02-27-2023 BPU RPT 05 - Laserfiche WebLink

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_= RIVERSIDE PUBLIC UTILITIES Board Memorandum P U B L I C U T I L I T I E S BOARD OF PUBLIC UTILITIES DATE: FEBRUARY 27, 2023 SUBJECT: ESTABLISH 2023 ANNUAL INTEREST RATE OF 2.80% TO BE PAID ON CUSTOMER DEPOSITS ISSUE: Consider approving an annual interest rate on customer deposits for the calendar year 2023 at the rate of 2.80% per annum, as provided by Riverside Public Utilities' Electric and Water Rules. RECOMMENDATION: That the Board of Public Utilities approve the annual interest rate on customer deposits for the calendar year 2023 at the rate of 2.80% per annum, as provided by Riverside Public Utilities' Electric and Water Rules. BACKGROUND: Per Electric and Water Rule 4, deposits are collected from customers who wish to establish service that do not have a good credit history, based on review from a national credit bureau which evaluates the history of late payments and other negative events, or from customers who have been disconnected and want service to be reconnected. Approximately 14% of the Utilities' customers meet the criteria of this category, with combined deposits totaling just over $5.8 million. Currently, 72% of that total represents commercial customers. The minimum residential deposit is $100 for electric and $40 for water service. Commercial customers are charged a deposit equal to two months service for the location. Interest is applied monthly to the deposits received. Deposits are held for one year or upon termination of services. If the customer account is in good standing, the deposit, plus interest, is applied to the customer's account to offset any outstanding balance or refunded to the customer if no balance is due. Electric and Water Rules 4 require the Board of Public Utilities to annually establish the interest rate for the held deposits. DISCUSSION: The methodology used to determine the amount of interest to record monthly to utility customer deposits is based on the 1 -year annual average Daily Treasury Yield rate. The use of the 1 -year average Treasury Yield for the allocation of interest to deposits is based on the same type of short-term security the City acquires for use in the Citywide investment portfolio. The average annual rate is obtained from the U.S. Department of the Treasury website. The rate calculated for 2023 is 2.80%.