HomeMy WebLinkAboutFinal-Staff-Report-ID-3287_Gas-Util-Rate-Decrease-Eff-1-1-2013 (1)
City of Palo Alto (ID # 3287)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 12/3/2012
City of Palo Alto Page 1
Summary Title: Gas Utility Rate Decrease Effective January 1, 2013
Title: Utilities Advisory Commission Recommendation That Council Adopt a
Resolution Decreasing Gas Rates by Amending Utility Rate Schedules G -1, G-
2, G-3, G-4, G-10, G-11 and G-12 Effective January 1, 2013
From: City Manager
Lead Department: Utilities
Recommendation
Staff and the Utilities Advisory Commission (UAC) recommend that the City Council adopt the
attached resolution decreasing gas rates by amending Utility Rate Schedules G-1, G-2, G-3, G-4,
G-10, G-11, and G-12, effective January 1, 2013.
Executive Summary
The City of Palo Alto Utilities (CPAU) gas rates approved by Council and effective July 1, 2012
included charges for planned increases in Pacific Gas and Electric (PG&E) local gas transmission
costs. CPAU expected to have to pay these costs as a result of pipeline safety-related projects
proposed by PG&E following the San Bruno natural gas pipeline explosion. A contentious
regulatory proceeding at the California Public Utilities Commission (CPUC) ensued, and PG&E’s
proposed cost increases have been delayed. Because the PG&E rate increase did not materialize
on the timeline anticipated, staff recommends lowering the Transportation Charge on all CPAU
gas rate schedules. The rate decrease of 2.5 cents/therm for all customer classes amounts to
about a 2% rate decrease for an average customer. If the CPUC ultimately approves an
adjustment to PG&E’s local transmission charges that are paid by CPAU, an appropriate
adjustment to CPAU’s gas Transportation Charge will be proposed at that time.
Background
CPAU pays PG&E for “local” natural gas transmission services. Local transmission services are
for moving gas from the PG&E “Citygate”, a standard delivery point for gas purchases, to Palo
Alto’s Citygate.
City of Palo Alto Page 2
On September 9, 2010 one of PG&E’s 30-inch high pressure gas transmission pipelines exploded
in a residential neighborhood in San Bruno, California. In August 2011, PG&E proposed
spending $2.2 billion between 2012 and 2014 on projects to improve pipeline safety with the
majority of costs to be borne by ratepayers. For Palo Alto, this proposal meant a doubling of
PG&E’s local transmission rate from $0.025 per therm to $0.050 per therm, or a cost increase of
approximately $800,000 per year. When CPAU’s budget and rates were under development,
PG&E’s proposed increased local transmission charge appeared very likely to take effect in 2012,
so staff included this cost in the gas utility’s revenue requirement and resulting rates effective
July 1, 2012.
After PG&E’s proposal, a contentious multi-party regulatory proceeding ensued at the CPUC.
Two significant issues include how much of the cost should be borne by ratepayers versus
investors, and what return on investment is appropriate for these projects. The proceeding is
still in process. The CPUC issued a revised scope of the rulemaking on April 20, 2012, and
added requirements for management and financial audits of PG&E. The CPUC noted its
expectation that the audits should be thorough, and the rulemaking could take 24 months.
Discussion
The cost components in CPAU’s gas supply rate include Commodity, Administrative, and
Transportation Charges. Currently, the Transportation Charge is $0.0685 per therm for all rate
classes. The rate includes the originally expected $0.025 per therm increase in PG&E’s local
transportation rate, costs to monitor and intervene in gas regulatory proceedings at the CPUC,
and non-commodity related administrative and overhead costs. Staff proposes lowering the
Transportation Charge by $0.025 per therm to $0.0435 per therm because the increase in
PG&E’s local transmission rate did not occur as expected.
Customer Bill Impact of Proposed Rate Changes
The table below shows the impact of the proposed rate adjustment on customer bills based on
various consumption levels in different seasons. In calculating commodity charges under the
current and proposed rates, the October 2012 commodity charge ($0.3556/therm) was used.
