Utilities Rate Advisory Commission Meeting - July 23, 2014

The Utilities Rate Advisory Commission (URAC) met on Wednesday, July 23, 2014, at 5:30 p.m. in the Council Chambers at 915 I Street, Sacramento. The meeting was chaired by Douglas Brown. Commissioners present: Christopher Butcher, Douglas Brown, Steven Archibald, Timothy Horner, and Scott Brown. Absent: Kevin Schubert and Carolyn Veal-Hunter. The commission approved the consent calendar, received updates on the Department of Utilities quarterly accountability plan and rate development planning, and discussed upcoming rate structure changes and retirements.

Consent Calendar

• Approval of Minutes for April 23, 2014: Moved by Christopher Butcher, seconded by Timothy Horner. Passed unanimously (5-0).

Discussion Items

• Department of Utilities Quarterly Accountability Plan Update: Director Dave Brent presented the update, including a preview of the new community engagement website (Sacramento Waterworks.com), bond expenditure status ($51 million spent of $240 million water bond; $12 million spent of $30 million wastewater bond), the water meter program (65,000 meters installed, 70,000 more to be installed by January 2025), and a drought update. He reported that the discontinuance program had issued 470 30-day notices: 48% of customers entered 12-month payment plans, 10% paid in full, 6% were exempt due to low-income status, and 51 services were terminated. The commission discussed project budgets (most coming in under estimates) and the water meter schedule.
• Department of Utilities Rate Development Planning Update: Presented by Wally Cole, Senior Management Analyst; Susan Goodison, Supervising Financial Analyst; and Lucy Edmund Crocker of Crocker & Crocker. Topics included the three-step rate development process, the 35-3 capital planning approach (30-year infrastructure plan, 5-year CIP, 3-year funding plan), and results of the last rate adjustment (fiscal years 2013-15). Susan Goodison provided report backs on fund balances (available fund balance for June 30, 2013 shown), debt obligations ($475 million outstanding as of June 30, 2013), and FY2014/FY2015 budget updates. She noted water and wastewater revenues were coming in higher than April projections but still below budget due to drought conservation ramping up. Debt service coverage ratios were projected at 2.4 times for water and 2.1 times for wastewater in FY2015, well above the 1.2 covenant. Lucy Edmund Crocker presented findings from the stakeholder group process on rate structures. Stakeholders expressed overwhelming support for keeping the unmetered flat rate structure unchanged until 2025, emphasized equity, conservation, and simplicity, and noted that tiered metered rates would require steep differentials to drive behavior change. The final findings report will be presented at a future meeting.

Member Comments – Ideas, Questions, and Meeting/Conference Reports

• Commissioner Scott Brown reported that he and Commissioner Veal-Hunter toured the recycling facility in South Sacramento, noting the facility could not process shredded paper in bags.
• Commissioner Douglas Brown announced his retirement from the commission; his last meeting was expected to be this one. He requested that the agenda be distributed earlier to allow commissioners time to suggest additions.
• Commissioner Christopher Butcher requested information on the economic benefits and cost savings/losses of the every-other-week recycling system, to be presented at a future meeting. He also noted his retirement from the commission.
• Commissioner Steven Archibald and Chair Douglas Brown praised outgoing Utilities Director Dave Brent for his leadership through difficult times and the bond-financed infrastructure strategy.
• Dave Brent announced his last day with the city is August 29, 2014, after 23 years.
• The commission discussed the Prop 218 process timeline. Staff indicated that formal rate proposals would be brought forward at a later date; a 45-day notification process is required. Solid Waste may present rate restructuring information in September.

Key Outcomes

• Approved consent calendar (minutes of April 23, 2014) unanimously.
• Received and filed the Quarterly Accountability Plan Update and the Rate Development Planning Update.
• Noted the completion of the stakeholder rate structure review; findings report to be presented at the next meeting.
• Scheduled future meetings: August 27, 2014 (regular meeting agenda with potential new chair election); September meeting dates also reserved.
• Staff will provide information on recycling program costs at a future meeting.
• The commission acknowledged retirements of Chair Douglas Brown and Commissioner Christopher Butcher, and Director Dave Brent's departure.