Gao, Beilei
From:
Sent:
To:
Cc:
Subject:
Monday, June 9, 2025 1 1:03 AM
Gordo, Victor; Hampton, Tyron; Rick Cole; Jones, Justin; Masuda, Gene; Rivas, Jessica; Madison, Steve; Lyon, Jason
Gao, Beilei
Item 14. Proposed Power Operating Reserve
&
You don't often get email fromLearn why this is important /i\] CAUTION: This email was delivered from the Internet. Do not click links or open attachments unless you know the content is safe. Report phish using the Phish Alert Button. For more information about the Phish Alert Button view article "KB0011474" on the DolT portal.
The proposed amendment to Municipal Code 13.04 creates new reserves that virtually guarantee the financial success of PWP's current Power Operating Model which is reliant on imported energy. Further, it totally ignores the promised transition to increased local generation of solar power coupled with battery storage.
Locally generated solar power with storage would reduce requirements for purchased power (e.g. power supply costs). It would also significantly reduce the need for long-distance power transmission (e.g. transmission service costs), as well as associated fire hazards from high voltage lines.
The proposed text of 13.04.175 - Reserve for Working Capital was apparently provided by consultants forthe Electric Rate Study. Itisfullof ambiguity and duplication and does not include a list of definitions such as those found in other code sections. Related definitions found in Municipal Code 13.04.170 and .173 duplicate items found in several of the seven different reserves which are proposed: a) Labor is included in Operating Reserve, Fuel Costs, Power Production Costs, and Transmission Revenue Requirement, b) Debt Service has a separate reserve: it is also included in the Energy Cost, and Transmission Cost. c) General Fund Transfer has a separate reserve; it is also included in Energy Costs and Transmission Costs.
1. Operational Reserve. How are operating expenses defined? Is this determined by the City Council approved fiscal year Operating Budget?
2. Debt Service Reserve. An earlier version stipulated that this reserve should be the amount of one year Principal Payment for Outstanding Bonds. However, the current version stipulates one year of Debt Service Payments which includes Principal and Interest.
3. Capital Expenditures Reserve: One-year of budgeted capital expenditures. How are capital expenses defined? Is this determined by the City Council approved fiscalyear Capital Improvement Plan (CIP)?
4. General Fund Transfer Reserve: One-year of budgeted General Fund Transfer. How is this determined? Is this the Council Approved General Fund Transfer?
5. Energy Services Charge Reserve based on projected power supply costs, hlow are these calculated? See Municipal Code 13.04.173, Section 4-D
06/09/2025
1ITEM 14
"Energy Costs" include operating margin, debt service, and the genera/funcf transfer associated with these costs.
"Fuel Costs" include in-plant handling of that fuel gas and fuel oil [a^a'ce^ Q labor charge).
"Power Production Costs" include Fuel Costs, labor, operating and maintenance expenses.
6. Transmission Reserve based on transmission services cost. How is this calculated? See Municipal Code 13.04.170, Section 3-C
"Transmission revenue requirement" includes labor and operating costs, associated general fund transfer, operating margin, and debt service.
7. Contingency Reserve adds additional reserves which duplicate reserves already included in the list above: #1 Operational Reserve and #3 Capital Expenditures.
Operational Reserve: 60 days or 90 days of operating expenses PLUS Contingency Reserve:
60 days or 90 days of operating expenses
Capital Expenditures Reserve: one year of budgeted capital expense PLUS Contingency Reserve: 60 days or 90 days of capital expenses
The current draft ordinance includes two options, 'Minimum' of 60 days cost -OR- 'Target' of 90 days cost for five items: the Operational Reserve (#1), Capital Expenditures Reserve (#3), Energy Services Charge Reserve (#5) Transmission Services Charge Reserve (#6) and Contingency Reserve (#7). Who decides whether to apply minimum transfer @ 60% or targeted transfer @ 90%? What is the basis forthe decision? When is the determination made? Adequate reserve amounts are important for prudent operation. However, the proposed reserves appearto guarantee Power operations regardless of management decisions. They also guarantee General Fund Transfers of 1 2% from the Power Fund to the City General Fund - a handsome return for a normal business but a virtual tax on ratepayers by our municipal utility.
The proposed ordinance is at the expense of Power Ratepayers. Power Cost Adjustments from March 2023 through December 2024 resulted in record income for the Power Fund in FY 2024. This 'surplus' was due in large part to increased costs for ratepayers whose reward was an additional $10 million General Fund Transfer to pay for items unrelated to power operations. Why were 'surplus'funds not reinvested in our solar future, for families, neighbors, businesses, and for our City? Who will pay for these duplicative reserves? Electric Ratepayers. This is the third Municipal Code amendment presented to Council by PWP in preparation for the Electric Rate Increase as explained in the Fact Sheet for Ordinance 7441: "In August 2024, Pasadena Water and Power initiated an electric rate study that included review of the current rate ordinance." Rate increases in 2024 for Water (PWP) and for Sewer (Public Works) included increased and new reserves which contributed to the price shock for ratepayers. History is repeating itself.
PLEASE REQUIRE EXPLICIT LANGUAGE DEFINING THE RESERVE FUNDS, ELIMINATION OF
UNNECESSARY DUPLICATION, AND RESERVES THAT MEET REAL NEEDS, NOT A WISHLIST OF GUARANTEES.
2 Genette Foster
Ratepayer, District 2
3