HomeMy WebLinkAbout2001-05-21 City CouncilCity of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
7
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:MAY 21, 2001 CMR:200:01
SUBJECT:APPROVAL OF A BUDGET AMENDMENT ORDINANCE AND
RESOLUTION ADOPTING A GAS RATE INCREASE
RECOMMENDATION
Staff and the Utilities Advisory Commission recommend that the City Council approve:
A 67 percent retail gas rate increase effective June 11 2001 to offset higher wholesale
natural gas costs and to build up the Gas Rate Stabilization Reserves.
Approve a Budget Amendment Ordinance (BAO) providing an additional appropriation
in the amount of $1.577 million for Gas Fund commodity purchases; adjusting gas sales
revenue by a net $536,000; and transferring $1.04 million from the Supply Rate
Stabilization Reserve (SRSR) and the Gas Fund. Conservation Loan Reserve.
Approve raising the cap of the commodity portion of the Large Commercial Core Gas
Service rate schedules G-3, G-11, and G-12 to $2 to reflect the gas market conditions.
DISCUSSION
Natural gas prices continue a dramatic and uncharacteristic rise, which began in May 2000,
because of nationwide supply and demand issues~ To cushion the rate shock of escalating
natural gas prices to Palo Alto residents and businesses, the City Council has approved a
combination of a series of rate increases and withdrawal of funds from Rate Stabilization
Reserves (RSR). During this period the Distribution Rate Stabilization Reserve (DRSR) and
Supply Rate Stabilization Reserve (SRSR) have been drawn down to cover rising purchase
gas costs while residents and businesses have been provided notifications of future rate
increases as well as provided ample time to implement conservation measures to help
CMR:200:01 Page 1 of 4
manage rising energy, costs.
This proposed rate increase is necessary to fully recover the wholesale cost of gas and
provide a contribution to reserves. The effect of the rate increase on the reserves will not be
realized until fiscal year 2001-02. Current rates and reserve levels are not sufficient to
recover the cost to buy and deliver gas to customers. The projected cost of gas for fiscal
2000-01 has risen above the estimated revised budget by $1.6 million due to a colder than
normal winter. To provide an additional $536,000 in sales revenue in the current fiscal year
to partially offset these unanticipated costs, staff recommends an effective date of June 1,
rather than July 1,2001.
The Gas Fund Conservation Loan Reserve was created several years ago and the program
for which it was created no longer exists.~ The reserve currently has a balance of
approximately $634,000. Staff recommends transferring $600,000 from the Conservation
Loan Reserve to the SRSR to help cover the increased cost of gas for fiscal year 2000-01.
Staff will return with a proposal for the use of the remaining balance in the Gas Fund
Conservation Loan Reserve.
This rate proposal is based upon budget projections for fisca!year 200.1-02. As part of the
budget process this spring, staffplans to seek Council authority to bond finance the GasFund
Capital Improvement Program (CIP)projects for the next three years. This is a temporary
departure from long-standing practice to finance the CIP through rates and reserves. Staff
believes this is a prudent action the City can take on behalf of Palo Alto residents and
businesses to provide rate relief during this unprecedented energy crisis. At the completion
of the three-year period, rates will fully fund the CIP. If the Gas Utility does not use bond
financing to fund CIP projects, the proposed 67 percent retail rate increase would rise to 77
percent to recover the Gas Fund revenue requirement.
Staff will continue to monitor the cost of gas in this era of uncertainty. Depending on the gas
market prices during fiscal year 2001-02, staff may propose additional rate adjustments
during the year. The timing and size of any other rate increases will be based on the actual
cost of new supply contracts
This rate increase has been spread among customer classes based on the system average of
67 percent. In addition, staff is proposing to raise the cap on Large Commercial Gas Service
rate schedules G-3, G-11, and G-12 to $2.00 to reflect market conditions. Despite this rate
increase, Palo Alto retail gas rates remain competitive with PG&E gas rates in nearby
communities. All gas customers have been notified through the media and bill inserts that
subsequent gas rate increases in 2001 would likely be necessary. The notice also encourages
CMR:200:01 Page 2 of 4
customers to invest in energy conservation solutions and, for .qualifying customers, to seek
financial assistance through the Residential Rate Assistance Program.
