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HomeMy WebLinkAboutPACKET Light and Power 1991-09-05a . AGENDA Liglit and Power Committee September 5, 1991 /· 31-~- ~.mi.- (~6~- d~/-- . Board Room 1. Light and Power Bucket Truck #27 0 Authorization to Keep in Service Rate Study Discussion Preliminary Recommendations 1 (~ Reports A. Platte River Efficiency Task Force B. Purchasing Practice-Transformers C. Project Updates D. Decorative Street Light Maintenance E. Platte River Power Authority . NOTE: The Light and Power Committee reserves the right to consider other appropriate items not available at the time the agenda was prepared. . 13.08.070 of the department's distribution transformers, two percent of the bill for service shall be deducted and if consumer shall take service at primary voltage and own the transformers and substation converting to the secondary voltage, an addi- tional two percent shall be deducted. Under schedules of rates for primary service and where secondary service is delivered or metered at secondary volt- age, correction factors shall be applied as provided under applicable rates. D. Service Loops: Except in unusual cases only one service loop shall be connected to a single premises or prop- erty. If more than one service loop is installed, it shall be connected to the same general delivery point to facilitate disconnection of the property in the event of fire or other emergency. Where practicable all service loops shall be in- stalled from department's secondary distribution at the rear of any lot or premises. If the property of the consumer does not abut on the right-of-way of the department's distribution system, it shall be the consumer's responsibility to provide adequate easements or bring his wiring to a point designated by the department, without service drop trespass upon other property. E. Attachment to Poles: Attachments to department's poles or lighting standards will not be permitted except upon specific written authority of the department. The attachment of radio or TV antennae is specifically prohibited. Attach- ments of communications circuits such as telephone or com- munity antennae systems may be made provided a joint use contract has been entered into between the department and those desiring to make such attachments. F. TFee Trimming: The consumer shall permit the de- partment to trim the limbs and tops of trees to the extent that such trimming shall be reasonably necessary to avoid interference with the department's lines on consumer's prop- erty. The consumer shall be responsible for such trimming of trees as may be necessary to avoid interference with de- partment's service wires running from the department's distribution poles to the point of delivery on consumer's premises. G. Shortage of Electricity: The department will make every reasonable effort to furnish a continuous supply of electricity to meet demands. However, should shortages occur by reason of acts of God or causes beyond the immediate con- trol of the department, the department shall have the right to grant preference to those services which in its opinion are the most essential to the public welfare. The department 115 1 .#45 TOWN OF ESTES PARK 0%-/Sk 8 , .... 14¢01 7/456* 4 4 . #tel.4/,4.i :1·' a.r .' yj, ·t>: fl#R*fi~1 - J»:...i.kil.\ .4 =.16..,41......24*. -*ilie'*f - - 4//,.i r A•-~ .: 14/.Aq.' 9 Estes Park, Colorado 805-17 L•+t·*4 44 September 4, 1991 OFFICE MEMORANDUM TO: Light and Power Committee FROM: Richard E. Matzke~72 25771 SUBJECT: Light and Power Bucket Truck #27 Authorization to Keep in Service The Light and Power Department received authorization at the March 7, 1991 committee meeting to purchase a bucket truck to replace existing truck #27. At that meeting, staff recommended sale of existing truck #27 upon delivery of the new truck at an expected price of $15,000. After further research, Gary Shanafelt believes we may actually receive no more than $10,000 from sale of the truck. We believe that keeping the truck in the fleet as a backup unit would be worth more to the department than the resale value of the truck. The department would like to keep the truck to be used only when one of the other two bucket trucks is in for service or when construction is to be performed in a location that might subject one of the newer trucks to damage. The purchase price of the new truck is approximately $8000 under the budgeted amount without consideration of trade-in or resale of the old truck. The Light and Power Department is requesting authorization to keep existing #27 in service on as needed basis as long as is economical. REM 2 P, f 1, Itan Id{)(1 1 :\X (tl)11 '-, 11(, 1,(}1 11) It,lt·~,lii,ii, 1 :1) 1) 'i;,f,·!;rtl 9/5/91 Light and Power Committee Rate Study Discussion L/0 411-1-~n • Existing Rates 0 132 • Changes to Residential Demand Rate Eliminate Ratchet Seasonal Demand Charge • Changes to Residential Rate 41,1 Maximum Demand Threshold • Shift Residential Customers in General Service Small Rate to Residential Demand Rate (Prior to 12/91) • Gradual Phase-in of High Demand Electric Heat Customers From Residential Rate to Residential Demand • Demand Controller Low Interest Loan Program 0 0 • Changes to General Service Small Rate Commercial Customers only • Changes to General Service Large Rate Eliminate Ratchet rk /2,9/. 