HomeMy WebLinkAboutAgenda Report - June 4, 2014 C-12AGENDA ITEM C dO 110
AhCITY OF LODI
,. COUNCIL COMMUNICATION
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AGENDA TITLE: Adopt Resolution Reviewing and Maintaining the Current Electric Utility Reserve
Policy
MEETING DATE: June 4, 2014
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: Adopt a resolution reviewing and maintaining the current Electric
Utility Reserve Policy.
BACKGROUND INFORMATION: In March 2011, the City Council approved Resolution 2011-39
approving a financial reserve policy as follows:
Fund Designation
Basis
For FY 2011
Operating Reserve
90 days cash on hand
$18,900,000
Capital Reserve
Largest distribution system
contingency
$500,000
NCPA — General Operating
Reserve
As identified by NCPA plus
allowance for unanticipated studies
$9,300,000
Total Target
$28,700,000
This policy provides for an updated assessment of the targets identified above every three years with a
report to Council. Since 2011, the formula for establishing the Electric Utility (EU) reserve policy has
remained unchanged. The actual dollar amounts have been reviewed and updated each year by the
Risk Oversight Committee (ROC) in accordance with annual budget amounts.
On May 19, 2014, the ROC recommended that the formula for calculating the reserve targets be
maintained until such time as the financial model and cost of service analysis is completed for the EU
and that the dollars associated with the reserve policy be updated as follows:
Fund Designation
Basis
For FY 2015
Operating Reserve
90 days cash on hand
$17,080,000
Capital Reserve
Largest distribution system
contingency
$1,000,000
NCPA — General Operating
Reserve
As identified by NCPA plus
allowance for unanticipated studies
$5,600,000
Total Target
$23,680,000
Changes to the proposed dollars associated with the reserve policy include:
Operating Reserve: This amount represents the dollars required to provide 90 days of operating cash
and is dependent upon changes in operating expenditure budgets from year to year.
APPROVED: J
Stephen Schwabauer, Interim City Manager
Adopt Resolution Reviewing and Maintaining the Current Electric Utility Reserve Policy
June 4, 2014
Page 2 of 2
Capital Reserve: This amount represents the approximate cost to procure, deliver and install a
substation transformer in the event of catastrophic failure and has been updated based on current cost
information provided to the EU.
NCPA — General Operating Reserve (GOR): This amount represents NCPA's recommended reserve
target level in addition to EU's estimate of unanticipated studies/activities. NCPA's recommendations are
based on a number of factors, including market power volatility, replacement power cost differential
between average and dry year generation and insurance deductibles/loss.
As of March 31, 2014, the EU had total cash reserves of $21.4 million.
FISCAL IMPACT: N/A
FUNDING AVAILABLE: N/A
Elizab4A.kley
V�Electric Utility Director
PREPARED BY: Melissa Price, Rates & Resources Manager
EAK/MP/Ist
RESOLUTION NO. 2014-88
A RESOLUTION OF THE LODI CITY COUNCIL
REVIEWING AND MAINTAINING THE CURRENT
ELECTRIC UTILITY RESERVE POLICY
WHEREAS, in March 2011, the City Council approved Resolution 2011-39 approving a
financial reserve policy as follows:
Fund Designation
Basis
For FY 2011
Operating Reserve
90 days cash on hand
$18,900,000
Capital Reserve
Largest distribution system
$500,000
NCPA — General Operating
Reserve
contingency
$5,600,000
NCPA — General Operating
As identified by NCPA plus
$9,300,000
Reserve
allowance for unanticipated
studies
Total Tar et
$28,700,000
WHEREAS, this policy provides for an updated assessment of the targets identified
above every three years with a report to Council; and
WHEREAS, since 2011, the formula for establishing the Electric Utility (EU) reserve
policy has remained unchanged with the actual dollar amounts reviewed and updated each year
by the Risk Oversight Committee (ROC) in accordance with annual budget amounts; and
WHEREAS, on May 19, 2014, the ROC recommended that the formula for calculating
the reserve targets be maintained until such time as the financial model and cost of service
analysis is completed for the EU and that the dollars associated with the reserve policy be
updated.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby approve
the review and maintenance of the current Electric Utility Reserve Policy as follows:
Fund Designation
Basis
For FY 2015
Operating Reserve
90 days cash on hand
$17,080,000
Capital Reserve
Largest distribution system
contingency
$1,000,000
NCPA — General Operating
Reserve
As identified by NCPA plus
allowance for unanticipated
studies
$5,600,000
Total Target
$23,680,000
Dated: June 4, 2014
I hereby certify that Resolution No. 2014-88 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held June 4, 2014, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN
COUNCIL MEMBERS — Hansen, Johnson, Mounce, Nakanishi, and
Mayor Katzakian
COUNCIL MEMBERS — None
COUNCIL MEMBERS — None
COUNCIL MEMBERS — None
&JOML-OL,S.ON
City Clerk
2014-88