Mar 13, 2025 Utilities Commission Finance Committee

[CALL TO ORDER]

[00:00:03]

ON GOOD MORNING.

UH, SO WE ARE BACK, UH, AGAIN, GOOD TO SEE EVERYBODY.

THIS IS THESE FIVE TIMES MORE PEOPLE THAN I EXPECTED.

UH, SO TODAY'S THURSDAY, MARCH 13TH.

THIS IS THE FIRST FINANCE COMMITTEE MEETING OF FISCAL YEAR 25.

UH, AND, UH, DINA, IT COULD BE

[ROLL CALL]

YES.

CHAIR SCOTT HERE.

MEMBER SHANNON HERE.

GREAT.

WE HAVE, THANK YOU.

THANK YOU.

AND I DON'T HAVE A SOAPBOX, UH, FOR THIS MEETING, SO WE'RE JUST GONNA JUMP RIGHT INTO THE AGENDA.

[1. 25-54655 Recommendation to review major cost components for FY 25 Budget and implications for FY 26 Budget.       Suggested Action: Receive report. ]

AND STEPHANIE, GOOD MORNING COMMISSIONERS.

THANK YOU FOR THE OPPORTUNITY TO ALLOW US TO PRESENT THIS YEAR'S BUDGET AS WELL AS IMPLICATIONS FOR NEXT YEAR.

UM, OUR GOAL IS TO ENSURE THAT THE BUDGET CONTINUES TO ALIGN WITH THE BOARD'S STRATEGIC OBJECTIVES WHILE MAINTAINING FISCAL RESPONSIBILITY AND PROVIDING HIGH QUALITY SERVICES TO OUR CUSTOMERS.

AND TODAY WE WILL BE, UH, GIVEN A PRESENTATION BY OUR MANAGER OF BUDGET AND RATES, DANIEL GUTIERREZ.

GOOD MORNING COMMISSIONERS.

UH, STEPHANIE SAID WE'RE GONNA BE REVIEWING THE FY 25 BUDGET AND THE, UH, MAJOR COMPONENTS AND AS WELL THE IMPLICATIONS FOR FY 26 UNTIL THIS WORKS.

GREAT.

WES GONNA TAKE OVER THAT.

OKAY.

SO WE'RE GONNA GO AHEAD AND START WITH THE, UH, WATER FUND.

UM, CAN I GET THE NEXT SLIDE? SO WHAT WE'RE LOOKING AT HERE IS A GRAPH OF THE TOTAL WATER CONSUMPTION, STARTING WITH 1997, UH, ALL THE WAY TO 2023.

AND ON THE Y AXIS WE HAVE THE TOTAL ACRE FEET.

UM, SO AS YOU CAN SEE IN THIS GRAPH, THE GRAPH SHOWS A STEADY DECLINE IN WATER USE, DRIVEN BY KEY ELEMENTS AND CONSERVATION EFFORTS.

UH, BY 2021, UH, 2022, CALIFORNIA FACED ITS WORST THREE YEARS OF WATER SUPPLY.

I'M, UH, SHOWING THIS SLIDE, UM, BECAUSE UTILITIES OPERATE WITH AN EXTREMELY HIGH FIXED COST, UH, THESE ARE TIED TO ESSENTIAL SERVICES SUCH AS SOURCING, TREATING AND DELIVERING WATER, UM, AT THE SAME TIME AS, UH, DEALING WITH A SHRINKING REVENUE BASE.

DANIEL? YES? CAN I JUMP IN FOR A SECOND? SURE.

SO IN, IN THE GRAPH, YOU CAN SEE THE STEADY DOWNWARD TREND.

I JUST WANNA POINT OUT THAT IN THE MIDDLE OF THE GRAPH, YOU SEE A PRETTY STEEP DECLINE, UH, SOMEWHERE AROUND THE 2007 TIMEFRAME.

UM, ONE OF THE THINGS THAT HAPPENED IN THAT TIMEFRAME WAS THE REGULATORY ENVIRONMENT CHANGED THE RESTRICTIONS ON PUMPING IN THE DELTA RELATED TO FISH.

AND SO CONSEQUENTLY IT REALIGNED EVERYBODY'S PRIORITY FOR WATER CONSUMPTION.

THERE WAS A SIGNIFICANT EFFORT ACROSS THE ENTIRE REGION OF SOUTHERN CALIFORNIA TO READJUST WATER CONSUMPTION AS A RESULT OF THAT REGULATORY ENVIRONMENT CHANGE.

SO YOU HAVE THAT DROP, YOU CAN SEE THINGS STABILIZE SHORTLY AFTER THAT.

BUT THEN IN THE 2015 TIMEFRAME, AND EVEN A LITTLE BIT IN THE 20 17, 20 18 TIMEFRAME, THERE WERE, UH, SIGNIFICANT DROUGHT EPISODES THAT OCCUR.

UH, IN ONE CASE, THE EPISODE IN 2015 WAS AN UNPRECEDENTED DROUGHT THAT HAD NO PRIOR RECORD OF OCCURRING IN TERMS OF RECORDED HISTORY.

SO, UM, THOSE ARE CONTRIBUTING ELEMENTS, BUT I THINK THE REGION'S RESPONSE OVERALL, UH, AND INCREASING REGULATORY ENVIRONMENT PRESSURES IS TO DRIVE DOWN WATER CONSUMPTION OVERALL.

AND YOU CAN SEE THAT, I'M SORRY, DANIEL, PLEASE KEEP GOING.

HERE WE HAVE THE, UH, WATER SUPPLIES.

UH, AND AS YOU CAN SEE FROM THE, UH, TOP ROW FOR THE CUSTOMER DEMAND, UH, WHAT WE HAVE HERE IS THE TOTAL AND ACTUALS FOR THE LAST FOUR YEARS, WHICH MIRRORS WHAT WE JUST SAW ON THE PREVIOUS GRAPH.

UM, ON THE LEFT SIDE WE HAVE THE TOTAL CUSTOMER DEMAND, WE HAVE THE PUMPED, AND THEN WE HAVE THE CONTRACT PUMP, WHICH IS OUR LAKEWOOD AGREEMENT.

AND THEN WE HAVE THE PURCHASE AMOUNT.

UH, THE PURPOSE OF SHOWING THIS SLIDE IS THAT THIS ACCOUNTS WERE ROUGHLY 30% OF OUR TOTAL BUDGET, JUST THIS ONE ASPECT.

ALRIGHT, SO ON THIS SLIDE WE ARE SEEING THE FY 24 BUDGET, UH, THE FFY 24 ACTUALS, AS WELL AS THE FY 25 BUDGET.

AND THEN WE HAVE THE TOTAL EXPENDITURES AND THE TOTAL REVENUES.

AND THE PURPOSE OF SHOWING THIS ONE, IT'S SORRY, AND JUST A LITTLE CLOSER TO THE MICROPHONE.

OKAY.

SORRY.

I'LL GET CLOSER.

[00:05:01]

OKAY.

SO TO FORECAST THE FY 26 BUDGET, UH, WE NEED TO EVALUATE FIRST THE FY 24 ACTUALS, UH, AND THE FY 25 BUDGET.

UH, THE FY 26, UH, PROJECTIONS ARE BASED ON A ROLLING 12 MONTH PERIOD, UH, BY TAKING THE FIRST SIX MONTHS OF THE FY 25 AND THE LAST SIX MONTHS OF FY 24.

THIS APPROACH ENSURES THAT WE'RE WORKING WITH THE MOST RECENT DATA AND HELPS US BUILD A MORE ACCURATE FORECAST FOR FY 26.

HERE, UH, WE'RE SEEING THE PIE CHART OF OUR EXPENDITURES, UH, WHICH MIRRORS WHAT WE SAW ON THE PREVIOUS SLIDE.

UH, STARTING WITH THE, UM, LARGEST COMPONENT, THE PUMP PURCHASE AND TREATMENT ACCOUNTS ARE ROUGHLY 30%.

UH, THAT WAS THE TWO SLIDES BEFORE THIS.

UH, THEN WE HAVE ROUGHLY PER, AND THEN WE HAVE THE, UH, PERSONAL SERVICES AT 21%.

WE HAVE THE CAPITAL IMPROVEMENT AT 28%.

AND THEN WE, THEN WE HAVE THE GENERAL FUND AT 1%.

