Government Performance and Finance Committee - Regular Meeting

We're ready when you are.

Alright. Well, let's lift a thousand people into the room and get started. Alright. You did it says. Okay. With that, I like to call the order of the government performance finance committee meeting 02/03/2026. Clerk, will you please call the roll?

Deputy mayor Bushnell?

Present.

Council member Rambaugh? Here. Council member Sjedalvi? Here. And council member Hunt?

Here. Alright. Clerk, has anyone signed up to speak virtually or in person?

I believe the Kit Burns is here in person

and signed up to speak. Alright. Come on down. Good. So quick.

Yeah. So we're it's, you we're quick. Alright. My name is Fisher Arnes. I live in Tacoma.

I've lived in Tacoma for the

last thirty three years. I'm here to speak about a couple things on your upcoming agenda. And there's a couple things that I believe should be handled before the government performance finance committee. One is multifamily housing. We've spoken about that before. I'd like to know what the requirements are, what the financial requirements are for establishing who gets multifamily tax exemptions. And I pointed out before the city council that Stadium Way Apartments received a $12,000,000 tax exemption, which I'd like to know what the justification is that for other things. The other thing another topic I wanna talk about is the Environmental Services Commission. It appears to me, and I

could be wrong about this. I don't

make make assumptions, so this is all set in kind of an advisory thing that the commission's being abolished by the director. Now the word used, George Orwell, like this, it's paused, But it doesn't make any sense to pause it. It seems to me that the director shouldn't be able to pause it because that purpose of that committee is oversight. And as such, the committee itself should decide whether it paused or not. Now I attended or attempted to attend all the meetings last year for the Environmental Services Commission, and four of them were canceled.

Now they're required by their charter to have four meetings a year, so they met that requirement. Four were canceled, and then there was some confusion on what the charter and bylaws are. They were having trouble meeting the quorum. And so I did volunteer to be on the committee. I've got the background to be on that committee, I believe, Because as an architect, I've worked on major projects like Kent Lake High School, Robert High School, Olympi High School. I've been responsible for the entire completion of the project on time and on budget, or actually below budget. So I thought I was qualified, and I was even more enthused when one of the council members last year said, hey. We wanna get old people on the committee. I'm 74 years old.

I qualified.

I was told I was told that I didn't qualify because they already have somebody from council district four. So my application was rejected. But I wrote back and said, well, hey. I'm old. And I said, I live in Council District 3. And then the response was also, oh, we need to have somebody for multifamily housing. Well, I've looked thoroughly at home in Tacoma. And home in Tacoma means that every homeowner is a multifamily housing possibility. So, anyway, the fact that they've decided not to have meetings and pause it wasn't done with consensus of the commission. So the council needs to look into that.

I'll also point out this real simple on my end. Last one. Yeah. They haven't had any minutes posted since last June. Why aren't they posting meeting minutes in a timely manner? So I have other government performance things I could talk to and suggestions, shut up.

That's fun. You can always submit comments in the committee too. The rest of the world look like. Andy, that just we decided that came up at the North America Council meeting last night about the environmental services commission. Do you mind just reaching out us and either have them come talk through what's going on with that or send us a demo of some kind? I'd just be curious. We'll do that. There you go. Alright. Thank you. Good. Anyone sign up online? No. Alright. Okay.

With that, we'll go and close public comment, and we'll move on to our first briefing item, which is the election of committee chair and vice chair. According to the council rules of procedure, each standing committee shall elect the chair and vice chair, which we typically complete at the first meeting of the New Year. Now it's time to bring forward nominations for election of the chair of the government performance finance committee. Are there any nominations? Council member Robach.

I'd like to nominate council member Hines to serve as chair this year for government performance finance.

I second. Alright. It's been the executive. Are there any additional nominations? Okay. Seeing none, all those in favor of adopting a motion to elect councilor Mckay as chair of the government performance and finance committee signify by saying aye. Aye. Those opposed? Yeah. We're still adopted.

Thank you to the committee for

allowing me to chair for one more year. You're not under my out under my oppressive rule just yet. Joke, I guess, unless you're too serious.

Know? Got it. Alright. Serious.

Yeah. Know. Yes. I I was just thinking through this is my

I started halfway through my second year

on counseling. This is year six. It's a chair. Interesting stuff. Now it's time to bring forward the nominations for elections of vice chair in Government Performance Finance Committee. Are there any nominations? Cousin Roomba.

I'd like to nominate deputy mayor, Krishna, as vice chair.

K. Is there a second?

Second? Okay. Second.

Yeah. Sorry.

