HomeMy WebLinkAbout2014-0331 Study Session PACKET
CITY OF
ASHLAND
CITY COUNCIL STUDY SESSION
AGENDA
Monday, March 31, 2014
Siskiyou Room, 51 Winburn Way
5: 30 p.m. Study Session
1. Look Ahead review
2. Response to Council follow-up questions regarding Cost of Service and Rate
Design Study for Electric Utility
Following the Study Session, City Council will hold an Executive Session for Performance
Evaluation pursuant to ORS 192.660(2)(i).
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this
meeting, please contact the City Administrator's office at (541) 488-6002 (TTY phone number 1-800-735-
2900). Notification 72 hours prior to the meeting will enable the City to make reasonable arrangements to
ensure accessibility to the meeting (28 CFR 35.102-35.104 ADA Title I).
COUNCIL MEETINGS ARE BROADCAST LIVE ON CHANNEL 9. STARTING APRIL 15, 2014,
CHARTER CABLE WILL BROADCAST MEETINGS ON CHANNEL 180 OR 181.
VISIT THE CITY OF ASHLAND'S WEB SITE AT WWW.ASHLAND.OR.US
City of Ashland Council Meeting Look Ahead
""**'THIS IS A DRAFT AND SUBJECT TO CHANGE*'**"
Responsible 4114 4115 515 516 5114 5119 5120 612 613 6116 6)17 6130 711 7114 7115
a/14 ~$tud Session in Siski .ou Room ~ arla
1 Goal settin discussion continuation Dave ss
4/151®Rece tlon fo.7Ra IandjV(linner 8?30T m' 47755
'?41£15 Re ularCouncillMe'etin 41,152
2 Presentation of Ragland Award (Mayor) Admin PRES
3 Historic Commission annual report to Council Bill CD PRES
4 Annual a is to Committees & Commissions Barbara Recorder CONS
5 Closed circuit camera van Mike PW CONS
6 Public Hearin on CDBG Grant Award Bill CD PH
7 Discussion of potential wildfire hazard zone expansion John Fire NEW
6 Discussion of Electric Cost of Service Study results and Electric PW NEW
ro osed utility rate increases Mark Mike Lee Finance
9 (tentative) Recology presentation on alternative rate structures Admin NEW
Adam
10 Plastic ba ban recommendations Adam Admin ORD-1 ORD-2
5i5 ~Stud'iSession iZSiski ou Room 5/5
11 Goal setting discussion continuation Dave Admin ss
5/6 Executive Session 6:30` m, In Jury Room 5/6
12 Pursuand to ORS 192.660(2)(d) - Labor Negotiations HR EXEC
5/6'g sRB"' u'Iar,COUrieil MBBbn"':°`' A-c`' -5/6 .
13 Annual report on Use of Force and Crime Rate (Terry) Police CONS
14 Public Hearing and resolutions regarding utility rate increases PW Finance PH
Mike/Lee/Mark Electric RES
15 Public Hearing and resolution regarding miscellaneous fees and Finance PH
char es Lee RES
16 Public hearing on the Normal Avenue Plan (Bill) CD PH
ORD-i ORD-2
17 Plastic ba ban recommendations Adam Admin ORD-2
16 Consideration of an ordinance regarding guns Dave/Dave Admin Le al ORD-1 ORD-2
19 2014 Fire Code Adoption John Fire ORD-1 ORD-2
5/14 r,Budget Mietin
5r19 ~S.tud'TSession 1-nTSiski ou Room Il♦ ® 5n9
20 AFN business plan Mark Electric/iT SS
21 Discussion of film and television policy (Ann) Admin SS
'.5%20 R9" ula cr COUIICIIFM@etln 1 : w r _ aF; ~h*'.. ~y,:" 35 iir. ,us s ~ ;.rF „~.r f'5/20;
22 FireWise Commission annual report to Council John Fire PRIES
23 RVCOG annual report to Council b Michael Cavallaro Dave Admin PRES
24 Update on drou ht possibility Mike PW PRES
25 Update on shelter program for 2013-2014 Dave K. Admin PRES
26 Unified Land Use Ordinance (ULUO) update (Bill) CD PH ORD-2
ORD-1
27 Second reading of ordinance re: Normal Avenue Plan Bill CD ORD-2
z8 2014 Fire Code Adoption John Fire ORD-2
29 Consideration of an ordinance regarding guns (Dave/Dave) I Admin Le al ORD-2
Page 1 of 2 3/272014
City of Ashland Council Meeting Look Ahead
THIS IS A DRAFT AND SUBJECT TO CHANGE
Responsible 4114 4/15 515 5/6 5/14 5119 5120 6f2 613 6H 6 6117 6130 711 7114 7115
30 U date to FireWise Commission Ordinance Dave L./John Le al Fire ORD-t -OR-D--2
31 Update to Chapter 18.108 Dave L. Legal ORD-1 ORD-2
62 Sttuud'ISession inTSisR1 .ou Roo'm ® ® si2
32 Goal setting discussion continuation - if needed Dave Admin UNFIN
6/3 Re Lilar Courf61I eetin'~ ' - . , ,1-; - -';6Y3
33 Band Board annual report to Council Don Bie hlef Admin PRES
