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Management Guide - Bulk Fuel Facility Business Operating Plan April 2008 Alaska Energy Authority
pertANNManagement Guide: Bulk Fuel Facility Business Operating Plan April 2008 Alaska Energy Authority =>ALASKA @-ENERGY AUTHORITY of Published by Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage,AK 99503 (907)771-3000 Project Funding Denali Commission Compiled and Designed by Aurora Consulting April 2008 Included in the back of this manual is a CD with all of the examples,exercises,etc.described in this manual. If it is not there,please call the Alaska Energy Authority's Training Program Manager at (907)771-3000 for a replacement. $$ Table of Contents Introduction Section 1 -Denali Commission Annual Report Itemized Instructions for Denali Commission Report ...............cccscssssesseseeseees 1 Section 2 -Setting Fuel Prices Fuel Pricing Policies ...........cc:ccccccccesssssteccceseesssscececceceessseanacaceeeeeesesssssaaeeasesoesoeess 1 Price-Setting Philosophy ................ccccececececcceeceeeessscsseeececceeeanseseesseseseseeeeeeaeeeeeees 1 Change Pricing as Needed .............ccccccesesssssnecceceeeecsseeeeeeseesesssseeeeeeessesoesssesees 2 Elements of Price -Special Charges ..............ccccccccnseeeeeeececeeseeeccaeeuseeeeeeeeeeseeeaes 2 Price-Setting Method -Per Gallon Pricing.............eee eescceeeceeesesseeeeeeeeeeesesenees 3 Elements of Price -Per Gallon Pricing ................cccccccecesssseseseeseeeeeeeeeeeceeeceseees 3 Overall Pricing Goal...eeessseeeesecccccccccccceceeeeeseeceerereeeseseceseeresseeseessesseseeres 4 Price-Setting Worksheet ...............cccsssccccccsessessnscececeseeesscceceeeesseesssaeeeeeeeeseeeeeeees 5 Cost of Fuel Worksheet ...............ccssccccsssesssencccceceesssssnneeeeeeeeessssneeeeeeeeeees heseeeeeees 12 Section 3 -AEA Energy Loan Programs Bulk Fuel Revolving Loan Fund......cccccccccssccccccccccceeeececeeececcesesceseeeceseeseeeeeees 1 Power Project Loan Fund.............cccccccesessssessesssecceeesesacceeeeeseneeaesnaaaceaaaaaneneenenees 2 Where to Obtain Loan Applications ...............cccccccesesesssenseeesenseneeneneneesesenseenenees 4 Section 4 --AEA Training Programs OVEYVICW 0....ccccccecesssesesssnceaceceecceeesssceneseceesscesceaeeeeeesenessaaaeeeeeeeseesesaeneeeaeeeeeeeeeeeeeea 1 Technical Operations Training ...............cccccsssessseeessesssceaaeneseeaeeeeesseneeasenaeeeaeeeee 2 Description of Management and Bookkeeping Training...................:ccccsceeeeees 3 Where to Obtain Training Program Schedule ..............ccccccccceeeseeeseteeeceeeeeeeeeees 4 Section 5 --Fuel Inventory Management Pros and Cons of Holding Fuel ...........ccccccssessecccccessssnecceceesessssssseeeeeeeseeeeeeens 1 Comparing Physical Fuel Levels with Bookkeeping Records..................:0000 1 Sample Monthly Fuel Inventory Record o......cccccceseecccceeeeeeeeeeeeceeeeeeeeeees 3 Worksheet Instructions -Monthly Fuel Inventory Records ................:::ccceeees 4 Section 6 -Annual Budgets/Annual Planning Financial Responsibilities of the Primary Operator ...........ccccccccsseceeeccceeceeeeeees 1 Wholesale vs.Retail Expenses.............:::sscssesessseseseesssseceeeeeeeseceesaeesesaceceeeeeeaeoaea 1 Required Bank Accounts ........cccccccccccscccssssessssseseccccceeeeeeessaenenssseeeeccceeeeuaaaeeeeeeees 2 Annual Budgets &Planning Requirements..............cccccccseeeeeeeeseeesseeseeeeeeeeeeeees 2 Estimating Expenses........ccccccccssssssceeeeessssnsneecececessecsaeeeeeceesesesseseeeceeseeeseseeseeaes 3 Amending the Budget ......cccccccccsccssscsscsssssccssscessscsssecesssessecssescssscecsssessesessssessues 5 |You're Finished with the Budget,Are You Done?0.0.0.0...ceccccccceenneneeeeeeeeeees 6 Sample Annual Budget Worksheet .........ccccccccccccccccccsccccceecceeceeeeeeeecessseeeeeeeeeees 6 Worksheet Instructions -Sample Annual Budget ...........cceeessseenneteeeeeees 10 Sample Exercise -Sample Annual Budget Worksheets .........Ledeeeseeeeeeeeeeeeeeees 13 Table of Contents (continued) Section 7 -Renewal &Replacement Account Information (R&R) What is the Purpose of the R&R Account?..........cccccsssesscccceessssnsesccessseeseeceeeeses 1 What Kind of Bank Account is Required?.............cccesceesesssssssssssesseesevecsscecseeees 1 How Much Should be Deposited in the R&R Account?...........cceeessecceeeeseeeeees 2 Further Information..............cccscscsccccceesssnccececccecsssesenssssensscccceecesssceseceseseessseeenees 4 Section 8 -Bookkeeping for Projects with Several Participants Annual Participant Agreements ...........cccccccssssseecssscescccecsccesceseesesscsnsssrseeeeasseeecs 1 Rights,Duties &Responsibilities of Participants.............ccccecccccccssssseeeeeseeeeees 2 Categories of Costs to Track ............ccccccccccsssssessessessnensacccecceceeeeseeeeseeecsnsnanenseeas 5 Setting Up Accounts............cccscccccccccccnesnnccceessseeseccescaensseeccesescaasseeeecessseuuseesceeeaes 6 Posting ACCOUNES ........cccccscccscsscsscccsscsscscccecccececcecccececeeesesceesssacesssssssessseeeceeeseeeeees 6 Allocating Costs .......ccccccccccscsssssscececcceesccneeceeeeseseesccceeceuseeecesseaceeseeeeeeeeesausceeeeeeeeos 6 Tracking Employee Time ............ccccccssssseccceessesssseessnscscnsseeeeeececeeeeeeseeteseeeseeeees 7 Year-end Summaly .........cccccscccsceceseccecccsessssssssssssnsenecceceeccccceseseeeeeeeeaaaeagauggensgsnes 7 Annual Payment by Participants 0...ccesssseeccccccessncecceceseeesssecccesseeeneeesecees 7 Sample Exercise -Bookkeeping for Projects with Several Participants........9 List of items on CD Section 1 -Denali Commission Annual Report Denali Commission Report Form Section 2 --Setting Fuel Prices Fuel Pricing Excel Worksheets (calculations) Sample:Completed Fuel Pricing Worksheets Section 5 -Fuel Inventory Management Fuel Inventory Records Excel Worksheets (calculations) Sample:Completed Fuel Inventory Records Worksheets Section 6 -Annual Budgets/Annual Planning Bulk Fuel Facility Annual Budget Excel Worksheets (calculations) Sample:Bulk Fuel Facility Annual Budget Worksheets INTRODUCTION Bulk Fuel Facility managers and staff are some of the most important people in their community -they are working hard to ensure that the community has the ability to store fuel in a safe and economically viable facility.The Alaska Energy Authority (AEA)and The Denali Commission recognize that everyone comes to their Bulk Fuel Facility positions with different levels of knowledge and experience and,as such,have developed this "Management Guide:Bulk Fuel Facility Business Operating Plan”to provide management information and tools for a variety of business management topics. This guide is a supplement to your Bulk Fuel Business Operating Plan,which provides a guideline for the maintenance,operation and sustainability of a new Bulk Fuel Storage Facility. Business Operating Plan Overview Generally,the Business Operating Plan:estimates operation and maintenance needs and costs,estimates renewal and replacement needs and costs,and estimates a per gallon surcharge for fuel.The Business Operating Plan requires the Primary Operator to be responsible for all aspects of the management and financial accounting for the facility,including: e Properly establishing and maintaining a financial management system,including budgets,financial reports and audits. e Accounting for,billing for,and using its best efforts to collect all O&M and R&R payments and all other receivables. e Establishing bank account(s)and depositing monies into the appropriate accounts. e Maintaining adequate cash reserves for both O&M and R&R. Guide Contents This guide provides tools to assist you with the successful implementation of your Business Operating Plan and contains both written materials and materials on a CD. Let's take a closer look at the content of this "Management Guide:Bulk Fuel Facility Business Operating Plan”: e Denali Commission Annual Report -An overview and set of written instructions is provided;along with blank forms on the CD. e Setting Fuel Prices -An overview of pricing principles,a pricing-model,along with samples of instructions,blank forms and examples on the CD. e AEA Energy Loan Programs -Information about Alaska Energy Authority Loans,including contact information. e AEA Training Programs -Information about Alaska Energy Authority Training Programs,including contact information. e Fuel Inventory Management -An overview of inventory control principles,an inventory control worksheet,along with samples of instructions,blank forms and examples on the CD. e R&R Bank Account Information -Information about required R&R bank accounts and Denali Commission requirements. e Annual Budgets/Annual Planning -An overview of the annual budgeting process,business operating plan requirements and a sample budgeting worksheet.A set of written instructions is provided,along with blank forms and examples on the CD. e Bookkeeping for Projects with Several Participants - An overview of the cost allocations for projects that have several participants,business operating plan requirements and cost allocation samples. Denali CommissionReport DENALI COMMISSION ANNUAL REPORT '.Itis the responsibility of the primary operator to arrange ..for an annual financial audit,or financial review,that is '”conducted by a Certified Public Accountant.It is not YO)required that the auditors travel to the primary operator's\ ”office;that decision is up to the primary operator and the auditor.Additionally,the primary operator must provide an annual report of operations to the Denali Commission that includes: 1.asummary description of O&M and R&R projects 2.annual O&M and R&R budgets and expenditures 3.an annual O&M and R&R payment schedule 4.any other information appropriate to the facility The Denali Commission will review the reports and the annual audit/review of facility operations and will actively monitor the primary operator's ability to operate consistent with guidelines outlined in the community's Plan.The Denali Commission has reserved the right to visit the site and to access all books and records related to the facility at any time upon written request. Additionally,the primary operator is required to provide all participants with copies of the annual financial report and audit/review. Itemized Instructions for Denali Commission Annual Report The following pages show the Denali Commission Annual Report and provide step-by-step instructions for providing the requested information.The information requested on the Report Form is very general -information such as the name and address of the Facility Manager,name of your bank and/or insurance company and information about the amount of fuel that flowed through the facility for the year. Other information,such as audit/review,bank statements,etc.,will need to be printed/copied and attached to the Report Form. A MS Word version of the Report Form is included on the Forms CD attached to the back cover of this "Management Guide”. -l- Page One:Denali Commission Annual Report Annual Bulk Fuel Facility Report to the Denali CommissionNameofPrimaryOperator:CA)Aue Report Period:B) Due Annually Within 90 days of the End of Primary Operator's Fiscal Year 1.Project Manager information a.Please provide the name,address,and phone number of the bulk fuel facility Project Manager. Cc)Name Address Phone Primary Contact Fax e-mail address b.Has the Project Manager changed during the past 12 months?yes no @) 2.Bulk Fuel Facility Participants (attach separate sheet if necessary)(cs)(o)«--->(9)indicate if any of the contacts are new since your last report. )a.Primary Operator Organization Name Please list the name of participating organizations (including your organization)in the bulk fuel facility and their respective contact information,and percentage of facility primary capacity.Please Contact Phone Number Percentage of Bulk Fuel Facility Primary Capacity: )b.Organization Name Contact Phone Number Percentage of Bulk Fuel Facility Primary Capacity:-p)b.Organization Name Contact Phone Number =)Percentage of Bulk Fuel Facility Primary Capacity: Revised:4/2/2008 Page One:Denali Commission Annual Report A: Instructions Enter the name of the organization that has been designated as the Primary Operator in the Facility's Business Operating Plan. Enter the 12-month period covered by the report.This should be the fiscal year of the Primary Operator. Enter the name,address,phone,fax and email of the Facility's manager.The Facility's Business Operating Plan requires that each bulk fuel facility have a designated Facility Manager. Mark "yes”if the Facility Manager has changed during the past twelve months or "no”if there has been no change.The Facility's Business Operating Plan requires the Primary Operator to notify the Denali Commission and the Alaska Energy Authority when the Facility Manager changes -and,marking "yes”on this form and sending it to the Denali Commission and the Alaska Energy Authority meets that requirement. Enter the name of the Primary Operator Organization,as designated in the Facility's Business Operating Plan,the contact person and phone number. Enter the "Percentage of Bulk Fuel Facility Primary Capacity” for the Primary Operator and all other participants.This information can be found in the Facility's Business Operating Plan.Basically,this is the percentage of space that the Primary Operator and other participants have available to them in the bulk fuel facility.It does not have anything to do with the amount of fuel actually stored -rather,it is the storage space available to each participant.The total of all participants must add to 100 percent.See example below: Example:Let's say that in the City of Nowhere's bulk fuel facility the Primary Operator is the City and the other participants include the Village Government and the School District.The City has available a total of 45,000 gallons of tankage to store diesel fuel;the Village has available a total of 25,000 gallons of tankage to store gasoline and diesel fuel;and,the School District has available 30,000 gallons of tankage to store diesel fuel.Therefore, -3- the "Percentage of Bulk Fuel Facility Primary Capacity”for each participant would be: City:45,000 gallons capacity divided by 100,000 total gallons =45 percent Village:25,000 gallons capacity divided by 100,000 total gallons =25 percent School District:30,000 gallons capacity divided by 100,000 total gallons =30 percent Total capacity:45 percent +25 percent +80 percent =100 percent Enter the organization's name,contact person and phone number for all other participants.If you have more than two other organizations,then,you must use a separate sheet of paper. Example:For our example above,we would need to provide information for both the Village and the School District. Page Two:Denali Commission Annual Report 3.Fuel Throughput Information -Bulk Fuel Facility Annual Participant GH)Throughput"Percent of Total Ga)a) *Throuchput =The annual estimated gallons of fuel that will flow through the Facility. Total G G@) 4.Bulk Fuel Facility O&M and R&R Account Information: Please provide the following information describing the Bulk Fuel Facility O&M and R&R Accounts: a.O&M Account Are the facility O&M funds deposited into a bank account? QD yes no if yes,what bank?N b.R&R Account Are the facility R&R funds deposited into a separate interest-bearing bank account -only for R&R funds? yes no lf yes,what bank?(P) §.Bulk Fuel Facility Liability Insurance Information: Please provide the following information describing the Bulk Fuel Facility liability insurance: a.Does the Bulk Fuel Facility have general liability insurance coverage? Q yes noIfyes,with what insurance company?CR b.If no,please explain how you are meeting the general liability requirement? © Revised:4/2/2008 Page Two:Denali Commission Annual Report Instructions H:Enter the name of each participant -one name per line. I;Enter the Annual Throughput for participant -this is the total gallons of fuel used or sold during the year by the participant. This information may need to be obtained from the other participants. J:Enter the "Percent of Total”for each of the participants.Again, this does not have anything to do with the amount of fuel actually stored -in this case,it refers to the fuel used or sold by the participant.The total of all participants must add to 100 percent. See example below: Example:Again,let's say that,in the City of Nowhere's bulk fuel facility,the Primary Operator is the City and the other participants include the Village Government and the School District.During the year,the City used 25,000 gallons of diesel fuel to generate electricity;the Village sold 21,500 gallons of gas/diesel;and,the School District used 15,000 gallons of diesel fuel to heat their facilities.Therefore,the total throughput for all participants this year is 61,500 gallons:25,000 +21,500 + 15,000 =61,500.And,the "Percent of Total”for each participant would be: City:25,000 gallons throughput divided by 61,500 total throughput =41 percent Village:21,500 gallons throughput divided by 61,500 total throughput =35 percent School District:15,000 gallons throughput divided by 61,500 total throughput =24 percent Total capacity:41 percent +35 percent +24 percent =100 percent K:Enter the total Annual Throughput for all participants -by adding up the participants'gallons of throughput in the column. Example:25,000 gallons +21,500 +15,000 gallons =61,500 gallons. Enter the total Percent of Total for all participants -by adding up the participants'percent of throughput in the column.NOTE: This should always be 100 percent. Example:41 percent +35 percent +24 percent =100 percent Mark "yes”if the Facility's O&M (operations and maintenance) funds are deposited into a bank. Enter only if the Facility's O&M funds are deposited into a bank account.If this is the case,enter the name of the bank. Mark "yes”if the Facility's R&R (renewal &replacement)funds are deposited into a separate interest-bearing bank account -one that is only for the bulk fuel R&R funds.