CR 94-103 SRA Budget
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council Report 94-103
June 2, 1994 .., ":>
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Approve 1995 SRA Budget
Proposed Action.
Staff recommends adoption of the following motion: Move that
Council approve the orooosed 1995 Suburban Rate Authoritv budqet
with its membership assessment rate increase.
Overview.
The purpose of this report is two-fold: to discuss the Suburban
I Rate Authority'S anticipated 1995 budget increase and at the same
time to inform Council of SRA's activities and the City's stake
in this organization. The issue of SRA budget increases comes at
a crucial time because it could have a bearing on the City'S
continued membership. Few council members in the Twin cities
area are aware of their local government's membership in the SRA,
let alone what SRA's several functions are. Hopkins city
Government faces some hard choices in preparation of its 1995
budget and this will focus attention on SRA's proposed membership
assessment rate increases.
. Primary Issues to Consider.
. What is the SRA?
. SRA activities
. 1995 SRA budget
. Recommendation
Supportino Information.
. Suburban Rate Authority Annual Review 1993
. 1994-95 SRA Projects and Anticipated Projects
. 1995 SRA Proposed Budget
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Engineering Superintendent
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. Analvsis.
. What is the SRA?
The Suburban Rate Authority is an association of 33 suburban
municipalities whose main activity centers around monitoring
public utility rates and rate design. Any activity by
Minnegasco, NSP, u.s. West or the Metro West Control
Commission before the Public utilities Commission is
scrutinized by the SRA. The Association retains a local law
firm specializing in utility rate issues to carry out the
monitoring services and serves as spokesman for the
organization. occasionally cases before the PUC are of such
scope and magnitude that the organization will seek help from
professional consultants. The membership meets on a
quarterly basis at various locations throughout the Twin
cities area and most meetings are taken up by discussion of
rate matters.
. BRA Activities.
The attached fact sheet concerning BRA activities in 1993 is
an appropriate review. It is a summary listing of the
association's victories (some just temporary) and some detail
of the cases in which the organization has had a stake. At a
minimum the BRA has had a watchdog function and at its best
has been instrumental in garnering collective mUlti-million
dollar savings for suburban phone ratepayers.
. The second attachment contains SRAts projected activities for
the remainder of 1994 and all of 1995. These projects are
predicated on SRA keeping a high profile of monitoring and
advocacy. These are activities in addition to the general
budget and most certainly will require the association to
reevaluate the membership assessment rate policy.
. 1995 SRA budget.
Currently the association's policy is that each member has
one vote for each 5,000 population or fraction thereof.
Membership assessments are $375.00 per vote. Hopkins yearly
membership cost in the organization with its 4 votes is
$1,500.00. The SRA is proposing to increase the assessment
to $400.00 per vote, or a total of $1,600.00. The attached
1995 budget details costs generated by normal operation of
the group as well as by a heightened activity schedule.
. Recommendation
As the City'S representative with the BRA I can attest to the
effectiveness of this organization. It is one of very few
organizations that represents the general rate paying public
before the PUC. The association with its legal firm has
worked diligently and effectively without high profile in the
media. I hope you will become more aware of the SRA and that
you as a Council will see fit to not only continue Hopkins
. membership but to approve the 1995 SRA budget with its
additional yearly membership cost to Hopkins of $100.00.
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.SUBURBAN RATE AUTHORITY ANNUAL REVIEW
1993
The following is a brief summary intended for the city councils of Suburban Rate Authority ("SRA ") member
cities. It highlights the major activities and achievements of the SRA during 1993. The SRA is a joint
powers association of 33 Twin Cities suburban municipalities that monitors rates and rate design of electric,
gas, telephone utilities and the MWCC. The SRA was actively involved in several significant issues con-
cerning residential and business ratepayers in 1993.
US West Uniform Rates Implemented
1993 began with the complete elimination of US West tier system of telephone rates. This major change in
rate design equalized all flat rate service residential and business telephone rates throughout the Twin Cities
metropolitan calling area served by US West for the first time since the tiered rate system was introduced in
1980. In late 1992, the SRA persuaded the Public Utilities Commission ("PUC") that tiered rates were unfair
because they had no basis in cost or policy. The new unifonn rates were implemented just prior to the start
of 1993. The collective savings in rates to nearly every US West suburban residential and business ratepayer
already totals in the millions of dollars and will increase with each passing year of the unifonn rate system._
Minnegasco and NSP 1992-93 Rate Filings
. During 1993, the SRA dedicated significant resources to one of the major utility ratepayer issues to be
decided in recent years, common to Minnegasco. NSP, and all other utilities--the recovery from ratepayers
of a large unrecognized "transition obligation" caused by the change from cash basis to accrual accounting
for post-retirement medical benefits (F AS 106). The SRA joined the Minnesota Department of Public Service
and the Attorney General's office in seeking a disallowance of all or a portion of the transition obligation.
