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7 Rate and ~irtartce Challenges <br />T,e Municipal Utility is owned by the rily an(I the citizens it <br />serves. As such, the city is entitle(I to a reasonable return on its <br />investment. The Municipal Utility makes a payment in lieu of tax <br />(PILOT) contribution to the city every year. Historically, the <br />amount of the f ILOT has been more or less neyotiatecl between <br />the Municipal Utility and Ule city. The Municipal Utility believes <br />the historical PILOT amount has been reasonable. Rec(:udy, the <br />city has come under economic pressure to increase fclnding and <br />has requested a significant temporary increase in the I'lLOT pay- <br />ment from the utility. The Municipal Utility is concen)ed that the <br />new f ILOT amount is unreasonable, the increase will not br: ten) <br />porary, and the utility may be viewed as a source for future <br />increased funding needs. <br />I t, .~ }, r ` ~ ~ <br />t~ <br />ISSUE 6 <br />he Municipal Ulility has onyl:)inct capital nee(Is to (anti infrastruc- <br />ture improvements and a(IdiGons to its system. It has outstanding <br />debt relate(I to past capital a(Iditions, and it maintains a favorable. <br />aril stable rating from the rating agencies. The utility is projecting <br />a steady increase in capital needs in the future for renewable re- <br />sources, ~1N11 systems, peaking generation and other local system <br />additions. The Utiiily Board is not debt-averse, but it prefers to pay <br />for capital needs out of reserves anll cash flow as much as possi- <br />ble. As increasing costs and opposition to rate increases combine <br />to diminish available margins, the board is concerned about its <br />ability to rnaintafn the utility's band rating while relying more on <br />debt financing of capital items. The Municipal Utility needs to <br />strike the light balance r•.onc(?rniny funding of capital. <br />~r I` ' ) 1~ ti~ ~ IAI' .I~' <br />tt ,~ ~ ~,~ <br />The Municipal Ulility detrnniu(•d Ihat its goals rclate(I in the <br />' <br />' <br />' I'hr, ,lhlnicipal l,)tilil~~ currently funds (lepreeialion through its <br />t <br />ILO <br />1 <br />;u'e lairntss, predictability an(I Ir:ulsparency. I'airncss \vill rides. It tuts decided to establish a policy to use the cash Ilo\v avail- <br />hc resoh'ed llu'aut;h dircl•t (liscussious \vith the city. The ,\tunil•ip;d ;Ihlc born llllldlllg IIOII-C:ISII Ilow (lepreciation tv fun(I normal <br />Utility \vill collect infornrdiun ref;:u(ling other nunlil•ipally o\vned <br />" uul;r,ing capital nee(ls. 1f capital nee(Is in a given year arc Icss than <br />utilities xnll their P1LO <br />I' pa}7nenls ;LS well as lrancllise an(1 Drop- (leprcl•i;)1ion, the excess funds \vill bc: added to ;( c;lpihd rescr~'c ac- <br />erty taz inforn)alion li)r communities selve(I by investor-owned colrl)t. 11•capital nee(Is exceed depreciation funding av;lilable <br /> <br />utilities and Iota) electric lvoperati\'es. Once a lair lcmlrihuliun is , <br />capital r<'se)~-c ,lands \vill be utilized as \vell. If these !ands are not <br />dcterlninc(l, the issue of prc(lictability caul be addressed. i'rc- snlTiricnt, the nlility will rely ou issuing a <br />ll(litional debt It \vill in- <br />(hcfal.)le 1CVClti Ol 1'1L01 pa~'nlt'lltti al'C a(h';111fagCnllS (U both tllr' <br />' l <br />l'1'C:IS(' ILC 17)teraetlQll O'Itll ItS 111U1I1Clal alll'ISCI' ;11111 the rallllg <br />city and !hl? 1Lmiripal Ulility. <br />fhlrrc :ue unnu•rolls ntclho(Is av;lil- <br />able li)r (revising a predictable c.•alcnlatiun of P11.0"I; iucludiug as a :lger)cies to ensnrc it mailtlaius or improves its clurent ratJng. 'hhe <br />uGlily also phrns to \vork with its <br />;o\'ernin <br />hlxl <br />t <br />k <br />I <br />1 <br />~..._~ perl•ent;lge of revenue, an auu)unl per energy sol(1, a percl•ntagc of <br />l l <br />g <br />y <br />o ma <br />e sure <br />-loar( <br />rnl•Inbcrs nndersland the need to maintain a fn•rnable rating; ;uul <br />p <br />ant iu sen'ice, :( lixcd anlounl with :ul csl•alalor an(I olhecs. f;ach the et(•I)s ne•cessar) to a(•1lievc fhal goal. <br />81L't11Ud 11:IS adValltag('ti allO (hSnd\'alllagC~, belt 11 hlll'lICSe 0;111 be <br />CY)Illhllle(11\'Ilh prelllClal)dll)', 111(.' ~'11It1ICIp:11 Uhhly U'lll Ilil1'(f 81'r't\'E'(1 <br />Ut :)Il OptCO)nC that hl;'st S(?Il'('ti Il5 nltl'p;l}'L: rS. 'l•IIC IStiIIC Ul ll'allti- <br />p;a'elicy can he a mor(r dillicnh political l•hallenge. "there .are nuuly <br />a(Ivordes of pla(•illg a separate line item un the utility hill In ulrulilti~ <br />the PILOT p:lynlent, so the Municipal Ulility has decided that it <br />~+~11 adopt ibis pr,•lclice. ,\s nlilily hills get more conq)licaled arul <br />costs increase for a v:a'icty of re;uous, thl:' \qunicip;ll lJlilily has dc- <br />tcrminell that it \v:nlts its custunlcl:c to h;n'c ae nnlc:h infirrn)atioll ;ls <br />possible to understan(I the indivi(Inal l•omponents that make li <br />p <br />their bills. The utility also Icels that if the !'ILO'! paynlenl is de- <br />len(l:lble, there is no re<I-eon nut to list it scpar:dcly. <br />As atilt#y bills get more complicated and costs increase for a variety of reasons, the <br />Municipal Utility has determined that it wants its customers to have as much <br />information as possible to understand the .individual components that make up their <br />bills, <br />ZO SEPT[tv1(1F:R 2009 <br />t~UBLIC Ppwf: F1 <br />