City of Palo Alto Page 3
Impact of Proposed Rate Decease on Customer Bills
Rate
Schedule Usage
Current
Monthly Bill
Proposed
Monthly Bill
Increase
(Decrease)
Increase
(Decrease)
Therms $ $ $ %
Residential Customers
G-1
Summer
10 18.08 17.83 (0.25) (1.4)
(Median) 18 24.64 24.19 (0.45) (1.8)
45 59.66 58.53 (1.13) (1.9)
G-1
Winter
30 34.47 33.72 (0.75) (2.2)
(Median) 54 54.15 52.80 (1.35) (2.5)
150 179.24 175.49 (3.75) (2.1)
Commercial Customers
G-2 500 573 560 (13) (2.2)
G-2 10,000 10,028 9,778 (250) (2.5)
G-3 50,000 49,746 48,496 (1,250) (2.5)
Commission Review and Recommendation
The UAC reviewed the proposed gas utility rate decrease at its meeting on November 7, 2012.
The UAC voted unanimously to recommend that Council adopt the proposed gas rate decrease
by a vote of 6 to 0.
The draft notes from the UAC’s November 7, 2012 meeting are provided as Attachment C.
Resource Impact
Approval of the proposed rate adjustment will decrease the retail sales revenues for the Gas
Supply Fund by approximately $762,000 per year. Based on an effective date of January 2013,
the estimated decrease in retail sales revenue for FY 2013 is $461,000. The estimated amount
over-collected from July through December 2012 for PG&E’s local transportation costs is
$301,000, which will flow into the Gas Supply Rate Stabilization Reserve (G-SRSR). During the
FY 2014 budget and rate review process, staff will update the cost and revenue projections as
well as expected reserve balances and recommend any appropriate action.
City of Palo Alto Page 4
Policy Implications
The proposed rate changes do not represent any change of policy.
Environmental Review
The decrease to the gas rates in response to changing operating expenses is not subject to the
California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec.
21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a).
Attachments:
Attachment A: Resolution for Gas Rate Changes (PDF)
Attachment B: Revised Rate Schedules (PDF)
Attachment C: Excerpted Draft Minutes of the UAC 11-7-12 Meeting (PDF)
*Not Yet Approved*
121113 dm 6051816
ATTACHMENT A
Resolution No. _________
Resolution of the Council of the City of Palo Alto Decreasing Gas Rates by Amending Utility Rate
Schedules G-1, G-2, G-3, G-4, G-10, G-11 and G-12
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-1 (Residential Gas Service) is hereby amended to read as attached and
incorporated. Utility Rate Schedule G-1, as amended, shall become effective January 1, 2013.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-2 (Residential Master-Metered and Commercial Gas Service) is hereby
amended as attached and incorporated. Utility Rate Schedule G-2, as amended, shall become
effective January 1, 2013.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-3 (Large Commercial Gas Service) is hereby amended as attached and
incorporated. Utility Rate Schedule G-3, as amended, shall become effective January 1, 2013.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-4 (Large Commercial Gas Transportation Service) is hereby amended as
attached and incorporated. Utility Rate Schedule G-4, as amended, shall become effective
January 1, 2013.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-10 (Compressed Natural Gas Service) is hereby amended as attached and
incorporated. Utility Rate Schedule G-10, as amended, shall become effective January 1, 2013.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-11 (Large Commercial Fixed-Term Commodity Gas Service) is hereby amended
as attached and incorporated. Utility Rate Schedule G-11, as amended, shall become effective
January 1, 2013.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule G-12 (Large Commercial Custom Commodity Gas Service) is hereby amended as
attached and incorporated. Utility Rate Schedule G-12, as amended, shall become effective
January 1, 2013.
//
//
*Not Yet Approved*
121113 dm 6051816
SECTION 8. The Council finds that the adoption of this resolution decreasing gas rates
in response to changing operating expenses is not subject to the California Environmental
Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14
of the California Code of Regulations Sec. 15273(a).
