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EN ER G i <br />RIVERSIDE PUBLIC UTILITIES <br />PUBLIC UTILITIES Board Memorandum <br />BOARD OF PUBLIC UTILITIES DATE: February 1, 2013 <br />ITEM NO: 2 <br />SUBJECT: INTEREST RATE PAID ON CUSTOMER DEPOSITS <br />ISSUE: <br />The item for Board of Public Utilities consideration is approval of the annual interest rate to be paid on <br />customer deposits as required by state law. <br />RECOMMENDATION: <br />That the Board of Public Utilities approve the annual interest rate of 0.04% for customer deposits. <br />BACKGROUND: <br />Deposits are collected from customers who wish to establish service and do not have a good credit history, or <br />from customers who have had service disconnected and want to be reconnected. Approximately 16% of the <br />Utility's customers fit this category, with combined deposits totaling $3.7 million. Currently, 30% of that total <br />represents commercial customers. <br />The minimum residential deposit is $100 for electric and $40 for water service. Commercial customers are <br />charged a deposit equal to two month's service for the location. Interest is applied monthly to the deposits <br />received. Deposits are held for one year or upon termination of services. If the customer account is in good <br />standing, the deposit, plus interest, is applied to the customer's account to offset an outstanding balance or <br />refunded to the customer if no balance is due. <br />The previously approved methodology used to determine the amount of interest to accrue monthly is based <br />on an average of local banks' passbook rates. The rate calculated for 2013 is 0.04% for deposits effective as <br />of March 2013. The investment of funds on deposit must be short-term and highly liquid. The calculation is <br />performed annually and is reflective of current market conditions. <br />FISCAL IMPACT: <br />There is no fiscal impact associated with setting the interest rate paid to customer deposits. <br />Prepared by: Laura Chavez -Nomura, Utilities Assistant General Manager Finance/Administration <br />Approved by: David H. Wright, Public Utilities General Manager <br />Approved by: Belinda J. Graham, Assistant City Manager <br />Approved as to form: Gregory P. Priamos, City Attorney <br />