UH, I'M SORRY, THE GENERAL FUND TRANSFER AT 1%.

UM, FOR THE WATER FUND, THE AMOUNTS ARE SMALLER, UH, IN TERMS OF A PERCENTAGE BECAUSE IT, UH, IT'S A BIGGER FUND ON THE INTERDEPARTMENT INTERDEPARTMENTAL TRA UH, CHARGES, WE HAVE 5%.

UH, FOR THE DEBT SERVICE WE HAVE THE 4% SEAWATER BARRIER, WHICH IS REIMBURSED IS 2%.

APPLE EQUIPMENT, WHICH IS OUR VEHICLES TRAILERS, IS ROUGHLY 2.3%.

AND THEN ON THAT LAST SLIDE, WE HAVE THE MATERIALS AND SUPPLIES, WHICH IS THE DISCRETIONARY SPENDING HERE.

UH, THAT ACCOUNTS FOR ROUGHLY 6%.

SO NOTABLY LESS THAN A QUARTER OF THE COSTS GO TOWARDS STAFF WITH THE BULK DEDICATED TO INFRASTRUCTURE AND OPERATIONS.

THE CAPITAL INTENSIVE MODEL MEANS LONG BEACH IS GRAPPLING WITH THE SAME PRESSURES DEVELOPED BY UTILITIES NATIONWIDE.

HERE ARE THE, UH, NUMBERS, UH, THAT FEED INTO THE PIE CHART FOR THE FY 25 BUDGET.

UM, CHALLENGES THAT WE'RE FACING IN LONG BEACH ARE NOT UNIQUE.

UH, THOSE MIRROR ACROSS MANY MAJOR REGIONAL PARTNERS LIKE MWD, THEY THEMSELVES ARE EXPECTING LARGE RATE INCREASES, WHICH WILL BE PASSED ON TO US.

BEFORE I GET TO THAT, THOUGH, I MENTIONED THIS IS THE FY 24 ACTUALS AND THEN THE FY 25 BUDGET ALONG.

AND THEN WE HAVE THE MAJOR COST CATEGORIES HERE.

SO WE HAVE THE PERSONAL SERVICES, UH, THE, WHICH IS GOING UP.

WE HAVE THE CIP, THE O AND M, WHICH WAS WHAT I WAS REFERENCING EARLIER WITH THE MWD.

WE HAD THE DEBT SERVICE COST.

DON'T BE ALARMED BY THAT 46 MILLION.

THAT WAS THE BUDGET ADJUSTMENT THAT WE HAD DONE, UH, IN A PREVIOUS, UH, BOARD MEETING TO ACCOUNT FOR THE REFINANCING OF OUR BONDS.

UH, AND THEN WE HAVE VEHICLES AND THE GENERAL FUND TRANSFER.

DOES ANYBODY HAVE ANY QUESTIONS SO FAR? YES.

ALRIGHT.

UH, WITHOUT GOING INTO EXACT FIGURES, UH, AS WE KNOW, UH, AN UNANTICIPATED, UH, EXPENDITURE, UH, HAS, HAS OCCURRED AND IS OCCURRING, UM, IS THIS GONNA COME OUT OF THE 25 BUDGET OR IS IT GONNA BE DELAYED UNTIL THE 26TH BUDGET? DEPENDING ON THE NATURE OF THOSE EXPENSES, WE'RE GOING TO SEE AND, AND SEE HOW IT AFFECTS, UH, TIMING IS CRITICAL.

UM, AND THEN IF WE'RE ABLE TO SPREAD IT OVER TWO FISCAL YEARS, THAT WOULD BE IDEAL.

SO WE DON'T, WE DON'T NECESSARILY KNOW EXACTLY WHEN, BECAUSE ON, ON A CLAIMS BASIS, IT'LL TAKE SOME TIME FOR SOME OF THOSE TO COME THROUGH.

UM, BUT DO YOU ANTICIPATE THAT SOME OF IT WILL COME OUT OF THE 25 BUDGET? I ANTICIPATE SOME OF IT WILL COME OUT OF THE 25 BUDGET.

INDEED.

OKAY.

AND IF IT DOES, WHAT, UH, WHAT, UM, UH, AREA WILL IT COME OUT? OR IS IT THAT SIMPLE? WELL, NO, I, I THINK THAT'S AN EXCELLENT QUESTION.

SO IN TERMS OF THE REPAIRS FOR THE PIPELINE AND SOME OF THE OTHER INFRASTRUCTURE THAT NEEDS TO BE TAKEN CARE OF, UH, THAT WILL COME OUT OF CAPITAL.

AND SO YOU'LL SEE THAT OCCUR THERE, RIGHT? UH, WHEN IT COMES TO SOME OF THE OTHER EXPENSES, YOU MIGHT SEE THOSE SHOW UP IN O AND M, UH, THAT'S WHERE THEY'LL BE UNDOUBTEDLY, THERE WAS A PRETTY LARGE AMOUNT OF LABOR INVOLVED, UH, WITH REGARDS TO THE BRAKES, UH, NEEDING REPAIR AND SO FORTH.

AND SO THAT WILL COME OUTTA LABOR AS WELL.

YOU'LL SEE THAT NOW, ARGUABLY WITH THE EXCEPTION OF OVERTIME, WE DID NOT INCREASE THE PERSONNEL COMPLIMENT.

SO IT'S JUST SIMPLY MANAGING EXISTING LABOR AND MANAGING OVERTIME.

SO THOSE ARE THE THREE PRIMARY CATEGORIES WHERE YOU'LL SEE IT.

HAVE WE EVER CONSIDERED A, A LIABILITY FUND, MUCH LIKE THE CITY HAS? WE HAVE NOT IN THE PAST HAD AN ACTUAL LIABILITY FUND.

UH, I, I AGREE THAT THAT ADVICE IS SOUND.

AND SO AS WE CONTINUE TO WORK WITH THIS INCIDENT AND DEAL WITH THE INSURANCE OUTCOMES THAT WE'RE GOING TO DEAL WITH, AND AS I BRIEF THE BOARD ON THOSE, ONE OF MY GOALS IS TO REEVALUATE THE RESERVE POLICY TO

[00:10:01]

LORD KNOWS THE SELF-INSURED RETENTION IS, IS LARGE ENOUGH FOR THE CITY, AND PERHAPS WE COULDN'T GET ANY BETTER THAN THAT, BUT AT LEAST I THINK WE SHOULD SOME CATASTROPHIC, SOMETHING EVEN WORSE.

RIGHT.

I THINK THAT GOING FORWARD IN THE BUDGET DISCUSSION, THAT WILL BE ONE OF THE KEY ELEMENTS AS WE TALK ABOUT BOTH THE RATES AS WELL AS THE RESERVES.

AND, UH, DO YOU EXPECT IT TO, TO TAKE ANYTHING OUTTA THE RESERVES FOR THIS OR DO YOU KNOW YET? I DON'T KNOW YET AT THE TIME.

'CAUSE ONE OF THE ASPECTS THAT WILL BE IN TERMS OF MANAGING CASH, UH, WE DO HAVE THE ABILITY TO HAVE THE RESERVES.

THE RESERVES ARE UNRESTRICTED IN THAT SENSE.

AT THE SAME TIME, IT'LL BE IMPORTANT TO MANAGE THOSE RESERVES, UH, BECAUSE THEY'RE ALREADY BELOW THE MINIMUM TARGET TO BEGIN WITH.

SO IT, IT IS DISCRETIONARY, IT'S WITHIN THE BOARD'S PURVIEW TO DO THAT IF IT CHOOSES.

AT THE SAME TIME THOUGH, IN TERMS FROM A MANAGEMENT PERSPECTIVE, WE'LL HAVE TO SEE WHETHER THAT'S THE BEST CASE OR WHETHER INSTEAD PERHAPS WE SMOOTH THINGS OUT OVER TWO FISCAL YEARS.

AS YOU KNOW, AT ONE TIME, THE, OUR LEVEL OF RESERVES WAS VERY, VERY LOW RELATIVE TO WHAT IT IS NOW.

OBVI, I I ASSUME THAT IT'S NOT YOUR RECOMMENDATION THAT WE APPROACH GO IN THAT DIRECTION AT ALL.

RIGHT? RIGHT NOW, RIGHT NOW, I THINK THE BOARD HAS SEEN, IN TERMS OF MANAGING THE BUDGET, HAS SEEN THE RESERVES CONSISTENTLY BELOW MINIMUM TARGET.