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
___________________________ ___________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________
Sr. Deputy City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative
Services
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-1 Effective 71-1-20123
dated 7-1-200912 Sheet No G-1-1
A. APPLICABILITY:
This schedule applies to separately-metered single-family residential dwellings receiving natural gas
service from the City of Palo Alto Utilities. This schedule also applies to individually-metered
residential dwellings in a multi-family complex.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides natural gas service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ..........................................................................................................$9.88
Tier 1 Rates: Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .......................................... $0.10-$2.00
2. Administrative ................................................................................... $0.0074
3. Transportation ................................................................................... $0.068435
Distribution Charge: ............................................................................................. $0.3883
Tier 2 Rates: (All usage over 100% of Tier 1)
Supply Charges:
1. Commodity (Monthly Market Based) .......................................... $0.10-2.00
2. Administrative.................................................................................... $0.0074
3. Transportation .................................................................................... $0.068435
Distribution Charge: ............................................................................................. $0.9037
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
RESIDENTIAL GAS SERVICE
UTILITY RATE SCHEDULE G-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-1-2 Effective 71-1-20123
dated 7-1-200912 Sheet No G-1-2
statement, the bill amount may be broken down into appropriate components as
calculated under Section C. The Commodity charge is based on the monthly natural gas
Bidweek Price Index for delivery at PG&E Citygate, accounting for delivery losses to the
Customer’s meter. The Commodity charge will fall within the minimum/maximum range
set forth in Section C.
2. Seasonal Rate Changes:
The Summer period is effective April 1 to October 31 and the Winter period is effective from
November 1 to March 31. When the billing period includes use in both the Summer and the
Winter periods, the usage will be prorated based on the number of days in each seasonal
period, and the charges based on the applicable rates for each period. For further discussion
of bill calculation and proration, refer to Rule and Regulation 11.
3. Calculation of Usage Tiers
Tier 1 natural gas usage shall be calculated and billed based upon a level of 0.667 therms per
day during the Summer period and 2.0 therms per day during the Winter period, rounded to
the nearest whole therm, based on meter reading days of service. As an example, for a 30
day bill, the Tier 1 level would be 20 therms during the Summer period and 60 therms during
the Winter period months. For further discussion of bill calculation and proration, refer to
Rule and Regulation 11.
{End}
RESIDENTIAL MASTER-METERED AND COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-2-1 Effective 71-1-20123
dated 7-1-200912 Sheet No G-2-1
A. APPLICABILITY:
This schedule applies to non-residential Customers who use less than 250,000 therms per year at a
single address. This schedule also applies to master-metered services in multi-family residential
facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides natural gas service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ........................................................................................................$74.86
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .................................... $0.10-$2.00
2. Administrative ................................................................................... $0.0074
3. Transportation .................................................................................... $0.068435
Distribution Charge: ........................................................................................................ $0.5638
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery
at PG&E Citygate, accounting for delivery losses to the Customer’s meter. The Commodity
charge will fall within the minimum/maximum range set forth in Section C.
{End}
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-1 Effective 71-1-20123
dated 37-1-20112 Sheet No G-3-1
A. APPLICABILITY:
This schedule applies to large commercial Customers who use at least 250,000 therms per year at
one site and to City-owned generation facilities.
B. TERRITORY:
This schedule applies anywhere the City of Palo Alto provides natural gas service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: $361.18
Per Therm
Supply Charges:
1. Commodity (Monthly Market Based) .................................................... $0.10-$2.00
2. Administrative .............................................................................................$0.0074
3. Transportation ...........................................................................................$0.068435
Distribution Charge: .............................................................................................................$0.5562
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as calculated
under Section C.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery
at PG&E Citygate, accounting for delivery losses to the Customer’s meter. The Commodity
charge will fall within the minimum/maximum range set forth in Section C.
2. Request for Service
A qualifying Customer may request service under this schedule for more than one account or
LARGE COMMERCIAL GAS SERVICE
UTILITY RATE SCHEDULE G-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-3-2 Effective 71-1-20123
dated 37-1-20112 Sheet No G-3-2
meter if the accounts are located on one site. A site consists of one or more contiguous
parcels of land with no intervening public right-of- ways (e.g. streets).
3. Changing Rate Schedules
Customers may request a rate schedule change at any time to any applicable City of Palo Alto
full-service rate schedule. Customers served under this rate schedule may elect Gas Direct
Access at any time.
