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Home My WebLink AboutA001 - Council Action Form dated April 8, 2008 (/ ITEM # DATE 04-08-2008 COUNCIL ACTION FORM SUBJECT: ELECTRIC UTILITY RATE CHANGES BACKGROUND: As discussed during the FY 2008/09 budget process, the Ames Municipal Electrical Utility budget includes an 8.0% metered electric revenue increase. The revenue increase was recommended to fund plant maintenance and improvements and operating costs while maintaining an adequate fund balance for the utility. The proposed change is an across-the-board increase with no change to our current rate structure. As decision paths are selected in the project to replace base load power generation, the utility will conduct an extensive cost-of-service study and prepare alternative rate structures and analysis of impact on customers. This rate increase is the second in a series of planned rate increases; the first was a 3.5% increase for FY 2006/07. It is important that a rate increase be implemented at the beginning of the fiscal year to allow the electric utility to fund planned capital improvements and maintain adequate fund balances. Attached is the edited ordinance section reflecting the increased rates. ALTERNATIVES: 1. Approve the proposed changes to the electric utility rate ordinance to increase overall revenue to the electric utility by 8.0% and maintain the current rate structure. This proposed rate increase is consistent with the information provided to the public during the budget process. 2. Refer electric utility rate ordinance back to staff with direction to develop an alternative rate structure (flat or inclining block) that is expected to generate an 8.0% revenue increase. This alternative would likely delay implementation of a rate increase, and could result in not achieving the electric utility fund balance target unless other changes are made to the budget to reduce expenditures. 3. Do not make a rate increase at this time. This alternative will require extensive changes to the electric utility budget since an 8.0% revenue increase was included in the adopted budget. MANAGER'S RECOMMENDED ACTION: While City Staff supports a redesign of the rate structure that will encourage conservation and reduce the need to increase power generation capacity in the future, we do not believe that this is the best time to implement a new rate structure. The electric utility will be making significant capital improvements in the near future to replace aging generation infrastructure. These capital improvements will create a new structure of costs and related revenue requirements that could vary greatly depending on the capital improvement decisions. The electric utility will also be issuing a significant amount of debt to fund future capital improvements, bond buyers will require that a rate structure is a place that will generate the revenue needed to effectively operate the utility and repay the bonds. Due to the complexity of these issues, we would not recommend any significant changes to the rate structure without a cost of service study, and that the cost of service study not be done we until decisions are made on capital improvements to replace generation capacity. Therefore, it is the recommendation of the City Manager that the City Council adopt Alternative No. 1, thereby approving the proposed changes to the electric utility rate ordinance to increase overall revenue to the electric utility by 8.0% and maintain the current rate structure. Given the fact that there are multiple electric rate increases in the near future, there will be other opportunities to study and implement changes to the rate structure. The Council might want a rate structure modification at this time. If Council decides to pursue Alternative 2, City staff believes that additional time will be needed to design a rate structure to meet Council goals and determine the impact of the combination of a rate increase and new structure on our customers, and notify the public of planned rate increases. Therefore, if Alternative 2 is selected, we would suggest the Council consider delaying the rate increase until October 2008 in order accomplish the above tasks. Under this scenario, the new rate structure would be implemented without the benefit of a cost of service study. Sec.28.103.RESIDENTIAL ELECTRIC RATES. (2) Rate per billing period.For each monthly billing period a residential rate customer: (a)shall be charged three four dollars and simty &e rents($3.65) 4.00 as a customer service charge, and (b)in addition,shall be charged for energy consumption during the billing period as follows: (i)for bills mailed on or between August , and Oetebe-21 2006 d on F between July 1 and October 31 of subsequent years(summer period): $0.0797$0.0861 per kWh for the first 400 kWhs $0.0756$0.0816 per kWh for the next 600 kWhs $0.0693$0.0749 per kWh for all kWh s over 1000 kWhs,or (ii)for bills mailed on or between November 1 and June 30(winter period): $0.0704$0.0760 per kWh for the first 400 kWhs $0.0590$0.0637 per kWh for the next 600 kWhs $0.0559$0.0604 per kWh for all kWhs over 1000 kWhs, and (3)Minimum bill:The minimum charge per billing period shall be three four dollars and sbay fWe""fits ($3.65) 4.00 . Sec.28.104.GENERAL POWER RATE. (2) Rate per billing period:For each monthly billing period a general power rate customer: (a)shall be charged five six dollars 6.00 as the customer service charge;and, (b)in addition,shall be charged for energy consumption during the billing as follows: (i)for bills mailed on or between August , and Oete."