HomeMy WebLinkAbout1406 - Modification of the Existing Power Cost Adjustment **Rescinded 8/6/19 by Resolution No. 2019-075** 'CITY OF REDDING, CALIFORNIA
Council Policy
• SUBJECT Resolution Policy Effective Page
MODIFICATION OF THE EXISTING Number Number Date
POWER COST ADJUSTMENT 96-218 1406 12/3/96 1
BACKGROUND
The power cost adjustment (PCA) was established initially on December 6, 1988, by Resolution
88-432 to provide a method of charging or crediting electric customers' monthly bills to reflect
charges or refunds to the City from the Western Area Power Administration's (Western) revenue
adjustment clause (RAC). On February 6, 1996, Council approved setting aside a portion of RAC
refunds to build up a rate stabilization fund (RSF) to cover a portion of future anticipated expenses
resulting from the cancellation of a power sales contract the City has with Western. During its
regular meeting of November 19, 1996, the City Council voted unanimously to establish a policy
to so set aside 100 percent of the Western RAC refunds.
PURPOSE
The Western contract cancellation will result in a $10.6-million revenue shortfall for the City over
the 1999-2001 time span. The Electric Utility expects to offset $7.4 million of that by selling the
power in the spot market. This leaves a $3.2-million revenue gap which will remain after the spot
• market sales. Unless all of this gap is offset, the difference would have to be made up in rates or
from funds that otherwise would be used to reduce debt. It is the purpose of this policy to modify
the PCA by setting aside 100 percent of RAC refunds in order to mitigate any future rate increase.
POLICY
1. There is hereby established a policy that 100 percent of RAC refunds will be set aside in
the RSF to cover future anticipated shortfalls between what Western would have paid and
what the City can now get for this energy resulting from the cancellation of a power sales
contract the City has with Western.
2. In the event the RAC refunds set aside in the RSF exceed the amount needed to cover the
revenue gap, proceeds from this fund shall be used for the purpose of industry restructuring
or shall be rebated to customers as directed by the City Council; but in no case shall
proceeds from this fund be used for non-Electric Utility purposes.
PROCEDURE
The following procedures shall be followed to implement these policies:
1. The City Council directs the City's Electric Department to identify on invoices received from
Western the amount of any RAC refund.
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CITY OF REDDING, CALIFORNIA
Council Policy
• SUBJECT Resolution Policy Effective Page
MODIFICATION OF THE EXISTING Number Number Date
POWER COST ADJUSTMENT 96-218 1406 12/3/96 2
2. The Finance Division shall accumulate 100 percent of RAC refunds in the existing RSF
deferred-revenue account established within the Electric Utility fund for RAC refund
purposes.
3. The City Council shall approve, in accordance with this policy, any payments to be made
from this RSF.
4. At such time as the original or any subsequent purpose for this RSF is met, as determined
by the City Council, any remaining balance in the fund shall become a part of the rate
reduction account within the RSF or shall be rebated to customers as a credit on their bills
or shall be used to offset any rate increases.
5. Any interest earned on the fund shall be applied to the account balance.
Amended 2/ 18/97 , Resolution 97-22
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Courr 1258.96
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