HomeMy WebLinkAboutAgenda Report - April 19, 2023 C-15 PH-,� CITY OF
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C A L I F O R N I A
AGENDA ITEM C4015
COUNCIL COMMUNICATION
AGENDA TITLE: Set Public Hearing for May 17, 2023 to Consider Introducing an Ordinance Amending Lodi
Municipal Code Chapter 13.20 — "Electrical Service" by Repealing and Reenacting Article III
"Rates" in its Entirety
MEETING DATE: April 19, 2023
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION- Set public hearing for May 17, 2023 to consider introducing an ordinance
amending Lodi Municipal Code Chapter 13.20 — "Electrical Service" by repealing
and reenacting Article III "Rates" in its entirety.
BACKGROUND INFORMATION: Lodi Electric Utility (LEU) maintains a financial planning model which identifies
the necessary rates and charges to be collected to ensure sufficient revenue
requirements to cover the cost of providing electric service to Lodi residents and
businesses.
In 2015, LEU implemented a 5 percent rate increase across all utility rate classes to address deferred maintenance and
capital infrastructure needs of the utility. At that time, staff recommended annual inflationary increases of no more than 2
percent through 2019 to be brought back to the City Council for consideration if the need arose. At that same time, City
Council expressed a preference for smaller, inflationary increases.
In 2017, LEU returned to the City Council with an updated financial forecast through 2025 and a 2 percent rate increase
was approved to meet debt service coverage requirements, gradually close the annual projected deficit for non -power
supply costs, sufficiently fund deferred capital maintenance, and meet reserve targets set forth by City Council policy and
contractual requirements.
Based on the utility's most current financial forecast through 2030, it is projected that LEU reserves will fall below City
Council approved reserve targets by 2024 with projected annual deficits ranging from $1.2 million to $3.8 million annually.
Reserves have been steadily declining since 2020 for a number of reasons including the COVID pandemic, energy market
instability and supply chain disruption. Approximately $2M was used in 2020 to provide utility bill relief in the form of bill
credits during a period when customers were severely financially impacted by job losses/layoffs during COVID and $4.5M
in reserves was used in 2021 and 2022 to mitigate rising energy prices that would have otherwise been passed on to
customers through the Energy Cost Adjustment. Finally, since 2017, LEU has seen a significant increase in material
costs associated with capital maintenance and infrastructure projects due to supply chain constraints with price increases
ranging from 150 percent to over 200 percent.
To provide the additional needed revenue to close projected deficits and maintain a financial reserve that meets City
Council approved reserve targets in accordance with the City's adopted Budget and Fiscal Policy, LEU is proposing a 2
percent increase in Fiscal Year 2023/24 and an additional 2 percent increase in Fiscal Year 2024/25. LEU reviews the
Handy Whitman Index (HWI) to evaluate cost trends. The HWI, published since 1924, calculates cost trends for various
types of utility construction and provides an index relative to the electric industry and even more specific to electric
distribution systems. LEU has not requested an inflationary base rate increase since 2017. These proposed revenue
increases of approximately 2 percent per year will help address inflationary trends since 2017 but to a lesser extent than
those indicated on average by the HWI for the same period — (4.9% in 2018; 3.4% in 2019; 5.7% in 2020; 4.8% in 2021;
11 % in 2022).
APPROVED: (qpr eo,ua.xoa3rp7i _
Stephen Schwabauer, City Manager
Set Public Hearing for May 17, 2023 to Consider Introducing an Ordinance Amending Lodi Municipal Code Chapter 13.20 - "Electrical Service' by Repealing and
Reenacting Article III "Rates" In Its Entirety
April 19, 2023
Page 2
LEU is proposing to collect the additional needed revenue through an increase to the monthly customer charge which is
intended to cover the fixed costs of the utility - those costs that do not change based on the amount of energy a customer
uses. LEU's annual budget is approximately $100 million; of which, approximately $14 million is attributed to fixed costs.
LEU currently collects less than 30% of its fixed costs through monthly customer charges. The remainder is collected
through variable energy rates. Increasing the monthly customer charge will help ensure better alignment of costs and
charges as well as ensure revenue stability for the utility moving forward. Below is a summary of the proposed changes:
In addition, similar changes are proposed to the current mobile home park rates for tenants in conjunction with changes to
the master metered customer rates to ensure mobile home parks have equitable cost recovery for both tenants and park
owners.
Approving incremental adjustments such as this will help avoid future potential rate shock while maintaining the financial
integrity and bond rating of the City's Electric Utility. Failure to approve the proposed rate increases subjects LEU to
system reliability issues resulting from potential delays associated with capital maintenance; an inability to meet reserve
requirements; and possible downgrading by rating agencies resulting in future higher borrowing costs - including those
associated with the financing needed for the 230 kV Interconnection Project. In addition, LEU's ability to transact in the
energy markets through Northern California Power Agency is dependent on its ability to meet contractual program reserve
requirements as well as maintain sufficient credit with the California Independent System Operator.
It is recommended the first year's increase take effect August 1, 2023 with the second year increases effective July 1,
2024 with the start of the Fiscal Year.
FISCAL IMPACT: The proposed rate increase is anticipated to generate an additional $25 million in rate
revenue through 2030. Actual additional revenue realized will depend on customer
growth.
FUNDING AVAILABLE: Not applicable.
