HomeMy WebLinkAbout04/02/1996, C-6 - STREET LIGHT ACQUISITION ���i���N��III��IIn�u►►�IU city of San Luis OBISp0 M N DAT
i COUNCIL AGENDA REPORT u ��
FROM: Michael McCluskey, Public Works Di
Prepared by: David Elliott, Administrative Analy
SUBJECT: Street Light Acquisition
CAO RECOMMENDATION:
Appropriate $550,000 from bond issue proceeds to pay for acquisition of street lights from
PG&E
DISCUSSION:
Background
The budget message on page A-2 of the 1995/97 Financial Plan mentioned the street light
acquisition as a project not budgeted in the Plan that would become a financing issue during
1995/96 after analysis of feasibility studies and negotiation strategies was completed. After
some delay (explained below), this project is ready to proceed.
There are 1,864 street lights within the City. The City owns 51 of these lights and pays
PG&E for electricity and maintenance on those 51 lights. PG&E owns the remaining 1,813
lights, and the City pays PG&E for rent plus electricity and maintenance on those 1,813
lights.
In late 1994 the City hired two consultants for advice on acquiring street lights from PG&E in
order to reduce operating costs. An accredited public utilities appraiser prepared a capitalized
income appraisal to establish a preliminary value for the system. 'Then an electric utilities
consultant prepared a report to determine the feasibility of the City acquiring the 1,813 street
lights owned by PG&E and assuming maintenance responsibility for all 1,864 lights. The
feasibility report showed that 1) acquisition cost would fall somewhere between $572,000 and
$729,000 and 2) following an acquisition the City could save about $120,000 each year in
operating costs.
Based on this information, the Council approved a 1994/95 midyear budget request to hire an
attorney for negotiation and condemnation services ($20,000) and an appraiser for appraisal
and negotiation services ($15,000).
In fall 1995 Public Works consulted with an attorney who specializes in negotiation and
condemnation proceedings needed to acquire street light systems from public utilities. He
advised the City to wait on its acquisition for two reasons.
First, there were two huge acquisitions then underway in Alameda County and Solano
County, involving both city and county governments. Because final acquisition prices in
those transactions would skew comparable sales averages, probably downward, it made sense
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= COUNCIL I GENOA REPORT
for the City to wait and possibly ride the coattails of these acquisitions to get a better price
than originally anticipated.
Then second, PG&E had recently proposed a rate restructuring that would reduce by more
than 20 percent the monthly rates paid by municipalities for rent, electricity, and maintenance
on utility-owned street lights (commonly known as "LS-1" rates). This restructuring would
also leave unchanged the monthly rates for electricity only on lights owned and maintained by
municipalitie (commonly known as "LS-2" rates). With all other factors remaining equal,
this restructu.ung might reduce the ongoing savings available through acquisition and lengthen
the payback period substantially.
Although there were too many unknown variables to proceed at that time, the situation has
stabilized since then. The Alameda County acquisition is still pending, but the Solano County
acquisition has been completed at prices somewhat lower than previously paid in other
jurisdictions. Also, the California Public Utilities Commission has approved the reduction in
LS-1 rates, which should take effect sometime after July 1996.
Recalculating the Feasibility of Acquisition
Public Works asked the public utilities appraiser to recalculate the capitalized income
appraisal based on the new LS-1 rate reductions. Included in the revised appraisal was an
estimate of the City's expected annual payments to PG&E under the new rate schedule before
and after acquisition of the street lights. Using these estimates Public Works recalculated the
feasibility of acquisition, with the results shown in the following table:
At Probable At High-End
Acquisition Acquisition
Cost of Cost of
$453,300 $543-900
Annual Operating Payments to PG&E Under Existing Circumstances (1) $190,100 $190,100
Less Annual Operating Payments to PG8 After Acquisition (2) -72,300 -72.300
Annual Savings Operating Payments to PG&E $117,800 $117,800
Less Annual Cost of Maintenance Assumed by the City -43,200 43,200
Less Annual Debt Service on Acquisition Financing (3) -39.000 -46.800
Net Annual Savings $ 35,600 $ 27,800
(1) for rent, maintenance, and electricity
(2) for electricity only
(3) over 30 years
More detailed calculations are attached. Even at the high end of acquisition cost, buying the
street light system still makes sense, because the annual savings in.operating payments would
exceed the annual cost of maintenance assumed by the City plus the annual debt service on
the acquisition financing.
