Loading...
HomeMy WebLinkAboutResolution - 1525 - Adopt Tariffs - LP&LW - Effective 12_01_1983 - 11_10_1983DGV:cl� RESOLUTION RESOLUTION 1525 - 11/ 9/83 ,. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LUBBOCK APPROVING TARIFFS FILED BY LUBBOCK POWER AND LIGHT AND WATER FILED NOVEMBER 39 19839 AND EFFECTIVE DECEMBER 1, 19839 AND REQUIRING SUCH TARIFFS TO BE FILED WITH THE CITY SECRETARY OF THE CITY OF LUBBOCK. WHEREAS, Lubbock Power and Light and Water has filed an application for a change in tariffs to be effective on the 1st day of December, 1983; and WHEREAS, the City Council finds such tariffs to be reasonable upon consideration of all matters involved; NOW THEREFORE: BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the new tariffs submitted by Lubbock Power and Light and Water on November 3, 1983, are hereby approved and may be implemented effective December 1, 1983; and THAT said new tariffs, which are attached hereto and made a part hereof for all purposes, shall be filed with the City Secretary of the City of Lubbock in accordance with Sec. 9-17 of the Code of Ordinances of the City of Lubbock, Texas. PASSED by the City Council of the City of Lubbock this loth day of November , 1983. ATTEST: Evelyn Gaf ga, City S cr -Treasurer APPROVED AS TO FORM: o d G. Vandiver, y Attorney fZ-c-a 15 4 5 TRANSCRIPTION Item V, City Council Meeting, November 10, 1983 Mayor Henry: Ladies and gentlemen, if I could ask you to take your seats please. We will now take up Item 7. Lee Stafford, Chairman of the Electric Utilities Board will appear to present a recommendation regarding rate adjustments for Lubbock Power and Light, and the Council will consider a resolution to adopt such adjustments. Mr. Stafford. Lee Stafford: Thank you very much your Honorable Mayor Henry and Councilmen and Councilwoman. It's my privilege and pleasure to be here representing Lubbock Power and Light as its Chairman this morning. I believe you've all had a chance to look at our proposed rate structure and discuss that with Mr. McDonald. It's basically a carbon copy of the rate structure submitted to you by Southwestern Public Service except in two instances. One is the condition of service that we would like to say basically with the condition of service that we operate under now and if you have questions in that area I'd like to ask Carroll to come up and the only other exception is we would like to offer a 2% discount to customers -residential customers - that pay their bill within 15 days. It's a very similar situation to what Pioneer Natural Gas now and we feel like that it's a marketing inducement to people here in the community that we can increase the size of our customers by some 5,400 in this next year for ... for the record, this past year we increased our customer base_.by 2,000 customers so we're talking about doubling that but we would like that challenge. We think that we can make that work and certainly it would be very profitable for the utility. We enjoy now about 27,000 customers. Again, with the 2,000 new customers we had this past year, to meet our goals would require new residential customers of some 5,400 next year. 30% of our low factor now goes to residential customers. 70% are our profit is generated from those accounts so what we're trying to do and the staff is trying to do is to identify the most profitable areas for LP&L and to move more directly in that area and that's certainly in the residential customer area, so we feel like that if we can concentrate more on the residential customers, we can make the utility more profitable. Transcription November 10, 1983 Meeting Page 2 We estimate that the 2% discount, if all existing customers took advantage of that, it would cost us just a little bit less than $400,000 this next year. We estimate from the new customers that we hope to bring on line that we can produce income in excess of 1.1 million, so the bottom line is that we feel it would be very profitable to Lubbock Power and Light to have this 2% discount on our monthly bills. Do you have any questions on the conditions of service that... Councilwoman Baker: On the conditions of service I have a question about what is this going to do to people that have more than one meter? How are they going to be billed? Carroll McDonald: If the meters ... the load is over 1OKW they'll be billed individually and get an individual bill. If it's a small busi ss that has a load of under 1OKW and doesn't qual for the demand rate, then they'll still be ombined if they're existing there now. Councilwoman Baker: Do you have any idea...? Carroll McDonald: No. I would imagine the majority... yes, it probably