Public Utilities 1995/12/07 r
FE3 G L 2 ai
PUBLIC UTILITIES BOARD r . ;.
MINUTES {'
DECEMBER 7, 1995
The agenda having been posted on Friday, December 1, 1995, the Regular Meeting of the Public
Utilities Board was called to order by Chairperson Dale Stanton at 3:30 p.m. on Thursday,
December 7, 1995, in the City Hall West, l lth Floor Conference Room, 201 S. Anaheim Blvd.,
Anaheim, California.
Board Members Present: D. Stanton, D. McMillan, T. Kirker, J. White, R. Lawson,
W. Wiseman, P. Lem
Board Members Absent: None
Staff Present: E. Aghjayan, M. Bell, H. Pepper, L. Moses, L. Topaz,
S. Stephens, L. Topaz, M. Long, B. McDonnell, C. Templeton,
G. Broeking, K. Welch, R. Howell.
Guests Present: Jerry Crum, Park Services Manager - Parks, Recreation &
Community Services
1. PUBLIC COMMENTS
Chairperson D. Stanton asked for public comments. There being none, the Public
Comments portion of the meeting was closed.
2. APPROVAL OF THE PUBLIC UTILITIES BOARD MINUTES OF
NOVEMBER 2, 1995
D. Stanton asked for approval of the November 2, 1995, Public Utilities Board Meeting
minutes. E. Aghjayan advised the Board of a correction on page 298, item seven, the year
of Ed Alario's retirement is 1996. T. Kirker asked that the word `overcrowded" on page
297, item five, be changed to `overloaded ". J. White moved approval of the November 2,
1995 minutes with the stated revisions. D. McMillan seconded the motion. MOTION
CARRIED 7 -0. NONE ABSENT.
E. Aghjayan introduced Henry Pepper, the new Assistant General Manager - Water
Services.
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3. CITY PARK IRRIGATION MODERNIZATION PROJECT
M. Long gave a presentation on the proposal to implement a City Parks irrigation
modernization project that will replace the outdated irrigation systems in two City parks
and 46 landscaped parkways and median islands and provide water audits of each park.
The project will save an estimated 41 million gallons of water annually through the use of
Calsense computerized irrigation controllers in the parks and Hydromanager systems in
the landscaped medians and parkways. Project funding will be shared by Metropolitan
Water District (MWD) (50 percent), United States Bureau of Reclamation (40 percent),
and the City's Parks, Recreation, and Community Services Department (10 percent). The
Parks Department will realize a net present value savings of over $350,000 in 1995
dollars, in reduced water bills over a 10 -year period.
D. McMillan asked when the installation would be completed and staff replied it would
take one year to complete the installation of the systems.
D. Stanton asked for an explanation of the two different types of irrigation systems. J.
Crum from the Parks Department stated that the Calsense computerized irrigation
controllers with moisture sensors will be strategically located throughout the 20 targeted
parks and wired back to a controller. The Hydromanager systems will be installed in 46 of
Anaheim's landscaped parkways and median islands and use moisture sensing probes,
utilizing existing valve wires to transmit signals to moisture level adjustment controls
mounted at existing controllers. Key personnel from the Parks Department will attend
MWD training sessions to assist them in ensuring that the systems operate at maximum
efficiency. A consultant will perform water audits of each park to identify deficiencies in
design and /or equipment and will make recommendations to correct those deficiencies.
Additional savings will be realized through retrofits that are identified as part of the park
water audits.
P. Lem asked why the different parks have such a wide degree of varying amounts of
water saved. J. Crum stated that with five different Parks Supervisors in charge of their
own irrigation programs, this causes a difference in interpretation as to how much a park
needs watering. The estimated savings was based on the metered water use history for
each park, with a consistent future moisture level maintained in all the parks. The
computerized systems already installed in some of the parks has proven to save
approximately 30 percent each year.
T. Kirker pointed out that each park also varies in how much green areas each has, how
many baseball diamonds and basketball courts, etc. In addition, past landscaping of parks
did not make full use of drought tolerant turfs and vegetation.