(Proceed to "P”) Mark "no”if the Facility's R&R funds are deposited into a bank account that is also used for funds from other programs, departments or enterprises,including the Facility's operating funds.NOTE:The Facility's Business Operating Plan requires that the R&R funds are deposited into a separate interest-bearing bank account. Enter only if the Facility's R&R funds are deposited into a separate interest-bearing bank account.If this is the case,enter the name of the bank. Mark "yes”if the bulk fuel facility is covered by general liability insurance. Enter only if the bulk fuel facility is covered by general liability insurance.If this is the case,enter the name of the insurance company. Enter only if the bulk fuel facility is NOT covered by general liability insurance.If this is the case,explain how the Facility is meeting the general liability requirement. Page Three:Denali Commission Annual Report 6.Outstanding Concerns/Issues:CT) Please provide any information you believe the Denali Commission should know about any outstanding issues or concems or reoccurring problems faced by the bulk fuel facility:(attach separate sheet if necessary) 7.Attachments: Please attach the following information:(please indicate if not applicable) On Financial statementiedger detailing O&M expenditures for the report period Q)Financial statement/ledger detailing any R&R expenditures for the report periodCW)C)Detailed budget for O&M expenditures for the upcoming year(X)C)Detailed budget for any R&R expenditures for upcoming yearCY)C)Estimated annual and per gallon surcharges,by participant,for upcoming year(Z )C)Bank statements for ending balance of R&R account for report periodQa)Q Annual financial audit/review -If not yet available please indicate when audit/reviewreportwillbecompletedandmailedtotheDenaliCommission€O)()Community/tacility photos,if appropriate 6B)oD (J Any other appropriate information 8.Report Submittal:Please submit the following reports annually: An original report,including attachments to:Submit a copy of report,without attachments: Denali Commission,Alaska Energy Authority Attn:Energy Program Rural Energy Group€)510 L Street,Suite 410 813 West Northem Lights Blvd.€£)Anchorage,AK 99501 Anchorage,AK 99503 9.Prepared By: €&) Name Title Signature Date Revised:4/2/2008 Page Three:Denali Commission Annual Report T: Instructions Enter any information that you believe would be of interest to the Denali Commission about your bulk fuel facility.This might include reoccurring problems,important events or milestones, etc. ATTACHMENTS:Please provide a copy of each of the following,as applicable.The copies should be clearly labeled,but,do not need to be physically attached to this form. Place a checkmark on the form and provide a copy of your financial statement/ledger for the year that shows the O&M (operations and maintenance)expenditures.The Denali Commission is interested in how much money was spent during the year to operate and maintain the bulk fuel facility.This information might be from your accounting software,such as QuickBooks or photocopies of your manual ledger.Please make sure that the report is clear and is as concise as possible. Place a checkmark on the form and provide a copy of your financial statement/ledger for the year that shows the R&R (renewal and replacement)expenditures.This might be from your accounting software,such as QuickBooks or photocopies of your manual ledger.Please make sure that the report is clear and is as concise as possible.It is possible that you did not have any R&R expenditures during the year.If so,do not make a checkmark on the form.Instead,make a short note on the form explaining that you did not have any R&R expenditures during the year. Place a checkmark on the form and provide a copy of your O&M (operating and maintenance)budget for the upcoming year.The Denali Commission is interested in how much money the Facility plans to spend in the upcoming year to operate and maintain the bulk fuel facility.This information might be from your accounting software,such as QuickBooks,an MS Excel form,a City budget form,etc.Please make sure that the report is clear and is as concise as possible. Place a checkmark on the form and provide a copy of your R&R (renewal and replacement)budget for the upcoming year.There are many different ways to develop a budget for the Facility's R&R.During the early years of your bulk fuel project,it might make the most sense to use the R&R Schedule that was developed in your Business Operating Plan.If you are using this R&R Schedule as your annual R&R budget,then simply make a copy and include it with the Report Form.If you are developing your own R&R budget,then include a copy of that budget with the Report Form. Place a checkmark on the form and provide a copy of the estimated annual and per gallon surcharges (or payments)by participant for the upcoming year for both the O&M and R&R. Each of the participants should be contributing to the overall operation and maintenance and/or renewal and replacement of the Facility,as agreed to in the Business Operating Plan. O&M:The amount of the O&M payment will most likely vary each year because the operating costs do not usually remain constant each year.Costs for labor,supplies,insurance,etc. generally go up over time -and,therefore,it is most likely that the O&M annual payments will also go up.Once the annual budget for O&M has been determined,then it is possible to determine each participant's payment and/or per gallon surcharge. Example:Again,let's say that,in the City of Nowhere's bulk fuel facility,the Primary Operator is the City and the other participants include the Village Government and the School District.And,let's assume that an O&M budget was developed,and agreed to by the participants,that determined that the total amount needed for the year would be $45,000. And,let's assume that each of the participants'share of the annual payment is based upon their percentage of the Facility's primary capacity.Therefore,the total payments for all participants this year would be: City:$45,000 total budget multiplied by 45 percent =$20,250 Village:$45,000 total budget multiplied by 25 percent =$11,250 School District:$45,000 total budget multiplied by 30 percent =$138,500 -10- Annual Payments:$20,250 +$11,250 +$13,500 =$45,000 Total Then,we need to calculate the estimated per gallon surcharge for each participant. Example:So,let's say that we asked each of the participants and, everyone estimates that this year fuel usage (annual throughput) will be the same as last year.Using that assumption,we can calculate the per gallon surcharges: City:$20,250 annual payment divided by 25,000 gallons throughput =$.81 per gallon O&M surcharge Village:$11,250 annual payment divided by 21,500 gallons throughput =$.528 per gallon O&M surcharge School District:$13,500 annual payment divided by 15,000 gallons throughput =$.90 per gallon O&M surcharge NOTE:Remember,the important number here is the annual payment.Regardless of how much fuel a participant uses or sells -they must pay the Primary Operator the total annual payment.The per gallon surcharge is calculated to assist participants who sell fuel and to provide the Denali Commission a way to compare costs from one bulk fuel project to the next. R&R:The amount of the R&R payment will most likely vary each year because costs go up each year and the Business Operating Plan R&R Cashflow calculates an annual R&R payment that goes up each year due to rising costs,inflation,etc. Again,once the annual budget for R&R has been determined, then,it is possible to determine each participant's payment and/or per gallon surcharge. Example:Again,let's say that,in the City of Nowhere's bulk fuel facility,the Primary Operator is the City and the other participants include the Village Government and the School District.And,let's assume that the participants all agree that the best plan is to utilize the R&R Schedule and Cashflow developed in the Business Operating Plan.These schedules calculate for annual R&R payments,by participants,for 40 years after the Facility was installed.Therefore,the total -Il- payments for all participants for this year would be obtained from the R&R Cashflow.Let's also assume that this is the fifth year of the bulk fuel facility project.Therefore,we would go to the R&R Cashflow table and obtain the annual payments for each participant.In this case,well provide them: City:$138,500 fifth year payment Village:$7,500 fifth year payment School District:$9,000 fifth year payment Fifth Year Annual Payments:$13,500 +$7,500+$9,000 =$30,000 Then,we need to calculate the estimated per gallon R&R surcharge for each participant. Example:So,again let's say that we asked each of the participants and,everyone estimates that this year fuel usage (annual throughput)will be the same as last year.Using that assumption,we can calculate the per gallon R&R surcharges: City:$13,500 annual payment divided by 25,000 gallons throughput =$.54 per gallon R&R surcharge Village:$7,500 annual payment divided by 21,500 gallons throughput =$.3488 per gallon R&R surcharge School District:$9,000 annual payment divided by 15,000 gallons throughput =$.60 per gallon R&R surcharge NOTE:Again,remember,the important number here is the annual payment.Regardless of how much fuel a participant uses or sells -they must pay the Primary Operator the total annual payment.The per gallon surcharge is calculated to assist participants who sell fuel and to provide the Denali Commission a way to compare costs from one bulk fuel project to the next. So,finally,we need to calculate the total estimated per gallon surcharge for each participant. -12- BB: CC: DD: Example: City:$.81 O&M +$.54 R&R =$1.35 total per gallon surcharge Village:$.523 O&M +$.8488 R&R =$.8718 total per gallon surcharge School District:$.90 O&M +$.60 R&R =$1.50 total per gallon surcharge Place a checkmark on the form and provide a copy of the bank statement for the R&R account that shows the year-end balance. Place a checkmark on the form if the annual financial audit or review is available and provide a copy of the annual audit report. If the annual audit/review is not yet available,indicate when the audit/review will be available and mailed to the Denali Commission. If appropriate,provide community/facility photos.If you havea photo that you believe would be of interest to the Denali Commission -then place a checkmark on the form and send the photo with the Report Form. If appropriate,provide other information you believe that the Denali Commission should know-then place a checkmark on the form and send the information with the Report Form. REPORT SUBMITTAL EE: FF: GG: Send a copy of the report,including all attachments to the Denali Commission at the following address: Denali Commission,Attn:Energy Program 510 L Street,Suite 410 Anchorage,AK 99501 Send a copy of the report,without attachments,to the Alaska Energy Authority at the following address: Alaska Energy Authority,Rural Energy Group 813 West Northern Lights Blud. Anchorage,AK 99503 Provide the name,title and signature of the person preparing the Report Form and the date the report was mailed. -13- Setting Fuel Prices -SETTING FUEL PRICES © The establishment and adjustment of fuel prices is critical to maintaining the financial health of your bulk fuel facility.And,in order to properly set prices,you must know how much it costs per gallon of fuel to d operate the bulk fuel facility.Once you have determined how much it costs to operate the facility-then you have a basis for setting prices. Properly setting fuel prices will assure that your facility can provide adequate funds for the proper management,operation,maintenance, renovation or expansion of the facility! Fuel Pricing Policies There are three major criteria that should be met in the development and establishment of fuel prices.Prices should be: 1.Set using an established written procedure adopted by the policy- making body.(NOTE:A written procedure does not need to be long and complicated.It can be as simple as stating that you will use the "Price-Setting Worksheet”and will include a markup of 5%to each gallon of fuel.) 2.Understandable and explainable to the policy-making body and the customers. 3.Fair to all customers. Price-Setting Philosophy There are three key price-setting elements that are generally accepted by many businesses,including: 1.The subsidizing of certain classes of customers (such as elders)is OK as long as the amount of subsidy and the effect it has on other customer's prices are understood. 2.The use of business funds to subsidize other operations (such as street maintenance,fire or police)is OK only if all of the fuel business's costs,including long-term repair and renewal,also are being included in the price. 3.Prices should be fair to all.Discounts and special prices are OK - but,only if offered to all customers under the same terms.For example,all customers purchasing more than 1,000 gallons per year receive a $.01 per gallon discount. Change Pricing as Needed Prices should be reviewed frequently -ideally monthly -to ensure that all of the assumptions that you used to develop your price are still true. And,prices should be reviewed when any of the following occur: each year during the budget development process a major change in the cost of bulk fuel a major change in the facility or operations a major change in your customer basePoh Elements of Price --Special Charges Cost of Special Services Bulk fuel facilities could provide special services,such as fuel delivery, fuel storage and sale of other products.The charges for recovering the cost of providing these services are called service charges.These charges are applied only to the individual customer who receives the service and usually wouldn't be included in the per gallon cost of fuel. Cost of Penalty Items When customers fail to pay a bill on time,they increase the cost of operating the facility.The charges for recovering these types of costs are called penalties and normally should be charged to the individual customers rather than added to the per gallon cost of fuel.However, once you determine that a customer will likely never pay their outstanding bill,and,you have terminated their service,then that outstanding amount becomes bad debt and will need to be incorporated into your general and administrative expenses. -2- Price-Setting Method -Per Gallon Pricing Determining Cost of Service The recommended price-setting method requires determining the price elements described below.Calculating the true cost of providing service requires fairly detailed and accurate accounting.The cost of service can be estimated using available data from the fuel invoices,the R&R plan,operating budget and other available accounting data. Allocate Costs Based on Usage The next step is to determine how much of the total cost each customer should pay.The fairest way to do this is to allocate the costs on a per gallon basis for each type of fuel sold.Therefore,it is important to keep good fuel records -amount of fuel purchased,used and sold. Adoption &Review The method of establishing prices should be described in the facility's operations procedures and approved by senior management. ,It should be in writing and explain what is included and /_excluded from the price set for each type of fuel.A minimum price should be reviewed frequently. Elements of Price -Per Gallon Pricing Fuel prices are designed to generate revenue to recover the cost of operating,maintaining,managing or replacing the bulk fuel facility, and,in some cases,to make a profit.So,what are those costs?The most common costs that will be incurred by bulk fuel facilities can be divided into three areas: 1.Cost of fuel 2.Facility upgrade surcharge 3.General &administrative expenses Cost of Fuel The cost of bulk fuel inventory can be further broken into three parts:cost of product,cost of transportation and cost of delivery services.Large enterprises track these three items separately, but,for most small enterprises,it is more efficient to combine them. Either way,it is important to make sure that you include all the fuel charges in your fuel pricing. -3- Facility Upgrade Surcharge The facility upgrade surcharge,which is calculated in the Facility Business Operating Plan,can be further broken into two parts:operations and maintenance (O&M)and renewal and replacement (R&R). 1.O&M:O&M items included as part of the facility upgrade surcharge are those items that are necessary to ensure the on- going operation of the facility,but,do not include any expenses related to retailing of fuel.These O&M costs are defined as expenses that are incurred on a regular basis (supplies,audits, etc.)and maintenance expenses that are incurred on an annual basis,as well as replacement costs of items under $5,000. 2.R&R:R&R costs are those expenses defined as items costing greater than $5,000 and/or that are not incurred on an annual basis,and,are required to ensure the long-term,on-going operation of the facility,but,do not include any expenses related to retailing of fuel. General &Administrative Expenses In addition to the O&M costs included in the Business Operating Plan,as part of the Facility Upgrade Surcharge,a bulk fuel facility may have additional general and administrative costs. Such additional costs could include additional salaries and office expenses for invoicing retail customers,additional insurance (beyond that required by the Business Operating Plan),additional salary expense for employees,etc.Again,make certain that all your costs are included in the fuel prices. Overall Pricing Goal The most important thing to remember about developing and managing your fuel prices is -you are trying to set a price that allows you to collect enough money to pay for your next fuel purchase and to operate the facility.If you buy fuel only once a year,then,you need to collect enough money to buy next year's fuel and to operate the facility.Also remember -fuel costs generally go up! NGNs /;"OYa, Step One: Step Two: Step Three: Step Four: Step Five: Step Six: Step Seven: PRICE-SETTING WORKSHEET Determine total estimated sales by type of fuel A.Diesel #1 =gallons B.Diesel #2 =gallons C.Gasoline =gallons D.Other =gallons Determine the per gallon Facility Upgrade Surcharge A.This year's O&M surcharge is $.__per gallon B.This year's R&R surcharge is $.