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Next-S=s
The next step will be.for the City to enter preliminary negotiations with PG&E with an offer
based on the rudimentary capitalized income appraisal already prepared. (More refined
appraisals are not possible without a complete street light inventory, which PG&E will not
release until the City makes an offer.) Typically these preliminary negotiations stall; the
municipality files a condemnation lawsuit, and the parties eventually negotiate a settlement
based on more refined appraisals prepared jointly by PG&E and the municipality's appraiser.
FISCAL.IMPACT:
The $550;000 appropriation recommended would cover the estimated high end of acquisition
cost based on comparable sales. On April 16, 1996, the Council will consider financing this
acquisition (along with other capital projects) out of bond issue proceeds.
ATTACHMENT:
Calculation of Net Annual Savings After Street Light Acquisition
Note: The revised Capitaliued Income Valuation Study is available in the Council reading
file.
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CALCULATION OF NET ANNUAL SAVINGS
AFTER STREET LIGHT ACQUISITION
At Probable At High-End
Acquisition Cost Acquisition Cost
Annual Payments to PG&E Effective July 1996:
1,813 Lights on LS-1 Schedule(a) $187,100 $187,100
51 Lights on LS-2C Schedule(b) 3,000 $190,100 3,000 $190,100
Less Annual Payments to PG&E After Acquisition:
1,864 Lights on LS-2A Schedule (c) (72,300) (72,300)
Annual Savings in PG&E Payments $117,800 $117,800
Less Annual Cost of Maintenance Assumed by the City:
Compensation for 1/2 Regular Electrician $21,000 $21,000
Annual Amorization on Pickup Truck (d) 1,600 1,600
Annual Fuel/Maintenance on Pickup Truck 600 600
Replacement Materials/Parts 20,000 (43,200) 20,000 (43,200)
Less Annual Debt Service:
Acquisition Cost $453,300 $543,900
Times Annual Debt Service Factor (e) 0.086 (39,000) 0.086 (46,800)
Net Annual Savings $35,600 $27,800
(a) from page 3 of Capitalized Income Valuation Study
(b) based on an average estimated LS-2A rate of$38.80/light/year plus$19.56/light/year maintenance
(c) based on average estimated LS-2A rate from page 3 of CNS ($70,345/1,813 lights = $38.80/light/year
(d) $19,000 cost over 12 years
(e) based on$8,571/year debt service per$100,000 financed
-CapUized Income Valuation Study
Appraisal of facilities
to be Acquired frorri
Padfic`Gas and Electric Company'.
bythe Oily-of San-Luis Obispo,Califomia
March 19%
1
CAPITALIZED INCOME VALUATION STUDY
APPRAISAL OF FACILITIES TO BE ACQUIRED
FROM PACIFIC GAS AND ELECTRIC COMPANY
BY THE CITY OF SAN LUIS OBISPO, CALIFORNIA
INTRODUCTION
' R. W. Beck, Inc., was retained by the City of San Luis Obispo, California, to
conduct an appraisal of Pacific Gas and Electric Company's (PG&E's) streetlight
facilities in the City to determine the fair market value of the property based on
1 the capitalized income approach and the cost approach to valuation. In our
earlier report dated December 1994, R. W. Beck estimated the capitalized income
value of the streetlight facilities as of July 1, 1994. Since then PG&E filed its 1996
Test Year General Rate Case which proposes changes to the streetlight rates
based on the results of an updated cost-of-service study.
This report presents the results of our updated study to estimate the capitalized
income value of the streetlight facilities based on PG&E's most recently filed
streetlight cost-of-service study. R. W. Beck will conduct further studies to esti-
mate the Reproduction Cost New Less Depreciation (RCNLD) and Original Cost
Less Depreciation (OCLD) values of the streetlight facilities once the detailed
plant inventory for the system is obtained from PG&E. As such, this report is a
limited appraisal and does not constitute an opinion of fair market value.
