HomeMy WebLinkAboutA002 - memo from Charlie Hammer, Council Member with his thoughts - till 11 Hit
TO: Mayor Goodland and City Council Members m WJ 0
FROM: Charlie Hammer, Council Member �JJ IJJJ
DATE: May 12, 1982
SUBJECT: Sundstrand Contract Renewal Request
Coming before you May 18 will be the Electric Contract renewal request by Sundstrand
Corporation. Since I will be unable to attend this meeting, I wanted to leave my
thoughts on this matter with you.
You also have before you John Klaus' opinion that favorable rates can be made for
particular users in a given customer category only if that customer is in some
way unusual from the other customers in that category.
It is my opinion that we should not enter into a contractual relationship with any
customer regardless of size. For the past 6 years at least we have been providing
Sundstrand with power below cost according to our cost of service study. For
calendar 1981 alone this amounted to approximately a quarter million dollar subsidy.
The Council should receive an accounting of this contract during the ten years of
its tenure to place this problem in proper perspective.
Any adjustments can and should be made through a revision of our rate structure
and should be based upon cost of service. Quantity of electricity used should not
be a factor in determining rates unless economy of scale is demonstrated or an
unusually favorable load factor has been achieved. All large power users are
facing the same economic bind because of increasing energy costs and they should
all be treated in the same manner. If we can, through time of day pricing for
example, alleviate this problem we should do it.
This will, of course, take a detailed study of our large customer loads to see what
can be done, if anything, to enable them to buy power at the most favorable rates.
Sundstrand, 3M, Bourns, the School Board and the University are examples of users
that might fall within this category.
Recommendations from our Utility Advisory Board on how we can provide power most
cheaply to these large users without subsidizing them from the other customer
categories would be very helpful. Certainly a review of our present rate structure
covering the points mentioned above is in order. The Advisory Board should be
specifically charged to recommend to us whether rate restructuring for large users
is in order and how such restructuring should be accomplished.
This review will, of course, take time. Probably more time than remains under
our present contract with Sundstrand. Should this be the case, I would suggest
that Sundstrand go on our regular rate schedule upon expiration of the contract
with their payments over the present contractual amount held in escrow until the
new rate structuring, if any, is completed. Refunds, if any, can be made from
this escrow account.
CH/acp
cc: Electric Operations Review and Advisory Board