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SR - - 2015 UTILITY BILL PASS THROUGH CHARGEAGENDA ITEM November 25, 2014 c�U1VTY GPY TO: Honorable Mayor and Members of the City Council THRU: John W. Sibley City Manager FROM: Joe DeFrancesco cp Public Works Di ector Reviewed/Verif By: City Manager Finance Direct `7� To Be Presente Joe DeFrancesco X Cons Calendar City Mgr Rpts Council Rpts Legal Affairs Boards /Crates Public Hrgs Admin Rpts Plan /Environ 1. SUBJECT Notice to the City Council that a pass through charge will be added to the water utility bill for Calendar Year (CY) 2015 to take effect on January 1, 2015. 2. SUMMARY Black and Veatch, the City's water rate consultant, calculated the pass through charge for CY 2015 using the formula approved by Council in March 2012. The calculation concluded that an additional $0.023 (two cent) per billing unit increase was needed to compensate for cost increases in water purchases and electricity costs necessary to supply water to the City. 3. RECOMMENDED ACTION Receive and File. 4. FISCAL IMPACT Pass Through charges collected will be deposited as follows: 600.8011.47111.00000 Water Consumption Charge $300,000 (Estimated) 5. STRATEGIC PLAN GOAL(S) lb) Provide for a safe community— Provide and maintain infrastructure necessary to ensure the safety of the public. 2d) Be a fiscally healthy community - Effectively manage and develop City assets. 4b) Provide outstanding public service - Provide facilities and services to meet customer expectations. ITEM 11/25/2014 ��1� Printed on Recycled Paper 6. GENERAL PLAN IMPLEMENTATION Infrastructure Element Goal 6.0: Ensure water, sewer, and storm drain systems that meet the needs of residents and businesses. Policy 1.1: Provide sufficient levels of water, sewer, and storm drain service throughout the community. Economic Development Element Goal 6.0: Provide sufficient infrastructure to support anticipated economic development and growth. Policy 6.1: Provide public improvements to support commercial, industrial and institutional uses. 7. DISCUSSION and BACKGROUND On March 27, 2012, Council approved Resolution No. 10638. Amending and Revising the Master Schedule of Fees and Charges for Water Rates. This Resolution approved a five year rate structure and a pass through charge. The pass through charge is calculated every year and takes into account only increases in purchases of water and electricity costs required to supply water to the City Based upon the results generated by the approved pass through formula, using the current values for the Replenishment Assessment, electric rates, and Import Water costs, staff is recommending a pass through charge to City of Orange water customers for Calendar Year (CY) 2015. Therefore, the overall rate increase approved by Council on March 27, 2012, of 3 %, will take effect on January 1, 2015 in addition to the pass through charge of two cents. Black and Veatch, the City's water rate consultant, calculated the pass through charge for CY 2015 using the formula approved by Council in March 2012. The calculation concluded that an additional $0.023 (two cent) per billing unit increase was needed. The $0.023 adjustment represents approximately $300,000 in revenue to the Water Fund. The pass through calculation takes into account costs for the three major elements contributing to the Water Supply cost. These include: import water costs (Metropolitan Water District of Southern California via the Municipal Water District of Orange County), ground water costs (Orange County Water District) and power costs (Southern California Edison). Rate payers will receive postcards with the pass through information at least 30 days prior to the pass through implementation. 8. ATTACHMENTS • Postcard containing pass through information. JDja;cp ITEM 2 11/25/2014