UTILITIES ADVISORY COMMISSION REVIEW
This rate increase proposal was presented to the UAC on April 4, 2001. At that meeting the
UAC recommended that the City Council approve the 67 percent rate increase effective June
1, 2001. However, some of members of the UAC have expr~essed concerns regarding the
value of bond financing the CIP projects. They were of the opinion that rates should be raised
enough to fund the CIP projects and that reserves may continue to be at their lowest possible
levels for another year.
Staff responded to the concern that bond financing is being used to build up the reserves by
indicating that, while indirectly, reserves will be partially replenished, it is not the reason for
bond financing the CIP projects. The main reason for proposing to fund the CIP through
bonds instead of rates is to relieve customers from paying for the accelerated infrastructure
projects while experiencing unprecedented high gas bills. As for building up reserves, the
Gas Fund’s RSRs have been depleted and will no longer be able to handle any emergencies
such as unanticipated higher purchase costs due to higher consumption.
Staff also indicated that there is no intent to undertake on-going bond financing. Bond
financing is anticipated to last for three years while gas commodity prices are rising. Staff
projects that gas prices will continue to rise.at least until fiscal year 2002-03.
RESOURCE IMPACT
Approval of this proposed 67 percent rate increase will increase the Gas Fund revenues by
approximately $19.7 million on an annual basis. Eor the current fiscal year, the revenue
increase will be approximately $536,000. This item will include a proposed BAO upon its
return to Council, appropriating $1.577 million for increased gas commodity costs. This cost
will.be funded in the BAO with $536,000 in additional revenues, $600,000 transferred from
the Gas Fund Conservation Loan Reserve and $441,000 from the Gas Fund SRSR.
For informational purposes, a summary of the BAOs approved to date in 2000-01 that impact
the Utilities Rate Stabilization Reserves will be attached when this item returns to Council.
This attachment also estimates future year ongoing costs associated with BAOs approved to
date to provide a projection for the future resource needs from the Utility Funds for those
programs approved atter the adoption of the 2000-01 budget.
CMR:200:01 Page 3 of 4
POLICY IMPLICATIONS
These recommendations do not represent a change in current City policies.
TIMELINE
The effective date of the proposed rates is effective June 1, 2001.
ENVIRONMENTAL REVIEW
The adoption of the resolution does not constitute a project under the Calif.omia
Environmental Quality Act, therefore, no environmental assessment is required.
ATTACHMENTS:
B.
C.
D.
E.
Resolution
Gas Rate Schedules, G-I, G-2, G-3, G -7, G-10, G-i 1 and G-12
Utilities Advisory Commission Report dated April 4, 2001
Budget Amendment Ordinance (to follow when item returns to Council)
Summary of Budget Amendment Ordinances impacting the Utilities Rate Stabilization
Reserves to Date in 2000-01 (to follow when item returns to Council).
REVIEWED BY:
PREPARED BY:
Girish Balachandran, Manager Supply Resources
Randy Baldschun, Assistant Director of Utilities
Lucle Hlrmlna, Rates Manager
DEPARTMENT HEAD:
ector of Utilities
CITY MANAGER APPROVAL: ~ -- _RRIS~//~
~¢z,~f EMILY HA
4!(" Assistant City MOaager
CMR:200:01 Page 4 of 4
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO AMENDING UTILITY RATE SCHEDULES G-l, G-2,
G-3, G-7, G-10, G-f1,. and G-12 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 asfollows:
SECTION I.Pursuant to Section 12.20.010 of the Palo
Alto. Municipal Code, Schedules G-I (Residential Core Gas
Service), G-2 (Commercial Core Gas Service), G-3 (Large
Commercial Core Gas Service), G-7 (Large Commercial Core Gas
Service), G-10 (Compressed. Natural Gas Service) G-II (Large
Commercial Fixed-Term Commodity Gas Services), and G-12 (Large
Commercial Custom Commodity 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-7-1, G-10-1,
G-II-I, and G-12-1, respectively,attached hereto and
incorporated herein by reference. The foregoing Utility Rate
Schedules, as amended, shall become effective on June 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 theCity 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
010405 syn 0072001
RESIDENTIAL CORE GAS SERVICE
APPLICABILITY:
UT]:LITY RATE SCHEDULE G-1
This schedule applies to core natural gas service to individually metered single family premises,
including those separately metered in a multi-family complex.
