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05-24-2018 HUCM Special MeetingMINUTES Special Meeting — Hutchinson Utilities Commission Thursday, May 24, 2018 Call to order — 9:00 a.m. President Morrow called the meeting to order. Members present: President Monty Morrow; Vice President Anthony Hanson; Secretary Robert Wendorff; Commissioner Mark Girard; Commissioner Don Martinez; General Manger Jeremy Carter Others present: John Webster, and Angie Radke. The purpose of the special meeting is to have further discussions on the Cost of Service (COS) Study. GM Carter reviewed the timeline of the COS study. At the last Commission meeting, a couple of different glide paths were reviewed to move the different classifications more toward equitability relative to the Cost of Service numbers. This would have each class paying their proportionate share while staying revenue neutral. During that discussion, it was decided that both divisions did not need to go down the same path. The Commission agreed to move forward with a 6 year glide path for the Electric Division and a 9 year glide path for the Natural Gas Division because of the larger variations between classifications. Now today the next step is to review the rate design documentation for the next 2 years. The Rate Analysis provided is for the next 2 years; and as part of the discussion a decision will need to be made on when to start implementing the rate structure change. Examples would be the fall of 2018 or spring of 2019. Common practice with rate designs is to review 5 -year financial projections but only implement 2-3 year rate changes. This is because of the many changes that can happen within the community out past 2-3 years. By doing a 2 year rate design change is allows the Staff and Board the opportunity to go back and see if the glide paths are doing what they are intended to do in the more near term and make adjustments as necessary if needed. Commissioner Hanson inquired if the intent is to go to City Council with a 2 year rate change but then paint the picture of the 6 year glide path for the Electric Division and the 9 year glide path for Gas Division. GM Carter stated HUC would present to the City Council that HUC is only implementing rate changes for the first 2 years, but still show the City Council the glide paths beyond the first two years to provide the long range look and view of bringing all classes towards more equitability as it relates to the COS data over a longer time period. This would again force HUC and the Board to relook at it in 2 years. However, in 2 years it would not be a full rate study but more of an internal analysis by staff to ensure the intended glide path results are being achieved. HUC will want to review financial data to make sure there is balancing between classes and HUC is staying revenue neutral. GM Carter noted reviewing the rates to see if they are appropriate within the community would be a good process to do internally every year. After some discussion, GM Carter reviewed additional graphs (Attached). These graphs show the bill impact at different usages. For Electric Division roughly 80% of customers are at 1000Kwhr's or below. The largest Residential Customer class is in the range of 501-750 Kwhr's at 25%. All the classes are fairly spread out. Small general customers have many different characteristics while large customers are by load factors. The majority of large customers fall between 30-70% load factor. GM Carter continued on to the Natural Gas Division. With the 5100 accounts, the average residential monthly Usage in MCF's falls between 3-7 MCF. After some discussion, GM Carter asked the Board to think about the time frame on instituting action. The Board would like to see this item on the Commission Agenda for next week to take action to move forward on the rate restructure. Commissioner Hanson stated since rates have not changed for some time, there should be conversations from a public relations standpoint in case questions are asked. There being no further business, a motion by Commissioner Girard, second by Commissioner Martinez to adjourn the meeting at 9:49 a.m. Motion was unanimously carried. obert \ endorff, Sec y ATTEST. MontyM rrow, President