HomeMy WebLinkAbout9 Water Electric Allocation Costs Agenda Item #
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Public Utility District 1
Workshop
To: Board of Directors
From: Peter Holzmeister
Date: September 29, 2006
Subject: Accounting allocation factors
Why this matter is before the Board: This is a workshop item. A question was raised at the last Board
meeting about the allocation of shared costs between water and electric utilities. This agenda item is
intended to provide for a full discussion of that matter.
History: We try to make sure each utility pays its own bills. In that way the two utilities are separate, with
no cross subsidy, and support themselves. In many cases it is easy to allocate costs to one or the other
utility. Linemen costs are allocated to electric and water service technician costs are allocated to water.
Many of the costs we incur are that obvious.
When we get an invoice from a supplier or a consultant it is usually easy to determine the appropriate
allocation. The vendor may have supplied us water meters or electric meters and we allocate accordingly.
Or the consultant may have performed services on a water facility and the cost is allocated to water.
In other cases we need to calculate an appropriate allocation factor. Some of these calculated allocations
are fairly easy to perform. In the case of meter reading, we read electric and water meters using the same
staff and vehicles. We know how many electric meters we read as opposed to water meters, so we use that
ratio to allocate meter reading costs.
In other cases the allocation calculation is complex because the factors are constantly changing. For
example, we allocate the Board of Directors budget to water and electric funds. Sometimes your agenda
deals primarily with water issues, like issuing a water COP or issuing water related construction contracts.
At other times your agenda deals primarily with electric power supply issues. Or your agenda may deal with
the annual budget for water and electric. Rather than engage in a complex record keeping and calculation
of allocation month by month, I have allocated the Board of Directors budget at 50% to water and 50% to
electric.
Over the years we used different Board adopted allocation factors. Several years ago we used an 85 / 15
spit. We went to 80/20, then 70/30, then 60/40. Each time we changed factors it was a recognition that
our share costs were getting increasing closer to 50/50. We now have about a fifty/fifty split in number of
employees in water compared to electric employees, and in number of water customers compared to
electric customers.
There is more to this issue than I have described in this brief memorandum. We will have a chance to delve
further into it on Wednesday evening.
Recommendation: This is a workshop item. No formal action is required.