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HomeMy WebLinkAboutElectric Board - Minutes - 08/03/2011Electric Board Meeting Minutes August 3, 2011 1 Fort Collins Utilities Electric Board Minutes Wednesday, August 3, 2011 Electric Board Chairperson City Council Liaison Steve Wolley, 288-0317 Lisa Poppaw, 223-4136 Electric Board Vice Chairperson Staff Liaison Edward DeCourcey, 206-9996 Brian Janonis, 221-6702 Roll Call Board Present Chairperson Steve Wolley, Vice Chairperson Ed DeCourcey, Board Members John Graham, John Harris, and Peggy Plate Board Absent Steve Yurash and Tom Barnish Staff Present Brian Janonis, Steve Catanach, Patty Bigner, Tom Rock, Bill Switzer, Ellen Switzer, John Phelan, Phil Ladd, Robin Pierce, and Harriet Davis Guests Joe Mancinelli and Robyn Wolfe with R.W. Beck, Rick Coen, Craig Godbout Meeting Convened Chairperson Wolley called the meeting to order at 5:30 p.m. Public Comment None Approval of July 6, 2011, Minutes Vice Chairperson DeCourcey moved to approve the minutes of the July 6, 2011, meeting. Board Member Graham seconded the motion, and it passed unanimously. Electric Rate Options (Presentation available upon request) Customer and Employee Relations Manager Patty Bigner introduced this topic and introduced Joe Mancinelli and Robyn Wolfe, consultants with R.W. Beck. Ms. Bigner stated this presentation is very significant because Utilities has not changed its rate forms in the history of the Electric Utility. The agenda topics are as follows: • Introduction/Purpose • Review Rate Options Developed to Date • Alignment of Rate Options with Energy Policy • Rate Options Impacts on Key Drivers • Gradualism/Phase-In The rate options are presented to the board for a recommendation to Council. Staff is also asking the board for a recommendation on the concept of a Community Benefit Charge. Electric Board Meeting Minutes August 3, 2011 2 Purpose • To Review Rate Options Developed to Date • To align Utilities Pricing Strategy (Customer Behavior) with the City’s Energy Policy Board discussion: What is the driver for this recommendation? Council asked Utilities for a tiered-rate option recommendation. This is not necessarily driven by costs? No. Mr. Mancinelli stated the presentation includes a variety of options that are in line with the City’s Energy Policy and carbon reduction goals. Some of the potential options are significant changes to the current rate structure. These types of options are not only unique to the City of Fort Collins, but also unique to the industry. The focus has shifted from promoting load to conservation. Other rate structures have been designed for a growth model. This puts a strain on the Utility because of the way the rates are structured. The rate options are a win-win situation for Utilities (i.e. stays financially strong) and for the customers (i.e. lower power bills). Factors Influencing Rate Design 1. Platte River Power Authority Seasonal Pass Through (Summer and Non-Summer) • Summer includes the months of June, July, and August. The rates are higher in the summer and lower during the other months. • It is Utilities’ policy to pass through Platte River Power Authority (PRPA) pricing to customers. 2. Increased Cost of Service • Residential Class – 6.4 percent The revenues can be achieved without changing the rate structure. • Residential Demand – 15.9 percent • General Service 3. Alignment with Energy Policy • There are programs in place that are not supported by the current rate structure. Rate Options Developed to Date Rate Options Defined • Proposed 2012 PRPA Seasonal Pass Through Overall 8.35 percent increase in rates • Tiered Rates (Inclining Block) Rates increase as a customer’s (kWh) usage increases. • Time of Use (TOU) Rates – Energy used during specific time period On-Peak: usage will add to the system load, rates are higher Off-Peak: usage does not contribute to system load, rates are lower A seasonal rate is generally a more dynamic rate structure. It requires a certain amount of infrastructure to support such as billing system upgrades. The Automated Metering Infrastructure (AMI) investment supports a TOU rate structure. Options Proposed per Customer Class • Residential Customers (PRPA Seasonal Rates and 3 Tier and 5 Tier Rate Alternatives) • Residential Demand Customers (Seasonal Rates – Summer and Non Summer) • Electric Vehicle Customers (TOU Rates) Electric Board Meeting Minutes August 3, 2011 3 There is a concept of not providing disincentives to customers with Electric Vehicles. This technology is in line with the Energy Policy. A board member asked if this concept would involve double metering. Light and Power Operations Manager Steve Catanach stated at this point the plan is for a single meter to be utilized as part of the AMI project. • General Service <50kW (Seasonal Rates – Summer and Non Summer) Residential Customers PRPA Seasonal Rates Option 1 PRPA Seasonal Rate Cost Curves Mr. Mancinelli explained the graph and corresponding tables to the board. Most of the customers use power between 300-900 kilowatt hours (kWh) per month. The very large users taper off after 1400 kWh per month. The red line on the graph is the current residential rate. He explained the increased Customer Charge from the existing 2011 rates and the proposed PRPA seasonal rate, and the dollar and percent increases between the different levels of usage. Typical Customers with Air Conditioning and Without Air Conditioning