DESCRIPTION OF THE PROPERTY
PG&E's streetlight tariff is comprised of two major rate schedules. Schedule LS-1
' applies to PG&E-owned streetlights, while Schedule LS-2 applies to customer-
owned streetlights. The streetlights that would be acquired by the City consist of
streetlights charged under the LS-1 rate schedule.'
The number of LS-1 streetlights by rate schedule, type, and size of lamp was
provided to R. W. Beck by Russell L. Hamm, a management consultant working
for the City, based on his analysis of PG&E billing data for the month of June
1994. City staff indicated that this data was still a reasonable estimate of the
number of LS-1 streetlights in the City. The following table shows the number of
I' 1 Within the LS-1 rate schedule there are various rates (LS-1A through LS-1F) for different
classes of service which take into account differences in plant facilities and whether the plant
was contributed by the customer. The California Public Utilities Commission does not
permit PG&E to earn a return on capital contributed by customers.
397
VALUATION STUDY
LS-1 streetlights, broken down by rate schedule, that would be acquired by the
City. To the extent there is a difference in the actual number of streetlights
acquired by the City compared to that assumed in this study, the value of the
streetlight facilities would have to be adjusted accordingly.
RATE SCHEDULE NUMBER OF LIGHTS
LS-1A 753
LS-1B 0
LS-1C 339
LS-1D 41
LS-1E 571
LS-IF 96
LS-1F.1 13
Total 1,813
All of the LS-1 streetlights to be acquired are high-pressure sodium vapor lamps.
Approximately 75 percent of the lights to be acquired are 70-watt lamps.
R. W. Beck has not conducted a visual inspection of the streetlight facilities
located in the City. Therefore, we cannot comment on the physical or functional
condition of the system at this time. This study assumes that the streetlight
facilities are in average condition for plant of comparable type and age.
DEFINITION OF FAIR MARKET VALUE
Fair market value is defined in the California Code of Civil Procedure
(Section 1263.320) as follows:
"(a) The fair market value of the property taken is the highest
price on the date of valuation that would be agreed to by a seller,
being willing to sell but under no particular or urgent necessity for
so doing nor obliged to sell, and a buyer, being ready, willing, and
able to buy but under no particular necessity for so doing, each
dealing with the other with full knowledge of all the uses and
purposes for which the property is reasonably adaptable and
available.
"(b) The fair market value of property taken for which there is no
relevant market is its value on the date of valuation as determined
by any method of valuation that is just and equitable."
3947 R. W.Beck Page 2
VALUATION STUDY
VALUATION DATE
The capitalized income value of the streetlight facilities was estimated as of
December 31, 1995.
APPROACH
Under the income approach, the value of the property is estimated by capital-
izing or determining the present worth of the prospective net income from the
property. The capitalized income indicator of value for the streetlight facilities
was determined based on a detailed analysis of the revenues and expenses asso-
ciated with the streetlights using data from PG&E's most recently filed streetlight
cost-of-service study. Since PG&E will continue to provide energy service to the
streetlights after acquisition, the income value of the streetlight system was
estimated by capitalizing the difference in net income PG&E would receive
under the LS-1 rates for PG&E-owned streetlights and the LS-2 rates for
customer-owned streetlights. The difference in net income was then divided by
a 14.30 percent pre-tax capitalization rate, which is equivalent to the 9.79 percent
after-tax rate of return authorized for PG&E by the California Public Utilities
Commission (CPUC) for calendar year 1995.
Detailed tables showing the development of the estimated income value are
provided in the Appendix to this report.
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal was prepared at the request of and for use by the City of San Luis
Obispo and the conclusions contained herein constitute only the opinion of
R. W. Beck. To the extent that information provided by the client or prepared by
others has been used in the preparation of this report, we have relied upon the
information to be accurate, and for which no assurances are intended and no
representations or warranties are made. The information was deemed reason-
able for the purposes of this report.