THE GOAL, THE FISCAL GOAL SHOULD BE TO MANAGE THE BUDGET, MANAGE RATES AND RESTORE THE RESERVES TO THE MINIMUM TARGET THAT THEY SHOULD BE HELD AT IN THE OTHER DIRECTION.

IN THE OTHER DIRECTION.

THAT'S CORRECT.

UH, COULD WE HOP BACK TO SLIDE FIVE? UH, AND I'LL, I'LL TAKE FULL RESPONSIBILITY FOR THIS.

WE, UH, IT'S THE FIRST BUDGET VERSUS ACTUAL FOR THE LAST YEAR THAT, THAT WE'RE LOOKING AT.

IF I'M, I'M NOT MISTAKEN, UM, ALL SEEING BUDGET VERSUS ACTUAL NO.

OKAY.

ALL RIGHT.

SO I WILL TAKE FULL RESPONSIBILITY FOR THAT AS THE CHAIRMAN OF THE FINANCE COMMITTEE.

UH, WE SHOULD HAVE HAD MORE MEETINGS.

UH, WE HAD A LOT ON OUR PLATE LAST YEAR.

UH, BUT, UH, THERE'S NO REASON WHY WE CAN'T WALK AND CHEW GUM AT THE SAME TIME.

SO I'D LIKE TO COMMIT TO HAVING MORE OF THESE MEETINGS GOING FORWARD SO I DON'T HAVE TO ASK A ELEMENTARY QUESTION LIKE THIS.

UM, OUR EXPENDITURES AND REVENUES FOR FY 24, UH, CAN YOU EXPLAIN THE FAIRLY SIZABLE INTERRUPT? SORRY.

I AGREE WITH YOU COMPLETELY.

AND, AND ONE, ONE POINT THAT I WANNA MAKE, IF WE COME OUTTA HERE WITH ONE POINT THAT I'VE MADE IS I'D LIKE TO KNOW, I'D LIKE THE INFORMATION, FINANCIAL INFORMATION SOONER RATHER THAN LATER.

IF IT MEANS THAT WE HAVE TO HAVE MEETINGS, UH, ON DAYS OTHER THAN THE, THE NORMAL MEETINGS, SO BE IT.

BUT WE NEED TO KNOW ABOUT OUR FINANCES SOONER THAN LATER.

CORRECT.

SORRY.

SO YOU'RE ASKING FOR NEXT, SO SIGNIFICANT DIFFERENCES? UH, YEAH.

SO THIS WAS, UH, THIS WAS, UH, IN RELATION TO THE BUDGET ADJUSTMENT THAT WE CAME TO, UH, WITH THE BOARD.

SO THERE WAS THAT REFINANCING OF THE $39 MILLION.

SO WE'RE SEEING THAT ON BOTH SIDES, UH, BECAUSE THEY ARE OFFSETTING.

SO YEAH, THAT'S WHERE THE JOB IS COMING FROM.

OKAY.

YEAH.

PERFECT.

THANK YOU.

OKAY, MOVING ON TO THE SEWER FUND.

UH, HERE AGAIN, WE'RE SEEING THE FY 24 BUDGET, THE FY 24 ACTUALS, AND THEN THE FY 25 BUDGET.

UM, AS YOU CAN SEE, WE ARE TRENDING UPWARDS, AND WE'LL GET INTO THAT.

UH, STARTING AT THE TOP FOR THE CAPITAL IMPROVEMENT, UH, WE HAVE 38% DEDICATED.

UH, WE HAVE PERSONAL SERVICES AT 24%, INTERDEPARTMENTAL CHARGES AT 13%.

WE HAVE THE GENERAL FUND TRANSFER AT 7%.

NOW, ALTHOUGH THIS AMOUNT IS ALMOST IDENTICAL TO THE WATER FUND, BECAUSE THE SEWER FUND IS, UH, SMALLER, IT REPRESENTS A BIGGER SLICE OF THE PIE.

UH, FOR THE DEBT SERVICE WE HAVE THE 6%, UH, CAPITAL EQUIPMENT IS 1%.

AND THEN AGAIN, WE HAVE THE, UH, DISCRETIONARY MATERIALS AND SUPPLIES, UH, REPRESENTING 11% OF THE TOTAL FINE.

SO HERE AGAIN, WE HAVE THE FY 24 ACTUALS, THE FY 25 BUDGET, UH, AGAIN WITH THE MAJOR COST CATEGORIES OF PERSONAL SERVICES, O AND MCIP AND THE GENERAL FUND TRANSFER, UH, PERSONAL SERVICES, JUST LIKE WATER IS INCREASING, UH, O AND M AND THE CIP, UH, ARE ALSO INCREASING.

GENERAL FUND IS STAYING RELATIVELY FLAT SO FAR.

THE GENERAL FUND TRANSFER, I'M SORRY.

ONE, ONE OF THE THINGS ABOUT THE GENERAL FUND TRANSFER IS UNDER PROP TWO 18 AND LITIGATION, THE GENERAL FUND TRANSFER FOR WATER AND SEWER IS CODIFIED BY MATHEMATICAL FORMULA.

SO THAT CALCULATION IS DONE.

AND THE PECULIARITIES OF IT IS THAT IN MANY

[00:15:01]

SO CONSEQUENTLY, THE MATHEMATICAL FORMULA LEADS TO CERTAIN CALCULATION REGARDLESS OF THE SIZE OF THE SEWER FUND.

AND SO NOW YOU HAVE THE SIZE OF THE SEWER FUND, LIKE DANIEL POINTED OUT.

SO FOR THAT NUMBER, THEN AGAINST THE SMALLER SEWER BUDGET, YOU SEE A GREATER PERCENTAGE ON THE PIE CHART ONTO THE GAS FUND.

HERE WE ARE LOOKING AT THE TOTAL GAS CONSUMPTION.

ON THE Y AXIS, WE HAVE THE TOTAL CONSUMPTION.

AND ON THE X AXIS, WE HAVE THE YEAR.

SO GOING BACK FROM, UH, 1988 TO 20,024, UH, THE MAJOR REASON FOR THE DROP AND, UH, 1995 WAS THE FACT THAT WE STOPPED SUPPLYING EDISON.

AND THEN THE OVERALL, SORRY, I'M SORRY, I DIDN'T HEAR YOU.

OH, IT WAS, UH, I WAS POINTING TO THE 1995 DROP AS IT WAS RELATED TO THE EDISON THAT WE WERE ORIGINALLY SUPPLYING EDISON WITH GAS.

AND THEN THE OVERALL DECREASE IN NATURAL GAS IS, UH, PRIMARILY DUE TO RISING COST OF NATURAL GAS, UH, POLICIES AIMED AT REDUCING GREENHOUSE GAS EMISSIONS, UH, THE GREATER EFFICIENCY IN BUILDINGS, AS WELL AS ELECTRIC ALTERNATIVES FOR NATURAL GAS, UH, SIMILAR TO WHY WE'RE FACING HIGH FIXED COSTS TIED TO ESSENTIAL OPERATIONS WHILE FACING US SHRINKING REVENUE BASE.

HERE AGAIN, WE'RE LOOKING AT THE FY 24 BUDGET, THE FY 25, I'M SORRY, FY 24 ACTUALS AND THE FY 25 BUDGET.

AND THEN WE'RE LOOKING AT THE TOTAL EXPENDITURES AND THE TOTAL REVENUE.

SO STARTING OFF WITH THE TOP CAPITAL IMPROVEMENT, UH, WE'RE LOOKING AT 12%.

UH, THE GENERAL FUND TRANSFER, WHICH IS SIX TIMES HIGHER THAN THE WATER SIDE, IS ROUGHLY 8% OF THE BUY, UH, INTERDEPARTMENTAL CHARGES IS 9% AB 32 CAP AND TRADE PROJECTS, WHICH WILL BE PART OF THE AGENDA.

ITEM TWO IS 15%.

UH, CAPITAL EQUIPMENT ACCOUNTS FOR LESS THAN 1%.

THE PURCHASE OF GAS, WHICH IS ROUGHLY ONE THIRD OF THE OPERATION IS 29%.

UH, PERSONAL SERVICE IS 21%.

