The URL can be used to link to this page

Home My WebLink About0237.094~ Ita 2) BUDG£7 94-95 W 'f.eI»Ol'l ___ _ Aprj.l 26, 1994 THE HONORABLE CITY COUNCIL Palo Alto, California Attention: Finance committee Proposed a., RAte Incr@§§~ Members of the council: Report in Brief This report recommends Council adoption of the attached resolution which authorizes a $1.123 million gas revenue incl.'ease to become effective July 1, 1994. This l.'epoxt discusses a ('·as Utility proposed revenue increase of $1.123 million or 6.3 percent. A review of the FY 1994-95 preliminat.y Gas Fund operations reveals that current rate levels are inadequate to meet the Utility's financial obligations. The revenue requirement of the Gas Utility consists of a number of components including the cost to purchase and transport natural gas, opel:.'ate and maintain a reliable system, finance an appl'opriate portion of the capital impt'ovements from current operating revenues, fund prudent reserve levels and produce a reasonable transfer to the General Fund. A significant change in any of these factors, as well as a change in the sales level or in the contribution from reserves .. can tl'igger a rate adjustment from one year to the next. The key factor for this proposed rate increase is the decision to reduce the contribution from reserves by $670,000. This"decision has been made t.o allow the Utility -to continue its policy to alternate gas rate increases every other year, avoid a larger rate increase ,in later years and to keep reserve balanceB within the adopted guidelines. Another factor affecting the Gas Fund revenue is lower interest .rates on the Utility's investments, which cause a decrease in the interest earned on reserVE; balances. Other factors contribute to the increase in the Gas, Fund expenses'. 'fhese factors include a $211, 000 increase in the Resource Conservatior:. budget to fund val'ious programs, \llhich will increase the efficient use of natural gas and will assist staff to analyze and assess CMR:237:94 1 ~-----------------------------------------~ I"'·':' I ':, :_,_ ,; ," ". -'.'c. I' o custom~rs loads. In addition, the gas purchase costs al'e projected to increase app~'oximateli' $152,000. Furthe~roore. the F'Y 1'994-'9& sales level is projected to decrease by about 1.4 percent from FY 93-94 projections. This is dve to the fact that:: some manufacturing companies have been moving their Operations from Palo Alto. The net impact of the projected sales decline (sales revenue less purchase costs) is approximately $92,000. lIl!;tll<\~~.!"Q1l. of (Jas R.a_l!l'-Mlt~~LQ:.1 In today'a. competitive environment. a key objective tor the success of a utility is to offer its customers different sel.-vice options. Unbundling the gas set-vice and pricing each service separately is a way to pl:ovide customers with choices. For this l:.'eason, it is appropriate to offer the Utility'S large non-residential customers transportation-only service. The proposed July 1, 1994, inll'cduction of transportation-only service is detailed in a separate staff report. 'transportation-only Gas Rate Schedule G-3 is a cost··based rate. A th.o:..'ough cost of service study was conducted to calculate the appropriate tran9pm:tatio~-only rate which will be offered to nOI1- core custcmel.-s. 