I. RECOMMENDATION:
City Council is recommended to adopt Resolution No. 4323 amending the method of determining monthly natural gas baseline Therms for single-family residential gas customers to achieve more equitable billing during months when the meter reading cycle varies from the typical 28 to 33 days.
II. BACKGROUND:
During the December 2024 meter reading cycle, many customers’ meter read cycles were longer than 33 days, with some as long as 44 days, due to late meter reading in January 2025. The longer read cycles caused many single-family customers to exceed the baseline usage of 50 Therms per month, when they would not have otherwise exceeded the baseline in a typical length read cycle. The result was they were billed at a rate $0.43 per Therm higher for some gas delivered -- the difference between the baseline rate of $0.88 and the excess rate of $1.31 (the rates in place at that time).
In response, these customers were provided with refunds for the overbilling. Specifically, 170 customers exceeded the baseline because of the longer cycle. These 170 customers are distinguished from the customers that would have gone over anyway -- those that would have been at 50 Therms if the billing cycle had been the standard 30 days. Refunds totaling $500 were issued to those customers. The average refund was $3.00; however, the highest refunds were $8.44 for some customers with the longest meter read cycles of 44 days.
These situations can be avoided by implementing baseline Therms per day rather than Therms per month billing cycle.
III. DISCUSSION:
The proposed solution to avoid this problem again is to modify the monthly baseline calculation from Therms per billing cycle to Therms per day across the meter reading cycle. This means the baseline allocation will be exact each month regardless of the number of days between meter reads. The table below shows baseline Therms for summer and winter based on days in the billing cycle rather than simply the billing cycle itself. Notice the table shows that if the billing cycle were an exact average month of 30.4 days, the baseline allocations would be exactly 15 Therms for Summer and 50 Therms for Winter. The determination of Therms per day is done by dividing monthly baseline Therms by 30.4 days in an average month. The daily allocations are shown at the bottom of the table below and restated in the proposed resolution.
Other utilities have set a precedent for calculating monthly baseline rates on a per-day basis. SoCalGas and PG&E (investor-owned utilities) and City of Palo Alto (municipal utility) all calculate baseline quantities for residential service on a per-day basis.[1]
This proposed modification is not a rate increase and therefore does not require customer notification or other Proposition 218 requirements. This modification simply improves the application of the existing baseline rate structure. Nonetheless, the existing natural gas rate resolution has been expanded to specify the improved calculation of baseline Therms.
Finally, this proposed change will require support from Tyler Technologies to modify the bill application of baseline Therms. At this point, Tyler has confirmed they can make the change. Staff are presently in dialogue with Tyler. The intent is to have the improved mechanism in place prior to this winter as reflected in the proposed resolution.
|
Baseline Therms Based on Read Cycle
|
|
Days in Cycle
|
Summer Baseline
|
Winter Baseline
|
|
25
|
12.3
|
41.1
|
|
26
|
12.8
|
42.8
|
|
27
|
13.3
|
44.4
|
|
28
|
13.8
|
46.1
|
|
29
|
14.3
|
47.7
|
|
30
|
14.8
|
49.3
|
|
30.4
|
15.0
|
50.0
|
|
31
|
15.3
|
51.0
|
|
32
|
15.8
|
52.6
|
|
33
|
16.3
|
54.3
|
|
34
|
16.8
|
55.9
|
|
35
|
17.3
|
57.6
|
|
36
|
17.8
|
59.2
|
|
37
|
18.3
|
60.9
|
|
38
|
18.7
|
62.5
|
|
39
|
19.2
|
64.1
|
|
40
|
19.7
|
65.8
|
|
41
|
20.2
|
67.4
|
|
42
|
20.7
|
69.1
|
|
43
|
21.2
|
70.7
|
|
44
|
21.7
|
72.4
|
|
45
|
22.2
|
74.0
|
|
Th/Day Input:
|
0.4934
|
1.6447
|
IV. ALTERNATIVES:
No changes to the calculation of monthly residential baseline Therms.
V. FISCAL IMPACT:
The City must pay Tyler Technologies for changes to the monthly billing calculations in the Tyler software. The change in revenue from gas billing will be imperceptible. |