06-26-2023 BPU RPT 08 - Laserfiche WebLink

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W A T E R E N E R G Y L I F E RIVERSIDE PUBLIC UTILITIES P UB LIC UTILITIES Board Memorandum BOARD OF PUBLIC UTILITIES DATE: JUNE 26, 2023 SUBJECT: CASH RESERVE UPDATE FOR WATER AND ELECTRIC UTILITY FIVE-YEAR RATE PLAN PROPOSAL ISSUE: Consider receiving an update on Riverside Public Utilities Fiscal Policies — Cash Reserve Policy, as it relates to the Water and Electric Utility Five -Year Rate Plan Proposal introduced to the Board on June 12, 2023. RECOMMENDATION: That the Board of Public Utilities receive an update on Riverside Public Utilities Fiscal Policies — Cash Reserve Policy, as it relates to the Water and Electric Utility Five -Year Rate Plan Proposal introduced to the Board on June 12, 2023. BACKGROUND: On June 12, 2023, the Board approved a recommendation to the City Council to conceptually approve both the Water and Electric Five -Year Rate plans. Both rate plan discussions include references to the Minimum Cash Reserve Balances to demonstrate the impact of no action and the impact of approving the rates presented. During this meeting, there were Board Member questions regarding RPU's fiscal reserves including a request for additional information. DISCUSSION: Reserve Policies Purpose Properly designed reserve policies send a positive signal to ratepayers, investors, and regulatory and credit rating agencies that the Board and City Council are committed to maintaining the long- term fiscal strength of RPU. Strong and transparent financial policies, including maintaining prudent reserves for emergencies, rate stability, working capital, capital improvements and debt service, are consistent with best practices in the utility industry and are important to RPU as they help to: • Maintain the short-term and long-term financial health of RPU. • Maintain stable rates for customers and help ensure manageable rate increases. • Fund unanticipated cost contingencies.