34 Adoption of self-insured benefits plan for FY15 Tina/Dave HR Admin NEW
35 Unified Land Use Ordinance ULUO update Bill CD ORD-2
36 Update to FireWise Commission Ordinance Dave L./John Le al Fire ORD-2
37 Update to Chapter 18.108 Dave L. Legal ORD-2
38 Ordinance setting FY14-15 Tax Rate Lee Finance ORD-1 ORD-2
1136 F!5t'udTgession ifiTSiskl ou Roo°m I!♦ 6061 -
39 Goal setting discussion continuation - if needed Dave Admin UNFIN
eni7 _ , Re ularlCouricihMeetiri` + _ ~ % ?en7,
40 Discussion of ad hoc Recycle Center Committee Admin NEW
recommendations Adam
41 Ordinance setting FY14-15 Tax Rate Lee Finance ORD-2
6/30 StudTSession in°TSiski ouTKoom si30
42 Workforce development discussion (request of Councilor Admin
Slattery) SS
711 Regular Council'. Meeting
L14 St'udTSession inTSiskf -ou Room I® 77N
,7(f5 „Regular-Coun'dif;Mietin ' : - ` 7/15x<
43 Annual resentation from the Forest Lands Commission John Fire PRES
Commission e 4
February 18 - Transportation Commission
March 18 - Tree Commission
-April 15 - Historic Commission
May 20- FireWise Commission -
June 3 - Band Board
Jul 15 - Forest Lands Commission
August 19 - Conservation Commission
September 16 - Airport Commission
October 21 - Public Arts Commission
November 18 - Housing and Human Services Commission
December 16 - Planning Commission
Page 2 of 2 327/2014
CITY OF
ASHLAND
Council Communication
March 31, 2014, Study Session
Response to Council Follow-Up Questions regarding Cost of Service and Rate
Design Study for Electric Utility
FROM:
Mark Holden, Director of IT and Electric Utility, mark.holden@ashland.or.us
SUMMARY
This is a study session to present answers to Council's follow-up questions regarding the results of the
Cost of Service and Rate Design Study (COS) from the Electric Department. The firm contracted for
the COS is participating in a conference call to provide the answers to the Council's questions.
Historically, the Electric Utility has used a single uniform percentage to adjust charges and rates across
all customer classes. The COS recommends charges and rates based on the cost to serve individual
customer classes; the recommended adjustments are not uniform across all customer classes.
Staff is requesting approval to proceed with final rate design and, subject to future review and approval
by the Council, implementation of the recommendations presented in the COS.
BACKGROUND AND POLICY IMPLICATIONS:
The Council generated a series of written follow-up questions (Attachment 1) from the COS study
session presentation on December 16, 2013 (Attachments 2, 3, and 4). The presenter at the December
16 study session, Mr. Mark Beauchamp (consultant and president of Utility Financial Solutions, LLC),
is participating in a conference call to answer the written questions and any other questions the Council
has regarding the COS.
The COS focuses on the long term financial stability of the Electric Utility. The COS provides
guidance to the Electric Department for evaluating and managing charges and rates. The COS
identifies the cost to serve each class of customer and ensures these costs are recovered through
equitable charge and rate structures. Taken together with the pending Ten Year Capital Plan, the COS
provides a master plan for the Electric Department.
Summary of Results from COS (previously presented on December 16)
Charge and rate adjustments are needed to reach and maintain long term financial stability.
• The cost of service model is recommended as the basis for charge and rate decisions. The COS:
o Unbundles cost structures
o Designed to equitably assign costs
• Cross-subsidies exist in the current rate structures.
• The Customer Charge is proposed to be the actual cost of service for each class of customer
(Ashland currently calls this the Basic Charge).
Page I of 3
~r,
CITY OF
ASHLAND
FISCAL IMPLICATIONS:
The COS provides the Electric Department with a methodology and road map to accomplish an
equitable rate structure while providing for the long term reliability and financial health of the electric
system.
