Public Utilities 1996/06/06 %\ ‘°11
14 PUBLIC UTILITIES BOARD
G MINUTES
QC V Or ,TUNE 6. 1996
The agenda having been posted on Friday, May 31, 1996, the Regular Meeting of the Public
Utilities Board was called to order by Chairperson Dale Stanton, at 3:30 p.m. on Thursday,
June 6, 1996, in the City Hall West, 1 lth Floor Conference Room, 201 S. Anaheim Blvd.,
Anaheim, California.
Board Members Present: D. Stanton, W. Wiseman, T. Kirker, R. Lawson,
P. Lem, D. McMillan
Board Members Absent: J. White
Staff Present: E. Aghjayan, M. Bell, L. Moses, H. Pepper,
D. Tarkington, J. Amato, J. Chavez, G. Corson, M. Flynn,
C. Gilbert, P. Grimes, R. Howell, M. Kazungu,
D. Shackelford, L. Topaz, K. Welch, M. Houghtaling
Guests Present: None
1. PUBLIC COMMENTS
Chairperson D. Stanton asked for public comments. There being none, the Public
Comments portion of the meeting was closed.
2. PROPOSED UTILITIES DEPARTMENT FY 1996/97 BUDGET
E. Aghjayan said since the budget was presented at the last meeting, the budget
presentation would not be repeated.
D. Stanton asked the Board members to present any budget questions they may have.
P. Lem said he reviewed the seven budget volumes, and thanked J. Amato for his
assistance in reviewing and answering the 36 questions he had concerning the budget.
P. Lem asked, referring to his question #28, why Electric Services is purchasing 4,000
meters. D. Stanton said that in addition to installing 392 new meters, the City is
constantly replacing old meters, and the cost of the meters is approximately half of what
it would be if the meters were purchased in smaller amounts.
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P. Lem asked, referring to his question #31, on the Water Services Capital
Projects /New Order Transmission line item, why is the total estimated cost $131,000,
and the projected cost $161,000, a discrepancy of $30,000 for FY 96/97. J. Amato said
the first two items 'add up when projected to the year 2000/2001. The last item is
correct as stated year by year, but the total is a typographical error and should be
$193,000, and this has been corrected.
P. Lem said his last question is #33, the San Onofre Nuclear Generating Station
(SONGS) adopted FY 1995/96 budget is $637,000, and proposed FY 96/97 is
$1,854,000. The change proposed for 96/97 is 191% from the adopted FY 95/96, and
using the projected FY 95/96, which is $551,470, compared to the proposed FY 96/97,
the increase is 236 %. G. Broeking said that had to do with scheduled outages
(approximately every eighteen months at SONGS). There are no scheduled outages for
FY 95/96, but there is a scheduled outage for FY 96/97, which increases expenditures.
E. Aghjayan added that scheduled outages are for a purpose, such as maintenance, and it
would be more accurate to amortize the costs over several years. It is also an item
budgeted by Southern California Edison (SCE), and that cost is set by SCE, but the
City's staff reviews those costs very carefully. As a result, there have been significant
reductions in the budget.
T. Kirker said the budget indicates that Public Works, Planning and Building
Departments work hours have increased, which indicates that the economy is showing
signs of recovery. M. Bell added that the General Fund Revenues this year have
exceeded the projections in almost all categories.
W. Wiseman asked what is the difference between adopted, projected, and proposed
budgets. M. Bell said the adopted budget is in reference to the FY 1995/96 budget that
was approved by the City Council, the projected is what the Department is projecting to
spend for FY 1995/96, and the proposed is the forthcoming budget.
D. Stanton said there is a proposed change in the budget, which resulted from the
meeting of Board Subcommittee on the Board's Travel and Education Policy. W.
Wiseman said the Subcommittee recommended a policy, which lists limitations placed
on the Board members for fund usage. The account would be funded by the Department
in the amount of $6,000 per fiscal year, if the Department agrees.
E. Aghjayan said, regarding the $750 allotment per fiscal year, per Board member, the
policy states that if a function cost exceeds $750, the Board member may request the
Chairperson to approve the additional amount, which would come out of the $6,000.
With that understanding, the fund is an excellent idea and he suggested that staff adjust
the proposed budget to include the $6,000 in a Seminars /Training Fund for the Board.
