7105 RFQ Water-Wastewater Utilities Cost of Service and Rate Design Study Scope of Work7105 RFQ WATER/WASTEWATER UTILITIES COST OF SERVICE
AND RATE DESIGN STUDY Page 1 of 14
REQUEST FOR QUALIFICATIONS
7105 WATER/WASTEWATER UTILITIES COST OF SERVICE AND
RATE DESIGN STUDY
TABLE OF CONTENTS
General – Community Profile – includes water/wastewater specifics
Project Description
Scope of Services
Statement of Qualifications Format and Requirements For Technical Proposal Submission
Evaluation and Award – includes request for terms and cost for 5-year maintenance contract
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General
1. COMMUNITY PROFILE - DENTON UTILITIES GENERAL INFORMATION
A. Brief Description of Denton’s Regional Environment
The City of Denton owns and operates its water and wastewater plants, and
transmission/interceptor and distribution/collection systems, which primarily serve the
population of approximately 130,990 within the city limits of Denton. Denton’s water rights
(reservoir assets) are from Lake Lewisville and Lake Ray Roberts. Denton is located twenty
miles north of the Dallas/Fort Worth International Airport, and thirty-five miles north of both
Dallas and Fort Worth, at the “Top of the Golden Triangle”. Due to the close proximity of
Denton to two dynamic metropolitan areas and an international transportation center, Denton
has experienced increased residential and commercial growth in recent years. An average
population growth of 2.0 percent annually is expected over the next 5-10 years. This growth
will place increased demands upon Denton’s water and wastewater utility systems and
Denton’s ability to continue to provide quality service at competitive costs.
B. Water & Wastewater Customer and Revenue Mix
Denton has approximately 30,830 residential water meters and 5,112 commercial water
meters. Denton’s wholesale raw water and treated water customer is the Upper Trinity
Regional Water District (UTRWD). Currently Denton provides treated water to two UTRWD
customers, Sanger and Krum. Denton’s wholesale wastewater customers include the City of
Krum, the City of Argyle, the City of Corinth and Lake Cities Municipal Utilities Authority.
C. The Utilities Organization
The Utilities Department, including Water, Wastewater and Drainage is under the direction of
the General Manager of Utilities. The Utilities Directors are responsible for the day-to-day
operation, maintenance, and capital construction requirements of all Water and Wastewater
departments.
The Water Department is comprised of 105.50 full time equivalent (FTE’s) personnel, with 87.50
fully dedicated to water operations. The additional 18 FTE’s funded in the Water Department are
part of the Adminitrative Department. The Wastewater Department operates with 89.50 FTE’s,
plus drainage and stormwater /watershed protection operations of 24 FTE’s, totaling 113.50
FTE’s in Wastewater.
D. The City of Denton Organization
The General Manager of Utilities reports to an Assistant City Manager, who in turn reports to
the City Manager. The Utilities departments purchase the services of several general government
support groups. The Finance department, under the direction of an Assistant City Manager,
provides services through their Finance and Accounting divisions.
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E. City Council
The Denton City Council, composed of a mayor and six council members, is charged with the
final authority to set all rates and charges for all utilities.
F. Public Utilities Board
The Public Utilities Board (PUB) is a seven-member board appointed by the City Council with
the City Manager and Director of Utilities (now General Manager) serving as ex officio
members. This board serves as a consulting, advisory, and approval bodyThe board is charged
by the city charter to act in a consulting and advisory capacity to the City Council, with authority
to hold public hearings and to study and recommend policies relating to the operation, promotion,
enlargement, future planning and such other Utility matters as may be referred to it by the City
Council. All rates and charges for utility services must be reviewed by the board on a periodic
basis and recommended to the City Council for final approval of utility rates.
2. CONTRACT TERM
It is the intention of the City of Denton to negotiate a final contract term with the selected
respondent, based on both City and respondent experience with the requirements and anticipated
timeline for completing the cost of service and rate design . It is expected that the timeline will be
approximately 6-9 months. The Contract shall commence upon the issuance of a Notice of Award
by the City of Denton, and services undertaken pursuant to this RFQ will be required to commence
within fourteen (14) days of delivery of a Notice to Proceed. The services shall be accomplished per
the Scope of Work and Services as identified in Section IV and the Schedule of Events as outlined
in Section VI. A maintenance contract will also be negotiated for a term of 5 years which will
commence on completion of the required rate model.
