HomeMy WebLinkAboutStaff Report 237-10TO:
ATTN:
FROM:
DATE:
SUBJECT:
BUDGET
FY 2011
HONORABLE CITY COUNCIL
FINANCE COMMITTEE
CITY MANAGER
MAY 25, 2010
DEPARTMENT: UTILITIES
CMR: 237:10
Adoption of a Resolution Amending Utilities Rate Schedules EDF-l and
EDF -2 Which Approves a 2.6% Fiber Optic Rate Increase and Other
Changes
RECOMMENDATION
Staff recommends that the Finance Committee recommend that the City Council adopt the
attached resolution to:
(a) Approve a 2.6 percent increase to commercial fiber optic rates EDF-l and EDF-2, for
Fiscal Year (FY) 2010, effective July 1, 2010, which will increase annual revenues
from commercial dark fiber customers by $48,500; and,
(b) Approve other changes to the Fiber Optic Rate Schedules EDF-l and EDF-2, as
attached.
BACKGROUND
The Utilities Department provides commercial dark fiber optic services within the boundaries of
Palo Alto. For customers with fiber optic licenses beginning prior to September 18, 2006, rates
for service are published in Dark Fiber Licensing Services Rate Schedule EDF-1. EDF-l was a
promotional rate and was closed to new Dark Fiber licenses in 2006. New fiber customers are
enrolled under Dark Fiber Licensing Services Rate Schedule EDF-3, which is cost based and
does not increase by CPI annually. There are currently 16 customers on the EDF-l rate and 35
customers on the EDF-3 rate. The annual revenues from EDF-l and EDF-3 customers currently.
total $1.6 million and $1.4 million respectively. As contract terms for customers on the EDF-l
rate expire, customers will transfer to the EDF-3 rate so that over time, the EDF-l rate will cease
to exist and all customers will be on the EDF-3 rate. Also, as CPI increases are implemented for
the EDF-l rate, some customers may voluntarily choose to move from the EDF-l rate to the
EDF-3 rate for cost saving purposes.
Customer expenses for engineering, construction and connection to the fiber optic backbone are
charged under Dark Fiber Licensing Services Rate Schedule EDF-2. The Council-approved
CMR: 237:10 Page 1 of4
Dark Fiber Licensing Agreement (CMR 177:97) allows the commercial fiber optic fees charged
under the EDF-1 and EDF-2 rate schedules to be adjusted annually in accordance with the
Consumer Price Index (CPI), which is published by the United States Bureau of Labor
Statistics. 1
DISCUSSION
This year staff conducted a review of the methodology used for the CPI adjustment and the
language used in the description of charges in Rate Schedules EDF-1 and EDF-2 and proposes
revisions to ensure consistency in the use of a CPI adjustment across departments and clarity in
explanation of the charges.
Historically, the EDF-1 and EDF-2 Rate Schedules have been adjusted based on,the change in
Annual CPI published by the U.S. Department of Labor, Bureau of Labor Statistics. This
practice, however, is inconsistent with how CPI adjustments are calculated by other City
departments. The common practice is to calculate the change reported in December CPI figures
and increase rates by that amount as opposed to those in the annual CPI.
The CPI adjustment using the old methodology results in a 0.7 percent adjustment while the CPI
adjustment calculated using the revised methodology results in a 2.6 percent adjustment. Using
the revised methodology, based on the rate of change in CPI for 2009, a 2.6 percent increase is
required for Rate Schedules EDF-1 and EDF-2 for FY 2011.
Another revision involves the Minimum Annual Backbone License Fees and Minimum Drop
Fees. These fees were not adjusted for,the prior two years and have now been amended to reflect
the prior CPI changes (3.27 percent for FY 2009, 3.11 percent for FY 2010, and the current 2.6 .
percent for FY 2011). In addition, as they were created for promotional purposes, the discounts
related to fiber pricing under EDF-1 will no longer be increased annually according to CPI, but
will remain at current levels.
