HomeMy WebLinkAboutMinutes - April 2, 2002 SSCITY OF LODI
INFORMAL INFORMATIONAL MEETING
"SHIRTSLEEVE" SESSION
CARNEGIE FORUM, 305 WEST PINE STREET
TUESDAY, APRIL 2, 2002
An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday,
April 2, 2002 commencing at 7:02 a.m.
A. ROLL CALL
Present: Council Members — Howard, Land, Nakanishi, and Mayor Pennino
Absent: Council Members — Hitchcock
Also Present: City Manager Flynn, City Attorney Hays, and City Clerk Blackston
B. CITY COUNCIL CALENDAR UPDATE
City Clerk Blackston reviewed the weekly calendar (filed).
City Manager Flynn announced that today was Mayor Pennino's birthday and City Attorney Hays'
birthday is on April 12.
C. TOPIC(S)
C-1 "Budget — Electric Rates and Market Cost Adjustment"
NOTE: Due to a potential conflict of interest as an employee of Pacific Gas and Electric
(PG&E), Mayor Pennino abstained from discussion on Item C-1 and vacated his seat at
the dais.
With the aid of overheads (filed) Electric Utility Director Vallow reported on the financial
condition of the Utility. He pointed out that the Enron and PG&E bankruptcies exemplify
the unstable and insecure energy market. Mr. Vallow stated that the Utility entered into a
long-term contract with Calpine last year. The contract was favorable by last year's
standards, but only marginal at today's standards. He had hoped to restructure the
contract between November 2001 and February 2002; however, it has not been possible.
He explained that Calpine has also had financial difficulties and is being scrutinized by
various federal and state agencies, regulators, and the financial community. Calpine has
cut 70% of what it had projected to build. The Federal Energy Regulatory Commission
price caps will be removed in November, which will add to the uncertainty of the market.
Mr. Vallow stated that the Utility's current financial position is stable. He did not
recommend changing the Market Cost Adjustment (MCA) at this time due to the
continued instability of the market. He noted that the Utility will make internal cuts where
possible and recommended that the MCA be considered again this fall. Mr. Vallow stated
that the Council set a "soft policy" when it established a rate structure, which he believed,
in essence, kept the economic engine of Lodi going. Based on energy use, this policy
resulted in a 7% business expansion in Lodi. He explained that it was much more
beneficial to the Utility's residential customers to be employed, than to save $5 or $6
dollars a month on their electricity bill.
Mr. Vallow reported that during the months of April through November the Utility typically
has a surplus that is sold to the state for half what customers pay. He proposed a Home
Comfort Discount program, in which customers would have the "first right of refusal" for
this surplus energy. As an example, if a customer used 700 kilowatt hours in 2001 and in
2002 they use 850 kilowatt hours, 700 of the 850 hours would be charged at the current
rate and the additional 150 hours would be deeply discounted. The premise of the Home
Comfort Discount program is to reward customers and allow them to be comfortable
during the summer months. The Utility will continue to focus on energy efficiency
programs.
1
Continued April 2, 2002
Council Member Howard stated that she had met with Mr. Vallow last Friday and
discussed the Utility and this morning's topic. She spoke in support of the Home Comfort
Discount program and believed that it represents what Mr. Vallow always strives to do,
i.e., to look for what is in the best interest of the City and is most fair to its citizens.
In reply to Council Member Howard, Mr. Vallow explained that an MCA adjustment is not
being recommended at this time because the Utility is prohibited by its bond covenants
from establishing a revenue that is less than its cost.
Council Member Howard suggested that if the Home Comfort Discount program is
approved by Council, a summary be prepared at the end of the year to show what the
participation level was.
Council Member Nakanishi recalled that, originally, the MCA was instituted for the
purpose of collecting $7 million of a $10 million shortfall. He asked how much as been
collected.
Mr. Vallow reported that approximately $9.2 million will be collected this fiscal year. He
stated that the MCA for last year was insufficient to cover the Utility's power costs for this
year.
Council Member Nakanishi asked City Manager Flynn why the City did not borrow the $10
million and amortize it over a ten-year period. Mr. Flynn explained that staff made that
proposal to Council; however, they were directed to keep the money for cash flow
purposes and not to use it to amortize the rates.
Council Member Nakanishi expressed concern about the public's perception that the City
is "gouging" its citizens by not eliminating the MCA, particularly in light of the $900,000
transfer from the Utility to the general fund. He suggested that a better job be done of
explaining the situation to the public.
Mr. Vallow reported that residential rates have been lowered from 14.8 cents to 13.3
cents, the Utility's budget is stable, and an environment was created where businesses
were able to grow. He hoped to bring back the Home Comfort Discount program for
Council consideration in June.
In reply to Council Member Land, Mr. Vallow stated that the City uses 440,000 megawatt
hours a year and generates 620,000 hours. The summer surpluses are based on running
the White Slough gas turbine at 50% capacity. Spicer Reservoir is projected to be 110%
of capacity.
Council Member Land agreed with Ms. Howard's suggestion that a summary be prepared
at the conclusion of the Home Comfort Discount program. He commented that at a
regulatory meeting of the Northern California Power Agency (NCPA) it was announced
that NCPA's budget may double for litigation costs related to the PG&E bankruptcy.
Tony Goehring, Economic Development Coordinator, stated that he has repeatedly
received assistance from Electric Utility in providing advantages so that Lodi can compete
with other communities for new businesses. He spoke in support of the Home Comfort
Discount program.
PUBLIC COMMENTS:
• Paul Littlefield, General Mills Manager, stated that Electric Utility is consistent and
reliable. Its cost structure provides an opportunity for General Mills to be competitive.
