HomeMy WebLinkAboutStaff Report 3778
City of Palo Alto (ID # 3778)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 6/3/2013
City of Palo Alto Page 1
Summary Title: Fiber Optic Rate Increase
Title: Adoption of a Resolution Approving Fiber Optic Utility Rate
Adjustments Effective July 1, 2013
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that the City Council:
1) Adopt a resolution to approve a 2.22 percent increase to Dark Fiber Licensing Service
Rates EDF-1 and EDF-2, for Fiscal Year (FY) 2014, effective July 1, 2013, which will
increase annual revenues from commercial dark fiber customers by $37,850; and
2) Amend Utility Rate Schedules EDF-1 and EDF-2, as attached.
Executive Summary
Dark Fiber Licensing Service Rates EDF-1 and EDF-2 increase annually by the Consumer Price
Index (CPI). This year, the applicable CPI results in a 2.22 percent increase, and, therefore,
these rates are proposed to be increased by that amount.
Background
The City of Palo Alto Utilities (CPAU) provides commercial dark fiber optic services within the
boundaries of the City of Palo Alto. For customers with fiber optic licenses beginning prior to
September 18, 2006, rates for service are published in Dark Fiber Licensing Services Rate
Schedule EDF-1. EDF-1 was a promotional rate and was closed to new Dark Fiber licenses in
2006. Customer expenses for engineering, construction and connection to the fiber optic
backbone are charged under Dark Fiber Licensing Services Rate Schedule EDF-2. The Council-
approved Dark Fiber Licensing Agreement (CMR 177:97) allows the commercial fiber optic fees
charged under the EDF-1 and EDF-2 rate schedules to be adjusted annually in accordance with
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the CPI, which is published by the United States Bureau of Labor Statistics.1 The CPI index used
for this annual adjustment is the change in the December CPI.
New fiber customers are enrolled under Dark Fiber Licensing Services Rate Schedule EDF-3,
which does not increase by CPI annually. There are currently 10 customers on the EDF-1 rate
and 50 customers on the EDF-3 rate. The annual revenues from EDF-1 and EDF-3 customers
currently total $1.7 million and $2.3 million, respectively. As contract terms for customers on
the EDF-1 rate expire, customers transfer to the EDF-3 rate so that over time, the EDF-1 rate
will be phased out and all customers will be on the EDF-3 rate. Also, as the EDF-1 rate is
increased annually by CPI, some customers may voluntarily choose to move from the EDF-1 rate
to the EDF-3 rate for cost saving purposes.
Discussion
Based on the data published by the United States Bureau of Labor Statistics, the change in the
San Francisco-Oakland-San Jose area December CPI from 2011 to 2012 was 234.327 to 239.533,
or a 2.22168 percent increase. The proposed rates for Rate Schedules EDF-1 and EDF-2 for FY
2014, which are based on that factor, are shown in the chart below.
1 http://www.bls.gov/ro9/cpisanf.htm
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Proposed Fiber Rate Increases
Rate Description
Current
Rates
Proposed
Rates *
$
Difference
%
Difference
EDF-1 (Section C-1): Dark Fiber Backbone License Fees (fiber miles/month)
Fiber Price $320.78 $327.91 $7.13 2.22
Quantity discount 59.84 59.84 - -
Buffer tube discount 59.84 59.84 - -
Route length discount 77.80 77.80 - -
Ring topology discount 23.94 23.94 - -
Length of term discount 46.80 46.80 - -
Minimum Annual License Fee 485.16 495.94 10.78 2.22
EDF-1 (Section C-2): Dark Fiber Lateral Connection Fees (ft/month)
Drop Cable Mgmt. Fees * 0.02-0.06 0.02-0.06 0.00-0.00 2.22
Custom Cable Mgmt Fees * 0.31 0.32 0.01 2.22
Fees for additional fiber * 0.06 0.06 0.00 2.22
Per Project Minimum Drop/Custom
Cable fees 239.73 245.05 5.33 2.22
EDF-2 (Section C-1): Advance Engineering Fees (AER)
Commercial/Industrial AER min. fee $766 $783 $17 2.22
* Calculations have been rounded to the nearest cent.