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P. Lem stated that page 4, number 13 of the agreement states that Anaheim will be
charged a penalty of 1/2 percent of the total amount if payment is received by MWD more
than thirty days after the due date. P. Lem felt that if the City pays early, then it should
receive a discount of 1/2 percent of the total for early payment and suggested staff
negotiate with MWD to include this.
E. Aghjayan explained that MWD must pay its contractor on time and by including a late
payment penalty, MWD is just covering its expense if the City were to pay late. The
payment of the invoice is for services already rendered.
T. Kirker advised P. Lem that the agreement includes the same standard language on late
payment penalty fees that is included in the majority of all City contracts.
W. Wiseman moved approval of the City Park Irrigation Modernization Project as stated
in the staff report dated December 7, 1995. J. White seconded the motion. MOTION
CARRIED 6 -1. P. LEM VOTED NO. NONE ABSENT.
4. CHANGE TO RATE STABILIZATION ACCOUNT STABILIZATION RATE
G. Broeking advised the Board that at the August 4, 1994, PUB meeting, a staff report
discussing plans for the Rate Stabilization Account (RSA) drawdown for Fiscal years
1993/94 through 1998/99 was presented. The RSA Stabilization Rate was temporarily
increased on January 2, 1995, primarily to cover the shortfall resulting from the City's
right -of -way (ROW) Fee which was implemented on July 1, 1994. The August 1994 staff
report noted that the RSA Stabilization Rate could be lowered from 1.204 cents per kwh
to .6143 cents in January 1996 and gradually decrease annually thereafter. The proposed
rate decrease would allow approximately the same amount of money to be transferred
from the RSA in fiscal 1995/96 as was transferred in fiscal 1994/95, which would be
sufficient to cover the right -of -way fee. The rate decrease will extend the life of the RSA
Account to fiscal year 1999/00, allowing the Department a longer planning period during
which to mitigate the rate impacts associated with exhausting the RSA. The Department
plans to continue seeking cost cutting opportunities and will look at the RSA Stabilization
Rate again in one year to determine whether the rate can continue to decrease annually as
projected.
D. Stanton asked if the dollar amounts in the forecast of the annual drawdown on page 2
of the staff report was derived from the RSA Rate shown each year.
G. Broeking replied that based on the kilowatt hours, the drawdown is actual dollars that
the Department expects to transfer. At the end of each month, staff takes the kilowatt
hours sold, times the RSA Rate which yields the dollar amount of the transfer out of the
RSA into the revenues.
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•
D. McMillan explained that the drawdown is physically in a calendar year and the rates are
in fiscal years.
W. Wiseman asked if the Department should consider increasing the standard rates each
year instead of changing the RSA rate because when the RSA is depleted, the rates will no
longer be subsidized by this account and it will be necessary to have a large rate increase
to the customers. M. Bell replied the Department plans to reduce the RSA rate gradually
over time so that by the year 2000, customers will not be faced with a large rate increase.
Over the last few years, the Department has been working towards reducing rates, instead
of raising them and this trend should continue in the future years through cost cutting
efforts.
D. McMillan moved approval of the Change to the RSA Stabilization Rate as stated in the
staff report dated December 7. 1995. T. Kirker seconded the motion. MOTION
CARRIED 7 -0. NONE ABSENT.
5. PROPOSED AMENDMENT TO THE ELECTRIC & WATER RATES, RULES &
REGULATIONS
G. Broeking gave a presentation explaining that Rule No. 17 of the Electric and Water
Rates, Rules and Regulations requires that the Utilities Department correct bills back to
the date for which an overcharge or undercharge may be reliably established. For
undercharges, the Department must back bill single - family domestic service for 12 months
and all other services for 24 months. As Rule No. 17 is currently written, the Department
does not have the flexibility to review these undercharge errors on a case -by -case basis.
The proposed amendment would allow flexibility in the recovery of funds from customers
for errors made by the Department through no fault of the customer. Billing errors may
include incorrect meter reads or clerical errors by staff such as applying the wrong rate,
wrong bill factor, or an incorrect calculation. With the amendment to Rule No. 17, the
General Manager would have the authority to exercise his judgment in unusual cases and
limit the back billing to 12 months for all customers.