One clarification to the methodology is that in the event that the annual change in CPI is less
than 1 %, a change to the ED F -1 rates may not be made for the upcoming year. In that case,
future rate changes will take the last year of change as the new base year for purposes of
calculation. For example, if the annual CPI increases in one year by only 0.5% (and a rate
change is not be made that year), and the CPI changes by 1.5% in the second year, then the EDF-
1 rate would increase by 2% the second year to capture both years of CPI change.
Finally, the language in the attached EDF-1 and EDF-2 rate. schedules has been revised for
clarity and consistency. The other revisions to the attached EDF-1 and EDF-2 rate schedules
detail the calculation of the charges, and explicitly state the source pUblication used for annual
CPI adjustments.
The table below outlines the adjustments proposed to the EDF-1 and EDF-2 Commercial Fiber
Optic rates:
1 http://data.hls.gov/cgi-hinldsrv
CMR: 237:10 Page 2 of 4
P d F'b R t I ropose 1 er a e ncreases
Current ···ProPQs~d .\ : $ %
... Rate Description· .. .Rates .. Rates* Diffel'enc~ ... Difference
EDF-1 (Section C-1): Dark Fiber Backbone License Fees (fiber miles/month)
Fiber Price $299.22 $307,04 $7.82 2.6
Quantity discount 59.84 59.84 --
Buffer tube discount 59.84 59.84 - -
Route length discount 77.80 77.80 --
Ring topology discount 23,.94 23.94 --
Length of term discount 46.80 46.80 --
Minimum Annual License Fee 425.00 464.39 39.39 9.3
EDF -1 (Section C-2): Dark Fiber Lateral Connection Fees (ft/month)
Drop Cable Mgmt. Fees * $0.02-0.06 0.02-0.06 0.00-0.00 2.6
Custom Cable Mgmt Fees * 0.29 0.30 0.01 2.6
Fees for additional fiber * 0.06 0.06 0.00 2.6
Per Project Minimum Drop/Custom Cable fees 210.00 229.46 19.46 9.3
EDF-2 (Section C-1): Advance Engineering Fees (AER)
Commercial/Industrial AER min. fee $715 $733 $18 2.6
* CalculatIOns have been rounded to the nearest cent.
RESOURCE IMPACT
The additional Commercial Fiber Optic revenues resulting from the CPI increase to Dark Fiber
Licensing Services Rate Schedule EDF-1 are projected 'to be approximately $48,500 for FY
2011.
As the Dark Fiber Licensing Services Rate Schedule EDF-2 applies to customer-driven
expansions and upgrades to the City's dark fiber network, and the fee represents the Minimum
Fee, the increase in projected revenue due to this rate increase is negligible and impossible to
predict.
POLICY IMPLICATIONS
These recommendations do not represent a change in current City policies.
ENVIRONMENTAL REVIEW
An increase in fiber optic rates is statutorily exempt from the California Environmental Quality
Act (CEQA), pursuant to California Public Resources Code Section 21080(b)(8) and Title 14 of
the California Code of Regulations Section 15273(a)(1) and (3), (modification or approval of
rates and charges).
CMR: 237:10 Page 3 of4
ATTACHMENTS
A: Resolution
B: Fiber Optic Rate Schedules EDF-1 and EDF-2
PREPARED BY: ERIC KENISTON, Associate Resource Planner ('. e.~
RA VEEN MAAN, Senior Resource Planner .e.w\
REVIEWED BY: ~4NERATCHYE trA";~istant Director, Resource Management
. 6)TOM AUZENNE ... ~Assistant Director, Customer Support Services
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 237:10
VALERIE ~. F<l!N,(;
Director of Utilities
Page 4 of4
ATTACHMENT A
Not Yet Approved
Resolution No. --
Resolution of the Council of the City of Palo Alto Amending
Utilities Rate Schedules EDF-l and EDF-2 Which Approves a
2.6% Fiber Opti'c Rate Increase and Other Changes
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code,
Utility Rate Schedule EDF-l (Dark Fiber Licensing Services) is hereby amended to read in
accordance with sheets EDF-l-l, EDF-I-2, and EDF-I-3 attached hereto and incorporated
herein. The foregoing Utility Rate Schedule, as amended, shall become effective July 1,2010
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code,
Utility Rate Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read in
accordance with sheet EDF-2-1 and EDF-2-2, attached hereto and incorporated herein. The
foregoing Utility Rate Schedule, as amended, shall become effective July 1, 2010
SECTION 3. The Council finds that the revenue derived from the authorized
adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2,
of the Charter of the City of Palo Alto.
