25th Annual Region VI Pretreatment Association Workshop

1

Wastewater Rate Equity Cost of Service,
Customer Classes Surcharges

• 25th Annual Region VI Pretreatment Association
  Workshop
• August 5, 2009

2
Presentation Outline

• Dallas Water Utilities (Morgan)
• Utility Summary
• Rate Charges
• Utility Rate Basics (Jennifer)
• Revenue Requirements
• Wastewater Rate Cost of Service
• Wastewater Rate Structure
• Customer Classes
• Significant Industrial User Surcharges
• Retail Customer Classes
• Customer Class Study (Morgan Set-up, then Randy)
• Benchmarking
• Information Collection
• Sampling Statistics
• Sampling
• Grouping Results

3
Dallas Water Utilities is a large, Municipally
owned regional water/wastewater supplier

• Self-supporting
• Costs are driven by infrastructure requirements
  for both growth and renewal
• Responsibility for planning for water
  requirements for service area

4
City of Dallas Water Utilities Fact Sheet

• The department is funded from water and
  wastewater revenues, and receives no tax dollars
• Approximately 1,500 employees
• Population served (treated water)
• 1.3 million - City of Dallas
• 960,000 wholesale customer cities
• 699 square mile service area
• 306,000 retail customer accounts
• 4,850 miles of water mains
• 4,200 miles of wastewater mains
• 3 water treatment plants
• 2 wastewater treatment plants
• Wholesale customers
• 24 treated water, 3 untreated water, 11 wastewater

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Morgan, Do you have a better map of the Dallas
Wastewater system / service area?
6
Dallas Water Utilities - Wastewater

• 2 Wastewater treatment plants
• Central and Southside
• Wastewater treatment capacity 260 MGD
• Wastewater pump stations 14
• Miles of wastewater main 4,146
• Wastewater treated 72 billion gallons
• Service Area 699 Square Miles
• Customer Accounts 300,000

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City of Dallas FY 2008-09 Budget
FY 2008-09 Annual Budget
2.7 billion
Operating Budget
Capital Budget
(day to day operation and maintenance)
(long-term capital improvements)
2.02 billion
673.0 million
General Fund - 1.09 billion
General Purpose - 347.0 million
Enterprise Fund - 686.2 million
Enterprise Fund - 326.0 million
Debt Service - 246.2 million
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FY 2008-09 Budget Enterprise Fund
FY 2008-09 Annual Budget
2.7 billion
Operating Budget
Capital Budget
(day to day operation and maintenance)
(long-term capital improvements)
2.02 billion
673.0 million
Enterprise Fund - 686.2 million
Enterprise Fund - 326.0 million
Water Utilities - 511.2 million
Water Utilities - 320.0 million
Aviation - 42.5 million
Convention Services - 67.2 million
Convention Services - 6.0 million
Development Service - 26.8 million
Municipal Radio - 3.5 million
Storm Water - 35.1 million
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Index Cities Comparison of Average Monthly Water
Sewer Residential Bills
Note Bill comparison based on rates effective
August 2008 water consumption of 8,300 gallons
and, 6,200 gallon Winter Months Average for sewer
10
Components of Water Utilities Revenues
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Surcharge Program

• A Surcharge program is a procedure for recovering
  costs incurred while treating high strength waste
  discharged by industrial (SIU Surcharge Program)
  and commercial users (Customer Classes) into the
  wastewater system.
• It is an additional charge made to a customer
  that discharges high strength wastewater that is
  amenable to treatment by the wastewater system
  but that exceeds the strength of normal
  wastewater.

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DWU Customer Class Groups

• Non-industrial (SIU) customers that routinely
  discharge Biochemical Oxygen Demand (BOD) and
  Total Suspended Solids (TSS) concentrations
  exceeding 250 mg/L are classified into the four
  class groups established under Dallas City Code
• Eating Places
• Equipment Service Facilities
• Food and Kindred Products Processing
• Drinking Places

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Presentation Outline

• Dallas Water Utilities (Morgan)
• Utility Summary
• Rate Charges
• Utility Rate Basics (Jennifer)
• Revenue Requirements
• Wastewater Rate Cost of Service
• Wastewater Rate Structure
• Customer Classes
• Significant Industrial User Surcharges
• Retail Customer Classes
• Customer Class Study (Morgan Set-up, then Randy)
• Benchmarking
• Information Collection
• Sampling Statistics
• Sampling
• Grouping Results

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Principal Objectives of Rate Design
Cost-of-Service Study

• Develop a comprehensive cost-of-service study
  that properly allocates costs to each customer
  class to ensure a fair and equitable rate
  structure.
• Design Rate Structure that meets community
  values.