The conclusions and opinions of value found in this report are made expressly to
the following conditions and stipulations:
1. No responsibility is assumed by R. W. Beck for matters which are legal in
nature, nor do we render any opinion as to the condition of the facilities or
' title, and land and/or land rights, which are assumed to be good and
marketable.
z The proposed streetlight rates are presented in Chapter 5 of the Phase 2 Update,dated June
1995,of PG&E's 1996 Test Year General Rate Case. It is our understanding that the LS-1 and
LS-2 rates proposed by PG&E will likely become effective in July 1996.
394; R. W. Beck Page 3
VALUATION STUDY
2. All existing liens and encumbrances have been disregarded and the value of
the property was appraised as though free and clear and under responsible
ownership.
3. The capitalized income value of the streetlight facilities that would be
acquired by the City was estimated based on a summary of the number of
LS-1 streetlights by class, size, and type of lamp, provided by Russell L.
Hamm, a management consultant retained by the City. R. W. Beck did not
verify the accuracy of the summary provided by Mr. Hamm. For the
purpose of our appraisal analysis, it was assumed that the inventory
provided was an accurate representation of the streetlights that would be
acquired.
4. The capitalized income indicator of value was developed using data from
PG&E's 1996 Test Year General Rate Case, Phase 2 Update, Streetlight
Workpapers.
5. R. W. Beck did not conduct a visual inspection of the streetlight facilities.
Therefore, we cannot comment on the physical or functional condition of the
system.
CONCLUSIONS AND RESULTS
Based on the limiting assumptions and conditions described in this report, the
capitalized income value of the 1,813 streetlights presently owned by PG&E and
located within the jurisdiction or boundaries of the City of San Luis Obispo is
estimated to be$155,046, or an average value of$85.52 per streetlight.
However, there are several approaches to estimating the value of utility property.
While the capitalized income value is a relevant indicator of the value of the
streetlight system, it is only one indicator of value. As stated previously,
R. W. Beck will conduct further studies to estimate the Reproduction Cost New
Less Depreciation (RCNLD) and Original Cost Less Depreciation (OCLD) values
of the streetlight facilities once the detailed plant inventory for the streetlight
system is obtained from PG&E. The fair market value of the streetlight system
will then be estimated based on all indicators of value developed.
3947 R. W. Beck Page 4
1 VALUATION STUDY
CERTIFICATION
I, Nancy Heller Hughes, hereby certify that, to the best of my knowledge and
belief, the statements of fact contained in this report are true and correct. The
reported analyses, opinions, and conclusions, which were prepared by me or
under my direction, are limited by the assumptions and limiting conditions
stated in this report. R. W. Beck has no present or prospective interest in the
property that is the subject of this report, and has no personal interest or bias
with respect to the parties involved. Our compensation is not contingent upon
the reporting of a predetermined value or direction in value that favors the cause
of the client or involved parties, the amount of the value estimate, the attainment
of a stipulated result, or the occurrence of a subsequent event. This appraisal
assignment was not based on a requested minimum valuation, a specific valu-
ation, or the approval of a loan. This report has been prepared in conformity
with the Uniform Standards of Professional Appraisal Practice of the Appraisal
Foundation and the Principles of Appraisal Practice and Code of Ethics of the
American Society of Appraisers. The American Society of Appraisers has a
mandatory recertification program for all of its Senior Members, and I am in
compliance with that program.
Dated: March 19, 1996
R. W. BECK,INC.
Nacy nH er Hughes, AS
Executive Analyst
Copyright 1996, R. W. Beck, Inc. All rights reserved.