TERRITORY:
Co
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)
(B)
Summer Rates (May. 1 to October 31):
0-20 therms per therm "$1.279
Over 20 therms per therm ""$1.792
Winter Rates (Nov. 1 to April 30):
0-96 therms per therm
Over 96 therms per therm
................. ; ...........................: ...........................$1.279
.............. ~ ...............: .........................................$1.792
SPECIAL NOTES:
Seasonal rate changes: The summer peri0d {s 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 shofiages. 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.
{End}
CITY OF PALO ALTO UTILITIES ’
Issued by the City Council
Supersedes Sheet No.G-l-‘1 dated 4-’1-01 CITY OF PALO ALTO
UTILITIES
Effective 6-1-2001
sheet No. G-l-1
COMMERCIAL coRE GAS SERVICE
UTILITY RATE SCHEDULE G-2
APPLICABILITY:
This schedule applies to non-residential customers who use less than 250,000 therms per year at a
single address.
TERRITORY:
Within the service area of the City of Palo Alto and on land owned or leased by the City.
C. RATES:
All year-round delivered commodity:Per Meter
Per Month
¯. .......................................................................................................................-$1.336PerTherm" " " ~
D.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 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.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. G-2-’I dated 4-1-01 CITY OF PALO ALTO
UTILITIES
Effective 6-1-2001
Sheet No. G-2-1
LARGE COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-3
APPLICABILITY:
This schedule applies, to service for large commercial customers who use at least 250,000 therms per
year at one site.
Be TERRITORY:
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:
Supply Charges:
1.
2.
3.
Cents
Per Therm
Commodity Charge .........................................................i ......................$0.10-$2.00
Administrative Fee ...... ........~ .....................,., ....................................................$0.004
’ PG&E Local Transportation ...........................................................................$0.019
Distribution Charge:
1. Palo Alto Local Distribution ........ : ................................................. ~ ........ i ....... $0.237
D. 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 furnish and deliver continuous service anda 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.
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 4-1-01 CI’I’Y OF PALO ALTO
UTILITIES
Effective 6-1-2001
Sheet No. G-3-1
LARGE COMMERCIAL CORE GAS SERVICE
UTILITY RATE SCHEDULE G-7
APPLICABILITY:
This schedule applies to service for large commercial customers who use at least 250,000 therms per
year at one ~ite.
TERRITORY:
Within the service area of the City of Palo Alto and on land ovc~.ed or leased by the City.
RATES:Per Therm
Supply Charges:
1.Commodity Charge ...........................................................;... .........................$0.911
2.Administrative Fee ........~ .................: .........................................................~ .....$0.004
3.PG&E Local Transportation ..........................- ...........................’ .....................$0.019
Distribution Charge:
1.
Total Supply Charges ................i..,.i ..............................................................$0.934
Palo Alto Local Distribution ...................: .................- ...............".... ....................$0.237
D.SPECIAL CONDITION:
Service under this schedule is subject to discontinuance in whole or inpart, 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, Fke, 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-’I d~ted 4-1-01 CITY OF PALO ALTO "
UTILITIES
Effective 6-1..2001
Sheet No. G-7-1
COMPRESSED NATURAL GAS SERVICE
UT]I,ITY RATE SCHEDULE G-IO
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..
TERRITORY:.
Applies to locations within the service area of the City of Palo Alto.
RATES:
Per Therm
Per Gasoline
Gallon Equivalent
Commodity Charge $1.210.$1.400
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
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 o/fly 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.
5.If r.equired by local or federal law, assessed applicable taxes shall be added to charges shown in this
rate schedule.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No. G-10-1 dated 4-1-01
CITY OF PALO ALTO
UTILITIES
Effective 6-1-2001
Sheet No.G-10-1
LARGE COMMERCIAL FIXED-TERM COMMODITY GAS SERVICE
UTILITY.RATE SCHEDULE G-11
APPLICABILITY:
This schedule applies to large commercial
one site.