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Cornerstones of a Defensible User Charge System
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The Three Forms of Equity
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RATE SETTING PROCESS
REVENUE REQUIREMENTS
COST ALLOCATION
ASSIGN EXPENSES TO FUNCTIONAL CATEGORIES
CLASSIFY FUNCTIONALIZED EXPENSES INTO
COST COMPONENTS
ALLOCATE TO CUSTOMER CLASSES
RATE DESIGN
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Cost-of-Service Goal
Revenue Requirements (OM Debt Service
Capital Reserves)
Non-Residential Cost of Service
Residential Cost of Service
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Steps in a Cost-of-Service Study
21
Wastewater Cost Allocation in the Broader
Perspective
22
Issue 1 Wastewater Cost Allocation Options

• Design Basis
• Functional Basis
• Hybrid Approach

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Design Basis

• Allocates costs based on engineering design
  criteria
• Less administrative burden
• Least implementation risk
• Potential positive impact on conservation due to
  increased unit cost for wastewater treatment and
  disposal

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Functional Basis

• Allocates costs based on operational or
  functional purposes
• Minimal administrative burden

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Hybrid Approach

• Allocates OM costs based on function and capital
  costs based on design
• More acceptable to public and political officials
• Increased administrative burden
• Improved interclass and intraclass equity
• Improved sustainability
• Recommended by consulting team

26
Issue 2 Customer Service Characteristics

• Flow, BOD, and TSS only
• Considerations
• Add Total Kjeldahl Nitrogen (TKN)?
• Add Phosphorus?
• Add OG?

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Flow, BOD, and TSS Only

• DWUs current methodology
• Least administrative burden
• Most common approach

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Add Total Kjeldahl Nitrogen (TKN)

• Difficult to implement without additional data
• Likely to become increasingly important in future
  (policy durability discharge permits)
• Improved interclass and intraclass equity
• Improved sustainability
• Recommended (once sufficient data is available
  from sampling program)

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Add Phosphorus

• Difficult to implement without additional data
• Likely to become increasingly important in future
  (policy durability)
• Improved interclass and intraclass equity
• Improved sustainability
• Recommended (once sufficient data is available
  from sampling program)

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Issue 3 I/I Estimation and Allocation

• Combined connections and volume
• Minimal administrative burden
• Less affordable for residential customers
• Potential increased economic development
• Contributed wastewater volume
• Easy to implement
• Easy to understand
• More affordable for residential customers
• Potential negative impact on economic development
• Number of connections
• Easy to implement
• Easy to understand
• Less affordable for residential customers
• Potential increase in economic development
• Land area
• Greatest administrative burden
• Greatest risk of implementation
• Least common approach

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Presentation Outline

• Dallas Water Utilities (Morgan)
• Utility Summary
• Rate Charges
• Utility Rate Basics (Jennifer)
• Revenue Requirements
• Wastewater Rate Cost of Service
• Wastewater Rate Structure
• Customer Classes
• Significant Industrial User Surcharges
• Retail Customer Classes
• Customer Class Study (Morgan Set-up, then Randy)
• Benchmarking
• Information Collection
• Sampling Statistics
• Sampling
• Grouping Results

32
Dallas Water Utilities Customer Classes

• Currently four major customer classes for
  establishments producing wastewater exceeding 250
  BOD and 250 TSS
• Eating Places
• Equipment Service Facilities
• Food and Kindred Products Processing
• Drinking Places

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Surcharge Class Study Phase I

• Benchmark Other Utilities
• Develop Database Structure Populate with
  Existing Data
• Screen Database to Develop Study Groups
• Develop Statistical Sampling Approach based on
  Study Groups
• Develop Sampling Analysis Plan

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Task 1 - Benchmarking

• Initial benchmark study done on the following
  cities
• City of Amarillo
• City of Austin
• City of Corpus Christi
• El Paso Water Utilities
• City of Fort Worth
• Benchmark Information
• Number and types of customer classes
• Surcharge rates for BOD and TSS
• Average Domestic Wastewater Strengths for BOD
  TSS
• Strength ranges for BOD TSS
• Additional Cities
• City of Bakersfield, CA
• East Bay Municipal Utility District, CA
• City of Fort Collins, CO
• City of Prescott, AZ