The examples presented are based on a hypothetical customer with air conditioning and a customer without air conditioning. The summer usage dropped for the customer without air conditioning. Board discussion: Chairperson Wolley suggested the graph should be modified to say “Example Customer” instead of “Typical Customer” to clarify that average costs are not represented in the graph. Residential Customers 3 Tier Rate Structure and 5 Tier Rate Structure Mr. Mancinelli explained the tier graphs showing the cumulative use over the course of consumption ranges for Summer, Non-Summer, and Annual. The blocks are in line with Xcel’s rate design structure. As more tiers are added, you can send stronger pricing signals. The actual signal is a function of how much energy is in each block. Board discussion: What is the impact if the first tier was at 55 percent? As the tier is lowered, revenue is shifted. It has to equal cost of service. Do you want to conserve more? Mr. Mancinelli stated customers respond to pricing signals and gave the example of increased gas prices. Utilities can create a flat rate structure and people will respond. This type of rate structure sends a strong pricing signal to send incentives to those individuals. A board member suggested Utilities should not send a pricing signal that is too strong. Mr. Mancinelli reminded the board that the Utilities’ cost structure is very competitive and that prices are in line with community values. Board discussion: Chairperson DeCourcey suggested that using the term “slow growth” may not be a good use of the term for explaining the proposed rate structures. Slow growth may imply that Utilities is Electric Board Meeting Minutes August 3, 2011 4 trying to stifle the community. The term “load” should be added to the description for clarification. Which rate structure (3 Tier versus 5 Tier) is better at meeting the community goal of reducing carbon? Mr. Mancinelli stated this information is still being reviewed. Is there data available from other communities on the rate structure variance? There is no information available at this time. What was the history when Utilities changed the water rate structure to different tiers? Utilities Executive Director Brian Janonis stated that Utilities started with a five tier rate structure for water rates. Subsequently, there was community uproar. Council went to a three tier rate structure. Mr. Janonis feels the five tier rate structure penalized the higher users and was more complicated. Mr. Mancinelli explained the Electric Rate Summary sheet and the difference between the options. Board discussion: A board member stated he likes the three tier rate structure because in the summer months he can pay less than what he pays with the current rate. There is a benefit to reducing usage. On the five tier rate, there is no incentive for him to conserve; however, it is possible to lower his bill with the three tier rate structure. A board member expressed concerns that individuals may reduce their usage too much with Option 2 and Option 4 because the price signal will be too strong. Mr. Mancinelli stated there is a Fixed Cost Recovery Factor that addresses that issue. A board member expressed concerns that showing the current residential rate on the Summer Cost Curves graph may be confusing to Council. It was also suggested that the graph should show the group of customers that will see lower bills with the lower tier. Energy Services Manager John Phelan reminded the board that a single customer does not use the same amount of energy each month. Their usage will change each month on the graph. Residential Customers Seasonal Cost Curves-Annual Annual Average Cost Curves Mr. Mancinelli explained the Electric Rate Summary sheet and the difference between Option 2 – 3 Tier Model, Option 3 – 3 Tier Model, and Option 5 – 3 Tier Model for Summer, Non- Summer, and Annual Average. The graphs show significant difference for customers who use more than 1,100 kWh each month. The comparisons between the different options were highlighted for customers with air conditioning versus customers without air conditioning. Board discussion: Chairperson Wolley suggested the graph should show a customer with air conditioning will spend more money. Residential Demand Customers Seasonal Cost Curves – Summer Mr. Mancinelli explained the Electric Rate Summary sheet for the residential demand customers. The new PRPA wholesale rate structure has a lower demand charge and a higher energy charge. Electric Board Meeting Minutes August 3, 2011 5 This will help lower load factor customers and will hurt higher load factor customers. Higher load factor customers will see increased bills. Mr. Mancinelli explained the concept of load factors. For example, Utilities has to have a certain amount of capacity on the system to supply a light bulb that is turned on. The load factor for a light bulb turned on and left on for a month will be 100 percent because the bulb is using 100 watts 100 percent of the time. Most customers have a load factor of approximately 20-80 percent. Larger commercial customers have a load factor of approximately 70-80 percent and sometimes 90 percent. Residential customers are generally at 20-30 percent load factor. Customers with electricity only have higher load factors than those customers with electricity and natural gas services. Board discussion: Chairperson Wolley questioned who will pay more