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3947 R. W. Beck Page 5
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APPENDIX
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TABLE 1
' STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
I LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
SUMMARY OF RATES USED IN STUDY
' Full Cost Full Cost
Schedule LS-1 LS-2A
Line Lamp Initial Avg.kWh Rates" Rates
No. Watts Volts Lumens per Month uanti1993 GRC 1993 GRC
(a) (b) (c)
HIGH PRESSURE SODIUM VAPOR
LS-3A
1 70 watt 120 5,800 29 557 6.182 2.432
' 2 100 watt 120 9,500 41 55 7.124 3.313
3 150 watt 120 16,000 60 0 8.650 4.706
4 200 watt 240 22,000 81 138 10.652 6.393
5 250 watt 240 25,500 100 1 12.428 7.714
6 400 watt 240 46,000 154 2 17.062 12.041
LS-1C
7 70 watt 120 5,800 29 233 6.543 2.432
8 100 watt 120 9,500 41 31 7.397 3.313
9 150 watt 120 16,000 60 0 8.836 4.706
10 200 watt 240 22,000 81 74 10.698 6.393
11 250 watt 240 25,500 100 0 11.993 7.714
12 400 watt 240 46,000 154 1 16.469 12.041
LS-11D
13 70 watt 120 5,800 29 41 9.381 2432
14 100 watt 120 9,500 41 0 9.971 3.313
15 150 watt 120 16,000 60 0 11.553 4.706
1 LS-1E
16 70 watt 120 5,800 29 453 9.535 2432
17 100 watt 120 9,500 41 11 10.389 3.313
18 150 watt 120 16,000 60 0 11.828 4.706
19 200 watt 240 22,000 81 107 13.690 6.393
20 250 watt 240 25,500 100 0 14.985 7.714
21 400 watt 240 46,000 154 0 19.462 12041
• Based on Energy Charge=0.07335/kWh.
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3/14/96 R.W.Beck Pagel
' TABLE 1 (continued)
STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
' LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
SUMMARY OF RATES USED IN STUDY
' Full Cost Full Cost
Schedule LS-1 LS-2A
Line Lamp Initial Avg.kWh Rates Rates
No. Watts Volts Lumens per Month anti : 1993 GRC 1993 GRC
(a) (b) (c)
' LSLS1 F
222 70 watt 120 5,800 29 88 12.042 2.432
23 100 watt 120 9,500 41 5 12.923 3.313
24 150 watt 120 16,000 60 0 14.571 4.706
25 200 watt 240 22,000 81 2 16.495 6.393
26 250 watt 240 25,500 100 1 18.238 7.714
27 400 watt 240 46,000 154 0 22.753 12.041
' LS-1F.1
28 70 watt 120 5,800 29 0 12.042 2.432
29 100 watt 120 9,500 41 0 12.923 3.313
30 150 watt 120. 16,000 60 0 14.571 4.706
31 200 watt 240 . 22,000 81 13 16.495 6.393
32 250 watt 240 25,500 100 0 18.238 7.714
33 400 watt 240 46,000 154 0 22.753 12.041
' 34 Grand Total 1,813
(a) Inventory based on street light billing records.
(b) Full cost rates per 1996 GRC,Phase 2 Update Workpapers,reflects energy charge=50.07335/klVh.
(c) Proposed rates per 1996 CRC,Phase 2 Update Workpapers,reflects energy charge=$0.07335/kWh.