Jeff Berkheimer
Electric Utility Director
Current
Fixed
Proposed (FY 24) - 8/1/23
Proposed (FY 25) - 7/1/24
Fixed
%
Fixed
Avg Bill
Increase
Charge Avg Bill
Charge
Avg Bill
Increase
Char e
Residential
$10.20
$125
$14.50
$129.30
$4.30
3.4%
$19.50
$134.30
$5.00
3.9%
EV (Separate
Meter)
$3.00_
$54
$4.50
$55.50
$1.50
2.8%
$6.00
$57.00
$1.50
2.7%
Small
Commercial
(Sin le Phase
$7.50
$115
$15.50
$123.00
$8.00
7.0%
$20.50
$128.00
$5.00
4.1%
Small
Commercial
(Three Phase)
$11.09
$266
$23.50
$278.41
$12.41
4.7%
$31.50
$286.41
$8.00
2.9%
Medium
Commercial
$60.38
$4,855
$77.00
$4,871.62
$16.62
0.3%
$103.50
$4,898.12
$26.50
0.5%
Large
Commercial/
Industrial
$137.23
$74.880
$235.50
$74,978.27
$98.27
0.13%
$316.50
$75,059.27
$81.01
0.11%
Cit $10.20
$483 J
$20.00
$492.80
$9.80
2.0%
$27.00
$499.80
$7.00
1.4%
In addition, similar changes are proposed to the current mobile home park rates for tenants in conjunction with changes to
the master metered customer rates to ensure mobile home parks have equitable cost recovery for both tenants and park
owners.
Approving incremental adjustments such as this will help avoid future potential rate shock while maintaining the financial
integrity and bond rating of the City's Electric Utility. Failure to approve the proposed rate increases subjects LEU to
system reliability issues resulting from potential delays associated with capital maintenance; an inability to meet reserve
requirements; and possible downgrading by rating agencies resulting in future higher borrowing costs - including those
associated with the financing needed for the 230 kV Interconnection Project. In addition, LEU's ability to transact in the
energy markets through Northern California Power Agency is dependent on its ability to meet contractual program reserve
requirements as well as maintain sufficient credit with the California Independent System Operator.
It is recommended the first year's increase take effect August 1, 2023 with the second year increases effective July 1,
2024 with the start of the Fiscal Year.
FISCAL IMPACT: The proposed rate increase is anticipated to generate an additional $25 million in rate
revenue through 2030. Actual additional revenue realized will depend on customer
growth.
FUNDING AVAILABLE: Not applicable.
Jeff Berkheimer
Electric Utility Director
Please immediately confirm receipt
of this fax by calling 333-6702
CITY OF LODI
P.O. BOX 3006
LODI, CALIFORNIA 95241-1910
ADVERTISING INSTRUCTIONS
SUBJECT: NOTICE OF PUBLIC HEARING TO CONSIDER INTRODUCING
ORDINANCE AMENDING LODI MUNICIPAL CODE CHAPTER 13.20,
"ELECTRICAL SERVICE," BY REPEALING AND REENACTING
ARTICLE III, "RATES," IN ITS ENTIRETY
PUBLISH DATE: SATURDAY, APRIL 22, 2023
TEAR SHEETS WANTED: One (1) please
SEND AFFIDAVIT AND BILL TO: OLIVIA NASHED, CITY CLERK
LNS ACCT. #5100152 City of Lodi
P.O. Box 3006
Lodi, CA 95241-1910
DATED: THURSDAY, APRIL 20, 2023
ORDERED BY: OLIVIA NASHED
CITY CLERK
PAMELA M. FARRIS
ASSISTANT CITY CLERK
Emailed to the Sentinel at legals@lodinews.com at
forms\advins.doc
KAYLEE CLAYTON
ADMINISTRATIVE CLERK
'j Qirna1 on
DECLARATION OF POSTING
NOTICE OF PUBLIC HEARING TO CONSIDER INTRODUCING
ORDINANCE AMENDING LODI MUNICIPAL CODE CHAPTER 13.20,
"ELECTRICAL SERVICE," BY REPEALING AND REENACTING
ARTICLE III, "RATES," IN ITS ENTIRETY
On Thursday, April 20, 2023, in the City of Lodi, San Joaquin County, California, a copy
of a Notice of Public Hearing to consider introducing an ordinance amending Lodi
Municipal Code Chapter 13.20, "Electrical Service," by repealing and reenacting
Article III, "Rates," in its entirety (attached hereto, marked Exhibit "A") was posted at the
following locations:
Lodi City Clerk's Office
Lodi City Hall Lobby
Lodi Carnegie Forum
WorkNet Office
I declare under penalty of perjury that the foregoing is true and correct.
Executed on April 20, 2023, at Lodi, California.
PAMELA M. FARRIS
ASSISTANT CITY CLERK
ORDERED BY:
OLIVIA NASHED
CITY CLERK
A�� 1
KAYLEE CLAYTON
ADMINISTRATIVE CLERK
\\cvcfi1v01\administration$\Administration\CLERK\Agenda\City Council\Public
Hearings\AFFADAVITS\DECPOST2.DOC
D.
CITY OF LODI
(.
Carnegie Forum
. • 305 West Pine Street, Lodi
NOTICE OF PUBLIC HEARING
Date: May 17, 2023
Time: 7:00 p.m.
For information regarding this notice please contact:
Olivia Nashed
City Clerk
Telephone: (209) 333-6702
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN that on Wednesday, May 17, 2023, 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 item:
a) Introduction of an ordinance amending Lodi Municipal Code
Chapter 13.20 — Electrical Service — by repealing and reenacting
Article III, "Rates," in its entirety.
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 protests may be filed with the
City Clerk, City Hall, 221 W. Pine Street, 2nd 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:
Olivia Nashed
City Clerk
Dated: April 19, 2023
Approved as to form:
e : Magdich
City Attorney
AVISO: Para obtener ayuda interpretativa con esta noticia, por favor (lame a la oficina de la
Secretaria Municipal, a las (209) 333-6702.
CLERKIPUBHEARINOTICESINolice EU Ordinance 4/13/23