___per gallon Total Facility Upgrade Surcharge per gallon = Determine the General &Administrative Expenses A.Additional administrative salaries are $ B.Additional office supplies and expenses are $ C.Bulk fuel loan interest are $ D.Other miscellaneous expenses are $ Divide total other general &administrative expenses by total estimated usage $/gallons =$per gallon Determine the per gallon costs of providing service (A) Facility Upgrade Surcharge =$ General &Administrative =$ Per gallon costs for providing service =$ Determine the cost of fuel purchase/per gallon by type of fuel (B)(See Cost of Fuel Worksheet) Diesel #1 $per gallon Diesel #2 $per gallon Gasoline $per gallon Other $per gallon Determine the price per gallon by type of fuel (A+B) Diesel #1 (A)+(B)=$per gallon Diesel #2 (A)+(B)=$per gallon Gasoline (A)+(B)=$per gallon Other (A)+(B)=$per gallon Add Markup/Profit Percentage _5- PRICE-SETTING WORKSHEET INSTRUCTIONS Step One:Determine total estimated sales by type of fuel A.Diesel #1 =gallons B.Diesel #2 =gallons C.Gasoline =gallons D.Other =gallons The first step in developing your fuel prices is to estimate how much fuel you will be selling.If you use fuel or contribute fuel toa community purpose,without collecting payment for the fuel,do not include those gallons in your estimate.Why?Because you are attempting to estimate the number of gallons that you will be able to sell,and collect cash from,in order to fund your fuel purchase and your operations.If you currently are allowing customers to charge for fuel purchases,and,some of those customers are not paying their bills -then,do not include those gallons in your estimate.Why? Because,if the customers are not paying their bills,you will not receive cash from them to help pay for fuel purchases or pay for facility operations. You should calculate "estimated sales”by type of fuel -mostly because you probably pay a slightly different amount for each type of fuel.But,it also helps you to understand your fuel business better. For purposes of working through the worksheet,let's assume the following estimated sales information for the upcoming year: Diesel #1 =85,000 gallons Diesel #2 =25,000 gallons Gasoline =40,000 gallons Other =0 gallons Total gallons =100,000 Step Two:Determine the per gallon Facility Upgrade Surcharge A.This year's O&M surcharge is $.__per gallon B.This year's R&R surcharge is $.___per gallon Total Facility Upgrade Surcharge per gallon =$ The second step in developing your fuel prices is to estimate the per gallon charge you should add to cover your facility upgrade surcharge.The facility upgrade surcharge is calculated in your bulk fuel facility's Business Operating Plan and should be reviewed and updated each year. The facility upgrade surcharge has two parts -the O&M (operations and maintenance)costs and the R&R (repair and renewal)costs. The O&M costs are expenses,required by the Business Operating Plan,for the purpose of operating the bulk fuel facility,for routine and regular items,such as administration,postage,audit,liability insurance and annual maintenance expenses,such as filters and parts;and,long-term repair and renewal items that are less than $5,000,such as pumps,small fence repair,etc.The R&R costs are expenses for repair and renewal items that are not annual and cost more than $5,000. Updating O&M Costs The goal of this step is to establish an O&M budget projection for the new year.You will need to compare the actual O&M expenditures against budgeted O&M costs.To accomplish this,first gather together your bookkeeping records that identify your O&M costs for this fiscal year.Ideally,you will have monthly records of actual expenses as well as a compiled total fiscal year summary statement of your O&M actual expenditures.Review the actual expenditure records and compare against the budgeted projections. Decide if you actually spent more or less than what was budgeted. If for some reason you spent more or less in any one area,ask yourself if some event or unique circumstance caused the expenditure or savings or will the same likely occur in the new year. You will need to make judgments and corresponding adjustments to your O&M budget.Any actual expenditures or savings that were -7- incurred during the previous year,that you believe will stay the same in the coming year,need to be reflected in the coming year's budget. Updating R&R Costs Generally,for purposes of investing money into your required R&R bank account,you should probably refer to the annual R&R payments detailed in your Business Operating Plan.However,if you are aware of a major R&R expenditure you need to make in the upcoming year,and,you do not yet have enough money deposited into your R&R bank account -then,you should add your annual R&R payment amount to the cost of the item(s)you know you need to buy in the upcoming year.Why add both into the pricing model? Because,you need to make an annual deposit into the R&R account to continue to build a fund balance that will provide for major repair and renewal items into the future. So,on the worksheet: O&M Surcharge Example:If you have put together your operating budget for the next year,and,the total is $45,000,and in step one above,you determine that you would sell a total of 100,000 gallons -then,your O&M surcharge would be $.45 per gallon. $45,000 divided by 100,000 gallons =$.45 per gallon R&R Surcharge Example #1:If you do not know of any major repair or renewal items that you have to buy in the upcoming year - then,you simply refer to the Business Operating Plan.Go to the table that shows the annual amount you should deposit into your R&R account and divide by the number of gallons you estimate you will sell.So,in the third year of the facility's operation,we would take the year three amount from the Business Operating Plan -let's assume it's $5,572 -and divide it by the number of gallons you estimate to sell -let's assume 100,000 gallons.Then,your R&R surcharge would be $.0557 per gallon. $5,572 divided by 100,000 gallons =$.0557 per gallon -8- Example #2:If you know you will need to spend about $7,500 to repair a dispensing tank in the upcoming year, then you should add the $7,500 to the annual R&R deposit amount of $5,572 and then divide by the number of gallons you think you will sell.So,your R&R surcharge would be $.1307 per gallon. $5,572 for annual R&R deposit plus $7,500 for fence =$13,072 $13,072 divided by 100,000 gallons =$.1307 per gallon Total Facility Upgrade Surcharge And,finally to get the total facility surcharge -add together the per gallon surcharge for O&M and the R&R (Example #1). $.45 (O&M)+$.0557 (R&R example 1)=$.5057 Step Three:Determine the General &Administrative Expenses A.Additional administrative salaries are $ B.Additional office supplies and expenses are $ C.Bulk fuel loan interest are $ D.Other miscellaneous expenses are $ Divide total other general &administrative expenses by total estimated usage $/gallons =$per gallon The third step in developing your fuel prices is to estimate the per gallon charge you should add to cover your annual general and administrative expenses.General and administrative expenses are defined as administrative costs that are incurred on an annual basis (bookkeeper labor,fuel loan interest,etc.).These costs will vary greatly from facility to facility,but,might include administrative salaries,office expenses,phone expenses,loan interest,etc.These expenses would also include any costs for training,an audit or Insurance,that are beyond what is required by the Denali -9- Commission and that are described in your Business Operating Plan.For example,if you have Spill Liability Insurance or maybe Property Insurance for your computers -the cost of those policies would be beyond the requirements of the Business Operating Plan, and,therefore,would be included here in the general and administrative expenses. How do these expenses differ from the annual O&M expenses?Well, in reality they may not differ very much.And,in fact for purposes of calculating your fuel prices -it might be easier to combine your O&M and general and administrative expenses.That's OK!The important thing is to make certain that you include ALL of your costs when computing fuel pricing. So,for purposes of filling out the worksheet,let's assume the following: Additional administrative salaries are $15,000 Additional office supplies and expenses are $5,000 Bulk fuel loan interest is $10,000 Depreciation expenses is $6,500 $36,500 divided by 100,000 gallons =$.365 per gallon Step Four:Determine the per gallon costs of providing service (A) Facility Upgrade Surcharge =$ General &Administrative =$ Per gallon costs for providing service =$ The fourth step in developing your fuel prices is fairly simple.All you are going to do is -add together the numbers from steps two and three. First,take the amount you calculated in Step Two,the Facility Upgrade Surcharge and enter it on the worksheet: Facility Upgrade Surcharge =$.5057 -10- Next,take the amount you calculated in Step Three,the General and Administrative Expenses,and enter it on the worksheet: General &Administrative (G&A)=$.365 Now,let's add the two numbers together to determine the Per Gallon Costs for Providing Service: $.5057 (Facility Surcharge)+$.865 (G&A)=$.8707 Step Five:Determine the cost of fuel purchase/per gallon by type of fuel (B)(See Cost of Fuel Worksheet) Diesel #1 $per gallon Diesel #2 $per gallon Gasoline $per gallon Other $per gallon The fifth step in developing your fuel prices is to estimate the per gallon charge you should add to cover the cost of fuel.This step is very important because,you need to estimate what you believe the cost of your next fuel purchase will be -do not use the cost of fuel for the delivery you just received!Why?Because,if you do,you are setting a fuel price that will not allow you to collect enough cash to cover the cost of your NEXT fuel purchase,AND,your facility operation.You need to look ahead not behind! There are a couple of different ways to approach this step: 1.You could ask your fuel supplier what prices are going to be or 2.You could use the current fuel prices and apply an inflationary factor to estimate future fuel prices. A Cost of Fuel Worksheet is provided below to help you calculate the cost of fuel using current fuel prices and an inflationary factor. -ll- COST OF FUEL WORKSHEET First:Determine the purchase cost of fuel /per gallon (C) Diesel #1 $/gallons =(C)$per gallon Diesel #2 $/gallons =(C)$per gallon Gasoline $/gallons =(C)$per gallon Other $/gallons =(C)$per gallon Second:Determine the delivery cost of fuel /per gallon (D) Delivery costs $/Total gallons =(D)$per gallon Third:Determine the cost per gallon by type of fuel (C+D)=E Diesel #1 (C)+(D)=(E)$per gallon Diesel #2 (C)+(D)=(EF)$per gallon Gasoline (C)+(D)=(E)$per gallon Other (C)+(D)=(E)$per gallon Fourth:Determine the inflationary factor for fuel /per gallon (E times Percent Inflation)=F Diesel #1 (E)$per gallon x %=(F)$per gallon increase Diesel #2 (E)$per gallon x %=(F)$per gallon increase Gasoline (E)$per gallon x %=(F)$per gallon increase Other (E)$per gallon x %=(F)$per gallon increase Fifth:Determine the fuel cost per gallon by type of fuel (E+F) Diesel #1 (E)+(F)=$per gallon Diesel #2 (E)+(F)=$per gallon Gasoline (E)+(F)=$per gallon Other (E)+(F)=§$per gallon -12- Here's an example of how to use the Cost of Fuel Worksheet to calculate the cost of gasoline: First:Determine the purchase cost offuel /per gallon (C) So,let's say that you just bought 40,000 gallons of gasoline for $140,000.Then,the per gallon price is: Gasoline $140,000/40,000 gallons =$3.50 per gallon Second:Determine the delivery cost of fuel /per gallon (D) And,let's say that the fuel company charged you a total of $20,000 to deliver all the fuel you purchased,including diesel and gasoline.The delivery charge per gallon is: Delivery cost $20,000/100,000 Total gallons =$.20 per gallon Third:Determine the cost per gallon by fuel type (C+D)=E Next,all you do is add the two numbers from above together to get the delivered cost per gallon: Gasoline (C)$8.50 +(D)$.20 =(E)$8.70 per gallon Fourth:Determine the inflationary factor for fuel /per gallon -(E times Percent Inflation)=F Now,this next step is a bit of guess work.It requires you to think ahead and guess whether fuel prices will go up.And,they usually do! So,let's say that fuel prices over the past few years have gone up each year -an average of 5 percent.You might decide,then,that next year's fuel prices will also go up 5 percent.But,let's say you just heard on the television news that oil production had greatly declined and gas prices were expected to go up.In that case,you might decide to assume that fuel prices will go up 10 percent. Ultimately,it is a bit of guess work.But,it is important to think about this step so that you collect enough cash for the next fuel purchase.But,let's assume 5 percent for now: Gasoline $3.70 per gallon x .05%=$.185 per gallon increase -13- Fifth:Determine the fuel cost per gallon by type offuel (E+F) Lastly,you simply add together the delivered cost of fuel and the estimated price increase: Gasoline (E)$3.70 +(F)$.185=$3.885 per gallon So,you would use $3.885 per gallon as the cost.And,then you repeat the procedure for all types of fuel you are pricing. Now,let's enter the cost per gallon by type of fuel information into the Fuel Pricing Worksheet,using the cost we calculated above for gasoline ($3.885)and let's assume a price of $3.55 for diesel #1 and $3.25 for diesel #2. Determine the cost of fuel purchase/per gallon by type of fuel (B) Diesel #1 $3.549 per gallon Diesel #2 $3.246 per gallon Gasoline $3.885 per gallon Other Not applicable Step Six:Determine the price per gallon by type of fuel (A+B) The sixth step in developing your fuel prices is to total the cost of providing the service and the cost of fuel.This is the last step unless you are going to add a markup for a profit percentage,which is often a very good idea. Diesel #1 (A)$.8707+(B)$8.5495 =$4.4197 per gallon Diesel #2 (A)$.8707 +(B)$3.246 =$4.1163 per gallon Gasoline (A)$.8707 +(B)$8.885 =$4.7557 per gallon Other Not applicable Step Seven:Add Markup/Profit Percentage The last step in developing your fuel prices is to add any profit margin or markup that your business has determined is necessary.Adding a profit margin or markup is a good way to make sure that you are collecting enough cash to pay future bills as prices and other costs go up! -14- Step One: Step Two: SAMPLE PRICE-SETTING WORKSHEET Determine total estimated sales by type of fuel A.Diesel #1 =35,000 gallons B.Diesel #2 =25,000 gallons C.Gasoline =40,000 gallons D.Other =gallons Determine the per gallon Facility Upgrade Surcharge A.This year's O&M surcharge is $.45 per gallon B.This year's R&R surcharge is $.0557 per gallon Total Facility Upgrade Surcharge per gallon =$.45 +$.0557=$.5057 Step Three: Step Four: Step Five: Step Six: Step Seven: Determine the General &Administrative Expenses A.Additional administrative salaries are $15,000 B.Additional office supplies and expenses are $5,000 C.Bulk fuel loan interest is $10,000 D.Other miscellaneous expenses are $6,500 Divide total other general &administrative expenses by total estimated usage $36,500 /100,000 gallons =$.365 per gallon Determine the per gallon costs of providing service (A) Facility Upgrade Surcharge =$.5057 General &Administrative =$.365 Per gallon costs for providing service =$.5057 +.3865 =$.8707 Determine the cost of fuel purchase/per gallon by type of fuel (B)(See Cost of Fuel Worksheet) Diesel #1 $3.549 per gallon Diesel #2 $3.246 per gallon Gasoline $3.885 per gallon Other $per gallon Determine the price per gallon by type of fuel (A+B) Diesel #1 (A)$.8707 +(B)$3.549 =$4.4197 per gallon Diesel #2 (A)$.8707 +(B)$3.246 =$4.1163 per gallon Gasoline (A)_$.8707 +(B)$3.885 =$4.7557 per gallon Other (A)+(B)=$per gallon Add Markup/Profit Percentage -15- SAMPLE COST OF FUEL WORKSHEET First:Determine the purchase cost of fuel /per gallon (C) Diesel #1 $/gallons =(C)$per gallon Diesel #2 $/gallons =(C)$per gallon Gasoline $140,000/40,000 gallons =(C)$3.50 _per gallon Other $/gallons =(C)$per gallon Second:Determine the delivery cost of fuel /per gallon (D) Delivery costs $20,000 /100,000 Total gallons =(D)$.20 per gallon Third:Determine the cost per gallon by type of fuel (C+D)=E Diesel #1 (C)+(D)=(E)$per gallon Diesel #2 (C)+(D)=(E)$per gallon Gasoline (C)_$3.50 +(D)$.20 =(E)$3.70 per gallon Other (C)+(D)=(E)$per gallon Fourth:Determine the inflationary factor for fuel /per gallon (E times Percent Inflation)=F Diesel #1 (E)$per gallon x %=(F)$per gallon increase Diesel #2 (E)$per gallon x %=(F)$per gallon increase Gasoline (E)$3.70 per gallonx_5 %=(F)$.185 __per gallon increase Other (E)$per gallon x %=(F)$per gallon increase Fifth:Determine the fuel cost per gallon by type of fuel (E+F) Diesel #1 (E)+(F)=per gallon Diesel #2 (E)+(F)=$per gallon Gasoline (E)$3.70 +(F)$.185 =$3.885 per gallon Other (E)+(F)=$per gallon -16- AEA Energy LoanPrograms AEA ENERGY LOAN PROGRAMS The Alaska Energy Authority (AEA)provides loans for power development projects or upgrades to electric »power facilities,as well as loans for the purchase of 'fuel.Both of these programs are subject to State of Alaska statutes and regulations as outlined below.For more information on the AEA loan programs contact:AEA Loan Officer, Phone (907)771-3000. Bulk Fuel Revolving Loan Fund The purpose of the AEA Bulk Fuel Revolving Loan Fund is to assist communities,utilities or fuel retailers,in small rural --communities,in purchasing emergency,semi-annual or pitalannualbulkfuelsupplies.Loans are only for the ares purchase of new fuel.Loans will not be provided for fuel already purchased,in the process of being used or already consumed. Who is eligible to apply? ¢«An organized municipality or unincorporated village with a population under 2,000 people. «Apperson,including private individuals,corporations and cooperatives,with a written endorsement from the governing body of each community for which the fuel will be used. Bulk fuel may be used for: ¢Municipal electrical power generators,municipal heavy equipment. ¢Heating fuel for the municipality,residents and businesses. «Municipal,business and residential motor vehicles and for subsistence purposes. Generally,aviation fuel and other non fuel-related supplies are not covered under the AEA Bulk Fuel Loan Program. Loan proceeds may not be used to subsidize a business or to make a profit unless the profit is used to purchase additional community fuel supplies. Amount: e Maximum loan amount per fiscal year (July 1 -June 30)is $400,000.00 per borrower or up to $1.5 million for cooperative organizations representing more than one community ($400,000 multiplied by the number of communities). «Cannot exceed 90%of the wholesale price of the fuel,plus the cost of fuel transportation. Fees: «Anon-refundable $25 application fee is required at the time of the submission of the application. «A.5%origination fee of the total loan amount is charged at the time the loan is disbursed. Interest Rate &Term: ¢«Generally no interest is charged on the first Bulk Fuel Loan. ¢Generally 5%is charged on the second Bulk Fuel Loan. «The third and subsequent bulk fuel loans are charged an interest rate equal to the average weekly yield of municipal bonds for the proceeding year (12 months). ¢The loan will be repaid within one year or less and generally the term is nine (9)equal monthly installments. Applicants are considered on a "first come,first serve"basis. Because the loans are for the purchase of new fuel,it is advisable for communities to submit their application well in advance of the anticipated time of purchase of community fuel supplies. Power Project Loan Fund The AEA Power Project Loan Fund provides loans to local utilities,local governments or independent power producers for the development or upgrade of electric power facilities,including conservation,bulk fuel storage,waste energy conservation or potable water supply projects. The loan term is related to the life of the project and interest rates vary between tax-exempt rates at the high end and zero on the low end. Who is eligible to apply? Electric utilities Regional electric authorities Municipalities Regional and village corporations Village councils Independent power producers Nonprofit marketing cooperatives Loans may be used for a variety ofprojects including: Reconnaissance studies,feasibility studies,license and permit applications,preconstruction engineering and design of power projects; Constructing,equipping,modifying,improving and expanding small-scale power production facilities that are designed to produce less than 10 megawatts of power,bulk fuel storage facilities and transmission and distribution facilities, including energy production,transmission and distribution, waste energy,energy conservation,energy efficiency and alternative energy facilities and equipment; Reconnaissance studies,preconstruction engineering,design, construction,equipping,modification and expansion of potable water supply including surface storage and groundwater sources and transmission of water from surface storage to existing distribution systems;and, e A power project or for bulk fuel,waste energy,energy conservation,energy efficiency or alternative energy facilities. Contact the AEA Loan Officer for more details. Loan Amounts,Interest Rates &Terms: Loan amounts,interest rates and terms are dependent upon the project and should be discussed with the AEA Loan Officer. Where to Obtain Loan Applications: Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage,AK 99502 1-888-300-8534 or (907)771-3000 Or on the web at:www.akenergyauthority.org From the Web Page: A.Click on Programs B.Click on Loan Programs C.Find Appropriate Loan for you 2 SRMall +@My Yahoo!