Electrical Rate with Ashley Furniture Inc

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CITY OF COLTON AGENDA REPORT ITEM #8 FOR COUNCIL MEETING OF JUNE 20, 2006 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: Jeannette Olko, Electric Utility General Manager SUBJECT: Approval of Contract Electrical Rate with Ashley Furniture Inc. DATE: June 12, 2006 BACKGROUND: The City of Colton Electric Utility Department is authorized by resolution No. R-74-94 to develop contract rates with customers whose loads exceed 150 kW. Rates shall be designed to meet the electric utility's revenue requirements, encourage growth, and to provide mutual benefits to the Electric Utility and its customers. DISC USS I ON/ANALYSIS: Ashley Furniture Inc. has been on a contract rate of nine (9) cents per kWh since opening in October 2001. Due to increases in the costs of service that the City of Colton Electric Utility has incurred, the existing contract rate does not provide enough revenue to cover the cost of providing electric service to Ashley Furniture Inc. Only by increasing the electric rate to eleven (11) cents per kWh and adding the PCA to its rates will allow Colton Electric Utility to cover its cost of service while not placing an undue burden on Ashley Furniture Inc. This contract is for a one (1) year term. After it expires, Ashley Furniture's energy usage and the City's costs of service will be analyzed and a new contract rate will be negotiated with Ashley Furniture Inc., or, in the alternative, Ashley Furniture Inc will be placed on the new Time of Use Rate that will be in effect at that time. FINANCIAL IMPACT: The increase in revenue is estimated to be more than $300,000 annually. After one year the Utility will benefit from the additional sales at a renegotiated rate. ALTERNATIVES: The City Council could opt to have Ashley Furniture Inc continue under the existing rate, however this will not allow Colton Electric Utility to recover costs of providing electric service to this customer. Putting Ashley Furniture Inc on the Standard TOU rate at this time could place undue financial burdens on the customer. None. CONFLICT OF INTEREST: None RECOMMENDATION: Staff recommends approval of the Contract Rate with Ashley Furniture Inc. Report prepared by Gerald Katz, Senior Energy Services Specialist Attachment: Contract Rate with Ashley Furniture Inc REVIEW TEAM ONLY City Attorney:} ) Finance Director: City Manager: OTHER: