Item Coversheet
City of Independence
AGENDA ITEM COVER SHEET
BILL NO. 21-749Res.No:          6677
Agenda Title:

21-749 - A Resolution Directing the City Manager to Suspend for 30 days the Increase to the Fuel Cost Adjustment Resulting from Winter Storm Uri in February, Effective May 1, 2021-Requested by Mayor Eileen Weir and Councilmembers Mike Huff and Mike Steinmeyer
Recommendations:

None. 
Executive Summary:

The Fuel Cost Adjustment (FA-1) is authorized under the approved Rate Schedule and Ordinance Numbers 17184 and 17248. This is computed on a monthly basis to account for fluctuations in the cost of purchased power and fuel. As outlined in the presentation to the City Council on April 12, February 2021 FCA Expenses totaled approximately $12 million vs February 2020 expenses of approximately $4 million. To account for the additional costs, the FCA  was increased by 1.79 cents/kWh to 3.99 cents/kWh. The intent with this increase was to recover a portion of these costs over an extended period to minimize the impact to ratepayers--$6.5 million of these costs were not included in the adjustment and absorbed by reserves. By taking this approach the average customer would see an increase to the monthly bill of approximately $9. The FCA is reviewed on a monthly basis and adjusted up or down as needed. It is anticipated the current FCA would need to be in place for several months. 
Background:

The FCA is a well-established component of the rate structure that provides for a mechanism to account for fluctuations in the cost of purchased power and fuel. The extraordinary costs experienced by IPL's generation assets resulted in costs three times as high as the same month last year. While official financial statements for the month ending March are not finalized, preliminary figures indicate IPL is currently $34.7 million below budgeted revenue for the fiscal year and $19 million below the target of the recently adopted Cash Balance and Resiliency Policy.  Staff cautions against further erosion of IPL's fiscal position which could negatively impact future bond issuances and a refinancing currently scheduled for the Spring of 2022.  

 

The adjusted FCA was effective at the beginning of April with billing cycle 1. Approximately half of the billing cycles have been completed with this new rate. If the temporary suspension is authorized, it is recommend all billing cycles for the month of April are completed. 


Fiscal Impact:

Any negative (downward) adjustments to the FCA will result in further decreases to IPL's revenues for the fiscal year. Reverting to the previous FCA will result in a reduction to revenues of approximately $8 million.  
Department:          City Manager's OfficeContact Person:          Adam Norris

REVIEWERS:
DepartmentAction
City Managers OfficeApproved
City Clerk DepartmentApproved
Finance DepartmentApproved
City Managers OfficeApproved
City Clerk DepartmentApproved
Council Action:          Council Action:         
ATTACHMENTS:
DescriptionType
Resolution-Fuel Cost Adjustment SuspensionResolution
April 12 Study SessionBackup Material