• Pat Patrick, Executive Director of the Chamber of Commerce, voiced support for
Electric Utility.
2
Continued April 2, 2002
D. COMMENTS BY THE PUBLIC ON NON-AGENDA ITEMS
None.
E. ADJOURNMENT
No action was taken by the City Council. The meeting was adjourned at 7:53 a.m.
ATTEST:
Susan J. Blackston
City Clerk
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Mayor's & Council Member's Weekly Calendar
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Tuesday, April
REMINDER
7:00 a.m.
7:00 a.m.
2, 2002
Conflict of Interest Statements are due by 5:00 p.m.
Shirtsleeve Session
1. Budget - Electric Rates and Market Cost Adjustment
Special Meeting
1. Prospective lease of property located at 100 East Pine Street,
(APN 043-072-01); the negotiating parties are the City of Lodi and
the Lodi Adopt -A -Child Foundation; price and terms of the lease
are under negotiation; Government Code §54956.8
Wednesday, April 3, 2002
5:30 p.m.
7:00 p.m.
Pennino. Women's Center of San Joaquin County's Building
Dedication Ceremony in memory of Lois Borchardt, founding
member of the Women's Center - Lodi Office, 29 S. Washington
Street. Mayor to present certificate.
City Council meeting
(Note: Closed Session meeting starts 5:45 p.m )
Thursday, April 4, 2002
REMINDER
5:00 - 6:00 p.m.
Pennino. Central California Mayors Conference, Fresno,
4/4 - 4/5/02
Reception to view "the busts" in honor of Mr. Lindeman's
(LUHS Class of 1955) donation, Hutchins Street Square --
Fine Arts Theatre.
Friday, April 5, 2002
REMINDER
6:00 p.m.
Pennino. Central California Mayors Conference, Fresno,
4/4 - 4/5/02
Pennino. Lodi Memorial Hospital's 50th Anniversary
celebration, Hutchins Street Square.
Saturday, April 6, 2002
5:00 p.m. Pennino. San Joaquin County Historical Society & Micke Grove
Zoological Society's "Legends of California" Wine Auction and
Dinner Award, Lodi Grape Festival Grounds.
Sunday, April 7, 2002
1:00 - 5:00 p.m. Grand Opening - Lodi Public Library open on Sundays!
REMINDER Hitchcock. Eagle Scout Award presentation, St. Paul's
Lutheran Church.
Monday, April 8, 2002
Disclaimer: This calendar contains only information that was provided to the City Clerk's office
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Financial Condition
• Current projected Revenue Requirement is met by current
rates & MCA & proposed rate
• Additional internal cost cuts will be required
• Uncertainty as to cost prevents MCA adjustment now
— Finalization of NCPA Budget
— FERC Price cap lifting effect
— PG&E Interconnection Agreement termination
— PG&E Bankruptcy
— Current cost still too high
• Look at MCA again this fall
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$63, 948
$168,858
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F I Residental Summer Bill Comparison I !
Kwh
i1 Lodi
ISummer
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PG&E
Summer
E-1 wio tax
1 Lodi
Advantage
PG&E
Summer
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! Lodi
i Advantage
200
$23.97
$25.18
5.0%
$26.69
11.3%
300
$35.96
$37.77
5.0%
$40.03
11.3%
400
$48.95
$50.36
2.9%
$53.38
9.0%
500
$64.23
. $64.43
0.3%
$68.30
6.3%
600
$81.05
$81.92
1.1%
$86.84
7.1%
700
$98.87
$101.37
2.5%
$107.45
8.7%
800
$116.69
$120.81
3.5%
$128.06
9,7%
900
$134.51
$143.42
6.6%
$152.03
13.0%
1,000
$152.32
$167.26
9.8%
$177.29
16.4%
1,100
$170.14
$191.10
12.3%
$202.56
19.1%
1,200
$187.96
$214.93
14.4%
$227.83
21.2%
1,300
• $205.78
$239.93
16.6%
$254.32
23.6%
1,400
$223.60
$265.75
18.9%
$281.70
-26.06h
1,500
$241.41
$291.58
20.8%
$309.07
28.0%
1,600
$259.23
$317.40
22.4%
$336.45
29.8%
1,700
$277.05
$343.23
23.9%
$363.82
31.3%
1,800
$294.87
$369.06
25.2%
$391.20
32.7%
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Strategic Question:
• How do we maintain revenues to
recover costs, yet give increased
value & lower rates to our customers
now?
• EUD is energy surplus during peak
months
• Power would usually go to market;
essentially the state
• Could we deliver a lower rate now,
given our current cost structure?
9
Energy Conservation Effort
Last year we asked for conservation given the high power costs we faced
• Energy use did drop due to weather & conservation
• Energy Efficiency Programs worked (not to be confused with
conservation)
• Higher rates lead to reduced consumption
kwh
Comparison average monthly residential usage 2000/20D1
lay
August
to 20X ii 2001
8
10
Home Comfort Discount
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Home Comfort Discount Example
2001 Summer Monthly Usage
700
2002 Summer Monthly Usage
850
Difference
150
Ave
$
$/kwh
Current Bill @ 700
$98.87
$0.141
Current Bill @ 850
$125.60
$0.148
Home Comfort Discount
X12.48
Proposed Bill
$113.12
$0.133
Summary
• Home Comfort Discount in place this
summer
• Remaining MCA & rates recover cost
• Other minor rate changes
— Program Share
— Minor MCA/Rate Adjustment
• Contract
• Other