HomeMy WebLinkAbout13 Cost of Service Procurementenda Item #
ACTION
13
To: Board of Directors
From: Lisa Hall
Date. July 18, 2018
Subject: Consideration of an Electric Utility Cost of Service and Rate Study
1. WHY THIS MATTER IS BEFORE THE BOARD
Board authorization is required for procurements in excess of $15,000,
2. HISTORY
The District has contracted with Shawn Koorn, of HDR Engineering, in the past to
review the District's revenue requirements, cost of service, and to provide rate design
for both the Electric and Water Utilities. The last Electric Utility comprehensive rate
study was commissioned in 2010 and resulted in no rate increases. Rates remained
the same from 2010 through 2016.
In 2016, HDR Engineering
recommended increasing
201 &01 increasing electric
3%, respectively.
3. NEW INFORMATION
provided a limited electric
the customer charge,
rates for the years 2017,
rate structure design review and
The Board adopted Ordinance
2018, and 2019 by 2%, 3%, and
District staff is recommending a comprehensive Electric Utility cost of service and rate
study. The cost of service study and rate design meets three objectives which include
developing a current utility revenue requirement, fair apportionment of operations
costs among customers, and optimal efficiency. Routine cost of service studies
support revenue stability from year to year, fairness of apportionment to different rate
categories, and freedom from controversies as to proper interpretation.
Staff, based on HDR Engineering's past performance and detailed knowledge of
District operations, is recommending again working with HDR Engineering. The
District requested a cost of service study proposal from HDR Engineering. HDR
Engineering provided a quote for the study which includes an analysis of the District's
revenue requirement, cost of service, and a rate design proposal. The HDR
Engineering Quote with Scope of Work is included in Attachment 1.
4. FISCAL IMPACT
Sufficient funds exist in the Electric Utility's Board approved FY18 & FY19 operating
budgets.
5. RECOMMENDATION
Authorize the General Manager to execute a contract with HDR Engineering for an
Electric Cost of Service and Rate Study, in an amount of $47,785 plus a 10% change
order authorization for a total not to exceed contract amount of $52,600,
Lisa Hall
Administrative Services Director
Michael D. Holley
General Manager
hdrinc.com
June 22, 2018
Ms. Lisa Hall
Administrative Services Director
Truckee Donner PUD
11570 Donner Pass Road
Truckee, CA 96161
Subject: Electric Cost of Service and Rate Study
Dear Ms. Hall:
HDR has been assisting the Truckee Donner Public Utility District (District) with water and electric rate analyses
over the past several years. Recently, you contacted HDR to assist the District in the development of an electric cost
of service and rate study. The purpose of this study is the adoption of cost -based and equitable electric rates that
provide adequate funding for the District's 0&M and capital needs over the long-term (e.g., 5 year period).
HDR has extensive experience in establishing cost -based electric rates and is highly qualified to perform this work
for the District based on our technical skills and experience in this specialized area of expertise. HDR's project team
specializes in rate and cost of service analyses full time and recently completed electric cost of service studies
and rate designs for electric utilities across the U.S. HDR has also assisted the District in the review and update of
residential electric rate structure alternatives.
We look forward to discussing our proposed approach to the District's cost of service and rate plan with you. Should
you have any questions about our approach to this project, please contact Shawn Koorn, 425-450-6366. Provided
in the following is a summary of the scope of services developed specifically for the District and the fee estimate to
provide those services.
Should you have any questions or require additional information or detail regarding this scope of services, please do
not hesitate to contact me. Should this scope and fee be acceptable to the District, please provide a notice to proceed
along with the appropriate contract documentation.
Sincerely,
HDR Engineering, Inc.
Ken Jong
Vice President
2365
Iron
Point
Road, Suite 300, Folsom, CA 95630-8709
T 916.817.4700
F 916.817.4747
Shawn W.Koorn
Associate Vice President
Truckee Donner Public Utility District
Electric Cost of Service and Rate Study
Understanding the District's goals and objectives for this study is an important starting point. By gaining an understanding of these
goals and objectives, the scope of services can be tailored to meet the District's needs. Based upon understanding of the District's
needs, the following goals and objectives for the study have been developed:
• Utilize "generally accepted" electric rate setting techniques and methodologies to establish the District's rates.
• Develop a projected revenue requirement (financial plan) for a five-year projected period that considers the prudent and adequate
funding of the District's operating and capital needs.
• Determine appropriate prudent financial management targets (i.e., reserve fund balances, rate funded capital, and debt service
coverage ratios).
• Develop revenue (rate) transition plans, as necessary, which reflect the results of the revenue requirement.
• Review the current rate schedules (e.g., customer classes) and identify potential changes to the current customer classes
of service.
• Develop an average embedded cost of service analysis that equitably allocates the costs of the District to the identified customer
classes of service.
• Develop cost -based rate design alternatives for the customer classes of service based on the results of the cost of service analysis.
• Review the relationship between the fixed (meter or service availability) and variable (energy) costs.