3/14/96 R.W.Beck Page 2
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rTABLE 2
' STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
LS-1 and LS-2A FULL COST REVENUES AND O&M EXPENSES
Gross Full Cost Gross Full Cost
Revenue O&M Annual Revenue O&M Annual
' Line Full Cost Expense O&M Full Cost Expense O&M
No. Schedule LSl Rates ($/lamp/mth) Expense LS-2 Rates ($/lamp/mth) Expense
(a) (b) (d (d) (e) (�
HIGH PRESSURE SODIUM VAPOR
LS-1A
1 70 watt 41,322 1.49392 9,985 16,259 0.26190 1,751
2 100 watt 4,702 1.49390 986 2,186 0.26190 173
3 150 watt 0 1.52144 0 0 0.26190 0
4 200 watt 17,639 1.52144 2,520 10,587 0.26190 434
5 250 watt 149 1.54889 19 93 0.26190 3
6 400 watt 409 1.54889 37 289 0.26190 6
LS-1C
7 70 watt 18,295 1.49392 4,177 6,801 0.26190 732
8 100 watt 2,752 1.49390 556 1,232 0.26190 97
9 150 watt 0 1.52141 0 0 0.26190 0
10 200 watt 9,500 1.52144 1,351 5,677 0.26190 233
11 250 watt 0 1.54889 0 0 0.26190 0
12 400 watt 198 1.54889 19 144 0.26190 3
'
LS-1D
13 70 watt 4,616 1.49392 735 1,197 0.26190 129
14 100 watt 0 1.49390 0 0 0.26190 0
' 15 150 watt 0 1.52144 0 0 0.26190 0
LS-1E
16 70 watt 51,835 1.49392 8,121 13,223 0.26190 1,424
17 100 watt 1,371 1.49390 197 437 0.26190 35
' 18 150 watt 0 1.52144 0 0 0.26190 0
19 200 watt 17,578 1.52144 1,954 8,209 0.26190 336
20 250 watt 0 1.54889 0 0 0.26190 0
21 400 watt 0 1.54889 0 0 0.26190 0
LS-1F
2 70 watt 12,717 1.49392 1,578 2,569 0.26190 277
3 100 watt 775 1.49390 90 199 0.26190 16
24 150 watt 0 1.52141 0 0 0.26190 0
25 200 watt 396 1.52144 37 153 0.26190 6
26 250 watt 219 1.54889 19 93 0.26190 3
27 400 watt 0 1.54889 0 0 0.26190 0
LS-1F.1
28 70 watt 0 1.49392 0 0 0.26190 0
29 100 watt 0 1.49390 0 0 0.26190 0
30 150 watt 0 1.52144 0 0 0.26190 0
' 31 200 watt 2,573 1.52143 237 997 0.26190 41
32 250 watt 0 1.54889 0 0 0.26190 0
33 400 watt 0 1.54889 0 0 0.26190 0
' 34 Grand Total $187,046 $32,618 $70,345 $5,699
(a) Quantity*Rate•12 months.
(b) 1996 GRC,Phase 2 Update Workpapers.
(c) Quantity•O&M Expense'12 months.
(d) Quantih"•Rate'12 months.
(e) 1996 GRC,Phase 2 Update Workpapers.
' (t) Quantity'O&A1 Expense'12 months.
3/14/96 R.W.Beck Page 3
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rTABLE 3
STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
' DEPRECIATION&REPLACEMENT EXPENSE
Depreciation Contributed Replacement
Line Investment Annual Chg Capital Annual Chg O
No. Schedule Quantity RCN Unit 6.0876% RCN Unit 3.90120b
(a) (b) (c) (d) (e)
' HIGH PRESSURE SODIUM VAPOR
LS-1A
1 70 watt 557 264.67 8,974 0.00
2 100 watt 55 272.26 912 0.00 0
' 3 150 watt 0 285.28 0 0.00 0
4 200 watt 138 324.33 2,725 0.00 0
5 250 watt 1 377.48 23 0.00 0
6 400 watt 2 415.45 51 0.00 0
LS-1C
7 70 watt 233 309.44 4,389 0.00
8 100 watt 31 306.19 578 0.00 0
9 150 watt 0 308.36 0 0.00 0
10 200 watt 74 330.05 1,487 0.00 0
11 250 watt 0 323.54 0 0.00 0
12 400 watt 1 341.98 21 0.00 0
' LS-1 D
13 70 watt 41 276.88 691 1,083.64
14 100 watt 0 273.63 0 997.95 1,733
' 15 150 watt 0 275.80 0 1,044.59 0
LS-3E
16 70 watt 453 307.21 8,472 974.08
17 100 watt 11 303.96 204 974.08 17,214
' 18 150 watt 0 306.13 0 974.08 418
19 200 watt 107 327.82 2,135 974.08 0
20 250 watt 0 321.31 0 974.08 4,066
21 400 watt 0 339.75 0 974.08 0
'
LS-1F
22 70 watt 88 991.57 5,312 0.00
23 100 watt 5 991.63 302 0.00 0
24 150 watt 0 1,019.72 0 0.00 0
25 200 watt 2 1,049.11 128 0.00 0
26 250 watt 1 1,098.26 67 0.00 0
27 400 watt 0 1,121.40 0 0.00 0
'
LS-1F.1
28 70 watt 0 991.57 0 0.00 0
29 100 watt 0 991.63 0 0.00 0
' 30 150 watt 0 1,019.72 0 0.00 0
31 200 watt 13 1,049.11 830 0.00 0
32 250 watt 0 1,098.26 0 0.00 0
33 400 watt 0 1,121.40 0 0.00 0
34 Grand Total 1,813 $37,301 $23,431
(a) Inventory based on street light billing records.