would have to be commercial to be able to qualify for the demand rate. We've got a lot of instances... this will also protect a residence too where in this happens has happened a lot where they have a meter at their house they've built maybe a storage room or something on the back and have - another meter there. At the present time we combine these and send them a bill. They will continue to be able to do that. We don't-Uvision a new one. Taking in the new ones all but the ones that are in place now we can go ahead and continue to do that. I believe under their rates they'll get two bills. Councilwoman Baker: ...we'll have to go through each minimum. Transcription November 10, 1983 Meeting Page 3 Carroll McDonald: Yes. And the reason for this is if you split two demand meters on it you're talking about billing them according to when that 30-minute period the load occurs and it'll probably be a different time on the two meters, so if there's not anyway we can we'll have individual bills for them. Mayor Henry: Alright, are there any other questions by Council members? Lee Stafford ?: Mayor, we have some members from our board here this morning I would like to recognize. Joe Norris is here. If you'll stand, Joe. And Jim Gilbreath and a long standing member of our board, John Mallory. Mayor Henry: I'd like to thank the members of the board, Lee, and you for your hard work. We do appreciate all the hours that you all put in on behalf of the City. Thank you. Councilwoman Baker: Well I have —that LP&L losing 1.5 million dollars a year. Can we afford to lose that much money a year? ... and a half on LP&L the ability if we pay 6 million dollars ... out of the General Fund. Lee Stafford: Let's clarify the 1.5 million that you have reference to. That's because we're going under the Southwestern Public system -wide rate schedule. It's actually 1.146. So there are two or three ways that we anticipate overcoming that particular situation. One is the renegotiations of the natural gas contract with Pioneer Natural Gas which we hope to have a fixed rate on that this next year which will certainly benefit the utility substantially in excess of $500,000 maybe if we can get that contract negotiated. Councilwoman Baker: In other words that's the second loss.. inaudible. Transcription November 10, 1983 Meeting Page 4 Lee Stafford: Yes. Well, really if you're adding the 400 to the 1.46, that's right. Then we would have to make up probably half of that with new accounts. We think we can add the 20% new residential accounts without any fixed cost increase other than fuel cost past the two-hour operation. So as we increase our residential accounts by 20%, the only cost we're actually gonna have is the fuel itself. We're not talking about additional overhead or anything like that. So it's about a penny which would amount to pretty substantial...right. Councilwoman Baker: What if it's lost? Suppose everything we've made when we've increased our customers by 20%7 Carroll McDonald: We do the same thing we did with last y ar• nd I think ya'la ave your reports now. We all our bills, our General Fund payment and cash flow is about 4 million 1. This is taking everything into consideration, even depreciation of this cash, principal on debt service. The bottom line is over that. So the worst thing that could happen under this condition, we could take all this, pay a million dollars of General Fund and still have some money left for the next 12 months. The gas contract should save us more than that. $500,000 would just be the savings on the state tax. The prices we're talking to them now are well below what we payed the last 12 months average. Councilwoman Baker: Then how much would you be able to pay the General Fund? Carroll McDonald: A million dollars. Lee Stafford: Well, we anticipate probably paying the General Fund as much as 4 million. Isn't that correct, Carroll? Carroll McDonald: As much as what? Lee Stafford: 4 million. Transcription November 10, 1983 Meeting Page 5 Carroll McDonald: Lee Stafford: Well, the average then we're talkinq everything. Right. And that's an increase from 2.4... right. So we anticipate... Carroll McDonald: ...adding another $700,000 almost for the City tax Nat we're gonna lose through the gas company. collecting from us and paying back to the General Fund. Councilwoman Baker: That's gonna get payed on the debt. ...Inaudible... Lee Stafford: I've got some figures here and I'm sure you looked at them but let me just point out. I compared 1982 to 1983 and I took three categories there. It was was income, depreciation expense and transfer to the General Fund and if you take those three items in 