HomeMy WebLinkAbout2001-02-20 City Council (19)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
1
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:FEBRUARY 20, 2001 CMR:144:01
SUBJECT:APPROVAL OF A RESOLUTION ADOPTING A GAS RATE
INCREASE
RECOMMENDATION
The Utilities Advisory Commission (UAC) and staff recommend that the City Council
approve a 25 percent retail gas rate increase effective April 1, 2001, in order to partially
offset higher natural gas costs.
BACKGROUND
Natural gas prices are continuing an uncharacteristic rise, which began in May 2000, because
of nationwide supply and demand issues. Since May 2000, the wholesale price of gas to the
City has risen approximately .250 percent. To recover these higher purchased gas costs, staffs
plan is to propose a series of rate increases over a 12- month period in combination with a
substantial withdrawal of funds from the Gas Fund reserves. This financial strategy was
identified in the two reports to Council requesting gas rate increases effective August 1,
2000 (CMR:330:00) and January 1, 2001(CMR:390:00). This proposed rate increase is the
third in a series of four rate increases planned and will partially recover the wholesale cost
of gas. Staff plans to propose a fourth rate increase for July 2001 that will fully recover the
wholesale cost of gas and provide a contribution to reserves.
DISCUSSION
The rate increase has been spread among customer classes based on the system average of
25 percent. Despite this rate increase, Palo Alto retail gas rates remain significantly below
PG&E gas rates in nearby communities. All gas customers were notified through the media
and bill inserts that subsequent gas rate increases in 2001 would likely be necessary. The
notice also encourages customers to invest in energy conservation solutions and, for
Page 1 of 3
qualifying customers, to seek financial assistance through the Residential Rate Assistance
Program.
Other future gas rate increases may be necessary. However, the timing and size of any other
rate increases will be based on future supply contracts and the projected ending balances in
the reserves for the current fiscal year.
UTILITIES ADVISORY COMMISSION REVIEW
The UAC met on February 14, 2001. At this meeting the UAC recommended that the City
Council approve the 25 .percent rate increase effective April 1, 2001.
RESOURCE IMPACT
Approval of this proposed rate increase will increase the Gas Fund revenues by
approximately $800,000 from April 2001 through June 2001. On an annualized basis, the
rate adjustment is projected to increase revenues approximately $5.9 million. The higher cost
of gas purchases was partially funded in the BAO that was approved by Council with the
January 1, 2001 rate increase (CMR:399:00). The adjustment in revenues resulting from the
April 1, 2001 rate increase will be done with the mid-year adjustments. With regard to the
Gas Fund reserves, staff Projects that the fiscal year 2000-01 ending balances for the
Distribution Rate Stabilization Reserve and the Supply Rate Stabilization Reserve will be
approximately $300,000 and $800,000 respectively. These ending balances reflect a
combined withdrawal of funds from the two reserves of approximately $10 million for this
fiscal year, The withdrawal of these reserves was done to lessen the severity of the rate
increase. The staff gas rate proposal for July 2001 will be designed to build up the reserves.
POLICY IMPLICATIONS
These recommendations do not represent a Change in current City policies.
TIMELINE
The effective date of the proposed rates is effective April 1, 2001.
ENVIRONMENTAL REVIEW
The adoption of the resolution does not constitute a project under the California
Environmental Quality Act, therefore, no environmental assessment is required.
Page 2 of 3
ATTACHMENTS:
A."
B:
C:
Resolution
Gas Rate Schedules, G-l, G-2, G-3, G-4, G-7, and G-10
Utilities Advisory Commission Report dated February 14, 2001
PREPARED BY:Lucie Hirmina, Rates Manager
DEPARTMENT HEAD:
CITY MANAGER:
Assistant City Manager
Page 3 of 3
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO AMENDING UTILITY RATE SCHEDULES G-l, G-2,
G-3, G-4, G-7, and G-10-OF THE CITY OF PALO ALTO
UTILITIES RATES AND CHARGES PERTAINING
TO GAS RATES
The Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION i.Pursuant to .Section 12.20.010 of .the PaloAlto Municipal Code, Schedules G-I (Residential Core Gas
Service), G-2 (Commercial Core Gas Service), G-3 (Large
Commercial Core Gas Service), G-4 (Large Commercial Core Gas
Transportation Service), G-7 (Large Commercial Core Gas
Service), and G-10 (Compressed Natural Gas Service) of the Palo
Alto Utilities Rates and Charges are hereby amended to read in
accordance with Sheets G-l-l, G-2-1, G-3-1, G-3-2, G-4-1, G-7-1,
G-7-2, and G-10-1, respectively, attached hereto and
incorporated herein by reference. The foregoing Utility Rate
Schedules, as amended, shall become effective on April i, 2001.
