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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 09/13/2011 - PROPOSED ELECTRIC RATE OPTIONSDATE: September 13, 2011 STAFF: Brian Janonis, Patty Bigner, Steve Catanach, Bill Switzer Pre-taped staff presentation: available at fcgov.com/clerk/agendas.php WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Proposed Electric Rate Options. EXECUTIVE SUMMARY In the last decade, the electric utility industry has evolved in several areas. While the core business of generation, distribution, metering and billing for service has continued to reflect advances in fuels, equipment and system design, policy goals have become increasingly important with an emphasis on engaging customers in achieving community goals through effective pricing signals. As such, the philosophy surrounding when and how much electricity is used by customers has become a focus of discussion. In Fort Collins, this shift is reflected in the City Council adopted Energy Policy and Climate Action Plan. Historically, electric rates, especially for Fort Collins residential customers, have remained stable with changes reflecting cost of service, including purchased power, distribution and customer service costs. Recently, City Council expressed interest in a tiered or inclining block rate for residential customers. Staff has prepared several residential rate options for City Council discussion and feedback. Commercial rate options propose a change to the General Service (GS) or commercial rate class that more accurately reflects electric use of this diverse group of customers. Rates for other commercial rate classes will reflect cost of service with a seasonal component that mirrors the 2012 purchase power rate. Suggested implementation strategies have also been developed for discussion. Based on earlier feedback from the May 10, 2011 Council Work Session, the Council Finance Committee and recent feedback from the Electric Board, staff in conjunction with consultants has developed and analyzed the rate options now offered for discussion. Feedback from this work session will be used in drafting rate ordinances for public comment and City Council consideration on October 18, 2011. Rates are expected to be effective January 1, 2012. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Residential Rate Options 1. Of the four proposed rate options for the residential energy rate, which specific option is preferred? 2. Does City Council support the proposed change to the residential demand rate? September 13, 2011 Page 2 Commercial Rate Options 1. Does City Council support the proposed change that would create an additional rate class from the existing General Service rate class? BACKGROUND / DISCUSSION Residential Energy Rates Approximately 55,020 residential customers comprise this rate class. These customers include single-family dwellings, individually metered apartments and home occupations. This rate class also includes a small group (220) of multi-family customers with a single meter. Seventeen of these customers occupy four-plex or larger units. Around the country, leaders in the electric industry are implementing rate design strategies that incentivize residential customers to change the way they view and use power, resulting in the reduction of electricity demand and energy. Such a reduction has numerous economic, environmental and community benefits and has been adopted by a growing number of utilities nationally. A comparison of electric rates from selected “progressive” municipal and investor- owned utilities shows tiered rates are used by 10 of the 14 municipal and 12 of the 13 investor- owned utilities. (Attachment 2) The success of this strategy can be measured as limited or slow growth of both energy consumption and the electric system peak load, (the time of highest demand for electricity on the Fort Collins system) compared to historical actual growth. Within the generation and transmission system operated by Platte River Power Authority (PRPA), reduction in demand has resulted in delay of additional peaking generation. Reduction in energy use results in lower carbon emissions. For example, since 2005, a reduction in 129,879 metric tons of CO2 has been reported within the Fort Collins Utilities boundaries as a result of reduced energy use (this represents more than 11% reduction in carbon emissions). The 2010 Energy Policy report highlights energy efficiency savings of 20,500 MWh in 2010, 1.4% of the community’s electric use. To be most effective, this pricing shift is balanced with the need for predictable and adequate revenue, and considers the appropriate allocation of cost to customer classes or groups of users, such as residential, small commercial and industrial customers. The 2009 Energy Policy directs development of rate policies in the following objective: “Adopt pricing policies that reflect the short-term and long-term costs, both direct and indirect, of generating and delivering electricity.” The rate options proposed for City Council consideration largely comply with this direction. The options use the rate design philosophy developed by staff as a platform for strategic alignment with the City and Light and Power Utility policies. The residential energy rate