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04-495Council FYIe # � � S C« Presented RESOLUTION SAINT PAUL, MINNESOTA �D Refezred To Committee Date Resolution to approve SL Pau1 Port Authority's request to amend their customer billing rates for the Energy Park Utility 1 Wf�REAS, St. Paul Port Authority filed a notice on November 18, 2002 of a proposed demand rate 2 increase for the Energy Park Energy System. The heating and cooling demand rate increase became 3 effective an January 2003, until approved or denied by the Saint Paui City Council pursuant to Secrion 6(e) 4 of the Energy Park Energy System Franchise; and 5 6 WHEREAS, evidence and recommendations have been presented to the City Council in the manner of a 7 City staff report submitted to the City Council on Apri126, 2004, in conjunction with a public hearing on 8 this matter; now therefore be it 10 RESOLVED, the Energy Park Energy System customer billing rates proposed by the St. Paul Port Authority, 11 effective January 1, 2003 through June 3Q 2005, appear to be reasonable in today's market conditions, and 12 thus formal approval by City Council Resolution is recommended based on the following: 13 14 l. The heating and cooling demand rate changes from $693.56 to $716.77 for 2003 and $731.05 for 15 2004 per MMBtuh per month. An increase of 33% and 2.Q%. 16 17 2. The heating energy rate remains $3.80 per NIMBtuh. 18 14 3. The cooling energy rate remains $3.73 per MMBtuh, and be it; 20 21 FINALLY RESOLVED, the Energy Park Energy System Franchise expires on July 1, 2005; therefore it is 22 recommended that: 23 24 25 26 27 28 29 30 31 32 The Saint Paul Port Authority begin renegotiating the franchise agreement with the City for the Energy Pazk Utility System. 2. The Saint Paul Port Authority provide to the City a plan that addresses future expansion, modification, capital needs and related financing. This plan shouid also address the Deparhnent of Natural Resources' ground water usage requirement that becomes effective in 2007. Green Sheet # L 5 S� \ � ' oY- �f 9S � z 3 4 5 6 7 8 9 10 il Adopted by Council: Date � S � �� --7— Requested by Department of: Office of Fin ncial Services t ty: <' . o � Form Approved by City Attorney By: `i� �S cl. }� . /J.l,t,�t� Adoprion Certified by Council Secretary By: _/� — t Approved by By: 1 Rate Review�EPUC Rate approval resolutlon-FY03.wpd 22 � � y � � Green Sheet Green Sheet Green Sheet Green Shee# GreenSheet�r-eea-She - - Departrnent/officelcouncil: Datelnitiated: GI�e'eIl ShP.et NO 3015555 FS Finaucial Savices 26APR-04 Gonta�� Person � Phw�e: - Deoartment _ SeM To Person IoitiaUDate �� � � 0 ' ao 'al ervi 266-8822 A551gn 1 nau 'aiServi De a nt irector Must Se on Council qgenda by (Date): Number 2 • so •s1 ervi Of5 an al OSMAY-04 �//, For .1r�„ T•ry! Routing 3 Atto --�71-/L-.. Orde� 4 a 1 ce / - 5 ouncil G Cou cil 6 rk erk ToWI # of Signature Pages ` (Clip Ail Locations for Signature) Action Requested: Appioval of Saint Paul Port Authority's request to amend the 7anuary 1, 2003 through 7une 30, 2005 Energy Pazk Energy System heating and cooling customer billing rates. Rea�mmendations: Approve (A) or Rejed (R): Persona{ Service Contracts Must Mswer the Foflowing Questions: , Planning Commission ' 1, Has this person/firm everworked under a contract for this depadmenY? CIB Committee Yes No . Civii Service Commission 2. Has this person/firm ever been a city employee? Yes No 3. Does this person/firtn passess a skill not normally possessed by any curtent ciTy employee? Yes No Explain all yes answers on separete sheet and artach to green sheet Initiating Problem, tssues, Opportunity (Wfio, What, When, Where, Why): In accordance with the Energy Park Energy System franchise, the Saint Paul Port Authority has filed notice to amend Schedule A of Saint Paul Legislative Code, Appendix G, as amended The City Council must review the evidence of tlus rate case and approve or ' deny their xequest The attached resolution recommends approvai of the new rates. AdvanWges H Approved: Enexgy Pazk's demand rate will be sufficient to cover demand-ielated costs. RECEIVEQ oisadvantapeslfAparoved: �QPR 2 (j 2�04 None. MAYOR'S OFFICE Disadvantages If Not Approved: The rates would not be sufficient to cover demand-related costs. Total Amount of CosNRevenue Budgeted: f � Transaction: �,6�;pu;' �'3`n.