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Lodi City Council urged to increase cash reserves for electric utility

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Posted: Wednesday, December 8, 2010 12:00 am | Updated: 6:01 am, Wed Dec 8, 2010.

The Lodi City Council has been advised by its staff to increase its Electrical Utility budget reserve fund in order to get a better credit rating to purchase power.

However, Electric Utility Director Elizabeth Kirkley says that increasing the reserve fund can be done without increasing rates.

The idea is to improve the city's credit rating in a similar way that you finance a home or car purchase, Kirkley said. The better the credit rating, the lower the interest rate and the less electricity from California's power grid will cost the city.

Kirkley made the recommendation during a council study session Tuesday morning on the Electric Utility's first-quarter budget for the 2010-11 fiscal year. The council isn't expected to make a decision on increasing its electrical reserve until either January or February.

The city's electricity budget has $23.1 million cash reserves, which is enough to finance operations for 60 days, Kirkley said. What she would like is to increase the reserves to 90 days, or $28.7 million.

The city's current policy, adopted by the council in 2007, calls for enough cash for 45 days of operation. A survey of seven cities and electrical districts show policies calling for cash reserves ranging from 55 days to 146.

Kirkley said the city can avoid rate increases by cutting expenses, but she said she'll have a better idea of how to trim expenses by January.

She said that Lodi, along with California as a whole, has required less electrical power this year for two reasons — the mild summer the area had this year, and due to home foreclosures and empty storefronts caused by businesses closing.

Additionally, the Lodi Energy Center, which is due to begin operation near White Slough in June 2012, is expected to decrease costs, Kirkley said.

The mild summer and foreclosures reduced electrical rates for customers by about two cents per kilowatt-hour. One kilowatt-hour will operate a 40-watt light bulb for a full day, a 19-inch television for about four hours, and a personal computer for two and a half hours, according to EnergyVortex.com.

The $28.7 million recommended reserve is based on $18.9 million in operating reserves, $500,000 in capital reserves and $9.3 million in renewable resources by the Northern California Power Agency.

Contact reporter Ross Farrow at rossf@lodinews.com.

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2 comments:

  • roy bitz posted at 9:21 pm on Thu, Dec 9, 2010.

    roy bitz Posts: 489

    Am I the only one who has questions about this recommendation?

     
  • roy bitz posted at 6:53 pm on Wed, Dec 8, 2010.

    roy bitz Posts: 489

    I recall council members touting Lodi's credit rating improved recently ( B+ I believe) and the cost of financing the bond to pay for the "treat and drink" water plant would be reduced dramatically.
    I find this all very confusing. Will someone please clarify how increasing the reserve will benefit rate payers?

     

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