Here we go. Like, okay. It's gonna move a second. Are there any, any other additional nominations? Seeing none. All those in favor of adopt all those in favor of adopting the motion of white council to the deputy mayor Bushnell as vice chair of the performance by saying aye. Aye. All opposed? Okay. Motion to declare adopted. K. The Dream Team's back. Thank you for the opportunity to continue to serve. Okay. Alright. So with that and having to do that one, we'll now move on to item number two, amendments to common municipal tax code six or sorry. Amendments to to common municipal code six a, tax code. I'd like to call in Dahya Larson from finance.

Chair Hines. I'm Danielle Larson, the tax and license manager, and today to talk about tax code amendments for utility tax rates. So last week, you heard a presentation from the public works team about the streets initiative passed in 2015 that included quite a bit of detail about that proposition. A portion of proposition three authorized the city to levy an additional 1.5% earnings tax on natural gas, electric, and telephone services for a period of ten years. The ten year period began on 03/01/2016 for city utility rates and is set to expire on 02/28/2026.

A ten year period for natural gas use tax, which is collected by the state department of revenue on behalf of the city, began on 07/01/2016. So that ten year period will be ending on 06/30/2026. As such amendments are required to update the tax rates in the code. Next slide, please. The tax rates being amended are spread across four different chapters in the tax code, reducing the 7.5 rate to 6%.

The amendments will not affect the tax classification set at 8% for solid waste, cable, water, rail, and wastewater. Next slide. The reduction in the utility tax rates will reduce annual revenues in the streets initiative fund by $10,500,000, which has been planned for and accounted for in the current budget. Next slide. So these amendments are scheduled to go to council for first reading next week on February 10.

As I mentioned earlier, the effective date for natural gas use tax is different from the other utility tax rates. And the reason for that is the state's process, when they change a rate, only allows a rate change on certain days of the year and with at least seventy five days notice from the city. So back in 2016, once they received the notice, that bombed out the effective date for them. So as such, the ordinance will include two different effective dates to accommodate the two different implementation dates. With that, I can answer the questions.

Alright. Any questions for Daniel? Ezra Robot?

Usually, I go first, counselor was still gay, but you can go first if you want.

It's alright.

Okay. Okay. I have a couple questions. First off, these are utility taxes. So how are they I just wanna understand why we're only seeing the street initiative. It's that's the street initiatives. Does it affect a lot of other things in the city besides, or is it all the money goes to the street initiatives? The additional 1.5% that was voted on had passed it goes directly into the street initiative. Okay. And then is any of it pass it's all pass through dollars, and it just goes right there?

Because you said the the is it the natural gas one? So it's just passed through from the state. Is that right? Yes. The state sends us they collect, like, sales tax, natural gas use tax, and they send that to us monthly, and it goes directly into those appropriate So they're not taking any fee off that? They do charge a 1% administrative fee for collecting our sales tax and all that. Mhmm. That's what Pierce County does. Yes. So Alright. Thank you.

Definitely. Cool.

Similar. So this is part of the speech signature package that the voters voted yes on eleven years ago. Okay. And so this would represent roughly half of I guess, study session last week, we were told it was $20,000,000 or 10,000,000 just from this specific tax. Okay. And when would it stop being collected?

It'll stop being collected March 1 of this year. March 1. For the city utility rates. The natural gas use tax will stop being collected July 1.

Okay. That's where I was confused between the March 1.

Okay. If

there was another streets initiative that was passed, I guess it would restart next year? Or

Mhmm. I would I would come back to you with another comment of finding out the gas. And

so this is a tax that people see on their GTE bill, I assume, for using natural gas.

Or

For utility bills, it's only on power.

Okay.

So that rate will change on their utility bill from seven and a half to 6% starting March 1.

And for clarity's sake, it's a tax on the utility, not on the customer. So it's the utility that is being taxed.

But they pass it difference? On

But, technically, it is on the utility, not on the customer. Think of a tidy up tax. That tidy up tax that we do is on the customer, not on the utility. The gross earnings tax is on the utility.

So our customers gonna see a drop in rates March 1?

They will see a reduction in theory on the the tax line that shows on the bill that says what they pay the state and what they pay the city should drop the city wants to drop from seven and

a half percent to six.

Okay. So they will see something drop on their bill March 1.

Thank you. Sorry about that. Ying Hall, Takoma Power section power manager utility manager. The way that our utility bill is formed and calculated, we don't have specific line items for city and state.

Okay. But I'm assuming that starting March 1, had this tax been in place, I would have paid slightly higher than like, if it was February, I would be and I use the same amount. I pay x. And then in April, I should be paying less than x. Is that not happening?

It would be reflected in your rates going forward.

Okay.

So we set utility rates every two years as part of the budget rate cycle.