In a significant (and temporary) victory, the PUC disallowed 50% of the transition obligation. This would
have been $12 million to be borne by Minnegasco shareholders rather than ratepayers and $80 million to be
bome by NSP shareholders. Persuaded by the collective {Xlsition of the utilities and unions, the PUC revenied
its decision on reconsideration and aJlowed the full transition obligation to be recovered from ratepayers. If
the PUC had not reversed its decision. all regulated utilities in Minnesota likely would have been subject to
the 50% disallowance. These cases also demonstrate the stakes involved in rate cases before the pue. I
Telecommunications Legislation
In the fall of 1993, the SRA was invited to participate in a process of discussion and drafting of legislation
regarding alternative fonns of telephone regulation and competition in telephone services. All major telecom-
munications industry groups were represented on the study group.
The SRA monitored the process with an interest in protecting its gains in telecommunications rate design and
obtaining an understanding of the PJIicies underlying any new legislation. The process has continued into
1994 and the legislation likely to be introduced at this session will be supported by US West. The differing
perspectives of the various groups was too great to result in consensus legislation. It is unclear at this time
. whether the legislation will be passed.
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. 1994-95 SRA Projects & Anticipated Projects
To assist in the 1995 SRA Budget review process, the following is information describing the types
of issues the SRA is currently addressing and those that we believe the SRA will be involved in to
protect the residential and business ratepayers of SRA members. These matters are in addition to
the "General" budget item that usually carries the largest component of any SRA annual budget.
The General category includes quarterly meetings, member and non-member communications, and
ongoing identification of new issues that may arise.
1. MINNEGASCO RATE INCREASE REQUEST. The SRA is currently participa-
ting in Minnegasco's $22.7 million annual rate increase request now before the Public Utilities
Commission. SRA is monitoring this case and may take a more active position depending on the
development of certain issues and the resources available to the SRA. Closely watched will be
proposed increases to customer service charges and ratepayer expenses for environmental clean-up.
This case will be concluded in the fall of 1994.
2. ELECTRIC. The outcome of the Prairie Island bill will inevitably effect the rate
increase NSP will request later in 1994. The SRA has not taken a position on the Prairie Island
legislation in part because of resources available and in part because of the difficulty in knowing.
the consensus view of the residents of any given SRA member. The results of the Prairie Island
legislation will influence NSP's timing and amount of rate increase request probably during the
. second half of 1994. The SRA will intervene in any NSP filed rate case.
3. TELECOMMUNICATIONS. Several important teleconununications bills have been
introduced into this year's legislature. Most significant to all Twin City metropolitan suburbs is
legislation directing the Public Utilities Commission to re-evaluate local calling area standards and
sizes in a two year generic proceeding. This results from a moratorium likely to be declared by the
legislature on Extended Area Service petitions that were governed by a statutory process since 1987.
Legislation has also been introduced regarding competitive telecommunication services, expanded
competition in telecommunications and regulation on new services available to customers. The SRA
intends to participate in some of these proceedings as they may affect the rates and telephone service
options available to SRA member residents and all metro ratepayers.
SRA member residents have enjoyed stable or decreasing telephone rates throughout the last
several years. The elimination of the tier system brought about by the SRA has caused most of the
thousands of dollars in savings to suburban telephone ratepayers. The incentive regulation of US
West has also ensured stable rates since 1990. When this incentive regulation is legislatively
terminated in 1995 there will likely be a petition for rate increases by US West. This will be due
in part to the restructuring of access charge revenue available to US West from other teleconununi-
cations carriers needing access with US West.
4. METROPOLD'AN WASTE CONTROL COMMISSION MATTERS. The SRA
monitors the MWCC. When issues of concern arise, the SRA investigates and proceeds as
. authorized by the Board. The SRA always allocates at least some resources in its budget to MWCC
issues. Recently, the SRA has monitored environmental requirements as they may affect capital
improvements to MWCC plants.
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1995 Suburban Rate Authority Proposed Budget
. (at $400 per vote)
1994
Assets:
Cash and Investments (12/31/93) 12,785
Receivables (1994 assessments) 62,625
Interest Income (estimate as of 12/31/94) 1,000
TOTAL $76,410
Anticipated 1994 Expenses:
1993-94 Minnegasco Case
legal fees $10,000
expert fees 4,000
1993-94 NSP Electric and Gas Matters
legal fees 3,000
expert fees 1,000
Legislative Matters 2,000
US West Regulation 7,000
MWCC Matters 1,000
General (fees and disbursements) 20,000
TOTAL ($48,000)
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Reserve at December 31, 1994: $28,410
. 1995
Assets:
Carryover from 1994 $28,410
Membership Assessment ($400 per vote)* 66,800
Interest Income (estimate as of 12/31/94) 1,500
TOTAL $96,710
Anticipated 1995 Expenses: $ 5,000
Minnegasco
NSP 15,000
US West 5,000
Legislative Matters 2,000
MWCC Matters 4,000
General Matters (fees and disbursements) 22,000
($53,000)
Reserve at December 31, 1995: $43.710
* 1991 Assessment was $375 per vote.
1992 Assessment was $375 per vote.
1993 Assessment was $375 per vote.
1994 Assessment is $375 per vote.
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