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Home My WebLink AboutAgenda Report - May 2, 2007 E-12 PHAGENDA ITEM Eve 12 CITY OF LODI COUNCIL COMMUNICATION AGENDA TITLE: Set Public Hearing for May 16,2007 to introduce ordinance amending Chapter 13.20, "Electrical Service," by replacing Section 13.20.175 Schedule MCA (Market Cost Adjustment) with Schedule ECA (Energy Cost Adjustment) to become effective July 1,2007 (EUD) MEETING DATE: May 2,2007 PREPARED BY Electric Utility Director RECOMMENDED ACTION: Set a public hearing for May 16,2007 to consider changes to Chapter 13.20, "Electrical Service," by replacing Section 13.20.175 Schedule MCA (Market Cost Adjustment) with Schedule ECA (Energy Cost Adjustment). It is recommended that implementation be effective July 1, 2007. BACKGROUND INFORMATION: Priorto December 2002, when the Market Cost Adjustment (MCA) was implemented, Lodi's electric rate schedules included an element similar to the ECA which was called a purchased power cost adjustment (PPCA). The applicability of the MCA superceded the old PPCA. Whereas the PPCA was applied equally to all kWh on all rate schedules, the MCA has been applied differently to specific rate classes and in some cases on a tiered amount based on monthly consumption. At times, some rate classes saw as much as 19¢ per kWh MCA, while others received little or no MCA. The MCA was intended to be reviewed/revised on a quarterly basis and requires City Council action to make adjustments. The proposed ECA, on the other hand, would provide for "automatic" adjustments with reduced electricity prices theoretically just as likely as increased charges. Similar schedules are utilized by electric utilities nationwide. including many cf California's publicly owned utilities (i.e. Anaheim, Redding, Pasadena, Los Angeles, Imperial Irrigation District, and Roseville). Both of the financial rating agencies (Standard& Poors and Fitch) involved in periodic assessment of Lodi Electric Uitlity's financial condition and outlook have strongly supported the implementation of automated energy cost adjustment mechanismsas proposed herein. The initial ECA base rate ($.0831) being proposed is the approximate energy cost perkWh as reflected in current electric rates. The ECA would be recalculated each month as actual costs are determined and the resulting values implemented for bills rendered on the first day of the following month. Staff also proposes to provide ECA calculations to the Lodi Budget and Finance Committee for their ongoing verification. The ECAwould be a componentof all City cf Lodi electric rate schedules, be nondiscounted and would replace Schedule MCA – Market Cost Adjustment. Attached is a copy of the proposed Schedule ECA, a 12 -month example utilizing fiscal year 2008 projected sales energy oasts and a preliminary financial forecast for fiscal year 2008. APPROVED: /Z;;W0— 7 " k i n g, C i Manager Set Public Hearingfor May 16,2007 to introduce ordinance amending Chapter 13.20. "Electrical Service," by replacing Section 13.20.175 Schedule MCA (Market Cost Adjustment) with Schedule ECA (Energy Cost Adjustment) to become effective July 1,2007 (EUD) May 2, 2007 Page 2 of 2 FISCAL IMPACT: The ECA is intended to be revenue/cost neutral —e.g. when energy costs increase, the ECA increases to offset such costs. The reverse is true during periods of energy cost declines. At the proposed base ECA level of .0831 per kilowatthour and projected fiscal year 2008 energy costs of $43.3 million, ECA net revenue cf $3.2 million is projected for fiscal year 2008. This is projectedto result in a net increase in fiscal year 2008 working capital of $1.4 million. (see attached.) FUNDING: Not Applicable. AAJAI� George F. Morrow Electric Utility Director Prepared By: Sondra Huff, Senior RateAnalyst GFMISHAst A%K mwft (3) CITY OF LODI ELECTRIC UTILITY DEPARTMENT SCHEDULE ECA ENERGY COST ADJUSTMENT APPLICABILITY: This schedule is applicable to all electric customers served by the City of Lodi. Each customer shall pay the applicable rate plus an Energy Cost Adjustment (ECA) for each kilowatt-hour (kWh) delivered to the customer. The adjustment shall be the product of the total kilowatt-hours (kWh) for which the bill is rendered times the adjustment amount per kWh. The purpose of the ECA is to adjust for increases/decreases to the City of Lodi's wholesale energy costs. This adjustment provides a mechanism to recover increased costs for wholesale energy or to lower collections when costs decrease below the base charge level. RATES: Effective July 1, 2007, the ECA billing factor for any given month shall be calculated as follows: ECA= (a) + (b) - (c)(d+f) - (f) (e) Where: (a) equals the amount the City of Lodi is actually charged by the Northern California Power Agency for the billing month, including adjustments for prior billing periods, less any third party revenue credits. (b) equals the City of Lodi's estimated costs related to the acquisition of wholesale power, both financial and physical, procured directly by the City for the billing month, including