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>> so the first tier for single family residential customers 4ccf, the first tier for multifamily residential customer social security 3ccf. for our non-residential customers, variable charge we don't have tears. tears. on the waste water side we have no fixed charge. all of our revenues are

recovered on a volume m metric charge. we have no tears. the volume metric rate is based on a stan domestic strength sewage. for now-residential customers firefighter separate rates for solids, chemical oxygen demand and fats, oil and grease. they make up the sewer service rate and are actually separate for non-residential customers and based on standard industrial classification codes. so those non-residential customers that have very strong sewage would pay more than those that have weaker sewage. so let's talk about what are the changes in rate design. so i talked about the fixed charge for water

service and that covers the cost of customer service, billing, meters and fire protection. we are also implementing a new -- well, it's a new fixed charge so it's a new part of the rate structure but it's not adding revenue to the rates and charges so it's a different way of recovering costs. it's a -- it will recover over the 4-year period about 2% -- 2.6% of the waste water revenue requirement. on the water side, not a large change to the fixed charge as the percentage of total revenues. it will recover 13.8% of total revenues recovered on a fixed charge. so essentially we are keeping the fixed charge about the same percentage of revenue for water and we are adding a fixed charge for waste water that will grow over the 4-year period. so now let's talk about rate design with

respect to the variable charge. so for residential customers. i mentioned we have two tiers in our residential rate structure. those tiers are different depending on whether you're a single family residential customers or multifamily residential customer. we looked at usage and distribution and are proposing no changes, the tier 1 for single family and 3 for multifamily. we did a significant update to the cost of service allocation with respect to the tiers. so much of the activity with respect the prop 218 and setting of water rates has revolved around tier pricing. you know, we wanted to ensure that we had a solid

administrative record and a solid financial record for setting our first and second tier prices. so the second tier includes the cost of water conservation and a portion of peaking costs by customer class including the peaking cost associated with water supply, diversification, extra capacity in the transmission, pumping, treatment, storage and distribution systems. what we are actually seeing in the proposed rates and charges is a compression of the tiers. so our tier 1 and tier 2 prices are getting more close together because the peaking characteristics of our system has changed over the past several years. we are phasing in the adjustments to that allocation over a 4-year period to mitigate the immapact on the low water volume users. so now let's talk about the water

nonresidential variable charges. essentially as i mentioned earlier, we have volume metric rates for a number of different customer types. we have a number of different customer types. these actually represent a very low volume usage. we charge some a commercial rate, interruptible rate, a special for docks and shipping. they recommended to consolidate them all into one rate. we think that makes sense. that achieves the rate assurance policy, the principal of simplicity and we needed to make sure that we had a strong financial and legal basis for having a different rate. so when you pull that altogether what does that mean? it's one thing to talk about rate design but what does it mean for the customer bill? what we have here is the average single family residential bill, which is about 5.3ccf of usage,

currently that customer pays $108 per month for water service and sewer service. it breaks down to about $49 is the water bill, $59 is the waste water bill. you can see the fixed charge and the variable charge. you can see in this table how that will change under the proposed rates and charges. essentially it's about a $10 per month increase in the monthly bill. it's a $10 increase in the monthly bill each year of the 4-year package. that translates to about an 8.4% annual increase to the typical single family residential customer. now one of the things to consider is that the commission is generally interested in is how do our bills stack up to customers in the -- other customers -- other service providers in the bay area. here we have a comparison

of the combined monthly water and waste water bills of various bay area agencies. i think one of the important things to note is that our waste water bills includes not just treatment of sanitary flow but also storm water run off and it's hard to create an apples to apples comparison when you're looking at some of these other waste water charges. not all of these include treatment for storm water run off. so currently our bill is about at the median level and will increase to about $116 per month and would -- all of the bars here for agencies are based on fiscal year '18 rates, not '19 rates so those would increase as well but we want today show the commission what the proposed rate for the fiscal year '19 looks like. so that's the discussion of the basic of the water and sewer rates and charges. in addition,

we are proposing as part of this package which is a practice that has been implemented by agencies up and down the state of the implementation of a temporary drought surcharge. this is a temperature rare surcharge that would be trigger body commission calling for water shortage that's associated with a supply shortage. so this would only be implemented in the situation where we had a supply shortage and the commission's retail water shortage allocation plan was activated. this is not just a general statewide call for conservation. the surcharge would be based on cost of service and would be relative to the mandatory water use, calls for water use restriction of the commission. it would be a surcharge on the volume metric portions of water and waste

water rates. the city would have to declare a water shortage and request customers reduce water use by 10%. this would be based on a shortage allocation plan. that's contained in the urban water management plan, not just a general call for water wise. finance staff would calculate the projected revenue and the corresponding surcharge which would not be greater in stage 1 than 10%. the stage water would be added to all volume metric water and waste water rates and removed at the removal of the declaration of the water shortage emergency. now we are moving to capacity charges. so this is item number -- so i described item 11 and 12. this is item 13. capacity

charges are charges to customers that are either newly hooking up to the system or requesting additional capacity from the water or waste water system. it's intended for them to pay a fair share of the capacity that existing customers have invested to develop. so it's really a generational equity charge. the puc adopted capacity charges in 2005 and 2007 and they have been reviewed and updated during each rate study. now we use what is called the equity buy-in calculation methodology. you look at the values of the assets, less depreciation, less any debt that was used to finance those projects, you add any cash that's been contributed by existing customers and divide t it -- it by the capacity and