SECTION 2. The Council finds that the revenue derived
from the authorized adjustments of the several 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:
Senior Asst. City Attorney
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
010215 syn 0071981
RESIDENTIAL CORE GAS SERVICE
no
Do
UTILITY RATE SCHEDULE G-1
APPLI.CABILITY:
This schedule applies to core natural gas service to individually metered single family premises,
including those separately metered in a multi-family complex.
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
(A)Summer Rates (May i to October 31):
0-20 therms per therm ...................... ...................................................$0.766Over 20 therms per therm ........................................................................ $1.073
Winter Rates (Nov. 1 to April 30): "
0-96 therms per therm
Over 96 therms per therm $0.766
........................................................................ $1.073
SPECIAL NOTES:
¸2.
Seasonal rate changes: The summer period is effective May 1 to October 31 and the winter
period is effective from November 1 to April 30. When the billing period is partly in the
summer period and partly in the winter period, the billing will be computed by prorating the
total therm usage and the applicable rates thereto between the two seasonal periods,
according to the ratio of the number of days in each seasonal period to the total number of
days in the billing period.
Service under this schedule is subject to discontinuance in whole or in part, for operational
reasons or if the City experiences supply or capacity shortages. The City will exercise
reasonable diligence and care to furnish and deliver continuous service and a sufficient
quantity of gas to customers, but does not guarantee continuity of service or sufficiency of
quantity. The City shall not be liable for any damage caused by interruption of service, if the
inten’uption of service is caused by an act of God, Fire, Strikes, riots, war, or any other cause
that is beyond theCity’s control.
CITY OF PALO ALTO’ UTILITIES
Issued by the City Council
Supersedes Sheet No.G-l-1 dated 7-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-l-1
COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-2
A.APPLICABILITY:
This schedule applies to non-residential customers who use less than 250,000 therms per year at a
single address.
B. TERRITORY:
Within the service area of the City of Palo Alto and on land owned or leased by the City.
RATES:
All year-round delivered, commodity:Per Meter
Per Month
Per Therm " $0.800
SPECIAL CONDITIONS:
Service under this schedule is subject to discontinuance in whole or in part, for operational
reasons or if the City experiences supply or capacity shortages. The City will exercise
reasonable diligence and care to fumish and deliver continuous service and a sufficient
quantity of gas to customers, but does not guarantee Continuity of service or sufficiency of
quantity. The City shall not be liable for any damage caused by interruption of service, if the
interruption of service is caused by an act of God, Fire, Strikes, riots, war, or any other cause
that is beyond the City’s control.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.G-2-1 dated 1-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-2-1
LARGE COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-3
A. APPLICABILITY:
This schedule applies to service for large commercial customers who use at least 250,000 therms per
year at one site. _
B.TERRITORY:
Co
Within the service area of the City of Palo Alto and on land owned or leased by the City.
RATES:
Monthly Market-based Power Supply Charge:Cents
Per Therm
Supply Charges:
1. Commodity Charge ................................................................................ $0.10-$1.00
2.Administrative Fee .........................................................................................$0.004
3.PG&E Local Transportation ...........................................................................$0.019
Distribution Charge:
1. Palo Alto Local Distribution ............................................................................ $0.237
D. SPECIALCONDITIONS:
Service under this schedule is subject to discontinuance in whole or in part, for operational
reasons, or if the City experiences supply or capacity shortages. The City will exercise
reasonable diligence and care to furnish and deliver continuous service and a sufficient
quantity of gas to customers, but does not guarantee continuity of service or sufficiency of
quantity. The City shall not be liable for any damage caused by interruption of service, if the
interruption of service is caused by an act of God, Fire, Strikes, riots, war, or ahy other cause
that is beyond the City’s control.
The commodity charge is equal to the City’s bidweek price of the natural gas paid at the
PG&E City Gate for the month immediately preceding the month in which the customer is
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.G-3-1 dated 1-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-3-1
LARGE COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-3
(Continued)
billed. The commodity charge will fall within the minimum/maximum range set forth in
C. 1.and include the cost of transporting the gas to the PG&E City Gate.
A customer who elects to be served under this rate will pay an administrative fee equal to the
allocable administrative costs incurred by the City in providing the gas service.