�+-R�R P°nAa�� Funding Source: Activity Number: Financial Information: A, �,� c� � � (E�cplain) � �a o�(- y 95 City of Saint Paul Interdepartmental Memorandwn To: Matt Smith From: Lori Lee, Chair,/-�,p4, Franchise Team` 7 '� u Date: Apri123, 2004 Subject: StaffReport for Proposed 2003-2005 Energy Park Energy System Rates This memorandum discusses the Franchise Team's review of the Energy Pazk Energy System proposed rate changes effective January 1, 2003 through 3une 30, 2005. PROCEDURAL HISTORY Pursuant to Secrion 6(e) of St Paul Legislarive Code, Appendix G- Energy Park Energy System Franchise - Port Authority (City Ordinance 16960, adopted September 28, 1982), as amended; the Port Authority of Saint Paul (Port Authority) filed notice on November 18, 2002 with the City Clerk of its intent to change rates charged to Energy Park Energy System (EPUC) customers. The Port Authority Board of Commissioners passed a resolution on November 26, 2002 authorizing the increase in the Energy Park Hot and Chilled Water System demand rate be submitted to the City Council for approval. The Port Authority was informed that an interdepartmental team, the Franchise Review Team, had been assigned to review their request. The team requested additional information regarding the rate increase and met with Port Authority staff Peter Klein and L,orrie Louder. Proper notice, publication and public hearing on the proposed rate change will be completed by May 5, 2004. These steps, along with the process to date, zvill satisfy all procedurai requirements of the franchise agreement. Background: In August of 1985, the City of Saint Paul granted a franchise to the Saint Paul Port Authority to operate the Energy Pazk Energy System through July 1, 2005. Since then, the Port Authority has adopted a schedule of rates, wtvich have generally been in effect for a period of five years and then renewed again. The last tnne City Council approved rates was on March 4, 1998 for rates effective from March 1, 1998 through December 31, 2002. Staff Report for Proposed 2003-2005 Energy Pazk Energy System Rates OC/_ ��� April 23, 2004 Page 2 PROPOSED CHANGES The Port Authozity proposes the Demand Charge Rider under Schedule A of the Energy Park Energy System Franchise shall be amended by the following language: Begvmiug on January l, 2003, and continuing through June 30, 2005, the demand portion of the hot water and chilled water rate schedules shall be adjusted and shail remain in effect until the end of such periods listed below, using the following formula: O1/O1/2003- O1/O1/2004- O1/O1/2005- 12/31/2003 12/31/2004 06/30/2005 Fixedreimbursement $270,000 $270,000 $135,000�'� Plus budgeted demand-related expenses 521,378 555,881 ��'-� Subtotal $791,378 $825,881 � Multiplied by 1 1 1 Budgeted demand revenues before 10% reserve for repairs, replacements, modifications and expansions $791,378 $825,881 �cac Divided by 90% 40% 90% Budgeted total demand revenues $879,309 $917,646 ac� Divided by budgeted energy demand (NIlVIBtuh) 1,227 1,255 �c Demand charge (cost per M1�IBtuh per month) $716.77 $731 A 1 $� (1) for %-yeaz period Ol/01/2005-06/30/2005, fixed reimbursement is $270,000 annually/2 =$135,000 (2) The 2005 