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<br />/23X <br /> <br />D. Cost of Service Allocations. <br /> <br />For a future test year, the revenue requirements, or cost of service to be met <br />from rates, will be allocated to customer classes for the utility. This <br />process would include the following elements: <br /> <br />1. Allocate the test year cost of services to the various cost of <br />service components which constitute a functional classification of the <br />different types of service the utility provides. For the sewer utility, <br />functional cost components will include contributed flow, <br />infiltration/inflow, strength, and customer costs. (For the water <br />utility, functional cost components would include annual volume of water <br />use, maximum day and maximum hour rates of water use, and customer <br />costs). <br /> <br />2. Review the existing customer class designations to determine their <br />appropriateness and equitability and recommend revised and/or new <br />customer class designations, as needed. <br /> <br />3. Determine usage and billing characteristics of each customer class. <br />For the sewer utility, characteristics include contributed flows, <br />strengths, infiltration/inflow, and customer billing requirements. <br />Estimates of class loadings will be based on bill tabulation data, <br />system operating statistics, available special studies, and Black & <br />Veatch judgement and experience with other similar systems. (For the <br />water utility, customer characteristics include annual water use, peak <br />day and hour rates of water use, and customer billing requirements). <br /> <br />4. Distribute the costs by functional components to the various <br />customer classifications on the basis of the relative responsibility of <br />each classification for service provided, as determined from the <br />customer classification characteristics. <br /> <br />5. Compare revenue expected under existing rates from each customer <br />class with their allocated cost of service to determine the adequacy of <br />present revenue levels for each class, and the indicated adjustment in <br />rates required to equitably distribute'costs to the respective classes <br />of customers. <br /> <br />6. Meet with representatives of the City to discuss the cost <br />allocation portion of the study. The effects of various assumptions on <br />the amount of cost assigned to each customer class will be reviewed. <br /> <br />7. Finalize cost allocations based upon policy direction from City <br />representatives. <br /> <br />E. Rate Design. <br /> <br />Sewer rates will be designed for the future test year to adequately recover <br />projected revenue requirements and equitably recover allocated cost of service <br />of each customer class while reflecting policies of the City. The rate design <br />portion of the study will include the following elements: . <br /> <br />1. Examine alternative rate structures to evaluate their applicability <br />to meeting the goals and objectives of the City. Alternative sewer rate <br /> <br />06/02/93 <br /> <br />A-17 <br />