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Home My WebLink About2025-12-17 Special Study Session MIN ASHLAND CITY COUNCIL SPECIAL STUDY SESSION MINUTES Wednesday,December 17,2025 Mayor Graham called the meeting to order at 5:30 p.m. Council Present: Mayor Graham, Councilors Bloom,Dahle, DuQuenne, Hansen, Kaplan,and Sherrell. Council Absent: none Staff Present: Sabrina Cotta City Manager Alissa Kolodzinski City Recorder Tom McBartlett Director of Electric Bryn Morrison Interim Finance Director I. Call to Order II. Reports and Presentations a. Electric Rate Presentation and Proposal McBartlett, presented along consultants Mark Beauchamp and Mike Johnson from Utility Financial Solutions (UFS) (presentation attached). Morrison was also present to answer questions. Beauchamp noted that Ashland's electric utility is in good financial position with low debt and adequate cash reserves but faces challenges with aging infrastructure (approximately 59% depreciated) and is currently spending $1.5-2 million in cash reserves annually. The presentation focused on three key components of a rate study: 1. Long-term financial projections (examining what revenue requirements are needed) 2. Cost of service study (identifying costs to provide service to each customer class) 3. Rate design (determining how to structure rates to achieve financial goals) Beauchamp emphasized that Ashland has one of the lowest electric rates in the country,with average residential customers paying around $70 monthly compared to the national average of approximately$120.This was attributed to both BPA's hydropower supply and the efficient management of the distribution system. Key financial metrics reviewed included: • Debt coverage ratio (not currently applicable as Ashland is debt-free) • Minimum cash reserves (calculated based on working capital needs, power supply costs, capital improvement funding, and emergency reserves) • Operating income targets The financial model showed that without rate adjustments, cash reserves would decrease annually and become negative by 2029. Current projections indicate operating losses of approximately$1.1 million,with those losses projected to grow each year. UFS recommended a 3.9% annual rate increase over five years to maintain financial stability while minimizing customer impact. It was emphasized that delaying rate increases would ultimately require City Council Study Session December 17,2025 Page 1 of 2 steeper increases later, about 5.5% annually if delayed by one year, and potentially double-digit increases if delayed further. For the average residential customer,the proposed 3.9% increase would result in approximately $3 more per month. The cost-of-service study indicated that current rates are relatively well-aligned with actual costs across customer classes,with recommended adjustments falling within a tight range. The proposal included a modest $0.50 increase to the residential customer charge (from $16.25 to $16.75) and maintaining the inclining block rate structure with a 20% differential between blocks. During council discussion,several questions were addressed: • Councilors asked about the loss of cash reserves mentioned in the presentation given that financial statements showed positive net income in recent years. It was clarified that the projected cash loss was attributed to a combination of projected operational and capital expenditures. • Councilors inquired how the minimum cash reserve requirements were calculated. The methodology was outlined which includes: 45-day working capital requirements, ensuring coverage for the largest power supply bill, incorporation of a 5-year capital improvement program,and a contingency for unexpected events. • Councilors questioned how the rate proposal would affect low-income discount programs.The current budget allocates approximately$265,000 annually for these discounts, allowing qualifying households to receive a 30% discount up to $400 per year. • A question was raised about whether the proposed rate increase would be used to fund recently approved staff salary