options proposed for Council discussion are as follows: • Status Quo (current rate structure ) • Seasonal (PRPA pass-through) • Three Tier • Five Tier September 13, 2011 Page 3 Rate form changes and rate increases result in various impacts among customers, including confusion and in some instances, difficulty in paying the higher monthly bill. Recent comparisons of state and national electric rates show that Fort Collins electric rates are among the lowest in the state and the nation. However, it is expected that some customers may experience difficulties with the new proposed rate options, including the status quo with COS increase. Fort Collins Utilities offers a variety of programs to assist customers with conservation and energy efficiency. As noted above, in 2010, energy efficiency and conservation programs resulted in 20,500 MWhs of savings. These programs are designed to reduce energy, improve comfort, protect indoor air quality, and help keep electricity and gas bills as low as possible. In addition, new programs that offer energy efficiency financing options and expand low-income customer assistance are in the planning stages for implementation in 2012. Residential Demand Rate About 2,929 residential customers currently are billed on the Residential Demand (RD) rate, a choice offered to all residential customers. These customers are single-family private dwellings, metered apartments and home occupations. The current RD rate is typically more economical for customers whose homes are heated entirely by electricity. Such customers use on average more than 1,400 kWh per month. If Council adopts a tiered rate structure, staff proposes phasing out the RD rate to achieve the pricing signal associated with the tiered rate. In addition, the rate would be brought up to full cost of service with a 15.9% increase making it less attractive for many of the existing electric heat customers. If this change is approved, it would be phased in with two steps. The first phase will allow customers with all electric homes to qualify in order to remain on the rate, with qualification within a specified timeframe. The second phase will be determined by decisions about future rate forms adopted by City Council. Future Time-of-Use Rates With the implementation of the Advanced Meter Fort Collins project underway, the amount of information available from the new meters will improve the ability of the City’s electric customers to understand when and how much electricity is being used in significantly greater detail, opening the door for a more sophisticated pricing signal. Installation of the advanced water and electric meters is expected to be completed by mid-2013. This could include introduction of a tiered rate structure with progression to time-of-day pricing (with or without tiers) once the advanced metering system is completed and supporting time-of-day data has been gathered and analyzed. Staff is planning to develop and recommend a pilot time-of-use rate specifically targeted to electric vehicle owners in 2012. Commercial Rates Approximately 7,555 commercial customers comprise this group. Several rate classes currently make up the commercial customer group including General Service (small), General Service 50 (mid and large-sized) and General Service 750 (industrial). Commercial rate options propose a change to the General Service (GS) or commercial rate class that more accurately reflects electric use of this diverse group of customers. This change would create September 13, 2011 Page 4 a fourth commercial rate class to include the lower end of the mid-sized commercial customers. Examples of customers in the proposed GS customer class include housing services for condos and apartments (lights, laundry, etc.), small retail, professional offices, non-profit agencies, and small churches. The proposed GS 25 customer class includes fast food restaurants, medium-sized churches, restaurants, larger retail, fraternity and sorority houses, convenience stores, copy centers and banks. Rates for other commercial rate classes will reflect cost of service with a seasonal component that mirrors the 2012 purchase power rate. Customer groups within the proposed rate classes include: • GS -6,552 customers • GS 25 – 520 customers • GS 50 – 467customers • GS 750 – 16 customers Conclusion The proposed rate changes are designed to assist in achieving City Council goals, support customer choice in behavior related to their use of energy and reflect the increasingly dynamic utility industry. These changes remain true to the City’s long-held values of fairness, equitability and financial responsibility. Staff anticipates the need for a robust communications to support the implementation of the new residential rate forms, beyond the annual rate increase communication. Final planning will be developed once the rate option is chosen. Staff recommends the following: 1. Three-tier residential rate to align with Energy Policy and the Climate Action Plan 2. Phase out the residential demand rate 3. Mid-2012, introduce a residential time of use rate pilot to support electric vehicles 4. Split the existing current commercial (GS) customer class into two classes: GS and GS 25 ATTACHMENTS 1. Powerpoint presentation 2. Comparison of Utility