So

going forward, that's not March 1 or April 1? I'm trying to figure out, like, are we keeping some money here? Like

So can I chime in? So the the rate process for the utilities looks out two years, and we start that, you know, three years before the end of the biennium that applies to. So we make all of our prognostications on what things are gonna cost. We come up with our rates. That's what goes in, and then we we check make those rates effective for two years.

When something happens in between, like transformers get more expensive, we have to adjust within that. If something gets less expensive, then it provides other opportunities. And so this tax is in that same bank where we can't we don't, real time change things that happen because the rate system is too complicated and it involves too many variables. So the rates get set for a two year period, and they'll get adjusted as we go through our rate making process this year for the next two years.

So that's the rate for usage, like, per kilowatt. This is a tax on that. Or is this part of that?

It's all part of the rate. Yeah. It

So we're gonna reduce a tax, but people aren't actually gonna see a difference on their rates for

They will, but not in real time. They will as we go forward.

So why don't we update rates when we update taxes?

It's just never been the process to Yeah.

I do it more than money. No. Those are thank you, councilor. Questions. And, this is probably a primer for us to have more of a conversation around the get tax because I it is an interesting dynamic where when we do kayak, those we see instantly whatever the tax is laid right on top or whatever the cost is or the rates purposes, whatever the taxes are. It it all gets baked in somehow. So we want Yo. Yeah. So but maybe a primer on how get taxes or how things are calculated because I think that is really important for us to be thinking about in rates conversation. Let's try one last thing, and then we'll look at. Nice.

The reason I was belaboring this point is it goes to the trust and transparency question. Right? We can't be seen to be doing the right thing and reducing a tax that everyone has seen, and then you have constituents doing. I thought you reduced the tax and my rates haven't changed. I don't trust government.

That's a fair point.

Vice Chebyshev, I

I also wanna recognize that there's volatility in the price of of infrastructure in in one of the philosophies around our rate structure is stability and and time because that's one thing that the utility has is it's it needs to always be there. It needs to always be working, and so they have time on their side. So one of the philosophies around the rates, as market fluctuations happen and things go up and down, there's a stable stability line. So even if this, for example, goes to the place that's supposed to be lower, there might be other market forces that pushes it higher. So we

try to find the middle ground to keep it stay stay low. So, yeah, just wanna point that out. Yeah. Okay. Vice representative, do have any questions? I

do not. Thank you.

Something you said was interesting to me was I think when I look at my bill for power, it says that there's a calculation in there for the 7.5%. So not it it isn't in the line item on my bill where it says that. I can

I can have? So my name is Jing Liu. I work for race planning analysis team of Tacoma Power. So in our bill, we do itemize the taxes, But this is kind of the

the

backstage conversion. This is how the the 7.5% GET is what's built in the rates. And when we have the the rates and we back it out and to show the customer for the tax line items, how much we pay the state, how much we pay the city. So there's so there's question about, you know, if the the the GET is on utilities, is Tacoma Power's cost of doing business increase or decrease? That's part of it's one of many expense items.

So if everything else equal, our tax expenses reduces, then it goes into our extra net earnings. And when we do the planning for the next ten years, those extra earnings will be there, and we will spread those cash reserve or in other forms will will flow through the benefit to to the customers.

In in other words, it all goes back to the customers in the form of lower rates, all else equal, going forward.

But it's not a straight line. So I won't be because with the excise tax and solid waste, right, is I have a bill. It's a percentage of top of that, so it's clear. If that went away, I would see it. But what I wanna remind everyone, it's not a straight line. Because I could say, well, on your growth, everything you earn, you're gonna be taxed 1.5% less. I should not expect a straight line into my bill for next year to see a 1.5% reduction versus the alternative.

Once this week once we know for sure what the tax percentage is in our bill, we should reflect the actual tax percentage. It's a flow through from our business. For

later conversation, I I would love when we start talking about the rate structure going forward. This is gonna

go in effect in April for it to

be reflective of what would I what would I be paying for my power rate if this was still in place versus what I would be paying. Just as a kind of a framework around that. So I'd love to see that. I I would be if it came back and it said you're gonna pay 2% more next year with this tax in place or 2% next year if this tax wasn't in place, I would have more further questions around, okay. So, like, I want some more detail around why we're still landing at that number in my mind.

But, before I go

back to Australia, just deeply, I mean, irrespective of kind of the conversation around the the power rates and and my, what I'm gonna be paying going forward. $10,000,000 out of our transition fund is stigmatized. And so that's just something to keep in mind as we're kinda moving forward. Just about, like, what we're gonna do to try to back to that as we start having conversations around potential options and what this looks like. Question for someone. What precludes us from councilmatically raising rates? Is that our charter that says we can't do it?

It's we have two statutory authorities. Well, We have RCW that restricts some rates at 6%, and we also have city charter that caps utility tax rate at 8%. So anything over 6% requires a a vote of the their approval by the voters just like the streets and it should have did, and they they.

