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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/28/2017 - RESIDENTIAL ELECTRIC TIME OF USE PILOT STUDYDATE: STAFF: February 28, 2017 Lance Smith, Utilities Strategic Finance Director Randy Reuscher, Utility Rate Analyst WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Residential Electric Time of Use Pilot Study. EXECUTIVE SUMMARY The purpose of this item is to present the results of the 12-month residential electric time of use (TOU) pilot study. The study showed that when compared to the current tiered rate structure both TOU rate structures reduced energy use by 2.5% and load was shifted from the on peak periods to the off peak periods, thereby reducing our community’s contribution to the Platte River Power Authority’s (PRPA) coincident peak. The additional complexity of the tiered TOU rate over the basic TOU rate did not provide any statistically significant difference from the basic TOU. Based on the pilot staff is recommending that Council consider adopting a TOU rate without the tier for all residential customers. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Does Council support a time of use rate structure implementation plan? BACKGROUND / DISCUSSION City Council passed Ordinance No. 078, 2015 in July 2015 to pursue a 12 month residential time of use pilot study. Customer outreach began and an open house was held in August and September of 2015. The official pilot study kicked off in November of 2015 and concluded in October of 2016. At that time a survey was sent to all participants and the best bill guarantee analysis and customer notification was completed ahead of any credits being applied to the customer’s bill in December 2016. Results from the pilot study were presented to the Council Finance Committee on January 23, 2017 (attached). The purpose of the pilot study as outlined in Ordinance No. 078, 2015 was to assess if a TOU rate structure could better achieve each of the following objectives than the current tiered rate structure:  Objective 1 - Determine energy conservation impacts  Objective 2 - Measure potential demand reductions  Objective 3 - Gauge customer preference for different rate structures  Objective 4 - Ensure revenue requirements are met Two time-of-use rate structures were considered during the pilot study. The first TOU was a time of use rate structure with an on-peak window when electricity costs more and a much wider off-peak window when electricity costs substantially less than the current tiered rate. In this TOU rate structure all of the expenses associated with energy efficiency programs and PRPA’s demand charges were included in the on-peak window. The second rate structure, labeled below as TOU w/Energy Efficiency (TOU_EE), was very similar, with the same on-peak and off- peak hours, but rather than including the costs associated with the energy efficiency programs in the on-peak charge, these costs were collected through an additional tiered component. February 28, 2017 Page 2 For the pilot study, 1,200 customers were randomly selected to be on each rate. Roughly 10% of the customers opted out at the beginning of the pilot study. After removing any customers that moved households during the 12 month study period, approximately 850 customers remained throughout in each study group. Objective 1 - Energy Conservation Based on the rigorous statistical analysis, both TOU rate structures effectively encouraged energy conservation better than the current tiered rate structure.  The TOU rate realized a 2.5% reduction in energy consumption.  The TOU_EE rate structure did not provide any additional energy conservation over the TOU rate without a tier. Objective 2 - Potential Demand Reductions The statistical analysis also showed both TOU rate structures reduced the probability that a residential customer’s daily peak occurred in the “on peak” window.  The TOU rate structure without a tier showed an 8.5% reduction in the probability that a customer’s daily peak occurred in the “on peak” window.  The TOU_EE rate structure showed a 2.8% reduction in the probability that a customer’s daily peak occurred in the “on peak” window. This shift of the customer’s daily peak reduced the contribution from the residential rate class as a whole to the system coincident peak hour used in the assessment of PRPA’s wholesale demand charges each month. Specifically, looking at the single coincident peak hour during the summer months,  The TOU rate showed a 7.5% reduction in the contribution to the system coincident peak.  The TOU_EE did not show any additional reduction. Objective 3 - Gauge Customer Preference A survey was sent to all participants at the end of the pilot study. In total, 1,450 customer surveys were received out of 7,000 sent (20% return rate). Below is a summary of the responses from each of the four survey questions. Attached is another document which captures the additional comments provided by customers. February 28, 2017 Page 3 Question 1 - Select the description which you think best explains the price you pay for electricity. From the results of Question 1, where customers were asked to identify their rate structure, it is clear that most customers do not understand how they are being charged for electric use. As such, an extensive public outreach effort is recommended before any rate structure changes are made. Question 2 - Select the description which best describes how frequently you seek out information about your energy consumption February 28, 2017 Page 4 Question 3 - In your view, what should be the primary objective of electricity rates (please choose