FG Solutions works on a variety of projects across the US. Here is just some of what we've been up to lately.
Snohomish County Surface Water Management Division, Everett
Seattle, WAshington
2009 RATE STUDY
FG Solutions managed a 2009 effort that successfully increased annual service charges from $33 to $90 for single-family residences. The study identified permit compliance costs and projected service costs related to requirements of the recently issued NPDES MS4 permit. FG Solutions ensured that rate increases were successful by establishing the defensibility of the analyses and the clear communication of permit requirements, benefits of other services, and financial impacts to elected officials.
2014 Service District Assessment Study
This study simultaneously addresses service charge and level of service issues. The level of service evaluation will help define the overall rate level for the Division’s four service areas: drainage, water quality, floodplain services, and habitat. Service charge issues will also consider geographic fee boundaries, rate structure, funding for flood protection and ESA-related activities, and infrastructure replacement. A key challenge was efficiently presenting the wide variety of Division’s services and the many accompanying policy decisions to the county management and elected officials, given the many other competing priorities. Because of funding constraints and other competing priorities, county management and elected officials elected not to pursue a Service Charge increase. As a result, the level of service evaluation focused on prioritization of existing services. The County implemented a series of code changes that changed the Service Charge collection boundaries and other activities that gave the SWM Division more flexibility in providing its services.
2017 Utility Business Plan
The Utility Business Plan will include elements of the 2014 Service District Assessment Study, with an emphasis on benchmarking to support service level evaluations, public engagement, and a stakeholder advisory group. FG Solutions will lead the level of service evaluation task, which evaluate services based on the following:
- Costs and benefits for SWM Division activities, including where applicable considerations of externalities and environmental benefits
- Criticality of services (what happens if the service level is reduced or the service is eliminated)
- Equity
- Stakeholder feedback
- Benchmarking
FG Solutions will also be acting as a Senior Advisor in other aspects of the project, defining existing services, benchmarking, rate structure evaluations, and public/stakeholder outreach.
City of San Bernardino, CAlifornia
FG Solutions staff have been providing utility rate consulting and management consulting services to the City of San Bernardino and the semi-autonomous San Bernardino Municipal Water Department since 2009.
Water Rate Studies
FG Solutions completed Water Rate Studies in 2010 and 2016. Both studies allowed the Department to continue providing reliable water services and implement capital programs in a financially sustainable manner.
Elements of the 2010 Study included:
- Creation of a separately identified Replenishment Fee, providing funds to purchase state water for aquifer recharge when water supplies are available.
- Recalculation of Elevation Surcharges using a mass balance and electricity cost data for six geographic zones within the Department’s service area. The Elevation Surcharge recognizes pumping costs are higher for service to upper pressure zones.
- Implementation of an increasing block rate structure. The previous uniform block rate structure was converted to an increasing block rate structure.
Elements of the 2016 Study included:
- Application of rate increases to increase fixed charges more than variable charges, to provide greater revenue stability.
- Identification of specific costs to be funded by revenues collected from the 2nd rate tier. These specific costs included capital costs associated with well rehabilitation to make the wells deeper, increased pumping costs from deeper wells, water production costs from more expensive seasonal wells, water loss prevention efforts, and conservation program efforts. These costs were identified to provide additional documentation, rate equity, and transparency in light of recent California case law.
- Financial planning to balance the District’s reserve requirements and financial impacts.
Wastewater Rate Studies
The Department provides wastewater treatment services for the City and two other local utilities. Wastewater treatment rate studies have included:
- Cost-of-service analyses based on the Department’s own BOD and TSS sampling data in order to equitably charge customers with high strength wastewater.
- Separate rate development for the Department’s retail customers and the retail customers of the other two utilities, recognizing that some services provided by the Department for its retail customers (for example, billing) are not provided for the other two utilities.
- Establishing rates to adequately fund ongoing operations, maintenance, and implementation of capital improvement plans.
The City of San Bernardino provides wastewater collection services. FG Solutions completed a rate study for the wastewater collection system utility. The previous rates were not sufficient to address a much-needed condition assessment of aging sewer lines and make the needed repairs. FG Solutions provided a defensible rate study that secured a more than 100% rate increase so that the City could begin to make sewer line repairs.
Solid Waste Rate Study
Revenue requirement and cost-of-service analyses were completed for the City’s solid waste utility to equitably charge for retail curbside collection from residential and commercial customers. The rate study addressed long-term capital improvement needs, changes in refuse disposal costs, and revised collection routing that affected the costs to provide service to the various customer classes.