Residential Rate Structures 3. Letter from the Fort Collins Electric Board 4. Work Session Summary, May 10, 2011 1 Electric Rate Options City Council Work Session September 13, 2011 2 Introduction and Background • Development of Electric Rate Options requested by City Council • Selection of SAIC (R.W. Beck) as consultant on financial strategy May 10, 2011 Work Session to discuss Rate Design Philosophy • September 13th Work Session for review – Four electric rate options for residential customers, change to residential demand rate – One proposed change for commercial customers ATTACHMENT 1 1 3 Questions for City Council • Residential Rate Options – Which specific option is preferred? – Does Council support the change to the residential demand rate? • Commercial Rate Class – Does City Council support the proposed change to create an additional rate class from the existing General Service rate class? 4 Review of Rate Options, Impacts and Alignment with City Policy and Goals Joe Mancinelli, Consultant SAIC (formerly R.W. Beck) 2 © 2011 by R. W. Beck, An SAIC Company. All Rights Reserved. Financial Strategy Electric Rate Options FORT COLLINS CITY COUNCIL WORK SESSION September 13, 2011 R. W. Beck, An SAIC Company | 2 Agenda/Purpose ƒ Context Behind Rate Design ƒ Pricing Strategy Alignment with Energy Policy ƒ Cost of Service Results ƒ Definitions/Clarifications ƒ Residential Customer Class ƒ Residential Demand Customer Class ƒ Commercial (GS) Customer Class ƒ Staff Recommendations 3 R. W. Beck, An SAIC Company | 3 Why are we discussing rate design? ƒ Align Rates with Policy ƒ Energy Policy ƒ Climate Action Plan ƒ Reduce Consumption ƒ Reduce System Peak Load ƒ Change Customer Behavior ƒ When and How Customers Use Electricity ƒ PRPA Pass Through ƒ Increased Cost of Service R. W. Beck, An SAIC Company | 4 Utilities Overview Residential Energy 443,941,220 kWh Residential Demand 50,096,749 kWh Commercial (GS) 195,133,283 kWh Commercial (GS 50) 304,853,362 kWh Commercial (GS 750) 353,110,550 kWh Contract 94,996,000 kWh Traffic 610,067 kWh 2010 kWh Sales by Customer Class Total kWh Sales = 1,442,741,000 4 R. W. Beck, An SAIC Company | 5 Utilities Overview 2010 Revenue by Customer Class Total Sales = $93,165,407 Residential Energy 37.26% Residential Demand 3.82% Green Program 0.57% Commercial (GS) 15.32% Commercial (GS 50) 20.07% Commercial (GS 750) 18.76% Contract 4.15% Traffic 0.03% R. W. Beck, An SAIC Company | 6 Utilities Overview 2010 Number of Customers by Class Total Customers = 65,504 Residential 55,020 Residential Demand 2,929 Commercial (GS) 7,072 Commercial (GS 50) 467 Commercial (GS 750) 14 Contract 1 Traffic 1 5 R. W. Beck, An SAIC Company | 7 Fort Collins Utilities Average Revenue Comparison Data presented is summarized from APPA’s published reports on Selected Financial and Operating Ratios of Public Power Systems with data for 2005-2009. R. W. Beck, An SAIC Company | 8 Fort Collins Utilities Average Cost Comparison $60 $- $20 $40 $60 $80 $100 $120 $140 LONGMONT GLENWOOD SPRINGS GUNNISON LOVELAND FORT MORGAN ASPEN FORT COLLINS JULESBURG LYONS FLEMING ESTES PARK DELTA OAK CREEK YUMA HOLY CROSS EA YAMPA VALLEY EA XCEL ENERGY COLORADO SPRINGS FOUNTAIN WRAY WHITE RIVER EA TRI-COUNTY HIGHLINE EA POUDRE VALLEY EA Y-W ELECTRIC ASSN INTERMOUNTAIN REA WHEATLAND DELTA-MONTROSE EA LA PLATA HAXTUN RATON UNITED POWER MOUNTAIN PARKS EI HIGH WEST ENERGY EMPIRE EA FREDERICK GUNNISON COUNTY EA MORGAN COUNTY REA GRAND VALLEY RPL BLACK HILLS ENERGY SAN MIGUEL PA LAMAR LAS ANIMAS R. W. Beck, An SAIC Company | 9 Fort Collins Utilities Average Cost Comparison $166 $- $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 GUNNISON FORT MORGAN LONGMONT LOVELAND GLENWOOD SPRINGS COLORADO SPRINGS WRAY FORT COLLINS FLEMING HIGHLINE EA LYONS JULESBURG HOLY CROSS EA XCEL ENERGY FOUNTAIN DELTA ASPEN Y-W ELECTRIC ASSN ESTES PARK YUMA POUDRE VALLEY EA WHITE RIVER EA OAK CREEK YAMPA VALLEY EA HAXTUN MOUNTAIN PARKS EI LA PLATA DELTA-MONTROSE EA HIGH WEST ENERGY MORGAN COUNTY REA EMPIRE EA UNITED POWER GRAND VALLEY RPL FREDERICK GUNNISON COUNTY EA TRI-COUNTY RATON WHEATLAND SAN LUIS VALLEY REA INTERMOUNTAIN REA LAMAR BLACK HILLS ENERGY SAN ISABEL HOLLY LAS ANIMAS R. W. Beck, An SAIC Company | 11 Fort Collins Utilities Average Cost Comparison $90,827 $0 $25,000 $50,000 $75,000 $100,000 $125,000 $150,000 $175,000 $200,000 $225,000 FORT COLLINS TRI-COUNTY LONGMONT LOVELAND COLORADO SPRINGS XCEL ENERGY SAN ISABEL EMPIRE EA DELTA-MONTROSE EA LA PLATA GRAND VALLEY RPL FOUNTAIN Y-W ELECTRIC ASSN SAN LUIS VALLEY REA MOUNTAIN PARKS EI GUNNISON COUNTY EA HIGHLINE EA HIGH WEST ENERGY WHITE RIVER EA UNITED POWER INTERMOUNTAIN REA MORGAN COUNTY REA FREDERICK FORT MORGAN BLACK HILLS ENERGY POUDRE VALLEY EA YAMPA VALLEY EA RATON Cost per Month Colorado Association of Municipal Utilities Industrial Rate Survey January 2011 --- Cost for 1,900,000 kWh and 3000 KW per month FORT COLLINS MUNICIPAL REA/CO-OP INVESTOR OWNED R. W. Beck, An SAIC Company | 12 Industry Trends ƒ Customer Sophistication ƒ Environmental Awareness ƒ Legislation & Regulation ƒ Efficiency ƒ Utility ƒ Customer ƒ Technology ƒ Renewable Energy R. W. Beck, An SAIC Company | 13 Utility Response to Trends ƒ Providing Customers More Options ƒ Renewable Energy ƒ Distributed Generation