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Power board to start rate study; staff say study should define reserves and maintenance funding
Summary
Hurricane City Power reported a proposal and purchase order are in place to start a formal rate study, with a kickoff meeting scheduled; board members asked the consultant to model reserve levels sufficient for operations, maintenance and emergency contingencies.
Scott, Hurricane City power director, told the board the power department has returned a signed proposal and purchase order with a consultant and planned a kickoff meeting for the rate study.
"We got the proposal back from the consulting firm and put in a PO," Scott said, and a kickoff meeting was scheduled for March 14, which staff expected would move the project quickly.
Nut graf: Board members pressed the department to ensure the study addresses not only revenue needs but also a defensible reserve policy: how many months of operating cash the utility should hold, and how much should be earmarked specifically for maintenance and repair.
During the discussion one board member asked the consultant team to model required reserves by reference to miles of line, number of customer connections and realistic maintenance needs. Staff and attendees said the consulting team had indicated industry guidance of roughly seven months of operating cash on hand; from a financial/bonding standpoint another participant suggested 8 to 9 months. Scott said he believed the power department policy calls for 10 months of reserves; staff said they would verify the written policy and ensure the rate-study scope addresses an optimal reserve, maintenance funding and recommended reserve targets for bonding considerations.
The study will also review the utility’s historical cost-of-service work and solar-rate structures as part of a five-to-ten-year review; staff said a cost-of-service study is generally considered best practice every five years and the city had not completed one in roughly a decade.
Ending: The board supported proceeding with the study, asked staff to ensure the consultant models reserve levels tied to operations and maintenance (not just cash-on-hand for operations), and requested that results be returned to the board and council once the consultants complete the analysis.