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100512jb 0073371
Not Yet Approved
SECTION 4. The Council finds that the adoption of this resolution does not
constitute a project under the California Environmental Quality Act, California Public Resources
Code section 21080, subdivision (b )(8).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Sr. Assistant City Attorney
100512jb 0073371
2
Mayor
APPROVED:
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENT B
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
lA. APPLICABILITY:
This rate schedule applies to customer accounts established prior to September 18,2006, unless the customer elects
to apply the EDF-3 rate to the entire customer account. This rate applies to Fiber Optic services from the City of
Palo Alto Utilities (CPAU) pertaining to the City's network (Backbone and associated connections).
B. TERRITORY:
Within the incorporated limits of the City of Palo Alto and land owned or leased by the City.
C. FEES:
1. DARK FIBER BACKBONE LICENSE FEES:
The values or ranges for each of these price components are shown below:
(1) Fiber Price........ ........ .......... ...... .................... ............. ........ $~307.04/FM1month
(2) Quantity discount............................................................... $0 to $59.84IFMlmonth
(3) Buffer tube discount ................................................. , ............... $0 to $59.84IFMlmonth
(4) Route length discount........................................................... ... $0 to $77.80IFMlmonth
(5) Ring topology discount. .............................................................. $0 to $23.94IFMlmonth
(6) Length of term discount............................................................ $0 to $46.80/FMImonth
(7) Per Project Minimum lA .. mlUal Backbone License Fee ................................................. $~64.39/month
Project Minimum Backbone Fees apply to any project proposal signed after September 18,2006 in which
the project connects with the Backbone.
Description for Discounts:
Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path.
Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path.
Route length discount: based on the route length licensed on a specific project.
Ring topology discount: The ring topology discount for customers contracting for complete rings.
Term discount: based on an array of discounts for contracts greater than one and less than ten years.
2. DARK FIBER LATERAL CONNECTION FEES:
Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules
and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the
Licensee shall pay an annual Drop/Custom Cable Management Fee based on the follow per foot fees:
(1) Drop Cable Management Fees (for the first 12-Fibers) ................................. $0.02-$0.06/ftlmonth
(2) Custom Cable Management Fees (for the first 12-Fibers)............................. $0.;W30/ftlmonth
(3) Fees for additional Drop or Custom Cable fibers (each additional set of 12-Fibers) $0.06/ftlmonth
(4) Per Project
CITY OF PALO ALTO UTILITIES
Issued by the City Council
I Supersedes Sheet No.EDF-1-1 dated 7-01-20()[Jfl.
CITY OF PALO ALTO
UTI LlTI ES
Effecti ve 07-01-20G91O
Sheet No. EDF-l-l
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
Minimum Drop or Custom Cable Management Fees ......................................................................... .
$229.462-W/month
I4ejeet-Minimum Drop Cable Management Fees apply to any project proposal signed after September 18,
2006.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.EDF-1-2 dated 7-01-2008Jl.
CITY OF PALO ALTO
UTILITIES
Effecti ve 07 -01-200010
Sheet No. EDF-1-2
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-l
3. EARLY TERMINATION FEES:
If the Licensee chooses to terminate for convenience the License Agreement or the term of any project
under the License Agreement, then the Licensee shall pay the applicable termination payment as specified
in this schedule or in the License Agreement, as provided below.
Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the
following amounts, whichever is less:
• Annual fee of the contract year that the Licensee chooses to terminates in full without term
discounts, or
• Remaining fees of the project term as indicated in the License Agreement.