increases. Cotta clarified that all electric utility revenue is allocated toward electric utility expenses. Council discussion also included the importance of making modest, planned rate increases now rather than facing steep increases or infrastructure failures later. It was noted that unlike for-profit utilities,Ashland's municipal utility has maintained high reliability and avoids outages common to surrounding areas. The council credited the City's continued affordability and efficiency to effectively managing the municipally owned utility system and the approach of gradual rate adjustments. Council reached the decision to direct staff to prepare a rate resolution based on the recommended 3.9% annual increase with a range of plus or minus 1% (allowing adjustments between 2.9% and 4.9% for specific customer classes).The resolution will come to a future business meeting for formal consideration. III. Adjournment of Study Session The meeting was adjourned at 7:34 p.m. c /U1 Aa � &AA� City Recorder Alissa Kolodzinski Mayor Tonya Graham City Council Study Session December 17,2025 Page 2 of 2 U■ S SOILUTIONS,4L CAL City of Ashland Electric Department President,Electric Cost of Service Study/Financial Projection Mark Beauchamp mbeauchamp@ufsweb.com 6164035450 Analytical Steps of Setting Rates Define Revenue Requirements — Cash or Utility Basis — revenues needed to properly fund the system Equitably allocates the revenue requirements ' ' between the various customer classes Design rates for each class of service to meet • the revenue needs of the utility, along with any other rate design goals and objectives Objectives • Financial Projection • Debt Coverage Ratio— No Debt • Minimum Cash Levels • Target Operating Income • Rate Adjustment Plan • Review Cost of Service Results • Class Cost Results • Customer Charges • Sample Rate Designs UUTILITY FINANCIAL SOLUTIONS,LLC 3 Significant Fiscal Energy/Demand Transmission Investment Utility Funded Year Inflation Growth Change Change Income Capital 2026 3.1% 0.2% -1.6% 17.6% 3.0% 1,000,000 2027 3.1% 0.2% 0.0% 0.0% 3.0% 1,000,000 2028 3.1% 0.2% -0.3% 0.0% 1.0% 1,000,000 2029 3.1% 0.2% 1.0% 1.0% 1.0% 1,000,000 2030 3.1% 0.2% 3.0% 3.0% 0.5% 1,000,000 UM UTILITY FINANCIAL r�SOLUTIONS,LLC 4 MeetingNot Debt Coverage DEFAULT OF LOAN • Technically in default even • Affects ratings and ability to issue if making payment but not bonds in future meeting Debt Coverage • Affects interest rate in the future = Ratio higher risk FINAL • If you participate in projects through a NOTICE Joint Action Agency, may have ■ significant impacts on future bond ratings of the Agency and other participating utilities COS Summary Financial Results (without change) Projected Adjusted Optimal Fiscal Rate Debt Coverage Operating Operating Projected Cash Recommended Year Adjustments Ratio Income Income Balances Minimum Cash 2026 0.0% N/A $ (1,142,821) $ 996,073 $ 5,622,148 $ 4,478,794 2027 0.0% N/A $ (1,500,131) 1,058,363 $ 3,745,991 4,570,550 2028 0.0% N/A $ (1,812,554) 1,119,832 $ 1,466,206 4,646,324 2029 0.0% N/A $ (2,241,281) 1,180,747 $ (1,225,103) 4,750,793 2030 0.0•/0 N/A $ (2,855,228) 1,241,305 $ (4,505,022) 4,900,950 UFS50 UT ONISAL CIA' 6 Debt Coverage RatioRate Change) Informational : No Debt Description Projected 2026 Projected 2027 Projected 2028 Projected 2029 Projected 2030 Debt Coverage Ratio Net Income $ (799,336) $ (1,201,466) $ (1,645,094) $ (2,096,619) $ (2,725,228) Add Depreciation/Amortization Expense 305,309 325,309 365,309 405,309 445,309 Add Interest Expense - - - - - Cash Generated from Operations $ (494,026) $ (876,157) $ (1,279,785) $ (1,691,309) $ (2,279,919) Debt Principal and Interest $ - $ - $ - $ - $ - Projected Debt Coverage Ratio(Covenants) N/A N/A N/A N/A N/A Minimum Debt Coverage Ratio L4 1.4 1.4 1.4 1.4 UFSUTILITY FINANCIAL r SOLUTIONS,LLC 7 Reasons • sh • Pay Bills • Catastrophic Events • Wind, Ice, Equipment Failure • Changes in Power Supply (PCA helps) • Capital Costs • Debt Service Maintain Stable Rates for • • Allows the utility to draw down on reserves for an unexpected event rather than issue debt or substantial rate increases • Allows the ability to phase in large rate adjustments • Reduces the chance of a significant transfers to city to reduce cash levels Minimum Cash ( No Rate Change) Description Projected 2026 Projected 2027 Projected 2028 Projected 2029 Projected 2030 Minimum Cash Reserve Allocation Operation&Maintenance Less Depreciation Expense 12.3% 12.3% 12.3% 12.3% 12.3% Purchase Power Expense 10.1% 10.1% 10.1% 10.1% 10.1% Historical Rate Base 3% 3% 391. 