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90-271 RESOLUTION NO. 90R-271 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM AMENDING RATES, RULES AND REGULATIONS FOR THE SALE AND DISTRIBUTION OF ELECTRIC ENERGY AS ADOPTED BY RESOLUTION NO. 71R-478 AND MOST RECENTLY AMENDED BY RESOLUTION NO. 89R-392. WHEREAS, the City of Anaheim maintains an electric generation and distribution system for the furnishing of electricity to residents and inhabitants of the City of Anaheim and has adopted Electric Rates, Rules and Regulations for the sale and distribution of electric energy; and WHEREAS, the Public Utilities Board held a public hearing on July 12, 1990 and evidence was presented in connection with the proposed revisions of Electric Rates, Rules and Regulations; and WHEREAS, the Public Utilities Board considered the California Environmental Quality Act and made the following findings: 1. The largest single expenditure category during the period of July 1, 1990 through June 30, 1991 is power supply at an estimated $151,728,000, excluding the cost of surplus power. 2. Other operating expenses and capital expenditures are estimated to cost $72,296,000. 3. Debt service requirements and an increase in reserve amounts estimated to cost $25,273,000 are required to meet financial reserves and requirements. 4. The transfer to the General Fund in an amount estimated to be $7,868,000 is authorized by the city Charter and constitutes an Intra-City transfer. 5. The decrease in working capital of $2,922,000 is required to meet the Utility's operating and capital expenses. 6. The matters covered in 1 through 6 above come within Section 21080 (b) (8) of the Public Resources Code of the State of California. Thus the establishment of these rates is exempt from the California Environmental Quality Act. WHEREAS, a Notice of Hearing was published as follows: 1. On June 29, 1990, notice of the public hearing on electric rates was published in the Anaheim Bulletin and proof thereof is on file with the Secretary of the Public Utilities Board. 2. On June 29, 1990, notice of the public hearing on electric rates was published in the Orange County Register and proof thereof is on file with the Secretary of the Public Utilities Board. 3. On June 29, 1990, notice of the public hearing on electric rates was published in the Orange County Edition of the Los Angeles Times and proof thereof is on file with the Secretary of the Public Utilities Board. WHEREAS, the Public Utilities Board has considered the proposal of the Public Utilities Department and has considered the evidence presented at the public hearing; and RESOL WHEREAS, the Public Utilities Board has considered a deoommissioning cost estimate for the San Onofre Nuclear Generating Station ("SONGS"), including the estimated service life of SONGS and estimated retirement date of all nuclear facilities; and WHEREAS, in connection with this electric rate proceeding, the Public Utilities Board has reviewed the information on the costs of decommissioning SONGS; and WHEREAS, the Public Utilities Board has made the following findings with respect to the need for changes to the Electric Rates, Rules and Regulations: 1. The Electric System revenue requirement of the Anaheim Public Utilities Department has been established, as set forth below, on the basis of projections for the 1990-91 fiscal year consisting of the twelve months July 1, 1990 through June 30, 1991. 2. The estimated service life of SONGS is thirty years and the estimated retirement date is October 18, 2013. 3. The decommissioning cost estimate for SONGS is $639,700,000 (1988 dollars) of which the city of Anaheim's share is 3.16%. 4. A reasonable estimate of the revenue requirement for power supply costs for the 1990-91 fiscal year is $154,391,000 including the cost of surplus power, as shown in Exhibit MAB-1. 5. A reasonable estimate of the revenue requirement for other operating expenses for the 1990-91 fiscal year is $27,640,000 as shown in Exhibit MAB-1. 6. A reasonable estimate of the revenue requirement for capital expenditures for the 1990-91 fiscal year is $44,656,000 including $23,721,000 for construction of the Combustion Turbine Project, as shown on Exhibit MAB-1. 7. A reasonable estimate of the revenue requirement for debt service and reserve build-up for the 1990-91 fiscal year is $25,273,000 as shown in Exhibit MAB-1. 8. A reasonable estimate of the revenue requirement for transfer to the General Fund for the 1990-91 fiscal year is $7,868,000 as shown in Exhibit MAB-1. 9. A reasonable estimate of the revenue requirement for a decrease in working capital for the 1990-91 fiscal year is $2,922,000 as shown in Exhibit MAB-1. 10. A reasonable estimate of the revenue requirement offsets due to other electric revenues, bond proceeds, sale of surplus power, interest, and other income for the 1990-91 fiscal year is $48,572,000 as shown in Exhibit MAB-1. 11. A reasonable estimate of the revenue requirement for decommissioning costs for the 1990-91 fiscal year is $1,724,000. 12. It is appropriate to include decommissioning costs in the utility rates charged to all customers. 13. An estimated revenue requirement of $208,334,000 as set forth below, is appropriate for the 1990-91 fiscal year: RESOL REVENUE REQUIREMENT ITEM CASH-FLOW BASIS Power Supply Costs $154,391,000 Other Operating Expenses 27,640,000 Capital Expenditures 44,656,000 Debt Service and Reserve Build-Up 25,273,000 Transfer to General Fund 7,868,000 Change in Working Capital (2,922,000) Less: Other Electric Revenues, Surplus Sales, Bond Proceeds, Interest and Other Income (48,572,000) Total Revenue Requirement $208,334,000 14. It is appropriate to perform a cost-of-service study in order to determine the allocated revenue requirement for the 1990-91 fiscal year for the following customer classes: Residential, Small Commercial, Large Commercial, Industrial, Agricultural and Pumping, Street Lights and Municipal. 