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City staff says electric revenues have stabilized; cash recovery remains slow
Summary
Management Services Director Christie Donnelly presented a preliminary Sept. 30 check‑in on the electric utility fund showing revenues roughly covering operating expenses after recent rate increases, but combined operating cash remained below target and staff expects gradual recovery tied to a power‑cost‑adjustment to be set for November.
Christie Donnelly, the city’s management services director, briefed the council on Oct. 7 with a high‑level check‑in of the electric utility fund through Sept. 30. Donnelly said the presentation used preliminary, unaudited numbers and stressed that the most recent July 1 rate changes would not fully appear in the books until bills generated later in the year.
"Our revenues have stabilized but there is no observable increase as of yet," Donnelly said, adding that the first of the recent rate changes began to show in July 2023 and a second round became effective July 1, 2025.
Donnelly showed that operating revenues generally now exceed operating expenses — the utility can cover recurring costs — but combined operating cash balances remain below the adopted reserve target. The presentation attributed the slow cash recovery to several factors: relatively small month‑to‑month revenue surpluses after the rate changes, capital outlays and a historical $11 million in an NCPA reserve that affects combined balances reported in the city’s financials.
Staff told the council that a power cost adjustment (PCA) mechanism adopted as part of the recent rate work will be calculated and may be implemented as soon as November 2025; the PCA will adjust rates incrementally based on the prior 12 months’ actual power costs compared with the baseline used to set rates. Donnelly said staff had not finalized the PCA number but expected to include it in the November billing cycle if calculations are complete.
Council members pressed for more granular detail about recent driver items: increased power‑purchase costs (which spiked during 2022–23), wage and staffing cost increases that raised utility personnel expenses, interfund right‑of‑way allocations and whether loan transfers or capital commitments explain the difference between operating results and cash on hand. Donnelly and other staff said some increases were one‑time or timing differences and that capital expenditures and interfund allocations reduce cash without appearing as operating expenses.
Council members asked about audits, independent verification of the power content label and whether local solar generation should be tracked differently in future audits. Staff said the city had accepted the California Energy Commission’s power content label this year and planned a January bill insert; staff said they are discussing how to report behind‑the‑meter and residential solar in future audits but noted tracking and REC (renewable energy credit) control take staff time.
No rate changes were adopted at the meeting. Staff said they will return with the PCA calculation in time for November bills and with an analysis regarding a recently announced court ruling affecting interfund right‑of‑way allocations; staff estimated the right‑of‑way analysis could appear at an upcoming November meeting.
Ending: Donnelly recommended continued monitoring, completion of the PCA calculation for November bills and a forthcoming analysis of right‑of‑way allocations; council members asked staff to present more detailed back‑up schedules and a clearer display of capital/cash flows in the next update.
