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<br />DRAFT REPORT <br /> <br />VIII. DETERMINATION OF TEST YEAR REVENUE REQUIREMENT <br /> <br />Table C-l in Appendix C shows the revenue requirement, as adjusted for the test year. As <br />shown in this exhibit, the total revenue requirement for the City's Wastewater Utility is <br />estimated to be $4,433,774. The wastewater utility revenue requirement is based on the City's <br />FY 2004/2005 budget, adjusted for the increase in electricity costs. <br /> <br />A. Functionalization of Revenue Requirement <br />Unlike the water utility system, where separate consideration of extra capacity components of <br /> <br />.. <br />plants and facilities is crucial to equitable allocation and cost distribution among customer <br /> <br />classes, it is not necessary to account for extra capacity in the allocation and distribution of costs <br /> <br />among wastewater utility customers unless there is large reserve capacity in the system. <br /> <br />The City's wastewater operation and maintenance expenses can be functionalized into the <br />following service cost functions: <br />a. Warehouse <br /> <br />b. . Billing and Collecting <br />c. Sewer Maintenance (Wastewater Collection) <br />d. Wastewater Treatment <br />e. Lift Station <br /> <br />\Varehouse <br />Since wastewater warehouse operations serve both treatment and collection, warehouse costs are <br />functionalized based upon composite allocation factors. <br />Billing and Collecting <br />These are costs associated with meter reading, billing, administration and other functions of the <br />wastewater utility that are independent of quantity and quality of the wastewater contribution by <br /> <br />a customer. <br /> <br />City of Paris, Texas <br />Water and Wastewater Cost a/Service Study <br />May 2005 <br /> <br />18 <br />