HomeMy WebLinkAboutResolutions - No. 2007-13RESOLUTION NO. 2007-13
A RESOLUTION OF THE LODI CITY
COUNCIL ESTABLISHING AN ELECTRIC
RESERVE FUND POLICY
WHEREAS, the City of Lodi recently contracted with Navigant Consulting to
perform a study to determine the prudent and appropriate level of cash reserves for the
City's Electric Utility Department; and
WHEREAS, Navigant considered local contingencies/probabilities, reviewed
industry reserve practices, and surveyed comparable California utilities; and
WHEREAS, Navigant recommends that the City of Lodi Electric Utility
Department establish a minimum cash reserve level of $12.9 million composed of the
following elements:
Operating Reserves - $8.2 million equal to 45 days of budgeted operating costs.
Capital Reserve - $500,000 roughly equal to the cost of largest distribution
system contingency.
Rate Stabilization Fund - $4.2 million equal to 20% of annual market power
costs.
WHEREAS, the Electric Utility Department recommends that the City Council
establish a formal Electric Reserve Fund Policy. Elements of the policy are as follows:
1. An initial target Electric Reserve Fund balance of $12.9 million is established
(Electric Reserve Target Level). This amount shall vary over time and be
comprised of (1) a capital reserve equal to 45 days of budgeted electric
operating costs, (2) a capital reserve equal to the largest local distribution
contingency, and (3) a rate stabilization fund equal to 20% of the Electric Utility
Department's estimated annual market power costs. This formula shall remain
fixed unless and until revised by a subsequent City Council resolution.
2. The City Council endorses a program to increase cash reserves from the fiscal
2006 year-end level of $3.6 million to the Electric Reserve Target Level by not
later than fiscal year end 2010.
3. During its annual budget process, the Electric Utility Department shall review its
then current and projected cash reserve levels. If cash reserves are projected to
be below the Electric Reserve Target Level at the end of the budget year, the
Electric Utility Department shall highlight available opportunities to supplement
cash levels during the budget year for consideration by the City Council during
budget deliberations.
4. To increase cash reserves, staff shall consider all options including sale of
surplus assets (i.e. inventory, equipment, real property), sale or "layoff' of
underutilized power supply assets (i.e. generation, transmission), new programs
to generate new revenues, special or general rate increases, use of existing
capital funds (subject to applicable covenants) and reductions in operating
and/or capital expenses.
5. The Electric Utility Department shall perform an updated assessment of prudent
cash reserve levels at a frequency no less than every three years and report
same to the City Council.
6. In the event that the Electric Utility Department receives any one-time cash
receipts (i.e. for sale of surplus property, etc.) and cash reserves are projected
to be less than the Electric Reserve Target Level at fiscal year end, such
receipts shall be dedicated to increasing cash reserves.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
establish and approve an Electric Reserve Fund Policy.
Dated: January 17, 2007
I hereby certify that Resolution No. 2007-13 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held January 17, 2007, by the following
vote:
AYES: COUNCIL MEMBERS - Hitchcock, Katzakian, and Mayor Johnson
NOES: COUNCIL MEMBERS - None
ABSENT: COUNCIL MEMBERS - Hansen and Mounce
ABSTAIN: COUNCIL MEMBERS - None
PRNDI JOHL
City Clerk
2007-13