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HomeMy WebLinkAboutStaff Report 240-09TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEP ARMENT: UTILITIES DATE: MAY 18,2009 CMR: 240:09 REPORT TYPE: CONSENT SUBJECT: Utilities Advisory Commission Recommendation to Approve Changes to the ProjectPLEDGE Program RECOMMENDATION Staff and the Utilities Advisory Commission (UAC) recommend that the Council approve changes to the ProjectPLEDGE customer financial assistance program. These changes modify the criteria for program eligibility, frequency of disbursements, and recipient funding limits. BACKGROUND ProjectPLEDGE provides funds which are applied to the Utilities accounts of residential customers having difficulty paying their bills due to financial hardship. The ProjectPLEDGE program is not funded in the Utilities Operating Budget. ProjectPLEDGE funding is provided by interested Utilities customers via voluntary contributions on their own monthly Utilities bills, made in addition to their regular charges. The Utilities Department currently administers ProjectPLEDGE on behalf of those donating customers to ensure that the funds reach those in need. On December 16, 1996, the Council approved the implementation of ProjectPLEDGE as a one- year pilot program (CMR:498:96). The program's goal was to target and assist Palo Alto residents who are elderly, handicapped, working low-income families or individuals, and public assistance families and individuals experiencing unusual hardship such as medical problems, loss of employment, abandonment, or other situations. This program allowed customers to voluntarily pledge an amount that was added to their utilities bill each month. The funds collected for the program were controlled by the Utilities Department and were originally administered by the Salvation Army. The Salvation Army received an administrative fee of 10 percent to make site-visits, verify eligibility, assist Utilities customers with completing the program application, or to make other Utilities customer contacts to complete outreach activities and reach potential program participants. At the end of the one-year pilot period approved by Council in December 1996, the program was continued. Although ProjectPLEDGE continued after 1996, the Salvation Army discontinued administering the program during Fiscal Year 2004-05, when their local Palo Alto office was closed. Regional Salvation Army representatives do, however, inform their Palo Alto clients of CMR: 240:09 Page I of 4 the existence of the program and refer these Utilities customers to the Utilities Department. The work of outreach, eligibility determination, site visits and other program functions has been performed by the Utilities Credit and Collection staff since Fiscal Year 2004-2005. DISCUSSION Project PLEDGE was originally established as a "needs-based" intervention program for Utilities customers in one-time crisis situations, unlike the long-term financial assistance for low-income customers addressed by the "income-based" Utilities-discount Rate Assistance Program (RAP). Other community-based utility bill financial support programs available to City of Palo Alto Utilities customers include annual payment programs from: a) the federal "Low Income Home Energy Assistance Program" (LIHEAP), administered by the County of Santa Clara, and b) from St. Vincent De Paul. Non-cash assistance is available through the Utilities Residential Energy Assistance Program (REAP), funded by the Electric Public Benefits Program, which helps low- income customers better manage their Utilities costs through free weatherization of their homes. Over time, the line between the long-term RAP rate discount and crisis-driven ProjectPLEDGE has become blurred, with RAP customers who are experiencing chronic financial hardship, rather than a one-time crisis, seeking and receiving assistance from ProjectPLEDGE. This has affected staff's ability to budget and dispense ProjectPLEDGE funds to families experiencing a one-time CrISIS. Staff recommends the ProjectPLEDGE program parameters be changed to more accurately differentiate between the RAP and ProjectPLEDGE programs. These changes to ProjectPLEDGE are based upon the most common customer "crises" that have been seen by staff and are intended to clarify eligibility, frequency, and funding availability. The changes will increase speed of service delivery to customers by reducing the need for site visits to determine eligibility and the amount of documentation required. The changes will also reduce overlap with the Rate Assistance Program, although RAP participants will remain eligible for one-time ProjectPLEDGE crisis assistance after implementation of the new guidelines. CMR: 240:09 Page 2 of4 CURRENT PROPOSED ProjectP LEDGE Elderly, Handicapped, • Recent unemployment by both the PROGRAM Working Low Income account holder and working ELIGIBILITY families, or Public spouse/domestic partner; Assistance families • Recent unemployment by the account experiencing "unusual" holder, ifthe spouse/domestic partner hardship such as an does not work; ongoing medical • Recent acute medical condition or problem, loss of job, unreimbursed medical expenses; abandonment, etc. • Recent death by either the account .......... holder or spouse/domestic £artner FREQUENCY Once every One time only for each unique event OF FUNDING 12 calendar months (including RAP participants after Guideline changes) I RECIPIENT Up to $750 Up to $750 . FUNDING (No Change) LIMITS In the current economic climate, long-term unemployment is increasing and represents one of the largest financial impacts on a household for a "needs-based" program, and is explicitly addressed in the