70/ Seasonal Demand Charge • Time of Day Rates Residential Commercial Light and Power Department Rate Change Objectives IMMEDIATE 1.-2 --4 • New residential electric heat customers served under Residential Demand Rate and provided assistance with demand controllers. • Eliminate minimum demand ratchet from rates. • Residential customers removed from General Service Small Rate. LONG TERM ~al-- • *iNiric heat customers in Residential Rate shifted to Residential Demand Rate. 3 TOWN OF ESTES PARK, COLORADO LIGHT & POWER RATE SUMMARY RESIDENTIAL RATES RESIDENTIAL Available for electric heat prior to 8/1/81 and new services not utilizing electric space heat. Customer charge $2.05/month Energy charge . $0.06501/kwh Minimum $2.05/month RESIDENTIAL DEMAND Available for any residential service. Customer charge $2.05/month Demand charge $5.15/kw Energy charge $0.03225/kwh Minimum $2.05/month plus $5.15 x minimum monthly billing demand GENERAL SERVICE SMALL Available for any residential service. Customer charge $7.25/month Energy charge $0.07044/kwh Minimum $7.25/month NOTE: Monthly demand shall be the highest 15 minute integrated demand occurring during the billing period. The monthly minimum demand shall be 60% of the highest demand established during the preceding twelve months. COMMERCIAL RATES GENERAL SERVICE SMALL Available for commercial service with demand of 35 kw or less. Customer charge $7.25/month Energy charge $0.07044/kwh Minimum $7.25/month GENERAL SERVICE LARGE Required for commercial service with demand exceeding 35 kw in any two consecutive months. Demand charge $9.65/kw Energy charge $0.02875/kwh Minimum $9.65 x minimum monthly billing demand or $55 which ever is greater NOTE: Monthly demand shall be the highest 15 minute integrated demand occurring during the billing period. The monthly minimum demand shall be 60% of the highest demand established during the preceding months of November through March. September 7, 1990 5 ·00.2-4 44, 4, 2-7 ..02:L,_ _, *. SEP- 5-·91 Et-I U _ 1-0 :39K I~R Z-E F 1 9 v M.E. KIBURZ AND ASSOCIATES Consulting Engineers 443 Sugarloaf Mtn Rd Boulder, Colorado 80302.9639 (303) 442-6450 TELECOPY 303.442-7472 September 4, 1991 ' Mr. Richard Matzke Town of Estes Park Light and Power Department P. O. Box 1200 Estes Park, Colorado 80517 Dear Rich: Thts letter provides the Town with some new prelininary concepts in reference to modifications which could be implemented to the residential electric heating customers electric service requirements and rates. As outlined in the July 23, 1991 letter to you the electric heating residential customers are the major contributors to the Town's winter peak demand, The Town's system winter peak demand increase.s the Town's annual cost of purchased power from PRPA by apprcximately $174,000, The following outlines concepts for changes 10 the residential demand/energy rate schedule. 1. The residential customers currently served uncer the General Service Small (GSS) Schedule would be required to switch to the demand/energy residential rate unless the sum of their .anuary and December consumption is below 6,000 kWh. Residential customers below this level would be served under the regular residential rate, Data collected to date suggests that there are approximately 150 residential customers receiving service under the GSS rate. 2. The residential demand/energy rate would be modified to eliminate the 60% demand ratchet and include a seasonal demand rate. The winter demand rate would be greater than the summer demand rate. 3. A low interest rate loan program would be implemented by the Town to hel p the residential electric heating customers , finance load controllers. Discussions with Dencor indicates the ins-alled cost of a load controller would be in the range of $800 to $1,000 per unit. 4. Electric heating customers currently served under the general residential rate schedule will be encouraged or possibl-, required to move to the residential demand/energy rate, if Town funks are available to the Customer to finance a load control unit. Basic data is still being collected on the number and usage of residential customers who would be impacted by the abov, proposal. Therefore, the following'is a generic example of the anticipated impact I on the load pattern and economics of the Town's electri: system and the individual customer. The bel ow table sets forth the annual payment levals necessary to ~ 0 200 repay various loan options. -;.A' 'An'.. . Estimated Annual Loan Payment , .\ P Amortization Period Two Years .LI111:a.