D. SPECIAL NOTES:
1. All fees must be paid to the City according to the specifics in in accordance with the terms of the Dark
Fiber License Agreement, the customer's project proposals and all the applicable Utilities Rates, Rules, and
Regulations.
2. 2. All fees and minimum charges are subject to consumer Consumer priee-Price ~Index (CPI)
adjustments, to be applied annually, except as defined by Section D.3 of this Rate Schedule. Discounts will
not be modified by changes to CPI.
3. The CPT adjustment will be based on the Consumer Price Index i()r All Urban Consumers (CPI-U) for the
San Francisco-Oakland-San Jose MSA, published bv the U.S. Department of Labor. Bureau of Labor
Statistics. The adjustment is calculated by dividing the most recent calendar year DecemberAnmtal CPI by
the prior 'tear calendar DecemberAnmtal CPI in the year rates last changedat the City's discretion but not
more frequently than an annual basis. In the event that the change between December cprs indicates an
adjustment of less than 1 % is required, a change to rate schedules may not be made for the upcoming year.
Future rate changes will take the last year of change as the new base year for purposes of calculation.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.EOF-1-3 dated 7-01-2()()[J200f
CITY OF PALO ALTO
UTILITIES
{End}
Effecti ve 07 -0 1-2GG920 10
Sheet No. EDF-1-3
, 1
DARK FIBER SERVICE CONNECTION FEES
UTILITY RATE SCHEDULE EDF-2
A. APPLICABILITY:
This schedule applies to all connections, expansions, and upgrades to the City's Dark Fiber network (Backbone).
B. TERRITORY:
All territory within the incorporated limits of the City and land owned or leased by the City.
C. FEES:
1. ADVANCE ENGINEERING FEES:
Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The
fees will be credited against the estimated project cost prior to the collection of the project construction
fees.
(1) Commercial/Industrial AER minimum fee ................................................................... ..
(2) Special conditions (requiring expert assessment) .......................................................... .
$7-h).33.00
By Estimate
2. ESTIMA TED SERVICE CONNECTION AND RECONFIGURA TION FEES
All estimated service connection and reconfiguration fees must be paid prior to the scheduling of any
construction or reconnections to the City's Dark Fiber network.
(1) Service connection (Interconnection) fee .................................................... . By Estimate
By Estimate (2) Reconfiguration Fees ................................................................................... .
Labor rates are subject to change as stated in the Utility Rate Schedule C-l.
D. NOTES:
1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to
the property line in compliance with City of Palo Alto Utilities Rules and Regulations and contract agreements.
~ The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to provide
timely continuous service.
L
3. /\11 fees are subject to consumer price index (CPT) adjustments, to be applied at the City's discretion, but not
more frequently than an annual basis. All fees are subject to Consumer Price Index (CPT) adjustments, to be
applied annually. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers
(CPI-U) for the San Francisco-Oakland-San Jose MSA, published by the U.S. Department of Labor, Bureau of
Labor Statistics. The adjustment is calculated by dividing the most recent calendar year December CPI by the
December CPI in the year rates last changed. In the event that the change between December cprs indicates an
adjustment of less than 1 % is required, a change to rate schedules may not be made for the uDcoming year.
Future rate changes will take the last year of change as the new base year for purposes of calculation.The CPI
adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI U) for the San Francisco
Oakland San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes sheet No. EDF-2-1 dated 7-01-2(}{)g.-200
CITY OF PALO ALTO
UTILITIES
Effecti ve 7 -0 1-2QQ9.20 1 0
Sheet No. EDF-2-1
• I
DARK FIBER SERVICE CONNECTION FEES
UTILITY RATE SCHEDULE EDF-2
adjustment is calculated by dividing the most recent calendar year Annual CPl by the prior year calendar
Annual CPl.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes sheet No. EDF-2-1 dated 7-01-2f)()[J..200
CITY OF PALO ALTO
UTILITIES
{End}
Effecti ve 7-0 1-:2QG920 10
Sheet No. EDF -2-2