A summary of rate adjustments recommended in the COS are:
Table 1: Proposed Rate Chan es
Rate Adjustments b FY 2014 2015 2016 2017 2018
Increase % 53 3.6 3.5 3.3 3.0
Recommended
Notes to Table 1: The COS based rate increase percentage is not a broad application of the
single increase percentage across all customer classes. Rather, the rate increase percentage
represents the net effect of the class-specific cost of service rates.
In FYI 5, under the historically applied single percentage rate change, all customer classes would
experience a 3.6% increase. In FYI 5, under a COS model the Utility will still experience a 3.6% rate
increase, however individual customer classes will experience the following changes. The change
reflects all customer charges and rates.
Table 2: COS Rate Design Summ
Customer Class Change from Current
Government Single Phase 3.50%
Municipal Single Phase 3.21%
Government Three Phase 3.75%
Municipal Three Phase 2.48%
Government Secondary 3.78%
Commercial Single Phase 3.50%
Commercial Three Phase 1.50%
Telecom 1.50%
Residential Single Phase 4.50%
Outdoor Lighting 1.98%
Seasonal Residential 4.50%
Composite Effect 3.63%
Outcome of not using COS
The Electric Utility will continue to use a single percentage to adjust customer class charges and rates
(FYI 5, 3.6%). Bias will continue in the charge and rate structures as costs are not accurately assigned
to the source of the costs. Future energy efficiency actions (time of use, solar) may further push costs
to customer classes not responsible for the costs.
Page 2 of 3
CITY OF
ASHLAND
STAFF RECOMMENDATION AND REQUESTED ACTION:
Staff recommends the COS as the basis for future charges and rates. Staff recommends the use of the
COS recommended class specific charges and rates and to gradually phase in the recommendations
over a four year period.
Staff is seeking guidance from Council on these points:
• Does Council want staff to design charges and rates using the results of the Cost of Service and
Rate Design Study?
• Does Council want staff to plan for a four year phase in of the COS results?
SUGGESTED MOTION:
N/A
ATTACHMENTS:
1. City of Ashland COS, City Council Follow-Up Questions
2. Council Communication, Study Session, "Presentation on Cost of Service and Rate Design
Study for Electric Utility", December 16, 2013
3. Executive Report, CITY OF ASHLAND, "Electric Cost of Service Study", Utility Financial
Solutions LLC, October 2013
4. Presentation. "City of Ashland Electric, Cost of Service and Rate Design Report", Mr. Mark
Beauchamp, Utility Financial Solutions LLC, December 16, 2013
Page 3 of 3
ATTACHMENT 1
City of Ashland COS
City Council Follow-Up Questions
As follow up to the Cost of Service Study and the presentation on December 16, 2013, the City
Councilorshave asked the following questions:
1. Is there anything in the literature/state of the art that argues against the cost of service
model? What about a modified cost of service system (i.e. with some users essentially
subsidized)?
2. Do the recommended revenue requirements (debt coverage, minimum cash reserves
operating revenue, etc.) vary between private utilities and municipally owned systems?
Is there any question that these are appropriate revenue requirements for us?
3. There are two pieces here: first, recommendations regarding the revenue requirements;
second a suggestion that we pursue a cost of service approach to address the revenue
requirements. If we accepted the revenue requirements but did not institute a cost of
service approach, what would the resultant increases look like?
4. Does the COS model adjust in any way for the fact that government/municipal customers
don't pay the electric user tax?
5. How does the COS incorporate taxes and franchise fees? I'm paying for electric power.
It is a service. How does a tax/fee for the general fund fit into the cost of service
calculations?
6. How does COS explain the service provided by the base fee?
7. This is a major policy shift from the past. We will no longer be subsidizing the
residential customers with the commercial accounts, which mean the base rates will be
higher resulting in a little less value for conserving electricity and higher rates for the low
income.
8. A future study needs to be done to evaluate the efficiency of our electric utility, and all
utilities and divisions for that matter. Since we actually have a monopoly of sorts there
needs to be confidence that we are as efficient as possible.
9. It would still be nice to see how our fixed costs, not related to Kw, compare to other
utilities. As I said earlier "the costs per meter".
10. Part of the data uses Kw and part uses Kwh. Is that actually how we bill different
customers? Can the numbers be normalized?
11. Since government entities cannot be taxed, is it possible that the base rates or the other
charges be increased to cover the difference? If not, then they are getting quite the
volume discount which goes against our current policy of increased rates for higher
usage.
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