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V. WATER AND WASTEWATER UTILITY FINANCIAL OPERATIONS <br />A. Dctcrmination of Test Year Revenue Reqnirements <br />To recognize the City'S COlltl'1Ct customers' contractual terms, two test year revenue <br />reqiiirements were developed, one for the contract customers, and one for the retai] customers. <br />Table B-1 in Appendix B shows the revenue requirement, as adjusted, for [he test year for the <br />contract custouiers. TaUle B-2 provides the ctistomer class cost allocations in recognition of <br />Campbe.li Soup's contract and the assumed Direct Energy contract. "I'able B-4 provides the <br />CLIStOl11Cl' CI1S5 COSt aJIOCfILlOt1S Ill l'eCOarilIl011 Of LCWSD's contract. Table G1 in Appendix C <br />shows the revenue requirement, as adjusted, for the test year for the retail customers. The <br />reventie requiremcnt for thc contract customers was developed on the fiscal year ended <br />September 30, 2009 actual expenses, while the retail customer revenue requirement was Uased <br />on the City's FY 2010 budget. Adjustments and reclassifications to the revenue requirements are <br />as follows: <br />12awWatcr Suuuly <br />Since the City budgets both raw water supply and water treatment O&M expenses in <br />Water Production, it is necessary to sepaiate raw water supply costs into their own <br />separately allocable cost section. <br />Water Distribution 1nd Transmission <br />Water distriUulion and transmission costs must be reclassified from expense type to cost- <br />catisal categories. Personnel, supplies, contractual, building maintenance, equipment <br />maintenancc, sundiy costs, and equipment capital outlay are classified into the three <br />categories of distribution and transmission (less than 8", 8" to 24", and greater than 24") <br />based upon the test year water system inch-feet percentages calculated on TaUle A-2 in <br />Appendix A. Hydrants/valves and meters/meter Uoxes remain separate categories for <br />cost allocation puiposes. <br />Debt Service <br />The contracts for Campbell Soup and LCWSD, and the assumed contract for Direct <br />F,nergy, allow for adjustments in known and measurable changes from the end of the <br />fiscal ycar to the cost of service deteimination. In January 2010, the City refinanced <br />12 Ciq, of Pm•is, Tesas <br />FVruer mid K'nsteuvnler Cosi ojServim Stitdj, <br />Jmie 2010 <br />