D. Stanton asked why the undercharges and overcharges are treated differently on the
number of months allowed for back bills. G. Broeking replied that he felt it was fairer to
the customer to limit the undercharge back billing to 12 months because it was the
Department's error that the customer was undercharged.
D. McMillan asked if the unusual billing error cases went undiscovered for a long period
of time and G. Broeking replied affirmatively.
T. Kirker stated that the new CIS System will have the ability to identify any unusual
discrepancies and the errors will be detected and corrected immediately.
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W. Wiseman suggested that exceptions to the Rule be brought before the Board if they are
over a certain dollar amount. J. White stated that the General Manager's good judgment
should be sufficient without bringing it before the Board for approval.
P. Lem distributed a recommended addition, paragraph D (Attachment A), to the Rule
No. 17 amendment that he and R. Lawson had prepared.
L. Moses advised P. Lem and R. Lawson that the existing Rule No. 10 refers to their
suggested addition. Adding this paragraph to the proposed change to Rule No. 17 would
be redundant. The change to Rule No. 17 is necessary, separate from Rule No. 10,
because Rule No. 17 currently states that the Department shall back bill, without any
flexibility to unusual cases. Rule No. 10 only applies when a customer wishes to dispute a
situation.
P. Lem asked why there is a two percent fast or slow meter test discrepancy allowed on
electric meters and three percent or more allowed on water meters instead of having a
consistent standard for water and electric meters. P. Lem asked if the Department tests
all meters that are installed
T. Kirker advised P. Lem that when residential meters are delivered to the meter shop, the
contract states that all the meters shall be within two percent plus or minus. There is a
sample test taken of 10 percent of the delivered meters to test accuracy. If any of the
meters fail to meet this standard, then all of the delivered meters are tested. There is an
extensive meter testing program in the Department's meter shop. In addition, an electrical
watt hour ,eter can be adjusted, whereas water meters cannot be adjusted. That is why
there is a difference in allowable discrepancies. E. Aghjayan stated that electric and water
meters differ in the manufacturer's guarantee of accuracy.
D. Stanton suggested to P. Lem that he contact the meter shop staff if he has further
concerns.
D. Stanton asked for a motion to approve the amendment to Rule No. 17 as stated in the
staff report of December 7, 1995.
P. Lem moved that Rule No. 17 have his and R. Lawson's paragraph D included in the
amendment to Rule No. 17. THE MOTION DIED FOR LACK OF A SECOND.
P. Lem moved that Rule No. 17 be amended to allow two percent fast or slow for both
water and electric meters. THE MOTION DIED FOR LACK OF A SECOND.
D. McMillan moved approval of the proposed amendment to Rule No. 17 as stated in the
staff report dated December 7, 1995. T. Kirker seconded the motion. MOTION
CARRIED 6 -1. P. LEM VOTED NO. NONE ABSENT.
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6. UPDATE ON THE MEAD - PHOENIX TRANSMISSION LINE (INFORMATION
ONLY, NO ACTION REQUIRED)
L. Topaz gave an update on the Mead - Phoenix transmission line per J. White's previous
request. The Mead - Phoenix and Mead - Adelanto transmission lines were authorized by the
Board and the City Council in 1991 and have been under construction since. The
anticipated completion date is February 1996. A map of the Western Systems
Coordinating Council transmission projects was shown and L. Topaz explained how the
Department obtains power for Anaheim. Although the Whispering Ranch property
acquisition issues in Arizona have cost Anaheim more than originally projected, the whole
project is still a good investment for the City. Anaheim's participation in Mead - Phoenix is
5 percent at 1300 megawatt capacity and Mead - Adelanto is 9 percent with 1200
megawatt capacity.
J. White inquired if the transmission that was supposed to come to Marketplace from the
Northwest was still expected to take place. L. Topaz replied that the project will probably
still take place, but is currently on hold until the industry restructuring impacts are defined.