County of Kaua`i, Hawaii
FG Solutions staff have been providing utility rate consulting and management consulting services to the County of Kaua`i’s Wastewater Management Division for the past 10 years.
2010 Wastewater Rate Study
The Division faced a significant challenge in upgrading its wastewater system while maintaining reasonable rates for its limited customer base. At stake was the County’s ability to continue providing safe and reliable wastewater services, meet the wastewater treatment demands from growth, meet regulatory requirements, and protect the environment of the County. FG Solutions staff evaluated the utility’s revenue requirements, performed a cost-of-service analysis, and designed new wastewater rates for customers.
The cost-of-service analysis re-evaluated the Division’s strength-based rates and resulted in a significant change in the rate structure. Rate increases were highest for high-strength wastewater recognizing the defensible allocation of strength-related costs in the Division’s operations and capital programs. Additionally, separate rate schedules for single-family and multi-family dwelling units were established, recognizing on average that multi-family dwelling units discharge less sewer flow than single-family residences. The successful implementation of new rates was phased in over a five-year period to allow for more gradual financial impacts to customers.
2017 Wastewater Rate Study and Impact Fee Update
FG Solutions is currently updating the Rate Study, to reflect changed conditions since the most recent rate increase in 2014. The Division has completed several wastewater treatment plant upgrades and is addressing needed collection system improvements.
This current work includes an update of the Division’s Impact Fees. The Impact Fees are being updated consistently with Hawai`i’s Impact Fee Statutes, which require a more prescriptive calculation than in many other states. Specifically, the calculations must recognize:
- how property owners seeking a connection have contributed to the cost of capacity from other funding sources (this could include through sewer rates and/or property taxes).
- how the utility will pay to resolve existing deficiencies in the system
- contributed off-site facilities funded by developers such as pump stations or oversized collection system lines.
Budget-Based Rate Evaluation and Utility Rate Study
Currently, we are completing a Utility Rate Study, which includes an evaluation of Budget-Based Water Rates. Some of the work is common to other rate studies, including completing a Revenue Requirement Analysis, Cost-of-Service Analysis, and developing Rate Structure alternatives. The Revenue Requirement Analysis
With the evaluation of Budget-Based Rates, FG Solutions is also completing the additional analysis that accompanies Budget-Based Rates: developing indoor and outdoor allocations for Rialto’s water system customers.
Common to all rate studies in California, rate structure tiers must be cost substantiated. FG Solutions has prepared a unit cost analysis for all of the City’s sources: City-owned wells; a surface water treatment plant jointly owned but operated by an adjacent utility; wells owned by others; and State Project Water sold to the City by the local State Water Project contractor.
FG Solutions is also acting as an extension of staff for the City to support the City’s management of the project and allow staff to also manage their other concurrent responsibilities.
Extraterritorial Rate Study
FG Solutions staff completed an Extraterritorial Rate Study in 2013 to equitably charge customers located outside the Rialto City limits for wastewater service. A utility basis methodology was FG Solutions staff completed an Extraterritorial Rate Study in 2013 to equitably charge customers located outside the Rialto City limits for wastewater service. A utility basis methodology was used to recognize that these customers are non-owner customers of the water system. Accordingly, the extraterritorial rates were calculated using a return on rate base methodology and resulted in an approximate 30 percent surcharge over in-city rates. This successful effort was accepted by the adjacent City where the extraterritorial customers lived, avoiding an intergovernmental dispute, and providing revenue certainty for the City.
Procurement Assistance and Rate Study
The City of Rialto was investigating alternatives for procurement of water and wastewater capital delivery and operations services. As part of this investigation, FG Solutions staff supported the development of an RFQ/RFP to select a concessionaire, assisted in the evaluation of responses, and supported Concession Agreement preparation and negotiation. The financial planning work included evaluating the potential financial impacts of Concession Agreement terms. Separate water and wastewater rate studies were prepared. These rate studies incorporated changing capital costs, changing demographics, water consumption patterns including significant price elasticity, the City’s financial performance metrics, and the Concessionaire’s financial performance metrics. The Concession Agreement is currently in its fifth year.
