1996 ADJ JT MIN JAN 24 - Laserfiche WebLink

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kilowatt level and raised that commercial rate by 2%, it would still leave Colton's rate 5% below Edison. Those dollars could be returned to the residential users in the community by lowering rates, and still be competitive with Edison. Utilities Director Clarke said mathematically it could be done, but it was not a sound business practice. He said everyone was charged fairly, according to what they used. He said "social rating" was not a good business practice. Council Member Hutton asked what would happen if Colton would lose a significant industrial user in an effort to reduce rates for residential users. Utilities Director Clarke said it depended on the cost the utilities user took with it. He said if Colton lost a very high efficiency customer, one that did not cost Colton as much to serve, Colton would get more revenue from that user. He added that Colton would lose a great deal of revenue and the associated cost to serve that customer would not go away in a proportionate manner, and the rest of the class would have to pick up that cost. Mayor Fulp insisted the City Council needed to meet the socio-economic level of Colton and moved that the Utilities Department increase the kilowatt threshold from 250 to 500 kilowatts per hour, and decrease the power cost adjustment from the current level of .00858% to .0050%. Council Member Bennett seconded the motion with the caveat that the method of calculations does not change — the costs applying to the kilowatt hours remain the same. Mayor Fulp agreed to add that to his motion. Councilmember Sandoval asked what the ramifications would be, by adjusting the level to .0050% and increasing the kilowatt hours to 500. Utilities Director Clarke said that without making any revenue adjustments or rate design adjustments, and just making the change to 500 kilowatts at the base line, would produce a revenue erosion of $45,000 per month, which translated into a lose of $600,000 per year just from the aspect of rate design. He said to move the power cost adjustment from .00858% down to .0050%, Utilities Director Clarke estimated an approximate loss of $700,000-$800,000 in revenue. Those two adjustments would produce an approximate loss of $1.5 million for the balance of the year. Utilities Director Clarke warned that the Utilities Department had to maintain 1.25 x debt service coverage, in order to stay out of technical default on the bonds, to meet the debt service and the conditions of the sale. The covenants within that sale specify the amount of coverage the Utilities Department must maintain. Utilities Director Clarke stressed the proposed action would drop the Utilities Department below that coverage ratio, resulting in a technical default of 17.5 million dollars worth of revenue bonds. CITY COUNCIL MEETING - JANUARY 24,1996 PAGE 7