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Water Rate Cost-of-Service Study Section 1. Executive Summary HF&H Consultants, LLC | July 8, 2025 | Page 11 of 53 per-unit charge. The change aligns these customers with all other customer classes and simplifies the rate structure. With the recommended increases and realignment to the cost-of-service, revenues from the Water Use Charges would increase 7.6% with twelve months of rate increase applied. Thereafter, all Water Use Charge rates would increase uniformly according to the recommended revenue increases of 6% and 5%, effective January 1, 2027 and January 1, 2028, respectively. Figure 1-10. Current and Proposed Water Use Charge Rates Source: Figure 5-10. 1Commercial includes commercial, industrial, other, municipal, commercial fire, landscape irrigation, and recycled water accounts. Proposed Drought Rates We recommend implementing Drought Rates that could be applied to the Water Use Charge rates during declared water shortages to compensate for changes in water use. For each shortage stage, there is a corresponding Drought Rate. Each shortage stage in the City’s Water Shortage Contingency Plan contains conservation requirements. The Drought Rates are designed only to offset the amount of revenue shortfall caused by conservation in effect during the specific water shortage stage, state mandated reductions in the level of potable water usage, or other natural disaster or event that results in a water shortage and an unforeseen drop in water demand. As such, the Drought Rates are revenue neutral and not a means to increase rate revenue beyond the amount that would have been generated under non-water shortage conditions. Figure 1-11 summarizes the Drought Rates that correspond to the water shortage stages in the City’s Water Shortage Contingency Plan. If the City experiences a water shortage beyond the level of water use projected, the Drought Rate corresponding to the specified shortage stage is added to the normal-year Water Use Charge rates. For example, if customers are required to cut back 20% (a Stage 2 water shortage) in FY 2025-26, a Drought Rate of $0.85 would be applied to each HCF of water used in addition to the then-current Water Use Charge rates. If the water shortage stage increased to 40% in FY 2025-26, a Drought Rate of $2.25 would be added to the then-current Water Use Charge rates. If the water shortage stage then decreased to 30%, the Drought Rates would be reduced from $2.25 to $1.45 per HCF. Water Use Charges Current FY 2025-26 FY 2026-27 FY 2027-28 Usage Rates Usage eff. 1/1/2026 eff. 1/1/2027 eff. 1/1/2028 Single Family Residential Tier 1 (0-10 hcf) $6.90 All Water Use $9.18 $9.73 $10.22 Tier 2 (11-14 hcf) $7.89 Tier 3 (15-20 hcf) $10.30 Tier 4 (21+ hcf) $15.59 Multi Family Residential All Water Use $8.47 All Water Use $9.18 $9.73 $10.22 Commercial¹ All Water Use $8.47 All Water Use $9.18 $9.73 $10.22 ATTY/RESO.0109/CC RESO WATER RATES - EXHIBIT A REV: 11-05-25 MI