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Agenda Packet - May 29, 2012 - UB
AGENDA REGULAR MEETING OF AZUSA UTILITY BOARD AZUSA LIGHT & WATER 729 N. AZUSA AVENUE AZUSA, CA 91702 AZUSA UTILITY BOARD ANGEL CARRILLO CHAIRPERSON URIEL E. MACIAS VICE CHAIRPERSON KEITH HANKS BOARD MEMBER 6:30 P.M. Convene to Regular Meeting of the Azusa Utility Board A. • Call to Order • Pledge to the Flag • Roll Call PUBLIC PARTICIPATION MAY 29, 2012 6:30 P.M. JOSEPH R. ROCHA BOARD MEMBER ROBERT GONZALES BOARD MEMBER (Person/Group shall be allowed to speak without interruption up to five (S) minutes maximum time, subject to compliance with applicable meeting rules. Questions to the speaker or responses to the speaker's questions or comments shall be handled after the speaker has completed his/her comments. Public Participation will be limited to sixty (60) minutes time.) 001 B. UTILITIES DIRECTOR COMMENTS C. UTILITY BOARD MEMBER COMMENTS D. CONSENT CALENDAR The Consent Calendar adopting the printed recommended action will be enacted with one vote. If Staff or Councilmembers wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. Minutes. Recommendation: Approve minutes of regular meeting on April 23, 2012 as written. Minutes April 23.pdf 2. Notice of Completion: Refurbishing the Existing Roof at Electric Division Yard. Recommendation: Accept the completion of refurbishing the existing building roof at the Electric Division Yard at 1020 W. Tenth Street by Best Contracting Services, direct the City Clerk's Office to execute the Notice of Completion and have same recorded at Office of the Los Angeles County Recorder. NOC Roof Repair. pdf NOC Roof Repair - Exhibt pdf Approval of License and Consulting Services Agreement with Power Settlements Consulting and Software. LLC. Recommendation: Approve the License Services Agreement with Power Settlements Consulting and Software, LLC and authorize the Director of Utilities to execute the agreement. PowerSettlernents.p df 4. Approval of Professional Services Agreement with Burns & McDonnell to Perform an Update of the Electric System Master Plan. Recommendation: Award a Professional Services Agreement to Burns & McDonnell to perform an update of the electric system master plan in amount not -to -exceed $28,000 pursuant to Azusa Municipal Code 2-517(g). IJ Elec Sys Master Plan Update. pdf 002 E F. 2. SCHEDULED ITEMS Approval of Installation of Underground Electric Conduits Crossing the Metro Railway Richt of Way and Authorize Staff to Arrange the Installation with Metro Gold Line Foothill Construction Authority. Recommendation: (1) Approve the installation of electric underground conduits at selected locations crossing the railway right-of-way within the City of Azusa; and (2) authorize staff to request and arrange the installation of the electric underground conduits with the Metro Gold Line Foothill Extension Construction Authority in amount not -to -exceed $106,881. Metro Goldline. pdf Approval by the City of Azusa to Purchase Outstanding Stock of the Azusa Agricultural Water Company and to Dissolve the Company. Recommendation: (1) Authorize the purchase of 45 shares of Azusa Agricultural Water Company stock from George Pieper at a price of $2,150/share to be paid by the Water Fund and execution by the Mayor of the related Stock Purchase Agreement; and (2) approve the acceptance of the assignment of all remaining rights and liabilities of the Azusa Agricultural Water Company to the City of Azusa in connection with the dissolution of the Company and authorize execution of the related Assumption of Liabilities Certificate by the Mayor. T. ,,, % Azusa Ag. pdf Signed Stock Assmptn of Liab Purchase Agreement Cert. pdf STAFF REPORTS/COMMUNICATIONS Smart Gardening Workshop Results CRC-SmartGardening Report. pdf L'DJ CRC-FinalReport.pdf Third Quarter Budget Report for Water and Electric Funds for FY 2011-2012 1 � 2— —11j - 3rd Qtr Fin Rpt.pdf Electric-3rdQtrty-Bud Water-3rdQtrly-Bud- -Rpt FY 11-12.pdf Rpt FY 11-12.pdf 003 3. Update on Long Term Debt Refunding 12k Update LTD Credit_ Pres S&P -5- Refundinq.pdf 3-12.pdf S&P Rpt for Electric.pdf S&P Rpt for Water.pdf 4. Power Cost Adjustment Effective July 1, 2012 1 J PCA Update. pdf PCA Calculation. pdf G. CLOSED SESSION CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Pursuant to Government Code Section 54956.9(c) One potential case 2. CONFERENCE WITH REAL PROPERTY NEGOTIATORS Pursuant to Government Code Section 54956.8 Property: Water rights regarding Main San Gabriel Basin Agency Negotiator: George Morrow, Utilities Director Negotiating Parties: Reiner Kruger, Monrovia Nursery Under negotiation: Price and terms of payment. H. ADJOURNMENT Adjournment. "In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a city meeting, please contact the City Clerk at 626-812-5229. Notification three (3) working days prior to the meeting or time when special services are needed will assist staff in assuring that reasonable arrangements can be made to provide access to the meeting." "In compliance with Government Code Section 54957.5, agenda materials are available for inspection by members of the public at the following locations: Azusa City Clerk's Office - 213 E. Foothill Boulevard, Azusa City Libraty - 729 N. Dalton Avenue, and Azusa Light & Water -729 N. Azusa Avenue, Azusa CA. " 4 004 •.i..+l� � � � r YY r r r � � � L P ti.'1�� � . Utilities Director Comments San Juan Lodi Energy Center GHG "Cap & Trade" EV Charging K AZUSA LIGHT b WATER Util'ity Board: Comments 3 AZUSA l I G H 1 d WATER �•�r���-��t A�•���li�•i�.1 April 23, 2012 Minutes Notice of Completion: Electric Yard Roof Project Power Settlements Consulting & Software Agreement Update of Electric Distribution Plan by Burns & McDonnell ($28,000) C! yv� AZUSA LIGHT & WATER Installation of Conduits under Gold Line Azusa Utility Board May 29, 2012 5 AZUSA LIGHT 5 WATER �•�GkCi�[_�i7�lI , Gold Line Authority is coordinating with impacted entities including utilities o L&W encouraged to propose possible infrastructure "betterments" o Authority will consider implementing requested betterments during rail line construction Goal is to minimize future disruptions N AZUSA LIGHT 6 WATER Item Location 1 Virginia Avenue Between 6th & Foothill Blvd. 2 Zachary Padilla Between 5th & Foothill Blvd 3 Rockvale Avenue Between 9th & Foothill Blvd Total 7 Cost $35,627 $35,627 $35,627 b�vJ AZUSA LIGHT & WATER It is recommended that the Utility Board: — Approve installation of conduits at selected locations along railroad R -O -W — Authorize Staff to request installation of such conduits with Gold Line Construction Authority at cost not to exceed $106,881 0 ViMe AZUSA L I G H T G W ATE 4 Azusa Agro'cu Wraf water Company Azusa Utility Board May 29, 2012 .AZUSA LIGPT G WATER �•�t:�t���f)L1I7C�� A long-time objective of the Azusa Ag Board is to acquire all outstanding shares and dissolve corporation o Cost and time required for management & accounting provides little benefit o Last shareholder other than City agreed to sell his 45 shares for $2,150 per share. Purchase of these shares will allow dissolution without risk of legal challenge 10 AZUSA LIGHT A WATER D'ISSt aton Steps • Purchase of the last 45 shares of Azusa Ag stock outstanding • City to accept assignment of remaining rights & obligations of corporation — Assets include certain water rights in San Gabriel basin — No known liabilities • Approval by Azusa Ag Board of Directors of Dissolution Plan ill AZUSA LIGHT 6 WAT ER R�-r:C•�111 I11 �-� r� �•i �.�ti c•� l� That the Utility Board/City Council: — Authorize purchase of 45 shares of Azusa Ag stock for $2,150 per share (funded by Water Fund) — Approve acceptance by City of all remaining Azusa Ag rights and liabilities subject to dissolution of corporation by Azusa Ag Board — Authorize Mayor to execute related Stock Purchase Agreement and Assumption of Liabilities certificate, as appropriate V. 12 AZUSA L I G H! 6 WATER f ir���rr���.�tic•}r� It�lrl�ti 13 WON AZUSA LIGHT G WATER ° Held April 14, 2012 at NRC o UB approved $5,525 in assistance from AB 939 Funds 35 attendees and 15 volunteers at event. 19 compost bins and 1 worm bin distributed 14 AZUSA L I G H T b WATER 3rd Qtr iriancial Report • Water and Electric both had positive cash flow through 3rd quarter 2012 • Water sales up 3.2% from prior year, electric sales flat • Debt Coverage for both utilities in excess of bond covenants • Level of Reserve funds improved 15 AZUSA LIGHT & WATER ° Standard & Poors affirmed water and electric system ratings —"A" for Electric and "AA+" for Water Bonds sold on 5/23/12 —1.99% TIC for water, $1.51 M NPV — 2.77% TIC for electric, $511 K NPV — Average savings of 12.1 % over existing WS rates AZUSA LIG H i b IN 4! EN Power Cost Adjustment • PCA provides for recovery of power supply related expenses • Set annually based on budget and "trued up" every six months •PCA of $0.01592 effective July 1, 2012 — Reduced from current level of $0.02053 4 ten. 17 VY, AZUSA LIGHT b WATER Recommend adjourning to Closed Session following the City Council Budget meeting AZUSA L I G H T & W A T E R CITY OF AZUSA MINUTES OF THE REGULAR MEETING OF THE AZUSA UTILITY BOARD/CITY COUNCIL MONDAY, APRIL 23, 2012 — 6:32 P.M. The Utility Board/City Council of the City of Azusa met in regular session, at the above date and time, at the Azusa Light and Water Conference Room, located at 729 N. Azusa Avenue, Azusa, California. Chairman Carrillo called the meeting to order and led in the Flag Salute. ROLL CALL PRESENT: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA ABSENT: BOARD MEMBERS: NONE ALSO PRESENT: City Attorney Ferre, City Manager Makshanoff, Director of Utilities Morrow, Assistant to the Director of Utilities Kalscheuer, Assistant Director Water Operations Anderson, Assistant Director of Resource Management Lehr, Public Works Director/Assistant City Manager Haes, Assistant Director of Electric Operations Langit, Director of Economic and Community Development Christiansen, Finance Controller Paragas, Police Captain Momot, City Clerk Mendoza, Deputy City Clerk Toscano. PUBLIC PARTICIPATION Call to Order Roll Call Also Present Pub Part Mr, Art Morales addressed the Board Members expressing his opinion regarding the use of Public Benefits A. Morales funds for free swim. He also suggested that people in the Light and Water department can transfer and save Comments money for use for children and seniors. UTILITIES DIRECTOR COMMENTS Dir Comments Director of Utilities Morrow provided an update on the automated trash pick up workshops, invited all to the Morrow Lodi Energy Dedication on August 10, 2012, S131368, and required investment for pollution control. He Comments responded to questions posed by the Board Members regarding automated trash timeline, feed back from the community, advertising to the public, contract implementation process, and the contract and evergreen clause. UTILITY BOARD MEMBER COMMENTS None. Board Member Comments None 0-0 The CONSENT CALENDAR consisting of Items D-1 through D-6, were approved by motion of Board Consent Cal Member Macias, seconded by Board Member Gonzales and unanimously carried with the exception of item C- Appvd D-6 6 which was considered under the Special Call portion of the Agenda. Spec Call 1. The minutes of the regular meeting of March 26, 2012, were approved as written. Min appvd 2. Formal sealed bids were waived in accordance with the Municipal Code Section 2-522, sub -section C; Pur John and the purchase a John Deere 326d Skid Steer Loader was awarded to Coastline Equipment Under Deere Skid Ldr California Multiple Award Schedule (CMAS Contract No. 4-08-23-0023A) in the amount of Coastline $69,719.91, including tax, delivery, discount, and State administrative fees. Equipment 3. Approval was given for the advertisement and solicitation of bids for Project W-265, Water Main Water Main Replacement in Bellbrook, Street, Lark Ellen Avenue, Brookport Street, Benwood Street, Benbow Replacement Street, Vogue Avenue, and Cypress Street in Los Angeles County near West Covina. Project W-265 4. Approval was given for the continuation of the Transaction Services Agreement between Azusa and Transaction Riverside; and the Director of Utilities was authorized to execute the extension agreement and Svs Agmt designated to administer/execute subsequent agreement renewals/amendments provided that Azusa and cumulative annual cost increases do not exceed $10,000. Riverside 5. Director of Utilities was authorized to execute the "Officer Certification Form" as required by the Officer Federal Energy Regulatory Commission (FERC) and the California Independent System Operator Certification (CAISO). 6. SPECIAL CALL ITEM. SPECIAL CALL ITEM Form Spec Call Spec Call Item Approval of Proposal by Standard & Poors for Credit Rating Services for Electric Utility. Credit Rating Svs Board Member Rocha asked what the annual surveillance fee of $5,000 was comprised of, in the fiscal impact. Questions Director of Utilities Morrow responded stating that the rating agency will re-evaluate during the year and put Response out a report. He detailed the issue. Moved by Board Member Rocha, seconded by Board Member Gonzales and unanimously carried to approve Standard & the selection of Standard & Poors for Credit Rating Services in amount not -to -exceed $18,000 plus reasonable Poors Credit out-of-pocket expenses; and the Director of Utilities was authorized to execute agreement subject to City Rating Svs Attorney's review and approval. SCHEDULED ITEMS Sched Items Resolution Approving Documents and Actions to Refinance Certain Long Term Debt Issued by Water and Reso refinance Electric Utilities. Wtr & Elect debt Assistant to the Director of Utilities Kalscheuer addressed the issue stating that in January 2012, the Utility C. Kalscheuer Board authorized Staff to move forward toward refinancing the utility's Water 2003 Series A and Electric Comments 2003 Series B Certificates of Participation. A financing team was assembled, Financial Advisor Urban Futures, Underwriter De La Rosa & Company and Bond/Disclosure Counsel Hawkins, Delafield & Wood. He stated that 20% of issue had been previously refinanced/refunded, and Tax Code allows tax-exempt debt to be refunded only once. He cited the options as follows: 1) Refund only 80% portion ($1,056,7000 savings), 2) Refund the 20% portion with taxable debt ($1,517,900 savings) or 3) Use water system reserves to defease the 20% portion ($1,800,000 savings, he recommended option 3. He stated there is sufficient cash on hand ($20+million), cash reserves earn only minimal interest, would improve debt service coverage and improves refinancing cash flow. He detailed the Water and Electric Bonds projected cash flow, projected savings, and Bond Documents recommending approval. Staff responded to questions posed by Board Members, 04/23/12 PAGE TWO 006 Board Member Macias offered a Resolution entitled: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING AND APPROVING 12-C25 DOCUMENTS AND OFFICIAL ACTIONS RELATING TO REFINANCING OF CERTAIN WATER Refinancing SYSTEM IMPROVEMENTS AND ELECTRIC SYSTEM IMPROVEMENTS AND THE ISSUANCE AND Water System SALE OF WATER SYSTEM REVENUE REFUNDING BONDS AND ELECTRIC SYSTEM REVENUE Improvements REFUNDING BONDS AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH. Moved by Board Member Macias, seconded by Board Member Hanks to waive further reading and adopt. Resolution passed and adopted by the following vote of the Board: AYES: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA NOES: BOARD MEMBERS: NONE ABSENT: BOARD MEMBERS: NONE Moved by Board Member Macias, seconded by Board Member Hanks and unanimously carried to authorize Authorize use use of $2.325 million from water fund balance to defease long -tem debt associated with the Series A Of $2.325 Mil Certificates of Participation issued in 2003 that cannot be advance refunded. ' Water Balance Approval of License Agreement with ECOtality for Fumishing and Installing Electric Vehicle Public Charging License Agmt Stations on City Owned Property and Rejection of All Other Proposals. ECOtality Director of Utilities Morrow addressed the issue presenting the background stating Staffhas issued an RFP for acquisition of EV charging stations, proposals received from Aero Vironment, General Electric, and Charge Point/Coulomb. He stated the City became aware ofan opportunity to participate in a national "EV Project", funded in part by federal ARRA grant which will deploy several thousand EV chargers in major metropolitan areas in six states, including California; the contractor forthe research project is ECOtality, Inc. He provided a summary of ECOtality arrangement, and fiscal impact. Question and answer session ensued. It was consensus of the Board Members to table the item in order that Staff gather additional information regarding the chargers, etc. STAFF REPORTS/COMMUNICATIONS Update on California Renewable Portfolio Standards (RPS) Bill and Azusa 2011 Compliance. G. Morrow Comments Item tabled for Additional information Staff Reports Update RPS Director of Utilities Morrow stating SBX 1-2 Law requires California electric utilities to reach 33% RPS in G. Morrow three compliance period and key issues for Azusa is treatment of Hoover and grandfathering of renewable Comments resources. He stated that for 2011 Renewable totals were 20.5% with Hoover and 18.8% without Hoover. Assistant Director of Resource Management Lehr stated that this was the first year of the compliance period Y. Lehr and regulations are not finalized yet, perhaps in June -July, the City is looking good going forward with the first Comments and second compliance period. It was consensus of the Board Members to adjourn. Adjourn TIME OF ADJOURNMENT 8:59 P.M. 0 xy 10111 rl :ra NEXT RESOLUTION NO. 12-C26. 