King County Auditor’s Office, Seattle, WAshington
Oversight Consulting, Brightwater Treatment System
FG Solutions provided oversight consulting services for the $1.8 billion Brightwater Treatment System that was in construction between 2007 and 2014. Oversight services included providing input to the King County Council regarding the project’s cost, schedule, and risk on a quarterly basis throughout the construction period. Oversight Consultant recommendations were related to budgeting procedures, adequacy of contingencies, risk management, staffing, and communication of project performance to elected officials. FG Solutions staff were also responsible for the development, on an annual basis, an independent estimate of the project cost, construction progress to date and remaining cost risks.
City of Rialto, CAlifornia
FG Solutions has provided utility rate consulting and management consulting services to the City of Rialto, California since 2010.
Budget-Based Rate Evaluation and Utility Rate Study
This study includes an evaluation of budget-based water rates with revenue requirement and cost-of-service analyses, as well as developing rate structure alternatives. In addition, FG Solutions is completing the accompanying analysis that develops indoor and outdoor allocations for Rialto’s water system customers.
All rate studies in California require that rate structure tiers be cost-substantiated. To that end, FG Solutions has prepared a unit cost analysis for all of the City’s sources: City-owned wells; a surface water treatment plant jointly owned but operated by an adjacent utility; wells owned by others; and State Project Water sold to the City by the local State Water Project contractor.
FG Solutions also acts as an extension of City staff to support its management of the project.
Extraterritorial Rate Study
FG Solutions completed this study in 2013 to equitably charge customers located outside the Rialto City limits for wastewater service. A utility basis methodology was used to recognize that these customers are non-owners of the water system. Accordingly, the extraterritorial rates were calculated using a return on rate base methodology and resulted in an approximate 30 percent surcharge over in-city rates. This successful effort was accepted by the adjacent City where the extraterritorial customers lived, avoiding intergovernmental dispute, and providing revenue certainty for the City.
Procurement Assistance and Rate Study
The City of Rialto was investigating alternatives to the procurement of water and wastewater capital delivery and operations services. As part of this investigation, FG Solutions supported the development of an RFQ/RFP to select a concessionaire, assisted in the evaluation of responses, and supported Concession Agreement preparation and negotiation. The financial planning work included evaluating the potential financial impacts of Concession Agreement terms. Separate water and wastewater rate studies were prepared, incorporating changing capital costs and demographics, water consumption patterns, significant price elasticity, the City’s financial performance metrics, and the Concessionaire’s financial performance metrics. The Concession Agreement is currently in its fifth year.
Utility Acquisition Services, Confidential Client
Acquisitions and mergers are part of the landscape in today’s utility industry. Many circumstances can trigger an effort to change who provides utility service in any given area. Sometimes utilities are consolidated to provide greater economies of scale, or a municipality may want to divest itself from the responsibilities of utility operation and management. There are currently a number of locations where a public entity such as an incorporated city wants to purchase the privately-owned utility that is currently providing service.
FG Solutions have provide a number of services related to an acquisition of a private utility by a municipality. Like many others, this potential acquisition was not cooperative, so work had to be done without the assistance of the private utility and with the anticipation of future litigation.
Financial Feasibility
We prepared a long-term financial model that projects the costs (and projected utility rates) under ongoing private operation and ownership. This analysis requires an understanding of how Public Utility Commission (“PUC”) regulated utilities set rates. Additionally, it requires the ability to extract utility data from public documents without contacting the existing privately-owned utility.
As a comparison, financial projections under municipal ownership were prepared. Municipal utilities typically use a cash basis for projecting revenues, and financial projections are very different from a PUC-regulated utility. These financial projections were done under a range of assumptions regarding purchase price and debt issuance terms. O&M expenses were also adjusted, recognizing that expenses for administration, centralized services, taxes, and profit are different between the two ownership scenarios.
In the short-term, acquisition of the utility was projected to result in higher rates than ongoing private ownership. However, in the long-term municipal ownership was projected to result in lower rates than private ownership. A “payback period” calculation was completed to estimate when rates under municipal ownership would be lower than rates under private ownership.
Operating Agreement Preparation
Working with legal counsel, FG Solutions prepared sections of an operating agreement in the event the municipal owner (after acquisition) contracted operations and maintenance services. The operating agreement:
- defines the roles and responsibilities of each agency,
- identifies retained responsibilities,
- specifies decision-making authority of the owner, and
- defines budget, payment, and rate setting procedures
Litigation Assistance
FG Solutions provided as requested services during litigation including preparing lists of deposition questions, reviewing deposition testimony, responding to questions related to operations, and providing additional benchmarking of operation agreement terms.
