HomeMy WebLinkAboutA003 - Council Action Form dated April 22, 2008 ITEM # !
DATE 04-22-2008
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. Per
discussions at the April 8, 2008 City Council meeting, the proposed change includes a
flat rate structure for the residential customer class during the summer peak season and
an across-the-board increase with no change to our current rate structure for all other
customer classifications. 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% as included in the FY 08/09 budget.
2. Refer the electric utility rate ordinance back to staff with direction to develop an
alternative rate structure. Depending on the complexity of the desired rate structure,
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 approve 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:
The proposed rate structure will provide funding for the operations and capital projects
included in the adopted FY 08/09 Electric Utility budget. The proposed change in the
residential rate structure from a declining block to a flat rate during the summer peak
season is expected to encourage conservation and reduce the need to increase power
generation capacity in the future.
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% as included in the FY
08/09 budget.