City of Austin

Austin, Texas, United States

Continuous Improvement Initiative Studies

The City of Austin (City) engaged Raftelis to conduct a series of continuous improvement initiative studies in consultation with the City’s Office of Performance Management (OPM). The purpose of these studies was to identify specific strategies to improve the efficiency of municipal government operations and the value of government services delivered to the community. The project team and OPM developed a formal project work plan that identified the scope and key objectives for a review of six of the City’s departments – Fleet Mobility Services, Communications & Technology Management, Building Services, Human Resources, Financial Services, and Communications & Public Information. For each of these departments, our project team was tasked with reviewing the value streams within the department, including service to customer departments, and recommending enhancements to improve operations and cost-effectiveness. We have now begun working with each department to implement the recommendations included in the initial assessments.

Water and Wastewater Financial and Rate Consulting

Raftelis conducted a water and wastewater cost-of-service rate study for the City of Austin Water Utility (AW). The project included cost-of-service and rate studies for the water and wastewater utilities and development of cost-of-service and rate models. Raftelis led/facilitated 10 public meetings each to educate the Public Involvement Committee (PIC) and the Wholesale Involvement Committee (WIC) about issues relating to cost-of-service methodologies and rate design. Raftelis prepared and presented information on select topics to PIC, WIC, and the AWU Executive Committee. These topics included: utility versus cash basis revenue requirements, fire protection costs and allocation, water use costing, test year selection, wholesale versus retail cost assignments, etc. The final product included a cost-of-service rate model for future use by AW.

AW’s wholesale water and wastewater rates are regulated by the Public Utilities Commission of Texas (PUCT) and have been the subject of litigation centered on what costs are appropriately included in the revenue requirements of wholesale customers. Raftelis provided expert witness and technical support that included a detailed assessment of the revenue requirement determination and cost-of-service processes. We also developed entirely new water and wastewater cost-of-service models that were specifically designed to show the PUCT and other interested stakeholders, in a fully transparent and easily understandable manner, how AW’s cost-of-service rates are calculated. For example, the new models show how wholesale customer revenue requirement disallowances ordered by the PUCT are allocated from wholesale customers to each individual retail customer class through each step of the cost allocation process. They also allow AW to transparently illustrate how each retail customer class will be impacted by wholesale revenue requirement reductions determined as part of a negotiated settlement process.

AW maintains a comprehensive Customer Assistance Program (CAP) that provides direct volumetric rate discounts to qualifying economically disadvantaged customers. Approximately 18,000 residential water customers and 16,000 residential wastewater customers currently participate in the CAP which provides volumetric rate discounts of approximately 8% to 20% depending on the consumption TIER in question. The CAP is funded by a surcharge (known as the Community Benefit Charge) of $0.15 per thousand gallons added to the volumetric rates of other retail customers. In fiscal year 2017, retail customers provided approximately $5.4 million in funding to reduce the volumetric rates for water customers participating in the CAP and approximately $3.9 million for participating wastewater customers. The new water and wastewater models developed by Raftelis were also specifically designed to provide full transparency regarding the exact amount of funding each retail customer class provides to customers participating in the CAP. This is accomplished by showing the reallocation of the cost-of-service revenue requirement from CAP customers to other retail customer classes based on their projected billed water consumption/billed wastewater discharges.

AW has long been an industry leader in customer outreach and education. As part our work, Raftelis led/facilitated 10 public meetings each to educate AW’s Public Involvement Committee (PIC) and the Wholesale Involvement Committee (WIC) about a variety of financial planning, cost-of-service, and rate design issues including: the criteria used by credit ratings agencies to determine municipal utility bond ratings; the balancing of revenue requirements and debt service coverage ratios and cash reserve levels; the use of utility versus cash basis revenue requirement methodologies; and the appropriateness of allocating reclaimed water costs to wholesale customers who do not directly receive reclaimed water service.

Raftelis has also assisted the City and AW in litigation brought by four of its wholesale water and wastewater customers before the Texas Public Utilities Commission. The litigation centered on the types of costs included in the revenue requirements that are allocated to both retail and wholesale customers. Raftelis provided expert witness testimony and support that included a detailed assessment of the revenue requirement determination and costs of service processes.

Raftelis participated as the City’s rate expert on Docket No. 49189. Raftelis submitted testimony for the case. Subsequently the application was withdrawn.