PG&E Local transportation charge is equal to the cost of transporting gas from the PG&E’s
City Gate to the Palo Alto City Gate.
The total monthly charge = therms used during the month X (commodity charge +
administrative fee + PG&E local transportation charge + Palo Alto local distribution
charge).
A customer may request service under this schedule for more than one account or meter if
the accounts are located on one site. A site shall be def’med as one or more utility accounts
serving contiguous parcels of land with no intervening public right-of- ways (e.g. streets) and
have a common billing address.
Customers may request a rate schedule change at any time, but only once during a twelve-
month period if the change is between City of Palo Alto full-service rate schedules. The 12
months limitation does not apply if a customer elects a Gas Direct Access rate schedule and
is served by another Gas Service Provider. Qualified customers may elect Gas Direct Access
at any time.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. G-3-2 dated "1-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-3-2
LARGE COMMERCIAL CORE GAS TRANSPORTATION SERVICE
UTILITY RATE SCHEDULE G-4
A. APPLICABILITY:
This schedule applies to gas transportation service for large commercial customers who use at least
250,000 therms per year for one account.
B.TERRITORY:
Within the service area of the City of Palo Alto and on land owned or leased by the City.
RATES:Cents
Per Therm
Supply Charge:
PG&E Local Transportation ...........~ ...............................................................i ............$0.019
."Distribution Charge:
Palo Alto Local Distribution .......................................................................................$0.237
SPECIAL CONDITIONS:
Qualifying customers may request a change to this rate schedule at any time.
Specific terms and conditions shall be covered by separate agreement between the City and
Gas Service Provider.
PG&E local transportation charge is equal to the cost of transporting natural gas fi’om the
PG&E City Gate to Palo Alto City Gate. Customers who elect this service must have the gas
delivered to PG&E City Gate.
Total monthly charge = therms used x (PG&E local transportation charge + P.A. distribution
charge).
A customer may request service under this schedule for more than one account or meter if
every account meets the minimum usage requirement of 250,000 therms per year.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No.G-4-1 dated 1-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-4-1
LARGE COMMERCIAL CORE GAS SER~-ICE
UTILITY RATE SCHEDULE G-7
A. APPLICABILITY:
This schedule applies to service for large commercial customers who use at least 250,000 therms per
year at one site.
TERRITORY:
Within the service area of the City of Palo Alto and on land owned or leased by the City.
C.RATES:Per Therm
Supply Charges:
1.Commodity Charge ........................................................................................$0.441
2.Administrative Fee ...........................; .............................i ...............................$0.004
3.PG&E Local Transportation ......................................... .............: ....................$0.019
Distribution Charge:
1.Palo Alto Local Distribution ..........................................................................$0.237
D.SPECIAL CONDITION:
Service trader this schedule is subject to discontinuance in whole or in part, for operational
reasons or if the City experiences supply or capacity shortages. The City will exercise
reasonable diligence and care to furnish and deliver continuous service and a sufficient
quantity of gas to customers, but does not guarantee continuity of service or sufficiency of
quantity. The City shall not be liable for any damage caused by interruption of service, if the
interruption of service is caused by an act of God, Fire, Strikes, riots, war, or any other cause
that is beyond the City’s control.
A customer who elects to be served under this rate will pay an administrative fee equal to the
allocable administrative costs incurred by the City in providing the gas service.
PG&E Local transportation charge is equal to the cost of transporting gas from the PG&E’s
City Gate to the Palo Alto City Gate.
CITY OF PALO ALTO UTILITIES
¯ Issued by the City Council
Supersedes Sheet No. G-7-1 dated 1-1-01 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-7-1
o
LARGE COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-7
(Continued)
The total monthly charge = therms used during the month X (commodity charge +
administrative fee +.PG&E local transportation charge + Palo Alto local distribution charge).
A customer may request service under this schedule for more than one account or meter if
the accounts are located on one site. A site shall be defmed as one or more utility accounts
serving contiguous parcels of land with no intervening ptiblic right-of- ways (e.g. streets) and
have a common billing address.