04/23/12 PAGE THREE 007 iik CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: MAY 29, 2012 SUBJECT: NOTICE OF COMPLETION FOR REFURBISHING THE EXISTING ROOF AT ELECTRIC DIVISION YARD BY BEST CONTRACTING SERVICES RECOMMENDATION It is recommended that the Utility Board accept the completion of refurbishing the existing building roof at the Electric Division Yard (1020 W. 101h Street) by Best Contracting Services and direct the City Clerk's Office to execute the Notice of Completion and also have the same recorded at Office of the Los Angeles County Recorder. BACKGROUND At its September 26, 2011 Board meeting, the Utility Board awarded a contract to Best Contracting Services for refurbishing the existing metal roof on the Electric Division Yard building located at 1020 W. 10�' Street. This project was intended to resolve roof leaks and provide cool roof solution. Work is completed and passed inspections by the City's Building & Safety Division and the roofing material manufacturers for warranty. FISCAL IMPACT Project was completed and within the contract amount of $112,345 under Electric Fund's Capital Improvement Project Budget #73012-A as originally approved by the Utility Board. Prepared by: F. Langit, Jr., Assistant Director of Electric Operations Steven Yang, Senior Management Analyst Attachment: Notice of Completion 008 RECORDING REQUESTED BY Azusa City Clerk AND WHEN RECORDED MAIL TO: NAME City ofAzusa STREET ADDRESS 213 E. Foothill Blvd. CITY, STATE a Azusa, CA 91702 zip CODE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093, must be filed within 10 days after completion. (See reverse side for Complete requirements.) Notice is hereby given that: I. The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is The Citv of Azusa 3. The full address of the owner is 213 E. Foothill Blvd.. Azusa. CA 91702 4. The nature of the interest or estate of the owner is: In fee (IF OTHER TI IAN FFF, SDH F. IN H.F. AND INSERT, FOR E%AMPI.f PURCIV,SIN UNDER CONTRACT OF PURCHASE, OR IJ :VETT) 5. The full names and full addresses of all persons, if any, who hold title with the undersigned as joint tenants or as tenants in common are: NAMES ADDRESSES 6. The full names and full addresses of the predecessors in interest of the undersigned, if the property was transferred subsequent to the commencement of the work or improvements herein referred to: NAMES ADDRESSES 7. A work of improvement on the property hereinafter described was completed on April 23, 2012 The work done was: Refurbishing the Existing Building Roof at the Electric Division Yard at 1020 W 106 Street, Azusa CA 91702 8. The name of the contractor, if any, for such work of improvement was - Best Contracting Services Inc September 26 201 I M NO CONTRACTOR FOR WORK OF IFV ROVF.MENF AS A W401L, INSERT NO RT (OAT} OF CONTRACO 9. The property on which said work of improvement was completed is in the City of Azusa, County of Los Angeles, and State of CA; and is described as follows: Refurbishing the Existing Building Roof at the Electric Division Yard at 1020 W. 106 Street, Azusa CA 91702 10. The street address of said property is 1020 W. 10" Street, Azusa, CA 91702 James Makshanoff, City Manager Dated: May 29. 2012 (SIONATURF. OF OWNER OR CORPORATE OFFICER OF OWMiR NAARI) IN PARAGRAPH 2 OR HIS AOENTO VERIFICATION I, the undersigned, say: I am the City Manager of the declarant of the foregoing notice of completion; M IRRESR)ENT OF',"ANAGER OF -."PARTNER OF.`OWNER OF, LTC.) I have read said notice of completion and know its contents thereof; the same is true of my own knowledge. I declare under penalty of perjury that the foregoing is true and correct. Executed on May 29 2012, at Azusa, California. (CITY) STATE) James Makshanoff, City Manger (PERSONAL SIGNATURE.OT TIT.. INDIVIOUAI. WHO IS S WEARING THAT TIM CONTENTS OF TI@ NOTICE. OF COMPUTION ARF. TRUE.) 009 d -3. AZUSA CONSENT CALENDAR TO: HONORABLE MAYOR. AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE MORROW, DIRECTOR OF UTILITIES DATE: May 29, 2012 SUBJECT: APPROVAL OF LICENSE AND CONSULTING SERVICES AGREEMENT ("Agreement') WITH POWER SETTLEMENTS CONSULTING AND SOFTWARE, LLC RECOMMENDATION It is recommended that the Utility Board approve the License and Consulting Service Agreement with Power Settlements Consulting and Software, LLC and authorize the Utility Director to execute the agreement. BACKGROUND On April 1, 2009 the California Independent System Operator (CAISO) instituted a new electric wholesale market structure. The resulting market is a centralized electricity market whereby the city is required to sell all of our power resources into this market (and/or other wholesale markets) and buy out of this market all the electricity and Ancillary Services we need on a day ahead and hourly basis. The CAISO uses sophisticated and complex optimization algorithms to determine the least cost dispatch of generation resources and Ancillary Services to serve all electric needs within its Balancing Authority Area. Accordingly, highly specialized automated functionalities (software) are needed by load serving entities such as Azusa Light & Water to operate in this environment. As a result, staff has been using a specialized computer program licensed from Power Settlements Consulting and Software, LLC ("Power") to perform daily settlement functions. The current agreement with Power, approved by the Utility Board on June 27, 2011, terminates on June 30, 2012. Since Light & Water continues to have a need for CAISO settlement functionality and since the software by Power has been working well 010 Power Settlements License and Consulting Agreement May 29, 2012 Page 2 and is relatively inexpensive, staff wishes to enter into this Agreement for the July 1, 2012 — June 30, 2013 term. 11 FISCAL IMPACT The proposed cost of the Agreement is $858.00 per month payable on a month-to-month basis (The cost of the current agreement is $833.33 per month). The Agreement can be terminated at any time without penalties by a 30 day written notice. Funds are budgeted to pay for this service. Prepared by: Yarek Lehr, Assistant Director of Resource Management 011 101 FROM: DATE CONSENT CALENDAR HONORABLE CHAIRPERSON AND MEMBERS OF THE BOARD / GEORGE F. MORROW, DIRECTOR OF UTILITIES MAY 29, 2012 UTILITY SUBJECT: APPROVE THE SELECTION OF BURNS & McDONNELL TO PERFORM AN UPDATE OF THE ELECTRIC SYSTEM MASTER PLAN RECOMMENDATION It is recommended that the Azusa Utility Board award a Professional Services Contract to Burns & McDonnell for Electric System Master Plan Update in the amount not -to -exceed $28,000 pursuant to Azusa Municipal Code 2-517(g). BACKGROUND The last Electric System Master Plan was prepared and completed in late 2004. Many of the recommended system improvement projects have been implemented and completed during the past 8 years. Staff anticipates new projects in the coming years such as smart grid, distribution automation, advanced metering infrastructure, electric vehicle charging, new large customer loads and other legislative mandates compliance. Moreover, the Metro Gold Line Foothill Extension Construction Authority ("Authority") has arranged with Azusa Light & Water for electric services to the railway transit power substations in City of Azusa. This project and others will have an impact on the electric distribution system which needs to be considered and studied as part of prudent utility system planning. Given the Metro Gold Line project timeline, staff is recommending that an update of the old Electric System Master Plan be initiated immediately. Staff would ordinarily have the Utility Board approve a scope of work for professional service contracts over $20,000 in advance of the proposal solicitation, however, in this case proposals were solicited directly by staff to enable the Utility to meet the needs of the Metro Gold Line project time frame. 012 Electric System Study May 29, 2012 Page 2 f The solicitation consists of gathering proposals from consulting engineering companies who specialize in the use of computer software modeling for analyzing the electric system and updating Electric System Master Plans. The following proposals were submitted and are listed below. ITEM COMPANY NOT -TO -EXCEED FEE I BURNS & McDONNELL $28,000 2 SAIC Energy LLC $33,000 3 POWER ENGINEERS INC. $78,052 Staff reviewed the proposals that were submitted and determined that the lowest fee proposal by Burns & McDonnell meets the requirements of Azusa Light & Water for performing the study and update the Electric System Master Plan. Staff is recommending selection of Burns & McDonnell and award of a Professional Services Contract pursuant to AMC Section 2-517(g) -- best interest of the City, in the amount not -to - exceed $28,000. FISCAL IMPACT Following approval of this contract staff will transfer funds available in existing budget sufficient to cover the expense of this contract. Prepared by: F. Langit Jr. — Assistant Director — Electric Operations Hien K. Vuong — Electrical Engineer 013 LISA . W.,t, AGENDA ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: MAY 29, 2012 SUBJECT: APPROVE THE INSTALLATION OF UNDERGROUND ELECTRIC CONDUITS CROSSING THE METRO RAILWAY RIGHT OF WAY AND AUTHORIZE STAFF TO ARRANGE THE INSTALLATION OF THE UNDERGROUND ELECTRIC CONDUITS WITH METRO GOLD LINE FOOTHILL EXTENSION CONSTRUCTION AUTHORITY. RECOMMENDATION It is recommended that the Azusa Utility Board: 1) Approve the installation of underground electric conduits at selected locations crossing the railway right-of-way within City of Azusa 2) Authorize Staff to request and arrange the installation of the electric conduits with the Metro Gold Line Foothill Extension Construction Authority in the estimated amount not to exceed $106,881. BACKGROUND The Metro Gold Line Foothill Extension Construction Authority ("Authority") is a public entity of the State of California created for the exclusive purpose of completing the design and construction of the Gold Line Railway Extension towards the City of Azusa. The Authority is coordinating their planning and design efforts with each City impacted by the proposed railway extension. As part of this effort, Azusa Light & Water was encouraged to determine and request any desired infrastructure improvements or "betterments" within the railway right-of-way. The Authority will then consider and potentially include these "betterments" when constructing the railway in order to avoid disruptions later once the railway lines are completed and operational. 014 Metro Gold Line — UG Electric Conduits May 29, 2012 Page 2 Light & Water engineering staff has determined that it will be desirable to install underground electric conduit at various crossings in the railway right-of-way within City of Azusa. These electric conduits will be used at a future time to underground the overhead power lines crossing the railway. The following locations were identified for the installing the electric "betterments". ITEM CROSSING LOCATION WITHIN RIGHT-OF-WAY ESTIMATED COST 1 Virginia Avenue Between 6` & Foothill Blvd. $35,627 2 Zachary Padilla Between 5 & Foothill Blvd. $35,627 3 Rockvale Avenue Between 9 & Foothill Blvd. $35,627 TOTAL $106,881 Pursuant to Article 6 p.38 of the Cooperative Agreement entered into between the Authority and City of Azusa, City may make requests for betterments and the Authority shall provide the betterment as long as design and implementation of the betterment would not delay the railway project and subject to payment terms as set forth in the Article. As a result, Staff is recommending the above described betterments for approval by the Utility Board. In addition, staff is recommending that the Utility Board authorize such request for betterments and arrange with the Authority the construction thereof in the estimated cost not -to - exceed $106,881. FISCAL IMPACT This new proposed project is budgeted in the FYI 2-13 CIP Budget under Gold Line Ext. Electric Distribution Improvements. Prepared by: F. Langit Jr. — Assistant Director of Electric Operations Hien K. Vuong — Electrical Engineer O15 boo* w SCHEDULED ITEM TO: HONORABLE MAYOR AND MEMBERS OF THE AZUSA UTILITY BOARD / CITY COUNCIL FROM: GEORGE MORROW, DIRECTOR OF UTILITIES DATE: MAY 29, 2012 SUBJECT: APPROVAL BY THE CITY OF AZUSA TO PURCHASE OUTSTANDING STOCK OF THE AZUSA AGRICULTURAL WATER COMPANY AND TO DISSOLVE THE COMPANY RECOMMENDATION It is recommended that the Utility Board / City Council: 1. Authorize the purchase of 45 shares of Azusa Agricultural Water Company stock from George Pieper at a price of $2,150/share to be paid for by the Water Fund and execution by the Mayor of the related Stock Purchase Agreement; and 2. Approve acceptance of the assignment of all remaining rights and liabilities of the Azusa Agricultural Water Company to the City of Azusa in connection with the dissolution of the Company and authorize execution of the related Assumption of Liabilities certificate by the Mayor. BACKGROUND A long-time business objective of the Board of Directors of the Azusa Agricultural Water Company ("Azusa Ag") has been to acquire all outstanding shares of Azusa Ag stock and dissolve the corporation. The time and cost for management of Azusa Ag. is relatively significant and provides no real benefit to the City of Azusa. Recently, the last remaining shareholder of Azusa Ag (other than the City of