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City Light Rate Adjustment
Effective May 1, 2010
Rate ordinance 123260 establishes rules for the operation of the Rate Stabilization Account (RSA) within the Light Fund established by Ordinance 121637.
In 2009, City Light budgeted for about $142 million in net wholesale revenue. The actual amount received was $68 million. The April forecast for 2010 also shows an anticipated shortfall of about $90 million relative to the approved budget forecast of $120 million. These shortfalls result both in significant disruption in City Light’s program planning and performance, negatively impacting its service to customers, and in erratic and reactionary changes in rates.
The ordinance seeks to minimize the impact of uncertain wholesale revenue on the utility and its customers by establishing a buffer to absorb the shocks. The utility may use the account when revenues are down relative to the budget forecast, thus stabilizing its financial situation. Conversely, when revenues exceed budgeted amounts, the excess revenue will be added to the RSA.
The legislation also provides for automatic rate surcharges as a corrective when the fund reaches certain thresholds. This allows for a more orderly adjustment of rates to volatility in revenues.
The thresholds are:
- Whenever the amount in the RSA is $90 million or less, City Light will impose a surcharge equal to 1.5% of base rates at the earliest opportunity. The proceeds from the surcharge will be deposited into the RSA. The surcharge will remain in effect until the amount in the RSA reaches $100 million and will be removed at the earliest opportunity thereafter.
- Whenever the amount in the RSA is $80 million or less, City Light will impose an additional surcharge equal to 1.5% of base rates at the earliest opportunity. The proceeds of the additional surcharge will be deposited into the RSA. The additional surcharge will remain in effect until the amount in the RSA reaches $90 million, and will be removed at the earliest opportunity thereafter.
- Whenever the amount in the RSA is $70 million or less, City Light will impose an additional surcharge equal to 1.5% of base rates at the earliest opportunity. The proceeds of the additional surcharge will be deposited into the RSA. The additional surcharge will remain in effect until the amount in the RSA reaches $80 million, and will be removed at the earliest opportunity thereafter.
City Light will notify the Mayor and the Council in writing of its intent to impose a surcharge under these provisions. In the event the RSA balance falls below $50 million, the ordinance requires a rate review to determine a course of action to replenish the RSA to $100 million within 12 months.
To assist in initial funding of the RSA, a rate surcharge of 4.5% will go into effect on May 1, 2010. The RSA will become fully functional on January 1, 2011.
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