based on the demand rate? If the customer uses a lot of kilowatt hours, and the energy rate is going up and the demand rate is going down, they will see an increase in their bill. Residential Demand Customers Seasonal Cost Curves – Summer Summer (20 percent load factor) Cost Curve Mr. Mancinelli explained the Electric Rate Summary sheet for the Residential Demand customers and the difference between Option 2 – 3 Tier and Option 4 – 5 Tier. The Residential Demand rate is contrary to the pricing signals for the tiered rate structure for the larger users. One proposed option is to close the Residential Demand rate to new customers. Electric Vehicle Assumptions Mr. Mancinelli explained these assumptions are based on a conceptual idea. This will primarily be based on a Time of Use (TOU) option. The rate can be implemented when the AMI meters are installed. With this scenario and the inclining block rate structure, individuals are encouraged to conserve usage and at the same time, encouraged to purchase an electric vehicle because of the numerous benefits. Using electric vehicle usage information from other utilities, the study concluded the average electric vehicle charges for approximately 3.25 hours per day, using 9 kWh per day and 270 kWh per month. It requires a 40 amp service with 240 volts, and a peak demand of 2.765 kW. The existing residential customer has a 6.9 kW peak demand, using approximately 670 kWh per year. If they buy an electric vehicle, their peak demand will increase to 9.7 kW and 940 kWh per year. Electric Vehicle TOU Rates Seasonal Peak Loads – Summer Mr. Mancinelli explained the Electric Vehicle Bill Comparison Table and TOU Rates for Electric Vehicles. A customer without an electric vehicle will pay $54.70 per month with the Option 2 – 3 Tier rate. With an electric vehicle, their bill will increase to $81.41 per month with the same option. For the months of June through September (On Peak: Summer), the shape of the load is very similar from approximately 1:00 p.m. to 9:00 p.m. For the months of March, April, May, and October (On Peak: Shoulder), there is a period for potential peaking from 11:00 a.m. to 10:00 p.m. For the months of December – January (On Peak: Winter), there is a very sharp peak from about 4:00 p.m. to 10:00 p.m. There are three distinct seasons and a TOU rate structure would have to take the different seasons into consideration. PRPA is providing a two season pricing signal, but the summer season is short because it does not include September. Electric Board Meeting Minutes August 3, 2011 6 Board discussion: Are you creating a new rate just for electric vehicle owners? There are four options provided (Residential TOU rate and Electric Vehicle TOU rate for both On Peak and Off Peak). Yes, the customer may want to choose a Residential TOU rate, regardless of whether they have an electric vehicle. Utilities is trying to send a strong signal to those who purchase the electric vehicles to charge them during the off peak period. Mr. Mancinelli reminded the board this scenario is hypothetical because there is no TOU data and electric vehicle usage data as of yet. How many electric vehicles are in the City of Fort Collins? Mr. Catanach stated this information is currently not available. Mr. Mancinelli explained the Electric Rate Summary sheet for Electric Vehicles. A board member noted the potential usage rates for charging an electric vehicle will be considerably lower than buying gasoline. General Service <50 kW Mr. Mancinelli explained the Electric Rate Summary sheet for General Service (GS) commercial customers less than 25 kW and GS customers from 25>50 kW. There are different customer charges based on the type of service and the tiered structure has been simplified. General Service 50 kW Mr. Mancinelli explained the Electric Rate Summary sheet for General Service (GS) 50 kW commercial customers. The rate is a TOU rate where commercial customers are being charged their demand at the time of your Coincident Peak (CP). The Coincident Peak is the measurement that PRPA measures when they charge their power cost. It is a very powerful pricing signal. Board discussion: What is the average load factor for this group? It is approximately 60-70 percent. General Service 750 kW Mr. Mancinelli explained the Electric Rate Summary sheet for General Service (GS) 750 kW commercial customers. These are the large-use customers with approximately 15 customers in this group. This category has a tiered structure because of the large usage. Rate Adjustment Factors-Community Benefit Factor Ms. Bigner explained this is a mechanism used to recover funds used for programs designed to benefit the community such as energy efficiency programs. Utilities seeks to create more transparency for their customers. When the Energy Policy was first adopted in 2003, Utilities considered the concept of the Community Benefit Charge. The ideas presented are conceptual in nature and are based on some of the current budget figures. Why a Community Benefit Charge? • Creates more transparency of the bill • Aligns City Council policies and goals with what’s on the bill • Highlights the contribution of street lighting to our Utility benefit • Adds a resource to meet unmet need with customer assistance • Supports fairness and equitability because it embeds the cost of service • Other communities are using it with conservation-oriented rates • Establishes funding for community