HomeMy WebLinkAboutA009 - Council Action Form, June 15, 1982 COUNCIL ACTION FORM /
NO: 06-15-82
SUBJECT: Sundstrand Contract for Power
BACKGROUND:
The City Council referred this to the Electric Utility Operations Review and
Advisory Board. At their meeting on May 28, 1982, the Board made the following
unanimous recommendation:
1. A cost-of-service study be undertaken as soon as it can be practically
worked out in selecting a firm, and what factors are to be included in
the study, including financing information based on Mr. Kruempel 's
proposal ;
2. extend present Sundstrand contract 90 days, and
3. City staff negotiate a two-year contract during this 90-day period.
ALTERNATIVES:
1. Adopt Electric Utility Operations Review and Advisory Board
recommendation.
2. Adopt Councilman Hammer' s recommendation for adopting an ordinance
to Industrial Power instead of extending the Sundstrand contract.
3. Put Sundstrand on the existing Large Power rate.
MANAGER'S RECOMMENDED ACTION:
It is recommended that Councilman Hammer' s recommendation be adopted (copy
attached) . It is also recommended that staff be authorized to begin the
process for a cost of service study.
COUNCIL ACTION:
A C� � �
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Attachment (1 )
ELECTRIC UTILITY OPERATIONS REVIEW AND ADVISORY BOARD
Ames, Iowa May 28, 1982
The Citv of Ames Electric Utility Operations Review and Advisory Board held
a special meeting on Friday, May 28, 1982, at 9:00 a.m. , in the Electric
Administration Building. Members in attendance were Don Biggs, Ken Kruempel ,
Virgil Maxwell , Morris Mericle. Also attending the meeting were Merlin Hove,
Director of the Electric Utility; John Klaus, City Attorney; Bill Robinson,
Manager of Plant Engineering--Sundstrand, and several local citzens.
The meeting was called to order by Chairman Virgil Maxwell at 9:00 a.m. The
minutes of the May 20, 1982, meeting were passed out and approved as read.
The purpose of this special meeting was to further discuss the Sundstrand
contract, which will expire June 30.
Mr. George White, 1901 Polk Drive, speaking as a concerned citizen, stated
that he had been following statements in the newspaper, in particular with
regards to Sundstrand. His personal feeling is that there is nothing wrong
for the community to offer lower rates for large power consumers. Retaining
Sundstrand is critical for the future growth of Ames. He also stated that the
Economic Development Commission (EDC) feels that a selling tool for Ames to
attract industry is to have competitive, attractive utility rates.
Mr. Hove stated that the Sundstrand tour, originally scheduled for May 26,
has been rescheduled for June 3, 8:30 a.m.
Mr. Hove clarified to the Board and the concerned citizens in attendance the
differences between the Sundstrand contract as compared to being a large
power customer. He distributed a "Rate Type Summary" that had been prepared
by Darrel Weber, and a comparison of utility rates charged by other utilities
applying Ames Sundstrand demand and energy. He also distributed a tabulation
of the "as billed" Sundstrand charges for the past ten years and a tabulation
of the Sundstrand bill for the same period if the large power rates would have
been used.
Mr. Kruempel presented to the Board a rate structure comparison with other
utilities. He had compiled this proposal after extensive research.
Chairman Maxwell asked each Board member to summarize their views on the large
power-Sundstrand discussion.
1 ) Warren Madden - Believed we should pursue a cost-of-service study and
also pursue how other utilities characterize large power customers.
2) Morris Mericle - It will have to be determined whether costs are calcu-
lated on an average or marginal basis. A two-year extension of the
contract would give time for the cost-of-service work to be done.
3) Don Biggs - We need to integrate the new unit costs and its operating
costs into the cost-of-service study.
4) Ken Kruempel - Agreed with what had been said by the other Board members,
and Ken passed out a list of areas to consider in the rate study.
It was the consensus of the Board that they do not have enough facts to make
adjustments in rates at this time. There was a unanimous feeling among the
members that a cost-of-service study has to be compiled. It is believed
that a two-year period would be sufficient time for the study to be completed.
Mr. Madden moved the Board recommend to the City Council that (1 ) a cost-of-
service study be undertaken as soon as it can be practically worked out in
selecting a firm, and what factors are to be included in the study, including
financing information, based on Mr. Kreumpel ' s proposal ; (2) extend present
Sundstrand contract 90 days, (3) City Staff negotiate a two-year contract
during this 90-day period. At the end of two years, the rate study should be
completed. Mr. Kruempel seconded the motion. It is understood that Sundstrand
will become a large power customer if the City Council does not agree on the
above recommendation.
It was agreed that City Staff would submit the Council Action Form for the
City Council to review the recommendation on June 15.
The meeting was adjourned at 10:30 a.m, by Chairman Maxwell .
�i
Vi it Maxwell , Chairman
• MR. KRUEf1PEL',S fROPOSU FOR R{ TE STUDY
Proposals
At least three rate classess
1. General service - no demand meter
2 . Larne general service - demand rate
3. Power Service
A. Study the proper dividing point between General Service
and Larne General Service - perhaps stated in terms of
both a kwh and/or a kw criteria. The current Ames division
between Large Power and General Power of 10,000/12 ,000 kwh
was defined over 20 years ago. This is about 40 kw
(at .4 load factor) .
B. Define a new rate - Power Service - which might include
1. One primary metering point
2 . Off-peak demand credit
3. Time-of-use rate
4. Magnetic tape metering with meter information available
to the customer ( to encourage the customer 's load
management) .
5. Minimum demand for the rate class with a rate study to
determine the proper value ( say 1000 kw) .
Attachment (2)
COMPARISON Ol' UTILITY RA'I'GS CIJARGIiD ILY OTIIIiR UTILITIhS
(Applying Ames Sundstrand Demand send Energy)
CUillfllonwcaltll Edison, Rockford Illinois
t9cighted Avg Month = $82,432
After April 1982 1eighted Avg Month = 99,473 (filed tariff)
Iowa Electric
iVeIghted Avg Month = $74 ,390
Illinois Power
Weighted Avg Month = $69,063
Proposed Increase = 82,18E
Iowa Public Service
Rate B Weighted Avg. Month = $69,540
Rate C weighted Avg. Month = 79,511
Rate D weighted Avg. Month = 75,252
City of Ames - Sundstrand Contract - $6S, 1 98
City of Ames Large Power Rate ' $86, 236
------------------------------------------ ---------------------
Denver Public Service = $70,153
Michigan Power = $67,833
Buena Vista REC = $75,435 (Eaton rates)
Buena Vista REC = $72,547 (regular rates)
Attachment D)
SUNDSTRAND BILLING SUMMARY
YEAR A5 B1LLED LARGE POWER 'DkFFERENCE
11372 153, 55 149,5 2 3
073 223;072 210,381 - 12,691
1 g 74 275 432 312,'631 37,3q9
1975 291 779 354,314 62,538
1976 34-6j327 41I ,236 64,q.09
i
M7 474,735 549,903 75, 1�749
�8
130,
1979 657,992 864�042 206,Q50
1980 664,01� 941,E I t 277,594-
19 81 7 2 2 283 98 I,456 259 `73
TOTAL -�- ' 41 390, 60 5,487, �44 1,09� 684