Azusa) has agreed to sell his 45 shares to the City of Azusa for $2,150 a share — a slight premium over the $2,000 a share offered several years ago. Purchase of these outstanding shares will enable the Azusa Ag Board to approve dissolution of the corporation without the risk of a legal challenge as there are no remaining shareholders to assert rights under the Wi • Azusa Agricultural Water Company May 29, 2012 Page 2 original agreements where the City took over majority control of the Company. The Water Fund will provide the monies necessary for the stock purchase as per past practice. Assuming approval by the Azusa Ag Board of the dissolution plan, it is necessary for the City of Azusa to agree to accept assignment of the remaining rights and obligations of the corporation. Assets include water production rights in the Main San Gabriel Basin which would accrue to the Light & Water department. There are no known liabilities. FISCAL IMPACT The proposed cost to purchase the 45 outstanding Azusa Ag shares is $96,750. Sufficient funds are available in the purchased water account of the Water Fund. Prepared by: George F. Morrow, Director of Utilities Attachments: 1. Stock Purchase Agreement 2. Assumption of Liabilities Certificate 017 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (the "A eement") is made as of April 6, 2012 ("Effective Date'), between George Pieper ("Shareholder") and the City of Azusa ("City"). RECITALS A. As rightful heir, Shareholder owns forty-five (45) shares of the issued and outstanding capital stock ("Shares") of The Azusa Agricultural Water Company, a California corporation (the o an ") originally issued to Mabelle Scott Anderson, June Belle Parker and Mary Belle Fulton as joint tenants with survivorship rights under Stock Certificate 1245. B. The City owns the remainder of the issued and outstanding capital stock of the Company and desires to acquire the Shares and Shareholder is willing to sell the Shares on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing promises, the terms, covenants, and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, with the intent to be legally bound, hereby agree as follows: 1. Purchase of Shares. On the terms and subject to the conditions set forth herein and in reliance upon the representations and warranties made by the parties hereto, Shareholder hereby agrees to sell to City and City agrees to purchase from Shareholder the Shares, free and clear of all liens, claims, charges and encumbrances of any nature whatsoever. 2. Purchase Price. The purchase price for the Shares shall be Ninety Six Thousand Seven Hundred and Fifty dollars ($96,750) ("Purchase Price'), payable by the City in immediately available funds via check or wire transfer to an account designated by the Seller. 3. Closing. The closing of the sale of the Shares shall occur as follows: (a) Shareholder shall deliver to the City the original stock certificate(s) representing the Shares being acquired accompanied by a Stock Assignment Separate from Certificate in the form attached hereto as Exhibit "A"; (b) Within five (5) business days of verification of the receipt of the deliveries set forth in Section 3(a) above, the City shall deliver the Purchase Price to the Shareholder as required by Section 2. 4, Shareholder's Representations. As a material inducement to the City to enter into this Agreement and to consummate the transactions contemplated hereby, Shareholder represents and warrants to City as follows: (a) Ownership of Shares of Company. Shareholder has full voting power and authority over the Shares, subject to no proxy, shareholders agreement, voting trust or other 45635.01911\7368143.1 j 018 agreement or arrangement and has full right, power and authority to sell and deliver the Shares to City in the manner provided for in this Agreement. Upon consummation of the transaction contemplated herein, Shareholder will transfer to City good and valid title to all of the Shares, free and clear of any claim, lien, charge or encumbrance of any nature whatsoever, except the share legend. (b) Authorization and Enforceability. Shareholder has all requisite power and authority to enter into this Agreement and to perform the transactions contemplated hereby. This Agreement is a legal, valid and binding obligation of Shareholder, enforceable against Shareholder in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting creditors' rights generally or by the availability of equitable remedies. As of the execution of this Agreement, Shareholder is a resident of the State of California. (c) Absence of Conflicts. Neither the execution and delivery of this Agree- ment, nor the consummation of the transactions provided for herein, will (i) conflict with or result in a breach of any agreement to which Shareholder is a party, (ii) result in a conflict or default under any Agreement by which the Shares are bound, or (iii) to the knowledge of Shareholder, violate any law, ordinance, order, writ, injunction, decree, statute, rule or regulation applicable to Shareholder. (d) Litigation. To the knowledge of Shareholder, there are no actions, suits, proceedings and investigations pending or threatened against or affecting Shareholder which could impair Shareholder's ability to enter into this Agreement or carry out the transactions contemplated hereby. (e) Claims or Rights Against the Companv. Shareholder has no right or claim of any kind against the Company. 5. City Representations. City hereby represents and warrants to Shareholder as follows: (a) Authority and Enforceability. City has all requisite power and authority to enter into this Agreement and to perform the transactions contemplated hereby. This Agreement is a legal, valid and binding obligation of City, enforceable against City in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting creditors' rights generally or by the availability of equitable remedies. (b) Absence of Conflicts. Neither the execution and delivery of this Agree- ment, nor the consummation of the transactions provided for herein, will (i) conflict with or result in a breach of any agreement to which the City is a party, (ii) conflict with or result in a breach of any provision of City's governing documents; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to City. 6. EFFECT OF CLOSING. SHAREHOLDER ACKNOWLEDGES THAT SHAREHOLDER DOES NOT CURRENTLY RECEIVE AGRICULTURAL WATER SERVICE FROM THE COMPANY AND THAT AS OF, THE CLOSING AND THE SALE OF THE SHARES, SHAREHOLDER WILL HAVE NO RIGHT TO SHARE IN ANY WATER 45635.01911\7368143.1 019 RIGHTS OF THE COMPANY OR TO RECEIVE ANY WATER SERVICE FROM THE COMPANY. 7. Release. Except for the obligations of City under this Agreement, Shareholder fully and forever releases and discharges City and Company from any claims for relief, demands, rights, titles, interests, damages, losses, expenses, disbursements, obligations, liabilities, cost and attorney's fees, arising with respect to the Company and Shareholder's ownership of the Shares. Shareholder expressly waives and relinquishes any and all rights and benefits conferred on her by California Civil Code Section 1542 and any similar enactment of, or other such rights afforded by, the State of California, the United Sates or any other state territory of the United States, Section 1542 of the California Civil Code states: "A general release does not extend to claims which the creditor does not ]mow or suspect to exist in its favor at the time of executing the release, which if known by him, must have materially affected his settlement with the debtor." Sbareholder hereby further acknowledges that the effect and import of California Civil Code Section 1542, and their foregoing waiver and relinquishment of rights, are understood by her and made voluntarily. Shareholder further acknowledges that if she hereafter discovers facts different than or in addition to those that she now knows or believes to be true, that said release shall be given full force and effect according to each and all of its express terms and conditions, notwithstanding such different or additional facts. The discovery of such different facts shall not in any way aher or affect the releases contained herein. The release in this Agreement shall be binding upon, extend to and inure to the benefit of the City and Company, and any and all of their respective past, present, and future agents, employees, officers, directors, shareholders and elected officials, and any and all other persons and entities acting or purporting to act on their respective behalves. 8. Indemnification. From and after the Closing, Shareholder shall indemnify, defend and hold harmless City and its successors and assigns against and from any and all claims, damages or liability sustained or incurred by City resulting from or arising out of or by virtue of any inaccuracy in or breach of any representation or warranty made by Shareholder in this Agreement. From and after the Closing, City shall indemnify, defend and hold harmless Shareholder and its successors and assigns against and from any and all claims, damages or liability sustained or incurred by Shareholder resulting from or arising out of or by virtue of any inaccuracy in or breach of any representation or warranty made by the City in this Agreement. 9. Entire. Apryeemerlt. This Agreement contains the entire understanding between City and the Shareholder with respect to its subject matter, and supersedes all prior agreements, oral or written, between the City and Shareholder. 10. Amendment. This Agreement cannot be amended except in a writing signed by all of the parties, provided, however, that any amendment that is solely intended to add shareholders of the Company to this Agreement or to add additional terms between the City and an individual shareholder, shall only require the signature of the City and such shareholder. 45635.01911\7368143.1 020 11. No Waiver. Any failure or delay on the part of either party to exercise any right under this Agreement shall not constitute a waiver of the right, and shall not preclude such party from exercising or enforcing the right, or any other provision of this Agreement, on any subsequent occasion. 12. Notices. All notices or other communications required or desired to be given pursuant to this Agreement shall be in writing and shall be hand -delivered, or sent by a reputable overnight courier service providing delivery confirmation. Each such notice or communication shall be deemed to be duly given when hand -delivered or one (1) day after being deposited for next day delivery with Federal Express or other courier. Each such notice or communication shall be sent to the following addresses: City: City of Azusa Attn: George Morrow 729 N. Azusa Ave. P.O. Box 9500 Azusa, CA 91702 Phone: (626) 812-5225 With copy to: Best Best & Krieger LLP Attn: Jeff Ferre P.O. Box 1028 3750 University Avenue Riverside, California 92501 Phone (951) 686-1450 Shareholder: See signature page. 13. Headings; Section References. Captions and headings appearing in this Agreement are inserted solely as reference aids for the ease and convenience; they shall not be deemed to define or limit the scope or substance of the provisions they introduce, nor shall they be used in construing the intent or effect of such provisions. 14. Binding Effect and Assignment. This Agreement shall be binding on and inure to the benefit of the parties, and their respective successors and assigns. Shareholder may not assign this Agreement without the consent of City. City shall not assign this Agreement to any third party without the consent of Shareholder. 15. Attorneys Fees. In the event that any action is brought to enforce one or more of the terms of this Agreement or to determine the validity of this Agreement or any part thereof, the prevailing party in any such action or arbitration shall be entitled to recover from the other its reasonable costs and expenses, including without limitation, expert fees and attorneys' fees, in addition to any other remedies available to it in law or equity. 16. Governing Law and Venue. This Agreement is a contract governed in accordance with the laws of the State of California THE PARTIES HEREBY AGREE THAT VENUE FOR ANY ACTION BROUGHT TO ENFORCE THE TERMS OF THIS AGREEMENT 45635.01911\7368143.1 021 SHALL BE IN A COURT OF COMPETENT JURISDICTION IN THE COUNTY OF LOS ANGELES, CALIFORNIA, AND CONSENT TO THE JURISDICTION THEREOF. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. IN WITNESS WHEREOF, the parties have executed this agreement as of the date this Agreement is signed by the Shareholder as set forth below. CITY OF AZUSA By: Name: Title: Approved as to form: By: Glen W. Price, Partner Best Best & Krieger LLP SHAREHOLDER: C • ' Address: - A -2-6L 45635.01911\7368143.1 022 EMMIT "A" STOCK ASSIGNMENT See Attached 45635.01911\7368143.1 023 STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the City of Azusa all of the common stock of The Azusa Agricultural Water Company, a California corporation, standing in the name of the undersigned on the books of said Corporation, including without limitation, the forty-five (45) shares of common stock described on Certificate No. 1254, and do hereby irrevocably constitute and appoint the duly elected Secretary of the Corporation as attorney to transfer said stock on the books of the within -named Corporation with full power of substitution. DATED: Avyi�3Y j 2, C.3 X�2'� rge Pi 45635.0191117366143.1 n24 ASSUMPTION OF LIABILITIES In order to complete the winding up and dissolution of THE AZUSA AGRICULTURAL WATER COMPANY, a California corporation, and in consideration of the distribution by said Corporation to the undersigned shareholder all of the adjudicated water rights owned by the Corporation in the Main San Gabriel Basin and all residual rights of the Corporation in any tangible or intangible property, the undersigned shareholder hereby agrees to assume and discharge the liabilities and obligations of said Corporation, including any outstanding tax liabilities of the corporation, which are known and set forth on the final financial statements of the Corporation, but only to the extent that such liabilities are not in fact discharged or adequately provided for in the winding up and dissolution. The assumption obligation contained herein shall not exceed the value of the property and assets received by such shareholder in distribution by the Corporation pursuant to the winding up and dissolution of the Corporation. Executed at Azusa, California, on this _ day of 2012. CITY OF AZUSA Lo 45635.01000\7250468.3 Joseph R. Rocha, Mayor 025 1. INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES Z DATE: MAY 29, 2012 SUBJECT: SMART GARDENING WORKSHOP FINAL REPORT At its regular meeting on January 23, 2012, the Azusa Utility Board approved a funding request by California Resource Connections, Inc. (CRC) in amount of $5,525 to conduct a backyard compost workshop on April 14, 2012 at the Memorial Park as part of the City of Azusa's April Clean and Green Campaign. CRC provided attached report on the results of the program. 