T. Kirker said he thinks the fund is a good idea but should only pertain to matters that
affect the Board members and the City of Anaheim.
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D. McMillan asked if Board members should check with the Chairperson prior to
attending a function. The Board agreed that it would be appropriate for requests to be
processed by K. Welch, and the Chairperson would be apprised of those requests.
E. Aghjayan said that the Board would be given advance notice of appropriate
conferences and seminars as early as possible.
W. Wiseman thanked the Subcommittee members for establishing the policy.
T. Kirker thanked the staff for assisting him regarding his questions on the budget, and
said the questions were handled in a professional manner.
D. Stanton commended staff on the budget book - it was easy to read and understand.
E. Aghjayan commended staff on the diligence used to reduce the FY 1996/97 budget
by approximately 5% ($16 million) from the adopted FY 1995/96 budget, while
maintaining quality.
D. McMillan said he had difficulty in tracking capital projects during the five year
period as the projects have different time frames. E. Aghjayan said the only year
relevant to the budget is the first year, and that staff would be glad to clarify the process
with him. M. Bell agreed.
D. McMillan moved approval to recommend to City Council the Public Utilities
Department Proposed Budget for FY 19961/97. T. Kirker seconded the motion.
MOTION CARRIED 5 -1. P. LEM VOTED NO. 1 ABSENT.
3. FY 1995/96 WRITE -OFF OF UNCOLLECTIBLE UTILITY ACCOUNTS
C. Gilbert, Credit Supervisor, gave a brief presentation on the FY 1995/96 Write -Off of
Uncollectible Utility Accounts.
The total bad debt write -off this year was $747,094 with the Sanitation Division's
portion being $85,916. That amount represents .258% of the current year's revenue of
$289,839,538, a record low since 1989, with the highest year being FY 1993/94. This
reduced figure is attributed to: 1) an improving economy, 2) the Credit and Collection
(Deposit) Policy, which was effective in late 1994, and 3) customer education about the
Policy along with its continued enforcement.
Comparing Anaheim's FY 1995/96 with other utilities, Anaheim has the lowest bad debt
write -off. On a calendar year, Anaheim is a close second to SCE, Orange County
Division.
Future plans to continue to decrease the bad debt write -off include implementation of the
Customer Information System (CIS) which will give greater report detail of bad debt
which will help analyze the bad debt throughout the year. Currently, account
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assessments and deposits are done manually and the new CIS system will allow staff to
more efficiently handle the accounts. Also, the system will automatically refer accounts
to collection agencies which currently is done manually, including a more sophisticated
credit scoring system including bankruptcy, diversion, and returned checks. Staff
currently works to collect on accounts before referred to an agency. The Department is
looking at a positive ID system which ties the computer system with another system with
name, social security number and license information. This information can alert staff
to a customer that has applied for service in another area that may still have a balance in
Anaheim so that staff can try to collect and it also identifies where a customer came
from and if a bill is owing. Also looking at Dun & Bradstreet reporting for commercial
customers.
D. Stanton stated in the past staff there was mention of eliminating or limiting the use of
collection agencies. C. Gilbert says staff intends to make collection efforts in house and .
reduce the need for outside collection agencies. One benefit to using a collection agency
is TRW reporting which would be difficult to do in house. M. Bell said that staff is
increasing its work on collecting accounts before referring them to agencies since they
receive 40 -50% of whatever is recovered. C. Gilbert stated that staff hopes to reduce
the fee percentage to 25-30% with a new agency.
D. Stanton commended staff for the excellent work done on reducing the bad debt over
the years.
R. Lawson asked in the case of filed bankruptcies if staff has problems collecting in
most cases. C. Gilbert says yes and added that in true bankruptcies the Department may
collect a few cents on the dollar.
W. Wiseman also congratulated staff for a good job and asked can staff compel people
to give driver's license and social security numbers when applying for water and
electricity or is this against civil rights. L. Moses said one cannot require a social
security number but can require unique identification like a driver's license.
E. Aghjayan said a driver's license number should be added to the utilities application
which would give at least one potential source of identification.
P. Lem noted in reference to bankruptcies, the Grand Hotel has been sold and appears
on the bankruptcy list and has there been any effort to collect from the past owners. C.
Gilbert said staff is precluded from doing this by law since they are protected by the
bankruptcy laws. It must go through court proceedings which it is now and may take
several years. M. Bell added that staff continues to pursue accounts even after they have
been written off.
