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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/06/2011 - PUBLIC HEARING AND SECOND READING OF ORDINANCE NO.DATE: December 6, 2011 STAFF: Brian Janonis, Patty Bigner Bill Switzer AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 35 SUBJECT Public Hearing and Second Reading of Ordinance No. 166, 2011, Amending Chapter 26 of the City Code to Revise Electric Rates, Fees and Charges. EXECUTIVE SUMMARY This residential energy rate is used to bill about 55,000 residential customers. 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. This rate ordinance increases the residential energy rate by an average of 6%; however, the percentage of increase varies by season and customer usage. Option B of the Ordinance was adopted on First Reading on November 15, 2011 by a vote of 4-2 (Nays: Troxell, Weitkunat; Kottwitz absent). If adopted on Second Reading, the rate will be effective with meter readings after February 1, 2012. The residential electric rate has three components: (1) a fixed charge, the monthly charge that recovers the cost of metering, billing, collecting and providing customer service, and all other customer-related costs; (2) a distribution facilities charge that recovers the cost of operating and maintaining the distribution substations, poles, wires, conductors, and transformers required to deliver power to customers, applied on a $/kilowatt hour (kWh or unit of electricity) basis; and (3) an energy charge that recovers the cost of fuel, purchased power, and all other variable costs associated with the production of electricity. The energy charge includes both energy and demand components of purchase power. The new rate will change the structure of the energy charge in two ways: (1) creating specific pricing for three tiers or blocks of energy use; and (2) creating seasonal pricing in the summer season billing months of June, July and August. The fixed charge will increase to $4.48 per bill from the 2011 charge of $3.91. The distribution facilities charge will increase to $0.0256/kWh from the 2011 charge of $0.0220/kWh. The current 2011 energy charge is $0.0248. The Ordinance creates three inclining blocks or tiers that will differ in the summer months of June, July and August from the remaining months of the year. 1. During the summer season billing months of June, July and August, the energy charge per kWh will be tiered with the following charges: a. for the first 500 kilowatt hours per month, per kilowatt hour: $0.0531 / kWh. b. for the next 500 kilowatt hours per month, per kilowatt hour: $0.0689 / kWh. c. for all additional kilowatt hours per month, per kilowatt hour: $0.1005 / kWh. The meter reading date will generally determine the summer season billing months; however, no customer shall be billed more than three (3) full billing cycles at the summer rates. 2. During the non-summer season billing months of January through May and September through December, the energy charge per kWh will be tiered with the following charges: a. for the first 500 kilowatt hours per month, per kilowatt hour: $0.0482 / kWh. b. for the next 500 kilowatt hours per month, per kilowatt hour: $0.0520 / kWh. c. for all additional kilowatt hours per month, per kilowatt hour: $0.0603 / kWh. Accommodation for customers with medical needs is planned. Also a pilot time-of-use rate for electric vehicles will be developed for Council consideration in mid-2012. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. December 6, 2011 -2- ITEM 35 ATTACHMENTS 1. Copy of First Reading Agenda Item Summary - November 15, 2011 (w/o attachments) 2. Powerpoint presentation COPY COPY COPY COPY ATTACHMENT 1 DATE: November 15, 2011 STAFF: Brian Janonis Patty Bigner, Bill Switzer AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 31 SUBJECT Public Hearing and First Reading of Ordinance No. 166, 2011, Amending Chapter 26 of the City Code to Revise Electric Rates, Fees and Charges. (Option A or Option B) EXECUTIVE SUMMARY Staff has prepared two Residential Energy Rate Options for Council consideration. This electric rate is used to bill about 55,000 residential customers. Option A is a seasonal rate form, Option B is a three-tiered seasonal rate. Both options increase the residential energy rate by an average of 6% over the current 2011 rate, however, the increase varies by season and customer usage. Both options are proposed to be effective for billings with meter reading dates on or after February 1, 2012. In three City Council work sessions, staff presented electric rate design principles, four residential rate options, a change to the residential demand rate and a pilot Time of Use rate for electric vehicles. At the September 13 Work Session, City Council also discussed a change to the General Service (GS) or commercial rate proposed by staff that will result in two rate classes, a GS (up to 