ƒ Energy Efficiency and Conservation Programs ƒ Demand Response ƒ Energy Management ƒ Investment in New Technologies ƒ Rate Design R. W. Beck, An SAIC Company | 14 Comparison of Selected Peer Municipal Utility Residential Rate Structures Utility Tiered Rate Structure Inclining Blocks # of Blocks TOU(1) Low Income Rates Electric Vehicle Rates (1) Time of Use Yes No No In Progress No Yes‐TOU Yes Yes‐TOU Yes Rebate Rate No Pilot‐TOU No No No Yes‐TOU Yes Yes‐TOU No No No Yes No Yes‐TOU No No Austin Energy (Proposed) Yes 5 Optional Eugene Water & Electric Board Yes 3 No City Public Service Energy Yes 2 No 2/3/4 Optional Yes 3 Optional Yes 2 Pilot No No Yes 2 Optional Optional Seattle City Light Santee Cooper Colorado Springs Utilities Jacksonville Electric Authority Los Angeles Department of Water and Power Memphis Light, Gas and Water Omaha Public Power District Salt River Project Long Island Power Authority Sacramento Municipal Utility District No R. W. Beck, An SAIC Company | 15 Comparison of Selected Investor Owned Utility Residential Rate Structures Utility Tiered Rate Structure Inclining Blocks # of Blocks TOU Low Income Rates Electric Vehicle Rates (2) Real Time Pricing No In Progress Yes Yes Yes Yes No Yes‐TOU No Yes‐TOU Yes No No Yes‐TOU Yes No Yes Yes‐TOU Yes Yes RTP(2) Yes Yes‐TOU No In Progress Ameren Illinos No RTP(2) No Pacific Gas & Electric Yes 5 Optional Arizona Public Service Yes 4 Optional Sand Diego Gas & Electric Yes 4 Pilot Avista Yes 2 No Pacific Power Yes 2 No IdahoOptional Power Yes 3 Pepco Yes 2/3 Optional Southern California Edison Yes 5 Optional Portland General Electric Yes 2 Optional Puget Sound Electric Yes 2 No Xcel Energy Yes 2 Pilot Toronto Hydro Yes 2 Optional R. W. Beck, An SAIC Company | 16 Comparison of Selected Utilities: Inclining Block Rate Structures ƒ Residential Customer Class Yes 22 Utilities (81%) No 5 Utilities (19%) Tiered Rate Structure Inclining Blocks 2 Blocks 50% 3 Blocks 25% 4 Blocks 10% R. W. Beck, An SAIC Company | 17 Comparison of Selected Utilities: Inclining Block Rate Structures ƒ Residential Customer Class Yes 7 Utilities (26%) Yes‐TOU 11 Utilities In Progress (41%) 3 Utilities (11%) No 6 Utilities (22%) Electric Vehicle Rates Yes 11 Utilities No (41%) 16 Utilities (59%) Low Income Rates Optional 18 Utilities (67%) No 8 Utilities (29%) RTP 1 Utilities (4%) Time of Use Rates R. W. Beck, An SAIC Company | 18 Commercial Rate Design ƒ Send commercial customers cost-based pricing signals to encourage the efficient use of power ƒ Demand Charge ƒ Usually applies to customers with demands of 10 kW and greater ƒ Fort Collins Utilities - demand charge 25 - 50 kW ƒ Encourages the customers to install and operate equipment that efficiently uses power ƒ Efficiency measured by monthly load factor ƒ Time of Use ƒ Usually available to larger commercial and industrial customers that can take advantage of time of use pricing ƒ Fort Collins Utilities - time of use demand charge (Coincident Peak Pricing) 50 kW and greater 11 R. W. Beck, An SAIC Company | 19 Alignment of Pricing Strategies with Energy Policy R. W. Beck, An SAIC Company | 20 Pricing Strategy - Key Drivers Primary Drivers ƒEnergy Efficiency/Conservation ƒ Climate Action Plan & Energy Policy ƒDeferred/Avoided Capital Expenditures for New Power Plants ƒ Energy Policy ƒCarbon Reduction ƒ Climate Action Plan & Energy Policy 12 R. W. Beck, An SAIC Company | 21 Pricing Strategy - Key Drivers Other Important Drivers ƒRevenue Stability ƒ City Charter ƒFairness and Equitability ƒ Fort Collins Utilities Financial Strategy and Rate Design Philosophy R. W. Beck, An SAIC Company | 22 Cost of Service Results (FY 2011) ƒ Fort Collins Electric Utility costs have increased ƒ Wholesale power costs (PRPA Pass Through) ƒ PRPA wholesale rate is increasing by approximately 4.8% ƒ Seasonal: Summer & Non Summer ƒ Distribution and customer service costs have increased ƒ Overall System Increase of 8.3% 13 R. W. Beck, An SAIC Company | 23 Cost of Service Results (FY 2011) ƒ Cost of Service Results by Customer Class ƒ Residential Class: 6.0% ƒ Residential Demand: 15.9% ƒ Commercial (GS) ƒ GS: 3.9% ƒ GS 25: 15.5% ƒ GS 50: 8.7% ƒ GS 750: 11.0% R. W. Beck, An SAIC Company | 24 Rate Design ƒ Residential ƒ Status Quo ƒ Seasonal Rate ƒ Three-Tier ƒ Five-Tier ƒ Residential Demand ƒ Seasonal Rate ƒ Commercial (GS) ƒ GS Seasonal Rate ƒ GS 25 Seasonal Rate 14 R. W. Beck, An SAIC Company | 25 Definitions/Clarifications ƒ Rate Structure is the design of utility’s means of recovering its costs from its customers. An unbundled rate structure shows itemized charges on the bill reflecting the costs associated with each utility function. ƒ Fixed Charge is a monthly charge that recovers the cost of metering, billing, collecting, providing customer service, and all other customer-related costs. ƒ Distribution Facilities Charge recovers the cost of distribution substations, poles, wires, conductors, and transformers required to deliver power to customers. Ideally, this charge is applied on a $/kWh basis as a customer’s demand directly impacts these costs. ƒ Energy Charge recovers the cost of fuel, purchased power, and all other variable costs associated with the production of electricity. ƒ Demand Charge recovers fixed production function