HomeMy WebLinkAbout4 Richard Wren Public Comment Agenda Item #
TRUCKEE
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Public Utility District
Memorandum
To: Board of Directors
From: Stephen Hollabaugh
Date: September 10, 2003
Date of Board Meeting: September 17, 2003
Subject: Request of Richard Wrenn
1. WHY THIS MATTER IS BEFORE THE BOARD
Richard Wren came before the Board during Public Input of the August 20, 2003. Mr.
Wrenn asking that the Board consider waiving the increase in his electric facilities fee for
the addition and larger panel he will install after constructing a new garage at his
residence. The Board agreed to agendized this item for a future meeting.
2. HISTORY
The board approved an ordinance on March 5, 2003 increasing the District's electric
facilities fees. The new fee took effect May 5, 2003. I got a call during the week of
August 15`h from Mr. Wren asking that he have his facilities fees for his addition of a
garage and subsequent increase in electric panel size. Mr. Wrenn stated that he had his
building permit in with the Town since 2001 but was just now finishing the garage when
he found that he needed to increase his panel size and wanted to know if he could pay
under the old fee schedule. He asked what options he had, and I told him only the board
can consider such a request. At that point Mr. Wrenn decided to come before the Board.
3. NEW INFORMATION
By way of clarification, when a customer increases his panel size the customer pays the
facilities fees for the upgrade. Currently we have credited the customer for the original
amount paid for the facilities fees and the difference is paid as the facilities fees for the
increase in panel size.
The District addressed a similar request from Mr. Robert Schwarz at the May 21, 2003
meeting and declined his request to pay under the old fee schedule. Attached is a letter
from Steve Gross regarding the legal implications of Robert Schwarz's request,
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1. Background
At the May 7, 2003 the Board meeting, President Hemig read a letter dated May 6, 2003
that he had received from Robert Schwartz, Pine Forest Truckee, LLC. The letter requests that
Pine Forest Truckee, LLC be permitted to pay its electric fees at the District's old rate for phase
11 of the Pine Forest at Truckee project. According to Mr. Schwartz, phase 11 of the project
consists of 55 parcels. Fees at the District's old rate would be $79,000.00 and fees at the new
rate would be $145,000.00. The District's new electric facilities fees became effective on May
5, 2003.
Mr. Schwartz states that one of the reasons that payment of the fees "slipped through the
cracks"was because he recently had back surgery. He states that he did not receive a reminder
of the fee increase and does not remember seeing any warning of the fee increase. He states that
Pine Forest Truckee, LLC has always paid all of its bills on time.
The District's new electric facilities fees were adopted by ordinance on or about March 5,
2003. In accordance with AB 1600, new facilities fees cannot become effective until at least
sixty(60) days after the passage of the ordinance adopting the fees. The District published
notice of the ordinance and the new fees as required by law. The new fees became effective on
May 5, 2003. 1 have been informed that District staff who has been working with the engineer
for Mr. Schwartz's project, specifically informed the project engineer of the new fee schedule
before it became effective.
II. Question Presented
May the District reduce the electric facilities fees for a project to the District's previous
fee schedule when the project's developer did not pay the fees before the new fees became
effective?
III. Conclusion
While the District has the exclusive authority to establish the amount of fees it charges,
the District must set its fees in such a manner that is not arbitrary, capricious or unlawfully
discriminatory. Care must given that if a reduction in fees is granted, that such reduction does
not constitute a gift of public funds. Based on the facts presented in this case, it appears that
reduction in the amount of facilities fees would not be permissible under current law.
IV. Discussion
A. Rate Setting Authority of the District
If the Board approves Mr. Schwatz's request for a reduction in facilities fees, that
action could as establishing a different facilities fees rate for phase II of the Pine Forest At
Truckee project. Local public agencies, such as the District, have a great deal of latitude in
establishing the rates they charge customers for utility service and the rates established by them
are presumed to be reasonable, fair and lawful. However,publicly owned utilities have an
obligation to deal fairly with their customers and may only charge different rates to different
customers as long as there is a reasonable basis for doing so. Hansen v. City o(San Buenaventura,
42 Cal.3d 1172 (1986). If there is no reasonable basis for the rate differential,then the rate may be
determined by a court to have been made arbitrarily and capriciously, in which case it will be
unlawfully discriminatory.
