This is estimated to be completed in the next month. Based on our financials, we estimate that our reserve fund (currently at $1.35M) will increase to approximately $1.5M by year‐end 2021.  Over the past month, we also continued to compile and analyze data that will be taken into consideration as we develop our rate structure for 2022. This data includes:

• Local vs. Part Time water usage levels
• BLSMWC usage levels vs. USGS average consumption needs
• Comparison of BLSMWC rate structure to local and bay area water agencies
• BLSMWC fixed vs. variable costs
• BLSMWC cost to make water vs. CCWD cost to purchase water

As you can imagine, each of the comparisons shown above include many factors and variables that can influence our future rate structure and, therefore, must be fully discussed with the LRPC members and the board of directors prior to implementation. A clear example of this is evident in the comparison of 6 local and 5 bay area water agencies to BLSMWC. The cost within each agencies rate structure (i.e., annual base rate, monthly consumption included in base, metered usage charge, and single vs. multi‐tiered usage structure) all vary to some degree. Note that this variation is expected.  Many customers incorrectly believe that the cost of providing a gallon of water is the same regardless of which water system provides it. In reality, there are many factors (i.e., salaries/benefits, cost of water treatment, quality to which water is treated, cost of water distribution, etc.) that can influence the price of water and cause water rates to vary, sometimes significantly, even among neighboring systems. These factors will be included within our analysis of the BLSMWC rate structure. Also included in the analysis will be our estimated fixed vs. variable costs, with fixed costs (i.e., costs that do not vary with consumption) being recovered by our base rate/base allocation revenue, and variable costs (i.e., costs that change from month to month depending on how much water we have to purchase and/or pump, treat and sell) being covered through our consumptive meter revenue that varies in proportion to the level of a customer’s use.

As we work through the process described above over the next month or so, rate structure options will be fully discussed within the LRPC and recommendations brought forward to the Board of Directors for consideration and approval.