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1. 7.9 Identify departmental costs narrowly attributable to the water or wastewater utility, and costs common to more than one utility (administration, utility business office, workshops or equipment, etc.) will be allocated to the separate utilities. Using information from the assessment of utility production volumes, allocate costs into base (winter) versus excess demand (peaking) cost components. Concerning wastewater, allocate various system costs into customer account, volume- related and BOD/TSS strength components. 1.7.10 Allocate costs to various functional parts of the systems so that current and anticipated future cost of service can be identified at differentiunctures in the system. The Consultant will evaluate any further specific facilities and costs in reviewing the City's in-city and out-of-city service costs, the adequacy of the City ''wheeling'' charge for moving the GBRA water through its system, as well as discerning costs attributable for producing and conveying reclaimed water for customer needs. 1. 7.11 Identify the base-year (most recent historical year) cost of service assessment. Furthermore, using cost trends, other known spending plans, and explicit planning or financing assumptions, and the IPFM the Consultant will prqiect the utility costs for the test-year (likely the pending fiscal year) and later years in the ten-year forecast. The Consultant will examine any prospective new costs as to possible effects upon the test-year's cost and cost allocation percentages. 1.8 TASK 7 - FUTURE REVENUE REQIDREMENTS The Consultant will: 1.8.1 Given the prospective overall cost of service by utility, work with the City to gain concurrence on initial target revenue requirements for rate-setting purposes. Consultant will consider the following factors in setting rate revenue requirements: a. Possible wet/dry, hot/cold weather influences on rate revenue; b. Operating reserves, debt coverage ratios, or other bond covenant requirements; c. Impact Fee, service fees, and other sources income; d. Use of prior balances; e. Adjustments for non-collection ofbills; f. Other possible issues. 1.8.2 Once rate revenue requirements are determined, allocate them to each utility and to associated customer classes using information on service use patterns; in particular how each class utilizes facilities needed for average day, peak day or peak hour demand conditions, as well as more standardized costs incurred for maintaining and billing customer accounts. 1.8.3 Discuss issues such as city policies of limited cross-subsidization between utilities, or customer classes, or water use blocks; degree of water conservation incentives, amount offmancial stability desired in the minimum charge revenue, lifeline rates for low or fixed income customers HDRRate Oesign.wpd 6