AND THEN AGAIN, AT THE VERY END, WE HAVE THE MATERIALS AND SUPPLIES, WHICH REPRESENTS OUR DISCRETIONARY SPENDING AT 5.5%.

HERE WE HAVE THE MAJOR COST COMPONENTS.

UH, AGAIN, WE'RE LOOKING AT FY 24 ACTUALS AS WELL AS FFY 25 BUDGET.

GAS COMMODITY MAKES A, IT ACCOUNTS FOR A BIG PORTION OF THAT.

UM, WE'RE SEEING GAS TRANSMISSION PERSONAL SERVICES, O AND MTIP COMPLIANCE, CIP BILLABLE, WHICH IS A REIMBURSABLE.

AND THEN WE HAVE THE GENERAL TRANSFER AMOUNTS.

AND THEN AT THE VERY BOTTOM WE HAVE MOUS.

AND THEN AGAIN, PART OF AGENDA ITEM TWO WILL BE AB 32.

ARE THERE ANY QUESTIONS? UH, YEP.

SO BACK ON THE PREVIOUS SLIDE 14.

UH, NO, UH, ONE MORE BEFORE THAT.

THERE WE GO.

SO WE BUDGETED FOR A FUND BALANCE DECREASE OF 7, 5, 6.

OH, YES.

YEAH.

SO WHEN WE BRING BUDGET AND RATES, BUDGET AND RATES, WE'RE NOT ALWAYS WORKING TO BALANCE THE BUDGET.

UH, RATE SETTING ON THE GAS FUND IS DIFFERENT THAN RATE SETTING ON THE WATER FUND AND SEWER FUND.

UM, THOSE ELEMENTS ARE PARTICULAR TO, TO THE NATURE OF THE GAS RESOURCE ITSELF.

SO CONSEQUENTLY, IT, IT IS DIFFERENT IN THAT SENSE.

SO YES, WHEN WE PRESENTED THE BUDGET TO YOU, WE WOULD'VE PRESENTED IT WITH A FUND BALANCE DECREASE, UH, BECAUSE STRUCTURALLY THE BUDGET WOULD'VE BEEN, UM, BUDGET AND RATES WOULD'VE BEEN UNBALANCED.

WE HAVE THAT, UM, IN WATER AND SEWER, THAT HAPPENS AS WELL.

UH, THE BOARD HAS WITHIN ITS PURVIEW TO MAKE THOSE DECISIONS.

AND IN FACT, IT HAS DONE SO IN THE PAST.

THE OUTCOME OF THAT IS THAT THE RESERVES THEN ARE TAPPED IN ORDER TO MANAGE THAT RATE INCREASE.

OKAY.

THERE ARE NO OTHER QUESTIONS.

THAT CONCLUDES THE PRESENTATION.

UH, I JUST HAVE A, A BRIEF QUESTION.

UM, THE INTERDEPARTMENTAL TRANSFERS, ARE WE CONTINUING TO, TO PUT THOSE ON THE AGENDA? THEY ARE PART OF THE BUDGET MAKING, BUDGET DECISION MAKING, AND SO THEY'RE BROUGHT FORWARD EVERY MONTH.

WE USED TO HAVE THE INTERDEPARTMENTAL TRANSFERS EVERY, EXCUSE ME, EVERY MEETING? NO, EVERY MONTH.

OH, YES, YES, YES.

THOSE,

[00:20:01]

THEY'RE ON THE AGENDA.

I HAVEN'T, I HAVEN'T.

MAYBE I, I'VE DISMISSED, BUT WE WE'RE CONTINUING TO PUT THEM ON.

YES, WE DO.

OKAY, SO I'M SORRY, DANIEL, DID YOU HAVE MORE? NO, I WAS JUST ASKING IF THERE WERE ANY OTHER QUESTIONS.

SO CAN YOU GO TO THE PIE CHART FOR WATER? SO, IMPLICATIONS FOR FISCAL YEAR 26.

SO IMPLICATIONS FOR FISCAL YEAR 26, WE'RE CURRENTLY WORKING TO ASSEMBLE THAT BUDGET.

UM, BUT IN TERMS OF PURCHASE METROPOLITAN'S, IMPORTED WATER RATES ARE EXPECTED TO GO UP BY 11.5%.

I'M IN DISCUSSIONS RIGHT NOW.

WE'RE DIFFERENT APPROACHES TO BUDGETING MAY LEAD TO INCREASES OVER AND ABOVE THE 11.5% BURN BUDGET SHORTFALLS PERHAPS INDICATE AN ADDITIONAL 3% ON TOP OF THOSE RATES.

SO THE ACTUAL COST OF IMPORTED WATER IS LIKELY TO GO UP 14% AS WE SCHEDULE OURSELVES FOR THE UPCOMING BUDGET.

WRD, THE WATER REPLENISHMENT DISTRICT, ITS FISCAL YEAR IS ALSO, UM, JUNE TO JULY.

UM, THEY ARE TARGETING A 4% RATE INCREASE RIGHT NOW.

AND THEN WHEN IT COMES TO TREATMENT, WE HAVE ELECTRICITY, CHEMICALS AND ALL OF THOSE.

AND SO WE HAVE INFLATIONARY PRESSURES ON THOSE CURRENTLY OCCURRING.

UM, NOTWITHSTANDING THE PERSONAL SERVICES, THEY HAVE THE LABOR AGREEMENTS AND THE SCHEDULED INCREASES COMING THERE.

CAPITAL IMPROVEMENT, THE CONSTRUCTION COST INDEX, UH, HAD BEEN ESCALATING AT RATE WELL ABOVE INFLATION, UH, DURING THE PANDEMIC.

UH, IT HAS CONTINUED TO THIS DAY.

AND SO AS WE LOOK AT WHAT THE CAPITAL COSTS WILL BE FOR STANDARD REPAIR AND REPLACEMENT PROJECTS, THOSE WILL INCREASE SIGNIFICANTLY TOO, POTENTIALLY.

WITH REGARDS TO THE GENERAL INFLATION RATE, UM, INTERDEPARTMENTAL CHARGES, UH, THE GENERAL FUND TRANSFER, THOSE MAY GO UP.

NOMINALLY WE'LL HAVE THE DEBT SERVICE REQUIRED.

UM, SO, YOU KNOW, FOR FISCAL YEAR 26, AS WE BRING YOU THE BUDGET, THERE'S GOING TO BE SIGNIFICANT, SIGNIFICANT BUDGET PRESSURES.

AND THOSE THREE MAIN CATEGORIES, 30 21 IS 51, 180 TO 62 80% OF THE BUDGET IS GONNA FACE COST PRESSURES UPWARDS.

AND AS DANIEL SHOWED YOU RIGHT, THE DEMAND CONTINUES TO BE FLAT OR POTENTIALLY DECREASING.

UH, CURRENTLY DEAN IS PROJECTING FLAT TO DECREASING DEMAND FOR THIS FISCAL YEAR.

SO AS WE LOOK TO WHAT THE BUDGET IMPLICATIONS ARE AHEAD IS, WE'RE GONNA FACE PRETTY SIGNIFICANT PRESSURE ON RATES AS A RESULT OF THESE MAJOR INCREASES TO THE NON-DISCRETIONARY PORTION OF THE BUDGET.

GO TO SEWER, SEWER IS A LITTLE DIFFERENT BUDGET, SO IT'S NOT THE PROVISION OF A RESOURCE, IT'S PROVISION OF A SERVICE.

SO IN THE PROVISION OF A SERVICE CAPITAL IMPROVEMENT AND THE PERSONAL SERVICES, THOSE ARE DIRECTLY RELATED TO, UH, A REGULATORY ENVIRONMENT THAT REQUIRES A CERTAIN APPROACH TO REPAIRING AND MAINTAINING AND IMPROVING THE INFRASTRUCTURE, AS WELL AS REGULAR CLEANING AND INSPECTION.

SO AS WE TALK ABOUT THE SAME PRESSURES THAT WE TALKED ABOUT ON THE WATER SIDE, WE SEE THEM NOW HERE AS WELL.

CAPITAL IMPROVEMENT WITH ITS CONSTRUCTION COST, INDEX PRESSURES WILL GO UP.

WE'LL HAVE PERSONNEL SERVICES INCREASING AS WELL, AND THEN THE INTER INTERDEPARTMENTAL CHARGES IN GENERAL FUND TRANSFER ARE GOING TO COME OUT TO WHAT THEY ARE, BUT IMPORTANTLY TO 62% OF THE BUDGET IS GONNA FACE SIGNIFICANT COST PRESSURES THAT ARE NON-DISCRETIONARY.