Committee Review and Recommendation
In 2012 both the Utilities Advisory Commission (UAC) and the Finance Committee (Staff Report
2680) recommended that these rate increases be approved by Council as part of the annual
budget adoption and not be reviewed in the future by the UAC or the Finance Committee, as
there are no policy questions posed by the annual adoption of these rates.
Resource Impact
The additional Commercial Fiber Optic revenues resulting from the CPI increase to Dark Fiber
Licensing Services Rate Schedule EDF-1 are projected to be approximately $37,850 for FY 2014.
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Since the Dark Fiber Licensing Services Rate Schedule EDF-2 applies to customer-driven
expansions and upgrades to the City’s dark fiber network, and the fee represents the Minimum
Fee, the increase in projected revenue due to this rate increase is negligible and difficult to
predict.
Policy Implications
Adoption of these rate adjustments represents no change in policy.
Environmental Review
Adoption of changes increasing dark fiber rates by the Consumer Price Index to meet operating
expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for
capital improvements necessary to maintain service 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 Fiber Rate Change Effective July 1 2013 (PDF)
Attachment B: Proposed Fiber Rate EDF-1 effective 7-1-2013 (PDF)
Attachment C: Proposed Fiber Rate EDF-2 effective 7-1-2013 (PDF)
*NOT YET APPROVED*
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Resolution No. ______
Resolution of the Council of the City of Palo Alto Adopting a Dark Fiber Rate Increase
and Amending Utility Rate Schedules EDF-1 and EDF-2
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule EDF-1 (Dark Fiber Licensing Services) is hereby amended to read in accordance with
sheets EDF-1-1 and EDF-1-2, attached and incorporated. Utility Rate Schedule EDF-1, as
amended, shall become effective July 1, 2013.
SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read in accordance with
sheet EDF-2-1, attached and incorporated. Utility Rate Schedule EDF-2, as amended, shall
become effective July 1, 2013.
SECTION 3. The Council finds that the revenue derived from the authorized adoption
enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the
Charter of the City of Palo Alto.
SECTION 4. The Council finds that the adoption of this resolution increasing dark fiber
rates by the Consumer Price Index to meet operating expenses, purchase supplies and
materials, meet financial reserve needs and obtain funds for capital improvements necessary to
maintain service 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
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*NOT YET APPROVED*
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Regulations Sec. 15273(a). After reviewing the fiber rate staff reports presented to Council, the
Council incorporates these documents herein and finds that sufficient evidence has been
presented setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
__________________________ _____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ _____________________________
Deputy City Attorney City Manager
_____________________________
Director of Utilities
_____________________________
Director of Administrative Services
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-1 Effective 07-01-20123
dated 7-01-20121 Sheet No. EDF-1-1
A. APPLICABILITY:
This rate schedule applies to customer accounts established prior to September 18, 2006, unless the customer elects
to apply the EDF-3 rate to the entire customer account. This rate applies to Fiber Optic services from the City of
Palo Alto Utilities (CPAU) pertaining to the City's network (Backbone and associated connections).
B. TERRITORY:
Within the incorporated limits of the City of Palo Alto and land owned or leased by the City.
C. FEES:
1. DARK FIBER BACKBONE LICENSE FEES:
The values or ranges for each of these price components are shown below:
(1) Fiber Price………………………………………………………………. $3270.7891/FM/month
(2) Quantity discount ……………………………………………………… $0 to $59.84/FM/month
(3) Buffer tube discount……………………………………………………….. $0 to $59.84/FM/month
(4) Route length discount…………………………………………………….. $0 to $77.80/FM/month
(5) Ring topology discount………………………………………………………$0 to $23.94/FM/month
(6) Length of term discount…………………………………………………… $0 to $46.80/FM/month
Minimum Backbone License Fee ...................................................................................... $48595.1694/month
Project Minimum Backbone Fees apply to any project proposal signed after September 18, 2006 in which
the project connects with the Backbone.