one) Question 4 - During the last 18 months, did you respond to your electricity bill by (choose all that apply) Objective 4 - Revenue Adequacy Both TOU rate structures, like the tiered rate structure, were designed to pass through the full wholesale generation and transmission charges and to collect adequate revenue to maintain the distribution system. Both TOU rate structures resulted in less revenue than the current tiered rate structure. However, because 30% of wholesale energy charges are determined by Fort Collins Utility’s contribution to the system coincident peak and that contribution was reduced, adequate revenues were still generated to meet the cost of service for the residential rate class. Below is a table summarizing the revenue impacts separating out the impact to those residential customers who either have all electric heat and are on the Residential Demand (RD) rate or have rooftop solar installed (Net Metering customers): Original Rate Pilot Study Rate Count % Difference on TOU Rate Avg $ Change per Month Tiered Rate TOU 880 1.6% less ($1.14) TOU w/ EE 851 1.9% less ($1.38) All Electric Homes TOU 18 1.8% more $2.44 TOU w/ EE 16 7.9% more $10.27 Net Metering TOU 5 12.4% more $2.82 TOU w/ EE 9 0% $0.07 February 28, 2017 Page 5 SUMMARY OF IMPACTS Rate Structure Impacts (utility perspective) (check mark shows more favorable option) Rate Structure Tiered TOU TOU w/tier Revenue Requirements Met Promotes Energy Conservation No 2.5% 2.5% Promotes Load Shifting No 8% 3% Considered Equitable (cost-basis) No Benefits Low Income Households Net Metering None Electric Heat No No Addresses Electric Vehicle Charging No STAFF RECOMMENDATION Staff proposes implementing the standard TOU rate as a default rate to all residential customers, including current tiered rates customers, demand rate customers, and net metering customers. There are many considerations in proposing the standard TOU rate, which is ultimately considered a fairer and equitable rate structure. The pilot study shows this rate provides a reduction in the probability that a customer’s peak happens during the on peak hours, and also realized energy conservation over the current tiered rate structure. In general, a TOU rate structure is easy for customers to understand, as well as react to. A TOU rate also encourages the use of electric vehicles and provides an incentive to charge during off peak hours, which is in line with the City’s climate goals. A TOU rate structure would negatively impact those customers who are on the Residential Demand rate financially ($2.44 / customer / month on average), but it better aligns the costs of generation and this customer group’s demands for electricity. This rate structure is available only to customers in all electric housing and is intended to recognize the increased electric demand of such housing. The current demand rate does not distinguish when that increased demand occurs. A TOU rate structure could encourage energy efficiency improvements by providing a price signal that recognizes when heating is primarily done. Both TOU rates better align with the marginal cost of electricity than the current tiered rate structure. Either TOU rate would reduce the compensation to net-metering customers for energy pushed back onto the distribution system in the off peak hours of the early afternoon. A TOU rate would encourage configuring solar arrays to generate more energy when the community needs it the most. The study shows that adding the energy efficiency tier to the standard TOU rate structure does not statistically improve the energy conservation and load shifting objectives. Thus, staff is recommending the standard TOU rate structure without the additional tiered component. NEXT STEPS If Council supports implementing a TOU rate, staff would begin developing an implementation plan and a communication outreach plan for all residential customers. Staff would then return to Council in the fall to discuss these efforts and to seek further direction on when the rate structure change would be brought forward for Council consideration. The 2018 rate Ordinances will be considered by Council in November or December of 2017, allowing this rate structure change to a residential TOU rate to be implemented in early 2018. Further consideration will be needed to implement TOU to a small group of customers that opted out of the AMI implementation, referred to as “option 2” customers (those that don’t want the utility to see 15-minute data) and “option 3” customers (those that don’t want a meter which transmits monthly reads via radio frequency). There are approximately 426 customers combined in these two groups. February 28, 2017 Page 6 ATTACHMENTS 1. Finance Committee Agenda Item Summary, January 23, 2017 (PDF) 2. Powerpoint presentation (PDF) COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Lance Smith, Utilities Strategic Financial Director Randy Reuscher, Utilities Rate Analyst Justin Fields, Utilities Rate Analyst Date: January 23, 2017 SUBJECT FOR DISCUSSION – Residential Electric Time of Use (TOU) Pilot Study EXECUTIVE SUMMARY The purpose of this agenda item is to provide the Council Finance Committee with the results of the residential electric time of use pilot study. The study showed that when compared to the current tiered rate structure both TOU rate structures reduced energy use by 2.5% and load was shifted from the on peak periods to the off peak periods, thereby reducing our community’s contribution to the Platte River Power Authority’s (PRPA) coincident peak. The additional complexity of the tiered TOU rate over the basic TOU rate did not provide any statistically significant difference from the basic TOU. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1) Does the Council Finance Committee support moving to a default residential time of use rate in the future? 2) What data or background information would be useful for including in the presentation at the Council work session on February 28th? BACKGROUND/DISCUSSION City Council passed Ordinance No. 078, 2015 in July 2015 to pursue a12 month residential time of use pilot study. Customer outreach began and an open house was held in August and September of 2015. The official pilot study kicked off in November of 2015 and concluded in October of 2016. At that time a survey was sent to all participants and the best bill guarantee analysis and customer notification was completed ahead of any credits being applied to the customer’s bill in December 2016. Two time-of-use rate structures were considered during the pilot study. The first TOU was a basic time of use rate structure with an on-peak window when electricity costs more and a much wider off-peak window when electricity costs substantially less. In this TOU rate structure all of the expenses associated with energy efficiency programs were included in the on-peak window. The second rate structure, labeled below as TOU_EE, was very similar, with the same on-peak and off-peak hours, but rather than including the costs associated with the energy efficiency programs in the on-peak charge these costs were collected through an additional tiered component. ATTACHMENT 1 For the pilot 1,200 customers randomly selected to be on each rate. Roughly 10% of the customers opted out upfront. After removing all additional customers that moved households during the 12 month study period, approximately 850 customers remained throughout in each study group. The purpose of the pilot study as outlined in Ordinance No. 078, 2015 was to assess if a TOU rate structure could better achieve each of the following objectives than the current tiered rate structure:  Objective 1 - Determine energy conservation impacts  Objective 2 - Measure potential demand reductions  Objective 3 - Gauge customer preference for different rate structures  Objective 4 - Ensure revenue requirements are met Objective 1 - Energy Conservation Both TOU rate structures effectively encouraged energy conservation better than the current tiered rate structure. The TOU rate realized a 2.5% reduction in energy consumption. The addition of a tier in the TOU_EE rate structure did not provide any additional energy conservation over the TOU rate without a tier. Objective 2 - Potential Demand Reductions Both TOU rate structures reduced the probability that a residential customer’s daily peak occurred in the “on peak” window. The TOU rate structure without a tier showed an 8.5% reduction in the probability that a customer’s daily peak occurred in the “on peak” window. The TOU_EE rate structure showed a 2.8% reduction in the probability that a customer’s daily peak occurred in the “on peak” window. This shift of the customer’s daily peak reduces the contribution from the residential rate class as a whole to the system coincident peak hour used in the assessment of the wholesale demand charge each month. Specifically, looking at the single coincident peak hour during the summer months, the TOU rate showed a 7.5% reduction in the contribution to the system coincident peak. Objective 3 - Gauge Customer Preference A survey was sent to all participants at the end of the pilot study. In total, 1,450 customer surveys were received (roughly 20% returned). Below is a summary of the responses from each of the four survey questions. Attached is another document which captures the additional comments provided by customers. Question 1 - Select the description which you think best explains the price you pay for electricity. From the results of Question 1, where customers were asked to identify their rate structure: Question 2 - Select the description which best describes how frequently you seek out information about your energy consumption Question 3 - In your view, what should be the primary objective of electricity rates (please choose one) Question 4 - During the last 18 months, did you respond to your electricity bill by (choose all that apply) Objective 4 – Revenue Adequacy The TOU rate structures, like the tiered rate structure, were designed to pass through the full wholesale generation and transmission charges and to collect adequate revenue to maintain the distribution system. Both TOU rate structures resulted in less revenue than the current tiered rate structure. However, because 30% of wholesale energy charges are determined by Fort Collins Utility’s contribution to the system coincident peak and that contribution was reduced, adequate revenues were still generated to meet the cost of service for the residential rate class. Below is a table summarizing the revenue impacts separating out the impact to those residential customers who either have all electric heat and are on the Residential Demand (RD) rate or have rooftop solar installed (Net Metering customers): SUMMARY OF IMPACTS STAFF RECOMMENDATION Staff proposes implementing the standard TOU rate as a default rate to all residential customers, including current tiered rates customers, demand rate customers, and net metering customers, with an effective date of January 1, 2018. There are many considerations in proposing the standard TOU rate, which is ultimately considered a fair and equitable rate structure. The pilot study shows this rate provides a reduction in the probability that a customer’s peak happens during the