HomeMy WebLinkAboutMemo - Mail Packet - 4/21/2020 - Memorandum From Lance Smith, Lisa Rosintoski, Randy Reuscher Re: Time-Of-Day Tod) Electric Rates During Covid-19 Stay At Home OrdersUtilities
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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
fcgov.com/utilities
M E M O R A N D U M
DATE: April 15, 2020
TO: Mayor Troxell and Councilmembers
THROUGH: Darin Atteberry, City Manager
Jeff Mihelich, Deputy City Manager
Kevin R. Gertig, Utilities Executive Director
FROM: Lance Smith, Utility Strategic Finance Director
Lisa Rosintoski, Utilities Deputy Director, Customer Connections
Randy Reuscher, Utility Rate Analyst
RE: Time-of-Day (TOD) Electric Rates during COVID-19 “Stay-at-Home” Orders
Bottom Line:
At the April 7 City Council meeting under Other Business, Council asked staff to look at the
possibility of delaying the shift to Summer TOD hours until June as well as the impacts of
eliminating the tier.
Staff recommends no change in the TOD rate structure based on the COVID-19 Stay-at-Home
Order. This recommendation is based on a review that recognizes:
Delaying the seasonal shift in on-peak hours would likely create more confusion among
customers as to when the on-peak hours are and provide relatively little benefit to
customers and children that are working or studying from home
Eliminating the tier charge would provide only a small reduction in electric charges to
customers who use more than 700 kWh per month, benefitting customers who use the
most electricity and no benefit to those that use less
Rather than modifying the electric rate structure, Utilities is offering a broader approach to assist
customers with their total utility bill, including:
Suspending disconnections for non-payment throughout the declared emergency.
Expanding the Payment Assistance Fund (PAF) to allow customers to receive up to two
payments and a maximum of $1,500 total during the PAF season (increased from one
payment and a maximum of $1,000 per season)
Payment arrangements on the total utility bill, which includes water, wastewater and
stormwater services, as well.
Summary:
The Governor’s Stay-at-Home Order through April 26 has created customer concerns regarding
the impacts of TOD as they are working at home and many are home-schooling due to school
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closures. Customers are concerned their utility bills will be more expensive due to the on-peak
hours, which are 5-9 p.m. in the non-summer season (October – April), and 2-7 p.m. during the
summer season (May – September). Some have also expressed concerns with the additional
“tier” charge for those who live in gas-heated homes and use over 700 kWh a month.
Based on extensive rate sensitivity modeling, both during the TOD pilot and the recent analysis
following the first year of TOD, staff continues to believe that if customers are diligent in
managing their on-peak use, there will be minimal, if any, financial impacts to their utility bills,
as the off-peak periods, which range from 19-20 hours each day and all weekends are 30% lower
in price than the average cost of electricity.
TOD provides an opportunity to “shift” electric use to the lower-priced, off-peak hours and help
residents lower their electric bills. An advantage of being at home more is that it could provide
more flexibility in running appliances during less expensive times. Throughout the year,
most customers use approximately 80% of their electricity during the lower-priced, off-peak
hours.
Customer Assistance
If customers are having difficulty paying their utility bill, they can contact Utilities at 970-212-
2900 to receive financial assistance or arrange for a payment plan. This assistance includes
making a payment arrangement to alleviate short-term financial stress, as well as funding from
the expanded PAF. Customers can now receive bill payment assistance two times this program
year (ending September 30, 2020), while not exceeding a total program year benefit of $1,500.
The Income Qualified Assistance Program (IQAP) is also available for customers who meet
established criteria (see details at https://www.fcgov.com/utilities/iqap/). Customers who are
enrolled in the Low-Income Energy Assistance Program (LEAP) are eligible to apply for IQAP.
In response to COVID-19, the LEAP application season that typically ends April 30 has been
extended and applications will be accepted until funding runs out.
Typical Customer Consumption
The months of March, April and early May are considered a low electric consumption period
because there is less need for heating and essentially no need for air conditioning use. While
working from home and/or taking online classes may increase the need for the use of electronics
within the home, it is estimated that one laptop, plus an additional monitor, would consume
around 17 kWh and cost around $1.25 - $1.50 per month to operate.
Delaying the Seasonal Change of the On-Peak Hours from May 1 to June 1
Staff does not recommend delaying the change in summer on-peak hours until June 1. Utilities
began TOD pricing in October 2018, nearly 18 months ago, and has spent this time educating
customers on the varying prices and on-peak/off-peak hours that change by season. Quickly
changing the start of summer on-peak hours without adequate time to communicate with
customers will likely result in confusion and could negatively impact customers financially. In
addition, bill inserts reminding customers of the change in on-peak hours on May 1 are already
being provided to customers with May only being two weeks away.
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TOD prices were established based on the coincident peak hours, when the demands on the
system and the costs to meet those demands are the highest. TOD prices align the cost of
electricity that residents pay more closely to the market price of electricity. Because higher
customer demands drive the higher costs, the prices during the on-peak hours are higher. This
means that prices are lower during off-peak hours when demand and utility costs are also lower.
Delaying the seasonal change may also cause a misalignment in the recovery of costs for the
month and send the incorrect price signal to customers. This may result in Utilities collecting
insufficient revenue to meet costs for the month (or any future modified months).
Converting Customers With a Tier Charge to TOD Without a Tier Charge
Utilities has two different TOD rates structures. Over 90% of customers are on the TOD rate
structure that includes an additional “tier” charge for total electric use over 700 kWh/month. This
rate has a slightly lower on-peak/off-peak kWh charge. The remainder of customers live in all-
electric homes and do not pay a tier charge but have a slightly higher on-peak/off-peak rates.
While both rate structures were designed to be revenue neutral, there are varying impacts for
individual customers. The breakeven point between the two rates is around 1,100 kWh per
month, where those consuming less than that in a month benefit on the TOD+tier rate and those
that consume more benefit on the all-electric TOD rate. Comparisons should be done for 12
billing months to understand annual impacts.
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Potential Rate Options
Eliminate the over 700 kWh tier charge, without adjusting the on-peak/off-peak charges.
o The tier charge accounts for ~5% of annual residential revenue, which would
create a revenue shortfall
~$240k for the combined months of April and May or ~$2.1M annually
o Only benefits larger consumers of electricity (those using over 700 kWh)
o Doesn’t provide benefit to customers in all-electric homes
Move all customers to TOD without a tier charge and adjust on-peak/off-peak charges
accordingly.
o Benefits customers who use over 1,100 kWh per month but has a negative impact
for average customers that use closer to 660 kWh per month
o Doesn’t provide benefit to customers in all-electric homes
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