HomeMy WebLinkAbout1996-12-16 City Council (35)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT :UTILITIES
AGENDA DATE: DECEMBER 16, 1996 CMR:499:96
SUBJECT:Adoption of a Resolution which raises the Commodity Price Cap on
Gas Rate Schedule G-3
REQUEST
This report requests that Council adopt a resolution which authorizes the raising of the
commodity price cap on Gas Rate Schedule G-3 from 35 cents to 65 cents per therm to track the
City’s wholesale gas purchase prices, effective January’ 1, 1997.
RECOMMENDATION
Staff recommends Council approve the attached resolution raising the gas commodity price cap
on Gas Rate Schedule G-3.
POLICY IMPLICATIONS
This recommendation has no policy implications.
EXECUTIVE SUMMARY
In 1995, the City Council approved revision of Non-core Gas Rate Schedule G-3 to allow the
commodity charge to be adjusted monthly within a preauthorized range of 10 cents to 35 cents
per therm (CMR:229:95). This range was established to track anticipated gas market prices.
Presently, there are six large non-core customers receiving service under G-3. The3’ represent
approximately $1.9 million in annual revenue. The commodity charge for these customers
changes monthIy and is equal to the City’s average cost of the natural gas paid at the California
border, for the month immediately preceding the month in which the customer is billed.
Gas prices are weather driven. The unusually cold weather which hit the Pacific Northwest
recently, coupled with lower storage levels, caused natural gas prices to rise higher than
anticipated levels. This sharp rise in the price of gas impacted Palo Alto’s wholesale gas prices.
In November 1996, the wholesale price of gas purchases to the City rose’by 10 cents, or 42
percent, and is expected to increase to a level of 37 cents in December 1996. Exhibit "A" shows
the change in natural gas prices since June 1995, when the present price cap was established.
This trend is expected to continue until the end of the winter season. The anticipated rise in gas
prices Will have a negative impact on the gas utility of about $14,000 during the month of
CMR:499:96 Page 1 of 2
January 1997. Therefore, staff recommends that the gas commodity cap of 35 cents be adjusted
upward to 65 cents to accommodate the expected increase in future gas market prices.
This price cap change will not impact the core customers, as they pay the average cost of gas
throughout the year. If purchase gas costs for FY 96-97 are higher than budgeted, the Rate
Stabilization Reserve, which currently has a revenue surplus would be used to cover this
contingency.
Normally, utility rate changes would be presented to the Utilities Advisory Commission and the
Finance Committee for their consideration before the Council’s consideration is requested.
However, in view of the City’s need to have greater flexibility in the pricing of natural gas
commodity during this era of price volatility and to assure that customers pay their fair share for
the purchase cost of gas, staff has brought this matter directly to the City Council. Staff~vilt
inform the UAC of any action taken in this matter at the next UAC meeting.
FISCAL IMPACT
There will be no fiscal impact of the recommended action as the price is a pass through cost to
non-core customers.
ENVIRONMENTAL ASSESSMENT
Adoption of this resolution does not constitute a project under the California Environmental Air
Quality Act; therefore, an environmental assessment is not required.
ATTACHMENTS
Exhibit "A"
Resolution
Gas Rate Schedule G-3
PREPARED BY:
DEPARTMENT HEAD APPROVAL:
Lucie Hirmina, Manager Utilities Rates
EDWARD J. 5,~ZEK (y
Director of Utilities
CITY MANAGER APPROVAL:
FLEMING
er
CMR:499:96 Page 1 of 2
-r
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING UTILITY RATE SCHEDULE G-3 OF THE CITY OF
PALO ALTO UTILITIES RATES AND CHARGES PERTAINING
TO NON-CORE NATURAL GAS SERVICE
The Council of the City of Palo Alto does hereby RESOLVE as
follows:
SECTION !. Pursuant to Section 12.20.010 of the Palo Alto
Municipal Code, Schedule G-3 (Non-Core Natural Gas Service) of the
Palo Alto Utilities Rates and Charges is hereby amended to read in
accordance with Sheet G-3-1 attached hereto and incorporated herein
by reference. The foregoing Utility Rate Schedule, as amended and
as adopted, shall become effective on January i, 1997.
SECTION 2. The Council finds that the revenue derived from
the authorized adjustment and addition of the several natura! gas
service rates shall be used only for the purposes set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 3. 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:APPROVED:
City Clerk
APPROVED AS TO FORM:
Mayor
City Manager
Senior Asst. City Attorney Director of Utilities
Director of Finance
961209 syn 0071099
NON-CORE NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
A. APPLICABILITY:
This schedule applies to non-core service for customers who use at least 250,000 therms per
year per service address.
B. TERRITORY:
Within the service area of the City of Palo Alto and on land owned or leased by the City.
RATES:
Per Meter
Per Month
1.Commodity Charge Per Therm ................................10.09 - 65.0¢
2.Brokerage Fee ....................................................0.4¢
3.Transportation Charge Per Therm ....................................17.0¢
D. SPECIAL CONDITIONS:
Service under this schedule is subject to discontinuance in whole or in part in Case of
actual or anticipated shortage of natural gas resulting from an insufficient supply,
inadequate transmission or delivery capacity of facilities, or shortage requirements.
However, the City will attempt to minimize disruption by providing adequate notice prior
to curtailment. The City will not be liable for damages occasioned by interruption or
discontinuance of service supplied under this schedule.
Specific terms and conditions shall be covered by separate agreement between the City
and customers served under this rate schedule.
The commodity charge is equal to the City’s average cost of the natural gas paid at the
California border for the month immediately preceding the month in which the customer
is billed. The commodity charge will fall within the minimum/maximum range set forth in
C.1.
4.A customer who elects to be served under this rate will pay a brokerage fee equal to the
allocable administrative costs incurred by the City in providing the non-core gas service.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. G-3-1 dated 7-1-95
Effective 1-1-97
Sheet No. G-3-1