on peak hours, and also realized energy conservation over the current tiered rate structure. In general, a TOU rate structure is easy for customers to understand, as well as react to. A TOU rate also encourages the use of electric vehicles and provides an incentive to charge during off peak hours, which is in line with the City’s climate goals. A TOU rate structure would negatively impact those customers who are on the Residential Demand rate. This rate structure is available only to customers in all electric housing and is intended to recognize the increased electric demand of such housing. It does not distinguish when that increased demand occurs. A TOU rate structure could encourage energy efficiency improvements by providing a price signal that recognizes when heating is primarily done. Both TOU rates better align with the marginal cost of electricity than the current tiered rate structure. Either TOU rate would reduce the compensation to net-metering customers for energy pushed back onto the distribution system in the off peak hours of the early afternoon. A TOU rate would encourage configuring solar arrays to generate more energy when the community needs it the most. The study shows that adding the energy efficiency tier to the standard TOU rate structure does not statistically improve the energy conservation and load shifting objectives. Thus, staff is recommending the standard TOU rate structure without the additional tiered component. NEXT STEPS Staff will be presenting the results of the study at the Council Work Session on February 28 th . Discussion from that meeting will determine future rate implementations. If Council supports implementing a TOU rate, staff would return to Council in March or April to ask for Council direction and approval (possibly in the form of a Resolution) in order to begin the public outreach process. The actual rate ordinance would be brought to Council in the fall, along with all other general rates and fees changes, normally in October or November. Again, staff would propose that the TOU rates take effect in January 2018 to allow for the proper outreach and education process to bring all residential customers up to speed on TOU rates ahead of deployment. ATTACHMENTS PowerPoint Presentation Backup slides - Powerpoint 1 Council Work Session February 28, 2017 Residential Time-of-Use Pilot Rate Study ATTACHMENT 2 8.24 8.64 9.52 0 5 10 15 20 0 500 1000 Cents Monthly kWh Use Tiered Rate (Non summer) 8.96 10.63 13.98 0 5 10 15 20 0 500 1000 Cents Monthly kWh Use Tiered Rate (Summer) 6.91 18.36 0 5 10 15 20 TOU off peak TOU on peak Cents Monthly kWh Use TOU (Non summer) 7.07 22.09 0 5 10 15 20 TOU off peak TOU on peak Cents Monthly kWh Use TOU (Summer) 20 hours /day 19 hours /day 4 hours/ day 5 hours/ day TOU Rates Timeline to Date 3 Ordinance 078, 2015 July 2015 12-month pilot study started Nov 2015 •Pilot study ended •Survey sent Oct 2016 •Statistical analysis performed •Best bill credits applied Dec 2016 PILOT Study Objectives 4 1. 1.impacts Determine energy conservation impacts 2. Measure potential demand reductions 3. Gauge customer preference for different rate structures 4. Ensure revenue requirements are met Study Design 5 Opt-out study with 1,200 customers randomly assigned to each group ~ 850 customers in each group after opt-outs and customer turnover Study design allows us to measures components of study and rates separately Controlled factors in pilot study Awareness of study Peak pricing information Best bill guarantee Weather Normalize Objective 1 6 Time-of-Use (TOU) rate showed a 2.5% reduction in energy consumption Adding a tier to TOU rate had no statistical impact on energy consumption Since 2012, the current tiered rate has shown no reduction in energy consumption Energy Conservation Objective 2 7 Air conditioning Heating Lighting Appliances Higher demands Demand Reductions Objective 3 8 Sent to all 7,000 participants, roughly 1,450 responded (~20%) Customer Survey Energy Consumption Rate Structure Rate Knowledge Conservation 47% infrequently or never seek out information 51% seek information when they receive their monthly bill 42% agree rates should balance equitable cost recovery with environmental concerns 25% correctly identified their rate structure 38% are conscious of their energy use 8% use without concern for cost 31% use energy efficient bulbs and/or appliances Objective 4 9 Revenue Requirements Original Rate Pilot Study Rate Count % Difference on TOU Rate Avg $ Change per Month Tiered Rate TOU 880 1.6% less ($1.14) TOU w/ EE 851 1.9% less ($1.38) All Electric Homes TOU 18 1.8% more $2.44 TOU w/ EE 16 7.9% more $10.27 Solar Net Metering TOU 5 12.4% more $2.82 TOU w/ EE 9 0% $0.07 Staff Recommendations 10 • Standard TOU rate realized a 2.5% reduction in energy consumption, as compared to the tiered rate • Better aligns benefits of solar production with costs • Encourages use of electric vehicles and charging during off-peak hours, consistent with community climate goals • Considered a more “fair and equitable” rate structure Transition to a standard TOU rate for residential customers, including residential demand and solar net metering customers Next Steps 11 Mar / Apr • Council approval requested to begin public outreach campaign Mar / Apr • Council approval requested to begin public outreach campaign May - Oct • 6 month outreach / communication May - Oct • 6 month outreach / communication 2018 • Time-of-use deployment to all residential customers 2018 • Time-of-use deployment to all residential customers Council Direction 12 Does Council support a Time-of-Use rate structure implementation plan? 13