programs Electric Board Meeting Minutes August 3, 2011 7 • Creates an efficient method of targeting community needs What are the Considerations? • Communication • Translating bills (not a change to the actual rates) • Detailed breakdown of the current costs embedded into the rates • Reformatting the bill • Initially, the charge to the customer would not reflect the true costs of the programs because Utilities is funding some programs from the reserves • Improve our ability to provide biannual evaluations of the cost of service of these programs What would be included in the Community Benefit Charge? • Energy Efficiency Program • Green Building Program • Community assistance program currently embedded in the Energy Efficiency Program • Additional funds for lifeline rate (for income qualified customers) • Renewable Energy Program • Solar Program • Street Light Program Board discussion: How much would the fee be on each customer’s bill? Ms. Bigner stated, without reserves, it would be approximately $0.01 per kWh. The fee would be less with reserves. Would it be based on the bill or would it be a flat charge? It would be based on the customer’s bill. A board member expressed concerns with giving customers too many details and suggested perhaps that this is not the appropriate time to call attention to this charge. What is the driver behind the transparency program? Staff is asking for the board’s input. How do the new rate structure and the AMI program work together? What are the benefits from AMI? Mr. Catanach stated Utilities could have implemented tiered rates when the Utility started. The AMI program is needed to support the TOU rates. Rate Adjustment Factors-Fixed Cost Recovery Factor Mechanism used to recover a Utility’s fixed costs when there is a decrease in sales/usage (kWh) • Decoupling • Revenue stability mechanism for Utility Conservation → decrease in usage (kWh) → decrease in revenue In the current rate structure, a fair amount of the fixed costs are recovered through the Energy Charge. In the new rate structure, a fair amount of the fixed costs will still be recovered through the Energy Charge. Electric Board Meeting Minutes August 3, 2011 8 Alignment of Pricing Strategies with Energy Policy Mr. Mancinelli gave an overview of the Plan Fort Collins and Utilities for the 21 st Century Programs. The concepts are based on Economic Principles (Cost of Service, Financial Planning and Rate Design). Other components include gradualism, honest transparency, and complying with the City Charter and Council Policy. Components build on each other to align with the overall strategic direction. An overview of the comparison between rate options was shared with the board. The comparison ranks the rate’s ability to meet Energy Policy goals and metrics. The comparison includes four components including if the rate fully achieves the metric, partially achieves the metric, minimally achieves the metric, or does not achieve or impact the metric. The goals are as follows: provide highly reliable electric service, support the City’s carbon reduction goals (20 percent reduction by 2020 and 80 percent reduction by 2050); enhance local economic health, and work closely with PRPA members and staff to achieve the City’s energy goals. The advantages and disadvantages for each rate structure were shared with each corresponding goal. Key Driver: Energy Efficiency/Conservation The existing rates are a good source of revenue and can fund the Energy Efficiency and Conservation Programs, but the existing rates do not use pricing signals to incentivize conservation. PRPA Seasonal Pass-Through rates also provide a revenue source for the Energy Efficiency and Conservation Programs, but do not send as strong a signal to conserve as with tiered rates. Tiered rates send a strong pricing signal; however, issues include penalizing customers for usage at the end of the month. Also, there is no clear relationship between Utilities’ costs and customer costs at the point in the billing cycle when customers move from tier to tier. TOU rates allow Utilities to send sophisticated, accurate pricing signals that encourage energy efficiency and conservation during peak periods of the day. It also reinforces one of the most effective elements of consumer behavior change – actionable price signals to the consumer. Although it creates a partnership with customers, it may negatively impact those customers that cannot curtail power during peak periods. Also, there is a customer “learning curve” to actively manage energy usage. Key Driver: Deferred Capital Expenditures The existing rates may not be sufficient to change customer behavior and may not impact peak demand. PRPA Seasonal Pass-Through rates could drive customer behavior to reduce usage during peak season. The Pass-Through rate may not be sufficient to change customer behavior or impact peak demand. Tiered rates may reduce energy use during the month, but are less effective in reducing peak demand than TOU rates. If increase is on the high end and usage is not reduced, tiered rates can result in additional revenue to the Utility. TOU rates can effectively reduce peak demand; however, if usage is deferred and not curtailed, the peak may shift, but not be reduced. Key Driver: Carbon Reduction With the existing rates, there is no pricing signal to incentivize a reduction in consumption and the related carbon emissions. PRPA Seasonal Pass-Through rates may