• Review of the development of a green rate category.
• Provide a comparison of the proposed rates to other similar electric utilities.
• Provide a written report that documents the analyses undertaken, along with the findings, conclusions and recommendations of
the study.
• Provide effective public presentations of the study.
• Work closely with the District project team to maximize the value of the study to the District and its customers.
• Develop a rate model, user manual, and training for staff on the use of the rate model.
a
The methodology HDR uses for its electric rate studies rely on generally accepted methodologies within the electric utility industry.
To determine fair and equitable rates, a comprehensive rate study must be conducted. A comprehensive rate study is generally
comprised of three interrelated analyses; a revenue requirement analysis, a cost of service analysis, and the design of rates. Figure 1
provides a brief overview of the comprehensive electric rate study process.
The above framework or methodology will be utilized to analyze the District's rates. While Figure 1 provides an overview of the typical
components of a comprehensive rate study, an important aspect of this study is incorporating and tailoring those analytical elements
into an overall scope of services that will provide the work products being requested by the District.
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Revenue Requirement Analysis
1
Cost of Service Analysis
1
Rate Design Analysis
Compares the revenues to the expenses
of
the utility
to determine
the overall adjustment
to
rates.
Allocates the total revenue requirement to the various
customer classes ofservice in a"(air and equitable" manner.
Designs rates to yield the total revenue requirement and
meet the rate design goals and objectives o(the study.
'►.I3
Truckee Donner Public Utility District 01
Electric Cost of Service and Rate Study
Scope of Services
To provide the services being requested by the District, the following detailed scope of services has been developed.
Task 1-117roject Management
To provide the study in a timely manner, and within the stated budget, HDR will provide a monthly progress report and invoice which
discusses the progress of the study, identify any issues or concerns, and provide a status of the budget compared to the overall
project progress. The HDR Project Manager and District Project Manager will participate in monthly conference calls to discuss the
status of the study.
Expected District Staff Support for Task 1:
• Participate in monthly conference calls.
Deliverables as a Result of Task 1:
• Progress reports and invoices.
• Monthly conference calls with the District's Project Manager.
Task 2—Initial Project (Kick -Off) Meeting and Data Collection
The initial project (kick-off) meeting is used as a starting point in the project. The HDR project team and District staff will discuss the
overall goals and objectives for this project, while at the same time discussing any issues and concerns that the parties may have. It is
proposed that the initial project meeting be held via conference call for approximately 1 hour.
Prior to the initial kick-off meeting, HDR will provide the District with a written data request detailing the data and information
necessary to conduct the study. The data request can be discussed during the initial kick-off meeting. The data and information
requested for this study should be, for the most part, readily available information (e.g, financial, statistical, customer, etc.).
Expected District Staff Support for Task 2:
• Participate in a 1-hour kick-off meeting conference call.
• Provide the requested data as outlined in the written data request.
Deliverables as a Result of Task 2:
• Identification of objectives, issues and concerns.
Initial data request detailing the information necessary to complete the study.
Conference call meeting to get the study off to a positive start.
Task 3-0evenue Requirement Analysis
The development of the revenue requirement analysis is the first major analytical portion of the rate study process. This portion of the
study entails reviewing the various revenues and comparing them to the expenses of the District. This task considers the prudent and
proper funding for O&M and capital expenditures for the District, and determines the need for any revenue (rate) adjustments over
the time period reviewed. A more detailed discussion of the various steps involved in developing the District's revenue requirement is
provided below.
STEP 1 — SELECTION OF A TEST PERIOD. The first step in the development of the revenue requirement is the selection of a test
period. A test period refers to a time frame of reference for the accumulation of revenues, expenses and consumption data. In this
case, a five-year projected time period is proposed. By reviewing costs over this extended time frame, the District can determine if
any major rate impacts are on the horizon and potentially take steps today to help minimize future impacts (e.g., rate adjustment
transition, accumulation of capital reserves, etc.).
STEP 2 — METHOD OF ACCUMULATING COSTS. Once the "test period" has been determined, the next decision is to determine
the basis or method of accumulating costs. The "cash basis" approach is most commonly used by public utilities for determining and
setting their revenue requirement since this closely follows their budgeting process.
STEP 3 — ACCUMULATION OF REVENUES AND EXPENSES. The revenue requirement is composed of two major types of costs;
operational and capital expenses. The following discussion will provide an overview of the revenue requirement analysis.
Operating and Maintenance Expenses —The operational costs are generally projected from historical or budgeted costs, using
assumed escalation factors, and adjusted for any known changes in operations (e.g., additional personnel, growth/expansion,
change in wholesale power costs, etc.). The O&M expenses will be projected fora 5-year period based on current budget or actual
year end documents. HDR will work with the District to review the forecasted expenditures to develop a reasonable estimate of
future operating expenses.
Truckee Donner Public Utility District
Electric Cost of Service and Rate Study
Purchased Power — The development of the projected purchase power costs is a critical aspect of the analysis for many reasons.