costs related to building and financing generation facilities. ƒ PILOT (Payment in Lieu of Taxes) is 6% tax applied to all rates and bill calculations. R. W. Beck, An SAIC Company | 26 Definitions/Clarifications ƒ Seasonal Rates are a simple type of time-of-use rates in which rates vary depending on the time of year. ƒ PRPA (Platte River Power Authority) Fort Collins Utilities wholesale power supply provider ƒ PRPA Pass Through are costs Fort Collins Utilities incurs from Platte River Power Authority and passes on to customers ƒ Tiered Rates/Block Rates are a rate structure that charges differing amounts for each unit of consumption within each tier on a kWh basis. Inclining tiers/blocks, charge higher prices for each unit of energy consumed as consumption increases. ƒ Top Tier/Block is the last tier/block of energy in a tier rate structure ƒ Fixed Cost Recovery Factor (FCRF) is a mechanism used to recover a utility’s fixed costs when there is a decrease in usage/consumption (kWh). 15 R. W. Beck, An SAIC Company | 27 Definitions/Clarifications ƒ Time-of-Use Rate (TOU) option is designed to better reflect variations in the utility’s power costs (seasonally and at various times of the day) and provide an incentive for customers to reduce energy during peak periods and/or shift energy usage to times when the utility’s production is more efficient and costs are lower. ƒ Load Factor measures an average of power usage over time and represents end- user efficiency. Load factor is expressed as a percentage, with higher load factors representing greater efficiency from a system engineering perspective. R. W. Beck, An SAIC Company | 28 Residential Customer Class Single-family dwellings, individually metered apartments and home occupations. 16 R. W. Beck, An SAIC Company | 29 Current Residential Rate Current Rate Fixed Charge ($/Bill) $3.91 Distribution Facilities Charge ($/kWh) $0.0220 Total Energy Charge ($/kWh) (Energy Charge + Demand Charge) $0.0532 R. W. Beck, An SAIC Company | 30 Residential Rate Structure Alternatives ƒ Status Quo (Current Rate Structure) ƒ Seasonal Rate (PRPA Pass Through) ƒ Three-Tier Rate ƒ Five-Tier Rate 17 R. W. Beck, An SAIC Company | 31 Status Quo (Current Rate Structure) Status Quo Rate Fixed Charge ($/Bill) $4.48 Distribution Facilities Charge ($/kWh) $0.0252 Total Energy Charge ($/kWh) (Energy Charge + Demand Charge) $0.0540 R. W. Beck, An SAIC Company | 32 Status Quo (Current Rate Structure) 18 R. W. Beck, An SAIC Company | 33 Status Quo (Current Rate Structure) Bill Impacts Annual Average Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $29.93 $67.71 $256.60 Dollar Increase $1.88 $3.78 $13.32 Percent Increase 6.7% 5.9% 5.5% Non Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $29.93 $67.71 $256.60 Dollar Increase $1.88 $3.78 $13.32 Percent Increase 6.7% 5.9% 5.5% Low User Mid Level User High User 300 kWh 750 kWh 3,000 kWh Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $29.93 $67.71 $256.60 Dollar Increase $1.88 $3.78 $13.32 Percent Increase 6.7% 5.9% 5.5% R. W. Beck, An SAIC Company | 34 Seasonal Rate (PRPA Pass Through) Seasonal Rate Fixed Charge ($/Bill) $4.48 Distribution Facilities Charge ($/kWh) $0.0252 Total Energy Charge (Energy Charge + Demand Charge) Summer* ($/kWh) $0.0631 Non Summer ($/kWh) $0.0506 *Summer Months: June, July, & August 19 R. W. Beck, An SAIC Company | 35 Seasonal Rate (PRPA Pass Through) R. W. Beck, An SAIC Company | 36 Seasonal Rate (PRPA Pass Through) Bill Impacts Low User Mid Level User High User 300 kWh 750 kWh 3,000 kWh Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $32.83 $74.95 $285.54 Dollar Increase $4.77 $11.02 $42.26 Percent Increase 17.0% 17.2% 17.4% Non Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.85 $65.01 $245.79 Dollar Increase $0.79 $1.08 $2.51 Percent Increase 2.8% 1.7% 1.0% Annual Average Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $29.85 $67.49 $255.73 Dollar Increase $1.79 $3.57 $12.45 Percent Increase 6.4% 5.6% 5.1% 20 R. W. Beck, An SAIC Company | 37 Tiered Rate Structure Rate Design Objectives ƒ To send a strong pricing signal to large users of electricity to incentivize conservation ƒ To generate sufficient revenue to meet the residential class cost of service ƒ To follow the seasonal variation in PRPA wholesale power costs ƒ To design tiered rates so that monthly customer bills will be greater than or equal to bills rendered under the existing rate structure R. W. Beck, An SAIC Company | 38 How does a Tiered Rate work? Tier (A) Rate ($/kWh) (B) kWh (A x B) Calculation Tier 1 [1-500 kWh] $0.0500 500 $25.00 Tier 2 [501-1000 kWh] $0.0600 500 $30.00 Tier 3 [1001 kWh & Higher] $0.0900 200 $18.00 Total or Average $0.0667 1,200 $73.00 1,200 kWh Customer 21 R. W. Beck, An SAIC Company | 39 Three-Tier Rate Three-Tier Rate Fixed Charge ($/Bill) $4.48 Distribution Facilities Charge ($/kWh) $0.0252 Total Energy Charge (Energy Charge + Demand Charge) Summer* ($/kWh) Tier 1 [1-500 kWh] $0.0520 Tier 2 [501-1000 kWh] $0.0667 Tier 3 [1001 kWh & Higher] $0.0961 Non Summer ($/kWh) Tier 1 [1-500 kWh] $0.0481 Tier 2 [501-1000 kWh] $0.0520 Tier 3 [1001 kWh & Higher] $0.0602 *Summer Months: June, July, & August R. W. Beck, An SAIC Company | 40 Three-Tier Rate 22 R. W. Beck, An SAIC Company | 41 Three-Tier Rate