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7.A. - Page 66 <br /> The table on the following page subsequently apportions these functional cost categories to the <br /> various customer classes and rate tiers based on the following assumptions. To ensure appropriate <br /> weighting of cost recovery (since different levels of water are used in each class and rate tier), the <br /> table allocates costs based on the percentage of water assigned for cost recovery for each customer <br /> class and rate tiers. For example, costs for the City's Water Resources Management Program are <br /> allocated to be recovered from 15% of Residential Tier 2 usage, from 50% of Residential Tier 3 <br /> usage, and from 90% of usage in Tier 4. Costs are attributed and allocated as follows: <br /> • Costs related to SFWD wholesale water supply expenses are allocated on a pro-rata basis to <br /> all water use. Every unit of water recovers the same level of costs for wholesale water <br /> supply. <br /> • The 80% share of costs for both a) the City's recycled water system, and b) the City's Water <br /> Resources Management Program that are allocated for recovery from quantity charges, are <br /> subsequently allocated to each rate class and tier as shown on the table. Higher levels of <br /> cost recovery are allocated to higher rate tiers in reflection of the City's estimated <br /> attribution of costs to each customer class and tier, resulting in more costs being allocated <br /> to customers who place a greater burden on the water system and contribute more to the <br /> need for the recycled water project and Water Resources Management Program. <br /> o No costs for the recycled water system or Water Resources Management Program costs <br /> are recovered from Residential Tier 1 rates as these low levels of use were not <br /> responsible for the need for the recycled water system or the City's conservation <br /> initiatives. Residential customers whose water demands never exceed Tier 1 usage <br /> levels will still pay for a small portion of recycled water and Water Resources <br /> Management Program costs through the 20% of such costs recovered by fixed charges, <br /> however, they will not pay additional usage-based charges for these expenses as minimal <br /> "lifeline" levels of residential use did not drive the need for the City's recycled water <br /> system or Water Resources Management Program. <br /> o Recycled water system and Water Resources Management Program expenses are <br /> attributed to 15% of the residential Tier 2 water use. As discussed in Section 2.12.2 of <br /> this report, a moderately-small percentage of water in Tier 2 can reasonably be <br /> attributed toward contributing to the need for the recycled water system and City <br /> conservation initiatives. <br /> - Unlike residential use, which is billed according to 4 tiers, all commercial use is <br /> proposed to be billed at a uniform block rate, including efficient and inefficient levels <br /> of use. To be reasonably consistent, a similar 15% of commercial water use is <br /> attributed for cost-recovery for recycled water system and conservation program <br /> expenses. <br /> B Water Utility Finances& Rates 39 <br /> �'\ Water&Sewer Financial Plans&Rate Studies <br />