AND THE SEWER BUDGET BEING SMALLER, UH, IT MEANS THAT THE PRESSURE ON RATES COULD POTENTIALLY BE LARGER DEPENDING ON WHAT WE TRY TO DO THERE.

GO TO THE GAS.

I'M SORRY, WHAT WAS THAT? PARDON ME? GO TO THE GAS FUND.

OH, THE GAS FUND.

THE GAS FUND'S SLIGHTLY DIFFERENT.

UM, AT THE SAME TIME THOUGH, THERE IS SIGNIFICANT ELEMENTS THAT ARE NON-DISCRETIONARY, RIGHT? SO THE PURCHASE OF GAS IS A PASS THROUGH AB 32 CAP AND TRADE PROJECTS IS ALSO A PASS THROUGH.

AND SO INTERDEPARTMENTAL CHARGES ARE WHAT THEY ARE, AND SO IS A CERTAIN ELEMENTS OF CAPITAL IMPROVEMENT AND PERSONAL SERVICES.

SO THE DISCRETIONARY PORTION WITHIN ITSELF FACES THE SAME PRESSURES, LABOR AND CAPITAL IMPROVEMENT.

AND AT THE SAME TIME, THE DEMAND RE REMAINS FAIRLY STABLE TO SLIGHTLY DECREASING.

CONSEQUENTLY, THE PRESSURES THERE WILL BE SIGNIFICANT, AND ALTHOUGH THE RATE SETTING IS DIFFERENT, WE'LL BEGIN TO TRY TO EXAMINE WHAT INDEED ARE THE PRESSURES ON RATES AND WHAT ARE THE PRESSURES ON THE RESERVES AS WELL IN THAT CONTEXT.

SO I JUST WANTED TO GIVE YOU THAT OVERVIEW THAT WE DON'T HAVE THE FISCAL YEAR 26 BUDGET

[00:25:01]

AND SO WE EXPECT AS WE ASSEMBLE IT TO HAVE EVIDENCE OF THAT AND BRING IT FORWARD TO YOU FOR DISCUSSION.

I KNOW ONE OF THE ITEMS LATER IN THE AGENDA IS TO KIND OF LAY OUT FOR YOU HOW THOSE MEETINGS ARE GOING TO UNFOLD AND SCHEDULE.

OKAY.

THE GENERAL FUND TRANSFER IS IN THE, IN THE GAS.

YES.

AND SO THAT, THAT ONE, PARDON ME, I THINK THAT, I DON'T KNOW THAT I WOULD CALL IT PRESSURE.

UH, THE PERSPECTIVE IS THAT IT HAS A CALCULATION ASSOCIATED WITH IT AS WELL, AND THERE WILL BE A DISCUSSION, AND IT'LL BE MY OBLIGATION TO BRING THAT DISCUSSION TO YOU SO THAT YOU'RE AWARE OF IT AS WE GO THROUGH THE BUDGET DISCUSSION.

IT IS NOT SUBJECT TO THE PROVISION OF THE PROPOSITION TO 18.

UM, AT SUCH TIME IF THE DISCUSSION WARRANTS IT, I CAN HAVE MARSHA GIVE A PERSPECTIVE ON THAT.

OKAY.

ANY OTHER QUESTIONS? NOPE.

NOPE.

OKAY.

THANK YOU.

THANK YOU, DANIEL.

ALL RIGHT.

SO WE'LL, UH, AGENDA

[2. 25-54656 Recommendation to receive an overview of Gas Fund revenue sources.       Suggested Action: Receive report. ]

GOOD MORNING COMMISSIONERS.

TODAY WE HAVE BEFORE UA PRESENTATION ON THE VARIOUS SOURCES THAT MAKE UP OUR GAS FUND.

AND I AM NOT AS TALL AS DANIEL, SO GONNA FIX THIS.

UH, BUT BEFORE WE GET INTO THE, THE ACTUAL SOURCES, I, I WANTED TO SHARE A LITTLE BIT ABOUT THE REGULATORY, UM, SIDE OF GAS.

AND THAT HAS AN IMPACT REALLY ON HOW GAS FINANCES ARE, UM, ACCOUNTED FOR AND MANAGED, AND HOW WE SHOW THOSE COSTS ON OUR BILLS.

SO, UM, IN 1978, UM, AND THEN FURTHER AGAIN IN 1992, UM, FEDERAL REGULATIONS DEREGULATED THE NATURAL GAS INDUSTRY.

AND, AND REALLY, UM, THE, THE LONG AND SHORT OF THAT IS, UH, THE INTENT WAS FOR THERE TO BE ADDITIONAL, UM, MARKET, UM, COMPETITION TO ENABLE ADDITIONAL MARKET COMPETITION TO ENABLE, UM, INCREASED TRANSPARENCY ON THE COST OF GAS.

AND I, I WOULD SAY THAT LONG BEACH HAS BENEFITED FROM THAT, UM, SINCE, BECAUSE WE DO NOW KNOW THE EXACT COMMODITY COSTS, WHICH WE'LL GET INTO A LITTLE BIT.

UM, WE SEPARATE OUT THE TRANSMISSION COSTS, AND THAT'S IMPORTANT TO US BECAUSE IN CALIFORNIA, UM, AS A STATE STATEWIDE, WE IMPORT 90% OF OUR NATURAL GAS, UM, COMMODITIES.

SO WE HAVE VERY, VERY LITTLE LOCAL SUPPLIES.

LA BEACH ACTUALLY HAS MORE THAN MOST AREAS.

AND SO, UM, THE CALIFORNIA ON A WHOLE, UH, RELIES ON, UM, INTERSTATE TRANSMISSION PIPELINES TO BRING IN, UH, NATURAL GAS TO OUR, OUR STATE AND OUR CITY.

ON THE STATE SIDE, UH, WE ALSO HAVE AB 32 REVENUES, WE'LL, WHICH WE'LL TALK ABOUT IN A LITTLE BIT.

AB 32 WAS ADOPTED IN 2006, AND AS KNOWN AS THE CAP AND TRADE PROGRAM, WE DO RECEIVE REVENUES FROM THAT, WHICH AGAIN, WE'LL TALK ABOUT.

BUT THOSE REVENUES ARE INTENDED FOR OPERATIONAL COMPLIANCE, UM, TO REDUCE GREENHOUSE GAS EMISSIONS, WHICH IS THE PURPOSE OF THE PROGRAM.

UM, AND ALSO, UM, OUR, OUR EXIST IN THE K AB 32 MARKET, THERE IS A, A MARKET SO MUCH LIKE NASDAQ OR WHAT HAVE YOU, THE MARKET PRICE FLUCTUATES.

AND SO, UM, AB 32 ALLOWANCES EXIST IN THAT, UM, OPEN MARKET.

BUT OPEN MARKET IS TRULY JUST THE AB 32 MARKET.

SO ON A BILL, UM, AND THIS IS A PHOTO OF A BILL, ACTUALLY, MY BILL .

UM, YOU'LL SEE THAT, UM, THE GAS SERVICE CHARGE, UM, IS SET AT A RATE, AND THIS RATE MATCHES THE SO-CALLED GAS COST EXACTLY.

THEN WE ALSO HAVE USAGE COSTS OR TIERED RATES.

WE HAVE THE COST OF GAS, AND THIS IS A MARKET, UM, PRICE THAT IS SET MONTHLY.

AND THEN AGAIN, THE AB 32 RATE.

SO BREAKING THAT DOWN A LITTLE BIT MORE, WE'LL TALK ABOUT THE GAS SERVICE CHARGE FIRST.

UM, THIS IS ALSO WHAT IS CONSIDERED THE METER COST.

SO IF YOU SET UP A GAS SER GAS SERVICE ACCOUNT WITH US EITHER IN LONG BEACH OR SIGNAL HILL, BECAUSE WE DO SERVICE SIGNAL HILL ALSO, UM, YOU GET CHARGED ABOUT $5 A MONTH FOR THE SERVICE CHARGE.

AND AGAIN, WE MATCH SOCAL GAS, UM, EXACTLY ON THAT.