15. It is appropriate to provide Anaheim's electric customers with stable rates and this is best accomplished at this time by setting the base rates as described in the testimony of Mr. Bell and Ms. Hoffman. These rates result in annualized base rate revenue of $208,977,000. The customer class base rate revenue requirements as determined on the basis of the cost-of-service analysis are shown in Exhibit RHH-1 and are appropriate: ALLOCATED ANNUALIZED REVENUE REQUIREMENT Customer Class Cost-of-Service Basis Residential $49,462,000 Small Commercial 12,824,000 Large Commercial 50,665,000 Industrial 89,421,000 Agricultural and Pumping 1,719,000 Street Lights 149,000 Municipal 4,737,000 Total $208,977,000 16. Section 1221 of the City Charter provides that utility rates charged to a class of consumers shall be uniform within the class and shall be based on cost of service for the class. Section 1221 also provides that lifeline rates may be established which would not necessarily be based on cost of service. 17. It is appropriate to phase in rate changes to bring class revenues to their cost-of-service levels when one time changes would be burdensome to a particular customer class. The Department intends to bring rates in line with cost of service over the next two rate 18. The California Public Utilities Commission has established baseline rates for Southern California Edison Company (Edison) and Edison is the retail supplier of electric service in all the communities surrounding Anaheim, and therefore, it is appropriate to establish residential lifeline rates for Anaheim. RE$OL 19. To the extent that the Anaheim lifeline rates produce lower revenues than would be produced by rates based on cost of service, the rates charged for nonlifeline sales must be increased above the level of rates based on cost of service. The difference between the revenues from sales made at the lifeline rates and revenues from those sales made at cost-of-service rates is the lifeline shortfall. 20. In allocating the lifeline shortfall to the nonlifeline customers, it is appropriate to give consideration to both cost of service and the retail rates of Edison. 21. On the basis of the preceding finding, the class revenues under the proposed base rates as shown in Exhibit RHH-2 are reasonable and appropriate. Proposed Base Rate Revenues Revenues as a % of At Proposed Revenues Based on Customer Class Base Rates Cost-of-Service Residential: Lifeline $20,328,000 65.9 Nonlifeline 28,182,000 151.3 Total Residential $ 48,510,000 98.1 Small Commercial $ 11,780,000 91.9 Large Commercial 51,192,000 101.0 Industrial 90,918,000 101.7 Agricultural & Pumping 1,678,000 97.6 Street Lights 209,000 140.3 Municipal 4,690,000 99.0 Total $208,977,000 100.0 22. It is appropriate that the Rate Stabilization Account (RSA) be established as a means of providing more stable retail electric rates for the customers of the City's Electric Utility. It is appropriate to temporarily stop the rate stabilization program when there are no funds remaining in the RSA. Likewise, it is appropriate to resume the program when refunds are received from Edison. The Stabilization Rate may still remain in effect despite the temporary discontinuance of the program. 23. It is appropriate that the Power Cost Adjustment (PCA) mechanism be kept as an emergency procedure to hedge against sudden and unforeseen changes in power supply costs. Generally, power supply costs will be recovered through application of the base rate. In the event that substantial changes in projected power supply costs occur, either as an increase or decrease, the Power Cost Adjustment Billing Factor will be activated to ensure that the Department charges appropriately for electric service. When activated, the Billing Factor will remain in effect until the next base rate change or until a revision to the Billing Factor is necessary. At the time of a base rate change, the power supply costs recovered through the Billing Factor will be included in base rates and the Billing Factor will be deactivated and returned to zero. Continuation of this mechanism would enable the Department to take rapid rate action in order to protect its financial stability. RESOL WHE~AS, based on the findings hereinabove made, the Public Utilities Board of the city of Anaheim recommends to the City Council that the Council adopt the findings of the Public Utilities Board with respect to the matters contained herein and ado~ the changes to the Electric Rates, Rules and Regulations as shown in Exhibit ~H-3. WBE~AS, the City Council has considered the evidence and concurs with the findings of the Public Utilities Board as set forth hereinabove and determined a need to change Electric Rules 11, 14, 19, 20 and 23. NOW, TEE~FO~ BE IT ~SOL~D that the findings of the Public Utilities Board be, and they are hereby, adored by the City Council of the city of Anaheim. THE FORGOING RESOLUTION is approved and adopted by the City Council of the City of Anaheim on this24th day of July , 1990. MAYOR~~OF T~ CITY~ ATTESTt t ~ fiESOL CLERK STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF ANAHEIM ) I, LEONORA N. SOHL, 0ity Clerk of the City of Anaheim, do hereby certify that the foregoing Resolution No. 90R-271 was introduced and adopted at a regular meeting provided by law, of the City Council of the City ef Anaheim held on the 24th day of July, 1990, by the following vote of the members thereof: AYES: COUNCIL MEMBERS: Ehrle, Daly, Kaywood, Pickler and Hunter NOES: COUNCIL MEMBERS: None ABSENT: COUNCIL MEMBERS: None AND I FURTHER certify that the Mayor of the City of Anaheim signed said Resolution No. 90R-271 on the 25th day of July, 1990. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City of Anaheim this 25th day of July, 1990. ~.CITY CLERK OF THE ANAHEIM (SEAL) I, LEONORA N. $OHL, City Clerk of the City of Anaheim, do hereby certify that the foregoing is the original of Resolution No. 90R-271, duly passed and adopted by the Anaheim City Council on July 24, 1990.