send a fairly weak signal to reduce consumption. Customers may not respond if PRPA’s pricing signal is not strong enough. Tiered rates can reduce total consumption and reduce production-related carbon emissions. Customers may not be able to curtail consumption during the month. TOU rates can be effective in reducing consumption and reducing associated production-related carbon Electric Board Meeting Minutes August 3, 2011 9 emissions; however, customers may not be able to reduce consumption during peak periods or may just shift consumption to off-peak periods. Key Driver: Revenue Stability The existing rates are highly stable. PRPA Seasonal Pass-Through rates maintain the direct link between costs for the customer and revenue for the Utility. Tiered rates are less stable. TOU rates can be set to match estimated usage and contribute to revenue stability; however, TOU rates may require continual adjustment and are dependent on the ability of the Utility to estimate customer behavior. Customer behaviors will be more predictable when AMI data is collected and analyzed. Key Driver: Fairness and Equitability The existing rates follow cost of service and the embedded cost curve. PRPA Seasonal Pass- Through rates are the most “fair and equitable” manner to send pricing signals, as the signal is based on costs; however, they may not be as effective in changing customer behavior. Tiered rates penalize large users of energy and encourage lower use through strong price signals; however, the pricing signal is unrelated to purchase power costs. TOU rates allow Utilities to send clear pricing signals to customers. They do not directly penalize those who simply use more energy due to factors such as size of family, home offices, retirees, or health reasons; however, these factors may make it more difficult for some customers to curtail usage during peak periods. Key Driver: Optimize Advanced Meter Fort Collins (AMFC) Investment Existing rates, PRPA Seasonal Pass-Through rates, and tiered rates do not optimize the AMFC program. TOU rates allow Utilities the most flexibility in realizing peak savings associated with the program. They dovetail with efficiency and conservation practices made possible through AMFC; however, the simultaneous roll-out could cause customer confusion and backlash. Mr. Mancinelli shared the example of Pacific Gas and Electric (PG&E), who rolled out their advanced meter program simultaneously with a new rate structure without adequate communication with their customers. Gradualism Mr. Mancinelli explained the concept of the phase-in rate structure changes that will be initiated to avoid “rate shock.” This will be achieved by educating customers to gradually impact their behavior. The TOU rates are at the end of phase. Mr. Catanach stated Utilities will need a year’s worth of AMI data to establish the TOU rates. Ms. Bigner stated staff will meet with the Council Finance Committee on August 15 th , 2011. Staff will use feedback from the Electric Board and feedback from the Finance Committee to make a recommendation to Council on August 23 rd , 2011. Board discussion: A board member expressed the TOU rates are easier to understand than the tiered rates. Can the current rate structure survive financially the PRPA Seasonal Pass-Through rate change? Utilities Rate Analyst Bill Switzer stated that Loveland is developing a similar program to that of the City of Fort Collins. Longmont has set a three-year plan for rate increases. He was unsure about Estes Park. Chairperson Wolley suggested proposing to Council that the current rate structure not change until after the AMI data is available. A hoard member suggested that the person lnstalling the Advanced Meters should be vemy knowledgeable about i/ic program to answer customer ‘5 questions i/necessary. A hoard member suggested doing the Seasonal Pass—Through Rates and the Tiered Rates at the same i/inc. A board member suggested sending a letter to Council staling Electric Board believes that Utilities and R. W. Beck has a proposal in line with the City ‘5 goals. However, the Electric Board J3erceives signifIcant risks in the /ict that the rate structures will be roIled out at the same time as the AMlprogramn. Utilities should be cautious to avoid potential backlash from customers. Ms. Bigner asked Chairperson Wolley to draft a summary of the board discussion with the recommendations. He suggested shortening the presentation and removing slides before presenting it to Council. Mr. Janonis asked the board if the five tier option should be removed from the presentation. The board agreed that this option should be removed to simplify. 1i’iio is doing the education program and presentations/br the community concerning the new rate structure? Ms. Bigner stated staff will work with consultants on this component of the project. Routine Updates Platte River Power Author/tv (Utilities Executive Director Brian Junoms): No update. Capitol Neit’s (1’7ce Chairperson DeCourcey): No update. Staff Reports Utilities Financial Operations Manager Ellen Switzer provided a monthly Financial Report included in the packet. Other Business None Future Agenda Items None Open Items Tracking None Adjournment The meeting was adjourned at 9:00 p.m. Submitted by Harriet Davis, Administrative Assistant, Fort Collins Utilities Approved by the Board on —_______________ 2011 Signed Board Secretary Date Flectric Board Meeting Minutes 10 August 3. 2011