• City of Houston
• City of Laredo
• City of Lubbock
• San Antonio Water System

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Benchmark Information

• Number and types of customer classes
• Surcharge rates for BOD and TSS
• Average Domestic Wastewater Strengths for BOD
  TSS
• Strength ranges for BOD TSS

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Benchmark Information

• Number and types of customer classes
• Surcharge rates for BOD and TSS
• Average Domestic Wastewater Strengths for BOD
  TSS
• Strength ranges for BOD TSS

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Benchmark Information

• Number and types of customer classes
• Surcharge rates for BOD and TSS
• Average Domestic Wastewater Strengths for BOD
  TSS
• Strength ranges for BOD TSS

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Domestic Wastewater Strength is Increasing.
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Benchmark Information

• Number and types of customer classes
• Surcharge rates for BOD and TSS
• Average Domestic Wastewater Strengths for BOD
  TSS
• Strength ranges for BOD TSS

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Benchmarked BOD value categories
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Benchmarked BOD value categories (contd.)
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Benchmarked BOD value categories (contd.)
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Benchmarked TSS value categories
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Surcharge Class Study Phase I

• Benchmark Other Utilities
• Develop Database Structure Populate with
  Existing Data
• Screen Database to Develop Study Groups
• Develop Statistical Sampling Approach based on
  Study Groups
• Develop Sampling Analysis Plan

49
City of Dallas Database Info

• Dallas Water Utilities Bill System
• DWU Pretreatment Laboratory Services
• City of Dallas Environmental Health Department
• City of Dallas Development Services Department
  Building Inspection Division

50
Project Database
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Categorization Process

• Used only the Certificate of Occupancy database
  
• Data extract included years from 1979 to 2006
• Inspected all 153,684 records to remove address
  duplicates to 73,965 records
• Removed all Land Use categories that had lt 10
  businesses (8.97 ) as not relevant
• Reclassified resulting Land Use categories in to
  35 Categories
• Of the 35 Categories we are interested in
  sampling 24 categories (27 of businesses in
  Dallas)

52
Surcharge Class Study Phase I

• Benchmark Other Utilities
• Develop Database Structure Populate with
  Existing Data
• Screen Database to Develop Study Groups
• Develop Statistical Sampling Approach based on
  Study Groups
• Develop Sampling Analysis Plan

53
Land Use categories identified
54
Surcharge Class Study Phase I

• Benchmark Other Utilities
• Develop Database Structure Populate with
  Existing Data
• Screen Database to Develop Study Groups
• Develop Statistical Sampling Approach based on
  Study Groups
• Develop Sampling Analysis Plan

55
Sampling Methodology

• Initial accuracy requirements
• Confidence 90, 5 accuracy for the mean
• 24 hour composite for each sample site (15 minute
  intervals)
• Implies
• Categories 24
• Each category mean to be 90 confident, 5
  accurate 2961 total samples
• So Very Expensive

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Reducing Cost Considerations

• Number of samples
• Sampling methodology
• Number of categories
• Supporting software
• Accuracy desired/required
• Number of iterations

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Options

• Cost is a function of accuracy
• Maximum Accuracy is 10
• 90 Confidence that a sample is within 35

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Surcharge Class Study Phase I

• Benchmark Other Utilities
• Develop Database Structure Populate with
  Existing Data
• Screen Database to Develop Study Groups
• Develop Statistical Sampling Approach based on
  Study Groups
• Develop Sampling Analysis Plan

59
Sampling Plan

• Plan to do field work Iteratively (minimizes
  cost)
• Field Investigations
• Conduct Sample study
• Analyze and create categories
• Determine need to refine number and quality of
  categories
• Determine additional accuracy of data required
• Field Sampling
• Conduct Sample Study
• Analyze and create categories

60
Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

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Cover Letter Drivers

• Do not cause alarm in the public about waste
  water rates increasing
• Attempt not to bias the survey results
• Survey and the sampling should not end up on the
  council agenda or evening news
• Survey methodology should be mathematically sound
  
• Survey responses should enable physical sampling
  activities
• Survey response rate target of 10

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Survey Design Structure / Principles

• One questionnaire for all participants
• Keeping the questionnaire short
• Logical grouping of questions
• Multiple choice questions
• No questions related to water rates
• Privacy will be maintained of the data

