The URL can be used to link to this page

Home My WebLink About0525.093• . '~:-,----- octobe~ 14 r 1993 THE liONORABLE CITY COUNCIL Palo Alto, California Elegtric CU.to •• ~~ Members of the Council~ Report in lI~i.f 10 This report notifies tbe Council of the final amount of the elec,trie C'lstomer refund follo1oling the guidelines adopted ~y the Council on June 21~ 1993. staff recommends Council app~oval of the attached Budqet Amendment Ordinance which 'Will refund $36.7 million from the Rate Stabilization Re.serve to electric customers. The projected ending balance of the Rate Stabilization Reserve for F¥ 1993-94 is approxililately $22 million. Implementation of the refund will begin November 1, 1993 and will be applied towards the entire utilities bill. The size of the credit will result in most customers a~oidin9 any utilities payment for November and a portion of the bill in December. An average residential customer using 6000 kilowatt-hours annually would receive a refund of approximately $209. laakaroun4 On June 21, 1993 the City Council approved the Fiscal Year 199)-94 Electric Cu$to~er Refund Plan [CMR:264:93). That plan indicated ho~ an Electric Fund surplus~ which arose primarily due to power cost savings~ would be distributed to ratepayers. The report was prepared .on May 6. 1993; and because there were a number of outstanding contingencies to be resolved, the actual amount of the ref'olnd was not speeified. Some of these factors included the pending outcome of a legal settlement involving the Western Area Power Administration and P~cific Gas and Electric Company~ ana the audit ot the FY 1992-93 financial results of operations tor the Electric Fund. During th~ budget prccess~ staff provided a $29.5 million projection of the refund amount and indicated that a revised amount would be forthcoming and reported to the council. Thus, the current budget already incorporates a $:9.5 million el.ectric refund, including the savings passed onto the General Fund. CIIR: 525 r 93 • ". __ ...... __ ........ _M~.~ .. __ . This report notifies the Council that the final electric refund amcunt is $36,700 1 000. The refund amount ia $7 ~2 Illillion higher than tbe previous refund estireate and the components of th~ $7.2 million are identified in the table belo~. This table compares the impact of ~pdatea projectio~g by staft tor power purchase costs, operating costs, and capital costs. These items have been revised downward to approximately $4,169,000 under budget. representinq a budget variance of 6.2 parcent from sales of ~6~.2 million. Since costs this year are projectea less than budgeted~ the refund is higher. Fer the mid-year report, the fiqures will be updated again. Additionally, the desired Rate Stabilization Reserve (RSR) ending balance for FY 1993-94 has been lowered from $26.3 million to $22.1 million, to reflect revisions do~nward in po~er purchase costs_ Electric RSR reserve level quidelines are based on a percentaqe of power-plJt'"chase costs. Reconciliation of Refund Estimate to Fina] Amount FY 1993-94 Components of $7.2 Million Refund Increase 1) Beqinninq balance of RSR: -actual -revious ro'ection 2) Western/PG'E Settlement Credit: -actual -revious ro"ection l) Funding to (from) the RSR: -reVised projection -revious rQ"ection {4' Variances for Capital, Revenue~ and Operating Budget, including Po-wer Costs: -revised projection (net savinqs) -revious ro"ection 5} DeSired RSR Balance, end of year: -revised projection -reviOU6 ro"ection Net Cumulative Increase in Refund $OOO'S Amount 45,065 43,946 10, 24~ 10,000 (412) 1,930 3928 o 22,050 26 300 $OOO's Chan e +1~119 +241 -2,342 +3 928 +4 5cO +7 196 Despite these updated po~er purchase cost projections, it is clear that the forecasting of the cost ot po~er resources remains subject to cost variances in the millions of dollars. This is a phenomenon CIOt.S25." , i -;-"----------" which warrants prudent monitoring and particular attention throughout the year and during the budget process r since rates and reeerve level guidelines are impacted. Durinq the upcominq Dudget process tor FY 1994-95, the Electric Fund Budget 'Will receive higher scrutiny than previously exercised~ The refund 'Will be distrikluted to all qualifying electric customers beginning with the November 1993 utilities billing cycles in accordance with the adopted Electric Customer Returld Plan~ The applicable "refund billing period'" is October 1, 1992 through September 