HomeMy WebLinkAbout1996-12-16 City Council (34)TO:
FROM:
City of Palo Alto
City Manager’s
HONORABLE CITY COUNCIL
Report
CITY MANAGER DEPARTMENT: UTILITIE S
AGENDA DATE: December 16, 1966 CMR:498:96
SUBJECT:Utilities Charitable Contribution Program, ProjectPLEDGE
REQUEST
This report transmits to the Council a proposal approved by the Utilities Advisory,
Commission (UAC) to introduce a charitable contribution program that will raise funds to
help resident experiencing financial difficulties pay their utility bills. This report requests
that Council approve the staff’s ProjectPLEDGE proposal.
RECOMMENDATIONS
Staff recommends that Council approve ProjectPLEDGE as a one-year pilot progam and
direct staff to return to Council with results on customer participation levels and staff
workload impact. Based on this information, staff will recommend to Council that
ProjectPLEDGE continue, be modified, or be discontinued.
POLICY IMPLICATIONS
ProjectPLEDGE supports the City Council’s prioriu; established in 1993 to develop
programs to address "People in Crisis."
EXECUTIVE SUMMARY
In fiscal year 1995-96, at the direction of Council, staff began exploring ways to design
and implement a voluntary ratepayer donation program to help residents who are unable
to pay their utilit2v." bills due to financial hardship. Staff evaluated several kinds of
programs which are described in an attachment to this report. Based on this evaluation,
staff recommends that the City introduce ProjectPLEDGE this fiscal year. With this
program, ratepayers would voluntarily pledge a given amount that would be added to
their utility bill charges each month. Staff does not anticipate a need to add resources to
implement and manage ProjectPLEDGE.
CMR:498:96 Page 1 of 2
For services provided to administer the distribution of funds, the Salvation Army will
charge approximately 10 percent of the amount.distributed to ratepayers. Targeted for
assistance would be the elderly, handicapped, working low income families/individuals,
and public assistance families/individuals experiencing unusual hardship such as an
ongoing medical problem, loss of job, recent desertion, abandonment, etc. Funds
received through ProjectPLEDGE by the Salvation Army would be dispersed only to Palo
Alto residents.
Staff estimates that this type of program will be cost effective, convenient for customers,
and introduce a new source of funds to complement existing rate relief programs. With
regard to the other two kinds of programs evaluated, staff does not consider a checkoff
box program to be cost effective and estimates that a direct mail solicitation program
would generate an insignificant level of donations.
FISCAL IMPACT
Ongoing costs to implement ProjectPLEDGE are estimated at $1,500 annually which
would be funded from the existing operating budget.
ENVIRONMENTAL ASSESSMENT
This proposal does not constitute a project under the California Environmental Quality
Act; therefore, an environmental assessment is not required.
ATTACHMENTS
Memorandum to UAC entitled ProjectPLEDGE Proposal
UAC Minutes of 11-6-96
PREPARED BY:Randy Baldschun, Assistant Director of Utilities
DEPARTMENT HEAD REVIEW:
CITY MANAGER APPROVAL:
City ger
CMR:498:96 Page 2 of 2
MEMORANDUM
TO:Utilities Advisory Commission
FROM:Utilities Department
AGENDA DATE: November 6, 1996
SUBJECT:ProjectPLEDGE Proposal
REQUF~T
This report presents staff’ s evaluation of charitable contribution programs designed to raise funds
to help residents experiencing financial difficulties to pay their utility bills. On November 6,
1995, the City Council referred this matter to the staff and UAC for consideration. This is a
request that the UAC approve and recommend to the City Council staff’s proposal for a
charitable contribution program that would be called ProjectPLEDGE.
RECOMMENDATION .
Staff recommends that the City offer ProjectPLEDGE as a pilot prog _ram near the end of FY96-
97. After a one-year pilot .program, staff will return to Council with results on customer
participation levels and staff workload impact. Based on this information, staff will recommend
to Council that ProjectPLEDGE continue, be modified, or be discontinued.
POLICY IMPLICATIONS
The proposed program supports the City Council’s priority established in 1993 to develop
programs to address "People in Crisis."