Customers may request a rate schedule change at any time, but only once during a twelve-
month period if the change is between City of Palo Alto full-service rate schedules. The 12
months limitation does not apply if a customer elects a Gas Direct Access rate schedule and
is served by another Gas Service Provider, or if a customer elects to be served under a term
contract. Qualified customers may elect Gas Direct Access at any time.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. G-7-2 dated 1-1-01 cITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No. G-7-2
COMPRESSED NATURAL GAS sERVICE
UTILITY RATE SCHEDULE G-10
A. APPLICABILITY:
This schedule applies to the sale of compressed natural gas (CNG) at the City-owned natural gas fueling
stations to customer who use CNG for fueling CNG vehicles.
B.TERRITORY:
Co
Applies to locations within the service area of the City of Palo Alto.
RATES:
Commodity Charge
Per Therm
$0.800
Per Gasoline
Gallon Equivalent
$0.930
For billing purposes, the number of gallons will be complied from a Summary of Transactions recorded
by the dispensing unit for the customer during the month.
D. SPECIAL CONDITIONS
o
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 insufficient supply, inadequate transmission or
delivery capacity of facilities.
Service under this schedule is provided only from a designated City fueling station which will
deliver CNG at approximatelY 3,000 pounds per square inch (PSI)..
Individuals responsible for fueling a Natural Gas Vehicle shall be required to complete training
sessions to be certified to fuel a vehicle. Each individual must sign and date the Certificate of
Instruction for Fueling Natural Gas Vehicle.
Customers requesting to take service under this rate schedule are required to sign a Compressed
Natural Gas Agreement before commencing service.
If required by local or federal law, assessed applicable taxes shall be added to charges shown in this
rate schedule.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supercedes Sheet No. G-10-1 dated 4-1-97 CITY OF PALO ALTO
UTILITIES
Effective 4-1-2001
Sheet No.G-10-1
TO:
FROM:
UTILITIES ADVISORY COMMISSION
uTIITIES DEPARTMENT
3
DATE:
SUBJECT:
FEBRUARY 14, 200"1
PROPOSED GAS RATE INCREASE
RECOMMENDATION
This report requests the Utilities Advisory Commission (UAC) recommend that the City
Council approvea 25%. percent system average retail gas rate increase effective April 2001,
in order to offset higher natural gas costs incurred in FY 00-01.
BACKGROUND
Natural gas prices Continue an uncharacteristic rise, which began in May 2000, because of
nationwide supply.and demand issues. Since May, the wholesale market price of gas has
risen approximately 250 percent. This dramatic rise in .the cost to .purchase gas has
dramatically altered the financial condition of the Gas Fund. To address these unanticipated
costs, staff developed a financial plan to recover the increased gas purchase costs. The
financial plan overlaps two fiscal years and includes a series-of rate increases in combination
w:ith withdrawal of funds from the Rate Stabilization Reserves (RSR). This plan recognize~.
the need to (1) cushion the rate shock of escalating natural gas prices to Palo Alto residents
and businesses, (2) recover rising wholesale gas costs and,. (3) use and replenish-cash
reserves.
The fu:st step to execute this financial plan was taken by the City Council on July 17,.2000.
At this meeting a 15 percent retail rate increase was .approved effective August 1, 2000
(CMR.330:00). In addition,. Council approved withdrawals of $3.5 million from the Supply
Rate Stabilization Reserve (SRSR) and $1.7 million from the Distribution Rate Stabilization
Reserve (DRSR) to partially offset the increased purchase costs. ~On January 1, 2001an
additional 25 percent retail rate increase was implemented to cover distribution system costs
and notification was provided to our customers that additional gas rate increases would likely
be necessary in 2001.
Page 1 of 4
DISCUSSION -
Current retail rates are insufficient to ~ecover the wholesale cost of gas.. During this fiscal
year, the Palo Alto Gas Utility executed supply agreements with.supp!iers to hedge against
further price escalations.. Therefore, flarough June 30, 200I, Palo Alto’s Wholesale gas .costs
are mostly fixed ,and are subject to variation if the load is different from forecast. Although
.these fixed-price supply contracts have helped.to stab’flize Wholesale gas. costs through June
30, 2001, the wholesale gas costs are higher than budgeted for the current fiscal year. To
offset these higher than budgeted fixed-price supply costs, retail rates need to be ramped up.
Staff recommends a 25 percent retail rate increase effective 4-i-01. If approved by Council,
staff projects that the SRSR and the DRSR will end the current fiscal year with estimated
balances of $800,000 and $300,000 respectively. ¯
This rate increase has been spread among customer classes based on the system average of
25 percent. However, the Compressed Nature. Gas (CNG) Rate Schedule G-10 will be
increased 42.6 percent to recover the cost of purchasing gas. The reason that the CNG rate
is higher is that the CNG rate was not increased in August and January. With approval of
this rate increase, the CNG rate is approximately 50-percent below PG&E’s CNG rate. The
following table shows the impact of this rate proposal on a typical monthly bill for the
various .customer.classes. .