35 people attended the April event and 19 compost bins and 1 worm bin were given away to Azusa residents. This is the fifth year that CRC organized and conducted this event. Funding was provided from the City's AB 939 fee, which is restricted to promoting and implementing recycling programs, including backyard composting. Attachment: CRC Final Report - 2012 Composting Wo Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities Liza Cawte, Sr. Administrative Technician 026 1 CALIFORNIA RESOURCE CONNECTIONS, INC. 1201 N. Azusa Avenue • Azusa, CA 91702 • 626.969.2491 • www.water5bedconnection5.org To: From: Date: Re: RESEARCH • EDUCATION • ACTION • LAND Azusa Utility Board / Azusa City Council Suzanne Avila, Program Director California Resource Connections, Inc. April 23, 2012 Final Report for Backyard Composting Workshop (4/14/12) California Resource Connections, Inc. (CRC), the Azusa -based non-profit organization with a mission to "connect people to land", is happy to submit the attached narratives and financial reports representing the final accounting for the Backyard Composting/Smart Gardening Workshop held April 14, 2012 at the North Recreation Center, Memorial Park as part of the April 2012 "Clean, and Green" city-wide campaign. Through your support CRC was able produced this environmentally -conscious program to educate residents on a variety of sustainable living practices. We also had a chance to showcase our new Azusa Community Garden as a seed and compost give-away took place in the garden as part of the program. This was the fifth year that CRC produced this event and interest throughout the community continues to grow. The Smart Gardening Workshop was produced by partnering and collaborating with a multitude of organizations and agencies. CRC is fortunate to have developed a number of partnerships over the years with organizations tasked with similar interests in conservation work. Our partners are happy to help when called upon, thus enforcing the relationship and helping CRC succeed. CRC is appreciative of the opportunity to work with and represent the City of Azusa in this endeavor. It is a pleasure creating and developing environmental programs in the Canyon City. 027 2012 Environmental Programs — Final Reporting BACKYARD COMPOSTING/SMART GARDENING WORKSHOP Saturday, April 14, 2012, 9:00 am — 12:00 pm North Recreation Center Memorial Park 340 N. Orange Place Azusa, CA 91702 Final Statistics: Number in attendance: 50 (35 participants + 15 volunteers) Total Composting bins distributed = 20 Total Bins given away free to Azusa residents: 20 (1 worm bins + 19 soil saver bins) Bins sold for nominal fee to non -Azusa residents: 0 Composting bins remaining in CRC possession: 28 (4 worm bins + 24 soil saver bins, stored inside shed at Azusa Community Garden, Memorial Park, 340 N. Orange Place, Azusa, CA 91702) Description of program: The purpose of the Azusa Smart Gardening Workshop is to educated residents on native plant gardening, promote water conservation practices, and encourage various methods of backyard composting including vermiculture (worm composting), all in an effort to promote sustainable living practices. CRC's main partners in producing the 2012 Azusa Smart Gardening Workshop are Azusa Light & Water, providing funding to purchase composting bins to be distributed to Azusa residents; Azusa Recreation and Family Services, waving all fees associated with the use of the North Recreation Center facility and adjacent Community Garden to host the event; and California Conservation Corps (CCC), providing a labor crew for event set up and tear down, equipment pickup and delivery, and who also conducted general maintenance in and around the native plant garden that surrounds the NRC and in and around Azusa Community Garden. Morning check-in began with participants signing in at a registration tent where names and addresses were collected in order to keep track of residents to whom composting bins were distributed. All resident's addresses were checked against address collected in previous Smart Gardening Workshops (2008 to present) to insure that duplicate bins are not given to the same household. 2 N? `, Brief welcoming remarks were said by CRC directors, followed by the introduction of the Master Composter representing Los Angeles County Department of Public Works Smart Gardening Division who conducted the lectures and composting demonstrations. A seed and compost give-away took place in the Community Garden immediately after the workshop with help from our garden caretakers and members of the California Conservation Corps helped distribute composting bins and loaded them in the automobiles of those in attendance. Description of how event was advertised and marketed: A press release inviting Azusa residents to attend the Smart Gardening Workshop was created and advertised through the following: Azusa Herald - articles appeared on 04/05/12 and 12/12/12; City of Azusa Azusa Light & Water — 2012 to 2013 Living Greener Calendar City Council Meeting - during public participation on 04/02/12 City Hall Marquee — on rotation from 04/01/12 to 04/14/12 On-line City Calendar— entire month of April 2012 Revolving Charter Cable Bulletin — on rotation from 04/01/12 to 04/14/12 San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy Website - Month of April 2012 San Gabriel Valley Tribune — submitted via features(a)sgvn.com Senator Dr. Ed Hernandez — via e-mail list of constituents Costs associated with program activities: See Financial Report outlined in chart on next page. 3 029 EVENT - Smart Gardening Workshop 2012 Financial Report: MATERIALS OUTLINED AZUS ALIGHT PARTNER IN BUDGET REQUEST & WATER CONTRIBUTION TOTAL NOTES FUNDING $450.00 $450.00 Athens Services — One -ton donation of composting soil, including delivery. $850.00 $850.00 Azusa Community Garden caretakers — 6 garden plot renters/volunteers to conduct seed and soil give-away, show casing new garden. Seed packet donation. 22 Composting Bins = $1,850.00 $1,850.00 Azusa Light & Water -22 composting bins 3 Worm + 20 Soil Savers including 3 worm cards + shipping. Purchased from TRIFORMIS Corporation, Hawthorne, CA. $150.00 $150.00 Azusa Pacific University School of Nursing and Neighborhood Wellness Center — 1 APU Nurse to discuss health benefits of gardening. $2,050.00 $2,050.00 Azusa Recreation and Family Services — Use of North Recreation Center facilities at Memorial Park, Azusa; Donation of use of 50 chairs 5 tables. $1,750.00 $1,750.00 California Conservation Corps— 12 Corps Members, 4 hours each @ $28.00/hours/member, to host event, help distribute composting bins to participants, and to conduct general maintenance of the native plant garden that surrounds the NRC and in and around the Azusa Community Garden. Use of equipment truck, van, clean up equipment). Program Planning stipend $3,675.00 $3,675.00 California Resource Connections, Inc. — 49.0 hours @ $75.00/hour Program planning, workshop leadership, final re2orting and accounting of bin distribution. $750.00 $750.00 County of Los Angeles Dept of Public Works Environmental Programs Division -2 person team to lead workshop. $375.00 $375.00 Master Gardener Xilonin Cruz -Gonzales, Los Angeles County, UC Cooperative Extension Master Gardener Program - Providing Smart Gardening information and serving as Community Garden advisor. Event Total $5,525.00 $6,375.00 $11,900.00 W 4 c Qbr LAZLTSA INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERSOF THE USA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIES DATE: MAY 29, 2012 SUBJECT: THIRD QUARTER BUDGET REPORT FOR WATER AND ELECTRIC FUNDS FOR FISCAL YEAR 2011-12 Attached reports include unaudited budget information regarding the water and electric funds through March 31, 2012. In general, both the water and electric utilities had positive net cash flow through the third quarter of FY 2011-12. While sales on the Electric side continued to be low by comparison with same period in prior years, water sales increased 3.2% during the third quarter compared to same quarter last year. Below table shows sales and billing trend for electric utility since FY 04-05 through third quarter of fiscal year: 3rd Quarter Electric Sales/Billings FY kWh Sales Billings 04-05 190,471,748 $20,612,794.63 05-06 187,307,423 $20,923,914.66 06-07 198,360,951 $22,360,051.02 07-08 191,906,326 $22,220,739.62 08-09 194,575,820 $24,636,826.89 09-10 189,042,374 $23,173,576.13 10-11 181,142,283 $25,165,127.53 11-12 180,099,346 $27,116,304.94 While the Electric Utility had about $1.8 million in positive net cash flow through the third quarter, about $800,000 of this amount is attributable to a credit issued by SCPPA for prior year power billings. The credit was applied to lower purchased power costs in February 2012. 031 Quarterly Financial Report May 29, 2012 Page 2 The Power Cost Adjustment in effect through the third quarter of FY 11-12 helped produce the positive net cash flow, however, the excess revenue during FY 11-12 will be used to lower electric rates effective July 1, 2012, when the PCA is expected to be adjusted downward to $0.01592 per kWh from $0.02053 per kWh. The financial performance of electric fund has allowed it to exceed the minimum debt coverage requirement of 1.10 with estimated debt coverage of 8.43 for the period, and also exceed minimum reserve policy of $12.6 million with an estimated $13.56 million available in cash. Below table shows sales and billing trend for water utility since FY 04-05 through 3rd quarter of this fiscal year: 3rd Quarter Water Sales/Billings FY CCF Sales Billings 04-05 6,833,381 $11,301,003.92 05-06 7,157,757 $11,096,241.13 06-07 7,689,683 $12,205,584.09 07-08 6,488,230 $11,844,582.36 08-09 6,325,483 $10,660,371.05 09-10 6,021,086 $11,673,294.81 10-11 5,650,960 $12,636,447.78 11-12 5,832,676 $13,163,020.28 The third quarter of FY 11-12 is the first quarter in 5 years in which CCF Sales actually increased, probably due in part to record low rainfall. While the Water Utility's reserve policy is set to $25 million, the Water Utility has adequate cash on hand with an estimated reserve of about $22.3 million for the third quarter ending, an increase of about $900,000 over FY End 10-11 balance of $21.4 million. For FY 11-12, purchased water costs are down, 40% of budget, and given a carryover balance of water rights, it is unlikely that the Water Utility will be purchasing additional water, unless it can lease some of its water rights by fiscal year end. While debt service payments for the water fund are far greater than the electric fund, the financial performance of water fund has allowed it to exceed the minimum debt coverage requirement of 1.25 with estimated debt coverage of 1.79 for the period. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities 032 Electric Utility Quarterly Budget Report and Fiscal Year End Forecast 3rd Quarter Ended March 31, 2012 (UNAUDITED) (1) source: 1• Y N10-11, CAFK, Unrestricted Cash and Rate Stabilization Fund, Reserve Policy is $12.6 million. (2) Actuals represent amounts billed based on Customer Information System report thru March 30, 2012, for 3rd (3) Source: Power Resources Division Budget. (4) 35% share of Fund 31 - Admin & Consumer Services Budget less offsetting revenues of $283,806.37. (5) Based on annual scheduled debt service payments for Series B and C, 2003 Certificates of Participation. (6) Capital Outlay Accts and Capital Improvement Project budget figures. (8) Total Revenue less Cost for Purch'd Pwr, Trans, O&M, and A&G, divided by debt service. Minimum debt coverage requirement is 1.10 per bond financing agreements. This is preliminary d/c ratio and it may vary with Disclosure Report prepared after the audited financial reports are available, around December 2012. 033 YAifir Y Consumption - kWh: 238,728,205 180,099,346 75% Cash/Reserve Prior Fiscal Year En&u $11,751,632 $13,560,563. 115% Revenue Retail Billing Amounts (2) $34,002,525 $27,116,305 80% Resale Revenue (3) 6,664,395 3,610,631 54% Other Miscellaneous Revenue 303,300 188,275 62% Interest Income 152,915 509,191 333% Total Revenues $41,123,135 $31,424,401 76% Expenses Purchased Power (3) $26,330,710 $18,798,191 71% Transmission/Dispatching 4,237,640 2,915,959 69% Operations and Maintenance 3,434,885 2,376,434 69% Administrative and General(") 2,188,211 1,336,494 61% Franchise and In -Lieu -Tax 3,400,250 2,734,677 80% Subtotal Expenses $39,591,696 $28,161,756 71% Capital Expenditures / Debt Service Long Term Debt Service(s) $948,151 $711,113 75% Capital Outlays and Projects (6) 1,730,240 742,601 43% Total Expenditures $42,270,087 $29,615,470 70% Adjustments Transfers Out 9,450 0% Total Expenditures and Transfers Out $42,279,537 $29,615,470 70% Change in Cash/Reserve ($1,156,402) $1,808,931 -156% Debt Coverage Ratio (7) 5.20 8.43 (1) source: 1• Y N10-11, CAFK, Unrestricted Cash and Rate Stabilization Fund, Reserve Policy is $12.6 million. (2) Actuals represent amounts billed based on Customer Information System report thru March 30, 2012, for 3rd (3) Source: Power Resources Division Budget. (4) 35% share of Fund 31 - Admin & Consumer Services Budget less offsetting revenues of $283,806.37. (5) Based on annual scheduled debt service payments for Series B and C, 2003 Certificates of Participation. (6) Capital Outlay Accts and Capital Improvement Project budget figures. (8) Total Revenue less Cost for Purch'd Pwr, Trans, O&M, and A&G, divided by debt service. Minimum debt coverage requirement is 1.10 per bond financing agreements. This is preliminary d/c ratio and it may vary with Disclosure Report prepared after the audited financial reports are available, around December 2012. 033 Water Utility Quarterly Budget Report 3rd Quarter Ended March 31, 2012 (UNAUDITED) Notes: (1) Source: Cash and Investments from FY 10-11 CAFR. Reserve Policy is $25 million. Note that Land was acquired from Redevelopment Agency for $2.9 million. This reduced cash by $2,919,646. (2) Based on Customer Information System Billing Amounts through March 31, 2012. (3) 65% of Customer Service Fund Expenses thru 3/31/12 less offsetting revenue of $283,806.37. (4) Principal and Interest on 2003 COP and 2006 Revenue Bonds thru 3rd quarter of fiscal year. (5) Approved appropriations for multi-year projects, some of which are carryovers from prior year. (6) Half of Interest Income may be transferred by policy if there is positive net income. As of 3/31/2012, no transfers have been made. (7) Total Revenues less Production, Purch'd Wtr, T&D, Cust Acctg, & A&G divided by Debt Svc Pymnts. Minimum debt coverage requirement is 1.25 per bond financing agreements. 034 Q& Ended Cons ump tion and Reserve Info Prior FY End 3/31/2012 Percent Consumption - CCF: 7,384,003 5,832,676 79% Cash and Investments,() $ 21,444,890 $ 22,340,346 104% FY 2 11' I 1 Budget Actual Thru Percent of Revenues Retail Billing Amounts (Z) $ 16,923,415 $ 13,163,020 78% Other Revenues 3,981,140 737,417 19% Interest Income 500,000 75,972 15% Total Revenues $ 21,404,555 $ 13,976,409 65% Expenses Production 2,908,825.00 1,894,166 65% Purchased Water 3,114,230 1,259,757 40% Transmission and Distribution 2,634,675 1,820,370 69% Customer Accounting and Sales 137 4,059,174 2,482,061 61% Administrative and Engineering 955,475 443,759 46% Franchise Fees 338,470 269,439 80% Subtotal Expenses $ 14,010,849 $ 8,169,552 58% Capital Expenditures / Debt Service: Debt Service Payments 141 $4,528,271 $ 3,396,203 75% Capital Improvement Budget (5) 3,524,423 1,515,198 43% Total Expenses (Less Bond Funding) $ 22,063,543 $ 13,080,953 59% Adjustments Transfers Out"' $0 $0 0% Total Expenditures and Transfers Out $ 22,063,543 $ 13,080,953 59% Net Change in Cash (Negative) $ (658,988) $ 895,456 4% Debt Coverage Ratio 171 1.71 1.79 Notes: (1) Source: Cash and Investments from FY 10-11 CAFR. Reserve Policy is $25 million. Note that Land was acquired from Redevelopment Agency for $2.9 million. This reduced cash by $2,919,646. (2) Based on Customer Information System Billing Amounts through March 31, 2012. (3) 65% of Customer Service Fund Expenses thru 3/31/12 less offsetting revenue of $283,806.37. (4) Principal and Interest on 2003 COP and 2006 Revenue Bonds thru 3rd quarter of fiscal year. (5) Approved appropriations for multi-year projects, some of which are carryovers from prior year. (6) Half of Interest Income may be transferred by policy if there is positive net income. As of 3/31/2012, no transfers have been made. (7) Total Revenues less Production, Purch'd Wtr, T&D, Cust Acctg, & A&G divided by Debt Svc Pymnts. Minimum debt coverage requirement is 1.25 per bond financing agreements. 