3. ADDING NEW SERVICES TO THE CONTRACT AFTER AWARD
Following the Contract award, ADDITIONAL services of the same general category that could
have been encompassed in the award of this contract, and that are not already on the contract,
may be added. A formal written request may be sent to successful Contractor to provide a
proposal on the additional services and shall submit proposals to the City of Denton as
instructed. The City of Denton may accept or reject any or all pricing proposals, and may issue
a separate RFQ for the products after rejecting some or all of the proposals. The services
covered under this provision shall conform to the statement of work, specifications, and
requirements as outlined in the request.
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Project Description
Denton’s Utilities desire is to accurately match costs with rate classes while maintaining
competitiveness with other regional water and wastewater utilities to the extent possible. The project
proposed has two sections: (1) Cost of Service (wholesale & retail), and (2) Rate Design (wholesale
& retail).
The purpose of this study is to estimate the cost of servicing all Utilities customer classes as well as
wholesale customers. In addition to estimating cost of service, the project should include
recommendations for rate design in order to enhance rate competitiveness and meet revenue
requirements for the next five years.
Scope of Services
1. PURPOSE
The purpose of the Utilities cost of service and rate study is to:
1) Determine the costs of service associated with Denton’s wholesale water customer, Upper
Trinity Regional Water District, using the utility basis methodology,
2) Determine the costs of service associated with Denton’s wholesale wastewater customers,
City of Krum, City of Argyle, City of Corinth, and Lake Cities Municipal Utility Authority
(LCMUA), using the utility basis methodology, and
3) Determine the costs allocated to each retail rate class based upon a cash basis cost allocation
methodology. Retail rate competitiveness in Denton’s regional water and wastewater market
may be considered in the cost allocation process. Existing rate classes may be eliminated
and/or additional rate classes may be created.
4) Provide all documentation and descriptions needed for continued use of working rate model
Alternative cost allocation or rate design methodologies may be used to enhance rate competitiveness
for individual rate classes. This permits existing competitive rate classes to continue to provide
competitive rates, while enhancing the ability of any potentially non-competitive rate classes to
provide more competitive rates. Water is projecting that rate increases will be necessary to meet
revenue requirements over the next ten years. Water also desires to continue to use water pricing and
rate design to further its water conservation program, accomplish its financial strategies, and to
establish equity and fairness within each rate class. The respondent should consider five and ten year
rate design goals and an incremental plan to phase in the rates to promote water conservation, maintain
revenue stability and to more accurately reflect actual cost of service.
2. SCOPE OF SERVICES –UTILITIES COST OF SERVICE
A. WHOLESALE WATER & WASTEWATER COSTS OF SERVICE
(UPPER TRINITY REGIONAL WATER DISTRICT, CITY OF KRUM, CITY OF
ARGYLE, CITY OF CORINTH, & LAKE CITIES MUNICIPAL UTILITIES
AUTHORITY)
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The respondent shall begin the project by assimilating the required information in preparation
for completing wholesale water and wastewater costs of service using the utility basis
methodology, followed by their respective rate designs. Questions of significance which will
impact the results of the wholesale costs of service shall be directed to the Utilities
administrative and business management staff. The test year for projecting the rates for
wholesale service shall be the projected FY 2020-2021 Test year data shall be obtained from
FY 2019-2020 actual data with adjustments made for known or verifiable changes.
B. RETAIL WATER AND WASTEWATER COSTS OF SERVICE
The retail water and wastewater costs of service shall be completed concurrent to the
wholesale rate study. Again, questions of significance, which would ultimately impact the
results of the study, should be directed to the appropriate administrative and business
management staff. The test years for establishing retail water and wastewater rates for service
shall be projected costs over the period 2019 – 2025.
Currently, water department rate revenues are recovered through residential, commercial, and
wholesale rates. All retail water rates consist of a facility and a volume charge. No minimum
water volumes are currently provided through the facility charge. It should be noted that
Denton has experienced a large increase in the number of multi-family units, and this
particular use should be evaluated by the respondent as a potential separate rate class.
Respondent should review the need for minimum volumes included in the facility charge for
retail customers as well as review the cost of service components that should be included in
the facility charge. Generally, per capita water uses have been declining in recent years, and
respondent should evaluate the impacts of declining use on the appropriate balance between
facility and volume charges for both water and wastewater.
Residential water rates are subdivided between those inside the city limits and those outside
the city limits. Both inside the city and outside the city residential rates utilize inverted block
rates in the summer billing months (May – October), and without blocking (flat rates) during
the winter billing months (November – April). Outside the city rates are set approximately
15% higher than inside the city rates. Commercial water rates are also subdivided for
customers inside and outside the city. As in residential water, outside the city rates are
approximately 15% higher. The commercial rates have no blocking (i.e. flat rates), however,
the commercial irrigation rate has a higher summer volume charge. The wholesale rate is a
three-part rate, consisting of a facility charge, volume charge, and demand charge.