-Xcal:.1 Interest Rate 5% ._.7% -11_ _21 Loan Size (KW) $800 $430 $442 $294 $305 $900 484 498 330 343 $1000 538 553 367 381 EP- 5-91 THU 10=40 KIBURZ M E P. The above table shows the estimated customer annual loan payment for loan sizes of §800 to $1,000. As an example if a relsidential customer borrows $1,000 at 7% interest rate with repaymeht in three yeare the annual payment would be $381, The loan size, ~interest rate and repayment period have not been established. If the Town were to establish a $100,000 revolving fund for loans for customers installin& load controllers, approximatelM 100 residential customers could initially participate in the program. As loan repayments are made funds would be freed for additional iloans. Under the two year amortization approximately $50,000 would bc available for residential customers in each succeeding year. This tyje of plan would support the financing of controllers for about 50 new r• sidential customers each year. Exhibit A consists of three paf;es showing the calculation of the customer savings and the Town'n avoiaed purchased power costs for peak demands of 10. 20 and 40 KW. Each column on Exhibit A is briefly discussed to Aelp understand the various components of the analysts. (a) Shows the sample regidential customers measured demand profile without a controller. The sample im simplified by assuming only two levels of demands, a high winter and low summer dem;.nd. (b) Shows the cuetomer demand assuming the 60% ratchet. (c) Shows the customer expected demand profile with the use of a demand controller. Discussions with Dencor suggest than a properly Get controller can reduce the winter peak demand by half. (d) Shows the demand savings resulting tor the customer with in*tallation of a demand controller. Column b minus c, Ce) Shows the expected reduction in the customer-, measured demand as distinguished from the customers billing demand. Ce) The assumed coincidence between the customer, peak demand and the Town'• system peak demand. (B) Shows the system measured demand reduction. (n) Shows the purchased power billing demand red-iction. The demand profile includes the impact of the PRPA average ·lemand ratchet. These figures are calculated by adding the applicable m,nth demand to the peak annual demand (January) and dividing by 2. (i) Rounding down of column h demands. The sum of the monthly demands le the estimated avoided purchase power resulti,g because of the use of a load controller. The results of the Exhibit A analyses are summarized on the following table. Ia!21/ Customer Annual Peak Loan Annual Avoided ..1106 - Eay•Ent.Zi- laxin:al.l) 22*2_Cnit: (KW) 10 $538 6200 8343 20 $538 $366 $62,7 40 $538 $876 $1,508 (1) Current rates. (2) Loan of 41,000, 5% interest and 2 year repayment. The above Table shows that the customer dollar benefit from using a controller reduces as the size of the customer peak demand 18 reduced. The differential between the customer saving and the avoid power cost* suggests that a higher residential demand rate is necessary to provide additional economic incentive for the use of demand controller. The higher seasonal demand rate would also allow the elimination of the 60% demand ratchet currentlv included in the residentl.El demand/energy rate. A portion of the higher winter residential demard rate would be associated with the transfer of energy rate revenues to the demand rate. The seasonal demand rate would impact the Town's cash flow from the 2 demand/energy residential rate (le more revenue in the winter season and less revenue in the summer season). The seasonal demand rate necessary for a residential customer to break even on the two year repayment cost of $538 per year for a 20 KW peak demand is estimated to be: Demand -Bata Winter Season $8.40/KW Summer Season $5.15/KW The above rates have not been evaluated based on the test period customer class statistice, therefor the rates are for illustration purposes only. The following Table shows how the Estes Park Residential, Residential demand/energy and General Service Small rates compare on a monthly unit cost basis. Regular General Demand lillustration ' Re,idential Ber... Small RutiL-111 ]~intilie s UU 3) (1) (1) Month Load Factor - - 2-51- Ali ill Bill Unit Cost ($/kWh) .06501 .07044 .0605 .0479 .(750 .0546 (1) Rate Schedule energy rate only. (2) Current Residential demand/energy schedule with no penalty for the 60% ratchet. (3) Illustration winter demand rate of $8.40/KW and $.(129/kWh. The table shows the energy rate for the Residential and General Service Small rates. The demand/energy rates show unit costs for two load factor levels. Load factor measures the average u:e of the peak demand. The 25% load factor is representative of an electric heat customer without a demand controller and the 45% load fictor is representative of an electric heat customer with a properly set demand controller. As is shown on the table the electric heat custom,r with a controller does have an economic incentive to be served under the demand/energy rate as compared to the regular Residentlki and General Service Small rates. When the controller loan repaymenb is included wtth the residential utility bill it appears a package ks feasible which would allow the electric heating customer to break even! during the repayment years and receive savings thereafter. The Tokn' 9 avoided ~ power costs would be sufficient to off set the reduced kevenues from residential electric heating customers with demand cont)rollers. As additional customer statistics are provided on the residential electric heating customera, the proposals outlined in this letter for the residential classes with be refined. 