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Anaheim, CA 92805
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CITY COUNCIL AGENDA REPORT
City of Anaheim
PUBLIC UTILITIES DEPARTMENT
DATE: APRIL 18, 2023
FROM: PUBLIC UTILITIES DEPARTMENT
SUBJECT: AMENDMENT OF ANAHEIM PUBLIC UTILITIES’ FISCAL
YEAR 2022/23 BUDGET FOR POWER SUPPLY EXPENSES
ATTACHMENT (Y/N): NO ITEM # 05
GOVERNMENT CODE § 84308 APPLIES: NO
RECOMMENDATION:
That the City Council, by Motion, authorize an amendment of Anaheim Public Utilities’ (APU) Fiscal Year 2022/23 budget, increasing appropriations by $48,000,000 for power supply expenses, which are recovered through corresponding wholesale revenue and do not require customer rate increases.
DISCUSSION:
At their meeting on March 22, 2023, the Public Utilities Board (PUB) recommended that the City Council approve amending APU’s Fiscal Year 2022/23 budget for power supply expenses.
Over the course of the current fiscal year, APU has employed hedging strategies to contain costs given the significant volatility in the price of natural gas, and correspondingly, increases in the price of energy in the wholesale electricity market. By securing a considerable portion of natural gas supplies through fixed price contracts, APU mitigated its exposure to market volatility and protected customers from significant rate pressures causing other neighboring utilities to raise rates. The budget amendment request primarily reflects APU’s cost of dispatching power resources (above what is needed to serve Anaheim customers) to the electric grid. APU recovers the additional fuel and operating costs associated with dispatched power through wholesale electricity revenue, so customers experience no rate impact.
The California Independent System Operator (CAISO), who manages the reliability for most of California’s electric grid, dispatches APU’s power generation resources to meet the region’s demand for electricity. This is part of the wholesale electricity market that allows APU to offer excess power to the grid or purchase energy when needed. It is important to note that there is no profiting from the wholesale market, as APU only bids its requisite operating costs including labor, fuel, and other supplies. Because of escalations in natural gas prices, the cost to run plants has been higher, necessitating Amendment of Anaheim Public Utilities’ Fiscal Year 2022/23 Budget for Power Supply Expenses April 18, 2023
increased wholesale prices that need to be recovered. Accordingly, the netting effect of increased expenses offset by increased wholesale revenue results in no impacts to Anaheim customers.
The appropriations requested represents both the increased power supply-related expenses incurred to-date and projected to be incurred before fiscal year end.
IMPACT ON BUDGET:
This action, which does not impact electric customer rates, will increase APU’s Fiscal Year 2022/23 restricted Electric Utility budget by $48,000,000 for increased power supply expenditures, which are recovered through corresponding wholesale revenue.
Respectfully submitted,
Dukku Lee
Public Utilities General Manager