Description for Discounts:
Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path.
Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path.
Route length discount: based on the route length licensed on a specific project.
Ring topology discount: The ring topology discount for customers contracting for complete rings.
Term discount: based on an array of discounts for contracts greater than one and less than ten years.
2. DARK FIBER LATERAL CONNECTION FEES:
Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules
and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the
Licensee shall pay an annual Drop/Custom Cable Management Fee based on the follow per foot fees:
(1) Drop Cable Management Fees (for the first 12-Fibers) …………………………… $0.02-$0.06/ft/month
(2) Custom Cable Management Fees (for the first 12-Fibers)……………………….. $0.312/ft/month
(3) Fees for additional Drop or Custom Cable fibers (each additional set of 12-Fibers) $0.06/ft/month
Minimum Drop or Custom Cable Management Fees ........................................................
$23945.7305/month
Minimum Drop Cable Management Fees apply to any project proposal signed after September 18, 2006.
DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-2 Effective 07-01-20123
dated 7-01-20121 Sheet No. EDF-1-2
3. EARLY TERMINATION FEES:
If the Licensee chooses to terminate for convenience the License Agreement or the term of any project
under the License Agreement, then the Licensee shall pay the applicable termination payment as specified
in this schedule or in the License Agreement, as provided below.
Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the
following amounts, whichever is less:
Annual fee of the contract year that the Licensee chooses to terminates in full without term
discounts, or
Remaining fees of the project term as indicated in the License Agreement.
D. SPECIAL NOTES:
1. All fees must be paid to the City in accordance with the terms of the Dark Fiber License Agreement, the
customer’s project proposals and all the applicable Utilities Rates, Rules, and Regulations.
2. All fees and minimum charges are subject to Consumer Price Index (CPI) adjustments, to be applied
annually, except as defined by Section D.3 of this Rate Schedule. Discounts will not be modified by
changes to CPI.
3. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the
San Francisco-Oakland-San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor
Statistics. The adjustment is calculated by dividing the most recent calendar year December CPI by the
December CPI in the year rates last changed. In the event that the change between December CPI’s
indicates an adjustment of less than 1% is required, a change to rate schedules may not be made for the
upcoming year. Future rate changes will take the last year of change as the new base year for purposes of
calculation.
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DARK FIBER SERVICE CONNECTION FEES
UTILITY RATE SCHEDULE EDF-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-2-1 Effective 7-01-20123
dated 7-01-20112 Sheet No. EDF-2-1
A. APPLICABILITY:
This schedule applies to all connections, expansions, and upgrades to the City's Dark Fiber network (Backbone).
B. TERRITORY:
All territory within the incorporated limits of the City and land owned or leased by the City.
C. FEES:
1. ADVANCE ENGINEERING FEES:
Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The
fees will be credited against the estimated project cost prior to the collection of the project construction
fees.
(1) Commercial/Industrial AER minimum fee ..................................................................... $76683.00
(2) Special conditions (requiring expert assessment) ........................................................... By Estimate
2. ESTIMATED SERVICE CONNECTION AND RECONFIGURATION FEES
All estimated service connection and reconfiguration fees must be paid prior to the scheduling of any
construction or reconnections to the City's Dark Fiber network.
(1) Service connection (Interconnection) fee ...................................................... By Estimate
(2) Reconfiguration Fees ..................................................................................... By Estimate
Labor rates are subject to change as stated in the Utility Rate Schedule C-1.
D. NOTES:
1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to
the property line in compliance with City of Palo Alto Utilities Rules and Regulations and contract agreements.
2. The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to
provide timely continuous service.
3. All fees are subject to Consumer Price Index (CPI) adjustments, to be applied annually. The CPI adjustment
will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-Oakland-
San Jose MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is
calculated by dividing the most recent calendar year December CPI by the December CPI in the year rates last
changed. In the event that the change between December CPI’s indicates an adjustment of less than 1% is
required, a change to rate schedules may not be made for the upcoming year. Future rate changes will take the
last year of change as the new base year for purposes of calculation.
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