[Council Communication]  [Proposed Resolution]  [Rate Tables]

Council Communication

Title:	Resolution increasing Electric rates in July 2003
Dept:	Electric & Telecommunication, Finance
Date:	May 6, 2003
Submitted By:	Dick Wanderscheid, Lee Tuneberg
Approved By: ...........................	Gino Grimaldi, City Administrator

Synopsis:	Rising health care and PERS costs, electric personnel returning to the electric utility from AFN, increased BPA transmission and power costs require an electric rate increase. The rate model indicates the need to increase our rates by at least 7.5%, and increase the BPA surcharge from 16% to 20.8%, to meet the revenue requirements for the Electric Utility.
Recommendation:	Staff recommends the Council approve the Electric Rate Resolution that increases electric rates by 7.5% and the BPA surcharge from 16% to 20.8%. This would result in an overall increase of about 11% in electric bills.
Fiscal Impact:	This rate increase will generate about $659,000 of additional electric rate revenue and $345,071 in additional surcharge revenue. For a residential customer that used 900 kWh's per month this would translate in the electric bill (not including the tax) increasing from $47.01 to $50.54. Their surcharge would increase from $5.54 to $7.21 For a.commercial customer that used 3200kWh's of electricity per month their bill for both energy and demand (not including the tax) would increase from $204.41 to $220.21. Their BPA Surcharge would increase from $51.21 to $55.05.
Background:	The City last raised the base electric rates by 6% and increased the BPA surcharge from 10% to 16% on July 1, 2002. The Council approved the Rate Resolution on May 21, 2002. At that time we informed the Council that because BPA rates were not known, this increase was a "best guess" and actual rates would be analyzed and we would return to the Council in October for an adjustment to the BPA surcharge if necessary. On December 3, 2002, staff returned to the Council to report that BPA Load Based Cost Recovery Adjustment Clause (LBCRAC),which covers BPA's costs of purchasing additional power to meet their contracted electric loads and Financial Based Cost Recovery Adjustment Clause (FBCRAC), which is triggered if BPA's accumulated net revenue falls a preset threshold were only a little higher than anticipated. Because BPA had decided not to impose the Safety Net Cost Recovery Adjustment Clause (SNCRAC), which triggers if there is less than a 50% chance of making their scheduled Treasury payment until October of 2004, we recommended that no additional increase in our rates would be required in October 2003. At this meeting staff informed the Council we would be running the City's electric rate model during the late Winter and early Spring using actual BPA billing data and actual electric loads to analyze the status of the electric fund. This has been accomplished and what the model showed was that the actual BPA power bills appear to be about $400,000 more than originally estimated necessitating a transfer of appropriation in this budget year to cover these higher costs. Before BPA implemented the cost Recovery Adjustment Clauses, the city's wholesale power bill in 2001 was $ 4,526,894. The budgeted amount for FY 03-04 is $5,801,300 or $1,274,406 more than pre surcharge rates. When the City became aware that the rates were going to drastically increase, the council decided to use the surcharge concept to pay these higher costs. The surcharge was exempted from the city's Electric User Tax to reduce the impact on overall electric bills. The current BPA surcharge of 16% collects $1,008,529. Increasing the surcharge to 20.8% will result in an additional $345,071 for a total of $1,353,600 in total surcharge revenue in FY 03-04. This is a little higher than the amount of the projected wholesale power increases caused by BPA's CRAC's. Other costs in the utility are also increasing. Increases in health care and PERS, and Electric personnel returning to the utility from AFN construction duties, results in an increase of $222,300. Transmission fees from BPA have increased by $60,814. Capitol spending has increased by 1.8% or $10,000. Franchise fees are up by $46,800 and Central Service Charges are also increasing by about $90,000. This coupled with the fact that our ending fund balance target is only close to the target if our contingency goes unspent, requires this general rate increase. The 7.5% rate increase will help to cover all of these increased costs and also bring our ending fund balance closer in line with our policy. BPA has also just started the process necessary to trigger the SNCRAC. This process will conclude in June, but an actual rate increase would not occur until October 2003. The City's BPA surcharge already covers the LB CRAC and FB CRAC costs and these costs have been projected by BPA over the remainder of the rate period as follows: Year LB CRAC & FB CRAC % (BPA Surcharge) 2002 2003 2004 2005 2006 43% 45.5% 39% 37% 40% Therefore, if the SN CRAC is higher than the 6.5% reduction in the other CRAC's projected for October 2003 (BPA's FY 2004), we could see another wholesale power increase from BPA. However, the actual amount of the SN CRAC won't be known until August. If the SN CRAC is substantially higher than 6.5%, we would have to discuss an increase in the BPA surcharge for October 2004. Staff will keep the council informed, as new information becomes available on this issue.

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RESOLUTION NO. 2003- _______

A RESOLUTION REVISING RATES FOR ELECTRIC SERVICE PURSUANT TO ASHLAND MUNICIPAL CODE SECTION 14.16.030 AND REPEALING RESOLUTION 2002- 09.

THE CITY OF ASHLAND RESOLVES AS FOLLOWS:

SECTION 1. The electric rate schedules are increased 7.5% for rates for electric service provided by the City Ashland effective with Cycle one billings prepared on or after July 1, 2003 as per the attached rate tables.

SECTION 2. The City of Ashland adopts a 20.8% surcharge (increased from 16.0%) on billings for electric usage in addition to charges specified in Section 1 to help pay for wholesale rate increases on power supplied to the City of Ashland by the Bonneville Power Administration effective with Cycle one billings prepared on or after July 1, 2003. The new surcharge rate is $0.00801/kwh.

SECTION 3. The surcharge revenue is not subject to the Electric Utility Tax or included in the franchise fee calculation for General Fund Revenues.

SECTION 4. Three copies of this resolution shall be maintained in the Office of the City Recorder.

SECTION 5. Classification of the fee. The fees specified in Section 1 and Section 2 of this resolution is classified as not subject to the limits of Section 11b of Article XI of the Oregon Constitution (Ballot Measure 5).

SECTION 6. Resolution 2002-09 is repealed.

This resolution was read by title only in accordance with Ashland Municipal Code §2.04.090 duly PASSED and ADOPTED this 6th day of May, 2003.
Barbara Christensen, City Recorder

SIGNED and APPROVED this 6th day of May, 2003.
Alan W. DeBoer, Mayor

Reviewed as to form:
Paul Nolte, City Attorney

Rate Tables are available in PDf format.  Please click on the link below to view these documents on your computer:

Elec_RateTables.pdf (475.6KB)

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