recommended changes to the eligibility criteria. Death of one or more primary wage earners or the onset of an acute medical condition that affects the ability to work can lead to sudden and large expenses and result in financial crisis affecting a customer's ability to pay hislher Utilities bilL It is proposed that ProjectPLEDGE pay up to $750 to address crises situations. Chronic financial conditions affecting a customer's ability to pay Utilities bills are addressed through the Rate Assistance Program. The $750 amount represents several months of Utilities consumption for some customers; for others it represents a portion of a single month. Written documentation would be required from the ProjectPLEDGE applicant verifying that the customer meets the proposed guidelines. Since the program is limited to the voluntary donations of customers, approving these guideline changes would help to ensure that the program targets those customers needing critical assistance, improves staff's ability to plan, budget and disburse funds, and allows for clearer community awareness and outreach for ProjectPLEDGE. If approved, the proposed changes would ensure that ProjectPLEDGE would remain "needs- based" for crisis-only intervention, as opposed to the "income-based" Utilities Rate Assistance Program. COMMISSION REVIEW AND RECOMMENDATIONS On May 6, 2009, the UAC voted unanimously (4-0, 1 absent) to recommend that the City Council approve the proposed changes to the ProjectPLEDGE Program, with the additional clarification that the "Frequency of Funding" originally indicated in the Table ("One Time Only Including RAP participants after the Guideline Changes"), be amended to read "Once per Unique Event", ensuring that recipients would remain eligible for program assistance more than once, but not for the same event. CMR: 240:09 Page 3 of4 RESOURCE IMPACT ProjectPLEDGE is voluntarily funded by Utilities customers with contributions held in a special account. This account allows contributions to exceed disbursements in some years (leaving a positive balance), or disbursements to exceed annual contributions in that year (if the account balance allows). At no time is the program allowed to have disbursements that exceed the ongoing positive balance in the account. The level of annual customer donations for ProjectPLEDGE has been relatively stable since the program was started in 1996, with donations averaging approximately $10,000 per year. Program marketing to increase donations has been limited. Twenty-four customers participated in ProjectPLEDGE for Fiscal Year 2007-08, with $13,063 in disbursements (average $544/recipient). Nineteen customers participated for the first three quarters of FY 2008-09 with $9,197 in disbursements (average $484/recipient). Approximately $11,000 remains in the ProjectPLEDGE fund as of the end of March, 2009. The ProjectPLEDGE program does not have a significant impact on the total amount of Utilities Department annual bad debt or write-off. Customer participation in ProjectPLEDGE will not affect the Utilities delinquency process or avoid termination of service for non-payment. Participation may result in a mutually agreed-upon payment arrangement between the customer and Utilities to help financially manage the customer account. POLICY IMPLICATIONS The proposed program changes reinforce the policy of limiting availability of ProjectPLEDGE to unusual, non-recurring situations for customers needing financial assistance with the City of Palo Alto Utilities bill. The proposed changes to ProjectPLEDGE do not change or impact the long- term financial assistance offered through the Utilities Rate Assistance Program. ENVIRONMENTAL REVIEW Approval of changes to the ProjectPLEDGE program do not meet the definition of a "project" pursuant to Public Resources Code Section 21065, thus no review under the California Environmental Quality Act is required. ATTACHMENTS A. CMR: 498:96 Utilities Charitable Contribution Program, ProjectPLEDGE B. Excerpt Minutes from UAC Meeting o~~~ PREPARED BY: ~------- TOM AUZENNE Assistant Director, Customer Support Services DEPARTMENT APPROVAL: VALE~ Director of Utilities CITY MANAGER APPROVAL: CMR: 240:09 Page 4 of4 ATTACHMENT A City of.Palo Alto .. City Manager's Report ---.---.. ---~."-.--.... ~ .... ~ .... ~.-------~---... --.. «'~-·-----·---------·--·1 0 TO: . ,HONORABLE CITY COUNCIL' ' . FROM: CITY MANAGER DEPARTMENT: UTILITIES 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 intro~uce a charitable con~ribution program that will raise funds to help resident experiencing financial difficulties pay their utility bilis. This report requests that Councjl approve the staffs ProjectPLEDGE proposaL . RECOMMENDATIONS Staffrecomme.nds that Council approve ProjectPLEDGE as a <;me·Year pilot program and' . direct staff to return to Council with results on customer participation levels and staff workload impact. Based on this infonnation, staff will recommend to Council that ProjectPLEDGE continue, be modified, or be discontinued. POLICY IMPLICATIONS ProjectPLEDGE supports the City Council's priority established in 1993 to develop programs to address "People in Crisis." , EXECUTIVES~ARY 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 utility 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. St~ff 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 Anny 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 il direct mail solicitation program would generate an insignificant level of donations. FISCAL INIP ACT Ongoing costs to implement ProjectPLEDGE are estimated at $1,500 annually which would be funded from the existing operating budget. ENVIRONMENT At ASSESSMENT This proposal does not