EXECUTIVE SUMMARY
In fiscal year 1995-96, at the direction of Council, staff began exploring ways to design and
implement a voluntary ratepayer donation program to help residents who are unabte to pay their
utility bills due to financial hardship. The assignment was limited in scope and not intended to
provide a mechanism to solicit contributions for multiple charitable purposes. Staff from
Information Technology, Revenue Collections, Accounting, Attorneys Office, and Utilities
participated in the assignment. Staff identified three types of donation programs in place at
municipal and investor-owned utilities. They are: 1) a checkoff box on the monthly utility bill
statement whereby customers add a contribution amount to their utility bill payment; 2) a pledge
program whereby customers donate a specific amount each month that is added to the utility bill;
and 3) a direct mail solicitation program whereby customers send donations to the Salvation
Army for dispersement.
The following table summarizes the programs:
Type of
Program
Checkoff
Box
Pledge
Direct
Mail
Solici-
tation
Frequeno’
of
Customer
Donation
Monthly
Monthly
Semi-
annually
Total
Estimated
Donations
per Year
$25,000
$25,O00
$5,000
Estimated
On-going
Costs per
Year
$20,000-
$40,000
$1,500
$9O0
Impact on Staff
Substantial. Utility Payment Processing
Center and Accounting require
additional staff resources (one half to
one full-time temp) to reconcile
payments received with amounts
actually billed on a dally basis. Costs
would outweigh benefits.
Significant software programming
initially. On-going impacts on Utilities
Customer Service Center, Payment
Processing Center, and Accounting
expected to be absorbed within existing
staff levels.
Minimal
From a municipal law point of view it is do-able to implement any one of the three donation
programs. After a thorough evaluation of each of these three programs, staff recommends the
Pledge Program because it provides a regular stream of contributions and the impact can be
accommodated by existing resources. The Checkoff Box Program provides the most flexible
option to ratepayers; however, it would result in a substantial workload impact on staff that
would necessitate the addition of resources. A Direct Mall Solicitation Program would have the
least impact on existing City resources; however, considerably less donations are anticipated by
this program compared to a pledge program. For the foregoing reasons, staff .recommends
ProjectPLEDGE.
ProjectPLEDGE is patterned from PG&E’s REACH Program whereby ratepayers authorize a
given amount to be added to their utility bill each month. Staff recommends that the Salvation
Army be contracted to disperse funds under ProjectPLEDGE. While staff does not expect this
program to appreciably lower bad debt write-off, it would provide another source of funds for
residents experiencing financial difficulties and would complement existing programs.
Furthermore, ProjectPLEDGE fills a void created this year by a 90 percent reduction in funding
available to Palo Alto residents through PG&E’s REACH Program.
Staff estimates a two to four month timeframe to implement ProjectPLEDGE. Staff does not
anticipate a need to add resources to implement and manage ProjectPLEDGE. Non-salary costs
are estimated to be approximately $1,500 annually. Existing staff would be utilized for software
programming, accounting, bill processing, administration, and promotion. For services
provided, the Salvation Army will charge approximately 10 percent of the amount distributed
to ratepayers. This administrative fee would be funded by the ratepayer donations. Based on
Palo Alto’s 26,!300 residential electric accounts, a projected 4 percent participation rate, and an
average monthly pledge of $2, ProjectPLEDGE residential contributions are estimated at
approximately $25,0130 annually.
DISCUSSION
Last fiscal year a total of approximately $54,000 was written off on uncollectible utility bills of
which $6,900 was subsequently recovered by the City’s collection agency. Single-family
residents and multi-family residents accounted for $35,400 of the write-off total. The principal
reasons for non-payment by residents during FY95-96 are summarized in the following table:
AmounJ
of Write-
off
$10,200
$16,800
$1,700
$6,700
Residents
92
n/a
6
23
Situation
¯ Reason/Customer Explanation
Cust. requests disconnection/leaves town/no forwarding addr¢~
¯Forwarding address not known at time of disconnect order
¯Customer delays notifying post office of forwarding address
¯Customer forgets to pay bill in midst of.moving
¯Customer believes bill too small to matter
Cust. request disconnection/forw,arding address given/doesn’t ray
¯ Similar reasons as above
~ustomer deceased
¯ No family member or estate responsible for bill
Utility initiates,,,,,dis¢onnection of service for non-payment
¯Customer leaves town, often experiencing financial difficulties,
no forwarding address given
Of the $35,400 write-off for residents, only $6,700 appears related to financial hardship cases
and $28,700 related to other factors. On this basis, staff does not anticipate that a program
providing financial assistance to customers to pay delinquent utility bills would have a significant
impact on the amount of bad debt write-off. It should also be noted that on an annual basis, the
Utilities terminates service to approximately 120 residents for non-payment. Approximately 100
residents have service restored after payment is made.