Bill Impacts Non Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.06 $64.06 $265.56 Dollar Increase $0.00 $0.13 $22.28 Percent Increase 0.0% 0.2% 9.2% Low User Mid Level User High User 300 kWh 750 kWh 3,000 kWh Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $29.30 $70.02 $351.53 Dollar Increase $1.24 $6.09 $108.25 Percent Increase 4.4% 9.5% 44.5% Annual Average Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.37 $65.55 $287.05 Dollar Increase $0.31 $1.62 $43.77 Percent Increase 1.1% 2.5% 18.0% R. W. Beck, An SAIC Company | 42 Five-Tier Rate Five-Tier Rate Fixed Charge ($/Bill) $4.48 Distribution Facilities Charge ($/kWh) $0.0252 Total Energy Charge (Energy Charge + Demand Charge) Summer* ($/kWh) Tier 1 [1-500 kWh] $0.0498 Tier 2 [501-1000 kWh] $0.0623 Tier 3 [1001kWh – 1500 kWh] $0.0873 Tier 4 [1501-2000 kWh] $0.1248 Tier 5 [2001 kWh & Higher] $0.1699 Non Summer ($/kWh) Tier 1 [1-500 kWh] $0.0481 Tier 2 [501-1000 kWh] $0.0514 Tier 3 [1001kWh 1500 kWh] $0.0576 Tier 4 [1501-2000 kWh] $0.0658 Tier 5 [2001 kWh & Higher] $0.0684 *Summer Months: June, July, & August 23 R. W. Beck, An SAIC Company | 43 Five-Tier Rate R. W. Beck, An SAIC Company | 44 Five-Tier Rate Bill Impacts Annual Average Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.19 $64.85 $315.85 Dollar Increase $0.14 $0.92 $72.57 Percent Increase 0.5% 1.4% 29.8% Non Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.07 $63.91 $275.55 Dollar Increase $0.01 -$0.02 $32.27 Percent Increase 0.0% 0.0% 13.3% Low User Mid Level User High User 300 kWh 750 kWh 3,000 kWh Summer Current Bill $28.06 $63.93 $243.28 Bill at Proposed Rates $28.58 $67.65 $436.77 Dollar Increase $0.53 $3.72 $193.49 Percent Increase 1.9% 5.8% 79.5% 24 R. W. Beck, An SAIC Company | 45 Comparing All Residential Options R. W. Beck, An SAIC Company | 46 Comparing All Residential Options 25 R. W. Beck, An SAIC Company | 47 Comparing All Residential Options R. W. Beck, An SAIC Company | 48 Customer Load Profile/ With & Without Air Conditioning Tier 3 Tier 2 Tier 1 26 R. W. Beck, An SAIC Company | 49 Rate Adjustment Factor Fixed Cost Recovery Factor Conservation Decrease in Consumption(kWh) Decrease in Revenue • FCRF is a mechanism used to recover a utility’s fixed costs when there is a decrease in consumption/usage (kWh) • Decoupling • Revenue Stability Mechanism for Utilities R. W. Beck, An SAIC Company | 50 Summary: Residential Rate Alternatives Status Quo (Current Rate Structure) Seasonal (PRPA Pass Through) Three-Tier Five-Tier 27 R. W. Beck, An SAIC Company | 51 Residential Demand Customer Class Single-family private dwellings, individually metered apartments and home occupations. An economical option for customers whose homes are heated entirely by electricity. R. W. Beck, An SAIC Company | 52 Current Residential Demand Rate Current Rate Fixed Charge ($/Bill) $6.32 Distribution Facilities Charge ($/kWh) $0.0188 Demand Charge ($/kW) $3.87 Energy Charge ($/kWh) $0.0248 28 R. W. Beck, An SAIC Company | 53 Seasonal Residential Demand Rate Seasonal Rate Fixed Charge ($/Bill) $7.24 Distribution Facilities Charge ($/kWh) $0.0288 Demand Charge ($/kW) $2.43 Energy Charge Summer* ($/kWh) $0.0372 Non Summer ($/kWh) $0.0355 *Summer Months: June, July, & August R. W. Beck, An SAIC Company | 54 Seasonal Residential Demand Rate* *Assuming 10kW Demand 29 R. W. Beck, An SAIC Company | 55 Seasonal Residential Demand Rate Bill Impacts* Annual Average Current Bill $115.20 $182.67 Bill at Proposed Rates $133.65 $233.82 Dollar Increase $18.46 $51.15 Percent Increase 16.0% 28.0% Non Summer Current Bill $115.20 $182.67 Bill at Proposed Rates $133.00 $232.51 Dollar Increase $17.80 $49.83 Percent Increase 15.5% 27.3% Mid Level User High User Load Factor 20% 40% Energy Consumption 1460 kWh 2920 kWh Summer Current Bill $115.20 $182.67 Bill at Proposed Rates $135.63 $237.77 Dollar Increase $20.43 $55.10 Percent Increase 17.7% 30.2% *Assuming 10kW Demand R. W. Beck, An SAIC Company | 56 Commercial (General Service or GS) Customer Class This schedule applies to an individual single or three- phase service with an average metered demand of no greater than fifty kilowatts. Commercial (GS) ≤ 25kW Commercial (GS 25) 25-50 kW 30 R. W. Beck, An SAIC Company | 57 Current Commercial (GS) Rate Current Rate Fixed Charge ($/Bill) Single-Phase 200 amp $3.21 Single-Phase > 200 amp $9.46 Three-Phase 200 amp $4.88 Three-Phase > 200 amp $11.56 Distribution Facilities Charge ($/kWh) $0.0158 Demand Charge ($/kWh) [0-2000 kWh] $0.0362 [2001-7000 kWh] $0.0178 [7001 kWh & Higher] $0.0000 Energy Charge ($/kWh) $0.0248 Demand Charge ($/kW) [0-25 kW] $6.57 [26 kW & Higher] $0.00 R. W. Beck, An SAIC Company | 58 Proposed Commercial (GS) Rate Proposed Rate Fixed Charge ($/Bill) Single-Phase 200 amp $3.68 Single-Phase > 200 amp $10.83 Three-Phase 200 amp $5.59 Three-Phase > 200 amp $13.24 Distribution Facilities Charge (All kWh) $0.0181 Demand Charge Summer* ($/kWh) $0.0267 Non Summer ($/kWh) $0.0139 Energy Charge Summer* ($/kWh) $0.0372 Non Summer ($/kWh) $0.0355 *Summer Months: June, July, & August 31 R. W. Beck, An SAIC Company | 59 Proposed Commercial (GS) Rate Example Customers ƒ House Services ƒ Lights, laundry rooms, shared facilities for condos and apartments ƒ Small Retail ƒ Ice cream/candy stores, bike