_Z, 2006 and, of-beyA,ee July 1 and October 31 of subsequent years(summer period): $0.0849$0.0917 per kWh for the first 2000 kWhs Qn�$0.0783per kWh for the next 5000 kWhs $0.0704$0.0760 per kWh for all kWh over 7000 kWhs. (ii)for bills mailed on or between November 1 and June 30(winter period): $0.0662$0.0715 per kWh for the first 2000 kWhs $0.0549$0.0593 per kWh for the next 5000 kWhs $0.0528$0.0570 per kWh for all kWh s over 7000 kWhs. (3) Minimum bill: The minimum charge per billing period shall be five six dollars and twenty „* `Q�i 6.00 . Sec.28.105.LARGE POWER RATE. (2) Rate per Billing Period.For each monthly billing period,a large power rate customer: (a)shall be charged forty-five dollars(,$45.00)$41.40 as a customer service charge,and (b)in addition,shall be charged for demand and energy consumption during the billing period as follows: (i)for bills mailed on or between Amgust 1 and Oetebef 31,2006,and on or-bewme July 1 and October 31 of subsequent yeas(summer period)a customer shall be charged a demand of: $4.399$4.751 per kW for the first 50 kW of billing demand $3 985$4.304 per kW for the next 100 kW of billing demand $3.571-$3.857 per kW for all kilowatts over 150 kW of billing demand and an energy charge of: $0.0569$0.0615 per kWh for the first 200 hours use of billing demand $0.0393$0.0425 per kWh for the next 200 hours use of billing demand $0.0362$0.0391per kWh for all kWh s over 400 hours use of billing demand (ii)for bills mailed on or between November 1 and June 30(winter period)a customer shall be charged a demand charge of $3.157$3.410per kW for the first 50 kW of billing demand $2.743$2.962 per kW for the next 100 kW of billing demand $2.329$2.515 per kW for all kilowatts over 150 kW of billing demand and an energy charge of: $0.0486$0.0525 per kWh for the first 200 hours use of billing demand $0.0383$0.0414 per kWh for the next 200 hours use of billing demand $0.0342$0.0369 per kWh for all kWhs over 400 hours use of billing demand Sec.28.106.INDUSTRIAL RATE. (2) Rate Per Billing Period.For each monthly billing period,an industrial rate customer (a)shall be charged one hundred twelve dollars($112.00)$103.50 as a customer service charge, and (b)in addition,shall be charged for demand and energy consumption during the billing period as follows: (i)for bills mailed on or between August 1 and QetebeF 31,2006,and en or-betwee July 1 and October 31 in subsequent years(summer period)a customer shall be charged a demand charge of$3.571 $3.857 per kW for all kilowatts of billing demand,and an energy charge of: $0.0507$0.0548 per kWh for the first 200 hours of billing demand $0.0342$0.0369 per kWh for the next 200 hours use of billing demand $0.0321 $0.0347 per kWh for all kWhs over 400 hours use of billing demand (ii)for bills mailed on or between November 1 and June 30(winter period)a customer shall be charged a demand charge of$2.329$2.515 per kW for all kilowatts of billing demand,and an energy charge of: $0.0435 $0.0470 per kWh for the first 200 hours use of billing demand $0.0331-$0.0357 per kWh for the next 200 hours use of billing demand $0.0300$0.0324 per kWh for all kWhs over 400 hours use of billing demand Sec.28.107.STREET AND SECURITY LIGHTING RATE. (2) Rate per Billing Period.For each monthly billing period the lighting customer: (a)shall be charged for service per lamp: (i)for bills mailed on or after August !,2006 July 1,2008: Monthly Consumption Monthly Lamp Charge (kWh per Lamp) 1000 Watt-Mercury Vapor 21.55 23.25 383 700 Watt- Mercury Vapor 15.7016.95 268 400 Watt-Mercury Vapor 9 M 10.60 153 400 Watt-Mercury Vapor-Ornamental 11.90 12.85 153 250 Watt-Mercury Vapor -7-.05 7.60 96 250 Watt-Mercury Vapor-Ornamental 10.4511.30 96 175 Watt-Mercury Vapor 3.-75 6.25 67 175 Watt-Mercury Vapor-Ornamental 7- 5 8.45 67 400 Watt-High Pressure Sodium 10.65 11.45 153 400 Watt-High Pressure Sodium-Ornamental 11.9012.85 153 360 Watt-High Pressure Sodium 10.0510.85 138 360 Watt-High Pressure Sodium-Ornamental 11.35 12.25 138 250 Watt-High Pressure Sodium 7-.79 8.30 96 A 250 Watt - High Pressure Sodium-Ornamental 10.90 11.75 96 200 Watt - High Pressure Sodium 7-.4-5 8.05 77 200 Watt - High Pressure Sodium-Ornamental 10.90 11.75 77 150 Watt - High Pressure Sodium 6 45 6.95 60 150 Watt - High Pressure Sodium-Ornamental $ 50 9.15 60 100 Watt - High Pressure Sodium -5- 0 5.60 38 100 Watt - High Pressure Sodium-Ornamental 7-.05 7.60 38 70 Watt- High Pressure Sodium 4—.50 4.90 27 70 Watt- High Pressure Sodium-Ornamental 6-.58 7.00 27 (d)Flood lights,where available from utility stock,shall have an additional monthly charge of" $0.60 per lamp. to Contract for energy only charges will be billed at a rate of$0 075 per kilowatt hour plus the applicable energy cost adjustment