Currently, a number of services are available to residents experiencing difficulties paying their
utilities bill. They include:
1) Payment schedules are often extended to meet customer needs.
2) Utilities offer a Budget Billing Program, whereby monthly bills are levelized over a
12 month schedule to help a customers cash flow.
3)Utilities place a customer in contact with the State Department of Equal Opportunity
which can offer direct financial assistance through the Federal Home Energy Assistance
Program (HEAP).
4)Funds are available from the Salvation Army, however beginning this year, they are
significantly reduced.
5) In 1993 the Council approved the utilities Residential Rate Assistance Program (RAP).
This program whereby qualifying residents receive a 15 percent reduction applied to
water, gas, and electric charges. To date, the program has 225 participating residents
meeting the financial need criteria and another 69 residents meeting the disability
criteria.
Despite the availability of rate relief programs, there are limitations on how much and how often
a resident can obtain financial assistance from such resources. Therefore, staff believes that a
program which complements existing services and programs would provide additional benefits
to residents.
Staff evaluated alternative programs with three objectives in mind:
.1)No additional funding or City resources will be requested to implement the program.
Minor costs related to materials, set-up, and administration will be accommodated with
existing resources.
2)The program will be convenient for ratepayers to make donations.
3)The program will introduce a new source of funds not currently available to ratepayers
experiencing financial difficulties.
Regardless of which program the City adopts, staff recommends that the Salvation Army be
contracted with to administer fund dispersement. The Salvation Army has trained staff with
experience dispersing funds for PG&E’s REACH program. Staff would develop income and
other qualifying guidelines similar to the City’s RAP program with the Salvation Army to
address Palo Alto’s needs. Targeted for assistance would be the elderly, handicapped, working
low income families/individuals, and public assistance families/individuals experiencing unusual
hardship such as an ongoing medical problem, loss of job, recent desertion, abandonment, etc.
Funds received through ProjectPLEDGE by the Salvation Army would be dispersed only to Palo
Alto residents.
Also, as a legal requirement under any program, the Internal Revenue Service (IRS) and State
Franchise Tax Board (FTI3) require documents be prepared to report annual taxpayer charitable
contributions. The taxpayer must similarly be notified of the amount reported to these agencies.
The utilities bill statement has adequate space available to provide this notification. Under
program types one and two these tax reporting activities would be performed by the City of Palo
Alto whereas with direct mail solicitation, the Salvation Army would do the reporting. With
regard to City accounting staff completing IRS and FTB reports, the impact is seasonal and not
expected to be substantial.
A description and evaluation of the three types of programs and how they might be structured
follows:
1. Checkoff Box..: Utility bills would be printed every month with the checkoff box on the
payment stub. If residents want to contribute to the program during that month, they check the
box and indicate the amount of the donation. This approach was identified by Council in
referring the matter to the staff and UAC. This program provides maximum flexibility for
donors.
One major drawback of the Checkoff Box Program is the substantial impact on staff in the
Accounting section and the Utility Payment Processing Center. In Accounting, additional time
would be necessary to reconcile daily payments with the corresponding amounts billed since they
would not match..Also, this difference between the amount billed and the amount received
creates exceptions in the Utilities Payment Processing Center. When transactions become
exceptions, they are no longer processed by the computerized billing system; manual intervention
is necessary to deter:mine the reason for the discrepancy between the amount paid and the
amount due and data entry is required. The impact on Accounting and the Utilities Payment
Processing Center would require additional resources that would exceed the benefits of the
program. There is software programming required with a checkoff box with a one-time
workload impact. The insert could be used to promote the program at a cost of $450 per
promotion; this cost may be mitigated by using space on the "Utilities Community and
Announcement" page on the bill statement.