constitute a project und~r the California Environmental Quality Act; therefore, an environmental assessment is riot 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: CMR:498:96 Page 2 of 2 MEMORANDUM TO: Utilities Advisory Commission FROM: Utilities Department AGENDA DATE: November 6, 1996 SUBJECT: ProjectPLEDGE Proposal REQUEST This report presents staffs 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 staffs proposal for a charitable contribution program that would be called ProjectPLEDGE. RECOl\fMENDATION Staff recommends that the City offer ProjectPLEDGE as a pilot prog~am 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. II EXECUTIVE SVMl\1ARY In fiscal year 1995-96, at the direction of ~ouncil, staff began exploring ways to design and implement a voluntary ratepayer donation program to help residents who are unable to pay their utility bills due to financial hardship. The assignment was limited in scope and not inten~ed 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 eacp 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. 1 The following table summarizes the programs: Type of Frequency Total Estimated Program of Estimated On-going Impact on Stqff Customer Donations Costs per Do1UJtion per Year Year Substantial. Utility Payment Processing Center and Accounting require Checkoff Monthly $25,000 $20,000-additional staff resources (one half to Box $40,000 one full-time temp) to reconcile payments received with amounts actually billed on a daily basis. Costs would outweigh benefits. Significant software programming initially. On-going impacts on Utilities Pledge. Monthly $25,000 $1,500 Customer Service Center, Payment Processing Center, and Accounting expected to be absorbed within existing staff levels. Direct Mail Semi-$5,000 $900 Minimal Solid-annually tation From a municipal law point. of view it is do-able to implement anyone 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 Cpeckoff 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 Mail 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. 2 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 26,000 residential electric accounts, a projected 4 percent participation rate, and an average monthly pledge of $2, ProjectPLEDGE residential contributions are estimated at approximately $25,000 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: Amounl #of Situation ofWrile-Residents • Reason/Customer Explanation off S1O,200 92 ~!.!st. r~u~sls dis~onn~tiQn/l~v~s townfnQ f~u:~·:ardin~ ilddr~ss • Forwarding address not known at tim~ of disconnect order • Customer delays notifying post office of fQrwarding address • Customer forgets to pay bill in midst of. moving • Customer believes bill too small to matter $16,800 nfa ~usl, r~uest diS~Qnn~liQnffQrwardin~ adgr~ss ~iv~nfd~S!l't 12aX • Similar reasons as above $1,700 6 Customer deceased • No family member or estate responsible for bill $6,700 23 UtilitX initiates di~nn~tiQn Qf servi" CQr nQn-12ilxm$3lt • Customer leaves town, often experiencing financial difficultiest 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: 3 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 199Jthe 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 forPG&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 desenion, 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 (FTB) 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 4 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: l, 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 determine 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. Pled&e: 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 bilI 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 Mail 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 ~endar year contributions to tax agencies and donors and would redistribute the contributions to qualifying Palo Alto residents. stafr 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 custQmer pledge programs in their service territories. The following chart represents a sample of utilitys with programs in place. . utUity Program Program Type Disperser Est. % of Name of Funds Customer Participation Gainesville ProjectSHARE Monthly Pledge Salvation 5% Regional Army Utilities Salt River SHARE Monthly Pledge Salvation 3% Project Army Sierra SAFE Monthly Pledge or Salvation nla Pacific one time donation Army PG&E REACH Monthly Pledge Salvation nla Army City of SHARE Checkoff Box Riverside 5% '! Riverside County Grays Project HELP Monthly Pledge Community 2% Harbor Action PUD Group 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. FISCAL IMPACT On-going costs to implement ProjectPLEDGE are estimated at $1,500 annually which would be funded from the existing operating budget. ENVIRONMENT AL ASSESSMENT This proposal does not constitute a project under the California Environmental Quality Act; therefore; an environmental assessment is nQt required. PREPARED BY: DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: Randy Baldschun, Asst. Director of Utilities, Administrative Services 7 1. 2. 3 • 4. 5. 6. 7. 8 • 9 . 10. 11: of Palo Alto Utilities Advisory Conunission Wednesday, November 6, 1996 City Council Chambers MINUTES Roll Call Oral Communications Approval of Minutes Agenda Review and Revisions Consent Calendar Unfinished Business: ...... . a. Final Report by the Organizational Review Consultant, TB&A . . . . . . . . . . . . b. Gas Issues Update .............. . c.' UAC Planning for Joint Meeting With Council .. New Business: ............... . a. Compressed Natural Gas Rate ......•. b. Information Report, Street Light Conversion 2 2 2 2 2 2 2 • • 17 • • • 42 • • 17 · • 17 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 . Palo Alto. 94301 "B" 415.329.2277 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 1. 