+ovHodoba +ropa VERE AEA TrainingPrograms AEA TRAINING PROGRAMS - Lae AEA,along with the Denali Commission Training y Fund,continues to provide training opportunities to aN ih local residents for their energy projects andi)infrastructure.The intent of this training is toéfee"¢ensure that community personnel have the best skills:with which to sustain their energy infrastructurein a business-like manner.With proper training,operators will keep their facilities code-compliant and managers and bookkeeping staff will keep their facilities financially healthy and well-managed. The Alaska Energy Authority has developed a series of courses relating specifically to bulk fuel facility operations and management.For information,contact the Alaska Energy Authority at 1-888-300-8534 (toll free in Alaska)or at 907-771-3000 and ask for the Training Program Manager. Technical Operations Training {=ALASKA>ENERGY AUTHORITY Bulk Fuel Operator Training Itinerant Bulk Fuel Training Power Plant Operator Advanced Power Plant Operator Training Hydro Power Plant Operator Training Management and Bookkeeping Training e PCE Utility Clerk Training e Electric Utility Business Training e Bulk Fuel Business Training TECHNICAL OPERATIONS TRAINING Bulk Fuel Operator Training This course provides the knowledge and skills necessary to safely operate and maintain a bulk fuel storage facility, while complying with state and federal laws.The program includes bulk fuel storage facility construction,facility operations,tank farm inspection criteria,facility maintenance, inventory control,tank farm safety,spill detection and spill response planning. Itinerant Bulk Fuel Training This course is a follow-up to bulk fuel operator training.An instructor travels to communities and provides on-site training for previously-trained Bulk |Fuel Operator students.Training activities include an1initialinspectionofthetankfarm,identification of operation and maintenance needs,hands-on-repair and replacement of minor maintenance items and additional on-site training as necessary. Training for reporting requirements is provided as well,if needed. Power Plant Operator Training This is the entry level course for power plant operators and provides the necessary skills to operate and maintain a power plant.The program includes engine maintenance,troubleshooting and theory, electrical systems and generators,introduction to electrical distribution systems,diesel electric set operations,control panels,paralleling generators sets,load management,fuel management, waste heat recovery,plant management,power plant safety and industrial CPR. Advanced Power Plant Operator Training This advanced course provides the necessary knowledge and skills to diagnose and repair failures in power plants.The program includes a review of electrical fundamentals,testing equipment,basics of computerized engine control systems,sensors and actuators,electronic signatures and waveforms,diagnostics and testing. Hydro Training This course trains local operators to ensure that hydro facilities can be sustained over the long-term.The program includes hydro plant overview (including hydrology and fuel systems),operation of all -2- systems involved (hydro,diesel,system voltage control and safe clearance procedures),maintenance of all systems involved (hydro,diesel,reservoir and electrical distribution system)and record keeping. MANAGEMENT AND BOOKKEEPING TRAINING Utility Clerk Training (PCE Clerk Training) This course focuses on Power Cost Equalization (PCE)reporting, Regulatory Commission of Alaska (RCA)reporting,bulk fuel loans application process and general accounting practices by which utilities can keep their records and reports current. Bulk Fuel Business Training This course includes interactive discussions and hands- on activities utilizing forms and exercises developed ! with information from the bulk fuel facility business plans.Participants will be trained on all the reporting and bookkeeping requirements of the business plan and evaluated by the training instructor. Electric Utility Business Training This course includes interactive discussions and hands-on activities utilizing forms and exercises developed with information from the electric utility business plans.Participants willebetrainedonallthereportingandmanagementrequirementsofthebusinessplanandevaluatedbythe training instructor. Follow-up Business Training &Technical Assistance Follow-up training and technical assistance is available to participants following the bulk fuel business training and the electric utility business training.A business consultant travels to communities andprovideson-site training and technical assistance in a ce variety of areas including,rate-setting,accounting, bookkeeping business operating plans,budgeting and more. Where to Obtain Training Program Schedule: Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage,AK 99502 1-888-300-8534 or (907)771-3000 Or on the web at:www.akenergyauthority.org From the Web Page: A.Click on Training in the Program Box B.Click on Training Schedule C.Current Training Program Bree spore sareesoof22Dariweew1 +s HOhep jen sare qashory repoganvareghon+O eer een 9)toned wet PCBS ©ALag ate vou Tobe Now!Catal >@My vitont +Proves >OGames >Me -©C 93>H-@ AupgadeyourTookeNom >OMe -OMyved:-Drouots-OGens et a tedule2007-2008 pdf Tobe announced,moet inary i January.2008 'SiactricatVuiltySrsinessTramengTabeannounced,most thery wm February.2008 Fuel InventoryManagement FUEL INVENTORY MANAGEMENT -_- Fuel inventory management means tracking the fuel you buy,store and sell as part of your bulk fuel facility. Your costs increase when you store too much or too little inventory.Inventory management involves more _|4 than just measuring fuel tank levels and record keeping.It's the key to effective operational 'J management of your bulk fuel facility. Good inventory management means having the right amount of inventory,tn the right place,at the right time. Pros and Cons of Holding Fuel Many bulk fuel facilities like to store more inventory than they need for immediate use or sale.This is because reserve inventory can: 1.Provide capacity to respond quickly to unexpected demand increases. 2.Provide reliable source of fuel to the community. 3.Take advantage of bulk purchase discounts. 4,Minimize freight and delivery costs. But there is a downside to holding inventory: 1.The cost of purchasing a large quantity of fuel 2.The cost of storing the fuel and not selling the fuel immediately 3.Risks of loss due to waste,spill or theft 4.The administrative costs of keeping track of inventory Comparing Physical Fuel Levels with Bookkeeping Records One of the more important "best practices of fuel inventory management”is the monthly comparison of physical fuel levels with bookkeeping records.This requires that you have current and accurate record keeping that tracks bulk fuel inventory. This inventory tracks: 1.Gallons of fuel purchased 2.Gallons of fuel used 3.Gallons of fuel in storage tanks 4.Gallons of fuel lost due to waste,spill or theft Annual consumption of fuel by a small city or village is important when deciding how much fuel to store at the bulk fuel facility.You need to keep a close eye on how much fuel is being consumed and how much fuel remains in your fuel tanks.Generally,measuring the fuel in your tanks is something that you should do at the end of the month.This is so you can compare the physical measurement to the bookkeeping records. Why?Both the physical measurement and sales/bookkeeping inventory should correspond with each other.By comparing these two amounts at the end of each month,you will be able to determine if the facility is "losing fuel'.Any loss,either by fuel leaks or theft,should be identified as soon as possible and corrected. Fuel losses cost money -somehow,the facility and its customers will have to make up for fuel losses,which cost money. The following formula for tracking bulk fuel inventory will identify,for the bulk fuel manager,gallons of fuel lost. Plus/Minus Gallons of Fuel Beginning Fuel in Tank Plus Gallons of Fuel Purchased Plus Gallons of Fuel Used Minus Gallons of Fuel Sold Minus Ending Fuel in Tanks Plus Gallons of Fuel Lost Balance Sample Monthly Fuel Inventory Record A "Sample Monthly Fuel Inventory Record”and instructions for its use are included below -and,a copy is included on the CD attached to the back cover of this "Management Guide”: -2- SAMPLE MONTHLY FUEL INVENTORY RECORDS Month January |February Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased March | Gallons of Fuel Used Gallons of Fuel Sold Ending Book Balance - Galions of Fuel Physical Measurement - in Gallons Difference Between Physical and Book -in Gallons Ending Month Balance (Assunied to be the Pavsical Measurement) Reasons for Shortage/Overage: YEAR:Type of Fuel: MONTHLY FUEL INVENTORY RECORDS WORKSHEET INSTRUCTIONS NOTE:For most bulk fuel facilities,we would recommend that you keep a separate worksheet for each type of fuel in your facility.Why?Because,if you experience a problem with the worksheet matching the physical levels in the tanks or in the bookkeeping records,it will be much easier to solve the problem, if you are only dealing with one type offuel. Step One:To begin using the worksheet,first record the number of gallons of fuel you have in the tanks as of the beginning of the year - make certain that you measure the physical level of the tanks.It is very important that you start with the correct number of gallons. Step Two:Each month,enter the gallons of fuel you purchased,used or sold in the Monthly column.It is important that you calculate these numbers as of the date that your operator measures the physical level in the tanks.We recommend that you use the last day of the month, but,if that doesn't work DO MAKE CERTAIN THAT YOU CALCULATE YOUR MONTH TOTALS AS RECORDED IN YOUR BOOKKEEPING RECORDS ON THE SAME DAY THAT THE OPERATOR MEASURES THE LEVELS IN THE TANKS.Why?If you don't use information from the same day -you won't be able to compare the two numbers and make any sense out of them. Remember,what you are trying to do is to compare the bookkeeping records and the physical measurements.It is this comparison that will help ensure that you always know how much fuel you have left and helps you to identify any fuel losses early enough to do something about them before they become a big problem. Step Three:Each month,calculate the Ending Book Balance in Gallons of Fuel.You do this by adding the beginning balance in gallons,plus any gallons you purchased,then,you subtract any gallons you used or sold.This is your Ending Book Balance,which may differ from the Physical Measurement in the tanks. Step Four:Each month,enter the gallons of fuel that were physically measured in the tanks. Step Five:Each month,compare the difference between the number of gallons that your bookkeeping "says”you have on hand and the number of gallons of fuel that were physically measured in the tanks. NOTE:If the difference is large -then,you need to figure out "why?” The first thing to do is check the numbers you entered on the worksheet -are they correct?Next,have the operator re-measure the fuel in the tank.Sometimes the operator may complain about the need to do this -but,be firm,it needs to be rechecked.Now,if you re-do everything and,there is still a large difference,you will need to get others involved in problem solving,because,it sounds like the problem is something other than bookkeeping.Is there a leak?Is there an equipment malfunction -such as the dispenser not reporting the amount of fuel dispensed?Is someone taking fuel without payment?There is any number of things that could be at fault -so,you need to spend some time trying to figure it out. REMEMBER -The best time to fix a problem is as soon as you discover it.It only gets harder if you delay. Step Six:Enter the ending balance of fuel for the end of the month. This should be the amount of fuel you actually have in the tank.So, use the physical measurement as your ending balance.NOTE:If you had a large difference between the bookkeeping records and the physical measurement -you still need to figure out why,so you can adjust your bookkeeping records. Step Seven:Enter the ending balance of fuel for the end of the month as the beginning balance for the next month. NOTE:If you are going to begin using this worksheet mid-year, the easiest way to begin is to enter your beginning fuel balance in the "Physical Measurement -in Gallons”row for the month before you start.For example,let's say that you plan to begin using the worksheet in April and,your beginning fuel balance is 40,501 gallons -simply enter 40,501 in the "Physical Measurement -in Gallons”row for March.The worksheet will automatically carry the 40,501 as the starting inventory for April. MONTHLY FUEL INVENTORY RECORDS SAMPLE EXERCISE There are a couple of different ways you can approach the use of this inventory worksheet -you can track all of your fuel on one worksheet or,you can use a sheet for each type of fuel that you have.But,as we mentioned above,for most bulk fuel facilities,we would recommend that you keep a separate worksheet for each type of fuel in your facility. Why?Because,if you experience a problem with the worksheet matching the physical levels in the tanks or the bookkeeping records,it will be much easier to solve the problem if you are only dealing with one type of fuel. Below is an example of how to complete the worksheet for tracking diesel fuel.This sample exercise is included as an MS Excel worksheet on the CD attached to the back cover of this "Management Guide”. Step One:Determine the beginning amount of fuel you have for each type of fuel and enter that number in the "Beginning Balance -Gallons of Fuel”row of the "January”column: Beginning Balance - Gallons of Fuel The first step in starting your new fuel inventory record for each year is to determine the beginning balance in the tanks.Again,it is important that you use the physical amount of fuel in the tanks -don't just take the amount in your bookkeeping records.One of the primary purposes for this fuel inventory record is to ensure that you are tracking the physical balance of fuel that you have in the tanks -so,you know when to record,etc. For purposes of working through the worksheet,let's assume the following beginning balance information: -6- Diesel =124,500 gallons Heating Fuel =115,450 gallons Gasoline =54,005 gallons Other =0 gallons Total gallons =293,955 gallons In the "Beginning Balance -Gallons of Fuel”row of the "January” column,you would enter 124,500 gallons on the Diesel "Monthly Fuel Inventory Record”: Beginning Balance - Gallons of Fuel Step Two:Enter the number of gallons,if any,you purchased during the month,for each month in "Gallons of Fuel Purchased”row. Month... Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased The second step each month is to record the number of gallons,if any, you purchased during the month.Make certain when you purchase fuel that you confirm the amount of fuel that went into the tank. Again,you always want to keep your eye on the actual amount of fuel that is in the tanks. For purposes of working through the worksheet,let's assume the following monthly purchases: Fuel purchased in May: Diesel =75,000 gallons Heating Fuel =75,000 gallons Gasoline =55,000 gallons Fuel purchased in September: Diesel =165,000 gallons Heating Fuel =175,000 gallons Gasoline =65,000 gallons In the "Gallons of Fuel Purchased”row,you would enter 75,000 gallons in the "May”column and 165,000 gallons in "September” column on the Diesel "Monthly Fuel Inventory Record”.The entry for May is shown below: Sonics Month ecneeneennen ==January:e=February”>Marehecs}ee:Apribece: Gallons of Fuel Purchased Step Three:Enter the number of gallons,if any,you used during the month,for each month in "Gallons of Fuel Used”row. "ganuary Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used The third step each month is to record the number of gallons,if any, you used during the month.Make certain that you record all of the gallons of fuel that you used for your operations/business during the month -this does not include fuel that you sold to someone else. For purposes of working through the worksheet,let's assume the following amounts were used,rather than sold: Gallons of Diesel Used for Power Generation January 29,750 February 27,350 March 26,890 April 17,330 May 16,500 June 16,500 July 15,900 August 16,770 September 18,800 October 22,500 November 26,500 December 28,925 In the "Gallons of Fuel Used”row,you would enter the number of gallons of diesel used each month in the Diesel "Monthly Fuel Inventory Record”.The entry for January through May is shown below: Month January =February March April May Gallons of Fuel Used 29,750 27,350 26,890 17,330 16,500 Step Four:Enter the number of gallons,if any,you sold during the month,for each month in "Gallons of Fuel Sold”row. Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold 22222? The fourth step each month is to record the number of gallons,if any, you sold during the month.Make certain that you only record the gallons of fuel that you sold to someone during the month -this does not include fuel that you used for your own operation/business. For purposes of working through the worksheet,let's assume that none of the diesel was sold to anyone else -we only use the diesel we buy to generate power. In the "Gallons of Fuel Sold”row,you would enter the number of gallons sold each month in the Diesel "Monthly Fuel Inventory Record”.The entry for January through May is shown below: Month)January.bf!February |i eMarch |April':fe May 22 oJdune so: Gallons of Fuel Sold ------ -10- Step Five:Calculate the Ending Book Balance in Gallons of Fuel. =Month | Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold Ending Book Balance -:222222GallonsofFuel. The fifth step each month is to calculate the Ending Book Balance in Gallons of Fuel.You do this by adding the beginning balance in gallons,plus any gallons you purchased,and then you subtract any gallons you used or sold.This is your Ending Book Balance,which may be different from the Physical Measurement in the tanks. For purposes of working through the worksheet,you don't need any new assumptions -just do the math! In the "Ending Book Balance”row,you would enter the number of gallons of diesel that your books say you have left in the Diesel "Monthly Fuel Inventory Record”.The entry for January is shown below: -ll- Month © Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used 29,750 Gallons of Fuel Sold - Ending Book BalancGallonsofFuel Step Six:Enter the number of gallons that were measured,at the end of the month,in the tank,in the "Physical Measurement in Gallons”row. We recommend that you measure the tanks'levels on the last day of the month,but,if that doesn't work,use the same day each month. Why?If you don't use information from the same day -you won't be able to compare the two numbers and make any sense out of them. What you are trying to do is to compare one month to the next -so, your measurements should be a month apart.Remember:It is this comparison that will help ensure that you always know how much fuel you have left and helps you to identify any fuel losses early enough to do something about them before they become a big problem. -12- Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold Ending Bo Physical Measurement -299999inGallons The sixth step each month is to record the number of gallons that are left in the tank at the end of the month. For purposes of working through the worksheet,let's assume the following physical amounts were the results of the measurements taken at the end of each month: -13- Gallons of Diesel in the Tanks at the End of the Month January 94,735 February 67,365 March 40,501 April 23,165 May 81,669 June 65,172 July 49,272 August 32,505 September 178,700 October 156,199 November 129,700 December 100,772 In the "Physical Measurement -in Gallons”row,you would enter the number of gallons of diesel measured in the tanks at the end of each month in the Diesel "Monthly Fuel Inventory Record”.The entry for January through May is shown below: cee:Month oeaiseecmeaas :danuary See =February:ae March=coeeeio April re eae May»:: Physical Measurement - in Gallons 94,735 67,365 40,501 23,165 81,669 Step Seven:Calculate the Difference Between the Physical Measurement and the Ending Book Balance in Gallons of Fuel. Each month,you will compare the difference between the number of gallons that your bookkeeping records "say”you have on hand and the number of gallons of fuel that were physically measured in the tanks. NOTE:If the difference is large -then,you need to figure out "why?” The first thing to do is check the numbers you entered on the worksheet -are they correct?Next,have the operator re-measure the fuel in the tank.Now,if you re-do everything and there is still a large difference,you will need to get others involved in problem solving because it sounds like the problem is something other than bookkeeping.Is there a leak?Is there an equipment malfunction - such as the dispenser not reporting the amount of fuel dispensed?Is someone taking fuel without payment?There are any number of things -14- that could be at fault -so,you need to spend some time trying to figure it out. REMEMBER -The best time to fix a problem is as soon as you discover it.It only gets harder if you delay. Month | Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold Ending Book Balance -|)72 Gallons ofFuel Physical Measurement - in Gallons Difference Between oePhysicalandBook-in”222222 -15- The seventh step each month is to calculate the Difference Between the Physical Measurement and the Ending Book Balance in Gallons of Fuel.You do these by subtracting "Physical Measurement -in Gallons' from the "Ending Book Balance -Gallons of Fuel'. 9 For purposes of working through the worksheet,you don't need any new assumptions -just do the math! In the "Difference between Physical Measurement -Gallons”row,you would enter the number of gallons of diesel difference between what your books say you have left and the physical measurement in the Diesel "Monthly Fuel Inventory Record”.The entry for January is shown below: Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used 29,750 Gallons of Fuel Sold - nding Book Bala Gallons of Fuel: Physical Measurement -94,735inGallons Difference Between|aPhysicalandBook-in 5 Gallons °=ee -16- Step Eight:Record the Ending Month Balance in Gallons of Fuel. Each month,enter the ending balance of fuel for the end of the month. This should be the amount of fuel you actually have in the tank.So, use the physical measurement as your ending balance. -Januar Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold Ending BBook Balance -=Gallons of Fuel. Physical Measurement - in Gallons Physical ¢and Book -in .Gallons ©Ae Dees En (Assumed to be the PhysicalMeasurement)|: -17- The eighth step each month is to record the Ending Month Balance. You do this by copying the "Physical Measurement -in Gallons”to the "Ending Month Balance”row.MAKE CERTAIN THAT YOU HAVE THE CORRECT PHYSICAL MEASUREMENT -MAKE SURE THAT YOU HAVE DOUBLE CHECKED EVERYTHING BEFORE YOU RECORD THE ENDING MONTH BALANCE. For purposes of working through the worksheet,you don't need any new assumptions -just record the balance! In the "Difference between Physical Measurement -Gallons”row,you simply enter the number of gallons of diesel that you entered in the "Physical Measurement -in Gallons”row into the "Ending Month Balance”.The entry for January is shown below: -18- Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used 29,750 Gallons of Fuel Sold Ending Book Balance -_ GallonsofFuel Physical Measurement - in Gallons 94,735 Difference Between Physical and Book -in Gallons:© Ending Month Balance (Assumed to be the Physical Measurement)ae -19- Step Nine:Record the Reasons for any Shortage/Overage. Each month,if you have a difference between the Physical Measurement and the Ending Book Balance -you should record the reason for the shortage or overage. Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used Gallons of Fuel Sold Ending Book Balan Gallons of Fuel: Physical Measurement -in Gallons Ending Month Balance|»©. (Assumed to be the Physical Reasons for Shortage/Overage: 229999 If the difference between the Physical Measurement and the Ending Book Balance is very small -then it is okay to consider the reason "insignificant”and not attempt to find the reason for the difference. Otherwise,it is very important that you find out why there is a difference between the accounting/sales records and the physical -20- inventory.Again,is it leakage?...is someone taking fuel without paying?...is the physical measurement being done correctly?...are we accounting for temperature's effect on the fuel levels?There are lots of reasons -the important thing is to figure out what is happening. For purposes of working through the worksheet,let's assume the following! Difference Reasons in Gallons January 15 Temperature February 20 Temperature March (26)Temperature April 6 Don't Know May (4)Don't Know June (3)Don't Know July 0 Don't Know August (3)Don't Know September 5 Don't Know October 1 Don't Know November (1)Don't Know December 3 Don't Know In the "Reasons for Shortage/Overage”row,you simply enter the same notation that explains the shortage/overage.The entry for January is shown below: -21- Beginning Balance - Gallons of Fuel Gallons of Fuel Purchased Gallons of Fuel Used 29,750 Gallons of Fuel Sold - Ending Book Balance -Gallons of Fuel| Physical Measurement - in Gallons Physical aand |Gallons|:Ending Month Balance -oe _.(Assumed to be theEbrsiedl ese 945785Measurement)ae = Reasons for Shortage/Overage: Temperature is causing fuel to contract. Step Ten:Record the Beginning Balance for the next month. Finally,each month you should record the "Beginning Balance”of fuel with which you will start the next month. Month -_.|J anuary Beginning Balance - Gallons of Fuel * La)nNco)° -22- For purposes of working through the worksheet,you don't need any new assumptions --just record the beginning balance! In the "February”column,"Beginning Balance -Gallons of Fuel” row,you enter the number of gallons of diesel that you entered in the "Ending Month Balance”that you recorded in the "January” column.The entry for January and February is shown below: January'=°|}:February®: Beginning Balance-22a ; : Gallons of Fuel 94,735 Gallons of Fuel Purchased Gallons of Fuel Used 29,750 - Gallons of Fuel Sold -- Ending Book Balance -.GallonsofFuel Physical Measurement - in Gallons Difference Between:== Enysical aand Book -inGallons==o Ending Month Balance |(Assumed to be the Physical |94,735 - Measurement):;:Q Reasons for Shortage/Overage: Temperature is causing fuel to contract FOLLOWING IS A COMPLETE EXAMPLE OF THE DIESEL "MONTHLY FUEL INVENTORY RECORDS”FOR 2007. -23- Monthiv Fuel Inventory Records Month January February March Aprit May June duty August Seprember Chtober November December Beginning Balance «Ege hacwots mares sete fe :ONS Doge .vt . F Gallons of Fuel 124,600 94,7356 87,365 $0,501 23,186 81,868 86,172 40,278 .33,505 =:178,700 _168,196 426,700 taallons af Fucl Purchased ----75,000 ---165,000 --- Kaalions of Fuel Used 29,756 27,550 26,800 17,330 16,500 18,500 15,900 16,770 18,800 22,500 26,500 26,026 taalions of Fuel Sold ------------ Ending Rook Balance «94,756 67,355 40,476 8,174 81,666 65,169 40,272 32,603 Gallons of Fuct . : . Physical Measurement -94,738 67,365 40,501 23,166 81,669 85,172 40,272 32,505 178,700 158,198 120,700 100,772 Difference Between 7 :cae Physical and Book -in 18 26 (28)6 ia)I.-(3)&1 q).$ Gallons Ending Month Bat 2 ::ee Be esanontesbe:the Peynteal $4,736 9 97,386 40,504 23,168 SL660 85,172 *€0,272 32,508 |178,700 156,196 128,700 100,772 Reasous for Shicrecaget wer age: Temperature |Temperature |Temperatureiscausingfuelliscausingfuct|ix causing fuct|Don't Know |Don't Know |Don't Enow|Don't Enow|Don't Know]Don't Enowj|Don't Know |Dont Know}Don't Enow ta contraut to contract te vontract YEAR:2007 Type of Fuel:Diesel -24- AnnualBudgets/Planning -ANNUAL BUDGETS/ANNUAL PLANNING The Primary Operator is responsible for the on-going operation and maintenance (O&M)of the facility,the long-term repair and replacement (R&R)of facility -\components and the on-going financial management-|of the facility.Your Bulk Fuel Business OperatingigPlan,and good business practices,requires that thePrimaryOperatordevelopabudgeteachyearfortheOperations& Maintenance (O&M)and Repair and Replacement (R&R)expenses and payments. Financial Responsibilities of the Primary Operator Basically,the primary operator is responsible for all aspects of the management and financial accounting for the facility,including: e Properly establish and maintain a financial management system, including budgets,financial reports and audits/reviews. e Account for,bill for,and use its best efforts to collect all O&M and R&R payments and all other receivables. e Establish required bank accounts and to deposit monies into the appropriate accounts. e Maintain adequate cash reserves for O&M and R&R expenses. Wholesale vs.Retail Expenses Your Business Operating Plan focuses ONLY on the bulk fuel facility - the function of storing fuel.The plan doesn't cover expenses that you have for other fuel functions,such as retailing fuel,operator labor for fuel deliveries,other costs for fuel deliveries,bookkeeper's labor for invoicing fuel customers,etc. So,when we talk about the budgets and annual planningthatisrequired-we are talking only about the bulk fuel -facility.However,the same sort of budgeting and planning is something that you should also do for all of your business operations. Required Bank Accounts The primary operator of the facility is responsible for establishing and managing accounting systems and bank accounts for O&M and R&R to ensure that sufficient financial resources exist to sustain the facility.And if there is more than one participant in the facility -it is the responsibility of the primary operator to manage the finances and collect annual required payment from all the other participants.(See "Bookkeeping for Projects with Several Participants”) Operations &Maintenance (O&M)Bank Account and Funds Your Bulk Fuel Business Operating Plan requires that you establish a set of accounting records to track your annual expenses for general operations and routine maintenance of the bulk fuel facility.You must deposit your O&M funds into a bank account -however,the account does not have to be a separate bank account.You must,however,separately track funds for the bulk fuel account in your bookkeeping and accounting systems. The O&M bank account does not have to be an interest-bearing account. Renewal &Replacement (R&R)Bank Account and Funds Your Bulk Fuel Business Operating Plan requires that you establish a set of accounting records to track your annual expenses and payments for long term renewal and replacement of the bulk fuel facility.You must deposit your R&R funds into a separate bank account,which must be interest-bearing.Once you have built up a significant balance in the account,usually $100,000,you are required to deposit the R&R funds into a separate managed savings or invested escrow-type account. Annual Budgets &Planning Requirements Your Bulk Fuel Business Operating Plan requires that each year you prepare a budget for both your O&M and your R&R expenses. Budgeting requires "guesswork”;however,your "guesses”should be based upon some rationale.Let's take a look at some ways to estimate expenses. Estimating Expenses Below are some of the most common expense categories for bulk fuel facilities and suggestions for how to estimate annual expenses. Wages Wages are normally the largest expenditure of the organization and budgeting the approximate wage expense is the most important expense item.To estimate this expense -list each employee,the rate they are paid and the usual number of hours they work per pay period.Multiple the rate,times the hours, times the number of pay periods.There are 52 weeks in a year. If you pay weekly,the number of pay periods would be 52.If you pay biweekly (every other Friday),then the number of pay periods would be 26.If you pay semi-monthly,each 15th and 31st,then the number of pay periods would be 24.Then,add all the employee wages together in the department to compute the total gross wages. Payroll taxes Payroll taxes are calculated as a percentage of gross wages. FICA tax (or Social Security)is 6.2%of gross wages.Medicare is 1.45%of gross wages.FUTA (Federal Unemployment Tax)is .8%;however,cities,federally recognized tribes and non-profits do not pay FUTA.Alaska Unemployment Tax (or Employment Security Contribution)is the amount established by the state on a contribution report.The percentage can vary from 2.85 %to more than 5%depending on the amount of turnover the organization reports. Budget only the employer's portion of the payroll taxes,since the employee's portion is deducted from their gross wages and is already budgeted. Retirement Plans/Public Employee Retirement System (PERS) If you have employees that participate in PERS or any other retirement program;and,the organization has contracted to match their contributions or contribute to their accounts,then multiply their gross wages by the percentage of contribution. Again,only the organization's portion should be budgeted since -3- the employee's contribution is a deduction from their gross wages. Travel &per diem Travel and per diem expense is incurred for employees and officials/board/council.Travel expenses are transportation,per diem and other.Transportation includes airfares,automobile mileage allowances,taxis and any other form of essential transportation expense incurred on official business.Per diem is paid to an employee to cover the cost of lodging and meals. Lodging is backed up with receipts and meals are usually a flat rate.Other charges may be telephone,parking fees (not parking tickets),emergency purchases of supplies and other charges to complete official business. To budget travel and per diem expense,determine the number of trips necessary during the fiscal year and compute the cost of transportation,per diem and other expenses for each trip.It is important to remember necessary training for operators and other personnel. Training To budget training costs,determine what training will be needed, such as operator training,bookkeeping training,computer training,etc.Then compute the cost of training necessary during the fiscal year.Make certain that you include the cost of transportation,per diem and other expenses for each trip in the travel budget. Electricity Electricity costs can be very difficult to budget,since the amount of power required is subject to many variables,particularly the weather.An extremely cold month or long,cold season can increase power costs significantly. You can estimate electric costs by two methods:1)take a look at your historical cost and raise this year's budget a percentage increase over the prior year cost;or 2)prepare a schedule of the amount of power you expect to use and multiply it by the expected cost per kilowatt.The second method is probably the better one during periods of fluctuating or high power prices. -4. Office/Maintenance Supplies The first thing to do when estimating office or maintenance supplies is to check the amount of supplies you presently have on hand.Carefully analyze any items that are expensive or must be purchased in bulk,but,not bought regularly (such as valves, preprinted letterhead,preprinted envelopes,checks for the various bank accounts,forms or booklets). Then,estimate the amount of supplies you will need for the next year and estimate how much money you will need to budget. Audit/Insurance Generally,you can estimate audit or insurance costs by two methods:1)take a look at your historical cost and raise this year's budget a percentage increase over the prior year cost;or 2) contact your audit and/or insurance firm and ask for a price quote.The second method is probably the better one because a quote will most likely be more accurate than your "guess”.But,if you can't get a quote,make an informed guess based on past or similar costs. Amending the Budget A budget is a plan,and sometimes a plan doesn't work the way you expect.Changes,that no one can predict,occur.Costs can sometimes double on an item,while another doesn't cost what was originally projected.It's time to amend the budget!If youre a City and the budget was adopted as an appropriations ordinance,the ordinance needs changing.To make changes to the appropriations ordinance a budget amendment ordinance is required. The important thing is that you must periodically review your budget and make changes as needed. Youw're Finished with the Budget,Are You Done? Now it's time to make sure the budget is followed.You should: 1.Develop a chart of accounts from your budget categories. 