Wastewater rates are subdivided into residential, commercial, food & equipment services,
pretreatment, metered volumes, treated effluent, septage, permits and fees and government
wholesale classes. All wastewater rates consist of a facility and a volume charge. Wastewater
residential has a cap on the winter average of 18,000 gallons. No minimum wastewater volume
is provided through the facility charge.
Residential wastewater rates are based on a three-month winter average (billing months of
December through February). All other rates are based on a percentage of water volume,
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except the metered volume rates (SCD, SM) and the wholesale rate (SSC), which are based
on actual metered volumes.
Both water and wastewater are expected to continue to operate as fully self-supporting
departments. All utilities rates are to be designed to provide revenue that meets bond
covenants. Bond covenants require that pledged revenues be a minimum of 1.25 times average
debt service requirements.
Water and Wastewater utilities have adopted specific financial goals and strategies. The
Water utility has also established water conservation goals. This information is contained in
the Utilities Financial Strategies and Water Conservation and Drought Contingency Plan. The
respondent shall review this information to ensure that the proposed rate design is supportive
of these goals.
3. SCOPE OF SERVICES –UTILITIES RATE DESIGN
The scope of work outlined in this RFQ is preliminary, and a final scope will be negotiated with the
selected firm and modified as needed. The scope of work for this project should include, but not be
limited to the following:
A. Wholesale Rate Design (Upper Trinity Regional Water District, City of Krum, City
of Argyle, City of Corinth, & Lake Cities Municipal Utilities Authority)
Wholesale water rate design should be expressed as a facility charge, a volume charge, and
an annual demand charge per unit of peak day usage. The wholesale wastewater rate design
shall consist of a facility charge and a volume charge. Discussion with the respondent will
determine how cost recovery of wastewater pretreatment program charges and sampling and
analysis charges are recovered. Governmental (City of Krum, Town of Argyle, City of
Corinth, and Lake Cities Municipal Authority) wholesale wastewater rate design should be
expressed as one rate for governmental and not a separate rate for each municipality.
B. Existing and Proposed Retail Rate Design
The respondent shall evaluate the existing retail rate design for each customer class. Rates
shall be designed to recover the costs associated with each customer class to the greatest extent
possible, but competition is to be a consideration in the design of the rates for each rate class.
Moderation with regard to significant changes in existing rates will need to be considered.
Proposed rate changes of significance should consider the magnitude of the change, and may
require a multi-year phase in approach.
Customer classes are to be of similar description to the current ratemaking practices of
regional water and wastewater departments to the extent that they are applicable to the City
of Denton water and wastewater departments. The respondent should make recommendations
for fewer or additional rate classes that may be appropriate. Consolidation of rate classes may
or may not ultimately benefit more customers. It should be noted that Denton has experienced
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a large increase in the number of multi-family units, and this particular use should be evaluated
by the respondent as a potential separate rate class.
The costs for each current and proposed rate class should be initially determined utilizing a
full cost methodology for all costs, direct and indirect. The respondent shall consider other
cost allocations utilizing indirect costs, and rate structures for the purpose of designing City
of Denton water and wastewater rates that are competitive. Adjustments to any rate classes,
from a full cost basis, should be clearly identified.
The respondent shall provide recommendations on how Denton may increase rate
competitiveness within the water and wastewater departments prior to beginning the rate
design process.
C. Water & Wastewater Customer Class Subsidization
The respondent shall identify any potential customer class rate subsidization which may be
occurring. The intent is that if rate subsidies exist, they will be identified for potential
elimination. Intra customer rate class subsidization should also be evaluated and
recommendations made to separate customers into separate rate classes if intra rate class
subsidizations exists.
D. Water & Wastewater Outside The City Limit Rates
The respondent shall provide a recommendation concerning the level at which Denton should
maintain “outside the city limit” rates, or whether this rate should be maintained at all.
E. Wastewater Mobile Home Park Rate
The respondent shall review the mobile home park wastewater rate. Currently, we have
mobile home park customers inside and outside the city limits. Some are both water and
wastewater customers and some are wastewater customers with a private well for water. The
respondent shall provide written recommendations for retention or revision or elimination of
this rate.
F. Water & Wastewater Customer Class Characteristics
The respondent shall review the customer class characteristics and load patterns of all water
and wastewater rate classes. The respondent shall determine if sufficient class characteristics
and/or usage differentiation continues to justify separate and distinct rate classes for Denton’s
existing rate classes. This review may result in the recommendation of fewer or potentially
additional rate classes.