And I I wanna bring that up because I we not saying this is, in the realm of possibilities, but, you know, we have cities outside of ours that have 20% tax rates as always, and 10% tax rates on utilities that we don't have. And those you know, we have restrictions with our charter, but we can and can't do along with state law. Spokane is sticking out my mind of a 20%, excise tax line, solid waste. I do this. So now question for me. Alright. Councilor Bobby? Nope. You

actually covered most of what I was gonna say, which is, you know, it sounds to me, like, the benefit is in the future, your rate went slightly less higher.

It's the reality of the business. Yeah.

And this is why constituents get so angry. Right? I mean, my point's just gonna be that it seems it's I'm I know the conversation I'm gonna have at the

door. Mhmm.

You lied to me. I voted this thing down. My rates didn't go down, and you

kept the money. We

have to figure out a way to communicate

that better. K. Alright. Any other questions? Alright. On that high note there, Danielle, when does this again, remind me when this comes to council.

Next week.

Okay. First, I need a motion first before I get to that one. Move forward the proposed amendments

to Tacoma municipal code subtitle six eight in

the full city council for

consideration. Second. It's been moved and seconded. All those in favor signify by saying aye. Aye. All those opposed? The motion's been adopted. Thank you, Danielle. Thank you. With that, we'll move on to briefing item number two, which our friends with briefing item two already yeah. We just did two. Alright. On to three, which our friends from Tacoma Power still be with us for this one. So brief by number three is Tacoma Power open access transmission tariff update. And I'd like to call on, Jane Hall from Tacoma Power. Or who's doing the presentation today? Jing Liu. In Jane front of Nicole Power to begin the presentation.

Thank you. Before we get started, again, my name is Jane Hall. I'm the power utility section manager. I just want to practice this presentation that James will be sharing with all of you in a moment and let you know that the this rate update proposal is specifically related to our to come up power's wholesale transmission customer. It is not related to our retail customers or retail. So before we dive into the details, just wanted to make sure everyone's aware of that. Thank you. I'll hand it over to JK.

Yes. Before we turn over, Kelcelia, our new member to our committee, has a question for us.

I just want examples of what a wholesale customer is versus a retail customer. Sure.

You'll hear about wholesale customer in one moment. So a wholesale customer is another entity that we sell directly to. In this case, as you'll hear in a moment, it's our transmission services that are being served to Lonnel Power Administration. Another example of a wholesale customer would be a trading partner such as another utility, so you'd like Puget Sound Energy, where we sell wholesale electricity to them. In this case, we're talking about wholesale transmission.

Got it. So Lake Lakeview Light

and Power is one of

our wholesale customers. Correct? Or it's like or what what's the local wholesale partner? Peninsula Light? Peninsula Light.

There you go.

So you get a bill for Peninsula Light, but the power, we hold it to them. Right? Versus our risk our retail customers, you get a bill that's from the whole company.

We don't wholesale the power.

We Wheel it?

They we we wheel it through, so we just charge the transmission.

They get they get their power from Bonneville. I see somebody else has joined us. Maybe answer that question.

Name is Rick Applegate. I'm an analyst with Tacoma Power. And the the customer, the wholesale customer was properly identified as the Bonneville Power Administration. They're in turn a service provider to to Lakeview with the Peninsula Way. Effectively, service goes supposed to be used by those customers, but billed in today's pay level.

Okay. Thank you. And thank you for your question. Yeah.

Okay. My name is Jing Liu. Again, I work for rates planning analysis team for Tacoma Power. I'm here today to present to you staff's proposal to update our open access transmission tariff, OAT for short. So first, I would like to give you some background and overview.

So what is transmission in the general sense? So a power as you probably already know, the power utility the power grid typically consists of three components, generation, transmission, and distribution. So transmission is transmission facilities are those giant scaffolding steel towers that you see on the sides of the interstate highway or in the mountains cross desert, those are the facilities that move large amount of high voltage energy from the generation resources to the neighborhood substations from from from where, you know, will be further delivered to the end users. So when you think of transmission facilities, you can think of it as the interstate highway for our power grid. So what is owed?

In 1996, the federal regulator Federal Energy Regulatory Commission, FERC, issued an order that require all public utilities provide open access transmission service in a comparable on a comparable basis to the service they provide to themselves because the transmission is the it is the interstate highway. Without it, the developers for the generation resources, whether nuclear, solar, or or wind, they're typically in, you know, far away removed from the end users. So they need to have access to the transmission system in order to move the electrons to the end users. And it doesn't it's so expensive, it really doesn't make sense for utilities to duplicate each other's facilities. So with the open access tariff, the all the transmission owners would publish a rate and terms and conditions to other interested parties for them to use that interstate highway.