(b) Replacement cost for typical installations,Workpapers,pp.STL 5-1 through 543.
(c) Depr.Component of Company Investment Levelized Annual Charge,Workpapers,p.STL 13-1.
(d) Replacement cost for typical installations,(Contributed Capital),Workpapers,pp.STL 5-5 through 5-7.
(e) Annual Carrying Charge on Contributed Capital,Workpapers,p.STL 13-1.
' 3/14/96 R.W.Beck Page 4
' TABLE 4
1 STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
TAXES OTHER THAN INCOME TAXES
1
Line
1 No. Source
1 Ad Valorem-Street Light System Total $492,000 STL 13-0
' 2 Payroll Taxes-Street Light System Total 298,000 STL 13-1
3 Business 3,000 STL 13
4 Other 7,000 STL 13-3
1 5 Total Taxes Other Than Income Taxes $800,000 Sum of Lines 1 through 4
6 Number of San Luis Obispo Street Lights 1,813 Table 1
1 7 Number of PG&E LS-1 Street Lights 210,660 STL 8-6
8 Allocation Factor- San Luis Obispo 0.0086 Line 4/Line 5
1
9 Taxes Other Than Income Taxes
1 Allocated to San Luis Obispo $6,885 Line 3Line 6
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1
1
1
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1 3/14/96 R.W.Beck Page 5
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' TABLE 5
STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
DEVELOPMENT OF GROSS WEIGHTED COST OF CAPITAL
' Gross
Line Capital Weighted Net to Gross Weighted
No. Ratios Cost Cost Multiplier Cost
Electric Department:
1 Bonds 46.50% 7.62% 3.54% 1.009686 3.58%
2 Preferred Stock 550% 8.05% 0.44% 1.71.1697 0.76%
3 Common Stock 48.00% 12.100a 5.81% 1.714697 9.96%
4 Total 100.00% 9.79% 14.30%
' For above Computations:
Fed Tax @ 35%
State Tax @ 9.3%
Uncollectables @ 0.24%
Franchise @ 0.723%
Super Fund Tax @ 0.12%
Source:1996 GRC,Phase 2 Update Workpapers,p.STL 12-6.
1
1
' 3/14/96 R.W.Beck Page 6
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' TABLE 6
STREET LIGHTING FACILITIES
OF PACIFIC GAS AND ELECTRIC COMPANY
LOCATED IN THE CITY OF SAN LUIS OBISPO,CALIFORNIA
VALUATION ANALYSIS-INCOME APPROACH
' AS OF 01/01/96
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No. Source
1 Gross Revenue-Cost Based LS-I Rates $187,046 Table 2
2 Less O&M Expenses 32,618 Table 2
3 Less Depreciation Expense 37,301 Table 4
' 4 Less Replacement Expense(on Contributed Capital) 23,431 Table 4
5 Less Taxes Otlur Than Income Taxes 6,885 Table 5
6 Net Operating Income(Pre-tax) $86,811
7 .Gross Revenue-Cost Based LS-2A Rates $70,345 Table 2
8 Less O&M Expenses 5,699 Table 2
' 9 Net Operating Income(Pre-tax) $64,646
10 Unadjusted Net Income Difference 522,165
11 Capitalization Rate(Pre-tax) 0.142958 Table 6
12 Income Approach Indicator of Value $155,046
' 13 ESTIMATED VALUE (Income Approach) $155,046
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' 3/14/96 R W. Beck Pagel