HomeMy WebLinkAboutMemo - Mail Packet - 10/30/2018 - Memorandum From Randy Reuscher And Lance Smith Re: 2019 Electric Rates And Component AdjustmentsUtilities
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700 Wood Street
PO Box 580
Fort Collins, CO 80522
970.221.6700
970.221.6619 – fax
970.224.6003 – TDD
utilities@fcgov.com
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M E M O R A N D U M
DATE: October 22, 2018
TO: Mayor Troxell and Councilmembers
FROM: Randy Reuscher, Lead Analyst, Utility Rates
Lance Smith, Director, Financial Planning & Analysis
THROUGH: Darin Atteberry, City Manager
Jeff Mihelich, Deputy City Manager
Kevin R. Gertig, Utilities Executive Director
RE: 2019 Electric Rates and Component Adjustments
This memo is to provide further clarification on how the proposed 5% increase to 2019 electric
rates will be applied to individual billing components.
Staff is proposing a 5% overall rate increase for the electric fund in 2019. This rate increase
consists of
3.6% needed to increase operating revenues enough to offset operating expenses so that
reductions in reserves stop and funds can be set aside for future capital improvements.
1.4% needed to offset the increase in wholesale energy prices
Note – the 2.0% wholesale increase Platte River is planning equates to 1.4% retail increase, as
wholesale costs equal approximately 72% of total utility operating expenses.
The proportion of each operating expense allocated to the retail rate classes varies between
residential and commercial customers. For example, approximately 66% of a residential
customers total bill is for wholesale costs, while the other 34% is for distribution costs. For a
large industrial customer, it equates to approximately 90% for wholesale costs and only 10% for
distribution costs.
There are two main reasons for this variation
1) industrial customers use much higher amounts of energy
2) industrial customers have much higher load factors, the ratio of average demand to the
non-coincident peak demand, (upwards of 90%, as opposed to 10-15% for residential).
The component charges for retail rate classes are broken out to directly pass-through the
wholesale energy and demand charges from Platte River. The distribution costs are collected
through the monthly fixed charge, and a separate distribution energy and/or demand charge. The
DocuSign Envelope ID: A20FBF19-A6E2-4378-B335-B465A00E7EC0
3.6% increase related to distribution expense is collected only through the distribution
components. Therefore, the effective increase to these particular components is higher than the
overall percentage increase being proposed, so that the weighted average equals the overall
increase for the particular rate class.
In the case of a residential customer, the monthly fixed charge and the distribution kWh
components are being proposed to increase by 10.2%. This is necessary because 66% of their
bill will only increase by 2%, related to the wholesale increase. The distribution portion, which
is the other 34% of their bill, will need to increase by the larger percentage, in order to get to a
4.8% increase overall for the residential rate class.
The table below shows the 2018 and 2019 residential component charges, as outlined in Code,
and how the percentage increases would be applied, based on the distribution and wholesale
proportions stated above.
NOTE – all charges shown below are without the 6% payment in lieu of tax (PILOT)
The “distribution kWh” component is not split out on the customer bill and is rolled into the total
kWh charges, in this case the summer and non-summer on-peak and off-peak charges.
Components 2018 2019 % increase
Distribution Fixed Charge $ 5.81 $ 6.40 10.20%
Distribution kWh $ 0.0197 $ 0.0217 10.20%
Distribution Tier Component $ 0.0166 $ 0.0183 10.20%
Wholesale Summer On-peak $ 0.2015 $ 0.2055 2.00%
Wholesale Summer Off-peak $ 0.0428 $ 0.0437 2.00%
Wholesale Winter On-peak $ 0.1788 $ 0.1824 2.00%
Wholesale Winter Off-peak $ 0.0411 $ 0.0419 2.00%
Blended Rate 4.8%
DocuSign Envelope ID: A20FBF19-A6E2-4378-B335-B465A00E7EC0
The effective wholesale increase equals 1.3% and the effective distribution increase equals 3.5%,
therefore totaling 4.8% and matches the overall percentage increase identified for the residential
rate class.
Residential Rate Class
Wholesale
Costs
Distribution
Costs
Percent of total bill 66.0% 34.0%
Percent increase for 2019 2.0% 10.2%
Effective % increase 1.3% 3.5%
Effective Wholesale + Distribution
Increase 4.8%
Components 2018 2019 % Change
Distribution Fixed Charge $ 5.81 $ 6.40 10.2%
Distribution kWh
Distribution Tier Component $ 0.0166 $ 0.0183 10.2%
Summer On-peak $ 0.2212 $ 0.2272 2.7%
Summer Off-peak $ 0.0625 $ 0.0654 4.6%
Non-summer On-peak $ 0.1985 $ 0.2041 2.8%
Non-summer Off-peak $ 0.0608 $ 0.0636 4.6%
Blended Rate 4.8%
DocuSign Envelope ID: A20FBF19-A6E2-4378-B335-B465A00E7EC0