30, 199J ~ All current or tormer Palo Alto electric customers who consumed electricity durinq this period qualify for the refund. For current customers, the computer wi 11 automatically indicate the total refund amount on the bill. The refund will be identified as a credit on the bill (separate from a gas therm factor credit which will apply in November 1993). Any unused credit will be carried forward to the successive month(s). In May 1~9J, staff indicated that a customer's refund credit would be applied against the current electric charges (CMR!264J. However. in order to simplify computer software programming, a preferred approach is to apply the credit against the total utilities bill. From an accounting standpoint, this is -bUSiness as usual-since customers pay one check for all six utilities. Proper accounting and separation of funds will be accomplished through the computer system and is transparent to the utility customer 4 Accordingly, the plan is to apply the credit to the total utilities bill. Impact on Elegtric Rat.payers Palo Alto residents, businesses r institutions, city dep~rtments and industries will all benefit from this refund, at a time when the economy is slow~ simil.erly, unmetered customers such as street liqhts and traffic signals will qualify tor a refund. The a~ount of refund for each metered electric account vill be bas~d on that account·s proportionate share of electric usage to the total system usage between October I, 1992 and September JD. 1993. Based on uS8qe of 500 kilOWatt-hours per month or 6000 kilowatt-hours per year, an average residential customer will receive a refund credit of approximately $209. For most residents, this will result in no utility payment for the month of November and a partial payment for December 4 In terms of just electric bills, the credit would -be equivalent to six: months of no electric payments~ The City's largest electricity users are industrial ones and some of them will receive retunds well in excess of $2.5 million. Beceuse electric charges represent a much larger share of their total utilities bill in comparison to residents, many large industrial customers will not have to make any utilities payments for several months. CXlIl52!.:13 o Impact ~b. Electric FUnd Approval of the attached Budget Amendment Ordinance will enable approximately $36.709.800 to be withdravn from the Rate Stabilization ileserve. $36,700,000 is planned to go to all qualifyinq ratepayers, while $9,800 is set aside to cover expenditures to administer the refund, such as advertising and correspondence cos~s to reach approximately 6000 former customers. As a result of this refu~d a~ount, the projected ending balance in the RSR on June 30, 1994 is ~pproxi~ately $22 million. This level is below the projectea maximum RSR guideline and above the target RSR quideli~e based on updated power purchase costs. x.p,et on the General FUnd a»4 vt~liti.s run~s This re~und will apply to all electric customers, including City and utilities facilities. Thus, approxinately 100 metered City and Utilities facilities will experience reduced electric charges totalling approximately $900,000 this tis-cal year. In addition, the .Public Works DeFartment budget will experience savings of $293,50.0 and '$138,000 for street lighting and traffic signal electric bills respectfully. The largest electric savings tor a single city account is estimated at $486,000 for the Regional Water Quality Control Plant. Most of these savings have already been reflected in the FY 1993-94 budget based on the estimated refund amount of $29.5 million. Therefore, the cu~ulative impact of this refund en the General Fund is an additional $519,500 beyond ."hat .... as or-iginally. budgeted, which will increase the General FUnd Budget Stabilization Reserve on a one-time basis. The attached Budget Amendment Ordiraance (SAO) provides for the necessary a.ccounting adjusttr,et'lts to reflect this final refun~ amount. Iteeomm&ndll:t.ioll staff recommends that Council approve tbe attached Budget Amendment Ordinance to distribute a $36.7 million refund to qualifying electric custo~ers this fi~cal year. Respectfully submitted, ;V!:;l!::~- Asst. Director of Utilities, Administrative Service5 Attachment: Budget Amend. Or-d. CXIl:525,U . ' f ' / /~.1~? EDWAR6 J. KRIZEK Director of Utilities ~ city Manager- ","" ------.. ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF P.!.+t.