What's this about? See this > Open before PUBLIC HEARING ON DECEMBER 1,2020
| File #: | 20-1140 |
| Type: | Ordinance | Status: | Agenda Ready |
| In control: | City Council |
| On agenda: | 11/16/2020 |
| Title: | Modifying terms/rates/fees/charges for electric utility services. (Districts 1 and 4) |
| Attachments: | 1. Council Report w Attachments, 2. Ordinance, 3. Resolution w Rate Book |
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City Council Report 21 Pages long
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
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
WATER UTILITY
Rates for water service are comprised of two components: Service Charge, with a flat monthly rate based on the water meter size and Usage Charge, based on units of water consumption.
The water utility forecast includes increased costs for debt service, payments in lieu of franchise fees, joint venture costs for the operation of the Val Vista Water Treatment Facility, power, commodity, and chemicals at City water treatment plants. Staff reviews and forecasts all costs each year to ensure rates are sufficient to keep up with expenses. This includes significant cost increases for operational ($15.2M) and debt service ($4.1M) costs from FY 2019/20 to FY 2020/2
WASTEWATER UTILITY
Rates for residential wastewater service are comprised of two components: Service Charge with a flat monthly rate, and Usage Charge based on wastewater demand volume. Wastewater volume is calculated for each customer based on 90% of the average monthly water use for the three lowest water usage months from December through March (also known as the “winter water monthly average”). This approximates indoor household usage and the resulting demand on the wastewater system. A Citywide winter water monthly average is used for new customers until an individual customer average can be determined.
The wastewater utility forecast includes increased costs for debt service associated with the expansion of the Greenfield Water Reclamation Facility, with start-up costs beginning
in FY 2019/20 and fully expanded operations beginning in FY 2020/21. Significant costs within the utility are the cost of chemicals, electricity, and the cost of ownership, operation, and maintenance of the 91st Avenue Wastewater Treatment Facility, a joint venture with the cities of Glendale, Phoenix, Scottsdale, and Tempe. Staff reviews and forecasts costs each year to ensure rates are sufficient to keep up with expenses. The debt service costs increased $3.9M and operational costs increased $6.4M from FY 2019/20 to FY 2020/21.
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