2. Pledge: This program allows the customer to request that a specific amount be added each
month to the utility bill as a contribution. The program would be promoted by inserting a small
pledge form (approximate $450 cost) on which the customer authorizes a donation each month
and encloses with the utility bill payment. This information would be entered into the billing
system by the Utilities Customer Service Center and subsequent bill statements would show a
line item description on the bill for the pledge. The customer would be able to notify the
Utilities to discontinue or change the pledge amount. If the customer skips a donation or pays
less than was pledged, the customer credit rating is unaffected.
The advantage of a Pledge Program compared to a Checkoff Box Program is that it would not
automatically create exceptions for the Utility Payment Processing Center; the payment amount
would generally equal the amount billed. Little tracking, analysis, and record keeping would
be required. A disadvantage is that the software programming for the pledge system would
require more "business rules" to address infrequent instances when the pledge amount does not
equal the amount received. However,-once the software program is written and debugged, the
programming workload ends, The Pledge Program is the most popular customer donation
program among utilities.
5
3, Direct M~I Solicitation: The utility would promote the program using semi-annual bill
inserts. The utility would include a one-time donation form and residents would be encouraged
to send their contributions for Palo Alto’s program directly to the Salvation Army. The
Salvation Army would be responsible for reporting the calendar year contributions to tax
agencies and donors and would redistribute the contributions to qualifying Palo Alto residents.
Staff gave this program strong consideration because it has minimal impact on existing
resources. There is no additional postage cost associated with including the insert in the utility
bill mailings. There would be a printing and paper cost of approximately $450 for the insert.
A disadvantage of the Direct Mail Solicitation Program is that it may result in fewer
contributions because solicitation would be exercised less frequently than a program operating
every month. This result has been confirmed with one utility that collected $1,500 by direct
mail solicitation compared to their subsequently established Project HELP pledge program which
achieved donations of $2,200 per month ($26,400 annually).
A recent survey of twenty California municipal utilities indicates that Burbank, Colton, Riverside
and Lodi currently offer programs whereby ratepayers donate funds to help residents
experiencing financial hardship pay their utility bills. California investor-owned utilities such
as Pacific Gas & Electric (PG&E) have such programs. The Modesto Irrigation District and the
Sacramento Municipal Utility District are presently reviewing agreements with the Salvation
Army to institute customer pledge programs in their service territories. The following chart
represents a sample of utilitys with programs in place.
Gainesville
Regional
Utilities
Salt River
Project
Sierra
Pacific
PG&E
City of
Riverside
Grays
Harbor
PUD
Program
Name
ProjectSHARE
SHARE
SAFE
REACH
SHARE
Project HELP
Program Type
Monthly Pledge
Monthly Pledge
Monthly Pledge or
one time donation
Monthly Pledge
Checkoff Box
Monthly Pledge
Disperser
of Funds
Salvation
Army
Salvation
Army
Salvation
Army
Salvation
Army
Riverside
County
Community
Action
Group
Customer
Participation
5%
3%
n/a
n/a
5%?
2%
6
CONCLUSION
Staff recommends that the City introduce ProjectPLEDGE this fiscal year to provide rate relief
to residential ratepayers experiencing financial hardship. Staff estimates that this type of
program will be cost effective, convenient for customers, and introduce.a new source of funds
to complement existing rate relief programs. Staff proposes to introduce ProjectPLEDGE as a
pilot program for one year and report back to Council on the results with any appropriate
recommendations. Staff does not consider a checkoff box program to be cost effective. Finally,
staff estimates that a direct mail solicitation program would generate an insignificant level of
donations.
~CAL IMPACT
On-going costs to implement ProjectPLEDGE are estimated at $1,500 annually which would be
funded from the existing operating budget.
ENVIRONMENTAL ASSESSMENT
This proposal does not constitute a project under the California Environmental Quality Act;
therefore, an environmental assessment is not required.
PREPARED BY:Randy Baldschun, Asst. Director of Utilities,
Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
Jo
of Utilities
of- Palo Alto
Item
i.
2.
3.
4.
5.