SO, UH, $5 A MONTH FOR THE NUMBER OF ACCOUNTS THAT WE MANAGE THAT COMES OUT TO BE ROUGHLY, UM, NINE TO $10 MILLION OR ACCOUNTS ARE ABOUT 10%.

WELL, LESS THAN 10% OF OUR TOTAL GAS REVENUE SOURCES.

THEN WE HAVE THE USAGE CHARGES.

AND THE USAGE CHARGES ARE REFLECTED ON A BILL AS TIER CHARGE.

UM, USAGE CHARGES ARE SET FOR LONGTON SIGNAL HELD BY THIS BOARD, BY YOU AS PART OF OUR

[00:30:01]

AND, UM, PRIOR TO LAST YEAR HADN'T INCREASED, UM, VERY MUCH AT ALL.

LAST YEAR, WE DID INCREASE OUR USAGE CHARGES BY 4%.

UM, AND AGAIN, THAT IS STILL IN LINE AND QUITE FRANKLY BELOW, UM, SOCAL GASES USAGE OR TIER CHARGE.

UM, AS A CONSUMER, THE LESS YOU USE, THE LESS YOU PAY.

UM, SIMILAR TO WATER, THERE IS TIER ONE AND TIER TWO.

IF YOU EXCEED TIER ONE, THEN YOU PAY A HIGHER, UM, COST PER, PER COMMODITY, UM, IN THESE, IN THESE TIERED USAGE CHARGES.

THEN, UM, THIRDLY, WE HAVE THE COST OF GAS.

AND THIS IS WHAT, UM, THIS IS WHAT WE REALLY, REALLY FOCUSED ON IN JANUARY OF 2023.

THE COST OF GAS IS PURELY MARKET BASED.

IT IS SET MONTHLY.

UM, WE, WE SET IT MONTHLY.

SOCAL GAS SETS SET MONTHLY, PG E UM, COST OF GAS IS SET MONTHLY IN THE NATURAL GAS INDUSTRY BASED ON SUPPLY AND DEMAND.

AND AGAIN, BECAUSE CALIFORNIA IMPORTS 90% OF OUR NATURAL GAS, THE COST OF GAS IN THE STATE CAN BE VERY VOLATILE.

THERE ARE A NUMBER OF WAYS TO, UM, CONTROL THE COST OF GAS, AND ONE OF WHICH IS THE PRICE SWAPS, WHICH WE IMPLEMENTED IN OCTOBER, 2023, AND WILL CARRY US THROUGH THOSE NEXT THREE WINTERS.

UM, THE COST OF GAS TO THE COST OF GAS, IT ROUGHLY IS ABOUT $35 MILLION.

UM, IS, IS WHAT IT TOTALS IN OUR ANNUAL BUDGET.

SO IT REPRESENTS ROUGHLY 30% OF OUR TOTAL GAS REVENUES.

AND THEN LAST BUT NOT LEAST, IS AB 32.

THIS IS THE NEWEST SOURCE OF GAS REVENUE, IF YOU CAN CONSIDER IT, THAT, UM, THAT WE COLLECT AS, UH, AS AN ORGANIZATION.

AB 32, AGAIN, IS A UNIQUE PROGRAM TO CALIFORNIA.

UM, ALL AB 32 REVENUES, WHETHER COMPLIANCE OR ALLOWANCE, UM, CREDITS WHICH WE SELL AT AUCTION EXIST AND ARE MANAGED WITHIN, UM, WITHIN JUST THAT.

IT'S AN AB 32 PROGRAM WITH ITS OWN MARKET, ITS OWN COMPLIANCE COST REGULATIONS.

UH, AND WE DO COLLECT AB 32 REVENUES FROM OUR RATE PAYERS AS A PART OF OPERATIONAL COMPLIANCE WITH THE PROGRAM.

THE INTENT BEHIND AB 32 IS TO REDUCE GREENHOUSE GAS EMISSIONS.

AND SO, UM, THE THOUGHT IS IF THE STATE MAKES IT MORE EXPENSIVE FOR CONSUMERS TO CONSUME A NATURAL GAS OR A, UM, OR, OR A, UH, FOSSIL FUEL, THEN THEY MAY BE MORE LIKELY TO REDUCE THEIR CONSUMPTION, THEREBY ALSO REDUCING, UM, CALIFORNIA GREENHOUSE GAS EMISSIONS.

AND, AND THESE DOLLARS, UM, ARE AGAIN, UM, SIMPLY COMPLIANCE COSTS.

WE AS A ORGANIZATION ARE REQUIRED TO COLLECT THEM, UM, BUT WE DO NOT USE THEM OTHER THAN TO COMPLY WITH THE STATE'S PROGRAM.

AND, AND THAT IS STIPULATED IN THE CALIFORNIA CODE OF REGULATIONS.

WE COLLECT ROUGHLY NINE TO 10 MILLION A YEAR, UM, FROM THIS PROGRAM.

IT DOES EXPIRE IN 2020, I'M SORRY, 2030, UM, WITH THE EXPECTATION THAT A REPLACEMENT PROGRAM WILL BE ADOPTED, UM, IN ITS PLACE.

AND THE, THE CURRENT EXPECTATION IS THAT THESE, THESE COSTS OR THESE REVENUES THAT WE COLLECT, BUT, BUT AGAIN, THE REVENUES ARE A COST OF COMPLIANCE, UM, WITH THE PROGRAM.

IT'S NOT A REVENUE THAT, THAT WE CAN USE, UM, FOR INFRASTRUCTURE, MAINTENANCE, CUSTOMER SERVICE, THINGS LIKE THAT.

IT'S, UM, FOR GREENHOUSE GAS REDUCTIONS.

UM, AND WE DO EXPECT THAT THOSE COSTS WILL INCREASE AGAIN, TO SIGNAL THE STATE'S DESIRE FOR, UM, ALL OF CALIFORNIANS TO USE LESS NATURAL GAS, THEREFORE REDUCE GREENHOUSE GAS EMISSIONS.

SO THOSE ARE THE FOUR, UM, FOUR GAS REVENUE SOURCES THAT FEED INTO THE, UH, INTO THE GAS FUND.

AGAIN, EACH, EACH TYPE OF CHARGE, UM, FUNCTIONS SLIGHTLY DIFFERENTLY.

THE MAJORITY OF, UH, REVENUES THAT WE DO RECEIVE ARE USAGE CHARGES, WHICH THIS BOARD DOES SET ANNUALLY.

AND AND THAT'S ROUGHLY 50%.

UM, OF, OF THE TOTAL, UM, THAT YOU SEE HERE, WHAT PERCENTAGE OF THE TOTAL DOES AB 32 REPRESENT? RIGHT NOW IT'S ABOUT NINE TO 10.

AND AGAIN, THE, THE COST, THE REVENUES THAT WE USE AS A DEPARTMENT TO MAINTAIN OUR INFRASTRUCTURE TO, UM, SUPPORT CUSTOMER SERVICE METER COSTS, THE EMERGENCY RESPONSE, UM, THAT IS THE GAS SERVICE CHARGE AND THE USAGE CHARGES.

THE COST OF GAS, AS WE'VE TALKED ABOUT EXTENSIVELY IN THE PAST, IS A PASS THROUGH.

WE AS AN ORGANIZATION, ARE NOT ALLOWED TO USE THESE REVENUES FOR, UM, OPERATIONAL PURPOSES.

UH, DEREGULATION INTENDED FOR THE COST OF GAS TO BE TRULY TRANSPARENT TO THE CUSTOMERS AND, AND REALLY TO EVERYONE IN THE NATURAL GAS SUPPLY CHAIN, CONSUMERS, PRODUCERS, AND THE COST OF GASES IS INTENDED TO BE A PASS THROUGH REVENUE AND AGAIN, REGULATED BY, UM, FERC AT THE FEDERAL LEVEL.

AND THEN WE JUST

[00:35:01]

UH, BUT I WILL GO BACK TO THIS SLIDE BECAUSE I, I DO BELIEVE THAT THIS SLIDE IS THE SLIDE THAT IS THE CRUX OF THE PRESENTATION.

DIDN'T PAY ATTENTION, BUT YEAH, WE SHOULD LOOK AT IT.

UH, YOU KNOW ME.

UM, SO CURIOUS ABOUT THE, UH, TIER ONE AND TIER TWO.