'The definition of a non-core gas customer is a noo-residential customer with an annual consumption level of 250,000 lherms at a single address. This new classification will result in some customers, who have been served under the Commercial Cas Rate Schedule G-le, to be eligible for service under the Non Core Rate schedule G-.3. For thefle cuatomel.'s, their gas bills will decrease approximately 2"j percent. The potential impact on the util ity is a revenue shift of approximat.ely $202,000 which will be recovered from the core C118tomel:.'s; this is consistent with the results of the recent cost of service study, which is discussed in the next section. Some of the primary objectives of rate design are to improve cost of set'vice and customer equity, meet the revenue requirement, lIl.!nin,ize the service costs on any given customer class, and encourage the efficient use of valuable rosources. In addition, a key rate-making objective is to maintain competitive rateS and ~hereby :t'educe the temptation of customers to "b}rpass I1 t.he Gas Utility which would lead to higher rates for the City' 8 core customers. A :recent cost-of~8ervice study indicates that the residential class is paying less than their fully allocated cost of service, while non-residential customers are paying more than theil.-proportionate CMR,237,94 2 \ .,' . , share. This extoting rate l"elationohip between customer classes is a result of a much lo·,.;~r rate {40 cents per therm) applicable to the first block or the baseline qoantity for the residential class. This rate is about 24 percent below roM~' fl cornpaL'able baseline quantity rat~. To improve equity among customer classes, staff proposes spreading the required revomle incl~ease on a different percentase basis between classes, In this case~ the increase in a typical residential bill w~ll range h'om 12.9 percent in the winte1' to 8.3 pe~:cent in the 9urr:ro:er while a non·l.-csidential bill may increase by 6, 3 perc~mt. A cOfnpari~on of PG&E cUBt(Y.l'ler bills ..... ith Palo Alto customer bills is illustrated by the attached ,graphs. This comparison io based 011 PG&B1a ctlt'"rent rates and Palo 1I.ltols proposed rates. Figure l.a, {Residential S\.H;,""""'Le-~-Bill Co·'nIMrioonJ and Figure l.b .• (Residential Winter Bill C~r.par~8on) indic~tc that the City l 6 residential gas r.a:tes are~ on the aver.a.ge )Iea}'-);'Qund~ apPJ:oxima:tely 10 percent below PGS .. R's :.:esidential l-ateJ;., Ho .... ·cver. fj gure 2 _a. (Non- r('"Pidential SUr.i.."ljp.r Bill compaxison) and Pigure 2.h. {Non- l.-eaidential Winte).-Bill Comparison) I reveal Palo Alto's gas rates are I on the average, ~bout 10 percent lO .... ·cT than ?G&E's rates in the winter but about 20 percent, hlg?let: than PGt.F.' s rates in the SUrM',er. fhe reaaon i;'J that thQ Gas Utility has to pay interstate and intl'itotate tranBpol'tation to PG&:E for gas del ivories to the City gate. The following table indicates the impact of this l-ate proposal on a typical monthly bill for the various ct]9tOO'.er claoses: % ABOVE TItBRl-1 PROPOSED $ CfU\NGB \ (BBLOW) WSTOM2R llS.rull> Ill!'], llLIllJ.,1 ~ PG&E Resid/llinter 100 $46.84 $5.36 12.9 (21. 0) R ... id/Wintcr 150 86.34 7.61 9.7 ( 8.9) Reaid/Sutt't1ller 26 13.84 1.35 10.8 ( 7.6) ReBid/Summer 45 28.85 2.21 8.3 1.3 Commercial 500 295.00 17.00 6.3 1 .4. Industrial 3,200 1,880.00 112. 00 6.3 5.S· IndU9trial 25,000 10,075.00 /3,875.00) (2"1.4 ) 3 .4} * Interruptible 0-50 & G-3 60,000 24,180.00 1,380.00 6.1 2.6)* • comparison with PG&E commercial and industr,ial bills is based on an average of winter and summer bills_ CMR: 237: 94 3 '" " Staff recommends Council approval of the attached Reo\,>lutlon inoreasing gas revenue by $1.12'3 million effective July It 199~. Respectfully submitted, ?~ LUCIE HIRMINA Utilities Rate Analyst ,/ /tJ/L_~/ ED~~ ;~-~K Attachments: Resolution Rate Sr.hedules G-1 and G-2 CMR:237:94 4 '.". RE~f6ENTIAL BILL COMPAhlsON SUMMER $ MONTHLY BILLS 30 25 20 15 10 ~ 5 O~~---~-L~--~~--~~C ______ L-__ --J Ffgur. La. 20 26 30 40 45 Tl1erms fi~--"--------~:l III Palo Allo I:,] PG&:J RESIDENTIAL BILL COMPARISON WINTER $ MONTHLY BILLS 140 120- 100 BO 60- 40 20 -~------~-------------------------, O~-~--4 __ ~---~_-_--J--______ ~ 70 100 150 200 THERMS Flgur& 1.b_ [.palo allo [:::J~G&~J , ) -, " ~ r I , -, ."" 