2.Track all revenues and expenditures through either a manual or computerized accounting system. 3.Prepare monthly financial statements for the governing body and management. 4.Prepare a year-end financial statement for the governing body and management. Sample Annual Budget Worksheet A "Sample Annual Budget Worksheet”and instructions for its use are included below -and,a copy is included on the CD attached to the back cover of this "Management Guide”: Bulk Fuel Facility: Annual O&M Budget For the Year Ending +2 Annual Operations &Maintenance Expenses: Administration/Finance:Budget Administrative Salaries Payroll Taxes Worker's Compensation Phone Electric Office Supplies Postage Freight Audit Training Insurance Other: Subtotal Administration &Finance Operations Operator Labor Payroll Taxes Worker's Compensation Maintenance Supplies Training Travel Dues/fees Other: Subtotal Operations [Total Annual O&M Expenses Annual Estimated Fue]Usage/Sales (throughput) Gallons Diesel #1 Diesel #2 Gasoline Aviation Fuel Other: Total Estimated Fuel Throughput Estimated O&M Surcharge Annual O&M Expenses Estimated Fuel Throughput O&M Surcharge Per Gallon -7- Bulk Fuel Facility: Annual R&R Budget For the Year Ending »2 Annual Renewal &Replacement Expenses: Enter below any R&R items that you plan to do this year -that you will pay for from your operating funds.DO NOT ENTER ANY R&R ITEMS THAT YOU PLAN TO PAY FOR WITH FUNDS FROM YOUR R&R BANK ACCOUNT! ITEM COST Total R&R Expenses from Operations Enter below the amount that you plan to deposit into your R&R Bank Account this year: !Annual R&R Bank Payment |Total Annual R&R Expenses Annual Estimated Fuel Usage/Sales (throughput) Galions Diesel #1 Diesel #2 Gasoline Aviation Fuel Other: Total Estimated Fuel Throughput Estimated R&R Surcharge Annual R&R Expenses Estimated Fuel Throughput Annual R&R Surcharge Per Gallon -8- Bulk Fuel Facility: Total Fuel Surcharge Estimate For the Year Ending ,2 Estimated O&M Surcharge Annual O&M Expenses $ Estimated Fuel Throughput - O&M Surcharge Per Gallon Estimated R&R Surcharge Annual R&R Expenses $ Estimated Fuel Throughput - Annual R&R Surcharge Per Gallon Estimated Total Fuel Surcharge O&M Surcharge Per Gallon Annual R&R Surcharge Per Gallon Estimated Total Fuel Surcharge $ This is the amount that you need to add to your fuel prices along with your cost of fuel,other administrative and selling expenses and fuel markups.REMEMBER THIS SURCHARGE REALLY ONLY INCLUDES THE COSTS FOR OPERATING AND MAINTAINING THE BULK FUEL FACILITY -THE FUEL STORAGE FUNCTION. MAKE CERTAIN THAT YOU ALSO ADD ALL OF YOUR OTHER COSTS TO YOUR FUEL PRICES.FOR HELP WITH FUEL PRICING,SEE THE FUEL PRICING SECTION OF THIS MANAGEMENT GUIDE AND CD. SAMPLE ANNUAL BUDGET WORKSHEET INSTRUCTIONS NOTE:These budget worksheets have been developed to assist your bulk fuel facility with the requirements of your Business Operating Plan.Therefore,they are designed to estimate expenses and bulk fuel surcharges.They ARE NOT designed to prepare a full-scale operating budget for your retail fuel operation -therefore,they do not include fuel sales revenue or expenses for purchasing fuel or the retail function. The Bulk Fuel Facility Annual Budget includes three (3)worksheets - the Annual O&M Budget,the Annual R&R Budget and the Fuel Surcharge Estimate. Annual O&M Budget: The O&M Budget worksheet has three sections:Annual Operations & Maintenance Expenses,Annual Estimated Fuel Usage/Sales (throughput)and Estimated O&M Surcharge. Step One:Enter your estimate for the annual budget for each expense category in Administrative/Finance section and the Operations section.And,total the results to calculate the "Total Annual O&M Expenses”.Finally,transfer the total to the Estimated O&M Surcharge section,at the bottom of the worksheet. Step Two:In the Annual Estimated Fuel Usage/Sales section:Enter the amount of fuel that you expect will be used or sold during the year for each type of fuel.And,total the results to calculate the "Total Estimated Fuel Throughput”.Finally,transfer the total to the Estimated O&M Surcharge section,at the bottom of the worksheet. Step Three:In the Estimated O&M Surcharge section:Divide the "Annual O&M Expenses”by the "Estimated Fuel Throughput”to calculate the "O&M Surcharge Per Gallon”.Record the result. The O&M Surcharge per Gallon is the amount of money you should collect,or set aside,for each gallon of fuel that is sold or used from the bulk fuel facility to pay for the on-going routine annual operations and maintenance. -10- Annual R&R Budget: The R&R Budget worksheet has three sections:Annual Renewal & Replacement Expenses,Annual Estimated Fuel Usage/Sales (throughput)and Estimated R&R Surcharge. Step One:In the Renewal &Replacement Expenses section:Enter your estimate for the annual amount that you plan to spend on R&R items that will be funded only from operations -NOT FROM YOUR R&R BANK ACCOUNT.Next,enter the amount that you plan to deposit into your R&R Bank Account this year.And,total the results to calculate the "Total Annual R&R Expenses”.Finally,transfer the total to the Estimated R&R Surcharge section,at the bottom of the worksheet. Step Two:In the Annual Estimated Fuel Usage/Sales section:Enter the amount of fuel that you expect will be used or sold during the year for each type of fuel.And,total the results to calculate the "Total Estimated Fuel Throughput”.Finally,transfer the total to the Estimated O&M Surcharge section,at the bottom of the worksheet. Step Three:In the Estimated R&R Surcharge section:Divide the "Annual R&R Expenses”by the "Estimated Fuel Throughput”to calculate the "R&R Surcharge Per Gallon”.Record the result. The R&R Surcharge per Gallon is the amount of money you should collect,or set aside,for each gallon of fuel that is sold or used from the bulk fuel facility to fund your renewal and replacement activities. Total Fuel Surcharge Estimate: The Total Fuel Surcharge Estimate worksheet has three sections: Estimated O&M Surcharge,Estimated R&R Surcharge and Estimated Total Fuel Surcharge. Step One:In the Estimated O&M Surcharge section:Enter your estimate for the annual amount that you plan to spend on O&M expenses.Next,enter the Estimated Fuel Throughput for the year. Then,divide the "Annual O&M Expenses”by the "Estimated Fuel Throughput”.Finally,transfer the total to the Estimated Total Fuel Surcharge section,at the bottom of the worksheet. -ll- Step Two:In the Estimated R&R Surcharge section:Enter your estimate for the annual amount that you plan to spend on R&R expenses.Next,enter the Estimated Fuel Throughput for the year. Then,divide the "Annual R&R Expenses”by the "Estimated Fuel Throughput”.Finally,transfer the total to the Estimated Total Fuel Surcharge section,at the bottom of the worksheet. Step Three:In the Estimated Total Fuel Surcharge section:Add the "O&M Surcharge Per Gallon”to the "Annual R&R Surcharge Per Gallon”to calculate the "Estimated Total Fuel Surcharge”.Record the result. The "Estimated Total Fuel Surcharge”is the amount that you need to add to your fuel prices along with your cost of fuel,other administrative and selling expenses and fuel markups.REMEMBER THIS SURCHARGE REALLY ONLY INCLUDES THE COSTS FOR OPERATING AND MAINTAINING THE BULK FUEL FACILITY - THE FUEL STORAGE FUNCTION.MAKE CERTAIN THAT YOU ALSO ADD ALL OF YOUR OTHER COSTS TO YOUR FUEL PRICES. FOR HELP WITH FUEL PRICING,SEE THE FUEL PRICING SECTION OF THIS MANAGEMENT GUIDE AND CD. -12- SAMPLE ANNUAL BUDGET WORKSHEETS SAMPLE EXERCISE Below is an example of how to complete the worksheet for preparing an Annual Budget and Total Fuel Surcharge.This sample exercise is included as an MS Excel worksheet on the CD attached to the back cover of this "Management Guide”. Annual O&M Budget: The O&M Budget worksheet has three sections:Annual Operations & Maintenance Expenses,Annual Estimated Fuel Usage/Sales (throughput)and Estimated O&M Surcharge. Step One:First,enter your estimate for the annual budget for each expense category in the Administrative/Finance section and the Operations section.Then total the expenses. For purposes of working through the worksheet,let's assume the following expenses information: Salaries Position :Hourly Hours AnnualRatePerWeek|Estimate Clerk _»$15 20 $15,600 Manager $25 8 $10,400 Lead Operator $18 20 $18,720 Backup Operator $18 8 $7,488 Payroll Taxes Tax Rate FICA 6.2% Medicare 7 1.45% FUTA .8% ESC |3.0% Workers Compensation/Insurance: Annual Cost Workers'Compensation $6,004 Insurance $2,500 -13- Other Expenses: Office Supplies Average $100 per month Phone Average $75 per month Board Expenses $15 fees x 8 members per month Training Quickbooks -$1,200 class and $1,000 travel Oil Spill -$800 Audit Accounting $1,500 for fuel facility share of total audit Maintenance Supplies $150 per month average Outside Labor $500 per month $1,200 annually Using these assumptions,your annual O&M budget would be: Annual Operations &Maintenance Expenses: Administration/Finance:Budget Administrative Salaries 26,000 Payroll Taxes 2,977 Worker's Compensation 3,445 Phone 900 Electric Office Supplies 1,200 Postage Freight Audit 1,500 Training 2,200 Insurance 2,500 Other: Board Expenses 1,440 Accounting Services 1,800 Subtotal Administration &Finance 43,962 Operations Operator Labor 26,208 Payroll Taxes 3,001 Worker's Compensation 3,027 Maintenance Supplies 6,000 Training 800 Travel Dues/fees Other: Outside Labor 1,200 Subtotal Operations 40,236 |Total Annual O&M Expenses I 84,198 | -14- - Now,transfer the total of $84,198 to the Estimated O&M Surcharge section: Estimated O&M Surcharge Annual O&M Expenses 84,198.00 Estimated Fuel Throughput - O&M Surcharge Per Gallon Step Two:In the Annual Estimated Fuel Usage/Sales section:Enter the amount of fuel that you expect will be used or sold during the year for each type of fuel.And,total the results to calculate the "Total Estimated Fuel Throughput”. For purposes of working through the worksheet,let's assume the following fuel use/sales information: Diesel #1 44,350 Gallons Diesel #2 15,850 Gallons Gasoline 25,000 Gallons Using these assumptions,your annual estimated fuel throughput would be: Annual Estimated Fuel Usage/Sales (throughput) Gallons Diesel #1 44,350 Diesel #2 15,850 Gasoline 25,000 Aviation Fuel Total Estimated Fuel Throughput 85,200 Now,transfer the total of 85,200 gallons to the Estimated O&M Surcharge section: Estimated O&M Surcharge Annual O&M Expenses 84,198.00 Estimated Fuel Throughput 85,200.00 O&M Surcharge Per Gallon -15- Step Three:In the Estimated O&M Surcharge section,divide the "Annual O&M Expenses”by the "Estimated Fuel Throughput”to calculate the "O&M Surcharge Per Gallon”.Record the result. Estimated O&M Surcharge Annual O&M Expenses 84,198.00 Estimated Fuel Throughput 85,200.00 O&M Surcharge Per Gallon 0.988 Thus,the O&M Surcharge per Gallon of $.988 is the amount of money you should collect,or set aside,for each gallon of fuel that is sold or used from the bulk fuel facility to pay for the on-going routine annual operations and maintenance. Annual R&R Budget: The R&R Budget worksheet has three sections:Annual Renewal & Replacement Expenses,Annual Estimated Fuel Usage/Sales (throughput)and Estimated R&R Surcharge. Step One::First,enter your estimate for the annual amount that you plan to spend on R&R items that will be funded only from operations - NOT FROM YOUR R&R BANK ACCOUNT.Then total the expenses. For purposes of working through the worksheet,let's assume the following information: Marine Header Repair -$6,250 Let's assume that the diesel marine header needs repair.And, let's assume that we don't want to take the $6,250 from our R&R bank account,because we don't yet have a significant balance in the bank.And,let's assume that we will have enough cash from our operations to pay for the purchase and installation of the header. Using these assumptions,your annual estimated R&R expenses from operations would be: -16- ITEM COST Marine Header Repair 6,250.00 Total R&R Expenses from Operations $6,250 Next,enter the amount that you plan to deposit into your R&R Bank Account this year. For purposes of working through the worksheet,let's assume the following information: Annual R&R Bank Payment -$17,741 Let's assume that we are in the second year of operating the upgraded bulk fuel facility.And,let's assume that we are following the R&R payment schedule in our Business Operating Plan.We would simply look in the Plan,at the Year Two R&R Annual Payment,and,use that amount for the annual bank deposit. Using these assumptions,your annual estimated R&R Bank Payment would be: Enter below the amount that you plan to deposit into your R&R Bank Account this year: }Annual R&R Bank Payment Ls 17,741 | And,total the results to calculate the "Total Annual R&R Expenses”. ITEM COST Marine Header Repair 6,250.00 Total R&R Expenses from Operations $6,250 into your R&R Bank Account this year: Enter below the amount that you plan to deposit jAnnual R&R Bank Payment 1 $17,741 | {Total Annual R&R Expenses |$23,991 | -17- Finally,transfer the total to the Estimated R&R Surcharge section,at the bottom of the worksheet. Estimated R&R Surcharge Annual R&R Expenses 23,991 Estimated Fuel Throughput Annual R&R Surcharge Per Gallon Step Two:In the Annual Estimated Fuel Usage/Sales section:Again enter the amount of fuel that you expect will be used or sold during the year for each type of fuel.And,total the results to calculate the "Total Estimated Fuel Throughput”. Again,for purposes of working through the worksheet,let's assume the following fuel use/sales information: Diesel #1 44,350 Gallons Diesel #2 15,850 Gallons Gasoline 25,000 Gallons Using these assumptions,your annual estimated fuel throughput would be: Annual Estimated Fuel Usage/Sales (throughput) Gallons Diesel #1 44,350 Diesel #2 15,850 Gasoline 25,000 Aviation Fuel Total Estimated Fuel Throughput 85,200 Now,transfer the total of 85,200 gallons to the Estimated R&R Surcharge section: Estimated R&R Surcharge Annual R&R Expenses 23,991 Estimated Fuel Throughput 85,200 Annual R&R Surcharge Per Gallon -18- Step Three:In the Estimated R&R Surcharge section,divide the "Annual R&R Expenses”by the "Estimated Fuel Throughput”to calculate the "R&R Surcharge Per Gallon”.Record the result. Estimated R&R Surcharge Annual R&R Expenses 23,991 Estimated Fuel Throughput 85,200 Annual R&R Surcharge Per Gallon 0.282 Thus,the R&R Surcharge per Gallon of $.282 is the amount of money you should collect,or set aside,for each gallon of fuel that is sold or used from the bulk fuel facility to pay for the long-term renewal and replacement. Total Fuel Surcharge Estimate: The Total Fuel Surcharge Estimate worksheet has three sections: Estimated O&M Surcharge,Estimated R&R Surcharge and Estimated Total Fuel Surcharge. Step One:In the Estimated O&M Surcharge section,using information calculated on the two previous worksheets:Enter your estimate for annual amount that you plan to spend on O&M expenses. Next,enter the Estimated Fuel Throughput for the year.Then,divide the "Annual O&M Expenses”by the "Estimated Fuel Throughput”. Estimated O&M Surcharge Annual O&M Expenses $84,198 Estimated Fuel Throughput 85,200 O&M Surcharge Per Gallon 0.988 Finally,transfer the total to the Estimated Total Fuel Surcharge section,at the bottom of the worksheet. Estimated Total Fuel Surcharge O&M Surcharge Per Gallon $0.988 Annual R&R Surcharge Per Gallon Estimated Total Fuel Surcharge -19- Step Two:In the Estimated R&R Surcharge section,using information calculated on two previous worksheets:Enter your estimate for annual amount that you plan to spend on R&R expenses. Next,enter the Estimated Fuel Throughput for the year.Then,divide the "Annual R&R Expenses”by the "Estimated Fuel Throughput”. Estimated R&R Surcharge Annual R&R Expenses $23,991 Kstimated Fuel Throughput 85,200 Annual R&R Surcharge Per Gallon 0.282 Finally,transfer the total to the Estimated Total Fuel Surcharge section,at the bottom of the worksheet. Estimated Total Fuel Surcharge O&M Surcharge Per Gallon Annual R&R Surcharge Per Gallon $0.282 Estimated Total Fuel Surcharge Step Three:In the Estimated Total Fuel Surcharge section:Add the "O&M Surcharge Per Gallon”to the "Annual R&R Surcharge Per Gallon”to calculate the "Estimated Total Fuel Surcharge”.Record the result. Estimated Total Fuel Surcharge O&M Surcharge Per Gallon $0.988 Annual R&R Surcharge Per Gallon $0.282 Estimated Total Fuel Surcharge $1.270 Thus,$1.27 is the total amount that you need to add to your fuel prices along with your cost of fuel,other administrative and selling expenses and fuel markups.Remember,this surcharge only includes costs for operating and maintaining the bulk fuel facility,which is the fuel storage function.Make certain that you also add all of your other costs to your fuel prices.For help with fuel pricing,see the "Fuel Pricing” section of this Management Guide and/or the attached CD. -20- Usd RENEWAL &REPLACEMENT ACCOUNT INFORMATION. The Business Operating Plan requires the primary operator to arrange for the facility's renewal