HomeMy WebLinkAboutStaff Report 216-06CMR:216:06 Page 1 of 2
TO: HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 9, 2006 CMR: 216:06
SUBJECT: UTILITIES ADVISORY COMMISSION RECOMMENDATION TO
APPROVE A RESOLUTION ADOPTING A GAS RATE
INCREASE
RECOMMENDATION
Staff and the Utilities Advisory Commission (UAC) recommend that the City Council adopt the
attached resolution to increase natural gas rates by approximately $5.9 million effective July 1,
2006.
DISCUSSION
Gas consumption has been flat and is projected to stay flat for FY 2006-07 while the budgets for
gas supply and Capital Improvement Program projects are increasing.
Staff is proposing a 20% overall rate increase to be effective July 1, 2006. On an annual basis,
this represents a revenue increase of $5.9 million. The increase will be applied to both the supply
and the distribution rate components of each customer class, so as to continue the move toward
equity between customer classes as identified by the most recent Natural Gas Cost-of-Service
Study. This is a normal practice for the industry. Each class of customers has to cover its cost
and the distribution cost is allocated based on customer class load and contribution to the peak.
Therefore, the residential customers will have a higher increase than the commercial customers
due to their load shape.
Drawing down the Gas Distribution Rate Stabilization Reserve (DRSR) and the Gas Supply Rate
Stabilization Reserve (SRSR) to fund the increased expenses would significantly reduce the
DRSR and the SRSR levels and would leave the Gas Utility vulnerable to unexpected physical
events or unanticipated increases to wholesale supply costs.
UTILITIES ADVISORY COMMISSION REVIEW AND RECOMMENDATIONS
On May 3, 2006, the Utilities Advisory Commission (UAC) unanimously approved staff’s
proposal to increase rates by 20% effective July 1, 2006.
CMR:216:06 Page 2 of 2
RESOURCE IMPACT
Approval of this proposed rate increase will increase the Gas Fund sales revenues by
approximately $5.9 million for FY 2006-07. This 20% rate increase will result in a projected
end-of-year balance for FY 2006-07 of $3.2 million in the Gas Supply Rate Stabilization Reserve
(below the minimum guideline of $10 million) and $2.9 million in the Gas Distribution Rate
Stabilization Reserve (below minimum guideline of $3.1 million).
ENVIRONMENTAL REVIEW
The adoption of the resolution does not constitute a project under the California Environmental
Quality Act. Therefore, no environmental assessment is required.
PREPARED BY: Lucie Hirmina, Utilities Rates Manager
Tom Auzenne, Assistant Director Utilities Customer Support Services
DEPARTMENT HEAD:
CARL YEATS
Director of Administrative Services
CITY MANAGER APPROVAL:
EMILY HARRISON
Assistant City Manager
ATTACHMENTS
A: Resolution
B. Gas Rate Schedules G-1, G-2, G-3, G-4, G-6, G-7, G-10, G-11 and G-12
C: Minutes of the UAC meeting of May 3, 2006