6.
i0.
ii:
Utilities Advisory Commission
Wednesday, November 6, 1996
City Council Chambers
MINI~ES
Roll Call .........................2
Oral Communications ....................2
Approval of Minutes ....................2
Agenda Review and Revisions ................2
Consent Calendar ......................2
Unfinished Business: ....................2
a.Final Report by the Organizational Review
Consultant, TB&A ....................2
b. Gas Issues Update ....................17
c~UAC Planning for Joint Meeting With Council .......42
New Business: .......................17
a.Compressed Natural Gas Rate ...............17
b.Information Report, Street Light Conversion
Program .........................23
c. Utilities Project PLEDGE Proposal ............24
d.Electric Utility Stranded Cost Update .........29
City Council Referrals ...................37
Reports of Officials/Liaisons: ...............37
a. NCPA Commission Report .................54
b.BAWUA Report ......................37
Next Meeting ........................54
Adjournment ........................54
250 Hamilton Avenue. Pal0/dto. 94301 ~ 415.3292277 FAX 415.321.0651
Chairman Johnston called the meeting to order at 7:30 p.m. in the
Council Chambers, 250 Hamilton Avenue, Palo Alto, California.
Item I. Roll Call
PRESENT:Commissioners Chandler, Eyerly, Gruen, Johnston and
Sahagian.
ABSENT: None.
COUNCIL MEMBER PRESENT: Rosenbaum.
Item 2. Oral Communications - None.
Item 3. Approval of Minutes and Executive Summary
Chairman Johnston: The next item is approval of the minutes of October
2, 1996 and the Executive Summary.
MOTION:Commissioner Eyerly:
Executive Summary.
I move approval of the minutes and
SECOND: By Commissioner Sahagian.
MOTION PASSES: 5-0.
Item 4. Agenda Review and Revisions.
Chairman Johnston: I would like to propose that we move Item 6c, UAC
Planning for Joint Meeting with City Council, to follow 7d, Electric
Utility Stranded Cost Update. One reason for my request is that it is
a Commission matter preparing for our meeting with the City Council next
week, and we do not need to have everyone present in the audience for
that item. Also~ I would like it to occur after we have the update on
the stranded costs. Does that meet with everyone’s approval?(It was
so agreed.)
Item 5. Consent Calendar - Nothing.
Item 6.Unfinished Business
Item 6 a.Final Report by the Organizational Review Consultant,
TB&A
MINUTES UAD:ll/06/96
Final Page 2
success story. What I am suggesting here is that when you get it all
done, in a couple of months, you put in the success story parts, calling
them out explicitly, and send it on to the council. You have something
you are doing right, so let’s go crow about it.
Mr. Starr: We will be glad to point out when this is done.
a long-term project.
It has been
Commissioner Chandler: Larry, is there any other technology coming down
the pipeline on this, while we are looking at it, that is going to make
us say in five years time that we are not going to want to do it again?
Not that this is a criticism.
Mr. Starr: Not that we have seen. Remember when you are going around
the country, you will see the pink lights almost everywhere now when you
fly someplace. There is nothing else that we have seen on the market.
Conunissioner Chandler: Also, as a point of interest, because I happen
to live near there (and this borders on the trivial), the last section
of the report talks about the conversion of the final 500. I notice
that 36 of them are going to be part of undergounding project #37.Is
that a project that will be undertaken in the current fiscal year?
Mr. Start: Yes, we are looking at the design for that right now.
is really going to happen in our lifetime.
So it
Chairman Johnston: I would certainly second this program. It is
obviously one of those very successful programs. In a sense, it is a
good example of the utility leading by example in terms of the cost
effectiveness of a variety of energy-saving measures. I know that the
utility has been trying to persuade many customers to change their light
bulbs, and here, you are doing it on a grander scale. So I fee! it is
a excellent program. Thank you very much.
Item 7. c.Utilities Project PLEDGE Proposal
Mr. Baldschun: Project PLEDGE is a proposal. You have read the
memorandum. It is a utilities program that is supported particularly by
Administrative Services. Emily is here to answer questions that could
potentially impact her group.. Also Rob Pound from Information
Technology Services is here to answer questions that affect his area
regarding software programming. Melissa Cavallo will answer questions
on the accounting end of it.
There are really four areas, and the fourth one is utilities. The
Project PLEDGE proposal is staff’s recommendation to provide a mechanism
MINUTES UAD:ll/06/96
Final Page 24
for rate payers to contribute or donate funds to help other rate payers
who are having trouble paying their utility bills. You have seen a lot
of literature on it, so I will not spend a lot of time on the details of
the program. To summarize, we think that the kind of program we are
recommending is cost- effective, however, we want to try it for a one-
year period and evaluate the results and come back to the City Council
with the number of participants and the impacts on staff.
