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HomeMy WebLinkAboutMemo - Mail Packet - 3/20/2018 - Memorandum From Lance Smith And Lisa Rosintoski Re: Memo 2 Of 2: Income Qualified Assistance Program (Iqap), Formerly Income Qualified Rate, Discount Rate AnalysisUtilities electric · stormwater · wastewater · water 222 Laporte Ave. PO Box 580 Fort Collins, CO 80522 970.221.6700 970.221.6619 – fax V/TDD 711 utilities@fcgov.com fcgov.com/utilities M E M O R A N D U M DATE: March 15, 2018 TO: Mayor Troxell and Councilmembers THROUGH: Darin Atteberry, City Manager Jeff Mihelich, Deputy City Manager Kevin R. Gertig, Utilities Executive Director FROM: Lance Smith, Utilities Strategic Finance Director Lisa Rosintoski, Customer Connections Manager RE: Memo 2 of 2: Income Qualified Assistance Program (IQAP), formerly Income Qualified Rate, Discount Rate Analysis This memo is the second of two memos that provides details on a revised approach to the Income Qualified Rate presented at the January 30 City Council work session, and discussions with Mayor Pro Tem Horak and Councilman Cunniff. This memo will provide the details on the recent IQAP analysis and recommendations in applying a discount to the electric, water and wastewater rates. In addition, after further discussions with the City Attorney’s Office, we recommend refocusing the Income Qualified Rate as the Income Qualified Assistance Program (IQAP). Bottom Line: Utilities proposes a modified Income Qualified Assistance Program to provide a 23% discount on certain rate components for electric, water and wastewater services. The discount would be applied to:  the electric base charge and on-peak / off-peak kWh charge, while excluding a discount on the tier surcharge under the time-of-day (TOD) rate,  the water base charge, as well as Tier 1 water consumption, while excluding a discount on Tier 2 and Tier 3 water consumption, and  wastewater base charge and variable charge. Modifications to the application of the discount for specific components considers recommendations from the Fort Collins Sustainability Group (FCSG). While their suggestion differs from the staff recommended approach for the electric discount, a tiered TOD rate is not the rate structure to be implemented in October. It is a TOD rate with a tier surcharge, which has differing implications. Based on conversations with FCSG, staff has completed the analysis summarized below, which provides a discounted rate to the fixed and energy charges, but not to the surcharge for consumption over 700 kWh. Summary: DocuSign Envelope ID: EE520E13-8CE5-40AD-B4C7-32D49C25445C The average utility bill for electric, water, wastewater and natural gas services in Fort Collins is roughly $2,271 annually. Customers participating in the County’s Low-Income Energy Assistance Program (LEAP) are provided an annual benefit from Larimer County that averages $441. Fort Collins Utilities provides indirect benefits to these customers, which represents another $215 annually. Recognizing the above low-income assistance amounts, 23% is the percentage discount needed to provide income- qualified customers a monthly utility bill discount that would reduce utility bill impacts to 3.1% of household income. This is lower than the originally proposed 42%. The proposed average annual and monthly bill amounts, along with the average percentage of income a customer pays at 165% Federal Poverty Level (FPL) and 100% Area Median Income (AMI), are demonstrated below in Table 1. By modifying the application of the discount within the rate, and only applying it to specific components, the effective discount is reduced.  Electric – the discount would apply to only the base charge, and the on-peak and off-peak kWh charges. It would not apply to the “tier surcharge.” o This lowers the benefit to these customers by 5% on average, since approximately 5% of total charges are collected through this tier surcharge. o All-electric homes would benefit from the full discount, as those customers do not have a “tier surcharge” (on the standard TOU rate). o Estimates show this would reduce direct benefits to customers by $18,000/year, which could be directed to energy efficiency improvements in eligible housing.  Water – the discount would apply to base charge and Tier 1 charges only, not the Tier 2 or Tier 3 consumption. o Roughly 75% of costs are collected through the base charge and Tier 1 charge, resulting in a lower benefit to these customers, on average. o Estimates show this would reduce direct benefits to customers by $17,000/year, which could be directed towards water conservation efforts in eligible housing.  Wastewater – no changes since initial proposal and the discount would apply to both the base charge and the variable charge. TABLE 1 Utility Expense Annually Monthly Electric $ 788 $ 66 Water $ 431 $ 36 Wastewater $ 469 $ 39 Gas $ 583 $ 49 $ 2,271 $ 189 6% 3.1% Avg LEAP Benefit $ (441) $ (37) Utilities programs $ (215) $ (18) $ (656) $ (55) Bill after existing benefits $ 1,615 $ 135 4% Avg IQR Benefit $ (387) $ (32) Bill with adding IQR $ 1,228 $ 102 3.1% % of income towards utilities @ 165% of FPL % of income towards utilities @ 100% of AMI DocuSign Envelope ID: EE520E13-8CE5-40AD-B4C7-32D49C25445C Table 2 below summarizes the financial impacts to the three utilities, gives the above new estimates for customers that may qualify through LEAP, the services that are in the low-income customer’s name, as well as the effective average discount. It is estimated that the program would provide a benefit of $435,000 annually, split among the three utility funds. TABLE 2 Staff will be recommending adoption of the 23% discount for electric (less the discount on the “tier” component under TOD + tier), water (less the discount on Tier 2 & Tier 3 consumption), and wastewater services, for those that qualify through LEAP. Financial impacts to utility enterprise funds under this proposal are estimated at $435,000 annually. Staff will monitor actual enrollment levels and financial impacts on an annual basis upon program approval, and modify qualifications and benefits as necessary going forward to maximize benefits for each respective set of ratepayers. Current research shows benefits of similar programs include reduced system consumption, increased participation in conservation education programs by customers occupying substandard housing, and improved consumption behaviors. Additional benefits also may be revealed as the program moves in the successive cycles and is broadly adopted by qualifying customer households. Next Actions: Utilities will prepare a City Council consent agenda item for an IQAP ordinance that combines memo 1 and memo 2 for the April 17 City Council regular meeting. The recommended effective date, in alignment with the TOD rates, is October 2018. C: Randy Reuscher, Utilities Rate Analyst John Phelan, Resource Conservation Manager Pete Iengo, Utilities Program Coordinator Service 2017 LEAP customers % Customers w/bill in their name Average 2018 Discount Annual $ Impact Electric 2,000 100% $35 14.$000 344, Water 2,000 25% $20 6.$000 37, Wastewater 2,000 25% $99 8.$000 54, Total $000 435, DocuSign Envelope ID: EE520E13-8CE5-40AD-B4C7-32D49C25445C