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Survey Sections

• Business information Validation
• Validate the physical business address
• Validate business category type
• Hours/season of operation
• Sampling can be done when the business is
  generating waste
• Water Equipment
• Rate Class Related
• Physical sampling
• Restrictions that would hinder setting up a
  sampler

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Survey Sections - Business information

• Name of the respondent ?
• Text field
• Job Title of respondent ?
• Text field
• Type of business ?
• The 25 Categories
• Other Text field
• Do you rent the facility ?
• Yes/No
• Do you operate your own laundry ?
• Yes/No
• Do you operate dishwashers ?
• Yes/No
• If you serve food at your establishment ?
• Yes/No
• Do you serve food primarily in disposable
  containers ?
• Yes/No
• Does your business have a drive through ?
• Yes/No

65
Survey Sections - Hours of Operation

• Hours of Operation
• Is your Business Seasonal
• Yes/No
• If seasonal what season is your business open
• School holidays
• Summer
• Winter
• Is your business open 24 hrs
• Yes/No
• Normal Business Hours ( except weekends)
• Operating Hours S_M_T_W_T_F_S
• Number of Shifts __
• 5am to 9am
• 8am to 5pm
• 9am to 9pm
• 10am to 9pm
• 10am to 8pm
• 10am to 6pm
• 11am to 2pm

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Survey Sections Water Equipment

• Water Equipment
• Do you have a split water meter ? i.e. D you
  share the meter with another business
  establishment/renter ?
• Yes/No
• Is there more than one water meter at your
  facility related to your business ?
• Yes/No
• Do you operate a grease trap ?
• Yes/No
• What is the size of the meter ?
• ½ inch
• ¾ inch
• 1 inch

67
Survey Sections Rate Class

• Rate Class
• Do you get a water bill by the city ?
• Yes/No
• Do you share a meter with another entity?
• Yes/No
• Is your water cost included in your rent ?
• Yes/No

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Survey Sections Physical Sampling

• Physical Sampling
• Do you know the location of the cleanouts ?
• Yes/No
• Is the cleanout located in a drive way or parking
  area ?
• Yes/No
• Is the drain line form you business also used by
  another business ?
• Yes/No
• Would you volunteer for the Dallas water
  utilities to sample your waster water for 24 hrs,
  at no cost to you ?
• Yes/ No

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Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

70
Mailing List Process

• Number of mailings computed based on 5 return
  rate and number of sites to sample
• Additional Mailings based on weighted
  distribution
• Target 4000 mailings

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Mailing List Target
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Restaurant with Drinks Sites Map

• In Progress

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Fast Food Sites Map

• In Progress

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Survey Results We Succeeded !!!

• Expecting lt 400 responses or 10 of mail outs
• Issues,
• Duplicate, Blanks, No Longer There, Returns
• Only 691 viable to be entered in the database

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Number of surveys received
76
Understanding Survey data

• The Dallas Certificate of Occupancy database was
  incorrect

77
Distribution of Responses by CO Category
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Survey Results Data Entry Validation

• Enter data in excel then transfer to Access
  Database
• Scan paper copy into the file server
• Data Entry Effort - 10 surveys per hour
• Some people also sent back the cover page
  increasing weight and postage
• Originally we had 224 in the budget for postage
  actual cost 700
• Increase in Data entry time from 40hrs estimate
  to 100 hrs

79
Survey Results Data Entry
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Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

81
Effects on Field Sampling Plan

• Do we have enough business to warrant sampling
• All except Coffee shops that only have 2 in the
  survey response
• Are the business close enough in expected results
  that extra sampling is not needed
• Retail
• Schools w/o kitchen
• Churches
• Offices
• All have BOD between 130 - 150, TSS 80 - 150

82
Survey Analysis Procedure

• Identify responses with the following
• Deli
• Vet/Hospital
• Boarding
• Auto Washing
• Bar
• Barber Shop
• Catering
• Coffee shop
• Mark facilities that are multi use low priority
• Remove facilities that are seasonal
• Remove facilities that have water bill included
  in rent
• Prioritize based on knowledge of sewer cleanouts
• Prioritize based on water treatment devices
• Generate map in Google

• Churches with kitchen
• Restaurants
• Laundry/Dry Cleaners
• Hotel with restaurant
• Retail food related
• School with kitchen
• Funeral home

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Identifying the Sample Sites

• For each category
• Remove multi use sites
• Remove seasonal facilities
• randomly pick twice the number of sites required
• Remove facilities that have water bill included
  in rent
• Prioritize based on the knowledge of sewer
  cleanouts
• Prioritize based on water treatment devices
• If we are short of sites pull from the CO
  database
• Generate map in Google
• Schedule site visit for sampling for each site