The program that was referred to us by the council was one that involved
the checkoff box. We evaluated that proposal, and based on the impacts
on staff, we do not feel it is cost-effective, so we are not
recommending to the council that we pursue that option. The third
option we mention in the report is male solicitation, which has very
little impact on the staff. It doesn’t appear to provide very many
contributions, based upon the experience of other utilities. With those
opening comments, I will open it up for questions.
Commissioner Gruen: I have a question on your Page 3 where you talk
about the number of residents who meet your four categories. One of
your "# of Residents" is n/a. Somehow, the theory is that if someone
who owes us money gives us a forwarding address, we do not know how many
people we have in that category, whereas if they give us a forwarding
address which doesn’t work, we know how many there are.
Mr. Baldschun: We have not bothered to look up the records for that
activity. It is not something we normally collect on a regular basis.
We had to do some special digging for this assignment just to come up
with these numbers. It was not worth the effort to pursue every last
customer in this report for that purpose.
Chairman Johnston: I have several questions. This obviously seems to
be one of those things where you try to make the logical compromise
between the program that gives the most money and the program that is
most cost-effective. This seems to me to be a very reasonable
compromise from that standpoint.
You are talking about this being a pilot program. As I understand it,
it is going to be done for all residents for a period of one year, so
the piloting is a time period. It is not going to be some subset. Is
that correct?
Mr. Baldschun: We are proposing to implement the program beginning near
the end of the current fiscal year, running it for 12 months, and then
report back to council on the results.
Chairman Johnston: The question I have when I see a report like this
MINLq’ES UAD:ll/06/96
Final Page 25
and when you are building the software, although it is apparently
relatively easy for this purpose to do so, is about other potential
programs that might want to use this. Obviously, there are all kinds of
people who lobby for various checkoff boxes. One that has perhaps been
knocking around here a little louder than some of the others is the
issue of green pricing. That is one of those areas that, at least in
theory, could be handled in exactly the same way. You could have a
pledge with regard to some fixed dollar increment or a percent of markup
on your bill, and you could proceed that way. In working on this
program, how do you see it relating to that? Do you see it as being an
opportunity to build software that could be applied that way? Or do you
see it as being totally separate? Is there any connection here at all?
Mr. Baldschun: The software program for green pricing, and I assume
what you are referring to is customers just contributing to a fund that
would go toward non-renewable resources, would not involve any
programming other than putting a line on the bill statement. ~That would
be fairly easy. What we are talking about with Project PLEDGE is much
more complicated than that. We would have to get into the billing
software programs which are a kluge of many, many programs with no
documentation. The problem with a lot of these things is that they
sound simple, but you have to plan for the unexpected. A customer
pledges that he is going to send two dollars a month, but only sends a
dollar. How do you handle that dollar difference? Those are the
exceptions that create the problems for a lot of folks. So the software
program has to be designed to anticipate and allow for all of those
exceptions. With green pricing, that would be an easy one-line item on
the bill, and there is room for it on the bill.
Chairman Johnston: The way I understand how that might work, it would
be quite similar to a pledge. People could pledge to sign up for so
many dollars per bill, for example, to be added to their bill for
purposes of green pricing. Then you would have the exact same situation
when they pay the bill if they do not pay the full amount. How do you
allocate that? I guess I do not really understand the difference
between this pledge program and a pledge program for money for green
pricing.
Mr. Baldschun: Maybe I do not understand what you are referring to on
green pricing. Is it a situation where the utility is simply collecting
a sum of money and distributing those sums toward the purchase of non-
renewable resources as part of its portfolio, not specifically
identifying on a customer’s bill how much of their kilowatt hours went
to that? If you are talking about the latter, it is more complicated.
Chairman Johnston:What I was talking about is what you might call
MINUTES UAD:I 1/06/96
Final Page 26
"voluntary green pricing" where essentially, some individuals or
companies could choose to pay a surcharge on their utility bill, a fixed
amount per month or a percentage markup, some such thing, and that money
would go to a fund. I believe we have had a number of letters,
proposals, etc., over the years that talked about that program. It
seems to me that there was a direct analogy with the Program PLEDGE.