HOW DO WE SET THE, UH, UH, THE THERMS? THE THERMS HISTORICALLY IN THE CITY, UM, HAVE BEEN CONSISTENTLY, IT'S, IT'S 52 THERMS IN THE WINTER.

UM, BUT WE DO, UM, WE, WE HAVE WINTER THERMS IN, THEN WE HAVE SUMMER THERMS. UM, WINTER THERMS ARE HIGHER BECAUSE WE EXPECT THAT PEOPLE WILL USE MORE GAS DURING THE WINTER FOR HEATING AND, AND BAKING AND COOKING DURING THE SUMMER MONTHS.

UM, THAT USAGE TYPICALLY, UM, DECREASES.

AND SO I BELIEVE WE'RE SOMEWHERE IN THE 30 30, UM, AND IT, IT'S SET BY THE SPORT SO YOU CAN CHANGE IT.

SO CAL GAS USES A UNIQUE SHOULDER MONTH SYSTEM THAT THERE ARE PROS AND CONS TO IT IN THE SHOULDER MONTHS.

THE IDEA IS, UM, THAT IT SHOULD THEORETICALLY STABILIZE THE CUSTOMER'S BILL DURING THEIR HIGHER USAGE MONTHS.

HOWEVER, THEN YOU'RE ALSO PAYING MORE DURING WHAT SHOULD BE LOWER USAGE MONTHS, AND AGAIN, PROS AND CONS TO IT.

UH, BUT ALL ALL THINGS THAT ARE WITHIN THIS BOARD'S, UM, AUTHORITY.

SO THE CHARTER DOES NOT HOLD US TO SOL'S, UH, THE AND TIER LEVELS.

IT DOES NOT HOLD YOU SPECIFICALLY TO THE TIER LEVELS.

THE CHARTER HOLDS US TO BEING COMPETITIVE ON, SAY, A MONTHLY BILL OR ON PRICING.

YES.

SO IT DOESN'T SPECIFICALLY SAY MONTHLY BILL, AND IT DOESN'T SPECIFICALLY SAY THERMS, FIND ME.

WHAT IT DOES SAY, IT SAYS BE COMPETITIVE.

AND, AND SO THAT, THAT IS AN ELEMENT TO MANAGING THE GAS FUND IS THIS ELEMENT OF CHARTER DIRECTION TO BE COMPETITIVE AND WHAT IS IMPLIED BY BEING COMPETITIVE, UH, THAT THAT IS THE, THE DIRECTION THAT, THAT YOU CAN GIVE AND WORKING WITH STAFF, RIGHT? UM, BUT IT'S NOT IN A VACUUM.

AND SO IN THAT SENSE, BEING COMPETITIVE IS A TRANSPARENT PROCESS.

AND ARGUABLY, AS WE WORK WITH YOU ON SO MANY DIFFERENT LEVELS OF MANAGING THE UTILITY, BEING TRANSPARENT IS ONE OF THE CRITICAL ELEMENTS OF A UTILITY MAINTAINING ITS RELATIONSHIP WITH ITS CUSTOMERS.

SO THOSE THINGS GO HAND IN HAND, THE DEFINITION OF BEING COMPETITIVE AND THEN ACTING AND WORKING IN A TRANSPARENT MANNER.

OKAY.

UH, AND THEN THE GAS SERVICE CHARGE, HOW IS THAT? OH, THAT'S TIED DIRECTLY TO SOCAL GAP.

WE DO MATCH THEM ONE FOR ONE, AND WE HAVE NOT INCREASED IT IN QUITE A LONG TIME.

THEY HAVE NOT INCREASED THEIRS.

AND, AND SO IT IS FAIRLY LOW, BUT IF, UH, IF WE ARE LOOKING AT INCREASING CHARGES, THE USAGE RATE IS TYPICALLY WHERE THAT HAPPENS.

SO ONE OF THE THINGS THAT HAVE ENGAGING DWGP IS ALSO IN MONITORING THE PUC, IS THAT THE PUC, THE RATE CASES GO FORWARD, AND THEN GOING FORWARD WITH THE RATE CASES, THE JUSTIFICATION FOR ONE OR MORE ELEMENTS OF A RATE ARE BROUGHT TO THE PUC.

SO COST OF SERVICE NEXUS ON CERTAIN THINGS ARE BROUGHT TO THE PUC AND DISCUSSED THERE.

AND SO THIS ASPECT OF BEING COMPETITIVE ALSO HAS THAT ANGLE AS WELL.

WE LOOK TO SEE WHAT'S GOING ON IN THE MARKET, WHAT SOCALGAS IS DEALING WITH, AND HOW IT'S PRICING, AND THEN WE SOMETIMES BRING THAT BACK TO THE BOARD FOR DECISIONS ON REFLECTING.

THAT WAS MY NEXT QUESTION, WHETHER WE'RE WE'RE MONITORING SOCAL GAS'S FUTURE EXPECTATIONS? YES.

SO IN, IN THE GAS INDUSTRY, IT USED TO BE A TCAP, THE T STOOD FOR TRI-ANNUAL, THE LAST TCAP ENDED UP IN A FOUR YEAR CYCLE.

UM, SO WE'RE FOUR YEARS, ACTUALLY WE'RE TWO AND A HALF YEARS OUT NOW FROM THE NEXT, UM, RATE, MAJOR RATE COST ALLOCATION PROCEEDING, UM, AND THE COST ALLOCATION PROCEEDING IN IS INTENDED TO SET FORTH WHAT IS EXPECTED, UM, FOR PLANNING PURPOSES FOR THE NEXT THREE TO FOUR YEARS.

DURING THAT PERIOD OF TIME, SOCAL CAN BRING ADDITIONAL, UM, RATE CASES TO THE CPUC FOR CONSIDERATION.

NOT ALL OF IT, UM, IS ADOPTED.

UNLIKE STATE REGULATION WHERE THERE IS A CYCLE, UH, A VARIOUS, UM, CYCLICAL CYCLE BASED ON CALENDAR, UM, AT THE CPUC IN, IN THE REGULATORY

[00:40:01]

THERE'S NEGOTIATION, UM, DIFFERENT ENTITIES ARE ABLE TO WEIGH IN.

AND SO WE DO TRACK ALL OF THAT.

UM, TONY AND I GET ALL OF THE RATE CASES SENT TO OUR INBOX, UM, EVERY DAY.

AND SO WE ARE ABLE TO SEE WHAT'S HAPPENING IN THE SOCAL MARKET AS WELL AS P, PG AND E AND THEN, UM, DOWN IN, IN SAN DIEGO AS WELL.

UH, AND THEN JUST SO I'M COMPLETELY CLEAR, THE COST OF GAS AND THE AB 32, UM, THEY MAKE UP ABOUT 40% OF OUR OVERALL REVENUE.

HOW MUCH OF THAT IS AVAILABLE FOR US TO USE FOR OPERATING COSTS? COST OF GAS, ZERO AB 32 FOR GAS OPERATIONS? ZERO AB 32, ACCORDING TO THE CALIFORNIA CODE OF REGULATIONS IS INTENDED, UM, TO THE COMPLIANCE COSTS ARE COMPLIANCE THAT WE REMIT TO THE STATE.

SO WE DON'T GET TO KEEP THAT.

THEN THERE ARE AUCTION PROCEEDS, UM, THAT ARE INTENDED TO BE RETURNED FOR THE BENEFIT OF RATE PAYERS SO THAT THEY COULD USE THOSE REVENUES TO MAKE INFRASTRUCTURE CHANGES TO THEIR OWN HOMES OR WHAT HAVE YOU, TO DECREASE THEIR GREENHOUSE GAS EMISSIONS.

WE DON'T GET TO SPEND THAT NOT ON OPERATIONS AND NOT ON, NOT IN THE SAME WAY AS THE GAS SERVICE CHARGE OR THE USAGE CHARGES.

SO, UH, WHAT WOULD BE AVAILABLE FOR SALARIES AND WAGES AND BENEFITS? CORRECT.

AB 32 CANNOT BE USED FOR LONG BEACH UTILITIES EMPLOYEES SALARY WAGES, YES, CORRECT.

COST OF GAS.

YES.

CORRECT.

SO CALLING IT A PROFIT IS, I UNDERSTAND WHY WE HAVE TO, GOVERNMENT ACCOUNTING STANDARDS BOARD HAS RULED ON, ON THESE SPECIFIC PASS THROUGHS AS YOU HAVE TO REFER TO THEM AS REVENUE.