TERRITORY: ’
Within the service area of the City of Palo Alto and on land owned or leased.by the City.
customers who use at least 250,000.therms per year at
RATES:Per Therm
Supply Charges:
1.Commodity Charge .........................~ ........................................~ ..............$0.20-$2.00
2.Administrative Fee .........................................................................................$0.004
3.PG&E Local Transportation ....................................................i ......................$0.019
Distribution Charge:
1 . Palo Alto Local Distribution ................................ ........................................... $0.237
TERM:12 Months or 24 Monflas
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 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 causedby an, act of God, Fire, Strikesl riots, war, or any other cause that is beyond the
City’s control
Customers who choose to be charged under this rate schedule are required ,to sign a letter with
CPAU committing.to a price and term and to adhere to rules and regulations set forth in CPAU
Rule and Regulation No. 5 (Contracts). The letter shall indicate the estimated gas consumption
over theterm of the contract rate. This consumption shall be served solely by CPAU.
CITY OF PALO ALTO UTILITIES.
Issued by the City Council
Supercedes Sheet No. G-11-1 dated 1-1-0"1
CITY OF PALO ALTO
UTILITIES
Effective 6-1-2001
Sheet No. G-11-1
LARGE COMlVIERCIAL CUSTOM COMMODITYGAS SERVICE-
UTILITY I~TE SCI~DULE G-12
APPLICABILITY:
This schedule apphes to large Commercial cusiomers 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.
RATES:Per Therm
Supply Charges:
1.Commodity Charge ................................................................................$0.20-$2.00.
2.Administrative Fee .........................................................................................$0.004.
3.PG&E Local Transportation .......................... ..................................................$0.019
Distribution Charge:
1. Palo Alto Lo~al Distribution .......................................................: ..................$0,237
TERM: Up t9 5 years
- 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 furnish and dehver 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.
Customers who choose to be charged under this rate schedule are required to sign a contract
and confirmation schedule with CPAU and adhere to rules and regulations set forth in CPAU
Rule and Regulation No. 5 (Contracts).
The Commodity Charge shall be based upon the customer load shape and size, term, and
market prices. The other components of the rate: Administrative Fees, Transportation
Charges,. and Distribution Charges may be modified periodically with the Council’s approval.
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supercedes Sheet No. G-12-1 dated 1-1-01
CITY OF PALO ALTO.
UTILITIES
Effective 6-1-2001
Sheet No. G-12-1
MEMORANDUM
8
TO:UTILITIES ADVISORY COMMISSION
FROM:UTIITIES DEPARTMENT
DATE:
SUBJECT:
APRIL 4, 2001
PROPOSED GAS RATE INCREASE
.RECOMMENDATION
This report.requests the Utilities Advisory Commission (UAC) recommend that the City Council
approve a 67% percent retail.gas rate increase effective June 1, 2001 to recover the high cost of
natural gas and to begin replenishing cash reserves.
BACKGROUND
Natural gas prices continue the 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 substantially. Staff developed a financial strategy to recover the increased gas purchase costs,
which was presented to the UAC in November 2000. The plan includes a combination of a s~ries Of
rate. increases and withdrawal of funds from the Rate Stabilization Reserves (RSR). This financial
plan recognizes the need to (1) stagger rate adjustments to cushion the rate shock of escalating
~natural gas prices to Palo Alto residents and businesses, (2)recover rising wholesale gas costs and,
(3) to use and replenish cash reserves.
The first 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 (CMR330:00). In
additioia, 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. Subsequently, a 25 percent retail rate increase was approved and
implemented January 1, 2001 (CMR:399:00) and another 25 percent increase was approved and
implemented April 1, 2001 (CMR: 144:01).