25 kW) and GS 25 (25 – 50 kW). With the exception of proposed changes to the residential electric rate structure, these changes were adopted by Council on Second Reading November 1, 2011, along with proposed rate increases. At the October 11, 2011 Work Session, Council further reviewed four residential electric rate options and answers provided by staff. Based on feedback from this work session, two rate ordinances have been drafted for Council consideration and public notification has been completed. BACKGROUND / DISCUSSION 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. As noted above, City Council has discussed options for changes to the electric rate structure at three previous work sessions. Previous presentations and discussions have included information about national trends related to utility rate structures, comparisons of City of Fort Collins rates compared to other utilities within Colorado and nationally, customer rate impacts on various levels of use, potential for impacts on low-income customers, expected customer response (price elasticity) and impacts on the distribution system. Based on City Council discussion, staff and consultants from SAIC have prepared background information on the two options. The current electric rate (single tier) has three components: (1) a fixed charge, the monthly charge that recovers the cost of metering, billing, collecting and providing customer service, and all other customer-related costs; (2) a distribution facilities charge that recovers the cost of distribution substations, poles, wires, conductors, and transformers required to deliver power to customers, applied on a $/Kilowatt Hour (kWH or unit of electricity) basis; and (3) an energy charge that recovers the cost of fuel, purchased power, and all other variable costs associated with the production of electricity. The energy charge includes both energy and demand components of purchase power. This energy charge currently does not vary based on the season or the amount of electricity used by the customer. Through the end of 2011, the fixed charge is $3.91/bill (month); the distribution/facilities charge is $0.0220 per kWh; and the energy charge is $0.0532 per kWh. Based on the current tier structure, the 6% rate increases adopted November 1, 2011 and effective January 1, 2012, these charges would be: fixed charge, $4.48/bill; distribution/facilities charge, $0.0252/kWh; and energy charge, $0.0540/kWH. These charges are shown for comparison only and are not among the proposed options. COPY COPY COPY COPY November 15, 2011 -2- ITEM 31 Option A, Seasonal Rate Option A, the Seasonal Rate structure, changes the current single tier or flat structure to a rate structure that results in a higher rate per kWH in the summer months of June, July and August. This structure mirrors the rate structure adopted by Platte River Power Authority (PRPA), the City’s wholesale electric provider, and passes through the price charged by PRPA to residential customers. If adopted, Option A will have a fixed charge of $4.48/bill; and a distribution/facilities charge of 0.0256/kWh. During the summer season billing months of June, July and August, the energy charge will be $0.0640/ kWh. During the non- summer season billing months of January through May and September through December, the energy charge will be $0.0506/kWH. As provided in the Ordinance(Option A), the meter reading date will generally determine the summer season billing months; however, no customer shall be billed more than three (3) full billing cycles at the summer rates. Option A, the Seasonal Rate, is consistent with the current practice of directly passing through PRPA costs to customers. Seasonal rates also are a simple time of use rate. A potential advantage of seasonal rates, in addition to recovering costs, may be a reduction in overall electricity demand during the summer months due to reduced use of air conditioning (in response to higher priced electricity during that period). A simple time of use rate may also serve as a step toward a more standard or traditional time of use rate that will be available by 2014, once the City’s Advanced Metering Infrastructure (AMI) program is completed and residential customers have an advanced meter. Data from AMI meters could then be used to determine an appropriate time-of-use residential rate. A disadvantage of the Seasonal Rate is that it is a more limited price signal during the non-summer months, resulting in a weak conservation signal to customers. Although it is not as complex as Option B, the Seasonal Rate is a shift from the current single tier rate structure and robust customer communication is planned for early 2012 with additional outreach prior to the summer months. Option A is planned to increase revenue from the Residential Energy Rate by 6%, which is consistent with the projected increased revenue requirement for this