G. Wastewater Commercial Class Comparison
After reviewing the wastewater commercial cost of service and the existing commercial rates,
the respondent shall compare Denton’s commercial rates with other municipalities. The
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respondent shall evaluate whether Denton’s commercial rate appears to be high in comparison
with commercial rates in other neighboring municipalities and provide written explanations
and recommendations.
H. Water & Wastewater Facility Charges
Existing water and wastewater facility charges differ by rate class for the same meter size.
Water and wastewater facility charges may more appropriately be set at specific cost recovery
levels independent of their rate class. The respondent shall address this issue during the rate
design. The respondent shall also address the issue of including minimum volumes in the
facility charge for retail water customers.
I. Water Irrigation Rates
In irrigation rate design, consideration should be given to the future availability of Denton’s
water supply and the existing revenues generated utilizing current rates. Irrigation rates should
further consider Denton’s available irrigation demand relative to the system demand, and the
irrigation impact on the current water supply. A demand component may become an integral
part of an irrigation rate.
J. Residential Water Rate Structure
The respondent shall analyze the residential water rate (WR) block structure. The structure of
the existing rate; four blocks, with the first block consisting of 15,000 gallons, should be
analyzed to determine if this is the most beneficial structure for the rate class based upon
specific management objectives. A review of alternate block structures, block sizes, number
of blocks, and the price differentials between the blocks should be conducted and
recommendations for changes should be made if appropriate.
K. Commercial Water Rate Block Methodology
The respondent shall analyze and provide written recommendations concerning the use of an
inverted rate block structure or other rate design for the commercial class. This analysis shall
identify any specific customer groups where such an inverted rate block structure may be
appropriate.
L. Commercial Wastewater Billed Volume
The respondent shall analyze the methodology used to determine commercial wastewater
volume based on water volume. Currently non-metered wastewater volume is billed at 90
percent of monthly water consumption. Some commercial customers also have water meters
dedicated solely to irrigation. The respondent shall provide written recommendations for
retention or revision of this methodology.
M. Wastewater Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS)
Surcharges
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The respondent shall review the existing BOD/TSS cost methodologies, determine if the
surcharge rates are appropriate, and provide written recommendations for their revision if
necessary.
N. Wastewater Categorical & Non-categorical Monitoring Costs
The existing wastewater rates contain fixed monthly charges for categorical and non-
categorical monitoring costs. The respondent shall determine if these fixed charges are
recovering costs, and make a recommendation regarding the best method for cost recovery in
these areas.
O. Water & Wastewater Rate Schedules
After completion of the rate design, and prior to approval of rates by the city council, the
respondent may be asked to provide assistance in wording specific water and wastewater rate
schedules. Clarity and simplification of rate schedules is important in order to obtain full
customer understanding of all rates.
P. Rate Review
All water and wastewater rate schedules, including wholesale and retail, shall be reviewed for
appropriateness and cost recovery.
Q. Cost of Service and Rate Design Model
The respondent will provide the completed cost of service and rate design model, and will
provide training on model use to City of Denton personnel. In addition, the respondent will
submit proposed maintenance terms and annual cost for a 5-year maintenance contract.
CITY OF DENTON DUTIES AND RESPONSIBLITIES:
The City will be responsible to the awarded contractor for the following tasks:
(1) Providing utility budget, rate, use, and similar information as needed to complete the proposed
project;
(2) Assist in the coordination of project activites ;
(3) Providing review comments
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Statement of Qualifications Format and Requirements
For Technical Proposal Submission
1. TECHNICAL PROPOSAL REQUIREMENTS
The Technical Proposal submission must be submitted in the following format, which complies
with Texas Government Codes. The technical proposal shall be in a sealed submission and
opened by the City of Denton.
A. Project Approach and Proposed Methodology
Describe firm’s understanding of the objectives and scope of the requested services.
Provide an outline of your firm’s process to implement the requirements of the RFQ Scope
of Work into a finished project.
B. Proposed Project Staff
Identify the key personnel who will be directly assigned to primary areas. State the
qualifications and related experience of each member of the proposed project team and
designate the employ of each team member e.g. company employee, contract employee, etc.
Demonstrate Company’s or Individual’s relevant experience to the type of work solicited
in the RFQ. Provide an Organizational Chart with roles and responsibilities of key
individuals assigned to support the project. Include State of Texas Professional
certification numbers for individuals that will have design, inspection, testing, and
certification responsibility for the specific requirements.
Respondent must be registered, or have personnel on their direct staffs that are registered
in the professional services discipline required to perform the services requested in this
RFQ. Professional Services are defined in Texas Government Code (TGC) 2254.002(A)
(2). Respondent shall certify that all professionals selected for this project shall be based
on demonstrated competence and qualifications, in the matter provided by Section
2254.004 of TGC.