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The selectable MAX-COOL troller will SAVE YOU MONEY. You now feature provides emphasis on air condition- have a way to make electric rates work ing for additional comfort. The Model Le·a.~u.~·.*c.~*4+~<4-**ki.-1•*:.m-,-•~-„r,~~;~04¥.- -9~%~~;~~~k...1~...1.. FOR you. 102D can even swap the priority of two air ' -GA -2.. conditioners between afternoon and night. Relief from High Bills WINDOW A B You receive comfort and savings with all - · '.p Ai ¢Ul'rl. 6 Join the satisfied homeowners already saw types of heating and cooling including heat miT C) ' .WW-, „, ~0~ ciac. : I. . lip ..., DISPLA~ ,•„ p,•• ,• /, I f,•0 1••WIM ,4 'll 5 9„ED ing 30% to 50% or more on their utility pumps, air conditioners, baseboard heaters, 3 4 sialus i 1.,1.1, A. '„0 . ..¥1.4. I. t... bills. It's time for you to start saving! The electric furnaces, electric boilers, and V 1 I•YA . 1.11 4. Ii. •. ' I. ...W 2 Model 102D is the best energy control radiant heat. IMM N./.44 7 r. *•HI 1 -1,-I- 1 ~*IN,¥ C.'il .,-0. t.. device for your home. It saves you inure BES Cll =-42 'DDencor=9992 E= --=E 0. • H. •f O 02 money because its powerful computer pro- How It Works vides the most effective load control for The Model 102D has two energy control Time-of-Use demand and energy rates. functions: D-82 Data Display Station Easy to Operate • It shifts energy use to off-peak by keep- You choose the settings and the controller ing specified loads off during the peak • Cost of energy use will do the rest. It takes over the job of price time and duty-cycling other selected • On-peak demand set point lowering your utility bills so you can relax. loads during the peak price time. It remembers to change its operation when • Instantaneous demand the rates change from Summer to Winter, • It controls demand by averaging the total energy usage of the home and comparing • Average demand when daylight savings starts or when holi- days occur. The Data Display Station the average with the desired demand • Maximum on-peak average demand allows operation of the controller from a level. When the average begins to rise • Percent of energy used on-peak above this level, the lowest priority loads • Circuits shed location of your choice and is especially useful with time-of-use rates. The Data are deferred according to the chosen • Circuit override Display Station keepsyou informed of the strategy. The loads are automatically status of operation and shows you how restored when usage decreases. What • Indoor temperature (optional) much energy you are using. you need least is turned off first. • Outdoor temperature (optional) Only a few, major, deferrable loads are • Time. Effective for Time-of-Use Demand and controlled - electric heat, air conditioner, It also provides fingertip control of: Energy Rates Independent Summer and Winter control water heater, and the clothes dryer heating • Override for any circuit may be specified using different on-peak element. Controlling these is all that is times as well as different forms of control needed to obtain major savings on your • On-peak and off-peak set point for each season. For each season control utility bill. adjustment • Shed modes may be specified for: Wide Range of Applications • Set point madmum and minimum • Two on-peak periods for weekdays The Model 102D is designed to provide • Time settings • Two on-peak periods for Saturdays you with the control you need for today and The Data Display Station also provides an • Two on-peak periods for Sundays the flexibility you need for tomorrow. You audio and visual indication to let you know The following forms of load control are will be ready when your utility offers new if uncontrolled loads are creating a demand provided: rates or incentives. It gives a choice of 15, higher than the set point. 30, or 60 minute demand intervals to fit all • Duty-Cycle utility companies. Control inputs permit Foolproof Memory • Minitnum on-tillie future use with utility load management The Model 102D is equipped with a mod- • Minimum off-time systems. em electronic battery backed-up memory • Mandatory-off during peak module which keeps the data and time for • Circuit override Data Display Station (Model D-82) up to 10 years of continuous power outage. • Holiday override The Model D-82 Data Display Station for Thirty years of holidays are stored in the • Mandatory-on during off-peak. the Model 102D Controller gives you memory. Optimum Cooling and Heating information on energy use as well as ease of Easy To Install The Model 102D has many modes of con- adjustment. The D-82 provides a digital The Model 102D has been designed for trol to provide optimum performance for display of: easy installation. 