TABLE 1~
Impact of Rate Increase on Customer Bills
Customer
Residential/Winter
Residential/Winter
Residential/Summer
Residential/Summer
Commercial G-2
Industrial G-2
Industrial G-3
Industrial G-7
Usage
Therms
100
150
26
40
500
10,000
60,000
30,~00
Monthly
Bill
$ 77.78
131.42
.21.75
36.77
400.14
8,002.75
42,075.00
21,037.50
Amountof
Increase
$15.56
26.28
4.35
7.35
80.03
1,600.55
8,415.00
4,~7.50~
Percent
Increase
25.0
25.0
25.0
25.0
25.0
25.0
25.0
25.0
Percent PA.
Below PG&E
as of 1/5/01 "
(56.7)
(52.3)
(53.0)
(49.6)
(54.7)
(50.7)
(54~5)
(54.9)
Page 2 of 4
Despite the two rate increases of.August 2000 and January 2001, and this proposed April
2001 rate increase~ Palo Alto retail gas rates remain below PG&E gas ra~es in’nearby
communities.. The primary reason is because customers of PG&E have already experienced
~[l~the ab.rupt rise in wholesale gas prices this year. PG&E employs an automatic cost pass
through mechanism mandated by the California Public Utilities Commission. For PG&E
customers, rates change monthly to reflect the actual commodity cost for the .month. This
approach has the advantage of automatic cost recovery for the utility, but can result in abrupt.
changes in customer bills from month to month.
In July 2001, staff plans to propose that the nine large industrial customers who are eligible
for Direct Access commit to purchase gas for a defined period. This reduces the risk that the
City would be saddled with gas purchase contract obligations that were entered into for large
customers. The customer options are the following: (1) Pal0 Alto’s Gas Rate Schedule G-3
whereby the commodity price changes monthly (PG&E approach), or (2) enter into a fixed-
term contract with the Palo Alto Gas Utility under .Rate Schedule G-11 or (3) continue
service under Rate Schedule G-7, or (4) enter intoa customer contract with the City of Palo
Alto Utilities under.Rate Schedule G-12, or (5) elect Direct Access under Rate Schedule G-4
whereby the customer would buy gas from an outside energy supplier. Large customers, who
would.like to be included in the Palo Alto’s procurement plans and take advantage of the
City’s portfolio management, will need to agree to forfeit their rights to Direct Access. Rate
Schedule G-7 will be revised to acknowledge this election requirement.
Finally, this proposed 25 percent retail rate increase is sufficient, to completely offset the
higher fixed-price supply costs "incurred for this fiscal year., However, projections of the
wholesale market indicate that with expiration of the current supply contracts on June 30,.
2001, the Palo Alto Gas Utility. will face even higher wholesale gas costs. Although the Palo
Alto G~s Utility is presently in the process of executing f’Lxed-price supply contracts for the
next three years, a fourth retail rate increase will be necessary in July 2001 to: (1) offset these
higher costs and, (2) replenish the Rate Stabilization Reserves. The magnitude of the
increase for July 1, 2001, will be determined during the fiscal year 2001-02 budget process.
It is estimated in the range of 25 percent to 45 percent.
REsoURcE IMPACT
Approval. of this proposed rate increase "will increase the Gas Fund revenues by
approximately $800,000 from April 2001 through June 2001. On an annualized basis, the
rate adjustment is projected to increase revenues approximately $5.9 million. The adjustment
tO the revenues will be done in the midyear report. ..;..
POLICY IMPLICATIONS
These recommendations do not represent a change in current City policies.
The effective date ofthe proposed rates is April 1, 2001.
ENVIRONMENTAL REVIEW
The adoptionof the resolution does not constitute a project under the California
Environmental Quality Act, therefore, no environmental assessment is required..
ATTACHEMENTS:
Gas Rate Schedules, G-l, G-2, G-3, G-4, G-7 and G-10
REVIEWED BY:Girish Balachandran, Manager Supply Resources
Randy Baldschun,Assistant Director Of Utilities
PREPARED BY:
LUCre ~A /-
Rates Manager
DEPARTMENT HEAD:
of Utilities