and replacement (R&R) funds to be placed in a separate bank account. What is the Purpose of the R&R Account? An R&R account will provide a way for the facility to save money for the long-term renewal and replacement of the facility.Everything wears out eventually;and,your facility will also. So,in order to repair equipment,fixtures and system parts -you need to put some money away into a savings account each and every year. What Kind of Bank Account is Required? Generally,the Business Operating Plan states:"The R&R account must be an interest-bearing savings account,which requires two signatories and a resolution from the governing body for withdrawals, until such time as the cash balance makes an escrow account more cost effective;(at least when the balance reaches $100,000)then,the R&R account should be transferred to an interest-bearing invested escrow account that is acceptable to the Denali Commission.” Savings Account -So,to begin with,your R&R funds must be deposited into an interest-bearing savings account,which requires two signatories for withdrawals.Additionally,you must obtain a resolution from your governing body (council,board,etc.) before you make a withdrawal from the R&R savings account. Escrow Account -When your R&R savings account reaches a balance of $100,000,you must transfer the funds into an interest- bearing invested escrow account.The escrow account must allow for monthly deposits;and,you must have a resolution from your governing body (council,board,etc.)in order to make the withdrawal.Additionally,the account must allow for the Denali Commission and other Auditing agencies to monitor the deposit and withdrawal activity (A copy of your year-end balance statement must be sent to the Denali Commission as part of your annual report). Denali Commission Guidelines,with Sample Resolution and Business Plan Language,are included at the end of this section. How Much Should be Deposited into the R&R Account? No one can accurately predict the future.No one can tell you today exactly how much money you might need for future facility repairs or replacements.All you can do is -deposit a reasonable amount into your savings account each year. Your Business Operating Plan provides a schedule for funding your R&R account -and,you should deposit at least the amount identified into the R&R account each year. Just go to Table A of your Business Operating Plan Financial Tables and look up the annual payment for the proper year.Here is where you will find the amount to deposit.Table A provides a summary of each participant's O&M and R&R annual payments and the associated per gallon amounts,for the first forty years of operation. See the sample Table A below: TABLE A SAMPLE BULK FUEL BUSINESS OPE RATING PLANSummaryofFacilityExpensesteParticipants City of Now here NASD NA OsaM R&R Toul OSM Rak Toul Ose RSR YouYeu Aeon Fer Tow Fer Anu $8 Per Tow =|Tomi FerFayoneresLyGillenPaymentsGallen|Payment Gillon |Paynenss Ge: 1 [8 20m3 it $0,045 3 3 $:=$sit 218 21.x 2.|$22,074 1 3 $9.055 $$i]}48 it iJ.i415 3 [8 240133 $9,065 }i $$i438 rae 24 oe ie eee 4 AE 2u708 7 §$___0.075 i £$bi «L$tad.213 1S 2 313.2207:$0.065 $bi $$ae ae Lt +48 : 6 LS 22,068 1 $$0,095.$t $$=1$zd ait oa ie : PNB an2703 2 $$_.9.105 }b :i 1%it 21s 13 : 8 1S 23,043 §$0115 F335 115 i$b $t $a3 1 13 9 |$23,389:8 $0125 $3438313 $$$-13 -i8 -1%-]$: wo |$wmoit $0135 $35066)5 t $bf -|t 7it =18 -1% 11,18 4,096 3 3 $0145 $ 36958 1 $b '}t 2k 43 13 '. 12 1S 24,4587 $$0155 $3865 i$:$i =i t 3 1S 218 2>|s 240253 $¥_0.165 $39,5863 $$$$-13 zit 18 -|$4 |25197 $t 0175 3 49920!3 $$'-13 -i3 "13 i is 13.25,575:3 $}$$$13 Sa 4d 13 : %|S 25959 2 $}$3 t =|718 ee 14 2 |S 2668 i$$$2i$t i =e iit 3 3 . 8 LE 263 it 3 $$$$Paid iif i$=k : 1 13 27,4 i$$$'$:tht 2it ned 218 : D |S 27551 i$$$$5 $x13 iit a a1 21.|$27,965 5 3 :$$::=nit 2.8.a1 221,_..26,584 5 §t $$$3 23 nit 13 zt B_|¥_26,810 7$t $5 21 $$ait "Ts -[3 LE 29,82 t $}$i :|3 nid Lt ae 2 |29081:$$$3 $$a)re an a 251 $30,126 :F bj $:3 }x14 nid om LE.2 B_|$30,576:$t $t $5 ae nid Lt tS wm |S 3407s $Hy $b t ae aid 243 =1$- 2 14310258 334,26:$t 18:$}13 213 ot 213 2 18 sae7h tt $3322 55 3 $3 }at 2d 2d.ol ee 31d 32454 ES $d3B7 i$0.545 $6471)5 $$3 zt id 13 13 224 33s $34,451 $0.955 $67.302:$:$bi $2it 13 ae BS [ft 3340533 $35,574:$F 0.365 $69.009:$t $$-13 zit -3 ae : M I$33,07;$5 $36,706:$O575 $7O082!§$$$-\3 -it -|3 -|$: Bs 1S 34446 i 5 $37,007:$0.385 $7322)3 3 t $"13 iit -]t zit : W%_]3.34,962:3 $38,975 0.395 $23,980 1 $$$$-{$238 218 oo aes 37 [$35,487 2 $$40,157:$F =O405 $FEMS S 3 $i "14 233 med i]t 38 |3 36,019 §21341925:$O41 $7755 5 Zit t $t iit i]t oa eed |E 36,559:§$_42,504 ($0425 $79,063 2 §i bd $=[%ais rm id.bd 40 |$37,108 3¢i$43601:0435 $8079/4 3 $t -[3 -it -[t -|t Let's take a closer look at the City of Nowhere's summary information on Table A: City of Nowhere O&M R&R Total Year Annual $$Per Annual $$Per Total Total Per Payments Gallon Payments Gallon Payments Gallon 1 $20,.7631$0.244/$3,825;$0045/$24588:$0.289 2 $21,0741$0.247/$46951$0.055]$25,769'$0.302 3 $21,391'$0.250/$55721$0.0651$26963{$0.315 4 |$21,7111/$0.252)$6457/$00751$28168{$0.327 5 $22,037:$0.255|$7,3491$0.085)$29,386;/$0.340 6 $22,368:$0.258/$8249:$0.095|$30,616!$0.353 7 $22,703;$0.260/$9,156;$0.105]$31,8591 $0.365 8 $23,044;$0.263/$10,071!$0.115]$33,115)$0.378 9 $23,389'$0.266)$10,993:$0.125]$343383:$0.391 10 |$23,7401$0.269/$11,924:'$0.135]$35,6641$0.404 Notice in the sample Table A,the first column shows the "Year”,the next two columns show the "O&M”payments,the middle two columns show the "R&R”payments,and the last two columns show the "Total” of "O&M”and "R&R”.But,let's just look at the "Year”and "R&R” column: -3- /\City of Nowhere Year N O&M Wa R&R IN Total Annual $$Per Annual $$Per Total Total PerPaymentsGatton/|Payments Gallon \Payments Gallon 1 [4 20,763]1$0.244/$3,8251$0.045|\§24588/$0.2892|21,074'$0.247[$4,6951$0.055]4 25.769:$0.302 3 [9 21391/$o0260[$55721$0.065]/49 26963!$0.315 4 |$21,7111$0.262]$6,457|$0.075]¢28,1681$0.327 5 |22,0371$0.2651$7,3491$0.08514 29,386)$0.340 6 |§¥22368/$o02498[$82491$0095/4 30,616/$0.353 7 22,7031 $O0.268]$9,156/$0.105/7$31,8591 $0.365 8 23,044/$0.263N$10,071'$0.115)$33,115!$0.378 \9 Vs 23,3891$o.2661%10,993/$01%|$34383!$0.391 10 A$23,740/$0.269]1$\41,9241$04351$35,664/$0.404 VS Se So,let's assume that our facility was put into operation in 2002,and in 2008 we are looking for the annual R&R payment amount.If 2002 is Year 1,then 2008 is Year 7 -the seventh year of operation.Therefore, the annual R&R payment amount for the City of Nowhere for Year 7 is $9,156. City of Nowhere O&M R&R Total Year Annual $$Per Annual $$Per Total Total Per Payments Gallon Payments Gallon Payments Gallon 1 [$20,7631$0.244/$3,825:$0.045|$245881$0.289 2 $21,074)$0.247)$4695:$0.0551$25,769/$0.302 3 |1$21,391/$0250]$5,572!1$0.065/$26963/$0.315 4 $$21,7111$0.252/$64571$0075]$28168!$0.327 5 |$22,0371$0.255)$7,3491$0.085{$29,386)$0.340 6 |$22368:$oO25R31¢872497 $0.095[$30.616/$0.353 <7 _|$22,703 /$0.260{$y 9,1561$0.105/$3185>/$0.365 8 [$23,0441$Qed]fd 10071)$0.115)$33,1151$0.378 9 |$23,389 LI 0.266 |$10,993:$0.125|$343831$0.391 $0.269 |$11,9241$0.135]$35,6641$0.404eeaale NOTE:The column "$$Per Gallon”shows you the amount per gallon you would add onto fuel prices,or set aside for fuel used but not sold,in order to collect the required annual payment.This number needs to be re-calculated each year to account for the number of gallons you expect to sell and/or use during the upcoming year.The "$$Per Gallon”figure is included in Table A for information purposes only -the "Annual Payments”column is where you will find the amount of money you need to deposit,for each participant,each year. Further Information Denali Commission Guidelines,with Sample Resolution and Sample Business Plan Language,are included below: How to Establish a Renewal and Replacement Account for Denali Commission Funded Public Infrastructure Background Under the guidelines of Denali Commission funding a bulk fuel facility is required to have a business plan that outlines how the Denali Commission funded project will be operated and maintained.One of the conditions required in the business plan is the establishment of a Renewal and Replacement (R&R)Account.An R&R account will provide a mechanism for the bulk fuel facility to save money for the inevitable renewal and replacement costs associated with the facility. Generally,the Business Operating Plan states:"The ...R&R account must be an interest-bearing savings account,which requires two signatories and a resolution from the governing body for withdrawals.When the cash balance of the R&R account makes an escrow account more cost effective (at least when the balance reaches $100,000);then the R&R account must be transferred to an interest-bearing invested escrow account that is acceptable to the Denali Commission.” General Guidelines of a Renewal and Replacement Escrow Account e Allows bulk fuel facity primary operator to make monthly deposits e Must be an interest bearing account e Only allows withdrawal of funds for Renewal and Replacement costs of the facility. o Requires a Resolution from the governing body certifying funds are being used for Renewal and Replacement expenses related to the facility that was partially or wholly funded by the Denali Commission. e Account must allow for Denali Commission and other Auditing agencies to monitor deposit and withdrawal activity (A copy of your year-end balance statement must be sent to the Denali Commission as part of your annual report) Financial Institutions for R&R Escrow Accounts The Denali Commission has negotiated terms with two Financial Institutions and the Alaska Municipal League/Joint Insurance Association that will allow for the unique guidelines of these R&R accounts.Other institutions that will allow accounts that meet the guidelines above are acceptable. Alaska Municipal League/ First National Bank West Star Escrow Joint Insurance Association (City-owned facilities only) Manager First National Bank Manager AML/JIA Operations Center 1751 Gambell St. Anchorage,AK 99501 Phone:(907)777-3424 Fax:(907)777-3446 3201 C Street,Suite 112 Anchorage,AK 99503 Phone:(907)265-2160 Toll Free:1-888-859-3557 Fax:(907)265-2170 807 G Street,Suite 356 Anchorage,AK 99501 Phone:(907)258-2625 Fax:(907)279-3615 Web:http://www.akml.org/ To establish an account: 1.Contact one of the representatives above. 2.Tell them you need to establish a "Denali Commission Renewal and Replacement Account”. 3.Sign the Account Agreement for the institution. 4.Pay set-up fee and fill out other general information to establish account. Attachments: 1.Sample Resolution 2.Sample Business Operating Plan Language 3.Sample Business Operating Plan R&R Cashflow ATTACHMENT A Resolution for Disbursement of Renewal and Replacement Funds for Energy Facility An Identical Resolution to This Must be Passed and Signed by the Governing Body To Withdraw Funds from The R&R Account Bulk Fuel Facility: Resolution No. WHEREAS,the has established an interest-bearing renewal and replacement account with the financial institution of for the purpose of renewal and replacement expenditures related to the facility,which was partially or fully funded by the Denali Commission,and WHEREAS,pursuant to the approved business plan for facility the primary operator,and other participants,has agreed that funds deposited into this renewal and replacement account will only be used for the renewal and replacement of facility,and WHEREAS,eligible withdrawal of funds from this account must be for the labor, transportation,equipment rental,professional services,materials,equipment and other costs for the replacement and repair of assets essential to the on-going sustainability of the facility.For energy facilities this is including but not limited to:Access Roads,Buildings,Poles,Transformers,Generators,Radiators,Electrical Systems,Wires,Meter Systems,Pumps,Fencing,Fuel Storage Tanks,Fuel Distribution Systems,Walkways,Access Roads Dispensers,Fill Stations,Tank Liners,Fencing,Pad, Valves,Pipelines,Piling,Decks,Manwalks,Headers,Ground Maintenance and Containment Systems. THEREFORE,the hereby attests that the funds being requested from the interest-bearing renewal and replacement account with the financial institution of is for renewal and replacement expenses related to the facility as outlined above and is not being used for any other purpose,and THEREFORE,the requests the total sum of $for the following detailed expenses Signed by two representatives, ATTACHMENT B EXAMPLE OF LANGUAGE IN DENAI COMMISSION FUNDED ENERGY FACILTIES Financial Responsibilities There are two cost categories that will be incurred in the ongoing operation and upkeep of the Bulk Fuel Facility -O&M and R&R. 1)O&M:The Primary Operator will incur a number of expenses relating to the O&M of the Facility.O&M items are defined as expenses that are incurred on a regular basis (administration, audits,etc.)and maintenance expenses that are incurred on an annual basis.O&M expenses are detailed in Table C:Annual O@'M Schedule and a narrative detail is provided in Section IX:Financial Information to address estimates and assumptions.Certain Facility components are common to all Participants,and the O&M costs of these items will be properly allocated,prorated according to fuel storage capacity or as detailed in the A,O,O¢M Agreement Appendix A:Participants'Operational Responsibilities. 2)R&R:R&R costs are those expenses defined as items costing greater than $5,000 and/or that are not incurred on an annual basis.Tab E:40 Year R¢ R Schedule details the anticipated items,the frequency of their replacement and their present day value.Certain Facility components are common to all Participants,and the R&R costs of these items shall be properly allocated,prorated according to fuel storage capacity,or as detailed in the.A,O,O¢>M Agreement Appendix A:Participants' Operational Responsibilities. Participants will make annual O&M and R&R payments on a mutually agreeable date,as specified in the attached A,O,O¢>M Agreement.'The payment will be made directly to the Primary Operator, which will deposit contributions into separate accounts.The Primary Operator will maintain separate O&M and R&R accounting records and a separate R&R bank account.The Primary Operator will maintain a sufficient cash balance to meet the O&M and R&R financial goals in this Plan.The Manager will be authorized to draw against the O&M funds for routine expenses of the Facility,however individual expenditures in excess of $5,000 will require the authorization of the Primary Operator's management or governing body.The R&R bank account must be an interest- bearing,savings account,which requires two signatories and a resolution of the governing body for withdrawals.When the cash balance of the R&R account makes an escrow account more cost effective (at least when the balance reaches $100,000);then the R&R account must be transferred to an interest-bearing invested escrow account that is acceptable to the Denali Commission.See Appendix A:Statement ofQualification for an overview of the Primary Operator's fiscal controls and accounting procedures. At least once a year,no later than June 30",the Primary Operator will develop a budget and payment schedule for the upcoming fiscal year,July 1st through June 30",for both O&M and R&R,and will distribute copies to each participant. Operations and Maintenance Guidelines The Primary Operator will maintain separate accounting records,and maintain a sufficient O&M cash balance,for the Facility O&M so that the O&M schedule can be completed and the Facility operations can be sustained into the future.Section LX:Financial Information provides Table C:Annual OM Schedule as a guide to plan for annual maintenance activities and Tab D:40 Year OOM Cashflow as a guide to estimated yearly O&M required contributions.These costs are based upon the O&M cost estimate provided by Acme Engineering,Inc;see Appendix B:O¢M and R&R Cost Estimate. -8- The Primary Operator of the Facility will be responsible for the majority of the O&M of the Facility. The NASD will be responsible for the O&M of its facilities,and as such,these costs are not included as part of this Plan. Renewal and Replacement Guidelines The Primary Operator will establish a Bulk Fuel Facility savings account or interest-bearing invested escrow account acceptable to the Denali Commission,which will ensure capitalization of an amount sufficient to maintain the R&R Schedule.It is assumed that the R&R activities for Year 20 will be funded 40%from the R&R account and 60%from debt financing,at 5.5%over 10 years.Section LX: Financial Information provides Table E:40 Year R&>R Schedule as a guide to plan for annual R&R activities,Table F:40 Year R¢>R Cashflow as a guide to estimated yearly R&R required contributions, and Table G:Loan Schedule as a guide to Year 20 loan assumptions and payment schedule.These costs are based upon the R&R cost estimate provided by Acme Engineering,Inc,see Appendix B: O@>M and Re>R Cost Estimate. At least annually,the Primary Operator will remit R&R funds to the financial institution or the administrator of its R&R account.Management and other fees charged by an escrow fund administrator will be automatically deducted from the Primary Operator's R&R escrow account, according to an Escrow Agreement or other similar document. The Participants will use the estimates in this Plan for annual R&R contributions,or in subsequent years will recalculate contributions based upon assets to be maintained as actually built. The Participants will use the estimates in this Plan for year one contributions,and in subsequent years will recalculate contributions based upon assets to be maintained as actually built. 