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W ,A r! ■ F a c . f <br />RIVVERSIDE PUBLIC UTILITIES <br />pUHLrC urIV.IffES Board Memorandum <br />BOARD OF PUBLIC UTILITIES DATE: February4, 2.010 <br />ITEM NO: E <br />SUBJECT: INTEREST RATE PAID ON CUSTOMER DEPOSITS <br />ISSUE: <br />According to State law, customer deposits held by Riverside Public Utilities (RPU) must be paid a fair rate of <br />interest. Water and Electric Rules provide that the RPIUs' Board of Public Utilities shall periodically establish <br />the annual interest rate paid to customers an their deposits. <br />RECOMMENDATION: <br />That the Board of Public Utilities approve the annua[ interest rate applied to customer deposits of 0.10%. <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 $3.4 million. Currently, 28 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, and if the customer has not received a tum -off notice, the deposit plus interest are applied to their <br />account. <br />Deposits are refunded after one year or upon termination of service, therefore the investment of the funds on <br />deposit must be short-term and highly liquid. By using an average of local banks' passbook rates, this <br />calculation is reflective of current market conditions. This calculation is to be performed annually. <br />Based on the previously approved methodology, the rate for 2011 should be set at 0.10% effective far <br />deposits held during the month of February 2011. <br />FISCAL IMPACT <br />There is no fiscal impact associated with setting the interest rate paid to customer deposits. <br />Prepared by: Reiko A. Kerr, Assistant General Manager Finance/Administration <br />Approved by: David H. Wright, Public Utilities Genera[ Manager <br />Approved by. Belinda J. Graham, Assistant City Manager <br />Approved as to form: Gregory P. Priamos, City Attorney <br />