budget will be completed in October of 2004. �1 �1% /�' 1 7��'J�7'. �L��i� The team reviewed: • Change in Overali Rates • Change in Direct and Indirect Expenses • Debt Service Obligations • Capital Reserves Staff Report for Proposed 2003-2005 Energy Park Energy System Rates D � _ �� � Apri123, 2004 Page 3 Chanae in Overall Rates A comparison of rates are as follows: Actual Actual Actual Actual Budget 2000 2001 2002 2003 2004 Rates: Demand (NfNIBtuI�A�r) 693.56 693.56 693.56 716.77 731.01 Commodity-Heating(MIvlBtuh) 3.80 3.80 3.80 3.80 3.80 Commodity-Cooling(MIvIl3tuh) 3.73 3.73 3.73 3.73 3.73 Customer (per month) 100.00 100.00 100.00 100.00 100.00 Increase % Demand 0.0% 0.0% 33% 2.0°/a Revenues: Demand 829,002 832,295 849,701 858,382 917,664 Commodity 552,150 687,191 613,006 681,131 728,236 Customer 22,896 22,896 23,089 23,496 24,096 EPUC has a three-part rate, which includes a customer chazge, commodity charge and demand charge. There has been no change in the customer or commodity charges over the past five years. The demand rate has increased at an average of 13% per year during the same period. The commodity charge covers direct expenses of the utility, such as natural gas, fuel oil and chemicals. The commodity chazge is a pass-through, as the commodity revenue equals the commodity-related expenses, except for timing differences. Customers are charged $3.80 per MMBtuh for heating and $3.73 per MMBtuh for cooling. The Port Authority indicated that beginning in 2000, any excess collections have been used to pay the invoice from the PCA for ground water fees at yeaz end, rather than refunding smail amounts to customers. The proposed 2004 demand charge includes $270,040 fixed reimbursement for debt service; $91,765 far tY�e 10% capitai reserve and $555,881 in other indirect expenses, which include operating labor, maintenance, engineering services, groundwater, management, administrative and regulatory fees. The indirect expenses are estimated to increase by approxamately $34,000 from actua12003, mainly due to an anticipated increase in chiiler maintenance in order to replace a chiller and compressor. Staff Report for Proposed 2003-2005 Energy Park Energy System Rates V�� t� Apri123,2004 Page 4 Chanee in Direct and Indirect Ex�enses Actual Actual Actual Actual Budget FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 I}irect Expense $552,062 $649,607 $552,560 $722,473 $704,036 (Commodity Revenue) % Increase/Decrease - 17.7% -14.9% 30.8% -2.6% Indirect Expense $481,898 $476,513 $492,294 $527,774 $555,881 (Demand Revenue) %Increase/Decrease - -1.1% 3.3% 7.2% 5.4% lntbrmahon from EYU(; income �acpense Keport - Accrual t3asis Debt Service Oblieations At the end of 2003, the balance of the Port Authority's loan outstanding to EPUC was $2,589,806. This is the only debt obligation of the utility. The Port Authority annually budgets $350,000 from EPUC for repayment of this obligation. This comes from the Fixed charge portion of $270,000 included in the demand charge, plus the administrarive fee to the Port of $28,000 and the remainder from the operaring cash reserves of EPUC. Beginning in 2000, the interest rate on this loan was the Federal Reserve Prime Rate. The average interest rate projected for payments on debt is 4% for this budget year. Canital Reserves Under the current rate formula, 10% of the budgeted demand revenues are set side for the Reserve for Repairs, Replacements, Modifications and Expansions. The balance of this reserve was $1,562,897 at December 31, 2003. RECOMMENDATIONS TO THE MAYOR AND CITY COUNCIL The demand rates proposed by the Saint Paul Port Authority for the Energy Park Energy System in their request dated November 18, 2002 appeaz to be reasonable and staff recommend approval of the 2003 through 2005 demand rates. 