HomeMy WebLinkAboutMemo - Mail Packet - 9/18/2018 - Memorandum From Randy Reuscher Re: Residential Blended Kwh Rate And Impacts Of Tiered ComponentUtilities
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700 Wood Street
PO Box 580
Fort Collins, CO 80522
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utilities@fcgov.com
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M E M O R A N D U M
DATE: September 12, 2018
TO: Mayor Troxell and Councilmembers
FROM: Randy Reuscher, Lead Analyst, Utility Rates
THROUGH: Darin Atteberry, City Manager
Jeff Mihelich, Deputy City Manager
Kevin R. Gertig, Utilities Executive Director
RE: Residential Blended kWh Rate and Impacts of Tiered Component
Utility staff received a request from Councilmember Cunniff for a summary of
the net effect of time-of-day (TOD) rates on a constant 24-hour electric load
an estimate of how much a residential customer in the 90
th
percentile of electric usage
pays in “tier” charges
Net effect of TOD rates on a constant 24-hour electric load
The TOD rate for residential, gas-heat customers has three variable component charges, which
includes an on-peak charge, an off-peak charge, and a tier charge (per kWh for total monthly
consumption exceeding 700 kWh). The graph below shows the on-peak and off-peak charges by
weekday hour (weekends are all off-peak), as compared to what Utilities would charge on a flat
rate structure. This does not include the TOD “tier” component (not time-based), or the monthly
fixed charge.
DocuSign Envelope ID: B05BF2C1-B0A7-4841-86B4-C35FE3AD9EEC
Depending on the month of the year, due to varying seasonal needs for electricity, a customer
typically uses anywhere between 10 – 30% of their total monthly consumption during on-peak
hours, with averages generally around 20% or less. This means that for most of the hours in a
day, approximately 88% of the hours in a month, the cost per kWh is lower than the flat rate.
The remaining 4 to 5 hours (depending on season) during on-peak hours are higher, as compared
to the flat rate. For appliances that have an even 24-hour load, the net effect between the
flat rate and the TOD rate is zero. This is intentional and by design to be revenue neutral.
Only those appliances, such as air conditioning being one example, that are more heavily used
during on-peak hours will impact a customer under the TOD rate. Heating needs (all-electric
homes only) does not appear to drive higher on-peak consumption, on average, as one may
assume, for two reasons: 1) non-summer months only have 4 on-peak hours, and 2) a substantial
amount of heating occurs during the overnight and morning hours, during off-peak hours which
are billed at the lower off-peak price.
Estimate of “tier” charges for customer in the 90
th
percentile of electric usage
Based on historical data, a residential customer in the 90
th
percentile uses approximately 825
kWh per month during a non-summer month and approximately 1,300 kWh during a summer
month. Note - all price comparisons below EXCLUDE the monthly fixed charge, this is for
variable charges only.
Flat Rate - In a non-summer month, the bill would total $75.08, while in a summer month, the
bill would total $136.50.
Non-summer $0.091 / kWh x 825 = $75.08
Summer $0.105 / kWh x 1,300 = $136.50
Existing Tiered Rate – In a non-summer month the bill would total $75.99, which amounts to the
customer paying $0.92 more than the flat rate in a tier charge. In a summer month the bill would
total $150.62, which amounts to the customer paying $14.12 more than the flat rate in a tier
charge.
Note – the burden is lessened in total for both the summer and non-summer tier charges because
tier 1 is lower in each case than the associated flat rate shown above
Non-summer Tier 1 $0.09031 / kWh x 500 = $45.16
Tier 2 $0.09487 / kWh x 325 = $30.83
Summer Tier 1 $0.09582 / kWh x 500 = $47.91
Tier 2 $0.11448 / kWh x 500 = $57.24
Tier 3 $0.15158 / kWh x 300 = $45.47
DocuSign Envelope ID: B05BF2C1-B0A7-4841-86B4-C35FE3AD9EEC
Future TOD Rate – In a non-summer month the bill would total $75.82, while a non-summer
month the total bill would be $140.48. The tier charges for consumption more than 700 kWh are
shown below at $2.20 during a non-summer month and $10.56 during a summer month.
Non-summer Off-peak $0.0644 x 685 kWh = $44.10
On-peak $0.2105 x 140 kWh = $29.52
Tier charge $0.0176 x 125 kWh = $2.20
Summer Off-peak $0.0663 x 1,040 kWh = $68.95
On-peak $0.2345 x 260 kWh = $60.97
Tier charge $.0176 x 600 kWh = $10.56
In summary, at the 90
th
percentile, the existing tiered rate would collect roughly $50.64 in tier
charges, annually, while the new TOD rate structure would collect roughly $68.20 in tier charges
annually.
DocuSign Envelope ID: B05BF2C1-B0A7-4841-86B4-C35FE3AD9EEC