The Peru Utilities Service Board held a meeting at the Peru office at 335 East Canal Street, Peru, Indiana, on May 14, 2014. Mr. Akers called the meeting to order at 4:00 p.m. pursuant to notice as required by law. Board members present: S. Akers, J. Richter, M. Costin, G. Ward, and G. Sandbakken. Others present: B. Berkshire, R. Merriman, B. Tillett, and S. Gough-City Council 

1.) APPROVAL OF BOARD MINUTES OF APRIL 30, 2014:

A motion was made by Mr. Richter to approve the minutes of the April 30, 2014, meeting. Mr. Sandbakken seconded the motion and the motion carried unanimously.

2.) PAYMENT OF CLAIMS:

A motion was made by Ms. Costin to approve the claims for payment as presented. Mr. Ward seconded the motion. The motion carried unanimously.

3.) NEXT REGULAR MEETING:

The next regular meeting will be held Wednesday, May 28, 2014, at 4:00 p.m. in the Utility Service Board room.

4.) OLD BUSINESS: None

5.) NEW BUSINESS:

A.) APPROVAL OF 3RD QUARTER 2014 ELECTRIC RATES – TRACKER ADJUSTMENT:

The 3rd Quarter 2014 filing will be on the City Council’s June agenda for their approval.

For the 3rd quarter 2014, the tracker decreased an average of $.001479 per kWh over all of our electric customer rates. The residential customer will see a decrease of $.009750 per kWh, the power/commercial customer’s electric rates will decrease $.001704 per kWh and the demand customer rates will increase $.005065 per kWh.

Mr. Ward made the motion to approve the 3rd Quarter Electric Rates – Tracker Adjustment for 2014. Mr. Richter seconded the motion. The motion passed unanimously.

6.) CITY ADMINISTRATION UPDATE: None

7.) CITY ATTORNEY UPDATE: None

8.) MANAGER’S REPORT:

WATER RATE STUDY:

Mr. Merriman has had contact today with Scott Miller of H. J. Umbaugh regarding the upcoming water rate study. H. J. Umbaugh is currently preparing the information and a completed water rate study would be presented to staff and the Board soon. Mr. Ward inquired if Mr. Merriman ever had the chance to discuss with H.J. Umbaugh about a possible change in the method of calculation for our electric rate study in 2015.

Mr. Merriman said he had not yet inquired, but went on to explain that he felt since it would be a full blown rate study the newest IMPA rate adjustments should be included in the new electric base rate. Because the most current IMPA adjustments would be reflected in the new base rate, the first quarter tracker would reset to zero and then annually until a new electric rate is approved the tracker would increase/decrease by the difference.

Mr. Merriman explained that we have five separate trackers, one for each customer class. Most utilities only have one tracker for all the customer classes. Mr. Merriman proposed that when the new electric rate is computed we would calculate the tracker as a single tracking factor equally across all the rate classes. This calculation method will be easy to do, explain, and understand. Mr. Merriman stated that depending on how successful we are with City Council in trying to implement an annual rate adjustment for the Water Division we would like to apply the same method with the electric rate as well. Ms. Costin inquired if the residential customer base would pick up some additional cost by having only one tracker. Mr. Merriman said that it could work both ways. Mr. Ward inquired as to how the utilities ever acquired five separate electric trackers. Mr. Merriman explained that it came about when Peru Utilities became a member of IMPA. The generating members Peru, Richmond, and Crawfordsville had made the argument that the tracker should be separated by out by classes. Mr. Merriman explained that if you look at the other utilities, it is one tracker that applies to all classes of utility. Mr. Akers inquired what is accomplished by resetting the tracker to zero. Mr. Merriman explained that the purchased power costs are already included in the new base rate, so the first tracker reverts to zero. The tracker takes into account changes in your purchased power cost from when the rate study was initially done. The first rate study includes an amount to cover your purchased power cost and after time goes on the purchased power costs either increase or decrease. Instead of a doing an entire new rate study every six months are so, those changes are taken into account through the tracking mechanism. That way we collect the difference. Mr. Ward noted that if an annual review were successful then the tracker would zero out annually. Mr. Merriman said if you include in that adjustment your purchased power costs. Mr. Merriman felt since that we already have a tracker in place to take into account changes in purchased power we would use that same mechanism and we would adjust the rate for Direct Operating expenses, such as wages, benefits, and materials annually. Mr. Merriman said his thought was that it would be done first quarter tracker annually. Mr. Akers inquired if it had ever been done before. Mr. Merriman said he had done it before in Ohio, but to his knowledge, it had never been done with any of the utilities that he was familiar with here. Mr. Akers asked if Mr. Merriman knew why they would not have done it if it were such a good deal. Mr. Merriman pointed out the fact that in prior years, if you were under the IURC’s jurisdiction, it was not allowed. However, state law allows utilities to remove themselves from the Commission if they so wish to do so and we are no longer under the Commission’s jurisdiction. Mr. Merriman said he had done it in Shelby, Ohio with the water rate. Instead of waiting a long period for a water rate adjustment, why not include an adjustment factor that tied to the Consumer Price Index, so that the rate increases a small amount annually, until you have to borrow money for a project. It forestalls the time that you have to have another rate increase and when you do it will not have to be a substantial amount all at once.

8.) ADJOURNMENT:

There being no further business to bring before the Board, Mr. Richter made a motion to adjourn. Mr. Sandbakken seconded the motion. The meeting adjourned by unanimous consent.