So the idea behind it is to promote competition among the generation of resources so the end users could benefit from the competition. They can pick and choose the cheapest and, you know, renewable energy. Tacoma Power is not subject to FERC jurisdiction. However, we voluntarily follow the guideline, and we offer open access to of our transmission services to other utilities or interested parties. So we established our OATT in 2012.

Since then, our transmission revenue has increased steadily at about 3% annual increase from so from about 6,000,000 to begin with, and now we received about 9 to $10,000,000 from our wholesale transmission services. We have only one transmission customer that is Bonneville Power Administration. They use our transmission system to to deliver the power from their generation sources to nine municipal and co op utilities that they serve. So we don't serve the small utilities directly. BPA buy from us and then use that as part of their system to serve their customers.

And on the flip side, we also purchase transmission services from BPA. We actually pay BPA a lot more on an annual basis for use of their transmission system in order to move power from our generation sources to our end customers. So the relationship is reciprocal and our rates are very comparable. Next slide illustrate our guiding principles in rate making. So in setting the transmission rates, it's we follow very much the same principles as the retail rate making.

We price our services based on the actual cost. We do pretty rigorous cost of service analysis for transmission and all transmission and only transmission. We follow industry standard. Our formulas are consistent with FERC guidances. We offer the service on a non discriminatory basis.

We treat all our customers, existing and potential customer, the same, including our own usage. And when we set the when we when we examine the cost, we follow the cost coordination principle, make sure all transmission users, including ourselves, pay a fair share of the transmission cost. The next slide, a little bit dense because it has technical terms. We have three different types of rates on our tariff. The first category is network integration.

That is that is where BPA is. So this NT service enable customers to use our transmission system the same way that we would use to serve our customers. So use the highway analogy, it's like we allow cars to come onto our highway, come off the highway in the most efficient way that the customer want. BPA use that service. Again, they purchase this anti transmission service from us to serve their municipal and co op utilities.

The the rates is set up in a way that their payment will equals to the cost of service that we specified in on the tariff times their load ratio. So if on the annual basis, our tariff says our cost of service is $36,000,000 and BPA uses, 26% of it, their load is 26% of it, then they pay us 2026% of the $36,000,000, which is translates to about 9 to $10,000,000 every year. The second category is called a point to point p to p. That is that is service that allow customer to specify a starting point to an endpoint. So it's a specified route.

We used to have one p two p customer, but not anymore. But we we we specify the rates on our tariff anyway. The way we set that rate is we take the cost of service from empty service divided by transmission load, and that translates to a per megawatt hour rate for p to p. And the third category is called ancillary services. They include frequency response and regulations, spin reserve, supplemental reserve, reactive power.

So in a highway analogy, those are the necessary services to keep the highway clean or lighting, police patrol. They are not exactly they they don't necessarily use transmission asset. A lot of the service actually rely on the generation assets, but they're there. They're necessary to support the a healthy grid to maintain the reliability. So those are the add on charges onto the NT and point to point rates.

The next slide shows our current rates and our proposed rates. The most important one is the network integration, NT service. As I mentioned, on the tariff, we will specify an annual revenue requirement, which means that's how much it costs us to maintain and operating the transmission service. Our current tariffs specify our cost of service is 26,700,000.0. After evaluating the most current cost, we determine our cost of service has increased to about $35,800,000.

So there will be a $9,000,000 increase. So that translates to an annual rate increase of 6% in the last five years. And then we translate the NT revenue requirement figure into the point to point per megawatt hour rate, and that rate would have similar percentage increase. The percentage increase is slightly lower because we divide the annual cost by the transmission load, and our transmission load has increased a little bit over the last five years. So that's why the point to point rate increase is slightly less, but fairly fairly consistent.

The rest of the rates on schedule one through six, they are ancillary services. We do the cost of service study for each one of the service, and they will see the varying degrees of increase or reduction. So vulnerable power administration, their load is about 26% of our total transmission load. So of the $9,000,000 increase, they're going to get the corresponding percentage. So we estimate we'll gain we'll have additional 2,600,000 every year from EPA.

And in the next slide, I would like to show you that our rate increase is reasonable, that we haven't updated this tariff rates for five years, and this five years is during pandemic, post pandemic. It has been a time of very high inflation for materials and labor, and we also see the supply shortage. We got industry information from two different sources, one from Energy Information Administration, EIA, and the other one come from the Handy Whitman Index, which is a utility specific construction cost index. Both sources indicate that transmission cost has increased by about 7.2% every year in the same time period. And our rate increase, our proposed rate increase is 6%, slightly lower.