Where courts have considered the reasonableness, and hence lawfulness, of differing rates,
they have considered the cost of service to be a legitimate reason to establish different rates.
Hansen, supra. In Hansen ,the California Supreme Court that a public utility may charge higher
rates to non-resident users than resident users, so long as there is a reasonable basis for doing so. In
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Hansen, the city owned and operated a water company which served city customers as well as
customers outside the city boundaries. Due to an increased demand from non-resident users, the
city substantially improved the water service. In order to do so, however, the city was required to
purchase additional water from a neighboring utility, at a greater cost than the city had previously
paid for water. The city was also required to expand and improve its existing facilities to handle the
increased level of service. Because of the impact caused by the increased water demand, the city
adopted a surcharge for its non-resident customers.
Similarly, the District adopted a two-tier electric rate structure several years ago in which it
adopted higher residential electric rate for non-permanent resident customers. The rationale for the
two-tier system is that non-permanent residents do not consume sufficient electric power to cover
the costs associated with maintaining the system to provide such power. Specifically, due to the
number of non-permanent residents in the District, the District's electrical system must be built to a
capacity that meets the demand on peak weekends and holidays created by the non-permanent
residential users. This increased demand necessarily creates additional costs to the District in both
size and financial investment in the electric system. However, if permanent and non-permanent
residents are charged the same rate for electric power, permanent residents bear a disproportionate
burden of the costs associated with the increased size of the system because they use a greater
number of kilowatt hours of electricity than non-permanent residents. Yet, it is the non-permanent
resident population which dictates the necessity for the increased size of the electric system. When
challenged in court by one of its non-permanent residential customer, the District prevailed and the
two-tier rate was upheld as reasonable.
In the present situation, the District had reviewed the new rates at least a couple of times in
public meetings, conducted a public hearing on the new rates, adopted and published and ordinance
establishing the new rates and District staff specifically informed Mr. Schwartz' project manager of
the future increases in fees in time for Mr. Schwartz to pay the fees before the increase became
effective. Mr. Schwartz' basis for the reduction in his fees is that he was not aware of the pending s
increase in fees and that it had "slipped through the cracks" while he was recovering from surgery.
Therefore, he claims to have missed the deadline to pay the fees at the old rate due to some sort of s
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mistake, inadvertence or excusable neglect. This rationale is not the type of cost of service or
reasonable basis that the courts have found to justify a rate differential or a reduction in fees.
Therefore, I do not believe that the reduction would be permissible under current law.
B. Gift of Public Funds
If the District were to agree to reduce Mr. Schwartz' electric facilities fees, such action
could be viewed as a gift of public funds. The gift would be the forgiveness of the difference
between the current rate and the old rate. In determining whether an appropriation of public funds is
to be considered a gift, the primary question is whether the funds are to be used for a public or
private purpose. A mere incidental benefit to an individual does not make a "public" purpose a
"private" purpose. The determination of what constitutes a public purpose is primarily for the
governmental agency to determine and its discretion 'Ail] not be disturbed or overruled by the courts
as long as the determination has a reasonable basis.
In the instant case, there has been no showing or suggestion that the reduction in fees would
serve some public purpose. (If, for example, the request was to delay the date of implementation of
the new rates for all District customers in order to provide more notice of the pending increase or to
reduce the fees for certain types of District customers, then it may be possible to find some public
purpose in the Board's action.) In this case, the benefit of the reduction would inure to a single
individual. The benefit to the individual does not appear to be incidental to that individual. The
benefit to the individual would be the sole and only benefit. Under these facts, it appears that there
would be no public benefit in granting the reduction and that the reduction would be a gift of public
funds.
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