12 experience has resulted in an extiemely Model REM-24 lt, ' - OlltIOI It i ..£/.OJ;*rf.f P . . ~4 reliable energy controller loads. One SPS-1 u f · ilb 93 . Two-Year Warranty coil and protection diode.3. LUU,dcts A two-year limited warranty is provided rated 2 amperes at 24 Vac for control for all parts. Dencor controllers are listed of class 2 circuits. Encapsulated in by Underwriters Laboratory. rubber. 4 Accessories Model EXP-1 One relay two-circuit Expansion Box Model EXP-2 Two relay two-circuit Specifications Expansion Box - Model 102D Control unit Relays are DPST-NC rated for 24 ~ 20* amperes in a 611 x 4"W x 2"D surface Packaged Weight: 9 pounds Power: 7.5 - 18 Watts - mount polycarbonate thermoplastic en- Voltage: 115 + 10%,60 Hz Model 102D with Current Transformers closure with 3/4" threaded nipple. and EXP-24 Expansion Relay Model EXP-24 Relay to expand the Current Transformers number of control outputs of the • Compact Current Transformers with Type: Ring type with 6 ft. of 600- Model 102D. One SPDT relay with Volt lead wire 1.2" ID for all cable sizes and service 24 Vdc coil and contacts rated 2 centers Saturation Current: 200 amperers amperes at 24 Vac for control of minimum (48 kW) • Separate compartment for low voltage external class 2 circuits. Encapsulated Size: Type C2: 1.3" ID for 500 wiring in rubber. MCM cable • Snap-in, snap-outcircuitcard forquick . 11. I 46 ;a. .." C4 (optional): Split-ring with service 1.3" ID • Only four conductors are needed for the Data Display Station · P D-82 Data Display Station Demand Set Point Range: 0-32.8 Reliable , kW (0.2 kW increments) The Model 102D is built by Dencor, the Alarm Volume Control: Off, Low, High nation's most experienced manufacturer : Ck . of residential Demand Controllers. It i . Dimensions: 6.5" wide, 4.9" high, provides all the features found important ,. : i 1.2" deep .. in tens of thousands of successful 4,12.''w''c'* digA Mounting: Surface mounted installations. 89#E:elvbe:/97" Control Cable: (not provided) Four conductor 18 AWG solid, Conservative design methods provide 14,1.0,1 NEC Class 2 with insulat- operation over a wide range of operating t~~cticitscuu~/ a~ddin(CetrCIC'J~tawty ing cover. , Connector: Push-on connector relays together with a unique RELAY supplied. SAVER feature provide extended years -Ill- . TSI Temperature Sensor of service. Each controller is per- t... formance tested before shipment. Use of e (one or two optional) components proven by years of field EXP-2 Expansion Box Temperature Range: -40F to 120F Accuracy: +3.0% of full scale -Ordering information Specifications subject to change Power Power Class II without notice. Model Size Relays Ciruits Circuits Enclosure LISTED 102D-I 8xl 0x4 2 4 2 Indoor ENCL ENERGY 102D-W 8x 10x4 2 4 2 Outdoor ~ MGMT E0PT Power relays are DPST-NC with 30 ampere contacts rated 24 amperes or 1.5 hp at 240 Vac. Class I[ circuits are \~/ 163X SPDT with contacts rated 2 amperes at 24 Vac. [ndoor enclosures have a flush mount cover. Outdoor enclosures have a raintight hinged cover. - For further information eun lael: DENCOR, INC. Headquarters - (303) 922-1888 1450 West Evans Avenue Denver, CO 80223 FAX (303) 922-3903 Arizona Office - (602) 861-2113 Phoenix, Arizona I 3 901020 Mission Statement "Develop programs that promote energy efficiency using cost-effective, environmentally favorable solutions which improve the quality of life for our consumers." *** 1 Initial Acceptance Criteria Programs toill: • Benefit retail customers, the Municipalities, and Platte River; 0 Yield net positive environmental impact; • Meet defined cost-effective criteria; * Accrue benefits to participants without penalty to nonparticipants; • Produce measurable results; and . Comply with Federal, State, Local laws and regulations. 40 0\ Ch h - 00 £O c/) 9 9 9 4·1 4 0 =10 2 g 0 -wh-N - 00 N LE U h 0 0 9- 1- M In 00 0\ C\ Ch Ch O\ Ch C\ 01 02 0 em Ocr) .-I <0 5 25 M M 44 ei V) 64 91- vivi 0 m N 61 N 8888 O lr; E t< cr; U * O 0 en 4-%O1O~r) £11 LId E- E- 0000 E.PUU U~ P FFEEn 8 8 0 0 -1 0 & 8=ke,6 O W O 0 0 W [Il 00~~0 14 MANUFACTURER SUPPLIER PURCHASE NO LOAD NO LOAD TOTAL EVALUATED 0L'L6§ZZ 06*Z€ZL 00'840£ 08 ZLSZ 00'08* 00'Z6LZI GNHIXEC 7¥101 ESTES PARK LIGHT AND POWER DEPARTMENT QTY 182.24 103 244.42 COOP 139.36 110 261.03 139.36 110 261.03 107.20 127 301.37 611.00 18 96.48 99 234.93 BE'952 80I 0809I 0£ 00't€g 13373 '-IVA03 NVNIHA 24.