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Annual Participant Agreements At least once each year,no later than 30 days before the end of the primary operator's fiscal year,the primary operator needs to call a meeting of the participants for the purpose of developing a budget of shared costs for the coming fiscal year.The terms of this meeting are detailed in the Access,Occupancy, Operations and Maintenance Agreement (A,O,O&M Agreement),which is included as an attachment to the bulk fuel Business Operating Plan. til Ce till _- uu» =e = ” Basically,the participants need to come to an agreement on the annual budget of shared costs.However,if no agreement is reached by the end of the primary operator's fiscal year,the A,O,O&M Agreement gives the primary operator the sole authority to establish a reasonable budget of shared costs for the coming fiscal year.The primary operator should develop the budget based on its best estimate of actual costs for the year.Then the primary operator needs to collect,from each participant,its proportionate share of the budgeted costs.Each participant shall pay its share of the costs no later than 30 days before the end of the primary operator's fiscal year. The annual sum of deposit into the O&M Fund and R&R Fund will depend on actual costs,but for the first year this sum will be set at the levels specified in the Plan.Beginning in year two,the budget for the upcoming year shall be adjusted up or down by the shortfall or surplus of the prior year's budget as compared to actual O&M or R&R costs.In the event of unanticipated budget shortfalls,it may be necessary to adjust the annual budget during the course of the year. The primary operator is required to track the shared O&M costs and payments in a separate set of bookkeeping accounts,and to use the payments only for the costs identified in the Plan.The reference in the Plan to an R&R Account is intended to be a separate bank account. The primary operator has to properly account for all expenditures from all accounts.The primary operator must provide back-up documentation that fairly justifies its annual budget,using the allocation methods described in the Plan. Additionally,the A,O,O&M Agreement gives each participant the right to review the accounting records,invoices and other documents associated with the shared costs;and,the information upon which the proposed budget of shared costs is based. Rights,Duties &Responsibilities of Participants In any given bulk fuel facility,there might be from one to five,or even more,entities participating in the facility.Most commonly, participating entities include -cities,tribal governments,community associations,native corporations,school districts and/or other local businesses or organizations.The participating entities in your bulk fuel facility are identified in the Business Operating Plan;and,if there is more than one participating entity,then the Business Operating Plan includes an "A,O,O&M Agreement”that describes the rights, duties and responsibilities of the participants. One of the most helpful parts of the A,O,O&M Agreement is the "Appendix A:Participants'Operation and Maintenance Responsibilities”,which lists what items (O&M and R&R)each participant will help pay for and how the cost of those items will be determined. Example:Let's take a look at the example Appendix A.As you can see,the top section of the table identifies the various key components of the bulk fuel system including (tank volume, dispenser volume,intermediate tanks,etc.)as well as the number of tanks,pumps and valves.In the columns adjacent to the -2- system components -the participants or participating entities are listed as well as the total gallon volume of each of the components. The far right column lists the total volume of all of the participants.These volume breakouts are important because many of the cost allocations to the various participants are based upon the percentage of tank volume they utilize. The remainder of AppendixA is a breakout of O&M and R&R responsibilities and how the associated costs will be allocated among the participants.While in most cases,the primary operator is the entity responsible for ensuring that the work is completed and paid for -funding for the activity is often the responsibility of several participants.Likewise,in most cases,the school district does not share in certain expenses -usually the school district only pays the primary operator for its share of the common costs and not for any of the costs for which they are solely responsible. Sample A,O,O&M Agreement Appendix A Participants'Operation and Maintenance Responsibilities Participant System Information i System City Council School Total Tank volume,gross 101,000 50,000 12,000 163,000 Dispenser volume,gross 4,000 4,000 Intermediate tanks 4,000 4,000 Subtotals 105,000 50,000 16,000 171,000 Pro-ration 61.4%29.2%9.4%100% #tanks 6 2 2 10 #pumps 3 I 1 5 #valves 21 5 26 Bhs Responsibility for Performing the Work (an "X"means responsible) HMS Cost ; Category Task City Council.School Allocation Method O&M 1 Ground Maint.x Shared cost,prorated by gross volume 2 ___Fuel delivery D4 Shared cost,prorated by gross volumeMinorrepairs,city &council x 'City &Council only contribute,gross volume'Minor repairs,school x 'School only contributesPressuretest,all tanks in tank farm X 'Shared cost,prorated by gross volume 3__Training x Shared cost,prorated by gross volume 'Administration x Shared cost,prorated by gross volume Supervision x Shared cost,prorated by gross volume Annual audit x x Shared cost,prorated by gross volume Insurance,city &council Xx City &Council only contribute,gross volume Insurance,school Xx School only contributes Repairs : 1A_Repair fence x 'Shared cost,prorated by gross volume 1B_iGrade pads x 'Shared cost,prorated by gross volumeRepairsteps&landings Xx 'Shared cost,prorated by gross volume 2A _Replace pumps,city &council X City &council only contribute,by count 'Replace pumps,school Xx School only contributes Replace valves&gauges,city&council Xx City &council only contributes,gross volumeReplacevalves&gauges,school x School only contributes 2B_Barge fill line manifold repair Xi Shared cost,prorated by gross volume 'Tank fill line manifold Xx Shared cost,prorated by gross volume3Electricalmaintenancex'Shared cost,prorated by gross volume Replacement 1A_Fence replacement x _'Shared cost,prorated by gross volumeIB'Pad,dike,steps replace x 'Shared cost,prorated by gross volume 'Liner replacement Xx Shared cost,prorated by gross volume 2A_Dispensers,replacement x Council only contributes Tanks,replacement,city &council Xx 'City &council only contributes,gross volume 'Tanks,replacement,school xX School replaces own Dispensing tanks x Council only contributes 2B Barge pipe &supports,replace X Shared cost,prorated bygross volume'Dispensing lines,replace X Council only contributesFueltransferlines,replace utility Xx City only contributesFueltransferlines,replace,council x City only contributes Fuel transfer lines,replace,school x School only contributes'Valves-barge &tank lines,replace,city Xx Shared cost,prorated by gross volume 2C_(Tank inspection,city &council Xx iCity &Council contribute only,gross volumeTankinspection,school Xx 'School only contributes 3 Electrical replacement,city &council X City &Council only contribute,gross volumeIElectricalreplacement,school Xx School only contributes Categories of Costs to Track Operator,will need to track,allocate to appropriate participant(s)and account for in the facility bookkeeping records.These four kinds of costs are: As you can see from the sample Appendix A above,there are aN aiebasicallyfourdifferentkindsofcoststhatyou,as the Primary eeJ -_.Costs that are the responsibility solely of the Primary Operator 2.Costs that are the responsibility solely of one of the other participants 3.Costs that are the responsibility of two or more (but,not all of the participants) 4.Costs that are the responsibility of all the participants In our example,we have some of each of the categories of costs to track: 1.Costs that are the responsibility solely of the City (Primary Operator) 2.Costs that are the responsibility solely of the Council Costs that are the responsibility solely of the School 3.Costs that are the responsibility of the City &Council together 4.Costs that are the responsibility of all the participants together Marine (+)Header Common Transfer Line Council Tanks (:)3 > Transfer Transfer Line To Line ToPowerRetail Plant .;Dispenser (2) |___» Transfer Line To School Intermediate Tank School Tank City Tanks Setting Up Accounts One method for your organization to track participant expenses is to set up separate account codes within your chart of accounts.To do so,first you need to establish bulk fuel facility account codes,if your organization'sexistingbookkeepingsystemdoesnotalreadyhavesuch account codes. Second,your organization will need to establish sub-accounts for participants'individual costs and for common/shared costs.So,what your organization will have is several accounts for tracking revenue and costs for the bulk fuel facility.Some accounts will track revenue and costs that are your organization's responsibility;some will track revenue and costs that are shared/common costs;and,finally you may have a number of accounts that track revenues and costs that are the sole responsibility of other participants. The allocation percentages can be obtained from Table B in your Bulk Fuel Facility Business Operating Plan,Financial Information. Posting Accounts At least once a month,or more frequently depending on your organization's bookkeeping system,the bulk fuel facility's revenues and expenses need to be entered into your organization's existing bookkeeping system.Your existing bookkeeping system may track revenue and costs using a variety of tools,including paper ledgers,computer spreadsheets or software bookkeeping programs,such as QuickBooks.Use any bookkeeping tool that makes good sense to track revenue and costs;the primary concern is that data entries are consistent,accurate and up-to-date. Allocating Costs The estimated revenue and expenses for the Facility are defined in your Bulk Fuel Facility Business Operating Plan; and,may be further defined or modified based on the bulk fuel facility's annual budget that you,as the Primary Operator,prepare for participants'review and approval.These costs may include labor costs for annual maintenance and fuel delivery,common power costs,annual -6- tank inspection,operator training,audit,general liability insurance, administration and supervision that are directly related to the shared/common costs of the bulk fuel facility. Tracking Employee Time The management and employees in your organization that charge a percent of their labor hours (timesheet)to the bulk fuel facility need to understand when to charge their hours to (1)the primary operator,(2)other participants,or (3)shared/common O&M accounts. Additionally,everyone needs to understand when and how to charge the bulk fuel facility's maintenance supplies,common power costs, annual tank inspection,operator training,audit,general liability insurance and other costs. It is the responsibility of the bulk fuel facility manager and bookkeeper to ensure that all costs are consistent and are accurately coded to the proper bulk fuel facility accounts. Year-end Summary or Ali At the end of your organization's fiscal year,when all oo accounts for the year have been closed,the primary operator bu22.38.97) needs to generate a summary of all the bulk fuel facility accounts.The shared/common account summary and the summary of the individual participants'accounts will be the basis for building the next fiscal year's budget that your organization,as the Primary Operator,will present to the participants at the annual meeting. Participants will want to review the account summaries at the annual meeting to verify that their past year's annual payment to the Primary Operator paid only for shared/common costs or their individual costs. Annual Payment by Participants A JItisimportantthatparticipants'annual payment be properly coded,as these funds are managed by the Primary Operator to cover either shared/common or the individual costs throughout the fiscal year.Since the participants'annual payment is -7- based on an annual budget,there may be a surplus or shortfall at the end of the fiscal year. The Primary Operator is responsible for reporting a surplus or shortfall of participant's funds to the participants at the annual meeting or earlier.Participants may need to increase their annual payment to the Primary Operator when there is a shortfall.Any surplus revenue may be deducted from the participants'next year's annual payment to the Primary Operator,based on the allocation formula or may be retained to increase the balance of the fund -based upon mutual agreement of the participants. BOOKKEEPING FOR PROJECTS WITH SEVERAL PARTICIPANTSSAMPLEEXERCISE|Le WHO PAYS FOR WHAT? FACT SHEET 1.The City is the Primary Operator and is responsible to maintain and pay the associated bills for the common components of the facility,as well as for the city and council components.The City uses its fuel/tanks to operate the electric utility and City functions. 2.The Council uses their fuel/tanks to retail heating fuel to the community.The Council pays the Primary Operator for their share of common expenses and for expenses related to their components. 3.The School uses their fuel/tanks to operate school buildings.The School pays the Primary Operator for their share of common expenses only. 4,Expenses should be allocated to participants based upon each participants'percentage of primary capacity. ee TABLE 1°PARTICIPANT ALLOCATION aa|City |Council |School |Total Primary Capacity (Net) Gallons 55,800 |364,800 |129,000 |549,600 Percentage 10.1%66.4%23.5%100% Initial Throughput Volumes Gallons 38,500 |244,960 |107,500 |390,900 Percentage 9.8%62.7%27.5%100% %Share Common 10.1%66.4%23.5%100% Expenses %Share 13.3%86.7%NA 100% City/Council Expenses %Share of 13.3%86.7%NA 100% Insurance WHO PAYS FOR WHAT? Primary Operator's |Council's City &Shared School's (City)Cost Only |Council's |Common |Cost Only Cost Only Cost Cost Oil filters &oil purchased for the bulk fuel facility Operator's labor hours for fuel delivery to the bulk fuel facility Operator's labor hours for performing minor repairs and replacing faulty valves at the bulk fuel facility Operator's labor hours for delivering heating fuel to council's buildings Store manager's labor hours for gasoline sales at the store's dispensing tank Manager's labor hours for scheduling transfer of fuel from barge to facility participants Bookkeeper's labor hours for invoicing and collecting payments for heating fuel deliveries Manager's labor hours for developing annual bulk fuel facility budget Bookkeeper's labor hours for data entry in cost spreadsheet for bulk fuel facility Electricity invoice for bulk fuel facility Bulk fuel facility's liability insurance quarterly payment Contractor's invoice for Annual Inspection/Pressure Testing Airline ticket for Operator to attend BF Training class Annual Audit Repair bill for retail dispenser Repair bill for marine header Paint for stairs/catwalk Operator's labor to paint stairs/catwalk -10- ANSWERSHEET -WHO PAYS FOR WHAT? Primary Operator's Council's City &Shared School's (City)Cost Only Council's Common Cost Only Cost Only Cost Cost Oil filters &oil purchased for the v bulk fuel facility Operator's labor hours for fuel v delivery to the bulk fuel facility Operator's labor hours for performing minor repairs and v replacing faulty valves at the bulk fuel facility Operator's labor hours for delivering heating fuel to council's buildings Not Applicable -This is a Council cost not covered by the Business Plan. Store manager's labor hours for gasoline sales at the store's dispensing tank Not Applicable -This is a Council cost not covered by the Business Plan. Manager's labor hours for scheduling transfer of fuel from barge to facility participants Bookkeeper's labor hours for invoicing and collecting payments for heating fuel deliveries Not Applicable -This is a Council cost not covered by the Business Plan. Manager's labor hours for developing annual bulk fuel facility budget v Bookkeeper's labor hours for data entry in cost spreadsheet for bulk fuel facility Electricity invoice for bulk fuel facility Bulk fuel facility's liability insurance quarterly payment Contractor's invoice for Annual Inspection/Pressure Testing Airline ticket for Operator to attend BF Training class Annual Audit Repair bill for retail dispenser Repair bill for marine header Paint for stairs/catwalk Operator's labor to paint stairs/catwalk NIN-ll- HOW MUCH DO THEY PAY? Primary Council School's Cost Operator Cost Only (City) Oil filters &oil purchased for the bulk fuel facility $375 Operator's labor hours for fuel delivery to the bulk fuel facility $200 Operator's labor hours for performing minor repairs and $100 replacing faulty valves at the bulk fuel facility Operator's labor hours for delivering heating fuel to council's $120 buildings Store manager's labor hours for gasoline sales at the store's $30 dispensing tank Manager's labor hours for scheduling transfer of fuel from $45 barge to facility participants Bookkeeper's labor hours for invoicing and collecting payments $60 for heating fuel deliveries Manager's labor hours for developing annual bulk fuel $200 facility budget Bookkeeper's labor hours for data entry in cost spreadsheet for bulk $50 fuel facility Electricity invoice for bulk fuel facility $50 Bulk fuel facility's liability insurance quarterly payment $575 Contractor's invoice for Annual Inspection/Pressure Testing $2,500 Airline ticket for Operator to attend BF Training class $450 Annual Audit $650 Repair bill for retail dispenser $450 Repair bill for marine header $750 Paint for stairs/catwalk $150 Operator's labor to paint stairs/catwalk $300 -12- ANSWER SHEET -HOW MUCH DO THEY PAY? Primary Cost |Operator's Council School's (City)Cost Only Oil filters &oil purchased for the bulk fuel facility $375 49.88 325.12 Operator's labor hours for fuel delivery to the bulk fuel facility $200 20.20 132.80 47.00 Operator's labor hours for performing minor repairs and $100 13.30 86.70 replacing faulty valves at the bulk fuel facility Operator's labor hours for Not Applicable -This is a Council cost not delivering heating fuel to council's $120.|covered by the Business Plan. buildings Store manager's labor hours for Not Applicable -This is a Council cost not gasoline sales at the store's $30 covered by the Business Plan. dispensing tank Manager's labor hours for scheduling transfer of fuel from $45 4.55 29.88 10.57 barge to facility participants Bookkeeper's labor hours for Not Applicable -This is a Council cost not invoicing and collecting payments $60 covered by the Business Plan. for heating fuel deliveries Manager's labor hours for developing annual bulk fuel facility $200 20.20 132.80 47.00 budget Bookkeeper's labor hours for data entry in cost spreadsheet for bulk $50 5.05 33.20 11.75 fuel facility Electricity invoice for bulk fuel facility $50 6.65 43.35 Bulk fuel facility's liability insurance quarterly payment $575 76.48 498.52 Contractor's invoice for Annual Inspection/Pressure Testing $2,500 252.50 1,660.00 587.50 Airline ticket for Operator to attend BF Training class $450 45.45 298.80 105.75 Annual Audit $650 65.65 431.60 152.75 Repair bill for retail dispenser $450 450.00 Repair bill for marine header $750 75.75 498.00 176.25 Paint for stairs/catwalk $150 15.15 99.60 35.25 Operator's labor to paint stairs/catwalk $300 30.30 199.20 70.50 -13- TegeTeapFeFREETe%._fe