3% 3% Current Portion of Debt Service Payment 83% 83% 8391 83% 83% Five Year Capital Improvements-Net of bond proceeds 20% 20% 20% 20% 20% %Plant Depreciated 58% 589/o 57% 579/6 56% Calculated Minimum Cash Level Operation&Maintenance Less Depreciation Expense $ 1,182,383 $ 1,226,387 $ 1,264,711 $ 1,304,223 $ 1,344,959 Purchase Power Expense 869,753 871,295 870,936 881,404 909,662 Historical Rate Base 589,268 619,268 649,268 679,268 709,268 Current Portion of Debt Service Reserve - - - - - Five Year Capital Improvements-Net of bond proceeds 1,000,000 1,000,000 1,0M000 1,000,000 1,000,000 Maintain 90 Days Cash 837,390 853,600 861,410 88S,898 937,060 Minimum Cash Reserve Levels $ 4,478,794 $ 4,570,550 $ 4,646,324 $ 4,750,793 $ 4,900,950 Projected Cash Reserves $ 5,622,148 $ 3,745,991 $ 1,466,206 $ (1,225,103) $ (4,505,022) .ter U r�M UTILITY FINANCIAL SOLUTIONS,LLC 10 Should public power have a rate of return Adequate rate of return on investment to help ensure current customers are paying their fair share of the use of the infrastructure and not deferring the charge to future generations • Fund interest expense • Fund inflationary increase on historical investment of system Optimal • ( No Rate • • Description Projected 2026 Projected 2027 Projected 2028 Projected 2029 Projected 2030 Optimal Operating Income Determinants Net Book Value/Working Capital $ 8,166,900 $ 8,761,591 $ 9,316,281 $ 9,830,972 $ 10,305,662 Outstanding Principal on Debt - - - - - Contributed Capital Estimated NBV 670,000 590,000 510,000 430,000 350,000 System Equity $ 7,496,900 $ 8,171,591 $ 8,806,281 $ 9,400,972 $ 9,955,662 Debt:Equity Ratio 0% 09/ 0% 0% 0% Optimal Operating Income Allocation Interest on Debt 0.001/. 0.00% 0.00% 0.00% 0.00% Contributed Capital Estimated 1L42% 12.97% 15.009/. 17.79% 21.86% System Equity 12.27% 12.02% 11.85% 1L75% 11.709/o Optimal Operating Income Interest on Debt $ $ - $ - $ - $ - ContributedCapitalEstimated 76,500 76,500 76,500 76,500 76,500 _System Equity $ 919,573 $ 981,863 $ 1,043,332 $ 1,104,247 $ 1,164,805 Optimal Operating Income $ 996,073 $ 1,058,363 $ 1,119,832 $ 1,180,747 $ 1,241,305 Projected Operating Income $ (1,142,821) $ (1,500,131) $ (1,812,554) $ (2,241,281) $ (2,855,228) Rate of Return in% 12.2% 12.10/6 12.0°/6 12.0% 12.0% UFS SOLU;IONS,FINANCIAL 12 Potential Rate Track Projected Adjusted Optimal Fiscal Rate Debt Coverage Operating Operating Projected Cash Recommended Year Adjustments Ratio Income Income Balances Minimum Cash 2026 3.9% N/A $ (812,869) $ 996,073 $ 5,952,099 $ 4,478,794 2027 3.9% N/A $ (128,325) 1,058,363 $ 5,457,647 4,570,550 2028 3.9% N/A $ 297,173 1,119,832 $ 5,304,706 4,646,324 2029 3.9% N/A $ 638,044 1,180,747 $ 5,531,107 4,750,793 2030 3.9% N/A $ 826,674 1,241,305 $ 5,960,746 4,900,950 UMUTILITYFINANCIAL SOLUTIONS,LLC 13 COS Summary Results Projected Effective Customer Class Cost of Service Revenues Change Residential $ 10,510,559 $ 9,282,505 13.2% Seasonal Residential 74,631 67,685 10.3% Outdoor Area Lighting 15,640 12,588 24.3% Commercial/Telecommunications 1(� 1,789,424 1,602,736 11.6% Commercial/Telecommunications 3(� 4,295,413 3,703,154 16.0% Municipal/Government 1(� 244,696 235,129 4.1% Municipal/Government 3(� 1,094,317 1,109,900 -1.4% Government Large w/Base 731,377 649,891 12.5% Government Large wo/Base 416,337 369,913 12.5% Total $ 19,172,394 $ 17,033,501 12.6% UTILITY FINANCIAL U SOLUTIONS,LLC 14 CustomerWhat is a Charge? • Meter operation, maintenance and replacement costs • Meter reading costs or AMR installation Recoverscost costs for • • Billing costs to grid at zero • Customer