And also in the appendix, we provide a comparison of our transmission rates with other regional utilities who also provide transmission service to BPA. And as you can see from the appendix slide, our rates are pretty reasonable and are very comparable to BPA's transmission rates. While we are mentioning the appendix, we would also like to propose to update the language in attachment o of the tariff. And those are the modifications of terms and conditions. They don't impact rates.

They're just to update the terms and conditions to reflect our market functions. And mister Rick Applegate is here in case you have any questions on those. Next, I would like to show you our current timeline in seeking approval for this tariff update. We have presented to the pub study session on December 10, and we are here today presenting to you of this proposal. Next Wednesday, we plan to present in the pub evening session requesting the pub to support us with the resolution.

And after that, we will be presenting to city council. At the time when we made the slide, our plan was to present to the city council on February 24 and March 3. After consulting our coordinator, we decided to postpone these two meetings postpone the presentations by one week. So the city council presentations would be on March 3 and March 10. Our proposed effective date for this tariff is 04/01/2026.

And we have already showed the draft tariff with BPA, and they have questions, and we reviewed certain we answered their questions. So and we have published this draft tariff on on the transmission website. There's a dedicated website for all utilities to publish the the open access transmission tariff. So we already posted around Thanksgiving time last year, and we have not received any negative feedback. So with that, I'm going to conclude my presentation.

So we are here to request this committee to move to city council for approval to update the wholesale transmission and ancillary services rates as well as terms and conditions in attachment o of transmit of Tacoma Power's open access transmission tariff. I'll be happy to answer any questions.

Alright. Thank you very much. Any questions? Vice chair.

Thank you. I appreciate the presentation. Actually, I think I was on the utility board because I remember this conversation

back when we updated the tariffs last time. And

so completely understand. I could you remind me, is BP the only user of our transmission lines appointment?

Yes.

Okay. It is there is it within the realm of possibility that there could be another utility that would wanna use ours as well, or is it just logistically not feasible?

I am not aware. That's possible.

It's sorry. Break Apple, Connecticut, an analyst with Cohen Power.

It's entirely possible that something could could show up request service from from us right off of that if the circumstances were within our capability.

Great. Thank you. And then just a follow-up question on that. It's my understanding that any revenues generated from this tariff goes back into supporting the system as Correct? Just wanna clarify that for folks out there.

It's not going to the general fund, for example.

You're right. You're you're absolutely correct, Deborah Rochelle. So the way it works is we will conduct our retail rate making every every two years. So we will know on the whole system how much it costs to maintain our business. And any revenue from wholesale market, the power sales and the transmission wholesale, those revenue will be used to offset the retail side of the cost. So if we increase our if our total cost, you know, is what it is, and then the higher the revenue from the wholesale market, the lower the retail base would be.

And so for anybody listening, basically, what that means is utilizing these revenues, we're helping keep rates down for everybody else in the system. So it's kind

of a downward pressure on our rates, so it's not going up as fast or as high as it could. Thank you.

Yeah. That's correct. And we haven't updated this cost for five years. So it's so we have our cost is here. Our our rates are here. So the revenue need to keep up with the the cost. Great. Thank you. Okay. Thanks a bunch.

I hope you love it.

Can BPA send out our rates effectively? What I would say is we have a

very significant relationship with with BPA in terms of purchasing transmission service for them, purchasing purchasing power services for them. It it is possible that they can object and can appear for this this committee and and and make recommendations of why perhaps our our our our cost is too high. But I believe ultimately, the authority resides with us in the understanding what we were deciding to put their transmission rights could affect approaches later on down the road when we deal with a lot of other matters such as power transmission service that we received from them.

Is the five year wait a statutory kind of thing, or we just waited five years to update this?

No. It's not statutory. It's just been a while since these have been updated, and we're committed to updating these rates every other year following the budget rate cycle. So the next next time we evaluate these rates and update them would be in 2027.

Right. We're committed to evaluate the cost every other year.

Okay. That's good to know because it sounded to me like we were basically running negative for five years because of the pandemic, and that probably added upward rate pressure to all customers. Correct?

It's a it's a cost of service business. If our costs go up in one area, the rates are set for two years, if you have anything, would have otherwise been distributed differently, that won't get justified until every two years rate making. And these specific rates on the time frames that they're redundant. So, yeah, five years.

Yeah. Are these proposed rates based on actuals that we actually hit and then we're trying to true up, or are we also trying to anticipate future increases? Knowing that five years ago, you couldn't have or maybe five years ago, you could have anticipated the effects of of a pandemic, but I mean, we're doing the 6% annualized increase. I get why. Right? All all costs went up. Should've done it earlier. Got that too. But are these rates based on what we have already experienced or also taken into consideration potential future updates or

lawsuits?

