SPECIAL UTILITY COMMITTEE
A Special Utility Committee Meeting was held on February 6, 2003, at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. Ritter (departed at 6:04 p.m.), Mr. Lambert, and Mr. Snaman. Mr. Speed was absent. Others present were Mr. Carey, Mr. McGlumphy, and Mr. Pitts.
AGENDA ADDITIONS/DELETIONS
Mr. Snaman moved for approval of the agenda, seconded by Mr. Ritter and unanimously carried.
REVENUE REQUIREMENT OPTIONS - ELECTRIC RATE STUDY (Electric Revenue Requirements/Cost of Service/Rate Design Study)
As a follow-up to the Special Utility Committee Meeting of January 6, 2003, members considered three (3) Revenue Requirement scenarios (Attachment #1) in order to provide a recommended scenario to Mr. Brian Farber, Burns & McDonnell, for use in developing a Revenue Requirements formula.
Mrs. Mitchell, Finance Director, explained that the Base Case scenario includes passing the Power Cost Adjustment and Duke contract increases on to the customer. This scenario does not include debt or use of reserves for Capital Projects. The Base Case with Debt includes passing the Power Cost Adjustment and Duke contract increases on to the customer and uses debt to help finance capital projects in the amount of $6M. The Base Case with Reserves (Preferred) includes passing the Power Cost Adjustment and Duke contract increase on to the customer and uses reserves to help finance capital projects in the amount of $6M. This scenario also changes the General Fund Transfer from a flat $4,525,000 to 8% and establishes a Rate Stabilization Reserve to reduce rate increases using the Duke rebate and excess cash flow.
After much discussion, it was the consensus of members that the Base Case with Reserves (Preferred) scenario was preferable over the other scenarios since it stayed within the defined constraints allowed. Mrs. Mitchell explained that the third scenario assumes $6M from the Capital Projects in the first year from the reserves rather than debt. She also stated that Operating Transfers out to the General Fund was changed to 8% of revenues rather than 4.5%. The positive net margin and debt coverage ratio, and the positive cash flow all remained the same.
Mrs. Mitchell noted that she is comfortable using the reserves for Capital Projects since they could be repaid within four (4) years and there would be a $1M savings in interest costs. Mr. Ruane emphasized that the estimated identified needs are based on historical averages, not actual figures.
Mr. Lambert moved to recommend that Base Case with Reserves (Preferred), as outlined, be used by Burns and McDonnell in developing a Revenue Requirements Formula, seconded by Mr. Snaman and carried with three (3) yes and one (1) abstention (Mr. Ritter) (Mr. Speed absent).
Mr. Ritter explained that he abstained due to his need for more time to review the scenarios prior to making a recommendation.
ENGINEER’S ANNUAL REPORT - ELECTRIC FUND
The City of Dover Electric Bond Resolution requires that the City retain an independent engineering consultant to inspect the City’s electric system and to review the electric budgets and insurance program. The City has contracted with Burns & McDonnell to perform this year’s analysis. The report provides the information related to the annual review for Fiscal Years 2000 – 2002.
Some of the highlights of the report are as follows, comparing FY 2000 to FY 2002:
1. Growth for the past two years has been approximately 1.2%.
2. Revenues for the past two years increased 2.5%.
3. Purchased power the past two years increased 4.2 percent.
4. KWH’s purchased the past two years decreased approximately 1.0%.
5. Energy losses have continued to improve: 2000 - 5.8%, 2001 - 4.4%, 2002 - 3.9%.
6. Net income has decreased at an average compound rate of 17.9%, attributed to increases in operating and purchased power cost, not offset by a proportional increase in revenues from growth or rates.
7. The revenue and expense budgets for the above-mentioned years provide for the operation and maintenance of the electric system according to sound utility practices.
8. The transfers, beginning balance and interest earnings in the Improvement and Extension Fund are adequate to cover the capital expenditures in Fiscal Year 2003.
9. Revenue tests, according to Section 502 of the 1985 Bond Resolution show sufficient margins above requirements indicating that retail rates are adequate for Fiscal Years 2000 – 2002.
10. It is the Engineering Consultant’s opinion that the City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice, and in general the performance, operation, maintenance, staff, planning and training aspects for the McKee Run and VanSant stations were found to be above average.
11. It is the Engineering Consultant’s opinion that the design, construction, operation and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards.
The consultant’s conclusions and recommendations are outlined at the end of each section. The fee for this report is $16,500. Staff recommended acceptance of the Engineer’s Annual Report on the Operation and Maintenance of the Electric System for Fiscal Year 2002, as reviewed by the Finance Director/Treasurer on December 28, 2002.
Mr. Snaman moved to recommend acceptance of the report, as presented, seconded by Mr. Lambert and unanimously carried (Mr. Speed and Mr. Ritter absent).
DEDICATION OF LAND - EDGELL
Mrs. Margaret Edgell has offered to donate a 1-foot by 40-foot parcel (Tax Parcel ED–05-68.13-1-88, consisting of 0.00091 +/- Acres) located along the terminus of Oak Lane. This is a remnant parcel from when the lots on Oak Lane were subdivided by Mrs. Edgell’s husband, who is now deceased. The original purpose for retaining this parcel was to block access to Oak Lane from the adjacent land to the north. At the time of subdivision, the land was vacant. Since then, the Luther Towers complex has been constructed and there is now a fence dividing the Luther Towers property from this property and Oak Lane.
The owner wishes to simply “clean up” her land holdings by donating this property back to the City for inclusion with the Oak Lane right-of-way. Under normal circumstances, this property would have originally been included as a part of the Oak Lane right-of-way.
By accepting this property, there would be no extra cost to the City other than the loss of the taxes, which amounted to $2.06 this year. By accepting this property, the City would also be cleaning up the tax map by eliminating a “remnant parcel.”
Staff recommended acceptance of the parcel, with the condition that Mrs. Edgell pay for all related legal expenses.
Mr. Lambert moved to recommend approval of staff’s recommendation, seconded by Mr. Snaman and unanimously carried (Mr. Speed and Mr. Ritter absent).
Mr. Snaman moved for adjournment, seconded by Mr. Lambert and unanimously carried.
Meeting Adjourned at 6:16 P.M.
Respectfully submitted,
Eugene B. Ruane
Chairman
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S:ClerksOfficeAgendas&MinutesCommittee-Minutes20032-06-2003-Special-Utility.wpd
Attachment on File at the City Clerk’s Office
Attachment #1 - Electric Rate Study (Electric Revenue Requirements/Cost of Service/Rate Design Study)