AGENDA MEMORANDUM

MEETING DATE:   May 14, 2007

FROM:                       Bill Pfeilsticker, Finance Director

SUBJECT:                  Ordinance amending Section 22-196 (1) Rate sSchedule RS, rResidential Sservice, (2) Rate Sschedule GS, Ggeneral sService, nNon-demand, (3) Rate sSchedule GSD, gGeneral sService, dDemand, (4) Bulk pPower cCost aAdjustment.

Staff Recommendation:

Staff recommends Aapproval of ane ordinance amending Section 22-196 (1) Rate sSchedule RS, rResidential sService, (2) Rate sSchedule GS, gGeneral sService, nNon-demand, (3) Rate sSchedule GSD, gGeneral sService, dDemand, and (4) Bulk pPower cCost aAdjustment

Analysis:

Based on recommendations received in the electric and gas rate study performed in 2004, the City implemented an automatic annual rate adjustment based onusing the Gross Domestic Products Implicit Price Deflator Index (GDP) provided by the Bureau of Economic Analysis. Cost increases for raw materials such as copper and oil have caused prices to outpace this index for renewal and replacement items such as wire, conduit, transformers and other copper and petroleum based commodities. In addition, salaries and other operating costs have increased at rates higher than the inflation index to keep pace with inflation and competition. Management has begun research to determine if the GDP index is the appropriate index to be using for our needs.

Staff has determined that an immediate increase of 8% for all rate classes will provide correction to the rate compression suffered as a result of the deficiency between the GDP index and actual inflation. The 8% increase will only affect the customer charge, energy rate, and one of three components of the fuel cost adjustment. Therefore, the customer will only experience a net increase of 3% to 5%.

Because the proposed increase is an equal rate to for all customer classes and does not cause change to rate structure between customer classes, Florida Public Service Commission (PSC) does not have jurisdiction over this change, thereforeso a detailed rate study will not be required. The new rates presented in the ordinance will be forwarded to the Public Service Commission (PSC) in the form of tariff sheets.  After the PSC assures that we are not changing rate structure and approves the revised tariff sheets, the ordinance will be presented to the City Commission for second reading and approval.

City staff will soon recommend, by a later resolution tohat the City cCommission, that a new rate study for gas and electric rates to correct inadequate energy rates compared to energy costs in some customer classes.

Options:        

1. Approve ordinance amending the Code of Ordinances Section 22-196, subsections 1-5, electric rate schedules including bulk power cost adjustment, or

2. Such alternate action as the Commission may deem appropriate.

Fiscal Impact: 

This change will result in an additional $_4,794,128__________$4,794,128 in revenue across all classes and provide for future expenditures anticipated in fiscal year 2008.

Submission Date and Time:    5/11/2007 1:48 PM5/8/2007 9:18 AM5/7/2007 1:49 PM5/7/2007 8:33 AM____

Department: ______________________ Prepared by:  ______________________                      Attachments:         Yes____   No ______ Advertised:   ____ ______ Dates:   __________________________                      Attorney Review :       Yes___  No ____ _________________________________            Revised 6/10/04

Reviewed by: Dept. Head ________ Finance  Dept. __________________                                    Deputy C.M. ___________________                                          Submitted by: City Manager ___________________

Account No. _________________ Project No. ___________________ WF No. ______________________ Budget  ______________________ Available _____________________