1982, our income in 1982 was a million 376. We had depreciation expense of a million 805, and we transferred to the General Fund a million 874 for a total of, if you approach it in that manner, about $5 million. This year we had an extraordinary loss which you're aware of from the bonds. It was 2 million but the income before the extraordinary loss was 4 million 360. We had a depreciation expense of 2 million 308 and we transferred to the General Fund 2.4 million which is an increase of about $550,000. ...Inaudible... Lee Stafford: Not on our financial statement. There's $2 million. ...Inaudible... Carroll McDonald: Inaudible... arguing with you than put it on the bottom of the statement... inaudible. Transcription November 10, 1983 Meeting Page 6 Lee Stafford: I have a statement here if you'd like. ...Inaudible... (about 3 minutes discussion) Lee Stafford: I've got a statement if you'd like to look at one of our... ...Inaudible... (about 3-4 minutes discussion) Mayor Henry: Okay, did we clear up that point? I believe Mr. Brown had a comment that he'd like to make on this. Councilman Brown: When it comes down to the figures involved, I understand that... percent... inaudible. ...Inaudible... (about 1 minute discussion) Lee Stafford: I passed out, Jack, to the other members of the Council the form I gave you at the residential rate comparison narrative. Councilman Brown: ...I've got several problems. How can an overall rate structure of 2 percent. I think that generally the rate structure... have no questions about that. This 2% thing bothers me for several reasons and I'd like to say exactly why. In the first place I'm not in any way opposed to providing the citizens of Lubbock the cheapest power that we can figure out any way to do. I think that the responsibility of the Council... inaudible. I'm also certainly not opposed to ... of a rate of some form to prompt... payment... on record we already have a ... charging a 5%... inaudible. I can't see ... granted our cash discount of 2%...5%. The majority of that... inaudible... We've got a change of situation that we've never had here before in all the history of my recollection that I can find that LP&L is gonna have to increase... They've never had to do that before ... The longer that we have these Transcription November 10, 1983 Meeting Page 7 little schedules ... on a comparable basis you've always got a place you can ... Now we're gonna have a rate structure in the commercial and industrial... that we've always had the rate structure that could be compared look comparable and orderly... In the years that I've been watching this operation as far as LP&L's financial operation ... a lot of objectivities that...3% reduction but we've got a lot of changing situations... This last year LP&L... Now we've adopted their rate structure... Cause I think that it's... Inaudible... Carroll McDonald: The system rates, like I say, I didn't realize they were so sacred. Jerry Diller works on them over there and he must be like God right now. They came in here and said, you know they disregard of what we were gonna do, and said we're gonna bill our rates to your Lubbock customers. I don't believed they asked anyone permission and that's fine. And the method that we've got there's nothing political about it. People don't give discounts to lose money. People give discounts to make money and get new business. And this will give us a tool to where we can better compete against the system rates and there won't ever have to be any more comparisons. They're exactly the same unless you pay your bill on time and late payment penalties are fine but what about the old boy that pays his bill on time everytime, the one you don't have to write off, the one that doesn't leave town on you, the one that's paying the bill. We want to reward him too. And this is our motive, like I said, but I want to say a lot of people, you know, their system rates they change from time to time because they make mistakes on them too. ...Inaudible... Mayor Henry: Okay, are there any other questions that we have? Councilwoman Baker: Yes, what can the 5% late charge...? Transcription November 10, 1983 Meeting Page 8 Carroll McDonald: You hadn't helped any As far as people paying their bill on time, iVut'we don't know whether the first month it did. Then we went on our new data processing system and we can't really identify whether our inability to...we had a lot of problems... this could've been a problem. We're collecting about $40,000 a month average since we had the late payment. So we're realizing money out of it, but it's not making any mark in our accounts receivable. It did the 'first