Be Prepared > The attached information outlines recommended electric, natural gas, solid waste, wastewater and water utility rates, components, fees and/or charges to be presented to the City Council in association with the introduction of utility rate ordinances on November 16, 2020.
This will be followed by the public hearing on December 1, 2020 as stated in the Notice of Intention to be published on September 21, 2020
Conduct a public hearing on modifications to terms/rates/fees/charges of City-owned utilities: items 8-b through 8-f
START WITH THE CITY COUNCIL REPORT - it's 21 pages provided in multiple links to underlined attachments farther down. Here are the first 8 pages:
City Council Report
Date: November 16, 2020
To: City Council
Through:
Michael Kennington, Chief Financial Officer Kari Kent, Assistant City Manager John Pombier, Assistant City Manager
From:
Candace Cannistraro, Management and Budget Director Scott Bouchie, Environmental Management and Sustainability Director Frank McRae, Energy Resources Director Jake West, Water Resources, Director
Subject: Fiscal Year 2020/2021 Utility Rate Recommendations
PURPOSE AND RECOMMENDATION
The following information has been compiled and placed on file with the Mesa City Clerk in Compliance with Arizona State statute.
The attached information outlines recommended electric, natural gas, solid waste, wastewater and water utility rates, components, fees and/or charges to be presented to the City Council in association with the introduction of utility rate ordinances on November 16, 2020. This will be followed by the public hearing on December 1, 2020 as stated in the Notice of Intention to be published on September 21, 2020.
Discussions of these proposals to the full City Council occurred at the study sessions on September 17, 2020 and October 22, 2020. Additionally, Utility Enterprise forecast and utility rate recommendations were presented to the Audit, Finance and Enterprise Committee on August 27, 2020 and September 10, 2020. Subsequently, the results of these discussions are available online at the City of Mesa website, Mesaaz.gov, under City Hall, council agendas and minutes.
The purpose of this report is to provide staff recommendations for utility rate adjustments. The rate adjustments are recommended to be effective January 1, 2021.
The forecasted expenses for each utility are compared to the forecasted revenues based on the current rates. The increases in annualized revenues due to the
recommended rate adjustments are in the table below. Additionally, the table below shows the increases in operating and debt service expenses for each utility from FY 2019/20 to FY 2020/21:
Utility Revenue Expenses Solid Waste $330,000 $1,945,000 Electric $272,000 $2,124,000 Natural Gas $428,000 $6,066,000 Water $6,698,000 $19,423,000 Wastewater $2,951,000 $10,352,000
The method of implementation of rate adjustments can vary from year to year based on the needs and goals of the individual utilities. The impact on individual customers can vary based on the method of implementation and the customer consumption.
For FY 2020/21, the following rate adjustments are being recommended (see Attachment 1 for more detail):
Solid Waste: Residential barrel rates: no adjustment Bulk item pick-up: Increase by $1.96, from $23.04 to $25.00 Bulk Item Not Out Fee: Increase by $13.21, from $11.79 to $25.00 Front-load rates: Overall 3.5% increase Commercial Roll-Off rates: 1.0% increase
Electric: Residential: service charge increase of $1.00 per month Residential: 1.0% Summer Tier 1 usage rate increase and 5.0% Winter Tier 1 and Tier 2 usage rate increase Establish new Standby Rate Gas: Residential: service charge increase of $0.25 per month Residential: 10.0% Summer and Winter Tier 2 usage rate increase Non-residential: service charge increase of $2.00 Non-residential: 3.0% Summer and Winter Tier 2 usage rate increase Non-residential: Adjust Tier 1 usage from 0-1,200 therms to 0-1,500 therms Establish new Economic Development Rate
Water: Residential: 1.50% increase to service and usage components Non-residential: 1.50% and 5.00% increases to usage and service components, respectively, across most customer classes Interdepartmental: no adjustment Continue with final residential water usage tier adjustment Continue with removal of final excess surcharge holiday
Wastewater: Residential rate: 3.50% increase to service and usage components Non-residential: 4.00% increase to service and usage components, across most customer classes Establish Household Hazardous Waste $0.41 per month rider for Leisure World customers Interdepartmental: no adjustment
BACKGROUND AND DISCUSSION
Each utility is operated as a separate business center. As such, rate schedules are adjusted annually in a manner consistent with costs of capital, as well as the fixed and variable costs of operation and maintenance within each utility. Reserve balances are combined in the Utility Enterprise Fund and are managed to maintain a targeted ending reserve balance of at least 20% of the following year’s estimated expenditures throughout the forecast period. The reserve balance allows for the smoothing of rate adjustments. This smoothing avoids large rate increases and minimizes the impact to customers in any single year.