7. TELECOMMUNICATIONS UPDATE (INFORMATION ONLY, NO ACTION
REQUIRED)
E. Aghjayan informed the Board that the next Telecommunications Policy Advisory
Committee (TPAC) meeting is scheduled for December 21, 1995. Currently, staff and
outside consultants are evaluating SpectraNet's revision to its proposal. Staff made a
recommendation for firmer financial guarantees from ICS and SpectraNet before pursuing
due diligence. ICS has not presented further financial guarantees. SpectraNet has
proposed total private financing to eliminate any risks to the City in the case of revenue
deficiencies. Staff has additionally reviewed an expanded proposal from ICG Access as a
backup in the event SpectraNet's revised proposal does not meet the guiding principles
approved by the City Council.
8. AGENDA ITEMS FOR NEXT MEETING (INFORMATION ONLY, NO ACTION
REQUIRED)
E. Aghjayan stated that the following items are proposed for the next PUB meeting on
January 4, 1996:
- Proposed Rules of Order for the PUB
Results of RFP's for Short-term Capacity Purchases
- Bad -Debt Write -Off Quarterly Update
P. Lem distributed a five page list of questions (Attachment B) that he and R. Lawson
would like addressed. E. Aghjayan suggested that staff can meet with P. Lem and R.
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Lawson to answer the more definitive questions or agendize a workshop session. The
Board, as a whole, can decide if the items should be agendized considering the extensive
amount of time involved in answering the questions.
D. McMillan agreed that if the majority of the Board felt some of the questions were
worth pursuing, then those items could be agendized; otherwise the Board should vote to
not spend staff's time answering them.
D. Stanton stated that each question could be evaluated as to whether it was worth
pursuing.
D. McMillan did not feel it was appropriate for staff to pursue answers to P. Lem and R.
Lawson's questions, particularly if it represents a potential yield of a penny, just to keep
staff busy. With staff responding to the Board's requests to reduce staff over the last five
years, it is not feasible to ask staff to spend hundreds of hours pursuing answers to
questions without expecting additional staff be added to deal with these questions.
Analysis and reports take a lot of staff time and should definitely be worth the time spent.
The Board has taken an informal stance in the past that certain operating procedures and
responsibilities are predominately the responsibility of the General Manager. The Board
looks at policies and implementing practices and policies.
D. Stanton added that issues such as staffing and labor costs are dealt with during the
budget approval process.
E. Aghjayan added that staffing levels are under the responsibility of the City Manager.
Classifications are dealt with in the budget process and can be discussed at that time. Staff
would be glad to give the Rating Agency Presentation to the Board at the next meeting
and discussion of the rate stabilization account can be agendized as well.
T. Kirker commented on the Major Council Updates for November, page three, Electric
Underground Conversion, in which Pacific Bell requested an exemption of all excavation
fees from Anaheim, however Pacific Bell could save money by entering the trenches at the
same time Anaheim is trenching. If Pacific Bell is going to enter the trenches at a later
date, then he feels that Pacific Bell should have to pay the same costs that the Utility has
to pay for right -of -way fees.
E. Aghjayan stated that issue lies with the Public Works Department and it has not
exempted Pacific Bell from the fees.
W. Wiseman asked for a presentation on the Water Supply Outlook at a future meeting.
D. McMillan asked for a presentation on the status of the projects along the Santa Ana
River.
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9. ITEMS BY SECRETARY (INFORMATION ONLY, NO ACTION REQUIRED)
None.
10. ITEMS BY BOARD MEMBERS (INFORMATION ONLY, NO ACTION
REQUIRED)
D. McMillan stated that he was very upset by the recent letters that P. Lem and R.
Lawson had submitted to the City Manager, Mayor and City Council without the Board
members knowledge. He feels that in the past, the Board's relationship with staff has been
on a very high level of integrity and trust and if a Board member asked a question of staff
then staff was given the opportunity to respond. The Board members did not go to the
Mayor and City Manager to provide input on information and blind side the other Board
members and staff.
P. Lem responded that the letters sent to the City Manager and Mayor contained questions
that he felt Mayor Daly had instructed the new commissioners to pursue in their duties.