034 Ah INFORMATION ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE USA UTILITY BOARD FROM: GEORGE F. MORROW, DIRECTOR OF UTILITIE DATE: MAY 29, 2012 SUBJECT: UPDATE ON LONG TERM DEBT REFUNDING This report provides a brief update on efforts to refinance long term debt issued in 2003, namely the Series A Certificates of Participation (COP) for the Water Utility, and the Series B COPS for the Electric Utility. Utilities staff together with Financial Advisor and Underwriter made a Credit Rating Presentation to Standard & Poors (S&P) on May 3, 2012, and S&P issued reports on May 14, 2012 affirming current rating of"AA+'for the Water Utility and"A'for the Electric Utility. The credit rating presentation prepared by staff, FA and Underwriter, is attached for your reference along with reports from S&P. Following include some highlights from S&P Report for Electric Utility Rating: Strengths: • Additional financial flexibility provided by the city's power cost adjustment (PCA) mechanism, which is currently set at 2.05 cents per kilowatt-hour (kWh), that allows for the recovery of higher-than-expected power costs; • Very strong historical debt service coverage (DSC) before general fund transfers of no less than of 4x in fiscal years 2005 through 2011, with the exception of fiscal 2010, when it dipped to 1.9x, although it rebounded strongly to 5.6x in fiscal 2011; • Minimal capital needs of just $6.25 million during the next five years and the lack of additional bond issuance plans; and • A good liquidity position, with audited fiscal 2011 cash reserves of $14.4 million, or 150 days' cash, forecast to rise to near 180 days by fiscal 2013. 035 Update on Long Term Debt Refunding May 29, 2012 Page 2 Partly offsetting the above strengths, in S&Vs view: • Power supply pressures related to various California regulatory initiatives with regard to carbon emissions and renewable portfolio standards, with coal representing two-thirds of energy delivered, and with costs expected to rise as more eligible renewable resources are added; • Exposure to short-term power markets and to power supply cost escalations, as demonstrated by plant outages in fiscal years 2008 through 2010 at the San Juan Generating Station, the utility's largest resource; and • A delay in adjusting rates during 2008-09 to reflect declining energy sales stemming from a sluggish economy and reduced wholesale sales (and prices), as well as rising purchased power costs due to outages and higher -cost renewable energy. [Staff comment: this issue was addressed with the Utility Board's adoption of the December 2009 rate increase and the PCA, but S&P prefers to see effect over longer period of time.] Following include some highlights from S&P's report for the Water Utility Rating: • Diversified portfolio of water supply sources, which management believes can accommodate demand for the foreseeable future; • History of implementing rate increases to offset the effects of recent lower water consumption; and • Strong unrestricted cash position of about 631 days of operating expenses as of June 30, 2011. S&P notes that"These strengths are partly offset by the system's declining debt service coverage during the past five years as debt service has increased, although coverage remained good in our view at 1.31x in fiscal 2011'.' The recent refunding will help the Water Utility maintain debt coverage and this is one of the reasons Staff recommended use of Water funds to buy down a portion of the existing debt. Staff, Underwriter and Financial Advisor held a pre -pricing meeting on May 22, and then a post - pricing meeting on May 23. The Municipal Bond Market moved lower in May as shown below: 10 -Year and 30 -Year D13ID ✓anua,y 1, 2012 m Pmsent 4.00Y. 4.00/. _ 3.507. 3.50'/. - 3.00/. 3.00% - X10-YearMNID 2.50/. —30-Y.YAMMD 2.5' 2.009: 2.00% 1.50. 1.50% 10 -Year and 30 -Year Treasuries January 1, 2012 to Pm mt The combination of relatively good credit ratings along with current market trend resulted in very favorable pricing for the bonds on May 23 as shown below: 5... 036 Update on Long Term Debt Refunding May 29, 2012 Page 3 Water True Interest Cost (TIC): 1.99% Net Present Value (NPV) Savings: $1.51 million, or 13.4% of $11.29 million bonds refunded. $6.1 million in cashflow savings as shown below: City of Azusa Water System Refracting Revenue Bonds, Series 2012A Date Prior -Debt Service Prior Receipts Prior Net Cash Flow Refunding Debt Service Savings Present to 06/20/120]22012 C 1.8825082°5 07/01/2012 1,232,641.26 12.389.59 119,329.16 L145,501.66 87,139.60 119,260.86 07/01/2013 87.139.60 87,089.73 07/01/2013 1,553.882.52 81,282.40 07/01/2014 263,437.50 1.553.882.52 1,007,352.36 175,568.76 546.530.16 84,986.53 537,285.42 07/01/2614 1.555.137.52 263.437.50 175,568.76 87,868.74 1.555.137.52 17001950.00 263.437.50 551,187.52 263,437.50 531,771.31 07/01/2015 -1,553.275.02 07/01/2017 828,437.50 1,551275.02 1,003,250.00 2,868.74 550.025.02 07/01/2018 520,707.83 07/01/2016 1,553.175.02 957,568.76 4,878.74 4,67222 1.553,175.02 .1,006,950.00 546.225.02 958,718.76 507,414.69 07/01/2017 1,555.025.02 962;272.50 962;272.50 1,555.025.02 1,004.900.00 2,928.39 550,125,02 964,112.50 501,433.16 07/01/2018 1.553.505.02 4,568.74 4,034.65 07/01/2022 L553,505.02 1.007.250.00 963,406.26 546,25542 4,487.50 488.547.40 07/01/2019 L552.930.02 96050.00 957,900.00 1.552,930.02 1.006.050.00 546.880.02 12,389.59 479,926.00 07101!2020 1,554.742.52 476,007.07 1.5.54342.52 1.004.900.00 549.842.52 473,436.27 07/01/2021 1,548.062.52 1,548,062.52 1,001,500.00 546,562.52 461,766.27 07/01/2022 1,552.737.50 1,552,737.50 1,003.250.00 549,487.50 455,532.42 07/01/2023 1,554,000.00 1,554,000.00 1,002.750.00 551,250.00 448,421.02 18319,113.94 1,145,501.66 - 17,173.612.28 11,052,102.36 6,121.509.92 5,493,331.51 Electric TIC: 2.77% NPV Savings: $51 lk, or 9.4% of $5.47 million bonds refunded $492,900 in cashflow savings as shown below: City of Anna Electric System Refunding Revenue Bonds, Series 2012B Present Value Date Prior Debt Service Prior Receipts Prior Net Cash Flow Refunding Debt Service Savings to 06/20/2012 @L8825082% 07/01/2012 131,718.75 12.389.59 119,329.16 119.329.16 119,260.86 07/01/2013 263.437.50 263,437.50 180,933.36 82,504.14 81,282.40 07/01/2014 263,437.50 263,437.50 175,568.76 87,868.74 84,986.53 07/01/2015 263,437.50 263.437.50 175,568.76 87,868.74 83,408.96 07/01/2016 263.437.50 263,437.50 175,568.76 87,868.74 81,860.67 07/01/2017 828,437.50 828437.50 825,568.76 2,868.74 2,987.03 07/01/2018 962.447.50 962,447.50 957,568.76 4,878.74 4,67222 07/01/2019 963,372.50 963,372.50 958,718.76 4,653.74 4,346.08 07/01/2020 962;272.50 962;272.50 959.118.76 3,153.74 2,928.39 07/01/2021 964,112.50 - 964,112.50 959,543.76 4,568.74 4,034.65 07/01/2022 963,406.26 963,406.26 958.918.76 4,487.50 31853.12 07/01/2023 960.750.00 96050.00 957,900.00 2,850.00 2,386.17 7,790,267.51 12,389.59 71777,877.92 7,284,977.20 492,900.72 476,007.07 Combined TIC: 2.33% NPV Savings: $2.03 million, or 12.1% of $16.76 million bonds refunded 037 Update on Long Term Debt Refunding May 29, 2012 Page 4 Over 99% of all Water Bonds were sold by 9 a.m. on May 23, however, a significant portion of the Electric Bonds had to be purchased by Underwriter. Underwriter considers the purchase of Electric Utility Bonds a good investment as they felt the credit rating for the Electric Utility was slightly low, and the yields on the bonds were attractive. Staff is very pleased with the outcome of this refunding effort and savings appears to have exceeded our forecast. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities Attachments Utilities Dept Credit Rating Presentation S&P Rating Report for Electric Utility S&P Rating Report for Water Utility M Financing Team City of Azusa • George Morrow, Director of Utilities • Cary Kalscheuer, Assistant to the Director of Utilities • Alan Kreimeier, Director of Administrative Services/CFO • Susan Paragas, Controller Bond Counsel — Hawkins, Delafield 6 Wood • Diane Quan Financial Advisor — Urban Futures • Michael Busch Underwriter— De La Rosa 8 Co. • Guillermo Garcia, Michael Melia :M i, 2 039, Financing Overview • The City of Azusa will issue its Water Revenue Bonds, Series 2012A to advance refund a portion of its 2003 Series A Water COPS — The City will contribute $2.3 million in cash to refund the portion of the bonds not subject to advance -refunding • The City will issue its Electric Revenue Bonds, Series 2012B to refund its outstanding 2003 Series B Electric COPS • Series 2012A and 2012B Bonds will be secured by Net Revenues of the Water and Electric Systems, respectively — The Series 2012A Water Bonds will be on parity with the Series 2006 Bonds — The Series 2012B Electric Bonds will be on parity with the 2003 Series C COPS M A Z L,: ,A Water System Credit Highlights • The Water System benefits from stable, low-cost water supply and very strong liquidity • The City owns water rights sufficient to meet consumption demand thus eliminating the need to purchase expensive water from MWD • There are opportunities to lease excess water rights to generate additional revenue • Liquidity remains above 630 days, providing tremendous operating flexibility • Debt service coverage is projected to be 1.60x to 1.70x over the next five years, and there are no anticipated additional borrowings • In total, the Water System's credit profile supports its current AA+ rating ME Electric System Credit Highlights • In 2011, S&P cited the exposure to power cost escalations and delays in enacting needed rate increases as the main credit weaknesses of the Electric System • Through the enactment and management of the Power Cost Adjustment (PCA), the Electric System has addressed both of these issues simultaneously • Debt service coverage was 5.60x in FY2011 and is projected to be 8.Ox in FY2012, up from the 2.75x in FY2010 which in part precipitated the enactment of the PCA • With the PCA in place, as well as continued strong liquidity, low retail rates, and no additional borrowing plans, the Electric System's credit profile is better than that of an A -rated utility and merits consideration of a rating upgrade ,N 5 AlU A Table of Contents Section I: City & Utility Summary Section II: Water System Section III: Electric System - Section IV: Water and Electric System Refunding Revenue Bonds, Series 2012 A and B ' + t I. City & Utility Summary NYiMi fpM i i � lnov \ r Vww' Itwn 1 Pmoe � mi Lo AIVIn P"" '„Y.,,,•"''"'\•� dAnpra ey" DT" o' 5 .Gtlpn' 3 t ~ //ar Z rntrne C� -kredoro '" UNme..,5.,•"r`.AirersAe 'i. ttetwma f"x^°^' Carona i Loh BteU w.ao4A m ll _ L •z. RYtror ' � rteL nem. --A4 K Sento Me•; 's "�"+ Palio .�i �k1aY(�'�`rFy �,�W Beech. �Got4 tkkfe'�Mfibn >E` t 0424 Azusa Overview • The City of Azusa was incorporated as a General Law City in 1898 • The City provides general government services, including police, library, and water and electric utility services Water and electric services are provided to virtually all residential, commercial, and industrial customers within the City limits — Light & Water is staffed by 78 employees • The City provides water services to portions of the Cities of Covina, Glendora, Irwindale, West Covina and unincorporated areas of Los Angeles County • Azusa Light & Water is governed by the City's 5 member Utility Board that is wholly composed of City Council members .^,M.^,' AZU.4A Demographics and Local Economy • Diverse property tax base and land uses, including Azusa Pacific University, one of the area's largest private universities • 2010 Census estimated a total population within the City to be 46,361 — Steady population growth (3.7% since 2000) Median household income — City of Azusa: $51;894 —close to the Los Angeles County Median Income of $55,476. Unemployment rate: 13.1% • Diverse customer base: 32% of water revenues and 27% of electric revenues from residential customers — 22,900 accounts served by the Water System — 15,500 accounts served by the Electric System ,..w 10 AZi::: 043 5 Utilities Management Team George Morrow, Director of Utilities • 34 years of electric and water utility experience • BS Electrical Engineering, MBA, University of Texas EI Paso Yarek Lehr, Assistant Director of Power Resource Management • 25 years in the electric utility industry • BS Electrical Engineering, MBA, Professional Engineer Cary Kalscheuer, Assistant to the Director of Utilities • 23 years of municipal management experience • BA, MPA (emphasis in Public Finance), Cal State Fullerton Chet Anderson, Assistant Director of Water System • 32 years water system experience • BS Civil Engineering, Professional Engineer Federico Langit, Assistant Director of Electric System • 25 years of electric utility experience • BA Business, MBA, Registered Engineer Karen Vance, Assistant Director of Customer Service .' • 33 years utility experience BA Business, Certified Internal Auditor 11 ,1 Z t, :A II. Water System .,,,, 12 A Z I A Water System Highlights • Strong Capital Reserves greater than $20.0 million • Over 630 days of cash on hand • Positive cash flow in excess of $1.0 million through 12/31/2011 • Water rights sufficient to cover nearly all consumption • No expensive water purchased from MWD in the last 5 years • Low cost ($130 per AF) water available from SGVMWD • Water rights leasing policy and opportunities • RWCAF rate mechanism • Diverse customer base consisting of over 22,900 accounts • Very competitive retail water rates • State-of-the-art water treatment plant built in 2009 13 AYi_: a:\ Water System • Established in 1899, the Water System currently provides service to approximately 22,900 accounts • Service area of 14 square miles — Population of about 110,000 • Average water demand of 18 mgd • 11 active wells • 13 reservoirs with total capacity of 38 million gallons 5 major pressure zones and 3 subzones • 251 miles of distribution pipe 14 A/ �A 443, Water Filtration Plant Completed construction in 2009. 16 mgd capacity 75 AZUSA Water Capital Projections • No new major facilities (i. e., reservoirs, treatment plants, or wells) need to be replaced or constructed • Water distribution system mains and SCADA projects will require ongoing maintenance and sludge drying basin will require an upgrade16 Fiscal Year Capital Projection 2011-12 $1.500 million 2012-13 $2.025 million 2013-14 $2.500 million 2014-15 $2.500 million 2015-16 $2.500 million Total $11.025 million Fiscal Year Capital Projection 2011-12 $1.500 million 2012-13 $2.025 million 2013-14 $2.500 million 2014-15 $2.500 million 2015-16 $2.500 million Total $11.025 million Water Resources • The Water System acquires water supply from four sources — Groundwater: Main San Gabriel, Intermediate San Gabriel, and Upper San Gabriel Basins Local wells provide 66% of the Water System's drinking water — Surface water: San Gabriel River — Water purchases: San Gabriel Valley Municipal Water District (SGVMWD) — Replacement water: SGVMWD, Upper San Gabriel Valley Municipal Water District, and Three Valleys Municipal Water District • The Water System's basin annual water rights total approximately 18,300 AF y.""