The Utility Enterprise Fund Cash Flow Projections (Attachment 2) includes projections of growth. The Water, Wastewater, and Solid Waste utilities have a citywide service area and are expected to grow by an average of about 1.7% per year during the forecast. With the inclusion of the Magma service area, the Natural Gas utility is expected to grow by 770 accounts in FY 2020/21 fiscal year. The Electric utility, with a smaller and largely built out service area when compared to the other utilities, is expected to grow by 100 accounts in FY 2020/21.
The Utility Enterprise Fund Cash Flow Projections also include expenditures that are increased by inflationary factors in future years. Some inflationary factors are unique to the individual utilities, such as those used for chemicals or purchased water. Other citywide expenditure pressures that are included in the forecast are listed below.
Capital Investment
The City continues to place a high priority on infrastructure investment to attract and service future development. The FY 2020/21 capital improvement program (CIP) includes the planning for increased customer demand, maintaining system reliability and satisfying contractual obligations. The debt service on utility revenue bonds is funded through the utility rates paid by customers. The City issues bonds on an asneeded basis in order to minimize the interest cost. Anticipated future debt service has been included in the forecast and rate recommendations.
Review of the General Fund Contribution
Based on direction from the City Council, the Utility Enterprise Fund contribution to the
General Fund is now calculated based off of 30% of each utility’s gross operating revenues. The amount of the transfer throughout the forecast period is adjusted based the gross operating revenue forecast. The adjustment for FY 2020/21 is projected to be a slight increase of $1.1 million, moving from $108.4 million to $109.5 million.
SOLID WASTE UTILITY
Solid waste services are charged flat monthly rates for the various services provided.
Residential Rates
Staff is recommending no increase on all residential barrel rates.
Bulk Item Collection
Staff is recommending increasing the following bulk item rates:
Bulk Item Service: increase of $1.96 per load, from $23.04 to $25.00. “Not Out” Fee: increase of $13.21, from $11.79 per occurrence to $25.00 per occurrence.
The projected annualized revenue increase is $20,000
Commercial Front-Load
There are various rate factors related to Front-Load service. The Front-Load program serves customers in competition with private waste collection companies.
Staff is recommending increasing the base rate, multi-day factor, multi-bin factor and outof-zone fees. In addition, staff is recommending implementing a set fee, removal fee, relocation fee and change in size fee. The projected overall increase for Front-Load Trash is 3.5%.
Increase base rates for all size bins by $1.50 Increase out-of-zone fee by $1.50, from $15.00 to $16.50 Increase multi-day and multi-bin discounts by 2 percentage points Implement a Front Load Set Fee of $80.00 Implement a Front Load Removal Fee of $110.00 Implement a Front Load Relocation Fee of $85.00 for the first bin and $10.00 for each additional bin Implement a Change in Size Fee of $90.00
The projected increase in annualized revenue is expected to be $220,000 for Front-Load Trash.
Commercial Front-Load Recycling
Staff is recommending eliminating Front-Load commingled recycling
Staff is recommending an increase to the base rate and multi-bin factor for commercial cardboard customers.
Base rate for cardboard: Increase 2-yard by $9.06, from $36.00 to $45.06 Increase 3-yard by $9.82, from $39.36 to $49.18 Increase 4-yard by $10.58, from $42.72 to $53.30 Increase 6-yard by $12.84, from $53.03 to $65.87 Increase 8-yard by $15.03, from $63.09 to $78.12 Increase multi-bin factor cardboard from a multiplier of 0.65 to 0.67
The projected increase in annualized revenue is expected to be $70,000 for Front-Load Cardboard.
Commercial Roll-Off
The Roll-Off program serves residents and business customers in competition with private waste collection companies.
Staff is recommending the following Roll-Off rate adjustments:
Increase trash and green set fee by $2.00, from $58.00 to $60.00 Increase trash per ton charge by $0.20, from $33.30 to $33.50 Increase green waste per ton charge by $7.45, from $32.30 to $39.75 Increase blocked, overloaded, and unserviceable charges by $25.00, from $65.00 to $90.00 Implement a 24-hour cancellation charge of $90.00
The projected roll-off increase in annualized revenue is approximately $20,000 for RollOff containers.
Solid waste rates across Arizona range from $10.00 to $40.00 a month. Costs to provide this service varies depending on many factors such as, but not limited to, distance to the landfill from collection location and landfill costs. An informal survey of private hauler service for county island residents within the City of Mesa resulted in costs comparable to those proposed by staff for FY 2020/21, but the private haulers do not provide recycling service in all locations.
The projected annualized increase in revenue for all Solid Waste utility recommendations is approximately $330,000.