C. Change Management
The Proposer agrees that the key personnel assigned to the Contract shall remain available
for the entirety of the project throughout the term of the Contract as long as that individual
is employed by the Respondent or unless the City of Denton agrees to a change in the key
personnel.
D. Anticipated Problems and Proposed Solutions
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Respondent shall offer written observations, based upon previous experiences in public
projects of this magnitude, addressing any anticipated problems and offer proposed solutions
to those problems.
E. Minimum Experience and Qualifications
The responding firm shall provide pertinent information about the firm and related experience
with primary areas. In addition, the firm should identify its total number of technical and
professional personnel by discipline and training and further describe the workload during the
period. Indicate what resources (including professional and technical time) the firm will have
available to allocate to the project within the primary areas.
The respondent must currently be licensed to perform work in the State of Texas. A copy
of current licensing must be included in your proposal.
The Respondent shall have the following minimum experience:
A defined level of industry knowledge and understanding related to the American Water
Works Association (AWWA) “M1” Rates and Charge Manual.
Sucessful completion of at least five Water/Wastewater Rate Studies.
Completed (or currently working on) at least five Municipal Cost of Service studies.
Providing consulting services for two or more projects involving Water/Wastewater
Impact Fee studies.
Completion of at least two Wholesale Cost of Service Water Rate studies.
The Respondent shall demonstrate, through previous minimum experiences, the ability to
maintain Budget and Schedule compliance for large scale public projects. Respondent shall
complete Attachment C – Budget and Compliance Questionnaire Form.
The Respondent shall demonstrate exceptional Quality Assurance, through previous
minimum experiences. Respondent shall provide the name and job title of the person in
your organization who oversees your quality assurance program. Provide a description of
your firm’s quality assurance program. The City of Denton reserves the right to require a
copy of your Quality Control Manual and Quality Assurance Processes, which, if
contracted, will become a contract document.
F. Relevant Business Information and Disclosures
Respondent shall detail any and all relevant history of litigation involving public works
projects.
Respondent shall detail any and all exceptions within the proposal response.
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Respondent shall complete Attachment B – Business Overview Questionnaire Form.
G. References
Respondent shall provide references including contact names, e-mail addresses and current,
correct phone numbers of firms for which you have performed similar professional services.
Respondent shall complete Attachment F – References.
H. Additional General Requirements
Prior to commencement of the services, the City and selected individual or business will
conduct an initial meeting to review the overall scope, schedule, deliverables and planning
process to implement a successful program.
The awarded Contractor shall provide detailed reports to the City on a scheduled basis in
agreement to both parties.
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SECTION VII
Evaluation and Award
1. EVALUATION CRITERIA
a) Proposed project scope, content and sample software model
(FACTOR: 25%).
The respondent's understanding of the objectives and scope of the
requested services of the primary areas, in a clear and concise, written
expression. The respondent will provide a sample or example cost of
service and rate design model as part of the evaluation criteria.The
software model in particular is considered to be a critical component of
the evaluation. In addition, the maintenance terms and annual cost should
be included for a 5-year maintenance contract.
b) Past performance and experience on projects, including municipal
experience, rate design, and model development (FACTOR: 30%).
The respondent's successful experience in projects within the primary
areas similar to the scope of work requested in this RFQ will be a major
consideration. Based on the past performance of both the individual
project personnel and the respondent, The City of Denton will determine
if the respondent has the track record to provide the required services in
successfully administering similar projects. The meeting of project
budgets and project schedules will be items of consideration in evaluating
past performance.
c) Experience and qualifications of the Respondent and key personnel
available for this project (FACTOR: 25%).
The qualifications of the respondent in terms of experience, service
capability and resources will be reviewed in order to assess the ability of
the respondent to successfully complete the project assignment. The
firm’s ability to provide the necessary professional and technical expertise
and supervision will be a major consideration.
The qualifications and experience of the individuals who will be directly
assigned to the primary areas is a major evaluation factor to be considered.
The personnel cited shall be designated as to whether they are an
employee, respondent or contract employee of the RFQ respondent. Their
educational and professional credentials as well as direct experience on
similar projects will be considered in evaluating the respondent.
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Experience with other municipally funded projects and familiarity with
municipal requirements and procedures will also be considered in the
evaluation process.
d) Schedule and employee-hours presented for this service as defined in
the scope of work (FACTOR: 20%).
Proposed schedule for completion of scope of work.
Hours each individual assigned to the project are forecasted to work on
the project should be provided, and the various portions of the project
they will be involved in. Total forecasted hours per employee for each
section of the project should be determinable.