-O Jo .. !,TO l'_lIfENOING TliI" iJi.JDGE't FOR TtlE FISCAL YEAR 1993-94 TO ADJUST THE REFUND CREDIT TO ELECTRIC CUS'rOMERS WHEREAS, pursuant to the provisions of section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 21, 1993 did adopt a b~dget for fi$cal year 1993-94; and WHEREAS, the eaunGil adopted a new Reserve policy and quid.elines for refunding the excess balance in tbe Rate Stabilizatio~ Re$erve for the Electric Fund on June 21, 1993; an~ WliEREAS, the final amount of the refund has been deter!%lined to be $36,709,800, based on the 1992-93 closinq balance in the Electric Fund Rate Stabililation Reserve; and . w""HEREAS, the 1993-94 Adopted Budget included a refund of $29,500,000; and WHEREAS, the additional refund amount including associated adeinistrative expenses, will require a total of $7,209,800 to be funded from the Electric Fund Rate stabilization Re5e~ve and other related financial projections; and WHEREAS f the additional ref~id amount vill impaet City depart-ents which purchase metered electricity by a total amount of $200,000 as well as the corresponding reserves; and WHEREAS, included in the refund is a refund of $4)1,500 for electric sales which vill lower the payment for street lights and traffic signals by the General Fund; and WHEREAS, additional funding of $9,800 is required to administer the refund; NOW, THEREFORE, the Council of the City of Palo Alto does ORDA!N 8S follows: SECTION 1. The sum of Six Million Seven Hundred sixty Eight Thousand Five Hundred Dolla~s ($6,768,500) is hereby decreased from Electric Sales in the Electric Fund, and the Electric Fund Rate Stabllization Reserve is corr-espondingly reduced. SECTION 2. The sum of ~our Hundred Thirty One Thousand Five Hundred Dollars ($431,500) is he~eby reduced from allocated revenue in the Electric Fund. The Electric Fund Rate Stabilization Reserve is correspondingly decreased. Allocated charges in the Operations Division of the PUblic Works Department is correspondingly decreased for street light and traffic signal expense. • \ .. ::'-:;":' __ ~_'-':';";;"'''' __ ''''',"'''_''('''''4''(_''''''-''''':-_ SECtIQK J. The s.um of Nine Thousand Eight Hundred Dolla.rs ($9,BOO) is hereby appropriated to contract services in utilities Administration, customer ServicE; the allocated revenue in Utilities AdJdinistration is correspondingly increased and the allocated chargee in 't.ne Electric Fund are correspondingly increased. SECTION 4. These transactions will reduce the balance in the Electric Fund Rate Stabilization Reserve from $'5~06S.0QO to $31,855,200 as of July 1# 1993. SECTI~ 5. The sum of Fifty One Thousand Dollars ($51,OOO) is reduced from allocated charges in the Facilities Maintenance Division of the Public Wor~s Department; the sum of Two Thousand Dollars ($2,000) is red.uced from allocated charges in the Fire Department, the sum of Thirty Five Thousand Dollars ($J5,OOO) is reduced from. the Recreation Division of the. Community Services Department; a~ the Budget Stabilization P.eserve is correspondingly increased!. SECTION 6_ These transactions will increase the balance in the Budqet Stabilization 'Reserve from $10,860.665 to $11. J80, 365 as of October 5, 1993. SECTION 7. The sum of TWelve Thousand Dollar5 ($12,000) is reduced in allocated charges in the Operations Division of the Water Fund and tbe Rate Stabilization Reserve is correspondinqly increased. SECTION B. This transaction will incr6ase the water Fund Rate Stabi~lzatiQn Reserve from $3,368,000 to $3,380,000 as of October 5, 1993. SECTION 9. The sum of One Hundred Thou~and Dollars ($1.00,000) is reduced fro~ allocated charges in the Wastewater Treatment Fund and the Wastewater Treatment Rate Stabilization Reserve is correspondingly increased. ~ION 10. 'This transaction Treatm~t Fund Rate stabili&ation $2,499,000 as of October 5, 199J. will incr~a5e the Wastewater Reserve from $2,399.000 to SECTION 11. The Council of the City of Palo Alto hereby finds that the enactment of this ordinance is not a project under the california Environmental QUality Act and, therefore I no environmen tal iDpact assessment is necessary. SECTION 12. Municipal Code, adoption. As provided in Section 2.04.375 of the Palo Alto this ordinance shall become effective upon INTRODUCED AND PASSED: A'tES: .. N -' • o NOES: ABSTEllTIONS: ABSEIl'!': ATTEST: APPROVED: city clerk Kayor APPROVED AS TO FORM: Sr. Asst. city Attorney APPROVED: city Manager DLrector of F~nance Director of Ut111ties