P. Lem asked if before submitting to a collection agency does staff spend 30 days trying
to collect the debt, and would increasing the number of days increase the chance of
collecting. C. Gilbert said in some cases it would and staff is expanding efforts in this
area.
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P. Lem referred to Exhibit 3 where Anaheim had a 3% decrease and most utilities had
little change from the previous year. E. Aghjayan said the percentage of the decrease
really only reflects how hard a utility is working compared to the year before and
Anaheim's staff has been working on this for three to four years and one should look at
the percent of write off compared to the total revenues and not just from year to year.
Other utilities decrease from year to year simply shows that bad debts were much higher
than they should have been and one would expect a decrease. What is relevant is where
Anaheim is now compared to the industry standard and Anaheim is the best of all of the
municipal utilities in this comparison.
T. Kirker asked to be notified when the CIS system comes on line so that he can see it
demonstrated.
W. Wiseman moved approval of the FY 1995/96 Write -off of Uncollectible Utility
Accounts as stated in the staff report dated June 6, 1996. D. McMillan seconded.
MOTION CARRIED 5 -1. P. LEM VOTED NO. 1 ABSENT.
M. Bell announced that the Department has hired a new Customer Services Manager,
Jim Harmon, who will be starting next week. He comes from Colorado and has also
been the Assistant General Manager, Finance, for Riverside Public Utility.
4. ELECTRIC COST -OF- SERVICE STUDIES AND ELECTRIC RATE DESIGN
CONSULTING AGREEMENT
E. Aghjayan stated that with the anticipated industry changes it is a good time to study
• the Department's costs and rates. D. Shackelford explained the proposed study will
allow the Department to look at historical costs, what costs are in the margin and to
develop a rate structure that will make Anaheim competitive in the future.
T. Kirker asked if this is similar to the rate study performed in 1994. M. Bell said it
will be similar but different in that marginal costs will be studied, as well as effects of a
deregulated environment which the Department will be operating in.
W. Wiseman asked what is the difference between a marginal cost and a regular cost.
M. Bell said there is an embedded cost study which looks at dollars invested in assets to
provide cost of service and it is also averaged out. The norm now is to use marginal
costs which is the next unit of production or cost of next kilowatt hour.
T. Kirker said that a marginal cost can also be called an incremental cost or differential
cost.
D. Shackelford said the cost of service study will lead to new rate design. It has been
five years since the last study, and it is appropriate to have rates reviewed to ensure the
Department is accurately pricing its services. The Department wants fair, equitable
rates for all of its customers and to have ability to produce innovative rates to attract or
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retain business in Anaheim. The consultant will develop computer models which will
give staff information regarding rate structure and local competition. Staff will return to
the Board and then to City Council in the spring of 1997 with the recommendations from
the rate study.
D. Stanton asked if the consultant will consider the method electricity is sold. D.
Shackelford said the study will break the cost components down into pieces so that the
consultant and the Department can review the components.
T. Kirker asked in looking at the plan schedule, the completion of the plan is November
8, 1996, but first public involvement meeting is October 15, 1996. Is the public met
with before completion. D. Shackelford said meetings with the public are held in order
to receive input before, during and after completion.
P. Lem asked how the five RFP responses were reviewed. D. Shackelford said several
factors were reviewed including, how they responded to the requested information,
ability and knowledge of staff, the cost, and history with other utilities, and also staff
familiarity with EES's staff. The panel consisted of L. Topaz, G. Broeking, R.
Hoffman, B. Nakayama and himself.
P. Lem asked how big a factor was cost. D. Shackelford said about 20 %. EES was the
best qualified and also the lowest cost.
P. Lem asked if the other proposers were as well qualified other than cost. D.
Shackelford said two of the proposers have the qualifications and the others were not as
experienced in this type of study. There were 8 criteria having to do with qualifications
and cost.
P. Lem said the Council Policy on consultants has 6 criteria of which cost is not a
factor. The policy should be considered with the objective of best qualified. M. Bell
stated EES was the best qualified despite that they were the lowest cost.
D. Stanton said that the lowest bidder is not always the best choice and staff must look
at the qualifications of the consultants.
E. Aghjayan added that price is never ignored. The selected firm was the best qualified
and at the fairest and most reasonable cost.