Mr. Baldschun: If it is a voluntary program, then it would be a problem
because we would run into the same problems we have. If they did not
pay what they had pledged, it would become an accounts receivable --
Commissioner Sahagian: First of all, in concept, I think this is a
really good program. At the same time, given that we are in an election
year and a year of welfare reform, I looked at it in that light trying
to understand it. Two things often come to mind with these kinds of
programs. One is ensuring that the money gets channeled to where it
really needs to be channeled. Secondly, what are the real
administration costs, relative to what you get back. In terms of the
channeling, it looks like you have indicated that you would use the
Salvation Army and would work in some kind of tandem or joint basis to
have them prequalify recipients. In terms of the cost of the program,
you indicate that there is a relatively nominal cost because you would
be piggybacking all of the work on the mailings that we are already
doing, so the postage and handling cost would be small. My only
question is in your analysis of administration costs. You really do not
talk much about the joint evaluation aspect of it with the Salvation
Army and how you determine who qualifies and who does not. Has that
been looked into? Those costs could run up pretty quick, offsetting the
value of the total program.
Mr. Baldschun: I debated whether or not to lengthen the report, and I
decided not include that part. Basically, the Salvation Army is very
amenable to working with agencies. There are a number of utilities, and
that part I mentioned. They have criteria they use for REACH. It is
Palo Alto’s choice. We could decide to liberalize those requirements or
not. We will meet with them and decide what makes the most sense. My
guess is that we will probably collect more money than the rate payers
are going to apply for if we simply stuck with the PG&E REACH
guidelines, which is once a year. I am aware of customers who really
could use rate relief four or five months of the year, but they do not
qualify under the current system. I would hope that we could liberalize
what is currently provided by the Salvation Army. They seem to be open
to that.
Commissioner Sahagian: I’ tend to agree with you. That was my reaction
-- that the collections would probably exceed the distributions. Would
MINUTES UAD:I 1/06/96
Final Page 27
the administration costs be included as part of that?
Mr. Baldschun: The Salvation Army would take 10% of the contributions
to cover their expenses. That is a verba! agreement with them. We have
not signed on the dotted line yet, but that is an estimate.
Commissioner Sahagian: And for the utility administration costs,
extraordinary costs, would there be any recovery there?
Mr. Baldschun: In our administration costs we are not talking about
incremental costs. It is just time of the existing staff to do the
work. It cuts across four areas, the four sitting here. The
incremental costs are only about $1,500 a year. We have not calculated
the actual costs of everybody doing their particular activity.
Ms. Harrison: The staff that would be working on this program are
already working on utilities programs in Administrative Services. So
there would be no increased cost to the utilities. It would be a
tradeoff as to which utility’s work they were doing at any point in
time, just additional work.
Chairman Johnston: I have a card from Mr. Lewis to speak.
James Lewis, 1498 Edgewood Drive, Palo Alto: Chairman Johnston and
members of the Commission, I wish to thank the UAC and staff for your
consideration of the Project PLEDGE program. This community has long
been known as a caring, compassionate place, and I believe this program
potentially .will be a fine example. This concept was originally
introduced to the City three years ago in 1993. At that time, there was
some interest, but for a variety of reasons, it was not pursued. A year
ago today, November 6, 1995, the City Council once again considered this
program, which I called "Utility assistance for families in crisis." It
followed a City Council priority known as "People in Crisis." At that
time, the City Council voted unanimously 9-0 to refer it to the UAC and
staff for further consideration. One might ask, who would donate into
such a program? The answer may be found by looking at a number of other
places that already offer this program such as the following. First,
PG&E’s highly successful REACH program has been offered for many years.
