Download June 2007 Independent Review of FY 2008 Proposed

Independent Review of
FY 2008 Proposed Rates
D.C. Water and Sewer Authority
Public Hearing
June 13, 2007
Objectives of Independent Review
• Review assumptions and confirm accuracy of computations
• Affirm adherence to Board rate-setting policy
• Ensure consistency with industry practice
• Review sensitivity of the proposed plan to potential changes in
assumptions
• Identify extent of flexibility available to the Board within the
10-year financial plan
2
PB Evaluation
• Recently completed Cost of Service Study (November 2006)
• Revenue Certification (February 2007)
• 2007 Bond Feasibility Analysis (May 2007)
3
Proposed Rate Increase
• WASA proposes 7.5% rate increase for FY 2008
FY 07
FY 08
Water
$2.03 per Ccf
$2.18 per Ccf
Sewer
$3.06 per Ccf
$3.29 per Ccf
Combined
$5.09 per Ccf
$5.47 per Ccf
Monthly water and sewer charges for average
residential customer change from $44.41 to $47.58 (w/
$2.01 Metering Fee added).
• WASA also proposes to increase the PILOT/ROW fee
due to the DC government from $0.44 per Ccf to $0.47
per Ccf to fully recover the amount due to the DC
Government.
When the District ROW and District Stormwater fees are
included the total monthly bill for average residential
customers changes from $48.66 to $52.08.
4
Comparison of FY 2008 and FY 2007
Sources and Uses of Cash
CHANGE IN SOURCES OF CASH
• $13.7 M in additional retail rate revenue with 7.5% rate
increase
• $2.3 M more in other revenue sources (wholesale,
interest, PILOT/ROW fee, etc.)
• $15.3 M more in rate stabilization reserve fund draws
5
Comparison of FY 2008 and FY 2007 Sources
and Uses of Cash
CHANGE IN USES OF CASH
• $15.4 M for higher debt service
• $7.9 M for higher O&M costs
• $9.4 M less for PAYGO capital costs ($11.7M in FY 2007 as
compared to $2.2M in FY2008)
• $2.5 M lower federal and wholesale settlements
6
Board Policy Requirements and
Key Ten-Year Plan Criteria
• Rate stabilization fund draws of $17.8M reduces balance
from $56.0M to $38.2 million; consistent with prior plans.
• Cash reserves forecast meets 180-day policy target of
$115.4M.
• Debt service coverage of 2.35x on senior debt exceeds
1.40x Board requirement.
• 10-year financial plan currently requires average rate
increases of 7.5% to 9.5% per year through FY 2015. The
proposed FY 2008 rate increase is within this long-term
range and is consistent with the Board’s policy for
gradual, predictable rate increases.
7
ROW and PILOT Rate
• In June 2002, before an agreement with the District was
reached, WASA established a rate of $.36 per CCF to collect
the then forecasted Public Right of Way Occupancy Permit
Fee (ROW) requirement of $14.4 million.
• The District charges the ROW fee for water and sewer
conduits within the District. The District also imposes a
payment in lieu of taxes fee (PILOT). Per the agreement,
the ROW fee is fixed, but PILOT payments increase
annually by the annual retail rate increase. Both of these
fees are a direct pass through to WASA’s customers.
• The ROW/PILOT will increase to a projected $18.4 million in
FY2008. A rate of $.47 per CCF fully recovers the projected
ROW/PILOT costs for FY 2008.
• WASA will need to periodically adjust the rate to fully
recover PILOT obligations.
• If PILOT costs are shared with wholesale customers, per
staff calculations the retail rates would be reduced by 1.5%.
8
Key Current Issues Affecting Rate Decisions
•
Operating Cash Receipts & Disbursements
– FY 2007 cash receipts are tracking budget
•
Capital Projects Receipts & Disbursements
– FY 2007 disbursements are lower than budget however the capital program is growing
– FY 2008 debt service $4M less than projected due to 2007 bond issuance cost is less
than planned
•
Future Capital Requirements
– By FY 2015 debt service projected at over $171M from FY 2007 levels of approximately
$59M
– The 10-year financial plan includes $299M for the lead service replacement program
from FY2008 to FY2015
– LTCP CSO schedule extends 20 years – cost estimates could potentially change in later
part of the schedule due to its size and complexity, and changing regulations
– A court ruling on the Total Maximum Daily Load (TMDL) expression could cause
increased costs for the CSO LTCP
– NPDES Permit modification requirements for total nitrogen reduction will require an
additional estimated $800 million in capital improvements at Blue Plains
– Assumed the District will pay for the relocation of WASA facilities related to the
construction of the new baseball stadium
9
Conclusion
•
WASA’s proposed retail rate projection has been reasonably
developed, accurately reflects revenue requirements, adheres to
Board policy, and is comparable to other utilities.
•
The ROW/PILOT fee needs to increase to keep pace with payments
due to the District.
•
FY 2007 capital spending is less than budgeted and 2007 bond
issue cost is less than planned. Thus, WASA’s Board of Directors
may have some flexibility in considering the FY 2008 rate increase
while still meeting all policy criteria.
•
Under current cash flow projections if the Board adopts a lower
rate increase in 2008, future rate increases may need to be higher
than currently projected or the rate stabilization fund tapped
sooner.
10