HomeMy WebLinkAboutE-6.1. Approve IBY Water Rate Adjustment 2022_APPROVEDCONSENT ITEM
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE UTILITY BOARD
FROM: TIKAN SINGH, GENERAL MANAGER
DATE: MAY 31, 2022
SUBJECT: IBY PROPERTY OWNER LLC WATER RATE ADJUSTMENT, EFFECTIVE JUNE
1, 2022
SUMMARY:
The City has an agreement with IBY Property Owner LLC to supply water (“Agreement”) to the
Irwindale Brew Yard brewery in the City of Irwindale (“Brewery”). Pursuant to the agreement, rates are
to be adjusted every two years based on an agreed to formula and incorporation of certain specified cost
components. The recommended action seeks authorization by resolution to implement rate changes
pursuant to the Agreement effective June 1, 2022.
RECOMMENDATION:
Staff recommends that the Utility Board take the following action:
1) Adopt Resolution No. 2022-UB-02 adjusting water rates for IBY PROPERTY OWNER
LLC, effective June 1, 2022.
DISCUSSION:
On February 23, 2009, the City of Azusa entered into a restated water supply agreement with
MillerCoors USA LLC, which set rates for water services provided to the brewery located in the City of
Irwindale. MillerCoors changed its name to Molson Coors USA LLC on April 1, 2020. IBY LLC (a
wholly owned subsidiary of Pabst Brewing Company) has since then acquired the brewery. The
agreement was assigned to IBY LLC on July 20, 2020 then IBY Property Owner LLC on December 21,
2020. Pursuant to the agreement, rates are to be adjusted every two years after May 1, 2010, and are to
be calculated based on a cost-based formula set forth in the agreement. The rate adjustment
methodology used for IBY parallels the cost of service process that the City uses to determine its water
rates for all customers.
The rate calculation methodology specified in the agreement takes both the fixable cost components of
Azusa Light & Water’s forecasted net revenue requirement and allocates those costs in proportion to
IBY’s expected water usage and meter capacity as compared to the rest of the water system. Fiscal Year
E-6Approved
Utility Board
05/31/2022
IBY PROPTERY OWNER LLC Rate Adjustment
May 31, 2022
Page 2
(“FY”) 2022-23 forecasts are being considered for IBY’s upcoming rate adjustment date of June 1,
2022.
The water utility’s forecasted net revenue requirement subject to rate adjustment calculations for the FY
2022-23 is about $27.9 million. Fixed costs are recovered through meter charges, and variable costs are
recovered through commodity charges. For rate design purposes, 40% of the budget is assigned to the
fixed cost/meter charge rate component ($11.2 million) and 60% is assigned to the variable
cost/commodity charge rate component ($16.7 million). IBY’s portion of the fixed costs has been
determined to be 0.3274%, and IBY’s estimated share of the commodity charges is 1.43%.
Based on the above information, Staff recommends approval of the following rates for IBY to be
implemented June 1, 2022:
PROPOSED RATE CHANGE FOR IBY PROPTERY OWNER LLC
BREWERY
EFFECTIVE JUNE 1, 2022
Service Current Rate Proposed Rate % Increase
Flat Monthly Meter Charge $2,946.63 $3,048.72 3.4%
Volumetric Charge per CCF $2.20 $2.39 8.8%
Rates are to be effective for a period of two years according to the agreement, at which time City Staff
will again review pertinent information and formulate an update of the contract water rates.
FISCAL IMPACT:
The June 1, 2022 rate adjustment for IBY Property Owner LLC is expected to increase water revenues
by about $20,684.24 assuming the Brewery consumption pattern remains at the same level of
approximately 100,188 CCF annually after the assumption by IBY.
Prepared by:
Danny Smith
Utilities Administration & Finance Manager
Reviewed and Approved:
IBY Property Owner LLC Rate Adjustment
May 31, 2022
Page 3
Tikan Singh
General Manager
Reviewed and Approved:
Sergio Gonzalez
City Manager
Attachments:
1. Resolution 2022-UB-02 Adjusting Water Rates for IBY Property Owner LLC
2. IBY Property Owner LLC Rate Calculation Model 2022
3. MillerCoors Amended and Restated Water Supply Agreement