2019-150 Alternative Rate StructureDate: July 26, 2019 Report No. 2019-150
INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Follow-up to request for information regarding application of income-based utility rates or service discounts, senior citizen programs and discounts, and Veteran’s deposit waivers by the City of Denton. BACKGROUND: March 26, 2019, Navigant Consulting presented a follow up study of the overall credit and
collections program and practices implemented resultant from recommendations of a 2008 study
which benchmarked industry best practices.
Navigant Consulting indicated that some utility systems offer alternative rate structures and discount programs such as senior rates, income-based rates, and other discount programs. Customer Service reviewed the program offerings of Austin, Houston, Lubbock, and San Antonio and provided the information via an informal staff report (see chart below).
Debt Performance Programs Offered
Debt Ratio ENDRO Income Based Other (Sr, Vet, Medical) Efficiency Improvements Donated Funds
Denton 0.15% 22 X X
Austin 0.45% 38 X X X X
DeSoto X
Houston X X
Lubbock 0.54% X
San Antonio 0.32% X X X
Customer Service invited questions and answers related to that follow-up during the budget
presentation June 4, 2019.
DISCUSSION:
The purpose of this report is to answer questions which were raised during the June 4, 2019 budget
presentation pertaining to the following excerpt of the credit and collections informal staff report:
State regulations prohibit municipalities from providing free utility services or forgiving debt and dictates that rates must be uniformly applied. The City of Denton adopted this requirement in the City Charter under article 12, section 2.
Date: July 26, 2019 Report No. 2019-150
City Charter, Sec. 12.02. - Rates.
The city shall have the power, subject to limitations imposed by state law and this Charter, to fix and, from time to time, revise such rates and charges as it may deem advisable for supplying such utility services as the city may provide. The utilities shall provide no free services; the rates and charges for services to city departments
and other public agencies shall be the same as the regular rates and charges fixed for
similar services to consumers generally. The rates and charges for services to consumers outside the corporate limits of the city may be greater but shall not be less than the rates and charges for similar service to consumers within the corporate limits of the city.
To accommodate uniform rate application rules, it appears most municipal utility organizations offset rates with qualified discounts ranging from an average about $80-$650 annually. Grand Prairie which provides water services only, has an affordability rate that discounts the lowest rate tier to accommodate for consumption required as a necessity.
Qualifications for all programs except senior citizen programs appear to be income based with most utilities validating eligibility through participation in state, federal, or local assistance programs. Senior citizen programs vary and may include service discounts, late fee waivers, deposit waivers or payment deadlines which have been extended by several days.
Deposits appear to be collected in the same manner for all customers regardless of program
qualification. The only exception to this is Austin Energy which waives deposits for veterans
returning from deployment and for residents who can prove medical indigency.
CONCLUSION: In reaching out to finance and utilities for further information, we determined some considerations
which indicate that provision of trustworthy information on the subject would be best served
through a full utility rate study to ensure complete and proper analysis. Broad-scale application of discounts and reduced rates could result in significant budgetary impacts for all utilities including planned capital projects to sustain and improve infrastructure and
utility delivery to customers. Additionally, risks associated to fraud and liabilities to the City
organization should be thoroughly explored. If further exploration is desired, the following parties would be engaged:
Mary Dickinson, Business Manager, Electric Administration
Kenny Banks, General Manager of Utilities Frank Pugsley, Director of Water Antonio Puente, Jr, Chief Financial Officer David Gaines, Director of Finance
Nicholas Vincent, Budget Manager
Date: July 26, 2019 Report No. 2019-150
STAFF CONTACT: Christa Foster
Customer Service Manager
Christa.Foster@cityofdenton.com REQUESTOR: Deb Armintor
PARTICIPTAING DEPARTMENTS: Customer Service, Finance STAFF TIME TO COMPLETE REPORT:
4.5 Hours