The questions were specific to them that would help himself and R. Lawson become better
oriented or trained. It was not intended to be disrespectful of the other Board members.
Since P. Lem felt that the new commissioners were asked by the City Manager, Mayor,
and Attorney Jack White to pursue questions such as these, he felt it was appropriate to
correspond with them, not the Board members.
D. McMillan said that he did not feel that department consolidation or major budgetary
concerns should be addressed with the Mayor prior to discussing the issues with the Board
and staff. •
T. Kirker agreed with D. McMillan's comments to P. Lem and R. Lawson, adding that he
was present at the orientation for the new commissioners and he did not hear the Mayor
instruct P. Lem or any other commissioners to pursue the type of questioning that was in
the letters. T. Kirker felt that the Mayor was talking generally and that the commissioners
should go to their respective staff and ask for information from them. The Mayor and
City Manager should not be contacted for information unless staff cannot answer
questions for them. Questions should be directed to staff in the Utilities Department.
D. Stanton circulated a letter that he had received from T. Kirker (Attachment B) and a
letter D. Stanton sent to P. Lem (Attachment C) with regard to P. Lem's letter to the City
Manager, Mayor and Council regarding benefits, etc. D. Stanton and the other Board
members were very upset that P. Lem and R. Lawson, after only attending four Board
meetings and without having been through a budget review process, would take incorrect
numbers and circulate them to City Council members without even copying the other
Board members. P. Lem and R. Lawson should investigate questions with the Utilities
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staff first and then, if they are not satisfied, they can publish the letters. The staff are the
ones that know the correct figures and the new Board members will see that at the budget
review time.
P. Lem replied that the figures he used in the letter were taken from the budget that was
received from the City Manager's office.
E. Aghjayan advised P. Lem and R. Lawson that the City Manager had instructed him to
respond to their letter and it is being sent at this time. If P. Lem or R. Lawson has other
questions on the budget figures they could ask staff to respond to them. The issue
regarding privatization should be addressed at the Board meetings.
11. ADJOURNMENT (NEXT REGULAR MEETING: JANUARY 4, 1996)
J. White moved adjournment of the meeting at 5:30 p.m. T. Kirker seconded the motion.
MOTION CARRIED 7 -0.
Respectfully submitt - • ,
Edward K. g jy an
�a
Secretary, ' •lic Utilities Board
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CITY OF ANAHEIM ELECTRIC RATES. RULES Attachment A
Utilities Financial Services AND REGULATIONS
201 S. Anaheim Blvd. Page No. :i.1 7 .1
..naheim, CA 92805
RULE NO. 17
METER TESTS AND ADJUSTMENT OF BILLS FOR ERRORS
A. TESTS
B. ADJUSTMENT OF BILLS FOR METER ERROR
C. ADJUSTMENT OF BILLS FOR UTILITY ERROR
proposed paragraph amendment addition to Rule No. 17
D. DISPUTED BILLS FOR UTILITY SERVICES
1. Due Process. A customer (ratepayer) shall have the right of due process
law to resolve any adjustment of bills for meter error. than
2. Hearing Board. Acustomer (ratepayer) may, notice of not
Board estab
thirty (30) days, request a public hearing fore a
according to Subsection .080 of Section 1.04.730. Powers and Duties, of
Anaheim Municipal Code 1.04.700, Public Utilities Board.
3. Appeal. If the disputed bill for utility service is not resolved, the customer
(ratepayer) and/or the Public Utilities General goal Manager Eager shall have, the right
to the due process recourse (appeal) to
Issued by Edward K. Aghjayan Effective by Resolution No.
Dated
General Manager Superseding Resolution No. 89 -R -361 Dated UM
ATTACHMENT -
November 1 5 , 1995
ur. :ale Stanton
Chairman, Public Utilities Board
:ear :ale:
rece_.ed a letter from Ed Aghjayn with the latest copy of
Paul's and Bob's letter to Jim Ruth, City Manager.
I Feel that this type of correspondence is inappropriate.