customer class. The average increase will be 16.8% in the three summer months and 2% in the non-summer months. Option B, Seasonal, Three-tier Rate Option B, the Seasonal Three-tier rate combines the rate recovery aspect of the Seasonal Rate with an inclining block or tiered rate structure. If adopted, Option B will have the same fixed charge of $4.48/bill; and distribution/facilities charge of 0.0256/kWh as Option A, the Seasonal Rate. The inclining blocks or tiers will differ in the summer months of June, July and August from the remaining months of the year. 1. During the summer season billing months of June, July and August, the energy charge per kWH will be tiered with the following charges: a. for the first 500 kilowatt hours per month, per kilowatt hour: $0.0531. b. for the next 500 kilowatt hours per month, per kilowatt hour: $0.0689. c. for all additional kilowatt hours per month, per kilowatt hour: $0.1005. As with the proposed Seasonal Rate, the meter reading date will generally determine the summer season billing months; however, no customer shall be billed more than three (3) full billing cycles at the summer rates. 2. During the non-summer season billing months of January through May and September through December, the energy charge per kWH will be tiered with the following charges: a. For the first 500 kilowatt hours per month, per kilowatt hour: $0.0482. b. For the next 500 kilowatt hours per month, per kilowatt hour: $0.0520. c. For all additional kilowatt hours per month, per kilowatt hour: $0.0603. Option B, the Seasonal Three-tiered rate, retains the cost recovery benefits of the Seasonal rate, passing through costs from PRPA to the customer. It also sends a strong signal to large users of electricity to incentivize conservation, and with the seasonal component, serve as a step toward further implementation of a time-of-use rate, once the City’s AMI project has been completed. The rate is more complex and significantly different from the current single tier rate structure. As a result, communication to all customers will be important throughout the year, with emphasis on the summer months. COPY COPY COPY COPY November 15, 2011 -3- ITEM 31 Option B also is planned to increase revenue from the Residential Energy Rate by 6%, similar to Option A above. The average increase will be 16.8% in the three summer months and 2% in the nine non-summer months. With this option, customer that use more than 700kWh monthly will see larger percentage increases than most customers who use less than average. 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 efficient pricing signal. Installation of the advanced water and electric meters is expected to be completed by mid-2013. Once completed and supporting time- of-day data has been gathered and analyzed, progression to time-of-day pricing (with or without tiers) can be implemented utilizing the new information. As discussed at the October 13 Work Session, staff is planning to develop and recommend a pilot time-of-use rate specifically targeted to plug-in electric vehicle owners in 2012. Conclusion As discussed in previous meetings, the City’s utility rates are designed to generate the revenue needed for operations, capital requirements, and the purchase of electricity from PRPA. As a municipal utility, rates are not designed to recover revenue above current requirements. This is sometimes referred to as a zero-sum strategy. Regardless of the structure of the rate, the utility does not design a rate to generate a profit. The proposed rate changes are designed to assist in achieving City Council goals and support customer choice in behavior related to their use of energy . These changes remain true to the City’s long-held values of fairness, equitability and financial responsibility. As mentioned above, 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. FINANCIAL / ECONOMIC IMPACTS Both options are designed to increase revenues from the Residential Energy Rate by 6%. When combined with the Residential Demand and commercial rate increases approved by Council on November 1, 2011 total Light and Power operating revenues are planned to increase 8.3%. Residential Energy customers will experience an average increase of 6%, however, the impact of Option B will be much higher for larger users and will be higher in the three summer months. The Utilities provides many programs to assist our customers to reduce their energy usage and thereby reduce their monthly electric bill. Proposed changes to the Residential Energy Rate are designed to be revenue neutral. Since the change to rate structure is likely to have a customer response, over or under collection of revenue will be evaluated each year and incorporated into any needed rate changes on an annual basis. The option adopted by City Council will determine individual customer impacts. Because there is a new Seasonal component to the