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: I move approval of t.he minutes and Executive Summary. 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. Item 6. Item 6 MINUTES Final Consent Calendar -Nothing. Unfinished Business a. Final Report by the Organizationai Review Consultant, ~ UAD:1II061% Pagel 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 tQ 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. It has been a long-term project. 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. Commissioner 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 underta~en in the current fiscal year? ~r. Starr: Yes, we are looking at the design for that right now. So it is really going to happen in our lifetime. Chairman Johnston: I would certainly second this program. It is obyiously 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 feel it is a excellent program. Thank you very much. Item 7. c. Utilities Project PLEDGE Proposal Mr. Baldschun: Proj ect 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 MIi'iUTES Final UAD: 11106/96 Page 24 for rate payers to contribute ~r 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 MINUTES UAD:llf06196 Final Page ZS 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 custome"r 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 ~n 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: MIl'iUTES Final What I was talking about is what you might call UAD:II/06/96 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 tome 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, wha,t 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 anq 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 costO 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 cri"teria 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, butothey 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 MI~UTES Final UAD:llI06196 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 verbal agreement with them. We have not signed on the dotted line yet, but that is an estimate. commissioner Sahaqian: 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. HI. Harrison: The staff that would be working on this program are already working on utilities program~ in Administrative Services. So there would be no increased cost to the utili ties. 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 ~tate 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 $10 .. 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, MINUTES Final UAD: 11106196 Plge 28 • 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, th~ 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 allocat~d 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: Tha~k you, Mr. Lewis. MOTION: Commissioner Eyerly: I move approval of the staff recommendation. aSCOND: By Commissioner Sahagian . MOTION PASSES: Chairman Johnston: That motion passes unanimously on a vote of 5-0. 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 Attachme~t 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 MINUTES Final UAD:11106196 Page 29 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 ~re 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 h.ere 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 MINUTES Final UAD:ll/06196 PageJO ATT ACHMENT 8 EXCERPTED from Draft Minutes of UAC Meeting of May 6, 2009 ITEM 5: ACTION ITEM: Recommendation to Approve Changes to the ProjectPLEDGE Program· Director Fong indicated that there would not be a presentation but that Tom Auzenne, Utilities Assistant Director for Customer Support Services, was there to answer questions. Director Fong prefaced the discussion by stating that the line between the Rate Assistance Program (RAP), a long-term financial assistance program for those chronically challenged with paying their Utilities bill, and ProjectPLEDGE, a program to assist those with unusual situations, had become blurred over time, making ProjectPLEDGE more difficult to administer. Commissioner Melton indicated that he was unsure as to whether the proposed program change under "Frequency of Funding" indicated in the table on page 3 ("One Time Only -Including RAP participants after the Guideline Changes") meant that program recipients were being limited to partiCipating in ProjectPLEDGE only once, forever, or if it meant limited to once per recipient per isolated event, because unusual things can happen years apart. Auzenne replied "once per unique event." Commission Chairman Dawes indicated that it seemed a positive program, but one he was unfamiliar with due to the lack of outreach since 1996. Commissioner Waldfogel asked if the proposed changes would lead to increased demand by potential program recipients. Auzenne felt that there would probably be an increase in program demand just because of the economy. Director Fong stated that that there would also be increased marketing and outreach to potential donors, once the program guidelines were clarified and distinguished from the long-term financial assistance provided by the Rate Assistance Program (RAP). Auzenne also forecast that the Department was likely to see an increase in Rate Assistance Program applications due to the state of the economy. Commissioner Keller asked that the "Frequency of Funding" language in the table, as identified by Commissioner Melton, be clarified in the report to Council. Director Fong indicated that it would be clarified. The Commission voted 4-0 to recommend staffs proposed changes to the program with the additional clarification that the "Frequency of Funding" will be "Once per unique event" and not "One time only".