adjustments for prior billing periods. (c) equals the difference between actual retail energy sales and projected sales level for the month which is two (2) months prior to the billing month. (d) equals the ECA billing factor for the month which is two (2) months prior to the billing month. (e) equals the forecast of projected retail energy sales for the billing month. (f) equals the baseline energy cost for the City of $0.0831. The City of Lodi will recalculate the ECA each month, and resulting amount shall be automatically implemented for bills rendered during the following billing month. ECA calculations will be presented to the Lodi Budget and Finance Committee for their ongoing audit verification. Canceling Ordinance No. 1772 (MCA) Effective July 1, 2007 ECA -1/1 Ordinance No. XXXX Projected kWh Sales 47,855,123 50,777,091 45,204,178 39,096,357 33,805,787 35,250,737 36,781,484 34,100,289 34,836,715 34,723,133 36,718,520 41,954,944 471,104,356 Energy Charges $ 3,625,649 $ 3,558,207 $ 2,751,355 $ 2,900,961 $ 3,685,351 $ 3,954,336 $ 4,029,295 $ 3,850,719 $ 3,985,613 $ 3,453,524 $ 3,469,809 $ 3,068,698 $ 42,333,517 Average Rate $ 0.0758 $ 0.0701 $ 0.0609 $ 0.0742 $ 0.1090 $ 0.1122 $ 0.1095 $ 0.1129 $ 0.1144 $ 0.0995 $ 0.0945 $ 0.0731 $ 0.0899 ECA $ (0.0073) $ (0.0130) $ (0.0222) $ (0.0089) $ 0.0259 $ 0.0291 $ 0.0264 $ 0.0298 $ 0.0313 $ 0.0164 $ 0.0114 $ (0.0100) $ 0.0068 Cumulative ECA $ (0.0103) $ (0.0140) $ (0.0129) $ (0.0069) $ (0.0018) $ 0.0018 $ 0.0047 $ 0.0073 $ 0.0081 $ 0.0084 $ 0.0068 $ 3,184,745 Baseline ECA 1 $ 0.0831 Schedule ECA Attachment C Sales Revenues 66,889,770 ECA Revenue 3,188,145 Other Revenues 1,022,564 tal Revenues iiiw Purchase Power 71,100,478 42,333,517 Non -Power Costs 11,300,000 Total Expenses 53,633,517 Net Revenue Available for Debt Service 17,466,961 Debt Service 9,131,628 Net Revenue Available for Other Purposes 8,335,333 In -lieu Transfer To General Fund 6,873,228 Other changes in working capital - et Increase (Decrease) in Working Capital 1,462,105 Beginning Cash 5,571,823 GOR Ending Cash 71,0339928 Please immediately confirm receipt of this by calling 333-6M CITY OF LODI P. O. BOX 3006 LODI. CALIEURM 95241-1910 ADVERTISING INSTRUCTIONS SUBJECT: PUBLIC HEARING TO CONSIDER INTRODUCTION OF AN ORDINANCE REPLACING §13.20.175, SCHEDULE MCA (MARKET COST ADJUSTMENT), WITH SCHEDULE ECA (ENERGY COST ADJUSTMENT) PUBLISH DATE: SATURDAY, MAY 5,2007 TEAR SHEETS WANTED: Three (3) please SEND AFFIDAVIT AND BILL TO: RANDI JOHL, CITY CLERK City of Lodi P.O. Box 3006 Lodi, CA 95241-1910 DATED: THURSDAY, MAY 3,2007 ORDERED BY: s4z6� 46 Via- �— js4j4IFER MJPERRIN. CMC DOUTY CITY CLERK formsladvins.doc RANDI JOHL CITY CLERK DANA R. CHAPMAN ADMINISTRATIVE CLERK IN H DECLARATION OF POSTING PUBLIC HEARING NOTICE TO CONSIDER INTRODUCTION OF AN ORDINANCE REPLACING §13.20.175, SCHEDULE MCA (MARKET COST ADJUSTMENT), WITH SCHEDULE ECA (ENERGY COST ADJUSTMENT) On Friday, May 4, 2007, in the City of Lodi, San Joaquin County, California, a Public Hearing Notice to consider introduction of an ordinance replacing §13.20.175, Schedule MCA (Market Cost Adjustment), with Schedule ECA (Energy Cost Adjustment) (attached and marked as ExhibitA), was posted at the following locations: Lodi Public Library Lodi City Clerk's Office Lodi City Hall Lobby Lodi Carnegie Forum I declare under penalty of perjury that the foregoing is true and correct. Executed on May 4, 2007, at Lodi, California. - �6 L?� A.A - NIFER M. PERRIN. CMC DEPUTY C6Y CLERK N:IAdministration\CLERKTot=\DECPOSTEUD2.DQC ORDERED BY: RANDI JOHL CITY CLERK DANA R. CHAPMAN ADMINISTRATIVE CLERK CITY OF LODI Carnegie Forum 305 West Pine Street, Lodi NOTICE OF PUBLIC HEARING Date: May 16,2007 Time: 7:00 p.m. For information regarding this notice please contact: Randi Johl EXHIBIT City Clerk Telephone: (209) 333-6702 NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Wednesday, May 16,2007, at the hour of 7:00 p.m., or as soon thereafter as the matter may be heard, the City Council will conduct a public hearing at the Carnegie Forum, 305 West Pine Street, Lodi, to consider the following matter: a) Introduction of an ordinance amending Chapter 13.20, "Electrical Service," by replacing §13.20.175, Schedule MCA (Market Cost Adjustment), with Schedule ECA (Energy Cost Adjustment) Information regarding this item may be obtained in the Electric Utility Department, 1331 South Ham Lane, Lodi, (209) 333-6762. All interested persons are invited to present their views and comments on this matter. Written statements may be filed with the City Clerk, City Hall, 221 West Pine Street, 2"d Floor, Lodi, 95240, at any time prior to the hearing scheduled herein, and oral statements may be made at said hearing. If you challenge the subject matter in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City Clerk, 221 West Pine Street, at or prior to the close of the public hearing. By Order of the Lodi City Council: C1� Ra di �Johl City Clerk Dated: May 2, 2007 Approved as to form: D. Stephen Schwabauer City Attorney CLERK1PUi3HEARMTICES%noteud2.dac 4130107