Loading...
HomeMy WebLinkAboutEmail - Read Before Packet - 1/27/2015 - Email From Darin Atteberry Re: Agenda Item #2 Fcsg Statement On Electric Time Of Use Pilot Project -Council Sar 286311 Debra Unger From: Debra Unger on behalf of Darin Atteberry Sent: Tuesday, January 27, 2015 1:26 PM To: Gerry Horak Cc: CCSL; Kevin Gertig; Lisa Rosintoski; ldavis@fcgov.com; Lance Smith; Robin Pierce; Kevin Cross Subject: Agenda Item #2 RE: FCSG Statement on electric time of use pilot project (Council SAR # 28631) Gerry, Please see the response below from Lance Smith, Utilities Strategic Financial Planning Manager; and Lisa Rosintoski, Utilities Customer Connections Manager, re: your request concerning the electric time of use pilot project: ~~~~~ Utilities’ appreciates the opportunity to respond to Mr. Cross's email. Below I have provided comments on key aspects to provide perspective for the discussion scheduled this evening during the City Council work session. • The time-of-use pilot is Utilities first attempt to quantify how our customers can effectively respond to a time based price signal that would not put them at risk based on our “price guarantee” approach. • Utilities’ currently has a tiered rate structure for about 3 years. We have not seen a significant change in customer behavior, based on the data, suggesting that electricity is inelastic at the level of tiers we have implemented. • The time-of-use (TOU) rate structure is being proposed because it is a more equitable rate structure than the tiered rate structure in place. It has the additional benefit of providing all customers with a clear price incentive to conserve energy during the peak hours of demand since on-peak energy costs are 2-3 times more than off- peak energy. This approach is in alignment with our Platte River Power Authority agreement, who manages our purchase power supply. In the end, understanding the magnitude of customer response is one of the reasons behind requesting the TOU pilot rate. • Utilities staff is proposing that fixed charges be analyzed as part of the pilot study because of industry best practices. Utilities staff has not seen data that supports the hypothesis that lower fixed charges promotes energy conservation. Having some customers on a TOU rate with a higher fixed charge and lower on and off- peak energy charges while other customers are on a TOU rate with lower fixed charges and higher on and off- peak energy charges will allow this hypothesis to be tested to make an informed recommendation to City Council. • Our billing system has been verified to support this initial time-of-use pilot rate. Our understanding is if we have multiple TOU, tiered rates we need to review further how the billing system can be configured to support. Thus, the proposed pilot would need to be postponed if we include multiple TOU rates. • As Utilities manages our cost of service study, we know we need to provide our customers with a clear allocation of costs they can respond to through the rate structure. Our cost of service study quantifies that the fixed charges are not adequately accounted for, thus, not providing the customer the appropriate allocation. Slide 12 demonstrates the difference. The proposed fixed rate increase would minimally impact the “red” variable costs, which is where conservation is achieved by our customers. However, the fixed costs such as distribution lines, transformers, sub-stations, field crews, and advanced metering, are costs that, regardless of conservation, need to be adequately billed. 2 Mr. Cross’s feedback is appreciated and Utilities is working in the direction he has suggested. Customer education and participation is the most important aspect in rate design and this “controlled” approach is Utilities way to take steps in that direction. Staff also presented a table showing the pros and cons of several potential rate structures: ~~~~~ Staff time: 1.75 hours Debra Unger Executive Administrative Assistant City Manager’s Office (970) 221-6266 Click here to Tell Me About My Service ... I Want to Know! -----Original Message----- From: Gerry Horak Sent: Tuesday, January 27, 2015 6:59 AM To: Kevin Cross; Karen Weitkunat; Bob Overbeck; Lisa Poppaw; Gino Campana; Wade Troxell; Ross Cunniff Cc: Darin Atteberry; Kevin Gertig; Lisa Rosintoski; ldavis@fcgov.com Subject: RE: FCSG Statement on electric time of use pilot project Kevin 3 Thanks for the email, perspectives and recommendations. Darin Please have a staff response prior to the meeting so we can discuss that analysis at the work session. Thanks Gerry Gerry Horak Mayor Pro Tem Councilmember District 6 ghorak@fcgov.com 217-2993 123 North Mack Street Fort Collins, CO 80521 With limited exceptions, emails and any files transmitted with them are subject to public disclosure under the Colorado Open Records Act (CORA). To promote transparency, emails will be visible in an online archive, unless the sender puts #PRIVATE in the subject line of the email. However, the City of Fort Collins can’t guarantee that any email to or from Council will remain private under CORA. ________________________________________ From: Kevin Cross [jkevin87@comcast.net] Sent: Monday, January 26, 2015 12:49 PM To: Karen Weitkunat; Bob Overbeck; Lisa Poppaw; Gino Campana; Wade Troxell; Ross Cunniff; Gerry Horak Cc: Darin Atteberry; Kevin Gertig; Lisa Rosintoski; ldavis@fcgov.com Subject: FCSG Statement on electric time of use pilot project Dear Mayor Weitkunat and Members of Council: At your work session on January 27th, you will be considering an electric time of use pilot project for residential customers. This work session item is a follow-up to the work session item you considered on May 13th of last year. At your May 13th work session, you directed Utilities staff to bring back at least one additional pilot project for your