rate structure, financial impacts on customers will be greatest in the three summer months. If the Seasonal Three-tier rate is adopted, financial impacts will be greatest on large electricity users, especially in the summer months. In some cases, customers generally use less electricity and do not have air conditioned homes or use their air conditioner in the summer. This group of low users may experience minimal impact to their monthly bills from a changed rate structure. Customers may choose to conserve electricity by changing their use of electricity (adjusting the thermostat up or down, turning off lights, etc) or by implementing efficiency measures such as insulation, high efficiency appliances. The City offers a variety of conservation and efficiency programs to help customers reduce their electricity use and may help lower bills. Financial impacts on low income customers are also a consideration. Existing programs that assist this group of customers will be expanded in 2012, including an expanded efficiency financing program. COPY COPY COPY COPY November 15, 2011 -4- ITEM 31 ENVIRONMENTAL IMPACTS Overall reduction in electricity use, whether from conservation of energy efficiency measures result in reduced Greenhouse Gas (GHG) emissions from fossil fuel generation. As noted previously, tiered rate structures are used designed to help lower overall electricity use, especially among large users. A seasonal rate may result in less electricity use in the summer months, but does not provide a strong conservation message during the rest of the year. Customer response to the new rate structure will determine the impact of reducing electricity use and overall environmental impacts from generation. STAFF RECOMMENDATION Staff recommends adoption of Option B of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION The City’s Electric Board provided a letter outlining their conclusions related to electric rate options (Attachment 5). PUBLIC OUTREACH Staff has completed required public notification. Public Outreach includes a Coloradoan notice to out-of-city electric customers, published on Sunday, October 30, 2011. Postcard notification to out-of-city electric customers was mailed the week of October 30, 2011. Typically, more information about rate increases is included in the Utilities end of year letter to customers. Since the letter will be published prior to adoption of the residential energy rate ordinance, customer communication to residential customers will be delayed to the end of the year. Communication will continue throughout 2012 as needed. ATTACHMENTS 1. May 10, 2011 Work Session Summary 2. September 13, 2011 Work Session Summary 3. October 11, 2011 Work Session Summary 4. Electric Board Memo on Electric Rate Options 5. Powerpoint presentation 1 1 Residential Electric Rates, Fees and Charges CITY COUNCIL MEETING December 6, 2011 2 Residential Electric Rate • Adopted by City Council on First Reading on November 15, 2011 • Rate changes: – Incorporate the 6% rate increase to Residential Class – Pass through the seasonal price change adopted by Platte River Power Authority and passed along to the City; and – Add three tiers to the Energy Charge per Kilowatt Hour (kWh) ATTACHMENT 2 2 3 Summary of Changes • Fixed charge increases to $4.48/bill (from $3.91/bill) • Facilities distribution charge increases to $0.0256/kWh (from $0.0220/kWh) • Charge per kWh higher in summer months of June, July, August • The Energy Charge per kilowatt hour (kWh) increases in three blocks of energy use – 0 – 500 kWh – 501 – 1000 kWh – Above 1000 kWh • New rate will be effective February 1, 2012 4 Impact of Changes • Designed to encourage conservation and energy efficiency • Stronger conservation message during the three summer months of June, July and August • Greater impact on higher users of electricity throughout the year • Greater impact on users of air conditioning during the summer months • Accommodation for medical needs is planned 3 5 Questions? ORDINANCE NO. 166, 2011 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS TO REVISE ELECTRIC RATES, FEES AND CHARGES WHEREAS, the City Council is empowered and directed by Article XII, Section 6, of the City Charter to fix, establish, maintain and provide for the collection of such rates, fees or charges for utility services furnished by the City as will produce revenues sufficient to pay the costs, expenses and other obligations of the electric utility, as set forth therein; and WHEREAS, Platte River Power Authority costs are increasing due to reduced surplus sales, increased operating costs for aging plants and environmental mitigation, increased natural gas expenses for peaking plants, increased financing costs, and continuing capital investment; and WHEREAS, Platte River Power Authority will increase the City’s wholesale cost of power approximately 6.4% in 2012; and WHEREAS, the revenues in