**E £0I +0'SL *I 00'699 TRANSFORMER LOSS EVALUATION 10 KVA CSP NO LOAD MULTIPLIER LOAD MULTIPLIER SNOI.LVOIdIDE[dS WAKINIAI .LE[HAI O.L GE[lIV:I * TRFL10CP.XLS I'LAIIE · -9#v-,i···-Mg.FS:*r-- |~ RIVER i · POWER AUTHORITY ba, , 1%14 SEP 0 3 1991 mi ~42·1 MIEM©liNAMID)UM T«*1 Cl.ERK August 30, 1991 To: Rich Widmer ; From: Thaine J. Michie Subject: Rawhide Outage Rawhide is being shutdown on Friday evening, August 30, for its once every five year outage. This outage presents a unique opportunity for members of your staff and city councils to look inside almost all of the large equipment around the plant. Below is a brief description of the activities that will be taking place during September and early October: • During the weeks of September 2 and 9, the disassembly of the turbine and generator will be underway and boiler scaffolding will be erected. Repair work will begin on various parts of the boiler. • The weeks of September 16 and 23 will find the turbine completely taken apart and inspection and cleaning work of turbine and generator components underway. Boiler repair work will be continuing and air heater cleaning will be underway. • During the final two weeks of the outage, September 30 and October 7, the assembly of the turbine will take place, boiler repairs will be finished up, air heater assembly will be completed, and the boiler scaffolding will be removed. Probably the best time to see all of these activities are the weeks of September'16 and 23?' If you would like a tour, please give me a call. If you could determine the date, time and number of people on the tour, I will make arrangements with the Rawhide staff to take your folks around. If I am unavailable, get in touch with Lynn Gunther at Rawhide. Lynn is our designated tour director. Her phone number is 229-1779. As a final thought, it might be fun to invite your councils to attend the September 26 Board Meeting or to have them come at lunch time to eat and take a tour together. /ch cc: Mike Dahl Lynn Gunther Attachments Transfer Policies: When to Say ENOUGH! by William Cox As municipal budgets tighten dlic tt) slowing economic to deliver high levels of services at low costs. activity,· the fiscal balancing alternatives tllat cities have at Tyer's study revealed that iii 1989 Soutli Carolina cit- their disposal are receiving greater scrutiny. Especially in ies that owned electric utilities spent 33 percent more per times of economic stress, it is politically ditlicult to raise taxes. capita on services (excluding utility operations) than cities It is often equally ditticult to reduce levels of services. Iii that had no enterprises. The effect of lower taxes is demon- searching for ways to fill that gap, public officials often re- strated in North Carolina. North Carolina cities larger than sort to some form of indirect taxation, Financial transfers 50,000 people that own electric utilities had a 1990 average from municipally owned utility operations can be one such tax rate 0f43 cents compared to 65 cents iii cities without a torm of indirect taxation. Electric utilities, since - ' utility--a ditti:rence of51 percent. their gross revenues are higher, tend to be a larger There are many other variables source of profits and transitrs tlian other enter- that could partially explain these prlses. 1 his gives rlse to questions about how . . . a transfer can results but none would discount much should a utility pay and what etkct do create very strong them. transfers have on credit quality. S&P, to some extent, examines Transfer policies do affEct credit ratings. Stan- leal coveraige of transfers' effects on spending and dard & Poor's Corp, is less concerned about the tax rates. If S&P is comfortable dollar amount of transfers than about the policy debt service, if it is that a utility operation call give from which they are derived. S&P does not, ill properly positioned, financial assistance to other city isolation, consider a particular amount of money operations without endangering to be too little or too much. In fact, high levels in tbe flow of its own financial and operating of transfers from a utility do not necessarily pre- abilities, then transfers typically clude high ratings. However, not having a clear funds. will not affect the credit evalua- policy to define and limit the financial risk of tion. However, there is always HI. tratisters will often negatively impact credit qual- . , some reservation when any oper- ity. Conversely, a well-defined and stable use of transfers ating fund is not adequately self-supporting. With few ex- can enhance credit quality. ceptions, a city that is heavily dependent on utility fund Although utility transkrs are a significant source of mu- transkrs has reduced its political and financial flexibility to ilicipal revenue in many states, tile subject is relatively un- raise other revenues. This creates the potential fur very ditli- derstudied and underdisclosed. However, the studies that cult financial decisions. have been done, most notably one by Charlie B. Tyer at the The clearest conclusion we have drawn regarding trans- University of-South Carolina, have reached consistent con- ters is that tile worst policy is no policy. This refers to Cities clusions: transfurs can cause either a higher level ofspend- that determine how much to trans|2r to their general funds ing or a lower rate of taxation than a city would otherwise each year by tile needs of the general fund budget and not be able to support. One other ettect could be a city using by any defined formula. This type ofarrangement often cre- utility rates to enhance revenues received from an otherwise ates a significant amount of financial instability and uncer- tax-exempt or shallow property base. Either way, a city taitity fur both the general budget and the utility budget. In heavily dependent oil transfors will almost inevitably con- our minds this approach leaves a utility's cash reserves prone front the disappearance ofthe "tiscal illusion" ofbeing able to erosion. There are many instances of the dangers of this 15 In C..........1.... fl.....1,... 