BUT I THINK IF WE WERE AT, UH, IN OUR OWN, UH, KITCHEN TABLE, YOU KNOW, WORKING OUT OUR OWN FAMILY BUDGET AND, AND LOOKING AT A PASS THROUGH AND, AND, UH, YOU KNOW, MONEY THAT COMES INTO THE HOUSE AND THEN JUST GOES RIGHT OUT OF THE HOUSE, I DON'T THINK ANY OF US WOULD BE USED THAT AS A WAY TO FORMULATE, YOU KNOW, WHAT WE HAVE AVAILABLE TO SPEND.

UM, SO THAT JUST WANTED TO IS TRY THAT AND MAKE SURE I'M ON THE SAME PAGE.

YES.

THAT'S

[3. 25-54657 Recommendation to review FY 26 Budget process and Board Calendar.       Suggested Action: Receive report. ]

SO AGENDA ITEM NUMBER THREE, UH, REVIEW FY 26, BUDGET PROCESS AND BOARD CALENDAR.

AND BACK TO STEPHANIE AGAIN.

ALL RIGHT, NOW THAT YOU KNOW WHERE WE'VE BEEN AND WHERE WE ARE NOW, WE'RE GOING TO DISCUSS WHERE WE'RE GOING.

UM, THE TEAM IS WORKING RIGHT NOW TO PREPARE THE FY 26 BUDGET.

UM, WE HAVE PROPOSED, UH, WORK WORKSHOPS FOR MAY 1ST, WE WILL REVIEW THE FY 26 WATER, GAS, AND SEWER FUND, PROPOSED BUDGETS, PROJECTIONS, AND RESERVES ON MAY 15TH.

WE WILL REVIEW THAT AGAIN.

IN ADDITION, WE WILL HAVE FOR YOU RATES.

AND ON JUNE 5TH, THE BOARD WILL ADOPT THE BUDGET AND THE RATES.

SO THESE ARE WORKSHOPS, UH, SAME THAT WE HAD LAST YEAR.

YES, WE HAVE THEM EVERY YEAR.

SO THIS, THIS WILL BE MORE FORMALIZED AS FAR AS FY 26 BUDGET.

SO TODAY WAS A PRECURSOR FOR PREPARING FOR THE UPCOMING FISCAL YEAR.

AND THESE ARE BOARD DATES.

SO THESE ARE WORKSHOPS BEING DONE WITHIN THE CONTEXT OF BOARD MEETING DATES, FIRST, 15TH, AND THE FIFTH.

AND THEN TYPICALLY WHAT HAPPENS WITH THE JUNE TIMEFRAME IS THAT DEPENDING ON WHAT OCCURS THERE IS FROM A PROP TO 18 BASIS, THERE'S A LITTLE BIT OF A WINDOW OR AN ADDITIONAL, UH, DELIBERATION IF NECESSARY IN THE JUNE MEETING.

BUT GENERALLY AT THE CLOSE OF JUNE FOR THE PROPER 45 DAY NOTIFICATION FOR PROP TO 18 IS WE USUALLY, UH, WORK WITH THE BOARD TO ENSURE THAT A DECISION HAS BEEN MADE ON BUDGET AND RATES THE CAPITAL IMPROVEMENT PLAN.

CAN YOU GO, SORRY, YOU WERE JUMPING DID THAT FOR YOU ALREADY.

I'M SO SORRY, STEPHANIE.

THE, THE MAY 1ST TIMEFRAME IS, UH, GENERALLY THE EXPECTATIONS THAT I WOULD, UH, PUT UPON ENGINEERING, UH, TO IN THE MAY 1ST TIMEFRAME THAT YOU ALSO GET A DESCRIPTION OF THE CIP AND WHAT THE PROPOSED CIP IS FOR THE VARIOUS FUNDS.

IS THERE ANY WAY TO GET SOME OF THAT INFORMATION BEFORE IT GETS TO THE FORMAL LEVEL OF THE BUDGET WORKSHOPS? I MEAN, WE CAN TRY TO DO IT IN COMMITTEE.

[00:45:01]

'CAUSE WE ARE CURRENTLY IN THE PROCESS OF ASSEMBLING IT WITH STAFF.

SO THE, THE ENTIRE BUDGET PROCESS UNFOLDS INTERNALLY AS AT THE START OF THE YEAR.

SO AT THE START OF THE YEAR, WE BEGIN THE INTERACTION WITH STAFF.

UM, AND IN FACT, WE'RE TIMING IT ALSO WITH THE FINANCIAL, UH, FINANCIAL BUDGET, UH, MODEL THAT EXISTS IN INTERACTION WITH THE CITY.

SO AS WE BEGIN TO ASSEMBLE THINGS, WE ASSEMBLE THINGS ALONG THE CITY CALENDAR AS WELL AS THE CITY OPENS UP THE, THE SYSTEM FOR YOU TO BEGIN INPUTTING THINGS.

UM, WE CAN WORK WITH YOU AND, AND TRY TO SET UP, IF YOU WOULD LIKE A COMMITTEE MEETING.

WOULD YOU LIKE A, A COMMITTEE MEETING? I THINK IT WOULD BE BENEFICIAL.

UM, SEEMS LIKE ONCE WE GET TO THE FORMAL BUDGET WORKSHOPS, ALL OF THE DECISIONS HAVE BEEN MADE AND THERE'S, YOU KNOW, IT, UH, BECOMES PROBLEMATIC, UH, TO ANY MODIFICATION REVIEW WOULD BE VERY HELPFUL.

THAT'S FINE.

I I'M, I'M HAPPY TO DO THAT.

ONE OF THE GOALS THAT I HAD FOR TODAY WITH THE COMMITTEE WAS TO SHOW YOU THOSE PIE CHARTS SO THAT YOU UNDERSTOOD WITH THE NATURE OF THE RESOURCE, UH, THE ASSEMBLING OF THE BUDGET WITH REGARDS TO RESOURCE AND THE UTILITY AND THE PROVISION OF UTILITY SERVICE IS FIXED COSTS.

AND SO 80 TO 90% OF THE COSTS ARE FIXED.

SO, UH, WE'LL DEFINITELY DO THAT AND BRING THAT TO YOU.

BUT I DID WANT TO GIVE YOU THAT GUIDANCE BECAUSE IT IS A CHALLENGE.

UH, IT IS INHERENTLY THE NATURE OF THE BUSINESS AND PROVIDING UTILITY SERVICE AND WITH DECLINING DEMAND OR FLAT DEMAND, INVARIABLY WHAT WINDS UP HAPPENING IS YOU GET BUDGET PRESSURES RELATED TO RATE PRESSURES THAT HAVE TO BE DEALT WITH, UH, ADMITTEDLY THEY MUST BE DEALT WITH.

UH, AT THE SAME TIME, THE ABILITY TO EXERCISE DISCRETION IS EXTREMELY NARROW.

SO WITH THAT, WITH THAT SAID, UH, I'M HAPPY TO TAKE YOUR GUIDANCE AND BRING TO YOU AT, AT A COMMITTEE MEETING TO LAY OUT AS MUCH AS WE CAN AHEAD OF THE MAY 1ST MEETING .

ABSOLUTELY.

THAT'S FAIR.

ABSOLUTELY.

ABSOLUTELY.

SO I'LL WORK WITH STAFF AND WE'LL DO OUR VERY BEST TO WORK WITH YOUR CALENDARS AS WELL AND SET UP A FINANCE COMMITTEE TOWARDS THE LAST WEEK IN APRIL.

SO THAT WAY YOU GET TO SEE THINGS BEFORE THE MAY 1ST WORKSHOP.

THAT'S, THAT'S WHAT WE'LL SHOOT FOR.

YES.

YES.

I, I DON'T KNOW WHAT DAY OF THE WEEK.

OH, WELL, MAY, THURSDAY.

THURSDAY.

SO, NO, I UNDERSTAND.

I'M SORRY.

COMMISSIONER SHANNON? YES.

YES.

WE'LL DO THAT.

OKAY, GREAT.

I HAVE ONE MORE SLIDE.

OH, SORRY.

NO WORRIES.

A**L DID JUMP.

YES.

'CAUSE I, I RUINED THE PRESENTATION, SO MY, MY APOLOGIES TO STEPHANIE.

NO, I'M SO SORRY.