{End}
LARGE COMMERCIAL GAS TRANSPORTATION SERVICE
UTILITY RATE SCHEDULE G-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-4-1 Effective 71-1-20123
dated 7-1-200912 Sheet No G-4-1
A. APPLICABILITY:
This schedule applies to gas transportation service for large commercial customers who use at least
250,000 therms per year and who utilize a Gas Service Provider to procure natural gas.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides natural gas service.
C. UNBUNDLED RATES: Per Service
Monthly Service Charge: ......................................................................................................$361.18
Per Therm
Supply Charge:
Transportation .......................................................................................................$0.068435
Distribution Charge: ..............................................................................................................$0.5562
D. SPECIAL NOTES:
1. Specific terms and conditions shall be covered by separate agreement between the City and
Gas Service Provider.
2. Request for Service
Qualifying customers may request service under this schedule for more than one account or
meter if the accounts are located on one site. A site consists of one or more contiguous
parcels of land with no intervening public right-of-ways (e.g. streets).
3. Changing Rate Schedules
Qualifying customers may request a rate schedule change at any time during the year to any
applicable full service rate schedule.
{End}
COMPRESSED NATURAL GAS SERVICE
UTILITY RATE SCHEDULE G-10
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-10-1 Effective 71-1-20123
dated 37-1-20112 Sheet No.G-10-1
A. APPLICABILITY:
This schedule applies to the sale of natural gas to the City-owned compressed natural gas (CNG) fueling
station at the Municipal Service Center in Palo Alto
B. TERRITORY:
Applies to location at the Municipal Service Center in City of Palo Alto.
C. RATES: Per Service
Monthly Service Charge: ........................................................................................................$50.65
Per Therm
Supply Charges:
Commodity (Monthly Market Based) ................................................................ $0.10-$2.00
Administrative ..........................................................................................................$0.0074
Transportation ......................................................................................................$0.068435
D. SPECIAL CONDITIONS
1. The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for
any applicable discounts, surcharges and/or taxes.
The Commodity charge is based on the monthly natural gas Bidweek Price Index for delivery at
PG&E Citygate, accounting for delivery losses to the customer’s meter. The Commodity charge will
fall within the minimum/maximum range set forth in Section C.
{End}
LARGE COMMERCIAL FIXED-TERM COMMODITY GAS SERVICE
UTILITY RATE SCHEDULE G-11
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-11-1 Effective 71-1-20123
dated 7-1-200912 Sheet No. G-11-1
A. APPLICABILITY:
This schedule applies to large commercial Customers who use at least 250,000 therms per year at
one site.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides natural gas service.
C. RATES: Per Service
Monthly Service Charge: $361.18
Per Therm
Supply Charges:
1. Commodity ............................................................................................ $0.20-$2.00
2. Administrative ..............................................................................................$0.0074
3. Transportation ...........................................................................................$0.068435
Distribution Charges: ............................................................................................................$0.5562
D. TERM: 12 Months or 24 Months
E. SPECIAL NOTES:
1. Calculation of Cost Components
The Commodity charge shall be fixed for a 12 or 24-month term. The other components of
the rate: Monthly Service Charge, Supply Charges, and Distribution Charges may be
modified periodically with the Council's approval.
The Commodity charge shall be based upon the Customer class average load shape, a risk
premium, and market prices. The Commodity charge will fall within the range set in Section
C, Part 1 of this Schedule and will be for gas delivered to PG&E City Gate.
2. Request for Service
Qualifying Customers may request service by submitting a completed Gas Service (G-11)
Form. Once both parties have agreed on all required terms, they may execute the form,
which will govern CPAU’s provision of service for the stated term.
LARGE COMMERCIAL FIXED-TERM COMMODITY GAS SERVICE
UTILITY RATE SCHEDULE G-11
(Continued)
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-11-2 Effective 71-1-20123
dated 7-1-200912 Sheet No. G-11-2
3. Changing Rate Schedules
The customer must remain on this term rate for the term indicated on the Gas Service (G-11)
Form, providing the Customer continues to receive distribution services from CPAU. The
Gas Service (G-11) Form shall indicate the Customer's approximate gas usage (load). This
usage shall be served solely by CPAU.
