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CITY COUNCIL AGENDA ITEM NO. 16

Meeting Date: March 22, 2005

Subject/Title: Approve a resolution authorizing the “Balanced Billing Program” for residential Utility customers

Prepared by: Kerry Breen, Accountant II

Submitted by: Pamela Ehler, Director of Finance and Information Systems

RECOMMENDATION
Approve a resolution authorizing the “Balanced Billing Program” for residential Utility customers.

PREVIOUS ACTION
On December 10, 2002, by Ordinance No. 729, City Council approved the 2002 Water Rate Study prepared by Berryman & Henigar with its recommendation of tiered water rates.

On August 26, 2003, by Resolution No. 2969, City Council adopted the 2003/04 Cost Allocation Plan containing tiered water rates for FY 2003-04.

On September 24, 2004, by Resolution No. 2004-222, City Council adopted the 2004/05 Cost Allocation Plan containing tiered water rates for the current fiscal year.

BACKGROUND
Brentwood experiences cold, wet winters and hot, dry summers producing substantial seasonal variations in water demand. Many residents found themselves with higher than expected water bills last summer as they irrigated gardens, filled pools, and made other hot weather uses of water. City Council members have expressed a desire to moderate these seasonal peaks while maintaining the revenue targets and goals outlined in the 2002 Water Rate Study.

The Balanced Billing program would significantly reduce the seasonal peaks without reducing utility revenue. Customers would receive a monthly utility bill that is more predictable. The current month’s actual utility charges will be added to the prior 11 month’s actual charges; that sum is divided by 12. Because customers will not be paying for their actual usage each month, their account will typically have a small balance at any given time, either owed to or owed by the City. In order to keep this balance from getting too large in one direction, the customer’s monthly bill will also include a small percentage of this balance. This total amount will be the amount of the “balanced bill.”

The program will not affect revenue collection adversely. A group of 200 residential customers with 2004 utility bills between $1,200.00 and $3,000.00 were studied to determine what impact Balanced Billing will have on collections. Using those customers’ billing history, the study group’s 2004 bills were recomputed based on the Balanced Billing formula. If those 200 customers had participated in the program for calendar year 2004, the City would have under collected $818.57 at the end of December. The average customer underpayment for 12 months was $3.95. Recovering a portion of unpaid balances in each month’s bill helps keep receivable balances low. The percent of unpaid balances can be adjusted to ensure that receivable balances do not become problematic. Recovery of unpaid balances or refunds of overpayment will take place when a customer moves from one address to another with Brentwood or closes an account. Staff will monitor under- and over payments closely to ensure an adequate recovery percentage is maintained.

Because customers will carry unpaid balances for portions of the year, the program is posed to be open to residential customers with good or excellent payment histories. Good payment history is defined as no more than two late payment and no payment arrangements or disconnections for non-payment in twelve months. In order to safeguard the revenue of the City, staff feels that it is not prudent to offer “balanced billing” to customers who have not established a reliable payment history.

Because water use can vary significantly from property to property, the balanced bill will be recalculated whenever a participating customer moves from one location within the City to another. A customer moving from a condominium to a single family home with a large lot would accumulate a large unpaid balance if high irrigation use were averaged against the lower condominium bills. A customer moving in the opposite direction would overpay excessively if the average from the former home were applied.

Balanced Billing will make utility bills more predictable for Brentwood customers without adversely affecting revenue or conservation efforts.

FISCAL IMPACT
There will be a very minimal effect on cash flow, with no effect on overall revenue

Attachments
Resolution
Application
Balanced Billing Brochure

RESOLUTION NO. _______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD TO APPROVE A RESOLUTION AUTHORIZING THE “BALANCED BILLING PROGRAM” FOR RESIDENTIAL UTILITY CUSTOMERS


WHEREAS, on December 10, 2002, by Ordinance No. 729, City Council approved the 2002 Water Rate Study prepared by Berryman & Henigar with its recommendation of tiered water rates; and

WHEREAS, on August 26, 2003, by Resolution No. 2969, City Council adopted the 2003/04 Cost Allocation Plan containing tiered water rates for FY 2003-04; and

WHEREAS, on September 24, 2004, by Resolution No. 2004-222, City Council adopted the 2004/05 Cost Allocation Plan containing tiered water rates for the current fiscal year; and