2. The Energy Park Energy System franchise ezcpires on 7uly 1, 2005, therefore the team recommends that the Saint Paul Port Authority begin renegotiating the franchise agreement with the City for the Energy Park Energy 5ystem. The Saint Paul Port Authority should provide the City with a capital plan that addresses fixture expansion, modification and financing for the Energy Park Energy system. This plan should also address the Department of Natural Resources' ground water usage requirement that becomes effective in 2007. Q:\Shared�FranchiseTeam�EPUC Staff Report 2004.wpd vy-�(9S `'' � CITY OF SAINT PAUL , ..,;:,, "���'! = OFFICE OF THE CITY COUNCIL __-� _ MEMORANDUM Date: April 1, 2004 To: Council President Daniel Bosttom Councilmember Jay Benanav Councilmember Patrick Harris Councilmember Lee Helgen Councilmember Kathy Lantry Councilmember Debbie Montgomery Councilmember Dave Thune � From: Marcia Moermond, Policy and Research Lead �� and Franchise Team Member � Re: Energy Park Energy System - Port Authority Rate Increase This memo is to request a public hearing for May 5, 2004 to consider the Energy Park Energy System - Port Authority request for a rate inerease pursuant to Chapter 16 of the Saint Paul City Charter, which states: `Before any franchise ordinance is adopted or any rates, fares or prices to be chazged by a public utility are increased by the council, the council shall hold a public hearing on the matter. I3otice of such hearing shall be published at least once in the official newspaper not less than ten (10) days prior to the date of the hearing." Energy Park Energy System - Port Authority submitted a request to the City of Saint Paul on November 18, 2002 stating an interim rate went into effect on January 1, 2003. Hereby, we formally request a public hearing be set for May 5, 2004 regarding this matter. Copy: Matt Smith, Director of Financial Services Lori Lee, Financial Services and Franchise Team Lead Todd Hurley, Financial Services and Franchise Team Lisa Veith, City Attorney's Office and Franchise Team CITY HALL THIItD FLOOR 15 WEST KELLOGG BOULEVARD SAINT PAUL, MINNESOTA 55102-1615 � AA-ADA-EEO Employer 7900 LandmarkTowea 345 St. Peter Street Saint Paul, Minnesota 55102-766i ��-i Mr. Donaid Luna Citizen Service O�ce/City Clerk 170 City Hai! 15 West Keilogg Boulevard St. Paul, MN 55102 P � R > � 9 J G T � > z Y O 2 � /b r � October 8, 2002 � N �� � Re: Energy Park Energy System Amendment fo Schedufe A Dear Mr. Luna: a�t-�45 Te1: 657-224-5686 Fax: 651-223-5198 Toll Free: 800-328-8477 www.sppa.com Pursuant to Section 6(e) of the Energy Park Energy System Franchise-Port Aufhority . (City Ordinance #16966 adopted September 28, 1982), as amended, the Port Authority of the City of Saint Pau! (Port Authority) hereby f es notice of the rates to b c rged to Energy Park Energy System cusfomers. Effective January 1, 2003, the Demand Charge Rider under Schedule A of the Energy Park Energy System Franchise shalf be amended by the following language: Beginning on January 1, 2003, and continuing through June 30, 2005, the demand portion of the hot water and chilled water rate schedules shal! be adjusted and shafl remain in efFecf unt�l the end of such periods listed below, using the Fo;lowing formula: Fixed reimbursement Plus budgeted demand-related expenses S�btotal Multiplied by Budgeted demand revenues before 10% Reserve for Repairs, Replacements, Modifications, and Exnansions Divided by Budgeted totaf demand revenues Qivided by budgeted energy demand (MMBtuh} Demand charge (cost per MMBIuh per month) zssao.i. 1!1l2003- 1/1/2004- 1/1/2D05- 12/31/2003 12/31/2004 6/30/2005 $270,Q00 �270,000 �135,000 �'� 521,378 xxx � xxx � �791,378 � xxx � x�c 1 � 1 � 1 $791,378 xxx 90% 90% $879,309 � x� 