..r. 17 Az1::A Water Sales Mazer Production )AF) Wells 21.504 15.994 18,668 14,783 12.796 Surface Water 5,627 6,449 5,454 6,036 6.547 Total 27,131 22,443 22,122 20,819 19,343 • Residential customers represent largest delivery class with 54% of all water deliveries • 10 largest customers represent 18% of total water revenues in 2011 — Includes a diverse but stable assortment of customers, including a private university, government, mining, and other industrial uses ..... 18 Azt'r: 0479 Largest Water Customers Ten Ia est Customers Mller ours LLC' Food 693.147 9.40% $1.179.307 7.10% Ready Pac Food 261.493- 3.50% 508,908 3.10% A4ma Western Mnirs 180.437 2.40% 257.893 160% Aims LhMed school Distrbt Educatbn 170.286 2.30% 304.201 1.80. City of Azusa GwemmeM 96,477 1.30% 204200 120% Azusa PacMc L1lbersaY Educatbn 88.814 1.20% 158.720 1.00% AZma Greens Country Cluht Gott 82.752 1.10% 123413 0.7036 S 8 S Foods. LLC Food 61.606 0.80% 117.826 0.70% CoVNe Valey Unifed School DISVbt Educatbn 58,594 0.80% 114,450 0]0% Cal NW MON 49.494 0.70% 57586 030% Total 1,743.100 $3,028,704 'Sulltal to.,OV .4ro.rale I6'IM As a Jure 30, 2011 19 AlAl A Z L ` A Water Rate Adjustments • The Water System Residential Water sales (MG) increased retail rates to ao a A e compensate for revenue a7n losses associated with cmo . ssaa s.ns reduced consumption eM_ s� • Rate increases: 4Mll" 9,o — 2009.18.0% ,me' — 2010: 15.6% m "Oil M5AY., J ti M ' M/ 20 At .n 4 •' Consumption Trends • Consumption decreases since 2007 were a result of a conservation program used to address a prolonged drought — Sluggish economy contributed to ongoing reductions in consumption • For 9 months ending March 30, 2012, consumption increased 3.2% when compared to the same 9 -month period of prior fiscal year • Water rate increases in 2009 and 2010 helped the Water System regain revenues despite lower consumption levels 21 A Z t �4 A 04,9 Water Revenues by Customer Class $20 -- -- - - --- $ts 1- $14 — $12 $10 , i .. a $8 E $8 $4 $2 _._ _-. 2007-' 2008 2009 2010 . 2071 Fiscal Y•ar •Other Retail and wholesale a Commercial. Industrial end Municipal N • Residential 22 04,9 Water Supply • Self reliance Watef supply °°OW — The Water System produces most of its water from wells m° and surface water, without the need to purchase water from °W ' MWD ` • In the last 5 years, no water has loll been purchased from MWD zm, 2we 19M 2010 m„ • "..1.In 2011, 66% of water production .Wells .sunace win was from the Water System's 11 wells, remaining 34% came from surface water z� 23 A Y t: :1 Water Leasing The Water System has access to low cost State Water Project water due to its membership in the SGVMWD SGVMWD has four member cities: Azusa, Alhambra, Monterey Park, and Sierra Madre, and each member has equal share of the 28,800 AF at price of $130 per AF • Price for replacement water is $640 per AF (MWD via USGVMWD) Water rights are sufficient to cover demand, allowing Water System to create excess water rights by purchasing water from SGVMWD When Watermaster rules allow, the Water System may lease excess rights to other producers pursuant to adopted policy of the Utility Board — Leasing has resulted in wholesale water revenue increases of $3.3 million in FY2009-10 r — Water System expects to lease 6,500 AF in FY2011-12 for $3+ ;^ million 24 .471: :1 05012 Low Retail Rates Several factors contribute to a very competitive retail rate base: • Historic water rights to cover most consumption • Available water rights allow Water System to cover demand without the need to purchase expensive water from.MWD • Low cost water purchases from SGVMWD • Water rights leasing program sanctioned by approved Resolution .M 25 AZU<A Water Rate Comparison 2012 Water Rate Survey - BI -Monthly Rate. For 314" meter consuming 17 hundred cubic feet per month of water Covina , San Dims -Golden 8rete Sen Dimas -Golhn 8Yte Pasadena -oursw Acoomes a vents " P?noru-GWMeAccounts Ronbnd Water Diemct " Glendora " Paced.- Inside Accounts - Alaema a Pomona -Inside A?euma Due". -Lel Am W. cosine-saburWn � corona-sueuman Anna (currenq Monterey Part. Monrovia � 1 $0 no ?o No Source. Azusa light 6 Wafer survey, ronducted m April W12 26 A7t'„ or) 1t3 ?Ss0 L2]1 1u.31 uo.os -1 11e15 lies? nasal 101.0 01.00 95.73 6 904A0M � ?.]s o sus o rises e3.10 0 00 $100 $120 $140 $100 A7t'„ or) 1t3 Additional Rate Mechanism • Replacement Water Cost Adjustment Factor (RWCAF) became effective in 1992 • Designed to mitigate risks associated with water cost fluctuations when consumption exceeds water production rights • RWCAF is administratively imposed at the outset of each fiscal year to compensate for revenue deficiencies associated with replacement water costs incurred during the prior fiscal year • Due to lower consumption levels and water purchasing and leasing activities RWCAF has not been used since 2009 • Because it went into effect before Prop 218 was adopted, it is not subject to Prop 218 27 Sc dul} ofRMAFCnerpe9 70t1999 $ ON $ 512,991 7!12000 ON 519335 7'12001 000 510150 7112002 0.16 1055.501 11!12003 009 '93720 7!2 206f 013 1175741 6'272M6 T[LNnIIeMYtlIRIM - 7'U2006 0054M331 TMIuCgeerd 7112007 0.13 1.185713 10'12007 024 196000 12.'12W7 029 222800 2112008 052 440680 40,2000 033 255617 6'12008 0.13 109950 7:12008 004 491 ON 7%12009 005 431000 7n+2010 Strong Financial Base Wholesale water rights leasing and retail rate increases in 2009 and 2010 have helped the water system meet its financial targets • Historic coverage has been near 2.Ox or higher Though coverage dropped to 1.31x in 2011, it is expected to increase to 1.67x in 2012 A Z U S A 052 14 SAYNstMe[Rdq[B 5 112% 5 15W 5 11 S6 S N0 c ;1635 YIkIOP e[b[N'p9 3.477 41. Pi Y iG Sn[eurcus 1 N z Feynle :IM 9. 1.M; 57J (i2 TMI .ww Tool Rn f naso s +9.m s 19,nd 5 xuu s +e.5xr rs Ca;desea elaeme 5 !G3 5 4500 5 2967 5 l091 5 15 5on<ds1(py V 'Ya 6A WS 1005 T.5 T[LNnIIeMYtlIRIM f ' t Ii1 1.51 1 yd rrt•lnvn 3W M 316 2R TMIuCgeerd 1l *1 1M 6131 6;9 SM f202 1.11 i[plEspnMf 5 Is}Y S ti1'tl f 11916 51$,]60 51241] 1MRmnu•• f 5395 f 600] $ OMS[ti[e' S ;YJ S INL 5 22:515 1'A' S dSe LaaaJe 6M. iM 1Y. f IFw Tf.W m as .+6 J!' evgsew9ap9+TrU9M 9•rvlu ib eKM11 qp9 TfNtlN s 1394 s 4TA s +.m s 14. f +A96 'i tll UCM14'P[PhF 851m5Cfs 2S23JV3 roxo..uYs �ewssns '_M� 28 AZl 052 14 Cash Reserve History • The Water System has consistently maintained high cash balances — Typically— 2 years of operations • FY2010-11 cash on hand represents 631 days of operations Fiscal Year Cash Balance 2006-07 $26,436,918 2007-08 $25,950,787 2008-09 $24,195,856 2009-10 $22,174,445 2010-11• $21,444,890 'Excludes E2 9 nullion ban to (tie City for land purchase for economic development, Cash to be returned fo the Water System upon resale of pmperty by City. 29 A Z i, <." Projected Financial Operating Results Forecast of Debt Coverage with Rafundin Fiscal Yea, Ending June 3D. N`12 2013 Retell Revenue S 16.923 S 1711/ 2014.. N15 S 17,646 $ 17.777 S W16 17.908 rnher Revenue 4.001 2,846 2.9% - 3,155 3.324 Komi Revenue 500 220 220 220 220 'Total Revenues $ 21A25 S 20,077 S 20,664 S 21,152 S 21,452 Total Expenses $ 13,903 $ 11153 $ 13.256 $ 13,353 S 13,450 Net Revenues $ 7,522 S 5,923 S 7,607 $ 71800 $ E002 DOM Servkea 4,506 4,360 3.966 4.673 4,664 Coverega 1.67 1.59 1.91 1.67 1,72 �ASSun45 3% retail une ovem; Based on proi UO Mows. St"ect to cnalbe pyler aman(s in ft.snns 30 M� 053 III. Electric System 31 AZUu A Electric System Highlights • Established in 1902, the Electric System provides service to virtually all electric customers within the City of Azusa • Utility is fully resourced through 2020 and beyond • Diverse resource mix includes: hydroelectric, wind, nuclear, solar and natural gas • Current renewable level is 20% with many other opportunities under evaluation • Management is active in addressing GHG regulations in California including strategic portfolio management • Recent implementation of power supply pass-through mechanism to mitigation market fluctuations 32 A1c'r.A 0546 Reliable Public Provider National program to recognize reliable public utilities • Recognizes: safety, reliability, workforce development and system improvement projects • In 2011, 82 agencies were recognized out of over 2000 public power utilities in U.S. 33 Reliable Public Power Provider \Zr.<A Diverse Resource Mix Resource Mix Nuclear 6% Spot _Purchases 6% Coal 67%,411 Renewables 19% N 34 7l'�.A 055 17 Lodi Energy Center • The Electric System is participating in the construction of a 280 MW power plant in Lodi, California — Project includes 11 other public power entities • LEC is high efficiency combined cycle natural gas fired plant • Northern California Power Agency (NCPA) is owner/operator • Electric System's interest is —2.8% or 7.8 MW • Plant expected to be operational July 2012 ILqll- ®`' " x pdk; �� .."".. 35 A/I ; San Juan Station • Electric System has entered into a power purchase agreement with SCPPA for 30 MW of San Juan Unit 3 • Electric System has been actively seeking a buyer for all or part of its interest in San Juan Coal Plant • A MOU has been executed with a JPA outside of California to initially "layoff' and to subsequently transfer title to the Electric System's San Juan entitlement • Arrangement is contingent on the Buyer securing necessary transmission service and execution of contract ..i • If successful, transfer could occur in FY2013 :" �ti 36 AZt: 056 18 Other Resources • The Electric System has a 4 MW entitlement to the Hoover Dam hydro project — Contract was recently extended 50 years by Congress • The Electric System has a 2 MW interest in each of the three units of the Palo Verde nuclear project — The NRC recently extended the plant's operating permits for an additional 20 years M if If 37 Renewable Resources MW FY2017 Energy (MWh) Average Price High Winds 6.0 14,825 $53.50 Garnet Wind 6.5 20,526 $75.00 San Dimas Hydro 1.05 2,822 $55.00 MWD Hydro 3.74 7,404 $93.50 38 At'>A [ 051� Electric Capital Projections • Electric system is mature, reliable and well-maintained • No new major distribution system expenditures are currently planned Fiscal Year Capital Projection' 2011-12 $1.25 million 2012-13 $1.50 million • Stable and diverse customer base 2013-14 $1.10 million • Top 10 clients represent 10% of revenues 2014-15 $1.20 million 30 2010 20111 2015-16 $1.20 million 13,W Comercial 1,420 1,421 1,401 m Total $6.25 million industrial 31 33 36 'Includes 8450,000 for Goldrine ElecMc Rail Station Pm/ed. 39 ZL'1:A Electric Accounts • 15,500 electric customers • Retail sales of approximately 240,000 MWh • Total sales of 373,040 MWh • Stable and diverse customer base • Top 10 clients represent 10% of revenues Fiscal Year Ending June 2007 2008 2009 30 2010 20111 Residential 13,843 13,960 13,730 13,823 13,W Comercial 1,420 1,421 1,401 m 1,408 1.420 industrial 31 33 36 36 36 Other 237 236 236 234 239 Total Customers 15,531 15,650 15,403 15,501 15,541 40 M ..�ry A Z•t' ti A Wholesale Sales • Electric System is within the California Independent System Operator (CAISO) footprint and is a Participating Transmission Owner — Active participant in the day- to-day operations of CAISO — Participates in the wholesale market due to its generally long position 15% of total FY2011 revenues from wholesale sales 41 Wholesale Power Sales n � SS <0 f592 f626 YS - u 39 S3 a6 53 f1 ' s, 2007 1008 2009 2010 2011 R..1Y.. \lU�A Electric Sales Megawatt hour Sales (MWhI Total: 373,040 M Wh C...161 �letluahbl 69A91 BCS63 16Y.� � 23k „t Public sew Md Highway Lighting 10.247 r, RealYWlaea 74.535 o Mar Milme Z0./. 136% 104 18•/. N Mi 42 A 7 1 A 0521 Electric Revenues Electric Sales 2010 500.000 Residential S 9202 S 9,809 S 10,387 S 9.899 S 10,588 450.000 9,563 10.388 Industrial 8.379 8,741 9,546 400.000 10,667 Wholesale Sales to Other Uldflies2 5.371 5.201 3,463 4,389 350.000 Street & Highway & Other 3,141 1.230 1,146 1,134 1,238 300.000 88,575 88,125 85.475 112.848 1]0.784 so.. Cdtys Coebme, mlormanon S,4m Balmy Reaons 250.000 Omleremwnbin movsends f 200,000 'Fsaf Year201041 Retail Revenues Include Poner CvghtljvsManl �llllrrp amounts 150.000 r tlranpmp alerke! demaM n,aMe1 ra511uRunnp. aM Anof wledlM 100.000 ' 255,586 251.261 253.313 246.888 50,000 238.W6 - 2007 2008 2009 2010 2011 Fiscal Year *Total Retail Sales • Wholesale Sales ; 43 A Z U S A Electric Revenues ,r LIFiscCl Year r.r• 2010 r Residential S 9202 S 9,809 S 10,387 S 9.899 S 10,588 Commercial 8.477 9,906 10,243 9,563 10.388 Industrial 8.379 8,741 9,546 9,405 10,667 Wholesale Sales to Other Uldflies2 5.371 5.201 3,463 4,389 5.920 Street & Highway & Other 3,141 1.230 1,146 1,134 1,238 Total Energy Sales S 35,571 $ 34,887 $ 34,766 $ 34,390 $ 38,779 so.. Cdtys Coebme, mlormanon S,4m Balmy Reaons Omleremwnbin movsends 'Fsaf Year201041 Retail Revenues Include Poner CvghtljvsManl �llllrrp amounts 'All pears rerrsad reN FY2010-111epoodve 1.u. o1d111e1enlmell�odolopy Mnuel ranencesdue b tlranpmp alerke! demaM n,aMe1 ra511uRunnp. aM Anof wledlM 44 1 1, A I Cash Reserve Policy • Formal Policy adopted by the Utility Board in September 2010 • Policy: — 90 days operating cash — 3% of historical asset values — 100% of annual debt service . — 5% of current year capital improvement program budget plus 15% of 5 year capital improvement program budget • Policy currently requires $12.6 million reserve, actual cash reserves total $14 million as of 12/31/2011 45 Rate History Electric system Rate History • Per Customer Class $0.16. Sf1.16 $0.14 1J 13 E01 �,i 3012 Sfi i _SD) _ u $0.12 - 10 x SO.ID b $0.00 $0.06 n $0.01 $002 - 2007 2006 2009 - -- 2010 2011(11 Fiscal Year �Rasld.NW aCOMMIrdal .Industrial � N 46 Z t 061 23 • PCA is currently $0.02053 per kWh and has generated $3.7 million through 3/30/2012 • Estimated debt coverage through 3/30/2012 was 8.Ox with PCA revenues 48 A Y (,'-%A 062 24 Rate Comparison • Utility Board adopted a Power Cost Power Cost Adjustment History 2011 kWh Charges by Customer Type Utility Name Residential Commercial Industrial !Southern California Edison $0.1846 50.1692 50.1277 System $0.1525 Glendale 0.1465 0.1534 0.1287 0.1422 :Burbank 0.1405 0.1500 0.1310 0.1421 Riverside 0.1614 0.1615 0.1119 0.1389 Anaheim 0.1464 0.1488 0.1233 0.1371 Azusa" "a =Z' q`7368M, 01394" '"* t07208' -'"'w 0.7321'`' iLADWP 0.1330 0.1415 0.1200 0.1290 Source: California Municipal Rates Group. 2012 Survey 47 N A Z i. • PCA is currently $0.02053 per kWh and has generated $3.7 million through 3/30/2012 • Estimated debt coverage through 3/30/2012 was 8.Ox with PCA revenues 48 A Y (,'-%A 062 24 Power Cost Adjustment • Utility Board adopted a Power Cost Power Cost Adjustment History Adjustment (PCA) mechanism in June • 2010 July 1. 2010 5 0.00960 January 1. 2011 $ 0.00958 - Designed to reflect power -related July 1, 2011 $ 0.02659 costs not included in base electric January 1, 2012 5 0.02053 rates as a billing surcharge/credit • PCA is currently $0.02053 per kWh and has generated $3.7 million through 3/30/2012 • Estimated debt coverage through 3/30/2012 was 8.Ox with PCA revenues 48 A Y (,'-%A 062 24 Operating Results Ebmdc 5 tem 105 5 Reese e• B4 S?493] E Seles aMsMMIC ]`.998 5 34 497 E 35 193 5 107 InieCem.e,tel cirerges 200 9. 1m 505 1221 133 ESscesli 133 10.9 203 58 132 ,n1e•esueveroe 2.111 1881 1388 1'(9t 910 Tinel Revemme S 57,082 E 3Rt25 9 30.073 r 37.603 S 40032 Don d .es.W Ser S 154 S 77 5 105 5 152 5 B4 Sorted supple 21,901 25.629 23107 25,N2 25.169 T,dl5mKe1]n(dI . 