Until a Person understands the budget process,
restructuring, downsizing and privatization that has already
taken place in the Utility Department, and that this is an
ongoing process, would ask questions of the staff or other
board members for answers or comments.
Restructuring:
The utilities Department has restructured it's Divisions to
obtain the greatest productivity and cost savings with the
minimum amount of manpower required.
Downsizing:
Downsizing has ocurred through the past years to meet the
needs of the economy, lower electrical rates, and still
maintain the interegity of the electrical system.
Privatization:
Where possible, privatization has taken place in various
Utility classifications. With the complex work preformed by
some classifications, it has been proven that to privatize
some of these functions would not be cost effective. The
quality of work would not be as good as it would be if the
work was preformed by a trained, experienced person who is
very familiar with the Utilities methods and standards. Work
performed by outside contractors /consultants would have to
be carefully scrutinized by an in -house engineer. This
would add to the cost of the job. An outsider may not be as
sensitive to the customer's needs and requests. Poor
customer service could seriously impact the image of the
Utility and City. The City would still need to have
in - house experts on engineering and design to meet all
state, federal and local laws. If, months or years after
installation, a problem developed on a project done by an
outside consultant /contractor, it would have to be followed
up by an in -house utilities person since the consultant may
be far gone. There is a higher degree of accountability
possible when the job is performed in- house. Contractors
and consultants may not have a good understanding of city
policies and how the Utility Departments interface with one
another. Contracts may be awarded to different
contractors /consultants each year. Therefore, we would have
to keep training people.
aTTa�:y`4 NT J
December 5. 1995
Mr Paul A. Lem Mr Robert Lawson
223 E Nyon Avenue 2105 Hammatt Park Way
Anare m CA 92806 Anaheim, CA 92805
Dear Paul and Rocert
I have received a copy of your undated letter sent to Mr. Ruth, City Manager with copies to ail
Council members. I have no problem with the letter. except the last paragraph which deals with
Public Utilities Department. In this case. a copy should have been sent to the Chairman of the
PUB Board and /or a copy to the Public Utilities General Manager.
My investigation indicates that neither of the signers of the letter contacted the Utilities department
staff to obtain correct information. The characterization that the Public Utilities Department is
losing $8 -9 million annually based upon the budget analysis in your letter is inaccurate and
misleading. Your representation contained in this letter to unbalanced budgets is also incorrect
You seemed to have selectively chosen numbers from the 1995196, 1996/97 Annual City of
Anaheim Budget report which do NOT include existing fund balances. These existing fund
balances are $109,266,000 and $101,335,000 for 1966 and 1997 respectively. Many of the
Utilities capitol improvement projects are funded by borrowed funds which carry across fiscal
years due to the long -term nature of these construction projects. These borrowed funds are later
paid back over the useful life of the assets that were financed. Generally this is over a 20 to 30
year time frame. The budgets for the Utilities Department are always in balance and revenues are
always sufficient to meet all operating costs, debt payments, general fund transfers and provide
for sufficient liquidity to meet all ongoing bond covenants and financial obligations.
Furthermore, if you had examined the audited financial statements, you would have found that the
net income for the Water and Electric systems was $7,972,000 and $21,005,000 respectively In
addition, the Department transferred $10,578,000 to the general fund out of retained earnings
Also $9.661.000 was paid to the general fund for administration overhead and direct charges for
services in fiscal 1993/94
The unaudited 1994 /95 financial statements show that the net income for the Water and Electric
system will be $7,614,000 and $26,003,000 respectively. In December, In December the
department will transfer $10,577,000 to the general fund out of retained earnings and also transfer
$3.469 000 in right of - wav fees. The department paid the general fund for administrative overhead
and direct charges for services and another $9,199,000 in fiscal 1994/95. In addition, electric
rates are currently about 11.5% below Edition (25% below for residential customers) - saving
Anaheim rate payers an estimated $25 million annually.
I understand that you are attempting to be helpful and to educate yourselves as new members of
the Public Utilities Board, however, these questions and letters of opinion are taking up a great
deal of staff time and the Board is very selective in questions posed to staff and realize the time
1