WATER ADJUSTMENT FACTOR OVERVIEW March 21, 2017 LADWP BOARD BRIEFING
Summary Water Supply Cost Adjustment Factor, which replaced the Water Procurement Adjustment Factor, including its Purchased Water component, will provide 27% of retail revenue in FY17/18. Additional Water Adjustment Factors (Water Quality, Water Infrastructure, and Owens Valley Regulatory) will provide about 29% of retail revenue in FY17/18. Other pass-through charges or components that are fully automatic (Base Rate Revenue Target Adjustment, Low Income Subsidy, and Water Expense Stabilization) make up 9% of retail revenue for FY 17/18. Base Rate Revenue makes up 35% of retail revenue for FY 17/18. The typical residential customer s monthly water bill, effective July 1, 2017, will change from $76.50 to $74.57. The main driver of the decrease is due to an increase in LA aqueduct production resulting in lower unit cost in Tier 1 and Tier 2 of the WSCA. Total Other Pass Throughs, 29% Water Supply Adjustment Factor, 27% Base Rate, 35% Automatic Pass Throughs, 9% Compared to the monthly 2015 rate case, the typical residential customer s water bill will change from $67.20 to $74.57 mainly due to the application of decoupling mechanism as provided by the Ordinance and resolution of under collection of revenues. * Consistent with the Water System financial plan that assumes securitization 2
COMPARISON OF ADJUSTMENTS FACTORS PROPOSED VS PRIOR APPROVED / RATE CASE Factor (in $/HCF) Proposed Approved Jan-Jun 2017 Variance (Decrease)/Increase Water Supply Cost Adjustment Factor Tier 1 $1.121 $1.525 ($0.404) Tier 2 $2.751 $2.974 ($0.223) Tier 3 $4.261 $3.093 $1.168 Tier 4 $4.360 $3.093 $1.267 Water Quality Improvement Adjustment Factor $1.270 $1.376 ($0.106) Owens Valley Regulatory Adjustment Factor $0.273 $0.297 ($0.024) Water Infrastructure Adjustment Factor $0.472 $0.351 $0.121 Factor (in $/HCF) Proposed Rate Case Variance (Decrease)/Increase Water Supply Cost Adjustment Factor Tier 1 $1.121 $0.988 $0.133 Tier 2 $2.751 $2.644 $0.107 Tier 3 $4.261 $2.903 $1.358 Tier 4 $4.360 $2.903 $1.457 Water Quality Improvement Adjustment Factor $1.270 $0.906 $0.364 Owens Valley Regulatory Adjustment Factor $0.273 $0.248 $0.025 Water Infrastructure Adjustment Factor $0.472 $0.566 ($0.094) 3
COMPARISON OF ADJUSTMENTS FACTORS PROPOSED VS PRIOR APPROVED / RATE CASE FULLY AUTOMATIC FACTORS (NOT REQUIRING BOARD APPROVAL) Factor (in $/HCF) Proposed Approved Jan-Jun 2017 Variance (Decrease)/Increase Base Rate Revenue Target Adjustment Factor Schedule A $0.235 $0.235 $0.000 Schedule B $0.339 $0.339 $0.000 Schedule Other $0.105 $0.105 $0.000 Low-Income Subsidy Adjustment Factor $0.120 $0.135 ($0.015) Water Expense Stabilization Adjustment Factor $0.181 $0.181 $0.000 Factor (in $/HCF) Proposed Rate Case Variance (Decrease)/Increase Base Rate Revenue Target Adjustment Factor Schedule A $0.235 $0.125 $0.110 Schedule B $0.339 $0.125 $0.214 Schedule Other $0.105 $0.125 ($0.020) Low-Income Subsidy Adjustment Factor $0.120 $0.137 ($0.017) Water Expense Stabilization Adjustment Factor $0.181 $0.079 $0.102 4
Typical Single Dwelling Unit Residential Customer Monthly Bills (12 HCF) $80 $70 $60 $50 $40 $30 $20 $10 $0 LADWP Historic/Projected Typical Single Dwelling Unit Residential Customer Monthly Bill (12 HCF) $71.50 $23.54 $27.68 $17.26 $1.81 $1.40 $17.06 $62.16 $19.43 $76.50 $24.29 $3.79 $2.57 $1.40 $2.82 $74.57 $24.10 $19.97 $24.18 $3.61 $2.82 $21.50 $21.50 $23.99 * Apr 16 **Jul 16 **Jan 17 **Jul 17 Legend Water Supply Adjustment Owens Valley Regulatory, Water Quality & Water Infrastructure Water Expense Stabilization & Low-Income/Lifeline Base Rate Revenue Target Adjustment Base Revenue * Ordinance took effect on April 15, 2016. **Consistent with the Water System financial plan that assumes securitization. 5
Single Dwelling Unit Residential Customer Monthly Bills (10 HCF) Due to 20% Conservation $80 LADWP Historic/Projected Single Dwelling Unit Residential Customer Monthly Bill (10 HCF) $70 $60 $57.96 $61.82 $59.97 $50 $17.99 $49.53 $18.15 $14.47 $40 $30 $20 $10 $0 $13.92 $20.15 $20.24 $23.07 $14.38 $3.01 $3.16 $2.14 $2.35 $1.17 $2.35 $1.51 $1.17 $14.22 $17.92 $17.92 $19.99 * Apr 16 **Jul 16 **Jan 17 **Jul 17 Legend Water Supply Adjustment Owens Valley Regulatory, Water Quality & Water Infrastructure Water Expense Stabilization & Low-Income/Lifeline Base Rate Revenue Target Adjustment Base Revenue * Ordinance took effect on April 15, 2016. **Consistent with the Water System financial plan that assumes securitization. 6
Water: Single Dwelling Unit Residential Rate (Tier 1 4) Structure with Updated Semi Annual Factors Effective July 1, 2017 $10.00 $9.558 $9.657 $9.00 $8.00 $7.00 $7.301 $4.261 $4.360 Water Supply Cost Adjustment Factor $6.00 $5.671 $2.751 Water Quality Improvement Factor Owens Valley Regulatory Adjustment Factor $5.00 $1.121 $1.270 $1.270 Water Infrastructure Adjustment Factor Water Expense Stabilization Adjustment $4.00 $3.00 $2.00 $1.270 $1.270 $0.273 $0.273 $0.472 $0.472 $0.181 $0.181 $0.120 $0.120 $0.235 $0.235 $0.273 $0.273 $0.472 $0.472 $0.181 $0.181 $0.120 $0.120 $0.235 $0.235 Low Income Subsidy Adjustment Factor Base Rate Revenue Target Adjustment Base Rate $1.00 $1.999 $1.999 $2.746 $2.746 $0.00 Tier 1 Tier 2 Tier 3 Tier 4 7
Appendix Background Board-approved qualified expenditures for the 12 month period commencing July 1, 2017 are used to calculate the factors below: Water Supply Cost Adjustment Factor (WSCA)- Replaces Water Procurement Adjustment Los Angeles Aqueduct, Purchased Water, Groundwater, Recycled Water and Water Conservation Water Quality Improvement Adjustment Factor (WQIA) Continue to fund costs for water quality and will now also recover costs of providing security to the Water System Owens Valley Regulatory Adjustment Factor (OVRA) Recovers Owens Lake Dust Mitigation Program, the Lower Owens River Project and Owens Lake Master Project Water Infrastructure Adjustment Factor (WIA) Provides revenues associated specifically with infrastructure investment to maintain and improve reliability of the water distribution system. 8