The City of Portland Water Bureau (Bureau) provides retail water service to customers within the City and wholesale water service to 19 agencies under agreements that were expiring within the next couple of years. Raftelis had three engagements with the Bureau.
The first engagement involved reviewing a preliminary wholesale contract that established the cost of service structure for the Bureau’s wholesale customers. The contract was the product of negotiations between the City and its wholesale clients. In particular, Raftelis performed a brief review and evaluation of the major contract provisions, including: the terms of the agreement, quantity of water purchases, pricing for firm and interruptible water supplies, conservation initiatives, curtailment, and related sales provisions. Following the review of the contract, Raftelis documented the findings and conclusions of the contract evaluation.
The second engagement included assisting in developing wholesale and retail water rates and developing of a robust modeling tool for ongoing rate calculation and financial planning use by the Bureau. Wholesale customers use 40 percent of the total water produced by the Bureau and generate about 20 percent of the total revenue under the current agreement. The new agreements took into account peaking factors and included take or pay basis arrangements, provided for interruptible water sales, and excess use. Other factors that entered into wholesale rates were differential losses in the transmission and distribution systems and flexibility to include different asset rate bases for different customers for calculating rates under the utility basis. As part of this project, Raftelis developed rates consistent with the new agreement for the wholesale agencies, reviewed rate structure alternatives for its retail customers, and reviewed impacts. On the retail side, Raftelis provided a financial planning model with dashboard capability to review the impacts of changes in various parameters and provided several alternative rates structures including uniform, inclining, seasonal, and “V” or “U” shaped rate structures. The models were designed to download information directly from the City’s systems to simplify updates.
Raftelis also developed a comprehensive computer model to support the cost allocation and rate design set forth in the new wholesale water service agreements. The model incorporated the specific cost allocation methodology and structure set forth in the wholesale agreements. Raftelis worked closely with Bureau staff in the development of the model specifications and the design of the model. Multiple versions were tested in collaboration with the Bureau to ensure that it would meet or exceed their expectations.
The third project was an “audit” of the wholesale contract between the Bureau and its wholesale agencies.
Raftelis also assisted the City with a wastewater bond feasibility study. The City issued more than $500 million in bonds to fund regulatory requirements to meet its sewer and storm discharge requirements. Raftelis reviewed the capital program and evaluated the operational and financial elements of the City’s Bureau of Environmental Services.