D. Stanton said that one thing for staff to make its own cost estimate before the RFP and
then staff can make sure the project is in line with the estimate.
T. Kirker added that since staff is using SCE as the base and since the residential rates
are 29 % lower it will be interesting to see what effect the marginal study will have on
those rates.
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T. Kirker moved approval of the Electric Cost -of- Service Studies and Electric Rate
Design Consulting Agreement as stated in the staff report dated June 1, 1996. W.
Wiseman seconded. MOTION CARRIED 5 -0. 1 ABSTENTION. 1 ABSENT.
5. STATE AND FEDERAL LEGISLATIVE & REGULATORY UPDATE
(INFORMATION ONLY. NO ACTION REQUIRED)
D. Stanton said staff had asked to continue this item to the next meeting.
6. AGENDA ITEMS FOR NEXT MEETING (INFORMATION ONLY.
NO ACTION REQUIRED)
E. Aghjayan proposed that the next meeting scheduled for July 18 (due to the July 4
holiday) be canceled since there are no pressing agenda items and move to the following
scheduled meeting of August 1, 1996. D. Stanton polled the Board members and with
no objections all agreed to move to the next regularly scheduled Board meeting of
August 1, 1996.
For the August 1 meeting agenda, staff proposes to bring to the Board: Electric Industry
Restructuring update and presentation, Thermal Energy Storage Program, information
on the Imperial Irrigation Water Transfer and the Water Replacement Program, and the
Legislative and Regulatory Update.
7. ITEMS BY SECRETARY (INFORMATION ONLY. NO ACTION REQUIRED)
E. Aghjayan stated that recently there were two significant outages in the downtown
area, one interrupting the Council meeting in consideration of the Stadium /Disney
agreement. Staff has an aggressive program in place to address these outages and
service problems in the area. Also, there is a major replacement program in place for
the failed direct buried underground cable which was addressed in the budget. This
refers to cable that was installed underground 15 years ago that has failed due to
corrosion to the system and must be replaced.
Also, the City's Economic Development program was successful in attracting L.A.
Cellular to Anaheim which will bring 700 jobs initially to the City and 900 jobs by the
end of the year. They will be a significant electric customer and staff is working with
them on an Economic Development Rate. They are also interested in the fiber optics
program.
8. ITEMS BY BOARD MEMBERS
R. Lawson commended staff on the hard work on the budget.
P. Lem stated that the Board has the duty to consider the annual budget during its
presentation according to City Charter and feels that the Board was not involved in the
budget preparation so he is interested in learning what went into the preparation in order
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to make the recommendations of the budget. E. Aghjayan stated that staff presents the
budget to the Board at two different meetings before it is recommended to the City
Council and this is considered part of the preparation since the Board makes
recommendations to staff during those meetings. It is up to the Board to decide the
number of meetings it would like on the budget to be more involved in the earlier
processes. If P. Lem feels there is a violation to the City Charter then he should outline
this in memorandum writing to the City Attorney. The Department follows the same
procedure that has been customary in the City for many years and if the Board wishes to
spend more time on the budget then staff will arrange additional meetings or workshops.
The Board as an advisor reviews and reacts to what staff presents rather than being
involved in the actual preparation, the Board has the right to amend the
recommendations and staff will respond.
D. Stanton noted that the City hires competent people to prepare the budget and every
year the budget has been reduced and feels that the Board should challenge staff on
proposed budget items and not help in its preparation. D. McMillan said he reviews the
larger budget line items such as, operation costs and power purchases to see if staff is
doing a good job in reducing these and the impact on the bottom line. W. Wiseman
added that the Board as an advisory group should participate by reviewing and
recommending the budget and not actually preparing the budget.
T. Kirker requested an update on stranded investment with respect to electric industry
restructuring. E. Aghjayan said that the next workshop to City Council will be on the
subject of stranded investment.
9. ADJOURNMENT (NEXT REGULAR MEETING: AUGUST 1. 1996)
W. Wiseman moved approval to cancel the July 18, 1996 Board meeting and adjourn to
the August 1, 1996 Board meeting at 3:30 p.m. and D. McMillan seconded the motion.
MOTION CARRIED 6 - 0. 1 ABSENT.
Respectfully submitted,
Fg
Edward K. A .. jayan
Secretary, Public Utilities Board
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