service department kWh • Service into customers facilities • Portion of distribution system consumption Cost to get a wire from the sub- transmission system to customer • Based on minimum sizing (If all customers only used a single kWh) UFSUTILITY SOLUTIONS.LLCAL subsidiesWhy is a Customer Charge Needed? Stabilizes revenue Reduces seasonal May impact low-use customers incomeLow . / low use UFSUTILITY FINANCIAL SOLUTIONS,LLC Lf Are Low-income • • Some use more and some use less electricity than the average residential customers • High or low number of people in home • Age, energy efficiency, own or rent • Mobile homes • May consider low-income assistance or energy efficiency programs UUTILITY FINANCIAL SOLUTIONS,LLC Average Residential Usage Compared with Low-Income Low Income Usage 2000 ^ 1500 t 3 Y 1000 L C O 500 0 ~ M Vl l0) ID M 0 00 O ON M Val 1� M O N M Ill N M O N T VI M O H N N N N N N M M M M M M O Customers -Low Income Monthly Usage -Residential Average Monthly Usage UMUTILITYFINANCIAL 18 SOLUTIONS,LLC Monthly • Charges COS Current Average Customer Customer Customer Class Charge Charge Residential $ 17.05 $ 16.25 Seasonal Residential 24.55 16.25 Commercial/Telecommunications 1(� 38.02 25.21 Commercial/Telecommunications 3(� 75.97 52.50 Municipal/Government 1(� 38.57 25.56 Municipal/Government 3(� 119.02 53.31 UM UTILITY FINANCIAL SOLUTIONS,LLC 19 Next Steps Proposed Rate Change • Planned 3.9% Develop Bandwidth Rates (Rate Adjustment Plan) • 1% Bandwidth • Maximum Increase 4.9% • Minimum Increase 2.9% Customer Charges • Move toward Cost of Service • Residential $50c/Month UM UTILITY FINANCIAL SOLUTIONS,LLC 20 Sample Residential Rate Rates Current Year Year Year Monthly Facilities Charge: All Customers $ 16.25 $ 16.75 $ 17.25 $ 17.75 Monthly Change Energy Charge: Usage Year Year Year Block1(0-500kWh) $ 0.07570 $ 0.07903 $ 0.08251 $ 0.08615 250 $ 1.33 $ 1.37 $ 1.41 Block2(501-5,000kWh) $ 0.09110 $ 0.09443 $ 0.09791 $ 0.10155 Block 3(Excess) $ 0.12940 $ 0.13273 $ 0.13621 $ 0.13985 500 $ 2.16 $ 2.24 $ 2.32 Revenue from Rate $ 9,292,505 $ 9,637,627 $10,006,334 $10,389,148 Average Change from Previous 3.8% 3.8% 3.80,,6 1000 $ 3.83 $ 3.98 $ 4.14 1250 $ 4.66 $ 4.85 $ 5.05 Change by Monthly kWh Usage(%) 1500 $ 5.49 $ 5.72 $ 5.96 10.0% 1750 $ 6.32 $ 6.59 $ 6.88 9.0% 2000 $ 7.15 $ 7.46 $ 7.79 8.0% 2250 $ 7.98 $ 8.33 $ 8.70 7.0% 2500 $ 8.81 $ 9.20 $ 9.61 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 250 500 750 1000 12So 1500 1750 2000 2250 2500UM UTILITY FINANCIAL -Yearl -Year2 --Yea13 SOLUTIONS,LLC 21 Questions ? UTILITY FINANCIAL UPS SOLUTIONS, LLC , '' From: noreoly(a)civicolus.com To: Ashland City Recorder Subject: Online Form Submittal:City Council Public Comment Form Date: Tuesday,December 16,2025 2:53:23 PM [EXTERNAL SENDER] City Council Public Comment Form Public Comment Use this form to submit public comment for City Council meetings. This form must be submitted by 10 a.m. the day of the meeting to be on the record. If you wish to speak to the Council in person at a meeting, you must fill out a Speaker Request form available on-site. Do not use this form. Full Name Jason Raehl Meeting Date 12/17/2025 Email Address Are you a City of Yes Ashland resident? Indicate if you want to Written provide written testimony, or if you want to speak via Zoom. Which agenda item Electric Rate Increase would you like to address? Comments (Leave this We currently pay$137.27 per month in taxes and fees for our section blank if you are electric and water bill before we even turn on a light bulb or use a requesting to speak drop of water. How much money is enough? Please be more electronically.) fiscally responsible and manage the money you have instead of continuing to bleed the tax payers. People keep talking about affordable living in Ashland but continuing to raise rates and taxes is not helping. Ashland used to be a desirable place to live but now with the hospital closing, the rink not opening, homelessness and people living out of theirs cars everywhere, and the continuing rise of taxes and fees, it's probably time to move.