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Water Rate Cost-of-Service Study Section 4. Cost-of-Service Analysis HF&H Consultants, LLC | July 8, 2025 | Page 24 of 53 periods of peak demands for which the system must be designed to meet. Non-Residential customers’ use produces fewer peak periods due to less homogenous use. In other words, some Non-Residential customers have significant water use during peak usage periods of the system while others do not. As a result, water usage is more stable over time as demand does not spike in the same manner as it does for Single Family Residential customers. Irrigation customers use depends on the demands of what is being irrigated. As such, irrigation customers can place both seasonal demands and peaking demands on the system. CURRENT RATE STRUCTURE There is no industry standard that specifies what rate structure must be used. The law allows utilities to exercise discretion in determining their rate structure as long as the rates yield charges that are proportional to the cost of providing the service. In the City’s case, its current water rate structure consists of a fixed Service Charge component and a variable Water Use Charge component. The use of a pair of Service and Water Use Charges is the most common standard in the industry. The current rates for the Service and Water Use Charge rates are dependent on each customer class. The Service Charge is billed based on the number of dwelling units or the size of the meter. Billing based on meter size reflects a charge that is graduated in proportion to the capacity of the service (i.e., meter-size), which is an industry standard for metered water systems. As the name implies, this charge is related to the customer’s service, which provides a fixed, upper limit on the amount of capacity that is available in the water system. The Service Charges are fixed rates that are charged on a dwelling unit basis for single family customers and on a fixed rate graduated in proportion to the capacity of the service provided for multi-family and Non-Residential (commercial, municipal, industrial, other, recycled water, and irrigation) customers. Single Family Residential and Multi Family customers are billed on a bi-monthly13 basis. Non-Residential customers are billed on a monthly basis. Figures 4-1 and Figure 4-2 summarize the current Service Charges and Fire Service Charges. Note, Customers with a separate fire service are billed a separate Fire Service Charge per connection. The charge is graduated in proportion to the capacity of the service (i.e., meter-size), which is an industry standard for metered water systems. Fixed service charges for Commercial and Multi Family Residential accounts are the same per meter size. However, two rates are shown to reflect the difference in billing frequency. Multi Family Residential accounts are billed on a bi-monthly frequency while Commercial accounts are billed on a monthly frequency. Rates are the same, but one is billed on a bi-monthly basis and one is billed on a monthly basis. 13 Bi-monthly periods assume a billing period of approximately 60 days. ATTY/RESO.0109/CC RESO WATER RATES - EXHIBIT A REV: 11-05-25 MI