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The Yosemite Spring Park Utility Co. Board of Directors meeting on on Dec. 29 approved a new budget for 2020. Following is a overview written by General Manager Jonathan Penrose.


FROM: YLOA/YSPUC General Manager Jonathan Penrose
TO: YSPUC Board of Directors and customers
DATE: Sunday, Dec. 29, 2019

Attached is the approved 2020 budget for YSPUC.

The budget is based on our current rates, though we do expect approval of an increase as a result of our general rate filing.

As discussed last year, while we have been showing positive cash flow from operations, we are running negative when you factor in the capital investments that are needed to maintain our plant.

In the short term, our cash position is good, but our present rates are not sufficient to maintain the system over the long run.

To do that, we need to be reinvesting to offset depreciation.

We are proposing minimal cap ex expenditures this year as we have several previously funded projects that are still in process.

Capex projects for this year total $84,000 to repair/replace pumps on well 1e and well 42e, which are currently not functioning and to upgrade/install cathodic protection on booster 3e and tank 2.

Fortunately our tanks are in good shape – though keeping them that way is a high priority.

In addition we have the already approved projects for SCADA, well 49a and ac and roof replacement for the new building.

The purchase of the new building has been a positive, with rent from other tenants offsetting the building operating costs and saving us an additional $18k/year in rent.

Based on the purchase price, the investment in the building is giving us a better than 7% return on investment – which is very good in the present market.

COGS:

There are 2 significant increases projected in COGS (Cost of Goods Sold) this year.

1) According to the PGE general rate filing with the PUC (which has not yet been approved) 2020 electric rates are expected to increase 7.7% next year. If the changes are approved, they will be retroactive to January 1.

The increase over last year’s budget is $52,000 (and the increase based on 2019 actual production is about $30k)

Electricity rates are projected to increase again in 2021, based on PG&E’s tariff filing.

It is also possible that that PUC will approve even larger increases based on the losses PG&E incurred this year – but that generally takes some time to filter through.

2) This year we have 10 wells which require Title 22 testing (at approximately $2k/well)

Taken together this is a roughly 13% increase in cost of production – and a 30% increase in projected costs over the 2018 budget.

Unfortunately, these costs are largely outside our control – and give greater importance to exploring options like solar.

LABOR:

For the last few years our labor expenses have been significantly less than budget, primarily due to unfilled positions – also until 2019, the outsourcing of admin functions to YLOA did not adequately cover the actual admin costs.

In 2019, per PUC direction, we increased the admin funding based on actual labor costs of YLOA.

We have also shared labor between YLOA and YSPUC for meter reading and aerobics inspections – with 1 FT position funded by YSPUC and 2 PT positions funded by YLOA.

This year I am proposing that we combine those positions in one reporting structure under YLOA – which largely explains the increased admin fee in the proposed budget.

Our investment in SCADA will reduce the overall long term staffing needs of YSPUC – in addition to providing much better operational data – which enables us to make better, more efficient use of our plant.

Taken together, the proposed labor budget for 2020 is actually LESS than what it should have been in 2018 (when factoring in what the YLOA admin fee should have been to cover actual costs) and is about 4% higher than the 2019 budget.

As last year, the YLOA admin fee does not include administrative overhead like office space, utilities or equipment – though this year, it does include a pro-rata share of expected systems software costs.

Finally, we are instituting a requirement that all YSPUC field staff hold appropriate certifications before the end of the calendar year.

EXPENSES:

The budget for expenses in 2020 is about 4% less than in 2019. This is primarily due to reducing the budget for contingencies, even though other expenses are projected to increase.

Due to the pipeline project, we are continuing to see a reduction in main breaks as we prioritize the most fragile portions of our pipeline infrastructure.

Further, (YSPUC Company Manager and Chief Operator) Ken (Harrington) and I have discussed ways to reduce pipe buildup by providing for internal pipe maintenance (via ‘pigs’ or robots) as we move forward with that project. This will help us reduce the incidence of ‘brown water’ that is largely the result of natural iron deposits in portions of the park and the reaction of manganese with chlorine used for water treatment.

Budgets always represent tradeoffs as we can rarely do all that we want to – in the short term – there are additional projects that we need to accomplish and additional equipment that is needed, however we will present those once the general rate filing is complete and the PUC determines the appropriate rates and funding to maintain our vital water infrastructure.

We also want to make the board aware of a potential need to install filtering equipment on the well on Long Hollow. This is still being evaluated and the scope and cost information is not sufficiently developed to provide estimates at this time – though we will keep the board informed as new data comes to light.

Finally, we are implementing new financial and billing software in January. We will initially run the systems in parallel to confirm that everything operates properly. When completed, this will enhance the invoicing and payment processing – which will be more efficient, provide better customer information and improve the customer experience.

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