DISCUSSION
Continued increases in the cost to purchase gas have adversely impacted the financial condition of
the Gas Fund this fiscal year. Current rates and reserve levels are not sufficient to recover the cost
to buy and deliver gas to customers. This proposed retail rate increase is designed to offset forecasted
gas purchase costs of approximately $33 million for FY01-02 and to replenish approximately $6.6
million to the rate stabilization reserves. However, to provide approximately $536,000 additional
revenues for the current fiscal year, staff is recommending an effective date of June 1 rather than July
Page 1 of 3
1. Staffwill continue to monitor the cost of gas paid in this era of uncertainty. The timing and size
of any further rate adjustments will be based on the actual cost of new supply contracts for FY01-02
and the need to restore the Gas Fund reserves to prudent levels. Depending on the cost of gas during
FY01-02, staff may propose an additional rate adjustment this fall or winter, if reserves are not
accumulating as planned.
This revenue increase has been spread to all retail rate schedules on an equal percentage basis. The
following table shows the impactof this rate proposal on a typical monthly bill for the various
customer classes. Despite the rate increases of August 2000, January 2001, April, 2001 and this
proposed June 2001 rate increase, Palo Alto retail gas rates remain competitive with PG&E gas.rates
effective for March 200 lin nearby communities.
TABLE 1
Impact of Rate Increase on Customer Bills
Customer
Usage
Therms
Monthly
Bill
Amount of
Increase
Percent
Increase
Percent PA
Below or Above
PG&E as of 3/01
Residential/Winter
Residential/Winter
100
150
$ 129.97
219.57
$ 52.14
88.09
67
67
(8 %)
Residential/Summer 26 36.34 14.58 67 0
Residential/Summer 40 61.42 24.64 67 6
Commercial G-2 500 668.00 268.00r 67 (3)
Industrial G-2 10,000 13,360 5,360 67 8
Industrial G-7 30,000 35,120 14,090 67 0
Finally, to help stabilize gas rates, the Palo Alto Gas Utility has been entering into long-term
wholesale agreements. Because these agreements obligate the City to purchase gas quantities to
meet specific gas consumption requirements, it is important that Palo Alto gas users commit to buy
gas from the City for the contract period. To manage the financial risk arising from these wholesale
contracts, the City will require large industrial, customers, who are eligible for direct access, to select
one of the following four options:
Page 2 of 3
°
o
Palo Alto’s Gas Rate Schedule G-3 whereby the commodity price changes monthly (PG&E
approach).
Enter into a fixed term contract with the Palo Alto Gas Utility.
Elect to be included in the Palo Alto’s load and take advantage of the City’s portfolio
management. A customer exercising this option will limit their rights to direct Access. The new
requirement is that if a customer elects the Direct Access option after June 1, 2001, they will
compensate the Palo Alto Gas Utility for any outstanding supply liability incurred by the City
on behalf of serving that customer.
Elect Direct Access whereby the customer would buy gas under contract with an outside energy
supplier. In this case, customers who elect to contract with other suppliers, have to do that before
June 1, 2001 .and the Palo Alto Gas Utility would not enter into gas supply contracts to serve
their load.
RESOURCE IMPACT
Approval of this proposed rate increase will increase the Gas Fund sales revenues by approximately
$19.7 million annually above the rates approved effective April 1, 2001. A portion of this additional
sales revenue will build up the reserves. The projected ending balances of the DRSR and SRSR for
FY01-02 are $3.6 million and $3.0 million respectively. If wholesale gas costs rise in the months
ahead, staff will propose a subsequent retail rate increase in the fall or winter of this year to maintain
or accelerate funding of 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 June 1,2001.
ENVIRONMENTAL REVIEW
The adoption of the resolution does not constitute a project under the Califomia Environmental
Quality Act, therefore, no environmental assessment is required.