WHEREAS, Brentwood experiences cold, wet winters and hot, dry summers producing substantial seasonal variations in water demand. Many residents found themselves with higher than expected water bills last summer as they irrigated gardens, filled pools, and made other hot weather uses of water. City Council members have expressed a desire to moderate these seasonal peaks while maintaining the revenue targets and conservative goals outlined in the 2002 Water Rate Study; and

WHEREAS, the Balanced Billing program would significantly reduce the seasonal peaks without reducing utility revenue. Balanced Billing averages a customer’s current month’s utility bill with the prior 11 bills to flatten out seasonal peaks and make utility bills more predictable every month. The current month’s actual utility charges are added to the prior month’s actual charges; that sum is divided by 12. That result, plus a recovery percentage applied to any unbilled balance, if applicable, will be the amount of the “balanced bill.” Balanced billing will make utility bills more predictable for Brentwood customers, without adversely affecting revenue or conservation efforts; and

WHEREAS, because customers will carry unpaid balances for portions of the year, the program is posed to be open to residential customers with good or excellent payment histories. Good payment history is defined as no more than two late payment and no payment arrangements or disconnections for non-payment in twelve months; and

WHEREAS, Balanced Billing will make utility bills more predictable for Brentwood customers without adversely affecting revenue or conservation efforts.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Brentwood hereby approves a resolution authorizing the “Balanced Billing Program” for residential utility customers.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 22nd day of March 2005 by the following vote:

 Balanced Billing Program Application Form
CUSTOMER / CONTACT NAME:
COMPANY NAME:
SERVICE ADDRESS:
BILLING ADDRESS:
HOME PHONE: WORK PHONE:
ACCOUNT NUMBER:
How the Program Works
Balanced Billing averages my current month’s utility bill with the prior 11 months’ bills to flatten out the peaks and make my utility bills more predictable in every season. My current month’s actual utility charges are added to my prior 11 months actual charges; that sum is divided by 12. That result plus a small percent of any under-paid balance will be the amount in the “balanced bill.” Comparisons of actual use bills to balanced bills are shown below. As the example illustrates, my bills will not be the same each month but will show much smaller variations. For the example customer, the maximum deviation fell from $316 to $34.

Example Customer Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Actual '04 Bills $100 $102 $107 $172 $264 $311 $373 $416 $401 $291 $222 $173
Averaged Bills $ 228 $232 $233 $237 $249 $259 $246 $248 $263 $256 $246 $244

Moving
If I move from one home to another within Brentwood, I remain eligible for the Balance Billing program. My bill average will be reset at my new location and may take several months to begin to affect the amount I am billed. Accumulated under- or over-payments will be billed or credited on the final invoice for the old address.
Qualifications
The Balanced Billing program is open to residential customers with 12 months’ good or excellent payment history. A good payment history will have no more than two late payments and no payment arrangements, returned checks or credit disconnections in the past 12 months.

Program Conditions
I understand and agree to abide by the conditions established by City Ordinance and related administrative procedures establishing the Balanced Billing program:
o The account for which I am making application is in my name.
o I must have been a City of Brentwood utility customer for at least 12 months.
o I must have maintained an excellent or good utility payment record for the past twelve months to qualify for participation in Balanced Billing. During that period, I may not have had more than two late payments nor have been on payment arrangements or disconnected for non-payment.
o Once in Balanced Billing, if I have more than two late payments or elect payment arrangements, I will be dropped from the program. If I am dropped, I must maintain a good payment record for twelve months before applying for reinstatement.
o If I move, bill averaging will be reset and begin with the first bill at the new location. Bill averaging may take several months to have a positive impact on my account after a move.
o My bills will vary slightly each month. In some months, the amount I may be billed may exceed the charges for actual use. In other months, I may pay less than the true cost of my actual utility use.
o The utility billing computer system will track the under- and over-payments for each customer. I may contact the utility billing staff to learn whether my account has a debit or credit balance.
o If I decide to withdraw or am dropped from the Balanced Billing program for any reason, the full amount of any unpaid balance will be due and payable in full in the next utility bill issued. If I am due a refund for overpayment, that amount will be credited to my account on the next utility bill issued.
o The City of Brentwood reserves the right to adjust or terminate this program at any time with written notice to participants.
To demonstrate my understanding of, and agreement with, the above provisions, I sign and date this application.

Signature of Account Holder Date 

 

City Administration
City of Brentwood City Council
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Brentwood, CA 94513
(925) 516-5440
Fax (925) 516-5441
E-mail allcouncil@brentwoodca.gov