ELECTRIC UTILITY
Rates for electric service are comprised of three major components: System Service Charge with a flat monthly rate, Energy Usage Charge based on units of consumption,
and the Electric Energy Cost Adjustment Factor (EECAF) which passes the cost of the purchase of the electric commodity to the customer.
Adjustments to the system service charge component of the electric rate allows for a more stable revenue source for the program and insulates customers from higher energy costs during peak demand periods such as the summer. Currently only 14% of the revenues (excluding EECAF) from electric customers are fixed revenues. The program is heavily reliant on consumption to cover fixed expenses. Rate adjustments applied to the system service charge allows for a movement toward a more balanced rate structure.
Additionally, the electric program is experiencing normal inflationary pressures on operating costs, as well as increased debt service expenses related to system infrastructure improvements.
The Electric Energy Cost Adjustment Factor (EECAF) component is adjusted monthly to “pass-through” increases and decreases in the costs of electric energy supplies acquired to meet our customers’ needs. This rate component has varied between $0.03800 and $0.05517 per kWh in the most recent twelve months.
Staff recommends the following rate adjustments:
Residential
Residential System Service Charge: increase of $1.00, from $12.00 to $13.00 Residential Usage Charge: 1.0% increase in Summer Tier 1 usage charge, and 5.0% increase in Winter Tier 1 and Tier 2 usage charge
Average residential bill with customer charge, energy usage charge, and EECAF: from $93.21 to $95.05, 2.0%
Salt River Project (SRP) comparison: Service Charge: $20.00 per month $7.00 more than Mesa’s proposed)
Mesa’s average residential customer: Monthly bills during calendar year 2019 (at FY 2020/21 Mesa rates) were approximately $14.10 less per month ($169.20 less per year) than SRP.
The proposed increase results in an annual cost approximately 12.9% percent less than if served by SRP. Lower use customers’ bills (i.e. first quartile with an average consumption of 325.69 kWh per month) would be almost 20.6% less than if they were served by SRP.
Establishing a Standby Electric Rate
Energy Resources is proposing a Standby Electric Rate Schedule to provide electric utility service to customer(s) that are significantly different than our other electric utility
customers. Existing rate schedules do not ensure that the cost to extend and provide safe and reliable service to these customers are recovered in a timely and equitable manner.
Multiple projects are developing in our electric service area that differ from our existing customers in two significant ways:
• The developments have indicated they will meet a significant portion of their electric energy needs with electric generation within their developments (i.e. onsite generation); and • Significant investments in electric infrastructure and equipment are still required to meet the developments’ requests for Mesa’s electric utility to meet their electric energy requirements when their on-site generation is not capable of doing so.
These customers have requested that Mesa’s electric utility be able to meet all of their developments’ electric energy needs when their on-site generation is unavailable to supply these requirements. Thus, electric distribution utility infrastructure and equipment will need to be installed to satisfy this request. Existing rate schedules recover investments made to extend electric infrastructure and equipment and provide electric service to new or expanding customers in a timely manner if the customers’ billed energy consumption and associated revenues are sufficient to pay for those investments. A customers’ reliance upon on-site generation and/or an unusually high investment in electric infrastructure and equipment will result in an unusual risk of costs for the electric distribution infrastructure and equipment not being fully recovered in a timely manner.
The proposed standby rate schedule ensures that the costs to extend electric infrastructure and provide service to customers who meet a significant portion of their energy needs with on-site generation are recovered in a timely and equitable manner. The proposed Standby Electric Rate also provides assurance to the Standby Customer that the electric utility will install the electric infrastructure and equipment and acquire the electric energy supplies to meet the customer’s energy needs when on-site generation is not able to supply their electric energy requirements.
The key differences between the proposed Standby Electric rate and the existing rate schedule that other commercial or multifamily customers are served under are indicated in Table 1 below.
The key difference between rate/bill component in the Standby Electric Rate is the Facility Charge. The Facility Charge on a customer’s bill will be determined by multiplying the Facility Charge rate ($6.67/ kilowatt) by the demand (kW) that the City is expected to provide in case the customer’s on-site generation is not available or sufficient to meet their requirements.
__________________________________________________________________________________________
ITEM 8-b
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for electric utility services. (Districts 1 and 4) |
ITEM 8-c
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for natural gas utility services. (Citywide) |
ITEM 8-d
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for water utility services. (Citywide) |
ITEM 8-e
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for wastewater utility services. (Citywide) |
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for electric utility services. (Districts 1 and 4) |
ITEM 8-f
| Type: | Ordinance | Status: | Agenda Ready |
| Title: | Modifying terms/rates/fees/charges for solid waste utility services. Proposed changes include bin, roll-off, commercial barrel service, and appliance recycling and bulk item collection schedule modifications. (Citywide) |
_______________________________________________________________________
-------
No comments:
Post a Comment