shops, martial arts, jewelry stores, weight loss clinics, nail salons ƒ Professional Offices ƒ Law offices, real estate offices, engineering firms, small dental offices, CPAs ƒ Nonprofit Offices ƒ Small Churches R. W. Beck, An SAIC Company | 60 Proposed Commercial (GS) Rate* *Assuming 10kW Demand 32 R. W. Beck, An SAIC Company | 61 Proposed Commercial (GS) Rate Bill Impacts* Annual Average Current Bill $179.11 $224.30 Bill at Proposed Rates $170.30 $225.34 Dollar Increase -$8.81 $1.04 Percent Increase -4.9% 0.5% Non Summer Current Bill $179.11 $224.30 Bill at Proposed Rates $161.88 $214.12 Dollar Increase -$17.22 -$10.18 Percent Increase -9.6% -4.5% Load Factor 30% 40% Energy Consumption 2,190 kWh 2,920 kWh Summer Current Bill $179.11 $224.30 Bill at Proposed Rates $195.54 $259.00 Dollar Increase $16.44 $34.70 Percent Increase 9.2% 15.5% *Assuming 10kW Demand R. W. Beck, An SAIC Company | 62 Proposed Commercial (GS 25) Rate Proposed Rate Fixed Charge ($/Bill) Single Phase 200 amp $3.68 Single Phase > 200 amp $10.83 Three Phase 200 amp $5.59 Three Phase > 200 amp $13.24 Distribution Facilities Charge ($/kWh) $0.0181 Demand Charge Summer* ($/kW) $7.07 Non Summer ($/kW) $4.36 Energy Charge Summer* ($/kWh) $0.0372 Non Summer ($/kWh) $0.0355 *Summer Months: June, July, & August 33 R. W. Beck, An SAIC Company | 63 Proposed Commercial (GS 25) Rate Commercial (GS 25) Customers ƒ Fast Food Restaurants ƒ Medium Sized Churches ƒ Restaurants ƒ Larger Retail ƒ Auto parts, clothing retailers, electronics, liquor stores ƒ Fraternities and Sororities ƒ Convenience Stores ƒ Medical Marijuana ƒ Copy Centers ƒ Banks R. W. Beck, An SAIC Company | 64 Proposed Commercial (GS 25) Rate* *Assuming 35kW Demand 34 R. W. Beck, An SAIC Company | 65 Proposed Commercial (GS 25) Rate Bill Impacts* Annual Average Current Bill $690.48 $800.43 Bill at Proposed Rates $783.48 $929.79 Dollar Increase $93.00 $129.36 Percent Increase 13.5% 16.2% Non Summer Current Bill $690.48 $800.43 Bill at Proposed Rates $753.73 $898.89 Dollar Increase $63.25 $98.46 Percent Increase 9.2% 12.3% Load Factor 40% 50% Energy Consumption 10,220 kWh 12,775 kWh Summer Current Bill $690.48 $800.43 Bill at Proposed Rates $872.72 $1,022.49 Dollar Increase $182.25 $222.06 Percent Increase 26.4% 27.7% *Assuming 35kW Demand R. W. Beck, An SAIC Company | 66 Staff Recommendation 1. Three-Tier Residential Rate to align with Energy Policy and Climate Action Plan 2. Phase out Residential Demand Rate 3. Mid 2012, introduce a Residential Time Of Use (TOU) Pilot to support Electric Vehicles ƒ Limited to Residential Customers with Electric Vehicles 4. Split the current Commercial (GS) customer class into two classes: GS and GS 25 35 R. W. Beck, An SAIC Company | 67 Questions 1. Residential Rate Options ƒ Of the four proposed rate options for the residential energy rate, which specific option is preferred? ƒ Does City Council support the proposed change to the Residential Demand rate? 2. Commercial Rate Options ƒ Does City Council support the proposed change that would create an additional rate class from the existing Commercial (GS) Rate class? © 2011 by R. W. Beck, An SAIC Company. All Rights Reserved. Thank you! September 13, 2011 FORT COLLINS UTILITIES CITY COUNCIL WORK SESSION 36 Electric Rate Options Attachment 2 Utility Tiered Rate Structure Inclining Blocks # of Blocks TOU(1) Low Income Rates Electric Vehicle Rates (1) Time of Use No Yes Austin Energy (Current) Yes 2 No No Optional Yes 3 Optional No Optional Yes Optional Seattle City Light Santee Cooper Colorado Springs Utilities Jacksonville Electric Authority Los Angeles Department of Water and Power Memphis Light, Gas and Water Omaha Public Power District Salt River Project Long Island Power Authority Sacramento Municipal Utility District No Yes 3 No 2/3/4 Optional Yes 3 Optional Yes 2 Pilot No No Yes 2 Optional Austin Energy (Proposed) Yes 5 Optional Eugene Water & Electric Board Yes 3 No City Public Service Energy Yes 2 No Yes‐TOU Yes Yes‐TOU No No No Yes No Yes‐TOU No No Yes No Comparison of Selected Peer Munic ipal Ut ilit y Resident ial Rat e St ruc t ures No In Progress No Yes‐TOU Yes Yes‐TOU Yes Rebate Rate No Pilot‐TOU No No No Electric Rate Options Attachment 2 Utility Tiered Rate Structure Inclining Blocks # of Blocks TOU Low Income Rates Electric Vehicle Rates (2) Real Time Pricing Xcel Energy Yes 2 Pilot Toronto Hydro Yes 2 Optional Pepco Yes 2/3 Optional Southern California Edison Yes 5 Optional Portland General Electric Yes 2 Optional Puget Sound Electric Yes 2 No Sand Diego Gas & Electric Yes 4 Pilot Avista Yes 2 No Pacific Power Yes 2 No IdahoOptional Power Yes 3 Ameren Illinos No RTP(2) Pacific Gas & Electric Yes 5 Optional Arizona Public Service Yes 4 Optional RTP(2) Yes Yes‐TOU No In Progress No Yes No Yes Yes‐TOU Yes Yes No In Progress Comparison of Selected Investor Owned Utility Residential Rate Structures Yes Yes Yes Yes No Yes‐TOU No Yes‐TOU Yes No No Yes‐TOU Utilities —Electric Board City of 700 Wood St. Fort CoLLins P0 Fort Box Collins, 580 CO 80522 974i6208 fax MEMORANDUM DATE: August 8, 2011 TO: Mayor Weitkunat and Councilmembers FROM: Steve Wolley, Chairperson on behalf of the Fort Collins Electric Board SUBJECT: Proposed Electric Utility Rate Structures EC: Darin Atteberry, City Manager