This proposed rate is based on 2024 financial information. So that's the most up to date one that we have. Is is the question it might be a good question to think about whether we want to escalate the cost into the future years, like building escalation factor or not. Currently, we don't. We hope PPA don't in their rate setting. So it's yeah. But I think in terms of rate making principle, it's certainly it will be reasonable

to I mean, it sounds like you're gonna wait a five year window, and I get that we're we're committed to a two year window that there has to be well, if there's a way to put in a component that says, if CPI goes above a certain amount, we have the right to add this much in a year or something, if that's even possible. I think that's something we should consider because, again, if we don't, it hits the actual customer. Correct? Eventually. Yes. Because we have to redo a rate.

And if we're doing it every two years, that's pretty much in sync with the time frame in which we do the rates for the customer. So I think it'll that would that system would stay fairly steady with findings. K.

Councilor Romero.

Thanks for that question, councilor Morisovia, because I think that we have to approve the rates up. Like, it has to go to the TP. So I appreciate that you wanna do that, but if they were doing something that says it could be increased, we'd still have to wouldn't the TPU board and then us have

to vote on it? So,

I mean, like, I don't it doesn't really make sense to add it add that. It just makes sense to go evaluate it every couple years. I just had a question about so you you said that they're using 26% or did you say 26% of our

Right. About.

And so then if that changes, do we reevaluate? Because it seems like that could happen. Right? If there's, like, a bad year, like, in California or wherever the the electricity is going.

It's usually it's pretty stable. It's based on their peak ratio. Okay. So on a so and we the bill is on a monthly basis. Every month, the ratio could be slightly different, and we hold them accountable for the peak ratio, the highest peak of all prior eleven months. So it usually the ratio is very stable.

And do we do a contract like they do with us where we have to sign, like, a long term contract that we're going to like, we were we we just recently renegotiated our BPA contract. It got signed. Right? I think I did. Do we have one of those with them, or do they say forget it? We're not gonna do that, or how does that work?

We we do. We have a long term agreement.

So what's our contract with them?

I have our

contract for transmission service to bond the power construction service provider to you now lasts until 2028. We would be expected to do that with the agency to do the same arrangement going forward. And it is one thing that was not mentioned earlier, our our our conversation about voluntarily offering open access transmission service. We do have a requirement that is imposed on us as a transmission customer of BPA to offer more or less reciprocal service.

Okay. That was kind of my question. So, like, a reciprocity kind of thing. Yeah. Okay.

It it's

not perfectly reciprocal. Okay.

But that makes sense. Okay. And when when is their peak? Like, our peak is to ask for the summer. Right? And or no? How does it work? Could you tell me where their peak is compared to our peak?

We are all in this this portion of region, the side of the winter until it's there's substantial water

No. We have more, and so we sell it is what I mean, in this in the winter. Right?

What I would say is that there

We create more energy in the winter is what I'm saying to sell. That correct?

Okay. In in in the Okay.

There's there's I'll I'll separate two things. There's there's energy, and then there's transmission capability. Energy can vary terms of our production, follows precipitation as hydroelectric based utilities. So that's that is sort of based on hydrology. Transmission service, the demands of our transmission system peak in the wintertime with peaking growth both for our system as well as bottom of road there. There are various customers.

Okay. That makes sense. Thank you.

Okay. I just had a couple of few specific questions, and then we'll report. There was one rate that's going to zero. That's right. Why is that going to zero? Thanks

for the great question. So when we are evaluating the cost, we have a rates consultant that evaluate our work, and they brought us brought to our attention that in 2024, the FERC issued an order prohibiting a charge the charge the transmission providers to charge for reactive power if the power from the generating facilities, and in this case, BPA's power source, stays within the standard power factor of 90%. So if the so reactive power is to so we have to this is about the voltage control on the grid. We have to absorb or expel the power if the connected generating resource is not stable. That's my nontechnical explanation.

So if the power source power factor is reasonable, then the FERC says, well, the service is just an obligation of good utility practice. You know, you shouldn't be compensated because you're running the grid anyway. So with the latest FCC order, we feel we should be consistent with the industry standard. We did so we zero out the rate in that section on schedule two, but we also put in the language that in the further in the future evaluation, if it turns out that the power we receive from DPA from the transmission user falls outside the standard range, and in that case, we would like to have the right to charge for reactive power function. Okay.

I just saw all the rates went up and that one's. Good answer to that. My other question, you made a good point about the fact that we BPA uses us as a pass through for their power to their subsidiaries. We also use the pass through because we sell on the wholesale market. So they charge us roughly similar fees that we charge them. And the reason I'm asking that is, is this something that they're just gonna pass back to top of us? So if we raise our transmission fees, do they raise theirs? Then we raise ours. Is it just the kind of the that kinda goes forever? So while we make it $2,600,000 more now, come 2028, BPA will find a way to capture that.