month. Councilman Brown?: I'd like to see...I think it's an attractive offer a merchandising tool for us. We can't change the size of the kilowats we deliver. They're all the same size. They're all the same ... Whether they come off of our system or SPS's system. We don't have the same identical capital setups. We're a municipal operation. They're a publicly owned operation. We talked about competition. The only way we could compete is 'in the service we get and some merchandising effect. I am highly in favor of giving good customers, good paying customers the advantage of our operation and asking them to do business with us. The money making is a smart operation, so I'm in favor of giving it a try and let's see what we can do with it. I don't like to see good paying customers subsidized and the slow payers and the bill ... don't want to carry their end of the load. They want to use the services. They don't want to pay for it. So I'm in favor of giving the good paying customers a break whenever it's possible... Councilwoman Baker: Well to me the real issue here is do you give the electric customer of LP&L a break for being on time or do you give the taxpayer a break for paying his property taxes ... in other words what I'm saying is if this discount is going to affect the prepayment to the General Fund of $1 million of LP&L... Because that does ultimately affect the taxpayer too then this is not a good idea. That's what the real issue is as far as I am concerned. Mayor Henry: I guess what you're asking is, assuming that their projections don't work, what would their action be. Transcription November 10, 1983 Meeting Page 9 Councilwoman Baker: Right. I am willing to try it on a 6-month or a yearly basis. I'm talking about the 2% discount and give us a chance to see, you know, what ... with the understanding that if it does affect the prepayment to the General Fund, then it should be... Lee Stafford: I would agree to that. I think that's a reasonable request. I'd like to go 12 months because I think the monkey's on our back to produce ... yes there is, there is a schedule. ?: We've had a lot of arguments about that. Ya'11 approve $500,000 a year. This year we payed and we didn't pay it because we wanted to. Robert took it. He took a million dollars and he has got already scheduled in our debts for our next fiscal year $1 million leaving a 5.2 million off. Now you gotta realize too that before they had a formula all they lack... everything that LP&L made, the General Fund took. It was a gift. Anytime LP&L needs some help they have to borrow it back and sign a note. So the committee ... it backtracks 52 said if it had a forms in 52. The General Fund would owe LP&L 16 million. But you know it doesn't work that way. We payed a million dollars this year. We're scheduled to pay a million next year. We've got $3 million in cash, and we can pay the million now. So the money will be there in an amount twice the amount that ya'11 agreed on. Councilwoman Baker: ...I just want to make sure that remains on schedule... Lee Stafford: No, we need to fix 400 new customers. Mayor Henry: I believe we've pretty well ridden this horse about as far as we can. I think everybody pretty well knows the facts here. Do we have a motion on this particular request? Transcription November 10, 1983 Meeting Page 10 Councilwoman Baker: I move that we approve the rate request with the understanding that the first week in November of 1984, if we have a recommendation made to the City Council at that time the status of the 2% discount, whether it's working or whether it isn't working. Lee Stafford: We're gonna let you know before that if it's not working. Councilwoman Baker: We need some understanding as to what iffect it is having on LP&L on accounts receivable, their cash flow and all the money to the General Fund. Mayor Henry: Is there a second to that motion? Councilman Brown: I second that without all the frills. Mayor Henry: We have a frilly motion and a plain second. Lee Stafford: Could I ask one question. It might be easier to do it on the City's end of the year rather than November 1. We're talking about a one months... Councilwoman Baker: Well that would give us some time to tabulate the figures. Lee Stafford: Okay, that be fine, the twelve months, that be fine. Mayor Henry: Alright, your motion stands the same then. Alright, those in favor of the motion vote yea. Those opposed Nay. There are three yeas and one nay. The motion does pass. Lee Stafford: Thank you very much. Mayor Henry, we'll be back with a capital improvements list including the western interconnect in about a week. Mayor Henry: Thank you for your work.