20`8 28<4 2.963 29311 3.285 tv '.Wwes 5333 53:5 5.806 5.829 6.478 TOW C"... S 30055 S 31,106 S 32081 S 30.961 S 35017 NO Reveoaee $ 7,637 S 6.010 S 0.612 S 2002 S 5.315 Deft Servire S 952 S 941 S 948 S 916 $ 919 CwereOe 802 526 488 275 50 Genua Fled Tren5fel 5 2.979 $ 5030 5 3184 S 3005 5 3339 FJmdf Av411ebk ager DaOt Service end G.roM FUM Tnmkr S 3705 S 1031 $ 480 $ 11411) S 1.027 (b4pr B'm rtb NIfg16dM6. µ 49 AZU�A Rating Upgrade Rationale • With the PCA in place, the Electric System has substantially reduced the risk and volatility of net revenues each year • The Electric System can now quickly recover the increasing costs of its power supply, e.g., PCA generated $3.7 million through 3/30/2012 • The effect on coverage is substantial, 5.6x coverage in FY2011 projected to increase to B.Ox through Q3 of FY2012 • Despite PCA, retail rates remain competitive with neighboring utilities and other POUs • Liquidity remains strong at $14,4 million, or 150 days of operations • Power supply mix is long and provides wholesale revenue opportunities and these will be expanded once the Lodi Energy Center becomes operational • Power supply portfolio currently meets 20% renewable energy :M— requirement 50 11 063 25 IV. Water and Electric System Refunding Revenue Bonds, Series 2012A and 2012B 51 z Bond Overview • Series 2012A Bonds (Water) — Bonds will advance refund $11.3 million of the 2003 Series A Certificates of Participation (COPs) • Cash contribution — Water System will make a $2.3 million cash contribution to refund the non -advance refundable portion of the 2003 Series A COPs — Over $20.0 million in cash will remain in reserves after contribution • Series 2012B Bonds (Electric) — Bonds will advance refund $5.5 million of the 2003 Series B COPS 52 A A 064 26 06' Security Structure and Bond Covenants Water System Electric System 2012 Series 2012A Series 20128 Additional 125% maximum annual debt service 110% maximum annual debt service Bonds Test 2013 685.000 Rate Water system net revenues will equal EleGtric system net revenues will Covenant at least 125% of debt service equal at least 110% of debt service Debt Service None Fully funded debt service reserve fund Reserve Fund 221,950 based on traditional three -pronged 2015 ti 312800 53 - AzUIeA 06' Estimated Debt Service* 2012 $ - S 36.681 S 36.581 S - S 23.428 S 23,428 2013 685.000 347,500 1,032,500 - 221,950 221,950 2014 700.000 333.800 1.033,600 - 221,950 221.950 2015 715.000 312800 1.027,600 - 221.950 221.950 2016 745.000 264,200 1.029.200 - 221,950 221,950 2017 775,000 254,400 1,029,400 560,000 221,950 781,950 2018 605.000 223.400 1.028.400 720,000 199,550 919,550 2019 840.000 191,200 1,031.200 750,000 170.760 920.750 2020 875.000 157,600 1,032:600 775.000 140,750 915,750 2021 900.000 122600 1.022600 610.000 109,750 919.750 2022 410.000 86,600 1.028.60D 840.000 77.350 917,350 2723 980.000 49.000 1,029.000 -1,-359,781 875.000 43.750 916750 Total S &960,000 S 2,399,781 Tl S 5,330,000 S 1,875,078 S 7,205,078 ' 'Preliminary subject to change - M 54 06' Estimated Sources & Uses* Escow Deposit S 14.868 5 5.863 $ 28.721 Debt 9ervloe Reserve Fund S . f 587 $ � ,4.. Tobi E.Peme. f 136 S Eon Promed. 218 Gren TOO Um S 16.804 5 Perknuunl S 8990 S SJJ3 5 14,290 Prempm %5 5y. ljM TOO f 9.946 S 6,886 S 16.810 Otter Sourms of Funs Reserve Fund S 1555 S $47 S 2101 PnmpelPM lnteeesl Fund 1,179 IID 1289 G S6 G uubutm n 2325 2.325 TOW S 6.069 S 667 S 6,716 Grand Toted Somm. $ 16.000 S 61671 S 21.626 WlJfdrtgUrte n f6CV5aM4 'PBemne�j's(G/eit to maga 55 A/U3 A Benefit Summary • Water — Reduced cash flow of —$520K per year through 2023 — NPV savings of —$1.6 million Electric — Reduced cash flow of—$41-46K per year through 2023 — NPV savings of —$454K 56 AZL;SA 06s Use. Escow Deposit S 14.868 5 5.863 $ 28.721 Debt 9ervloe Reserve Fund S . f 587 $ 687 Tobi E.Peme. f 136 S K S 218 Gren TOO Um S 16.804 5 Can f 21,526 WlJfdrtgUrte n f6CV5aM4 'PBemne�j's(G/eit to maga 55 A/U3 A Benefit Summary • Water — Reduced cash flow of —$520K per year through 2023 — NPV savings of —$1.6 million Electric — Reduced cash flow of—$41-46K per year through 2023 — NPV savings of —$454K 56 AZL;SA 06s Financing Schedule Monday, May 14 Receive ratings Tuesday, May 15 Post Preliminary Official Statement Tuesday, May 22 Price Series 2012 A and 20128 Bonds Wednesday, June 13 Close financing M 57 AZt:'n Questions/Comments AMR ;W 58 06729 Global IjfMdit Po aIRatingsDiE% May 14, 2012 Summary: Azusa, California; Retail Electric Primary Credit Analyst Paul Dyson, San Francisco j1) 415-371-5079; paul_dyson@standardandpoors.com Secondary Contact: Jeffrey Panger, New York(1)212-438-2076; jeff_pangergstandardandpoors.com Table Of Contents Rationale Outlook Related Criteria And Research www.standardandpoors.com/ratingsdirect 1 1 ' w Summary: Azusa, California; Retail Electric Credit Profile US$5.33 mil Bloc r dg rev bnds ser 20128 due 07/01/2023 Long Term Rating A/Stable New California Resource Efficiency Fin Auth, California Azusa, California California Fincg Auth For Res Efficienty (Azusa) Elec Unenhanced Rating A(SPUR)/Stable Affirmed Many issues are enhanced by bond insurance. Rationale Standard & Poor's Ratings Services assigned its 'A' rating to Azusa, Calif.'s $5.33 million series 2012B electric system refunding revenue bonds and affirmed its 'A' long-term rating and underlying rating (SPUR) on the California Resource Efficiency Finance Authority's (FARECal) series 2003B and 2003C certificates of participation, issued on behalf of Azusa. The ratings reflects our view of: • A diverse and mostly residential customer base, located within the large Los Angeles MSA; • Below-average retail rates for the region despite several rate increases of 5% to 10% during the past five fiscal years; • Additional financial flexibility provided by the city's power cost adjustment (PCA) mechanism, which is currently set at 2.05 cents per kilowatt-hour (kWh), that allows for the recovery of higher-than-expected power costs; • Very strong historical debt service coverage (DSC) before general fund transfers of no less than of 4x in fiscal years 2005 through 2011, with the exception of fiscal 2010, when it dipped to 1.9x, although it rebounded strongly to S.6x in fiscal 2011; • Good fixed -charge coverage (FCC) of 1.23x in 2011, forecast at between 1.7x and 1.8x through 2013; • Minimal capital needs of just $6.25 million during the next five years and the lack of additional bond issuance plans; and • A good liquidity position, with audited fiscal 2011 cash reserves of $14.4 million, or 150 days' cash, forecast to rise to near 180 days by fiscal 2013. Partly offsetting the above strengths, in our view, are the electric system's: • Power supply pressures related to various California regulatory initiatives with regard to carbon emissions and renewable portfolio standards, with coal representing two-thirds of energy delivered, and with costs expected to rise as more eligible renewable resources are added; • Exposure to short-term power markets and to power supply cost escalations, as demonstrated by plant outages in fiscal years 2008 through 2010 at the San Juan Generating Station, the utility's largest resource, which required the utility to purchase a large amount of replacement power at substantially higher costs; and Standard & Pours I RatingsDirect on the Global Credit Portal ) May 14, 2012 069 Summary: Azusa, California; Retail Electric • A recent delay in adjusting rates during a period of declining overall energy sales stemming from a sluggish economy and reduced wholesale sales (and prices), as well as rising purchased power costs due to outages and higher -cost renewable energy, resulting in substantially weaker and inadequate FCC of just 0.5x in fiscal 2010 (which necessitated a draw on cash to meet all obligations), down from 1.2x in fiscal 2009. Azusa's electric system has a business profile of '4' based on our 10 -point scale in which '1' is the highest, reflecting generally competitive rates, concentration in power resources, and stable markets. The bonds are secured by net revenues of the electric system and are being issued to refund $5.5 million of the city's series 2003B certificates outstanding, which are secured by installment payments made to FARECal by the City of Azusa from net revenues of its electric system. Debt payments related to an additional $21.5 million (fiscal 2011) of off -balance -sheet debt in the form of take -or -pay obligations to joint powers agency debt are considered operating expenses of Azusa, payable ahead of the city's electric revenue bond debt service. Bond provisions are adequate, in our view, and include a 1.1 x rate covenant and projected additional bonds test that allows for adjustments for system extensions or charges. Additional security is provided by a debt reserve fund for each series of bonds. The city's electric system provides service to a mostly residential (89%) customer base, and the customer account total of 15,541 is virtually unchanged from the 2007 count of 15,531. The 10 leading customers account for 31 % of energy usage. Azusa Pacific University is the utility's largest user (6%). Government, light manufacturing, retail, and education make up the balance of the utility's leading 10 power customers. In fiscal 2011, the city sold 373 gigawatt -hours (GWh) of electricity to retail and wholesale customers, an increase of 3.7% from fiscal 2010. Retail -only energy sales, at 239 GWh in fiscal 2011, have been declining slightly during the past five years mainly due to the impacts of the recession. However, during that time wholesale sales have grown, to 134 GWh in fiscal 2011 from 99 GWh in fiscal 2007. The residential, commercial, and industrial classes account for 27%, 27%, and 28%, respectively, of total revenues as of fiscal 2011; wholesale sales represent 15%, consistent with fiscal 2007. Management has projected wholesale sales will account for approximately the same percentage of sales in fiscal years 2012 and 2013. Azusa's resource portfolio is dominated by coal-fired generation from the San Juan Generating Station Unit 3 via its membership with Southern California Public Power Authority (SCPPA). Although its ownership in a coal-fired facility is dominant, the balance of Azusa's portfolio is fairly diverse, in our opinion, and includes 20% of qualifying renewable energy. The portion of specific resources in 2011 specifically taken for native load consist of coal (50.9%), renewable energy (11.4%), nuclear (4.7%), and hydroelectric (1.1%), with assorted contract and spot purchases (32.0%) making up the balance. San Juan actually represents a higher 67% of energy resources but the amount over 50.9% was sold to the market in 2011. Likewise, Azusa's actual qualified renewable energy percentage was, as stated above, actually 20% in 2011, and several other renewable energy projects are currently under evaluation, including solar. Management projects that Azusa will be 25% renewable by 2016 and 33% by 2020, putting the utility in a comfortable position to meet California legislation known as SBXI-2 (Senate Bill 2 in the First Extraordinary Session). Signed into law on April 12, 2011, SBXI-2 requires both investor-owned utilities and public utilities in the state to achieve a 33% renewable portfolio percentage by 2020. All load -serving utilities must also serve an average of 20% of all retail sales from renewable resources for 2011 to 2013, and 25% by 2016. Azusa will continue to ramp up renewable power resources, both directly and indirectly through purchased power arrangements such as projects related to its membership with SCPPA. The city already participates in various SCPPA projects, including the coal-fired San Juan Generating Station (Unit 3). The city's obligation to make payments to the SCPPA projects in which it participates are payable as operations and maintenance expenses of the electric www.stand.ardandpoors.com/ratingsdirect 070 Summary: Azusa, California; Retail Electric system. Approximately 67% of the city's firm resources on a megawatt -hour basis is derived from the San Juan Generating Unit. During fiscal years 2008 through 2010, forced and unplanned outages at the plant caused the city to resort to more expensive market-based replacement power resources, and this, in combination with the purchase of more costly renewable energy resources and the absence of commensurate rate adjustment, caused purchased power costs to rise in recent years and margins to fall. In response to this, the utility instituted a 9.3% rate adjustment effective Dec. 1, 2009. This adjustment raised about $1.6 million by fiscal year-end 2010. According to management, the city is actively monitoring and managing state regulatory issues and mandates and has been allocated sufficient allowances from the state to cover its carbon exposure from San Juan. Management's strategy is to divest of San Juan and is currently negotiating with another power agency to do so. The earliest that the transfer would take place would be January 2013, and Azusa's plan is to replace San Juan with additional energy in the market, currently available at low prices. While, in our opinion, Azusa's carbon exposure is moderately high and its decision to reduce this exposure has its benefits, we also believe its strategy to divest San Juan in its entirety over the next year or so could cause rates to spike if spot market power costs rise, given increased exposure to the market. In response to volatility in power costs in 2010, the utility converted its fuel cost adjustment mechanism into a more general PCA mechanism and assessed this add-on to customer bills effective July 1, 2010. The system adopted this new PCA after an independent consultant's review of Azusa's rates, revenues, and expenses, and the development of a rate mechanism to address fluctuating purchase power costs. Management expects the PCA to generate about $4 million to $5 million in fiscal 2012 (it has generated $3.7 million through March 31, 2012). The PCA is calculated semiannually and implemented July 1 and Jan. 1 of each fiscal year. It is based on upcoming 12 -month budgeted purchased power costs, and is adjusted every six months to reflect actual versus budgeted figures. The current PCA through June 30, 2012, is 2.053 cents per kWh. Management plans no other rate adjustments, but will monitor financial performance quarterly and propose additional rate adjustments, if it deems doing so necessary, to meet its DSC and reserve requirements. During 2011, the total average system rate, not including wholesale sales, was about 13.75 cents per kWh, up from 12.72 cents per kWh in 2010 and 11.63 cents per kWh in 2007. Azusa's all -in system rates were 5% below the average rates of nearby public power utilities in Southern California (9% below for residential only) and 13% below those of investor-owned utility Southern California Edison (26% below for residential). Residential rates were 14% below the average of all public power utilities in the state in 2010. Prior to the Dec. 1, 2009, 9.3% base rate increase, the previous rate increase was 5% in October 2007. Financial margins, liquidity, DSC, and FCC were, in our view, strong during fiscal 2011, a positive development as financial metrics suffered in fiscal 2010. Given higher purchased power costs, DSC fell to 1.9x in fiscal 2010 from 5.2x in fiscal 2009, and FCC, which takes into account in -lieu payments to the general fund, franchise fees, and off -balance -sheet debt service requirements related to its SCPPA projects, was inadequate, in our view, at 0.5x in fiscal 2010, down from 1.2x in fiscal 2009. However, DSC and FCC rose to 5.6x and 1.23x, respectively, in fiscal 2011, given the effect of a full year's worth of rate increase and an increase to the PCA. Based on results through the first three quarters of fiscal 2012, management's forecast for fiscal 2012 indicates DSC of 8.7x, which we consider extremely strong, and FCC of 1.8x, which we view as very strong. However, Azusa's rate flexibility could be reduced in future years given the expectation of higher operating costs, mostly due to purchased power. Standard 8c Poors I RatingsDirect on the Global Credit Portal ) May 14, 2012 ,!.. 