It's a great question. So BPA's rates for us as one of their customers for power and transmission is set for the next three years. We do not expect that to change. Also, BPA's rate making is very, very complicated. It's very possible that they would pass this increase on directly to the nine mutual customers that they serve because, obviously, they're using our transmission service system to directly serve those nine mutual customers.

But we're we're not concerned they're gonna just because we're using their infrastructure to send our power back out. So isn't there a risk that they will just say, well, you're raising by 2,500,000 of your bill. We have to we're a cost research entity. Or, I mean, they're gonna charging our mortgage. They just pass it back on us in the three year period in the future, or do we feel like Go ahead. That is

I I would expect, effectively, roughly about 5% of the cost that we pass on to them with this rate increase to show up down the road in our power bill, not our transmission bill.

Gotcha.

Funnel distinction there in the circumstances that that we mentioned. Yeah.

Okay. I that was one of my questions around, you know, because we've had lots of conversations about increases here. I mean, they have to be directly passed across over here. And so, you know, we're it looks great right now that we have $2,600,000 more. But if that's just gonna disappear in the three year period, then, you know, it's good to think kind of operate on that.

Okay.

My only other question was oh, so one of the things you're hearing a lot about California and other parts is wildfire risk and home transformation. So when we think about our rate setting, maybe this is a broader conversation to come back. But we're thinking about our rate setting, conversation around transmission, I imagine we can see the same thing as we're seeing increased risk while wildfires and wildfires being attributed to utilities. Is that being baked into what we're doing here? Is that something separate?

Or is the because I could see there being upward pressure. Okay. So maybe that's a further presentation to come back at some point in time. I'd love to know more about how we're responding to that, especially some of some of the movement at the state level to try to create funding sources by which people who are damaged by wildfires can recover cover their their costs. I'd love to know what that means for us as an organization.

Thank you. Great question. We do have

a wildfire mitigation plan in place.

Takoma Power does have a wildfire mitigation plan in place. And we are always looking at wildfire risk and trying to mitigate that risk. As Jean mentioned, these rates use historical data around 2024.

That would just make some data for further

Yeah.

Conversation. I know it's not that's not directly relevant to this conversation. But as we're thinking about trying to capture the cost of transmitting power to our infrastructure, I imagine that's a factor we have to consider as part of it. So okay. With that, if there are any further questions nope. And seeing none, I'll entertain the motion. I moved forward to propose ordinance updating wholesale transmission and ancillary services rates in Takola Power's open access transmission tariff to the full city council for consideration. Second. Alright. Let's move to second it. All those in favor, signify by saying aye. Aye. All opposed. The motion's declared adopted. Alright. Thank you all very much.

Thank you. Thank you for your question.

Alright. We'll now move on to our fourth agenda item, which is topics for upcoming meetings. And I'm gonna call in a Trello, executive liaison for topics for upcoming meetings.

Okay. So February 17, we haven't officially canceled. That is the day after President's Day holiday, so we thought it was again, you all don't have council study session or committee that day. So we can certainly find an agenda item or we can cancel. Otherwise, March 3, we have the state auditor coming in for an accountability exit for the 2024

accountability audit.

Alright. Well, unless I've got major pushback, I think we can just go ahead and cancel the February 17 meeting at this point in time. Since, yeah, for holiday. Yeah. No. It's alright. I don't wanna meet for just a meet. And then the audit office, the the auditors conference that may join me with the audit advisory board too. Will our Jeff be here for that one? It will be. Okay. Great. Okay. Before we move on, I have other interest, I wanna thank board member so the board chair at this point in time, board member Laughlin? Sure. Board chair Laughlin. And vice chair, Klaus McGann, who I see. Yeah. That was what I really wanna recognize who's been with us since the beginning. Thank you for joining us.

Alright. Under other items of interest, the committee has received Baker Tilly's twenty twenty five audit entrance conference memo and presentation on their audit plan, which will help the utilities, power, water, and rail, and the environmental services, solid waste wastewater and stormwater. There will not be accreditation this time mostly because the auditors weren't gonna be available for this meeting. So what we did is we just put the audit the entrance conference memo into the packet. So the Colorado Finance is available if you have any questions, and otherwise, will be available on the website following the meeting.

And just as a reminder, please take a look at that document before our exit conference on well, actually, no. It's a twenty twenty five entrance conference, so unrelated to twenty twenty four exit conference.

So there you go.

And with that, are there any items of interest in the committee?

I'll move to adjourn.

Second.

Alright. It's been moved and seconded. All those in favor signify by saying aye. Aye. Opposed? With that, we say adjourned. Alright. Thank you. It's never done once again.