come up with a charge of meter equivalent. this is actually very conservative. it's the most conservative capacity charge. you'll see that when you look at our capacity charges in comparison to other statewide -- or other regional agencies. again, they ensure that new customers pay their fair share of the cost that existing customers have already paid into the system. when you run that formula and that calculation, this is a formula calculation, there's not discretion in this methodology, the waste water charges going up by about 4% and the water capacity charges going up by 35% and the increase in the water capacity charge is really the result of the significant increase in capital assets and investments from the wisp. the items are annually authorized increases proposed

based on engineers, news, records, cost escalation for construction costs. as i mentioned, when you look at the sf puc capacity charges in comparison to pier agencies what you see is on the left -- well, we are the second and third bar from the left. it's objeabout blocked by the closed captioning. there's others that charge more for capacity. >> is that the same formula that you're using? >> it's service level characteristics. so it's a very high growth area. high new growth area. they need to procure a new capacity to meet demand. they might have a slightly different formula. so

east bay mud has a formula that's different than ours. it's an equity buy-in like we have plus an extra capacity that has to be built to service certain customers. so that's it for my formal presentation. i'm happy to answer any questions or discussion before todd elmer, my colleague, talks about the out reach that is associated with this rate package. >> commissioner kwon: any discussion? okay. >> todd. >> commissioners thank you for having me here today. i'm todd elmer. i'm excited to talk about the extensive public

education and out reach strategy that we have put in place to educate the members oh of the public via a variety of different channels and methamphetamine -- methods so they understand what their rates are being used for. so that's what i'll be describing in my next few slides. so i'd like to begin with a broad level over view of the st -- sf puc approach. whether it's a rate year like now, we are engaging our community members. we are working to educate them on the critical 24/7 services that the agency provides as well as what is necessary to maintain those 24/7 services in top shape. finally when we are out of -- i'm sorry, also we are out at

community events, meetings, using our social media channels or any other channels for communicating with the public and trying to educate them about those critical services we also want to show folks what their investments and their rates have already paid for so we provide them regular updates on on going projects such as the water system improvement program which at this point is almost 95% complete and we have a focus on engaging two-way dialogue and conversation so it's just another government agency preaching from high to the public but also getting feedback and dialogue from the community. with that broad over view in place there's three core pillars regarding our rates out reach that we have been focusing on on all the many channels we have been using. the first key message is that our water system provides essential services critical to the every day life of the bay area. the second

pillar is that our sewer system is the front line of defense to protect public health and we've identified critical upgrades to the system to insure we continue to provide public health and safety to the environment as well. finally, the third pillar is rate increases are absolutely necessary to pay for critical system upgrades and the longer we wait the more expensive they will cost over time. we started out with 150 front line staff who were engaged in talking to the public. we wanted to make sure they understand the rates messaging, why we were raising rates so everyone was speaking from the same page. some of those 150 line front line staff members who were trained on the education of out reach strategy

included everyone from the communications team, policy and government affairs team, everyone from the community benefits, our finance departments, our customer service bureau, out reach and engagement team and our water resources team. beyond just those front line employees we also offered a series of brown bag luncheons for anyone in the agency to learn more about the critical rates messaging and the need for that. moving forward, starting in january 2018 once the rates fairness board had recommendations we increased our out reach and education to the public and with targeted out reach so we started doing direct customer out reach. first of all, we mailed out almost 247,000 proposition 8 public notices with extensive information on the need for our new rates package as well as driving every person driving to

our website that included our rates page with extensive information with ways to the public to engage. in addition to those 240,000-some props we started to use our monthly bills to drive people to our rates page, to our website. we used our public currents newsletter that has 150,000 subscribers to spread the word about our critical services and what rates were going to be used for coming up. moving from some of that direct out reach to the public, we also turned to extensive out reach and personal presentations to a wide variety of community groups in every district in the city. starting in the fall we offered to make presentations to some 240 different community groups all over the city and in the district. from those about

60 have currently taken us up on that offer. so we've met with 60 different community organizations, usually after hours when most people can attend the meetings and we presented to a wide diversity of groups that reflect the wide diversity of our city and our community. we were pleased to speak to engaged citizens in every district in the city. to provide you a sample of some of the educational materials we've been using when we were out working with the public in person but also provided materials online, so every time we were driving traffic to our website through all these other channels these are some of the materials that were available. if addition, eathese are some o the materials we took with us to many presentations. we created a one-page summary of why the rates are needed and what the money will be going for. we created a comprehensive new cost saving guide that shows the rebate programs, affordable

programs and incentive programs so there was an early one-stop-shop for folks to see what all those materials are. we also provided about 20 different rates materials that were translated into chinese, spanish and filipino as well. so we've done extensive efforts to reach all our community members regardless of the language that they speak. finally, we've turned to our extensive digital reach between our website and our social media presence which we are very proud of as well. for example, as i mentioned, we developed a rates web page on our -- we started advertising that on our home website, our website between the months of january and february. home page received 292,400 unique visitors, each of which was greeted with front page banner signs about the new rates and education on how they can learn, become involved in this highly transparent public process. we used our social media channels on