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Potential Survey Sites
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Survey sites Fast Food
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Survey sites Restaurant with drinks
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Field Survey - Overview

• Develop the forms for site inspection
• Pictures of the site
• Pictures of the water meter showing the reading
• Pictures of the sampler installed
• GPS coordinates of the sampler on site
• Facility code
• Weather conditions
• Time reached facility
• Time Sampler turned on
• Time Sampler picked up
• Sampler condition

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Field Survey - Overview

• Site Recon (280 Recons for 139 Samples)
• Is the site suitable for sampler install
• Criteria ?
• Saves cost by not having a sampling crew out
  there
• Field Crew route planning
• Save cost on drive time
• Sampler pre programming
• Battery charge
• Sampler - two crews
• Three sites per day, per crew, 6 days a week
• Data analysis
• Report generation, review finalization

89
Field Issues

• Site contact is unaware or unwilling to direct us
  to grease trap and/or cleanout locations
• Cleanouts are covered with asphalt/concrete or
  are highly corroded and can not be removed
• Grease traps and cleanouts are located within
  drive-thru or parking lot areas
• Property is located within mall or office
  building
• Field teams can not locate cleanouts
• High probability of sampler theft
• Funeral Homes unwilling to let us in
• Very few Donut shops not in strip malls

90
Suggestions for Effective Field Sampling

• Assistance from City if site contact is unwilling
  to allow site access
• Funeral Homes
• Sampling executed in sanitary sewer side of
  grease trap if cleanouts can not be accessed?
• Strip Mall businesses
• Donut shops
• Dry cleaners
• Coffee shops
• To deter sampler theft, samplers will be chained
  and locked to a secure object if possible
• Grab Samples?

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Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

92
Sampling Data Statistical Analysis
93
Additional Sampling Evaluation

• Hotel / Motel had significant variation - onsite
  restaurants vs. continental breakfast
• Some sampling and testing determined
  non-representative
• Additional samples needed to provide statistical
  numbers
• Some classes had large variations

94
Additional Sampling Recommendations

• Hotel/Motel with Restaurant 2
• Hotel/Motels without Restaurant 3
• Bakery 2
• Funeral Home 3
• Auto 2
• Bar 1
• Hospital 2

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Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

96
Customer Class Sampling Results
97
Surcharge Class Study Phase II

• Customer Survey Design
• Survey Distribution
• Field Sampling Data Validation
• Statistical Analysis
• Reporting
• Final Recommendations

98
Customer ClassGroup 1 Domestic Strength

• Group 1 (Domestic Strength)
• Residential
• Hotel/Motel without Restaurant
• Funeral Home
• Auto
• Amusement
• Animal
• Barbershop
• Car Wash
• Dry Cleaner
• Schools

99
Customer Class Groups 2-4

• Group 2 (BOD 450 mg/L, TSS 200 mg/L)
• Bar
• Group 3 (BOD 700 mg/L, TSS 250 mg/L)
• Deli
• Grocery
• Group 4 (BOD 1,000 mg/L, TSS 450 mg/L)
• Fast Food
• Restaurant
• Hospital

100
Customer Class Groups 5-7

• Group 5 (BOD 1,400 mg/L, TSS 200 mg/L)
• Bakery
• Group 6 (BOD 1,950 mg/L, TSS 800 mg/L)
• Catering
• Coffee Shop
• Group 7 (BOD 2,150 mg/L, TSS 450 mg/L)
• Convenience
• Hotel/Motel with Restaurant

101
Significant Industrial Users Surcharge Group X

• SIUs are sampled and managed through DWU
  Pretreatment Laboratory Services
• SIUs are not a customer class as currently
  defined in the City Ordinance

102
Future Steps

• Dallas Water Utilities calculates new wastewater
  billing rates for Customer Classes
• City of Dallas Ordinance is updated with new
  Customer Classes
• Billing systems are updated
• Certificate of Occupancy forms are updated to
  identify Customer Class as new business are added

103

• Morgan Dadgostar, Dallas Water Utilities,
  morgan.dadgostar_at_dallascityhall.com
• Jennifer Ivey, Malcolm Pirnie Inc.,
  jivey_at_pirnie.com
• Randy McIntyre, Malcolm Pirnie Inc.,
  rmcintyre_at_pirnie.com