071. Summary: Azusa, California; Retail Electric The city's liquidity, including unrestricted cash and its rate stabilization fund, remains good, in our view, at $14.4 million, or 150 days of operating expenses, although down from 166 days in 2009 and 227 days in 2008. The utility's forecast indicates maintenance of cash at roughly 180 days in 2012 and 2013 (six months). The city has a policy of maintaining 90 days' operating cash, 3% of historical asset values, 100% of debt service, 5% of current year capital costs, and 15% of the five-year capital improvement plan. This translates to a minimum of $12.6 million in cash reserves, which the city currently exceeds. Including off -balance -sheet debt, the debt -to -total -capital ratio is 47%, with a debt burden at $3,315 per customer, levels we consider low -to -moderate. The utility has a relatively small and manageable capital plan, in our opinion, totaling an additional $6.25 million during the next five years. We understand that management has no plans to issue additional bonds. Azusa (population: 49,099) is located in Los Angeles County about 24 miles east of downtown Los Angeles. The economy represents a diverse blend of industrial, commercial, agricultural, and residential development. Unemployment as of March 2012 was 12.9%, down slightly from 13.2% in March 2011 and 13.5% in March 2010. Median household effective buying income as of 2011 is good, in our view, at 105% of the national average. The system projects minimal load growth of 0% to 0.5% per year during the next five years. Outlook The stable outlook reflects our anticipation that the utility will continue to address its volatile and escalating purchased power costs prudently through timely rate increases and/or the use of its PCA mechanism. Although we believe the utility did not adjust revenues in a timely manner in fiscal 2010, results for fiscal 2011 and projections for fiscal 2012 indicate that financial metrics, including DSC and FCC, have rebounded to levels we consider adequate for the rating. If actual financial results for fiscal 2012 are materially worse than management indicates, we could lower the ratings. Rating upside is limited, in our opinion, given recent volatile financial performance, a concentrated resource portfolio, and pressures related to state regulations on emissions. As such, we do not expect to raise the ratings during the next two years. Related Criteria And Research USPF Criteria: Electric Utility Ratings, June 15, 2007 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. www.standardandpours.com/ratingsdirect 072 Copyright © 2012 by Standard & Poor's Financial Services LLC. 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Standard & Poors I RatingsDirect on the Global Credit Portal I May 14, 2012 073 Global Credit Portal EM IgSDirect° May 15, 2012 Summary: Azusa, California; Water/Sewer Primary Credit Analyst Robert Hannay, San Francisco (1) 415-371-5038; robert_hannay@standardandpoors.com Secondary Contact: - - Paul Dyson, San Francisco 111 415-371-5079: paul_dysongstandardandpoors.com Table Of Contents r Rationale Outlook Related Criteria And Research www.standardandpoors.com/ratingsdirect 1 074- Summary: Azusa, California; Water/Sewer Cre.dit Profile US$8.96 mil wtr ddg rev bnds ser 2012A due 07/01/2023 . Long Term Rating AA+/Stable New California Resource Efficiency Fin Auth, California Azusa, California California Fineg Auth For Res Efficienty (Azusa) Wtr Unenhanced Rating AA+(SPO/Stable Affirmed Rationale Standard & Poor's Ratings Services assigned its 'AA+' long-term rating to the City of Azusa, Calif.'s series 2012A water revenue refunding bonds. In addition, Standard & Poor's affirmed it's 'AA+' long-term and underlying rating (SPUR) on the city's existing water revenue bonds. The outlook is stable. The rating is based on our view of the water system's: • Diversified portfolio of water supply sources, which management believes can accommodate demand for the foreseeable future; History of implementing rate increases to offset the effects of recent lower water consumption; and Strong unrestricted cash position of about 631 days of operating expenses as of June 30, 2011. These strengths are partly offset by the system's declining debt service coverage during the past five years as debt service has increased, although coverage remained good in our view at 1.31x in fiscal 2011. The proceeds of the series 2012A bonds, combined with $2.3 million in water fund cash, are being used to refund the water system's $14.0 million outstanding series 2003 bonds. The system has $54.0 million in additional parity water revenue -backed debt outstanding. The bonds are secured by net revenues of the city's water system. A rate covenant requires the city to generate net water revenues providing at least 1.25x debt service coverage. The series 2012A bonds will not have a reserve fund. Azusa (population 46,000) is located in Los Angeles County, about 25 miles northeast of the downtown Los Angeles. The city has significant commercial and industrial sectors as well as residential areas with good access to the greater Los Angeles County economy. Leading employers include Azusa Unified School District, aerospace firm Northrop -Grumman, Azusa Pacific University, the city, and Costco. The city's median household income is 105% of the nation, which we consider good, while the per capita income is 67% of the nation, which we consider adequate. The water system provides service to about 22,290 accounts lying within the city and parts of surrounding cities and unincorporated areas. Approximately 40% of the water system's customers are located in the city, with the remainder in the cities of Covina, Glendora, Irwindale, West Covina, and unincorporated areas of the county. The city does not have wholesale customers, although it occasionally leases its water rights on an annual basis. We view the system's customer base as diverse, with the top 10 customers representing 17% of fiscal 2011 operating revenue. Standard & Poors ( RatingsDirect on the Global Credit Portal I May 15, 2012 Q75 Summary: Azusa, California; Water/Sewer The water system has a diversified portfolio of water sources, in our view, with access to relatively low cost supply. Water sources include: • Groundwater from 11 wells in three adjudicated basins; • Surface water from the San Gabriel River, which is treated at the system's treatment plant; • Treated water from the Upper San Gabriel Valley Municipal Water District (USGVMWD); and • Untreated state water project water from the San Gabriel Valley Municipal Water District (SGVMWD). The USGVMWD receives its water from the Metropolitan Water District of Southern California (MWD). Most of the system's water demand is met through non -imported local sources. In the past five years, the city has purchased no MWD water. According to management, the city has adequate water supply for the foreseeable future. The system at times also generates additional revenue from leasing water rights on an annual basis. The city has regularly increased water rates during the past 10 years, including relatively large increases of about 18% in fiscal 2010 and 16% in fiscal 2011 in response to declining water sales. The city also has in place a volume -based replacement water cost surcharge to offset the cost of replacement water in the groundwater basins when the city pumps more than its annual allocation. This surcharge is adjusted annually. We view current rates as moderate. Water customers pay a fixed monthly charge plus a tiered -volume based charge and replacement water surcharge. Currently, a single-family residential customer would pay $27.10 per month for 10 hundred -cubic feet of monthly water use. The system has experienced volatility in operating revenue during the past five years, although increased water rates have helped offset the effects of decreased consumption during this period. In fiscal 2011, operating revenues totaled $17.7 million, down 14% from 2010 partly due to higher -than -normal water rights leasing income in 2010 and decreased water sales in 2011. Operating expenses in fiscal 2011 were up 0.4%, totaling $12.4 million. Net revenues including interest income were $5.9 million in fiscal 2011, providing debt service coverage of 1.31x, a level we view as good. This calculation does not include the effect of a $341,033 transfer to the general fund representing a franchise fee. Under the indenture, debt service has priority over the franchise fee. Debt service coverage has declined during the past five years as annual debt service has increased. We would view further declines in coverage as a credit concern. In the city's projections, debt service coverage is more than 1.6x for years 2012 through 2016. These projections incorporate a 3% rate increase in fiscal 2014, which has not yet been approved. Given the city's relatively low water rates and history of adopted rate increases, we anticipate that the city will implement future rate increases to maintain good -to -strong financial metrics. The water system's cash position has been consistently strong. As of June 30, 2011, the water fund had $21.4 million in unrestricted cash and investments, representing about 631 days of operating expenses on hand. The system has maintained liquidity at more than 600 days in each of the past five years. The water system's capital needs are modest relative to the size of the system, in our view. The system's five-year capital improvement program covers about $11.0 million in projects. We understand that the city intends to pay for these projects primarily with ongoing water system revenues. www.standardandpoors.com/ratingsdireci 076 Summary: Azusa, California, Water/Sewer Outlook The stable outlook reflects our anticipation that debt service coverage will improve after declining the last few years to levels that are in line with the city's financial projections. We also anticipate that rates will be adjusted as needed to maintain good -to -strong financial metrics. If debt service coverage or liquidity were to fall during the next two years, we could lower the rating. We do not anticipate raising the rating during the two-year outlook period. Related Criteria And Research • USPF Criteria: Key Water And Sewer Utility Credit Ratio Ranges, Sept. 15, 2008 • USPF Criteria: Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008 Ratings Detail 0 1 Azusa Pub Fin Auth, California Azusa, California Azusa Pub Fin Auth (Azusa) wtr Unenhanced Rating AA+ISPURI/Stable Affirmed Many issues are enhanced by bond insurance. Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. 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S&P's public ratings and analyses are made available on its Web sites, wwwstandardandpoors.com Tree of charge), and www.ratingsdirect.com and www.globalcreddpmml com (subscription), and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. www.slandardandpoors.com/ratingsdirect 078 TO FROM: DATE: POW 44P HONORABLE CHAIRPERSON AND MEMBERS (— BOARD GEORGE F. MORROW, DIRECTOR OF UTILITIE MAY 29, 2012 AZUSA 116Ni l WATER INFORMATION ITEM SUBJECT: POWER COST ADJUSTMENT EFFECTIVE JULY 1, 2012 11101NO 4 In June 2010, the Utility Board adopted a Power Cost Adjustment ("PCA") rate mechanism. The PCA authorizes the Director of Utilities to administratively set a per kWh fee based on forecasted purchased power costs that are expected to exceed base rate revenue. The PCA is set on July 1 and January I based on budget forecast and actual purchased power costs incurred. If forecasted costs are less than actual costs, the PCA is increased to make up for the revenue shortfall; if forecasted costs are more than actual costs, then the PCA is adjusted downward to rebate customers for excess of revenues collected. In this way, the PCA helps mitigate risks associated with purchased power costs fluctuations. Since base rates are well below real purchased power costs, the PCA has been a net revenue generator since it was instituted, generating $1.7 million in Fiscal Year 2010-11, and $3.7 million from July 1, through March 31, 2012. See below table showing the per kWh history of PCA rates: Power Cost Adjustment History Effective Date $ Per kWh PC 7/1/2010 $0.00960 1/1/2011 0.00958 7/1/2011 0.02659 1/1/2012 0.02053 Based on budget for FY 12-13, and excess revenues of $639,188 being collected through April 2012, the upcoming PCA will be adjusted downward to $0.01592 per kWh. Information used to calculate the PCA is attached for reference. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities M TAB R-1111111, Power Costs POWER COST ADJUSTMENT CALCULATIONS Effective July 1, 2012, based on Actuals from November 1, 2011 thru April 30, 2012 (Baseline) FY 2011-12 FY 2011-12 - Nov'11 Dec'11 Jan'12 Feb'12Mar'12 Mar -12 A r'12 6 Mo Total 493,112 497,113 564,129 (497,158) (527,792) (404,591) (2,983,895 1,625,322 1,833,443 2,109,845 1,990,248 2,085,373 1,924,878 11,769,109 598,578 213,378 213,378 213,378 213,378 214,575 1,666,665 53,989 53,989 56,489 53,989 53,989 60,989 333,434 $ 1,984,777 $ 1,603,697 $ 1,815,583 S 1,760,457 $ 1,824948 $ 1,795,851 $ 10,785,313 17,194 19,450 19,538 17,706 17,534 20,134 111,556 115.43 62.45 92.93 99.43 104.08 89.19 96.68 TABLE 2: Actual Costs FY 2011-12 FY 2011-12 Wholesale Revenues 3340.734-470-4811 Purchased Power 33-40-775-550.6590 Transmission 33-40.785650-6493 Schedulingand Dispatch 33-40-785-560.6493 Total Purchased Power Costs Eno Sales In MWH Avera eCost ar mWh Purchased TABLE 3: Actual vs. Base Rate Period Actual Average Power Costs Per MWN Cast Recovered thru Base Rate Deference Approved and Effective PCA (Excluding 10% City Fees) Per M WH Excess / Deficient in Rates Total M WH for Period Total Excess /(Deficiency) in Rates - Current Period Prior Period - Month / Yr Total Excess / Deficient in Rates - Prior Period Total Excess / Deficient in Rates - Current & Prior Periods Nov'11 Dec'11 Jan'12 Fe 12 Mar -12 Apr'12 6 M Totals 383,084 456,947 196,484 229,628 191,294 (111519) 1,558,956 1,757,840 1,760,179 1,844,466 1,024,012 1,816,074 1,670.425 9,872,9% 318,592 207,642 211,837 198,918 210,445 191,643 1,339,077 51,171 38,337 38,518 37,255 37,328 49,506 252,115 $ 1,744,519 , $ 1,549,211 $ 1,8,337 $ 89 1,030,557 6 t 672,553 1.800.055 S. 9,895,232 19,196 17,591 18,468 17,876 17380 20,134 110,646 90.88 88.07 102.79 57.65 107.74 88.40 89.43 FY 2011-12 FY 2011-12 ov Dec,11 =-,. Jan'12;._. Feb12 Mar'12 r'12 8 Mo Totals S 89.43 $ 89.43 7-89 43 $ 89.43 89.43 $ 89.43 $ 89.43 $ 81.64 $ 81:64 $ 81.64 $ 81.64 $ 81.64 S 81.64 $ 81.64 $ 7.79 $ 7.79 $ 7.79 $ 7.79 S 7.79 $ 7.79 $ 7.79 $ 18.72 $ 18.72 $ 18.67 $ 18.67 $ 18.67 $ 18.67 n/a $, 10.93 $ 10.93 $ 10.88 S 10.88 3 10.88. $ 10.88 n1a 19,196 17,591 18,468 17,876 17,380 20,134 110,646 $ 209,775 $ 192,238 $ 200,902 $ 194,453 $ 189,065 $ 219,025 1,205,458 Ma '11 Jun '11 Jul'11 Au '11 Se 'N oct'11 nits $ 229,768 $ 253,149 $ 15,741 $ 7,908 $ 15,628 $ 21,333 $ 512,270 $ 19,993 $ 60,911 $ 185,161 3 186,545 S 204,693 $ 197,693 $ 693,188 FY 2012.13 Per kWh PCA Effective July 1, 2012 $0.01592