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RIVERSIDE PUBLIC UTILITIES <br />PUBLIC UTILITIES <br />Board Memorandum <br />BOARD OF PUBLIC UTILITIES DATE: February 17, 2012 <br />ITEM NO: 6 <br />SUBJECT: INTEREST RATE PAID ON CUSTOMER DEPOSITS <br />ISSUE: <br />That the Board of Public Utilities consider approval of an annual interest rate to be paid on customer deposits <br />as required by state law. <br />RECOMMENDATION: <br />That the Board of Public Utilities approve the annual interest rate of 0.07 percent 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 been disconnected and want service reconnected. Approximately 15 percent of <br />the Utility's customers fit this category, with combined deposits totaling $3.7 million. Currently, 31 percent of <br />that total represents commercial customers. <br />The minimum residential deposit is $100 for electric and $40 for water. Commercial customers are charged a <br />deposit equal to two month's service for the location. Interest is applied monthly. Deposits are held for one <br />year or upon termination of services. If the customer account is in good standing, the deposit plus interest <br />are applied to the customer account to offset any outstanding balances or refunded to the customer if no <br />balance is due. <br />The calculation used to determine the amount of interest to accrue monthly is based on an average of IocaI <br />banks' passbook rates which is a previously approved methodology. The rate calculated for 2012 is 0.07 <br />percent for deposits effective as of March 2012. The investment of funds on deposit must be short-term and <br />highly liquid. The calculation is 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: Kevin S. Milligan, Assistant General Manager, Interim 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 />