PREPARED BY:Lucie Hirmina, Rates Manager
REVIEWED BY:Girish Balachandran, Manager Supply Resources
Randy Baldschun, Assistant Director of Utilities
DEPARTMENT HEAD:
JOHN ULRICH
Director of Utilities
Page 3 of 3
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR THE FISCAL YEAR 2000-01 TO
PROVIDE AN ADDITION~_L APPROPRIATION OF $1,577,000 FOR GAS
FUND COMMODITY PURCHASE COSTS
WHEREAS, pursuant to the provisions of Section 12 of Article
IiI of the Charter of the City of Palo Alto, the Council on June 19,
2000 did adopt a budget for fiscal year 2000-01; and
WHEREAS, the Gas uti!ity’s adopted budget for fiscal year
2000-01 is based on historically normal gas price forecasts as of
December 1999; and
WHEREAS, gas prices have increased more than two hundred fifty
percent since the May 2000 forecast due to several factors, relating
to supply and demand; and
WHEREAS, the Council has adopted three previous rate increases
during fiscal year 2000-01, totaling sixty-five percent or $10.3
million in gas fund revenues over the adopted budget; and
WHEREAS, an estimated additional $1,577,000 beyond budget
amount adjusted by these rate increases, is required for gas
commodity purchases; and
WHEREAS, an additional sixty~seven percent rate increase,
effective June i, 2001 will generate an additional $536,000 in gas
sales revenue for the remainder of fiscal .2000-01, partially
offsetting increasing gas commodity costs; and
WHEREAS, the Gas Fund Supply Rate Stabilization Reserve is
below Council recommended guidelines and a $600,000 transfer from
the Gas Fund Conservation Loan Reserve is proposed to achieve an
adequate funding level for commodity purchases; and
WHEREAS, City Council authorization is needed to amend the
2000-01 budget as hereinafter set forth.
NOW, THEREFORE, the Council of the City of Palo Alto does
ORDAIN as follows:
SECTION i. The sum of One Million Five Hundred Seventy-Seven
Thousand Dollars ($1,577,000) is hereby appropriated to commodity
purchases expense in the Supply Resource Management Functional Area
in the Gas Fund, and the Supply Rate Stabilization Reserve is
correspondingly reduced. ..
SECTION 2. The sum of Six Hundred Thousand Dollars ($600,000)
is hereby transferred from the Gas Fund Conservation Loan Reserve
to the Gas Fund Supply Rate Stabilization Reserve.
SECTION 3. The transactions authorized by Section 1 and 2 will
reduce the Gas Fund Supply Rate Stabilization Reserve by a net
$441,000 from $2,410,051 to $1,969,051.
SECTION 4. Gas Fund revenues are hereby increased by a net of
Five Hundred Thirty-Six Thousand Dollars ($536,000) to reflect the
rate increase.
SECTION 5. As specified in Section 2.28.080(a) of the Palo
Alto Municipal Code, a two-thirds vote of the City ~ouncil is
required to adopt this ordinance.
SECTION 6. The Council of the City of Palo Alto hereby finds
that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 7. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:City Manager
Senior Asst. City Attorney Director of Administrative
Services ~
Director of Utilities
City of
ATTACHMENT E
Budget Amendment Ordinances Impacting Utilities Rate Stabilization Reserves Approved To Date in 2000-01
UTILITY FUNDS ....-, -Piaceholders
-Already in the Impact on theRevenue Net Cost 2000-01 Adopted RSR
Budget
Gas Fund
Estimated Gas Distribution Rate Stabilization Reserve (RSR)
Balance
Gas Rate Increase BAO
Gas Rate Increase BAO #2
Mid-Year Report
$7,355,000
($ !,700,000)($1,700,000)
($2,780,001)($2,780,001)
($560,551)($560,551)
05/15/01
Estimated
Future Year IOngoing Costs]
Total BAOs ($5,040,552)$0 ($5,040,552)$0
RSR Balance After BA O’s $2,314,448
Gas Fund
Estimated Gas Supply Rate Stabilization Reserve (RSR)
Balance
Gas Rate Increase BAO #1
Gas Rate Increase BAO #2
Mid-Year Report/Gas Rate Increase BAO #3
Gas Rate Increase BAO #4
$3,832,000
($4,567,307)($4,567~307)
$2,173,358 $2,173,358
$972,000 $972,000
($441,000)($441,000)
Total BAOs $972,000 ($2,393,949)$0 ($1,862,949)$0
RSR Balance After BAO’s $1,969,051
Estimated Net Gas Fund RSR Balance¯_ ....._~:__ __ .......$4,283~499