1,226.76 � x� �716.77 � S� xxx 90% � �cx $xxx b�l-y9S Page 2 Donald Lun ve er18,2002 (1) For the period 11112005-6(30/2005, fixed reimbursement is $270,000 / 2=$135,000. (2) The 2004 and 2005 budgets will be completed in October of 2003 and 2004 respectively. Under the heading "Billing Administrative Services" the fo(lowing paragraph is to be changed: "In addition to other demand-related expenses, the company shall be allowed to charge a fiscal and administrative fee in the amount of �28,000.00 for each calendar yeas." A copy of the Port Authority's Credit Committee memo is attached. Please contact me at (651) 224-5686 if there are any questions. Sincerely, J�i�- -� •• �� l � Peter M. Klein Vice President — Finance PMK:cp Attach. cc: City Council Members Matt Smith, Financiaf Services Lori Lee, Financial Services Anders Rydaker, Market Street Energy Company Andrew Kasid, Market Street Energy Company 25680.1. SAINT PAUL PORT AUTHt�Ri�`Y MEMORANDUM TO: CREDiT COMMITTEE (Regular Meeting Novembe; 19, 2002) FROM: Peter M. Kiein N'"�. Laurie J. Hansen Kenneth R. Jo s n o�l - y�5 ATE; Nov. 14, 2002 SUBJEGT: ENERGY PARK ENE42GY SYSTEM FRANCkilSE ORDlNANCE � Authorization to presenf to fhe City Councii a revised Schedule A of Appendix G, Energy Park Energy System Franchise Ordinance — Port Authority. Action Requested: Authorization to present to the City Council a revised Schedule A of Appendix G, Energy Park Energy Sysfem Franchise Ordinance — Port Authority. Public Purpose: The revised rate schedule will ailow Energy Park Utility Company to adopt a rate schedule that wi{I allow it to continue fo provide affordabie energy to the residents and businesses in Energy Park. Business Subsidv: Not appiicable. Backqround: In Aua �s� t of 1985, the City of Saint Paul aranfed a u era� r rarK tnergy System tnrough Jul 1 2005. Since then, the Port Authority has adopted a sc e u e o ra es, which have generally been in effect for a period of five years and then renewed again. The last time that the fees were adjusted was in November 1997 for a period extending ;hrough December 2002. The two major portions of the energy charges to EPUC customers are the Commodity Charge and the Demand Charge. The Commodity Charge covers direct expenses of the utiiity such as naturai gas, fuel oil, chemicals, and auxi(iary power. The Commodity Charge is basically a pass-through as the Commodity Revenue generally equals the Commodity Expenses except for timing differences. The Demand Charge makes debt service payments on the initiai loan made to develop the system. At the end of 1996, the Port Authority had an investmenf of approximately $3,350,000 and the fixed charge portion ($270,000) of the Demand Charge will allow this to be paid off over a 40 year period. The unamortized amount of this invesfinent is currently $3,011,000. 2ss�s.�. .. I . . (,/ ` - ( YV Current Status: For 2002, the budgeted demand charge ($/MMBtuh/Mo.) was $693.56. This is a 1.1% increase from the rate that was charged in 1998 ($686.00). Under cuu��n e�Fi" aemand charge wo`�td mcrease fo $716.77 or ess f� 1% annual increase over the 1998 level. The Port Authority's administrative fee in 2D02 is $27,821 and we are recommending that fee tre fixed at $28,000 annuaily for the remaining 2'/Z years. A draft letter to the City Council requesting the approval of the rates through June 30, 2005 is attached. The Port Authority will need fo go back to the City before June 30, 2005 to renew its ' franchise agreement and adjust its rates as needed. Workforce Implicafions: Not applicable. Policv Exceptions: None. Recommendation: We recommend the authorization to present fo the City Council a revised Schedule A of Appendix G, Energy Park Energy System Franchise Ordinance — Port Authority. 25678.1.