Brian Janonis, Utilities Executive Director Patty Bigner, Customer and Employee Relations Manager Steve Catanach, Light and Power Operations Manager Electric Board At the August 3 Electric Board meeting, Utilities staff and representatives from their consulting team, SAIC (an R.W. Beck company) met with the Electric Board for more than three hours to review findings related to proposed electric service rate structures for commercial and residential customers. Board members engaged Utilities staff in a deep and broad-ranging discussion, testing whether the analyses and conclusions presented to the Board: 1) Met the original intent of the study; 2) Covered all known risks and impacts; and 3) Would result in a rate structure that favorably drives the City’s Energy Policy and financial requirements. In the end, the Electric Board found the findings to be complete and the Utilities leadership has prepared well for the challenges it will face over the course of the next several years, starting in 2012 and continuing past the rollout of Automated Metering Infrastructure (AMI) in mid-to-late 2013. The Electric Board commends the Utilities leadership and SAIC teams on the thoroughness and the quality of the study. The Electric Board makes the following additional observations and recommendations: 1. The data and analyses are complex. Decision-makers should set aside ample time to review the rate structure analysis. Utilities leadership and their consultants have a very thorough understanding of several rate structures and their impacts on both the Utility’s economic viability and impact to the broad spectrum of their customers. Rate structure data was presented in several tables and graphs. Ft0oLLins It may take multiple hours for decision-makers to review and comprehend the analysis. 2. Decision makers should evaluate the impact of rate structure options on related City goals. The Electric Board also viewed information regarding how each rate type will perform against stated City values and goals. The Electric Board recommends that decision-makers use this information when discussing rate structLlres. 3. The new AMI infrastructure will be a valuable tool for shaping second or third- generation rate changes, especially rate structures that employ a Time-of-Use (TOU) model. AMI will provide extensive insight into Fort Collins’ customer usage patterns and demand elasticity, enabling an entire new level of understanding of grid and customer behavior. When the data becomes available, thoughtful analysis of this new data set will provide invaluable insight into the effectiveness of second or third-generation rate structures. The Electric Board believes that future TOU rate strLlctures should be shaped by analysis of this data when it becomes available. 4. Exercise considerable caution when finalizing the planned rollout of the phased rate changes. Utilities staff and SAIC understand the potential unfavorable impact of implementing sequential i-ate changes over a period of years. To manage this risk and impact, Utilities plans call for applying the concept of “gradualism”. The Electric Board fully supports the use of gradualism. It is worth noting that board members are united in their concern that successive and complex i-ate changes may still generate elevated and counterproductive levels of concern in the community. Evidence from the industry provides examples of rate structure changes that have met their goals and others that have been received badly by customers. Fort Collins Light and Power is well positioned to move ahead. Should you have any questions regarding this topic, please feel free to contact us for further clarification. ATTACHMENT 4 5 Blocks 15% # of Blocks 10 Yes 3 No No Yes Austin Energy (Current) Yes 2 No No Optional Yes 3 Optional No Optional Yes 9 ƒ Distributed Generation ƒ Better Information 8 LA JUNTA SAN MIGUEL PA TRINIDAD SE COLORADO PA SPRINGFIELD Cost per Month Colorado Association of Municipal Utilities Small Commercial Rate Survey January 2011 --- Cost for 2,000 kWh and 10 kW per Month FORT COLLINS REA/CO-OP INVESTOR OWNED MUNICIPAL R. W. Beck, An SAIC Company | 10 Fort Collins Utilities Average Cost Comparison $3,048 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 GUNNISON LONGMONT FORT COLLINS LOVELAND ESTES PARK COLORADO SPRINGS FLEMING HOLY CROSS EA JULESBURG ASPEN GLENWOOD SPRINGS HAXTUN FOUNTAIN HIGHLINE EA DELTA XCEL ENERGY TRI-COUNTY DELTA-MONTROSE EA FORT MORGAN Y-W ELECTRIC ASSN OAK CREEK GUNNISON COUNTY EA MOUNTAIN PARKS EI YAMPA VALLEY EA WHEATLAND HIGH WEST ENERGY MORGAN COUNTY REA LA PLATA UNITED POWER FREDERICK INTERMOUNTAIN REA BLACK HILLS ENERGY GRAND VALLEY RPL SAN LUIS VALLEY REA EMPIRE EA SE COLORADO PA POUDRE VALLEY EA RATON SAN MIGUEL PA WHITE RIVER EA SAN ISABEL LAMAR SPRINGFIELD LA JUNTA LAS ANIMAS TRINIDAD Cost per Month Colorado Association of Municipal Utilities Large Commercial Rate Survey January 2011 --- Cost for 45,000 kWh and 130 KW per month FORT COLLINS REA/CO-OP INVESTOR OWNED MUNICIPAL 7 SAN ISABEL SE COLORADO PA SAN LUIS VALLEY REA SPRINGFIELD LA JUNTA HOLLY TRINIDAD Cost per Month Colorado Association of Municipal Utilities Residential Rate Survey January 2011 --- Cost for 700 kWh/Month FORT COLLINS REA/CO-OP INVESTOR OWNED MUNICIPAL 6