the Light and Power Fund have not been sufficient to fund capital projects and system replacements and reserves have been utilized to make up for the shortfall; and WHEREAS, the reduction in reserves was accelerated due to reductions in interest revenue and development fee revenue; and WHEREAS, without additional rate increases, reserves are projected to fall below minimum policy levels as early as 2013; and WHEREAS, a 6% rate increase to the residential energy service rate will adequately fund additional purchase power and the necessary capital improvements and system replacements and stem the decline in reserves; and WHEREAS, City Council desires to enact rate structures to encourage additional energy conservation measures in order to meet Energy Policy and Climate Action Plan goals; and WHEREAS, the proposed rate structure will change the current flat rate structure into a seasonal, three-tier rate structure that results in a higher rate per kilowatt hour in the summer months combined with a tiered rate structure; and WHEREAS, the proposed increases are to be effective on all billings issued with meter readings on or after February 1, 2012; and WHEREAS, based on the foregoing, it is the desire of the City Council to amend Chapter 26 of the City Code to revise the residential energy rate. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That Sections 26-464(c), (j) and (o) of the Code of the City of Fort Collins are hereby amended to read as follows: Sec. 26-464. Residential energy service, schedule R. . . . (c) Monthly rate. The monthly rates for this schedule are as follows: (1) fixed charge, per account: four dollars and forty-eight cents ($4.48). (2) distribution facilities charge, per kilowatt-hour: two and fifty-six hundredths cents ($0.0256). (3) energy and demand charge, during the summer season billing months of June, July and August, with the summer season billing month determined by the month the meter is read, and provided that no customer shall be billed more than three (3) full billing cycles at the summer rate. The energy and demand charge shall be billed as follows: a. for the first 500 kilowatt hours per month, per kilowatt hour: five and thirty-one one-hundredths cents ($0.0531). b. for the next 500 kilowatt hours per month, per kilowatt hour: six and eighty-nine one-hundredths cents ($0.0689). c. for all additional kilowatt hours per month, per kilowatt hour: ten and five one-hundredths cents ($0.1005). (4) energy and demand charge, during the non-summer season billing months of January through May and September through December: a. for the first 500 kilowatt hours per month, per kilowatt hour: four and eighty-two one-hundredths cents ($0.0482). b. for the next 500 kilowatt hours per month, per kilowatt hour: five and twenty one-hundredths cents ($0.0520). c. for all additional kilowatt hours per month, per kilowatt hour: six and three one-hundredths cents ($0.0603). -2- (5) in lieu of taxes and franchise: a charge at the rate of six and zero-tenths (6.0) percent of all monthly service charges billed pursuant to this Section. . . . (j) Parallel generation. Operation or connection of any electric generator in parallel with the utility system is not permitted under this schedule unless authorized by the General Manager. See appropriate alternate schedules for this service. The credit for the energy delivered to the electric utility under this provision shall be provided at applicable Platte River Power Authority avoided cost rates. If a customer is receiving net metering service, such customer's service shall also be governed by the net metering service terms and conditions described in Subsection (o) below. . . . (o) Net metering. . . . (5) The customer-generator's consumption of energy from the utility shall be measured on a monthly basis and, in the event that the qualifying facility has produced more electricity than the customer-generator has consumed, the customer-generator shall receive a monthly credit for such production. During the second calendar quarter of each year, the customer-generator shall receive payment for the net excess generation accrued for the preceding twelve (12) months. The credit per kilowatt hour for the energy delivered to the electric utility under this provision shall be provided at the summer season energy charge charge as specified in Subsection (c). Section 2. That the amendments to Chapter 26 of the City Code contained herein shall go into effect for all bills issued based on meter readings on or after February 1, 2012. Introduced, considered favorably on first reading, and ordered published this 15th day of November, A.D. 2011, and to be presented for final passage on the 6th day of December, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk -3- Passed and adopted on final reading on the 6th day of December, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk -4-