1001 type of approach to transfet:s but a most striking example is of the transler cim be unimportant. For ex.unple, the city of - that of the participants in the North Carolina Mullicipal San Antonio's revenue bond resolution permits 14 percent . Power Agency No. 1. of the utility's gross revenues to be triiisferred to the gen- A particular example is the City 01 (lastonia. In 1990 Cral fund. 1'|lis alilcillilted to $110 tilillion in 1990 or 38 Gastonia's A+ general obligation bond rating was assigned percent 01 general fund revenites. Despite this large trahs- a negative outlook, which reflects a likely rating trend within fit-,the titility has a AA.ratiiig, which is very strong fur dec- tile next one to three years. Among our reasons wAS the tric and gas revenue bonds. Olle reason is that tile litility |las city's potential tinancial dilliculty resulting from decreased proven its ability to foll,),v its transfer policy without alltet- ability to make trilisfei-s from its electric utility operations. ing its capital plans or its very low rates. S&11 has gained During 1984-89, the electric filnd trallsfurs accounted tiur com|brt with the high transfers because the policy has re- between 32 and 49 percent of general fund revenues. The mained unchanged since 1963. In addition, since the trans- city faces a dillicult political dilimma. Ifit contimics to make QI· is based on a percentage of revenues instead of a lixed large transIErs, its electric rates will become less competitive dollar amount, it is the city's general fund and not the litil- compared to other cities and Duke Power Co. The alterna- ity that is exposed to changing fuel costs and weather-re- tive is to raise its well-publicized low tax rate-which at 32 lated fluctuations in energy demand. This can be a crucial cents in 199() was easily the knvest c)| illy Sigililicalitly sized fbature of a fixed tl'aliskr policy. <)11 the (,ther |land, the city iii the state. One indication of the niagilitilde of tlie gencial Ailli|'s exposill-e to these Illictilations contribilted to challenge Gced by the city is the thet that it unsuccessfiilly the City's general obligation rating downgrade to AA from explored the possibility ofsellingits share in NCMPA and AA+ iii 199(). its disti-ibution system to Duke. Some city ollicials believed V.11-ious policies, even iflixed, Call i tilp.let dellitilent.illy that the financial benefits of a sale Cotild possibly be lised to on a utility's bond rating. In a recent attirmation ofthe Jack- avoid having to raise taxes. S&P saw this as evidence of po- sonville, Fla., Electric Authority's AA rating, S&P said the litical stress. Meanwhile, Gastonia has compromised, rais- litility's potential exposure to increased general fund trails- ing taxes sonic and reducing trills|61-s some. fers \ras one reason why a rating lipgrade was tic)t warranted. The characteristic of high transturs and low tax rates is Although the Jacksonville City Council has limited transters common iii many NCMPA-member cities. Also common is to an allie)lint based on kil~)watt-liour sales that results ill the rising cost of wholesale power fi-om tile joint action transfurs ofless than 10 percent of gross revenues per year, agency. To stay competitive, the cities need to lind WayS to the Jl·.A bond resohition allows a 11'.ills|G~ up to 30 percent reduce other costs, including tratistdrs. S&P has stated plib- ofrevenues ill ally given year. The council policy is reviewed licly that NCMPA's A rating cotild potentially be revised every five years. Alt|lough we have been comtortable with downward.unless the cities and the agency el}1:ctively ab- JEA's ti-atisfer practices to date, recent budgetary problems sorb the rising wholesille costs witholit croding their retail ....„._____,.__...... . ....W.......4„...,--m-....~.„41... rate competitiveness. Statewide, there have been improve- Questions To Consider 4 9':2'Z' ments on this front. Cities tliat own electric utilities have reduced transfers to an average of 28 percent of general fund About Transfer Policies revenues in 1990 from 36.5 percent iii 1984. Progress on 1. Does the size ofthe transfer reduce the city's politi~' this and other potential cost-absorbing fronts led S&P to cal or financial flexibility to raise other revenues? assign a stable outlook to tile power agency's rating. 2. Is the utility making transfers while delaying or fore- i Austin, Texas, is another city with ati unclear transfer going pursuit of its long-range capital plant? policy. S&P downgraded the city's electric titility iii 1988, 3. Does the transfer take place despite pressure on aN citing deterioration in the utility's operating and tinancial flexibility resulting from policies adopted by tile City. His- system's rate competitiveness? 