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Home My WebLink About0390.093• July 8, 1993 THE HONORABLE CITY COUNCIL Palo Alto, california 17 Regqmmendation for a Gas CystQm~r Therm Factor Bill Credit HeQbers of the council: Report in Brief This report notifies the Council of a proposed gas customer bill credit to refund a 1~58 percent overcnarqe in therms hilled and requests approval of the attached resolution authorizing distribution of funds f~om the Gas FUnd Rate stabilization Reserve. This refund does not involve a change of Policy or Rates. The gas credit is necessary to correct bills issued bet~een August 1990 and May 1993, which were based on an overstated therm factor. Implementation is recommended for this fall. The total credit for an averaqe residential qas customer ~ill be approximately $lS. Background For accurate gas billinq, two component& must be correct~ First, the number of billing uni~s expressed in therms ~U&t be correct. Second, the rates must be identical to those approved by the Council. Accordingly, proce~ures are established to verify "rate tables· in the Utiliti~s Billing Syst~ and the billing units upon 'Which the charges are based. Tt-~e procedure for arriving at the number of billing units is t~ obtain through meter readings the voluaetric amount of qas passing through the customer's meter, and apply a current ~therm factQ~" to that amount to obtain the number of theras to be billed~ The therm factor represents the l:Iheating value" or BTU (Sriti&b Thermal UnitJ quality of the gas delivered to the city by Pacific Gas and Elf'lctric (PG&Ei. This qua.ntity can vary monthly, dependinq on which gas fieldS are drawn upon. since gas heating value otten chanqes monthly, the procedure is to revise the therm factor used for billing on a monthly basis, or longer, it PG&E does not send ClOt: 390: 93 • • o o tiDel), hills. Upon receipt of the pe"E bill, the utilities Department notifies the Information Resources Department by memo 60 necessary .adj 'Ustm.ents are m.ade ~ iioW'ever, the proced1..Lre was not followed for the period August 1990 through May 1993. As a result of this over~i9ht, the therm factor remained at 1.032, while actual therm factors ranged from 1.010 to 1.023 during that period. To assure that this mistake will not occur in the future, a new procedure has been adopted expanding the meeo cHstribution list and .setting a computer flag" in "the event A therm factol." is not up<l .. te<l. The impact of this oversight is that the number of therms billed was approximately 1.68 percent higher than should have ~~en billed d~rin~ this 34-month period. Consequently, Gas FUnd ~evenue ~as overcollected by 1.67 percent, as the utility billed $48 j ge4,OOO but should have bill~d qas customers $48,178,000 during this period. Thus,. the amount of the overcharq"! is approximately $806,000, ~hich is recommended to be refunded to the City's gas cust.omers. Since the qas therm factors were in error. gas therms and the resulting charges {includinq Utilities Users Taxj W$re overstated. consequently, the utilities Users Tax should similarly be re~unded as well as the interest ealned by the City on this sum. For purposes of estimating the utilities Users Tax,. 5 percent is used; and a portfolio interest rate of 7 ~ 6 percent is used. These components add to a total gas customer cr@dit of $9l7,400 to be funded trom the Gas Fund Rate Stabilization Reserve (RSRJ. This represents approximately 5 percent of annual qas sales revenue, and withdrawal of this amount trom the RSR will not have an adverse impact on its balance. For an average gas customer, the credit represents approximately $18, which will partially offset a one manth gas bill. depending on the season. Implementation of Gas Customer Tberm Factor 'ill Credit The Utilities Department plans to implement the gas cus~omer therm factor bill credit this fall. A new software computer program. will be developed to calculate appropzjate distribution of the credit. The credit will appear on the custOJDer's gas bill as a credit against the current month's gas charge. A separate line on the bill statement will be used f~r the therm factor bill credit, in order to differentiate from the electric custcmer rebate which may be implemented simultaneously. The plan is to base a customer's therm factor credit on the respective ~as usage during the 34 month period ana allocate the credit proportionate to the customer~5 usage to t~~ total system usage over this period. All current customers are eligible, if they purchased qas prior to June 1993 and will automatically receive their respective credits. Former Palo Alto qas customers durinq the period between Augl..'st 1990 and May 1993 are also eligib1e to rec~iv9 a credit, if they contact the Utilities CJQl.uo." ----..-...----- \ • .... '.- .