consideration. They have done so, but propose conducting only one of the two pilots they propose. This is, in our view, unacceptable. In order to determine a residential rate structure that optimizes a) energy conservation, b) customer acceptance, and c) revenue stability, it is necessary to obtain pilot project data for more than one option. The two rate pilots should be run simultaneously for at least one year, and the resultant energy use data should be compared to that of the previous year by customer for each pilot. Customer acceptance and the impact on revenue stability should be evaluated at the end of the year for each pilot as well. As part of the same work session item you will consider on January 27th, Utilities staff are asking you to consider increasing the monthly fixed charge for residential customers. We do not support doing this, as doing so would reduce variable charges and would tend to dis-incentivize energy conservation. It would be better to determine the impact of the two pilot rate structures on Utility revenue stability before making changes to the monthly fixed charge. We urge you to direct Utilities staff to run the two pilots they propose simultaneously. We also urge you to direct utilities to run a third pilot featuring steeper rate tiers, as we suggested last year. Finally, we urge you to direct Utilities 4 NOT to make further changes to the monthly fixed charge for residential customer until the pilot projects have been completed. Sincerely, Kevin Cross Fort Collins Sustainability Group Steering Committee Fort Collins Community Action Network P.O. Box 400 Fort Collins, CO 80522 Ph. 970-484-3141 http://fcsg.fccan.org/ P.S. I have included our statement on the time of use pilot project proposed last May below. FCSG statement on time of use pilot project for electric rates Statement updated on May 13, 2014 The Fort Collins City Council considered whether or not to move forward with a “time of use pilot project for electric rates” at its work session on May 13th of this year. The time of use rate proposed by Fort Collins Utilities would apply to approximately 1,000 randomly-selected residential customers. It would charge them a variable amount per kilowatt- hour of electric energy consumed based on how much it costs to produce that kilowatt-hour at different times of the day, week, and year, labeled either “peak” or “off-peak” periods. This differs from the tiered rate that currently applies to most residential customers, which charges customers more per kilowatt-hour as they consume more electric energy. Council directed Utilities to come back with at least one additional pilot project, and to perform more outreach to City Boards and Commissions before conducting a second work session on this topic later this year. The Fort Collins Sustainability Group believes it would be worthwhile to run the proposed time of use pilot project. However, we believe that it would be beneficial to explore two alternative rate structures as well. The first alternative we think the City should consider alongside the time of use rate structure is a tiered time of use rate. Such a rate would charge customers more per kilowatt-hour as they use more electric energy in both the peak and off-peak time periods. This rate would build on the City’s current tiered rate structure. Unfortunately, the City’s web portal for customers cannot currently support this rate structure. The second alternative we think the City should consider is a tiered rate that offers a greater incentive for conservation than the current tiered rate. This rate structure should charge less for the first block of electric energy used than the current rate does, and more for the third or higher blocks. Consideration should be given to including an allowance for families with more than a specified number of members in the two tiered rate pilots. Doing this would ensure that large families do not provide a significant subsidy to small families or to groups of unrelated people living together. We recommend proceeding with these pilot programs once the City’s web portal can fully support each of them. Once the programs have been in place for at least a year and the data has been analyzed, each rate structure should be evaluated on the basis of a) its ability to promote reduced energy use, b) its acceptance by customers, and c) its ability to provide revenue stability for the Utility, i.e. a good match between its budget and actual revenues. The City of Fort Collins has aggressive goals, which will likely become more aggressive soon, for both reducing electric energy use and for reducing its carbon dioxide emissions. Any rate structure that does not promote those two goals should not be adopted on a larger scale. Customer acceptance is important to help ensure community support for goals related to reducing environmental impacts. And it should go without saying that the Utility must be financially viable in order to provide its services to the community. Finally, the Fort Collins Sustainability Group recognizes that the rate structure alone is not sufficient to ensure steadily decreasing per capita and community-wide electric energy use. An effective demand side management program is also critical to ensure these outcomes. The most significant step forward that the City could take in this area would be to 5 implement an on-bill financing program for all customers that would allow them to make efficiency upgrades AND pay a lower electric bill each month than they do currently. Other utilities have managed to do this, and it is high time that Fort Collins follow their lead. A rate structure optimized for encouraging efficiency and a demand side management program that would reward the adoption of energy efficiency upgrades by all residents would be a powerful combination indeed.