A Customer may renew service under this rate schedule with 30-day advance notice. The
Commodity charge for the renewed term of service will be based on the published fixed-term
commodity charge at the time service is renewed. Customers electing not to renew service
under this rate schedule will be returned to an applicable full-service gas rate schedule of
their choice. If no choice is made, the Customer will be placed on G-3.
{End}
LARGE COMMERCIAL CUSTOM COMMODITY GAS SERVICE
UTILITY RATE SCHEDULE G-12
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-12-1 Effective 71-1-20123
dated 7-1-200912 Sheet No. G-12-1
A. APPLICABILITY:
This schedule applies to large commercial Customers who use at least 250,000 therms per year at
one site.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides natural gas service.
C. RATES: Per Service
Monthly Service Charge: $361.18
Per Therm
Supply Charges:
1. Commodity ............................................................................................ $0.20-$2.00
2. Administrative ..............................................................................................$0.0074
3. Transportation ...........................................................................................$0.068435
Distribution Charges: ............................................................................................................$0.5562
D. TERM: Up to 5 years
E. SPECIAL NOTES:
1. Calculation of Cost Components
The Commodity charge shall be based upon the Customer usage shape and size, term, and
market prices. The other components of the rate: Monthly Service Charge, Supply Charges,
and Distribution Charges may be modified periodically with the Council’s approval.
Rate options may include, but are not limited to, commodity rate caps, collars, forward strips,
and trigger rates. Pricing for such products, including any necessary fees, will fall within the
Commodity Charge range set forth in Section C, Part 1 of this Schedule.
A rate cap is defined as a floating rate with a guaranteed maximum price.
A rate collar is defined as a floating rate with maximum and minimum rate levels.
Forward strips are defined as a set rate for a set term calculated by taking the average rate
over a specified period of time. A rate trigger is a mechanism wherein the customer could
set a specific rate level and if the market rate reaches that level, the customer rate is
automatically set at that level.
LARGE COMMERCIAL CUSTOM COMMODITY GAS SERVICE
UTILITY RATE SCHEDULE G-12
(continued)
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No G-12-2 Effective 71-1-20123
dated 7-1-200912 Sheet No. G-12-2
2. Request for Service
Qualifying Customers may request service by submitting a completed Gas Service (G-12)
Form. Once both parties have agreed on all required terms, they may execute the form,
which will govern CPAU’s provision of service for the stated term.
Qualifying customers may request service under this schedule for more than one account or
meter if the accounts are located on one site. A site consists of one or more contiguous
parcels of land with no intervening public right-of- ways (e.g. streets).
3. Changing Rate Schedules
The Customer must remain on this term rate for the term indicated on the Gas Service (G-12)
Form so long as the Customer continues to receive distribution services from CPAU. The
Gas Service (G-12) Form shall indicate the Customer's approximate gas usage (load). This
usage shall be served solely by CPAU.
A Customer may request a renewal of this rate with 30-day advance written notice to CPAU.
The commodity charge for the renewed period will be based on the market prices and other
pricing factors that exist at the time the rate is renewed. Customers electing not to renew the
Contract will be returned to an applicable full-service gas rate schedule of their choice. If no
choice is made, the Customer will be placed on G-3.
{End}
ATTACHMENT C
EXCERPTED DRAFT MINUTES OF THE UAC’S NOVEMBER 7, 2012 MEETING
ITEM 4: ACTION: Gas Utility Proposed Rate Decrease Effective January 1, 2013
Assistant Director Jane Ratchye advised that there was no presentation on this item, but staff is
available to answer questions about the proposal.
Commissioner Waldfogel asked if there is any issue with respect to the reserve levels after such
a rate decrease. Ratchye responded that the reserve levels after the rate decrease will be
within the Council-approved reserve guidelines.
ACTION:
Vice Chair Foster moved that the UAC recommend that the Council amend proposed Utility
Rate Schedules G-1, G-2, G-3, G-4, G-10, G-11, and G-12 to be effective January 1, 2013.
Commissioner Hall seconded the motion. The motion carried unanimously (6-0) with
Commissioner Eglash absent.