~ Oepa~ent and make such request. Since we cannot locate allot the customers, it is necessary tor them to contact US4 The Gas Utility will advertise in a newspaper of gene~al circulation to notify such customers that they are eligible for the qas customer therm factor ~ill credit and will honor all such requests through March, 1994. Recommendation staf~ recommends ~)at Council approve the attached Resolution and BUdq~t AIlJendment Ordinance autbor-izinq a ciistribution of funds from the Gas Fund Rate Stabilization Reserve to refund a therm factor billing overcharge to qas utility customers. Respectfully cuemitted , ~ " 'i?...u<6E __ /,~y :LOSCHUN Assistant DirectoL of Utilities, Ada~l~t~~v~ ~rvices E! I J • :.xJ Int~~ Director of Utilities ~~ Attachments: Resolution Budget Amendment ordinance CXR.390:13 · .. ~ , -, I L'/ RllSOLUTION NO. RESOLUTION OF THE ("'lUNCIL OF THE CITY OF PALO ALTO AUTHORIZING THE D: -RIBUTION OF SUMS FROM THE GAS FUND RATE STABILIL rON RESERVE TO FUND A ONE-TIME CREDIT TO GAS CUSTOMERS WFBR.EAS, staff has determined that for the period between August, 1990 and May, 1993 the gas consumption of PaIn Alto gas utilities customers was not calculated in accordance with City procedures, ~hich require periodic adjustments to the therm factor in computing a gas customer's billing units; and WHEREAS, staff has recommended that during the fall of 1993 excess gas utility charges should be credited to the account of any affected Palo Alto gas utility customer based upon the gas usage af the affected gas utility customer in proportion to the total gas usage of all affected yas utility customers during this 33-month period; NOW, THEREFORB, the Council of the City of Palo ~to does hereby RESOLVE as follows, SECTION 1. The "Gas CUstomer Thenn Factor' Bill Credit Plan" set forth in the City Manage~ R~port er.titled ~Reco~endation for a Gas CUstomer Ther,m Factor B~11 credit", attached hereto and incorporated herein by reference, is hereby adopted, and the City staff is hereby authorized tG execute and administer such plan in accordance wit-h the provi.sions of that Report. Under such plan, commencing in th~ second quarter of fiscal year 1993·94, a one-time credit against current gas utility charges will be granted to each qualifying gas utility customer who resided in Palo Alto aod received from~ or used or consumed gas utility service provided by, the City of Palo Alto during the period August 1, 1990 to May 31, 1993. There shall be included in the credit any utility users tax attributable to the amount of the gQs utility credit plus interest at the City's portfolio interest rate in effect at the ti~e this Council apprOV~B of thi:; ~Cti01 .. ~ Tr .. a gas utility credits shall be paid out of sums in the Gas Fund Rate Stabili7.ation Reserve. The City Manager is autIJ.orized to dete=r::Une the amount of funds which viII fund the gas utility credits in accordance with the method of computation recommended by staff in the Report. SECTIQN 2. The Cou:lcil approved does not constitute a Bnvironmental Quality Act. INTRODUCED AND PASSED, AYES, 1 9106lO 1]11 007'04: 11 finds that the action hereby project under the California --:------- o ABSTENTIONS: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: City Manager Senior Asst. City Attorney Interim Director of Utilities Director of Finance 2 ORDINANCE NO. ORDINANCE OF TilE COUNCIL OF TIlE CITY OF PIoLO ALTO AMENDING TIlE BUDGET FOR TIlE FISCAL YEAR 1993-94 TO CREDIT GAS CUSTOMERS FOR OVERBILLINGS --. .-- WHEREAS, pursuant to the provisions of section 12 of Article III of the Charter of tbe City of Palo Alto, the Council on June 22f 1993 dld adopt a budget fo~ fiscal year 19~)-94; and WHEREAS, from August 1990 through May 1993, the correct adjusbaent for the gas therm factor was not made on customers' bills and~ as a result, gas customers were overcharged; and WHEREAS, the correct gas therm facto~ billinq procedure has now been appropriately adjusted; and WHEREAS, a credit of $9J7,400 to gas coapensate for The overcharging and overpayment of utility Users Tax; ~nd custome~s is required to for the corresponding ~~EA5, this adjustment viII also include City Departments who are customers of the Gas Fund; NOW, THEREFORE, the COUncil of the city of Palo Alto does ORD~N as follows: SECTION 1. The sum of Nine Hundred Thirty Seven Thousand Four Hundred Dollars ($937,400) is hereby reduced rrom customer sales in the Gas FUnd, and the Gas FUnd Rate stabilization Reserve is correspondingly reduc~d. SECTION Sta:bilization 1993. 2. This transaction will ~e.duce the Gas Rate Reserve from $9,435,000 to $8,497,600 as of July 1, SECT1?N J. The sum of Three Thousand One Hundred Dollars ($3,100) 18 hereby reduced froQ the Public Works Department allocated charqes, and the sum of Five Thousanu Dollars ,$5,000) is reduced from the Community Services Department allocated charges, al~ the General Fund Budget Stabilization Reserve is correspondingly increased. SECTION Stabilization 1993. 4. This transaction w1l1 inc~ease the Budqet Reserve f~om $10,81'1,000 to $10~S25,100 as of July 1, SECTION 5. The sum of Five Thousand Nine Hundred Ninety Four Dollars ($5,994) is transferred from the Wastewater Treatment FUnd alloc.ated charqes and the Wastewater Treatment FUnd Rate stabilization Reserve is cocrespondinqly increased. S?CTION 6. This transaction will increase the Waste'Water- Treatment Rate Stabilization Reserve from $3,100,000 to $3,105,994 as of July 1, 1~9J. ~~. The Council of the City of Palo Alto her-eby.fin~s that the en.1J.ctlaent ot this ordinance is not a project under the California Environmental Quality Act and, therefore, no -',nvironmen tal impact a)!Jsessment is necessary. SEC"L'ION 8~ Municipal Code, adoption. As provided in Section 2,04.375 of the Palo Alto this ordinance shall become effective upon INTRODUCED AND PASSED: NOES: ABSTENTIONS: ASS Eli'l" A'M'ES?: APPROVED: city Clerk Mayo~r~----------------- APPROVED AS TO FORM: Sr. Asst. City Attorney APPROVED: c~ ty Ma.nager Director of F1nance Director of utilities ..... 1 " .. -----