CC/RDA/CUA SPE MIN 2010 JUL 28 - Laserfiche WebLink

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Standardize process for capital project priority setting and management accountability: determining priorities, funding and timing. Written succession plan. 2. Financial Position, Rates & Fees • Colton Electric retail prices higher than median of other Southern California municipal electric utilities for most customers. • Many customers paying more than if they were SCE customers. • High level of indebtedness key factor driving costs: Agua Mansa Power Plant; other debt funded projects. • Cost reduction initiatives by management needed to keep Utility competitive. • Fees for development project services not increased since 1994 — not recovering actual costs ($268,050 revenues FY 2008-09). Recommendations • Agua Mansa Power Plant adds $6.2 - $7.2 million/year in costs; provides small amount of power. City should consider: — Rebidding operating contract — In-house staff — Combination in-house/contract — Expanding the plant — Selling the plant • Multi-year financial plan needed to address how 2009 rate increases should be used: rate rollbacks; building reserves; building rate stabilization fund; capital projects; others. • Colton Electric management initiate cost reduction program at Utility. • Swap vacant Analyst position for Manager responsible for cost reduction, contract oversight, and improved planning. 3. Financial Relations with City • Electric Utility's General Fund transfer of $4-5 million/year to City worsens Colton Electric's financial position in some years. • In two recent years, Electric Utility funds insufficient for General Fund Transfer. City required Utility to carry transfer amount as loan liability and pay City off in future years. ➢ Not prohibited by ordinance but action worsened Electric Utility's financial position. • Other cities require transfer but allow for City Council review of financial impact before transfer is made. ➢ Of six Southern Calif. cities surveyed, Colton Electric's transfer amount is 3rd highest. • Allocated administrative costs in FY 2009-10 based on allocation plan; $318,000 in charges were not supported by plan document prepared based on previous year costs. ➢ Cost allocation plan now under review by City. Recommendations Electric System Revenue Fund Ordinance should be amended: — Remove or define term "surplus revenue"; — City Council review, assessment of financial impact of transfer at mid -year and 3rd quarter before final transfers; — Transfer amount to be reduced if in best interest of Utility; — Policy needed on carrying over transfer amount as loan for repayment in future. City Manager direct staff to review certain aspects of City cost allocation plan. 4. Contract Management 2010 JUL 28 SPC CC/RDA/CUA MEETING - 3-