4. Does the transfer represent a concentration in the. torically, the utility has transterird .lbolit 10 percent of its general flind's revenue stream and, if so, will the utility· gross revenues (rolighly $60 lili||ion) to tile gelleral lillid. By' itself, this is not a problem. The problem lies in tile fact be able tO Sustain the level of transti:rs over the long term? I 5. Which fund is forced to absorb the financial impact.:, that the city does not abide by a consistent method to arrive of nuctilating fuel costs and energy demand or other; at this dc,Ilar amount. 7'lie ticeds oftlie general limd deter- fijiaticio] stresses? mine the aillount transferred each year. The utility's bond 6. Does the size of the tbrmula behind the transfer leave- resolittle)11 allows unlimited trilisfers, creating uncertaility. Compounding the problem fic,tii a credit perspective, the the city exposed to external opposition, especially from Austin City Council has beell relitctant to raise electric nites large clistoniers or clistoniers outside city |inlits? 7. Is there clear disclosure of the amount of money Sll Miciently to Cover the tr ans tbrs :111<.1 to pe] 111 it the utility to being transferred between funds in bond documents lind pursue its long-range capital planning consistently. Austin finaticial statements? (Hesitancy to say how much is trans, 5 recently initiated a study to decide a fi,rinal transfur policy. A fixed policy is better than no policy. A fixed policy tbrred and Why raises questions about the level of coid-; allows fur smoother Litility budgeting and capital planning. furt that ollicials teel about their policies.) 8. Is there both stability and conunitment to the chosdn If the fixed policy is not overly b,11-liensome and is not so rigid as to be dainaging to tile litility, then tile doHar aniount policy? Cl 1 6 i,imi,i~; row~,~ si , of the city's general fund left us uncertain whether council furces can have cither a positive or negative impact on how will use its ability to close the gap between what's allowed we view credits in particular states or regions. North Caro- and what has been historically transferred. lina cities have been mentioned often as having some gener- Greenville, N.C., Utilities Board has become embroiled ally negative characteristics associated with their unstructured in a conn-oversy over the ainount of moncy it translurs to its approach to nulking transfers. The main reason fur this is city goverimient operations. Iii what sonic critics claim that tew utilities in the state have authority to issue revenue was an attempt to increase transfers, the City Council debt where a bond resolution could limit transfer amounts. attempted to take over the independent Utility. Public resis- Massachlisetts also has a relative scarcity oflocally issued rev- i tance furced a reconsideration of the plan but a compro- enue bonds. The state's budget problems and local govern- mise arrived at a shift in transfer policy from 6 percent of ments' revenue-rasing restrictions resulting from Proposition fixed assets to 2.5 percent of gross sales, although the 2-h place further pressure on utility operations. A signifi- dollar amount remained essentially unchanged. This case cant raid on the finaticial reserves of tile participants in tile revealed general fund budgetary pressures that need to be Massachusetts Municipal Wholesale Electric Co. will be fac- monitored closely. tored into tile review of that agency's credit rating. In our financial analysis, Standard & Poor's will typically In other states and regions inherent characteristics often treat all types ofcross-fund appropriations identically, what- can lead to consistently stable tratistcr policies. Otie example ever they are called. No matter where the tratistkrs may tall is ill Tellnesse where tile Temiessee Valley Authority's mu- out of the utility system's flow of funds, S&P will calculate nicipal customers' contracts restrict tlie amount of tratiskrs debt service coverages that incorporate the full transfer as that can be made, using a property tax-equivalent formula. ati operating expense. This provides a more accurate assess- Iii doing so, TVA ensures that retail customers accrue the ment of the impact of this inescapable budget item on fi- benefits of low-cost power. Laws in other states, such as In- nancial operations. This doesn't prevent S&P from noting diana, place similar restrictions on transfers. These have a positively that a transfer can create very strong legal cover- positive impact oil credit ratings. 0 age ofdebt service, if it is properly positioned iii the flow of funds. Willinin Cox is a ratitul (4Jicer in Standard e Pooes Corp.'s S&P recognizes that often the type and amount of trans- Municipal Finance Department. Tbis article is adapted front fers that can be made from a utility to its municipal owners a talk be presental nt tbe American Pitblic Power Association's are governed by tbrccs that are beyond citlier's control. These annital national conference in Nasbrille, 7'cnn., last Jitne. 17