Over 70,000 customers per year contributed $4.5 million in 1995. In the
State of Texas, their program brought in $2.15 million, and in the State
of Arizona, last year $775,000 was contributed into their program. At
the City or municipal level, we find that in the City of Mesa in
Arizona, over $30,000 was contributed by their citizens. In the City of
Garland, Texas, over $i0,000 was voluntarily contributed. You might ask
whether, once collected, are the rate payers in need of the funds? In
checking with several groups, I learned that Palo Alto has such a need,
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as outlined in your staff report. With PG&E, over 350,000 customers
statewide have been helped over the years by this program. In Texas,
the Lone Star Gas Company reports that they have helped 29,000
customers. Incidentally, the Salvation Army already helps a number of
Palo Alto residents, but the source of their funds is outside of Palo
Alto. The REACH program that is collected by PG&E customers has been
allocated to the local Palo Alto Salvation Army people, and
unfortunately, they run out of those funds during the year. Presently,
there is an insufficient amount, so if this program does get approved by
the City, we can either replace those funds with our own citizens
helping our own citizens, or we can supplement those funds that they are
allocated by their own office. I am delighted and pleased that this
program is being considered by the UAC and by the Palo Alto Utilities
Department. I can share with you that I fully support the staff
recommendation. Thank you very much.
Chairman Johnston: Thank you, Mr. Lewis.
MOTION:Commissioner
recommendation.
Eyerly:I move approval of the staff
SECOND: By Commissioner Sahagian.
MOTION PASSES:
vote of 5-0.
Chairman Johnston:That motion passes unanimously on a
Item 7. d.Electric Utility Stranded Cost Update
Mr. Baldschun: Earlier this spring,as you know, we spent some time on
the subject recommendations that council approved, one of which was that
we review this matter again this year with the UAC. That is why we are
here tonight to begin the first of three meetings on stranded costs.
Tonight we have a report that outlines our approach to the subject and
how we plan to approach it over the next three meetings. We also have
Attachment 1 that was performed by Jane Ratchye and Doug Boccignone with
Tom Habashi’s review on the updated stranded cost estimates. They can
answer specific questions in that area, and I will try to answer
questions on the agenda items and how we plan on addressing these items.
Next month, I will primarily be addressing the mitigation measures that
we want to bring to your attention to engage in a dialogue,
specifically, what happens if the staff is wrong in our forecast and we
underestimate or overestimate stranded costs, what options are available
to the City? This is something that we danced around in the spring. We
did not spend much time on it, and I don’t know if any of us sitting
here tonight have definitive answers tonight or next month, but we want
to attempt to look at these things and try to get a comfort zone for
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them. In order to recommend a stranded cost plan, you need to have some
sense of the risk involved if you are wrong.
One other comment I wish to make is that the current council policy is
that we will establish a balance in the Calaveras Reserve by the end of
2003 of $31.6 million. As you know, since the spring, AB 1890 has come
out, and now they have moved it up a year, essentially for the investor-
owned utilities for fall, open competition in 12/31/01. So we have
updated the stranded costs numbers to include what the target balance in
the Calaveras Reserve would be in 2002 rather than in 2003.
There are some other changes that Tom’s group is going to talk about.
Mainly, the COTP is in there this time. Also, the there are some
refinancing assumptions regarding Calaveras that have an impact on the
numbers. There are also some policy decisions that we plan to bring
before the council that really have to be made before any final action
can be taken on the stranded cost policy. The plan is to get those to
the council and to you prior to the final decision on stranded cost.
Chairman Johnston: Tom, are you going to make a presentation?
Mr. Habashi: We do not have one but we are ready to respond to your
questions. I have one thing to add to what Randy said. I want to
emphasize that next month, in addition to the stranded cost investment,
the stranded cost report that you will be getting from Randy addressing
mitigation measures and recovery measures, we will also be bringing in
recommendations for certain policy issues that need to be addressed by
the council in regard to customer choice and asset investment recovery,
as well as sales. We are working on that right now, and we
hope to be able to bring it to you in December.
Chairman Johnston: Could I begin by trying to get a gut level feel of
where we think we are now? I understand that a lot more work needs to
be done, but when I look at Exhibit A, I wonder if I am reading it right
or wrong. The way I look at it, it appears that maybe my worst fears
have been realized. When we had this issue here before, we had talked
about a projection of how fast the energy prices would rise and that if
we were going to have relatively low stranded costs, it would depend
upon our having a fairly steep climb in energy prices. You show the
four different levels that we had talked about before for the City of
Palo Alto, and then there are these two other lines which, at least to
a first order, mirror the City of Palo Alto low-estimate cost for low
energy prices therefore being the stranded cost high estimate. If I
understand this correctly, that seems to be telling us that the
projection is as bad as we thought it could have been. To make matters
even worse, we knew we had a limited time period. We missed a year in
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