2000 1500 1000 500 FigUJ6 2.oft, ,-'-. NON-R)PSIDENTIAL BILL COM~RISON SUMMER $ MONTHLY BILLS 300 500 700 1000 2000 3200 TfiERMS lit -;~IO A Ito (] ~-G&;,-J NON-RESIDENTIAL BILL COMPARISON WINTER $ MONTHLY BILLS 2500 2000- 1500 1000 500- 0 300 500 700 1000 2000 3200 THERMS Figure 2.b. l-Palo Alto fl PG&E I ".',' ' .;, . . , '., RRSOLUTION NO, RESOLUTION OF 'tHE COUNCIL OF THE CITY OF PALO ALTO AMBNDING UTIhITY RATE SCHBDULR G-l lIND ADOPTING NBW UTILITY RATE SCHEDULE G-2 OF T1I8 CITY OF PALO ALTO !fJ'1LITIBS RATBS /\NO CHARGES PBRTAINING TO GSNRRAI, NI\.TURl\L OIlS SERVICE 'the Council of the City of Palo Alto does hereby RESOLVE as [0119...,8: , ~~l, Pursuant to Section 12.20.010 of the Palo Alto z.!unieiPal Code, Schedule G~l (General Natural' Gas Sel.vice) of the Palo Alto Utilities Rates and Charges is hereby.amended to read in accord~nce with Sheet G-l·1. and former Schedule G·l (General Natural Gao Service), Subse(:tion Gl·C is hereby reincorporated in new Schedule G42 {General Natural Gas Service) of the Palo Alto Utilities Rates llnd Cl1arges to read in acco1-dance with Sheet G·2 -1, attached he:L'"et-o and incorporated herein by reference. The fore- 9 0i l l9 ULility Rate Schedules, ti.8 amended and as adopted, shall bR~orr,e effective July 1, 1994. ~JicrLQlL2. The Council finds tJVlt the revenue derived from the .nuthori zed adjust.ments of the general natural gas service rates Bhall be used only for the purposes set forth in Article VII, Section 2, of the: Charter of the Cit.y of Palo Alto. SE.cr.IQtU. The Council finds that the adoption of this resolution does not-cOllstitute a project under the California b"nvirol'lFl'lantal Quality Act, California Public Resources Code section :.noao. subdivision (b) (8) . INTRODUCED AND PASSED: 1\YRS: NOES: ABSB!.f.i:': ,ABSTBNTIONS: ATTEST: APPROVED: City C"IO:e"'rk;;--------~~~--Mayor I\PPROVBD I\S TO FORM: I' " , , i '1 I I \ GENERAL NATURAL GAS SERVlCt; A. APPLICABILITY: This selledule applies to all natulBi gas seIVice 10 illdividuelly metered single femirt premlses. In<:Iud'ng those separataly r/lSleroo in II mu~i femily compiex. B. TERRITORY: W~hln the servioo eleB of tha City oJ Palo Allo WId on IWId owned l)( leased by tha City. C. RATES~ 1. .GUlCQmrrlQQilY...QIJ..il£rut; Wer individually met.fed rosi(!onti<ll ""slomefS.) (A) Summef Rate (May 1 10 October 31): Per Meter ~L.M201tt 0.20 therms per therm .... . . • . . . . . . . . . . . . . . . . . . . . . . . . . . .. 45.5¢ Over 20 tharms per them) ............ ,", ... , ...... ,..... 79.0i! (8) Winter Rale (Nov. 1 to April 30): 0.96 therms per Ih.nn .....•...................... , . . . . .. 45.5~ O{.r 96 therms per tharm ......... , .. ,", .......... ,..... 79.0i! 'j D. SPECIAL NOTES: 1. Saasonal lale eIlangos ~ The applicable residential rale slruc1ura Will be prers led in the May and November billing periOds based on Iha rales of the number of days prior to May 1 and SubSequ~nt to October 31, respoclively, lo.th.,01el number of days in lhe billing pefiO<!, -----~-~ .. -----.-._--- CITY OF PALO ALTO UTILITIES Issued by the City Council Supersedes She~1 No. G-l-l daled 7-1-92 .. \) Effeclive 7·1-94 Sheet No. G.1-1 '." GENERAL NATURAL GAS SERVICE A. APPLICABILITY: This SCI1edule applies to all nOll·residentlal core customers. Cote ClJSionwrs am oorined as customers using Isss than 250,000 Therms per ye9t at a slngle addr~ss. B, Territory: Wrthln the service area oltha City 01 Palo AlIo and on laod owned Of leased by tIw City. C. Rates: All year round delivered commodity: Per Thelm ............................................... 59.0¢ ----------_. CITY OF PALO ALTO UTILITIES Issued by the City Council -----"-"--"-- EffeClive 7-1·94 Original Sheal No. 0·2-1 . ';., '.