First it represents one of the largest annual expenses for the District. HDR will work with District staff to develop the forecast of
purchased power based on current wholesale rates and the District's current projections. Future years purchased power will be
escalated based on projected wholesale rate increases.
Capital Expenses —Within this study, the starting point for projecting capital costs (expenditures) will be the capital improvement
plan, and other relevant capital planning, and capital budgeting documents. In the financial planning process, consideration
is given to maximizing the capital improvements (expenditures) for the system, while minimizing rates to customers. This is
accomplished in a variety of ways. However, the most important aspect of this discussion is that there are multiple methods of
financing capital expenditures, and it is through this process that rates can be minimized. HDR's general approach is to list the
capital projects by year, and determine the various outside funding sources for each of the projects. These outside funding sources
may be low -interest loans, grants, customer capital contributions, etc. The balance of projects not funded by the available sources
of funds must be financed from a combination of long-term debt and rates. It is the balancing of the use of long-term debt to
the impact upon rates, which is critical to the analysis. In summary, given a better understanding of the overall magnitude of the
needed capital projects, a final financing plan can be developed which meets the District's goals and objectives, while attempting
to minimize rates to the degree possible.
After development of the initial draft of the revenue requirement HDR will meet with the District project team to review the
assumptions used in the study to confirm or adjust the assumptions and estimates used within the study. Incorporation of District
comments will result in a final revenue requirement. In the course of conducting the revenue requirement HDR will review key
financial planning criteria (e.g., appropriate reserve fund balances, adequate rate funded capital, debt service coverage) and
recommend additional financial tests as necessary.
Expected District Staff Support for Task 3:
• Provide as needed assistance to explain the District's data and information for the development of the revenue requirement.
• Provide as needed additional data refinements or needs as determined during the development of the revenue requirement.
• Have the District's project team participate in half -day project meeting to review the draft revenue requirement analysis.
Deliverables as a Result of Task 3:
• A revenue requirement for afive-year period that considers the necessary operating and capital needs of the District.
• A capital financing plan within the revenue requirement analysis, utilizing the comprehensive plans or capital budgets of
the District.
• If needed, a rate transition plan to phase -in any needed adjustments over the five-year period.
• Recommendations regarding key financial indicators (debt service coverage, capital replacement levels, reserve ending balances,
etc.).
• A half -day project meeting at the District's office with the HDR project manager and technical lead to review the draft revenue
requirement analysis (combined with the Task 4 project meeting).
Task 4—Cost of Service Analysis
The revenue requirement developed in Task 3 will be allocated to the various customer classes of service using an average embedded
cost of service methodology. In simplified terms, a cost of service study equitably allocates the revenue requirement between the
various customer classes of service (e.g., domestic, small commercial, medium commercial, large commercial). A brief discussion of
the major steps associated with cost of service analysis is provided below.
STEP 1 — SELECTION OF TEST PERIOD. The first step of a cost of service is to select a time period for the allocation of costs. A cost
of service analysis typically reviews a one year time period, or the period over which rates will ultimately be set. In the District's case,
allocating the 2019 revenue requirement, for cost of service purposes, would appear to be appropriate. HDR and the District project
team can discus the appropriate time period during the initial project meeting.
STEP 2 — DETERMINATION OF CLASSES OF SERVICE. Development of the cost of service begins with determining the classes of
service that will be used for purposes of establishing cost allocations and rates. HDR will review the District's current rate classes
(schedules) and discuss with the District any recommended changes to the customers classes. Specifically the District has requested
the review of the consolidation of the primary and secondary residential rates. The process of establishing classes of service is to
group customers into homogeneous groups. That is, customers with similar power and/or facility requirements.
STEP 3 — FUNCTIONALIZATION AND CLASSIFICATION OF EXPENSES. The next step in the cost of service analysis is to
functionalize the data. Functionalization refers to the arrangement of cost data into its basic cost categories (e.g., generation (power
supply), transmission, distribution, etc.). Given functionalized costs, the costs are then classified to their various cost components.
Classification involves determining whether each specific cost or account item was incurred to meet a consumer's demand, energy, or
customer -related need. While the basic cost components noted above are the cornerstone to the analysis, they are by no means the
05
Truckee Donner Public Utility District �� 6
Electric Cost of Service and Rate Study
only cost components to be utilized. A thorough review of the various types of costs that the District incurs will be undertaken and
specific cost classifiers developed. Classification will be based upon generally accepted cost of service techniques for electric utilities.
STEP At — ALLOCATION OF EXPENSES. Once the classes of service have been determined, the process of developing allocation
factors is undertaken. In developing the allocation factors, HDR will develop factors that are fair and equitable to all customers, and
rely upon District, and District customer, specific data.
STEP 5 — SUMMARY OF THE COST OF SERVICE. Given the development of all the allocation factors, the final task allocates the
expenses to each class of service. From this process, a summary page of the cost of service study is provided. The summary page for
the cost of service study compares the difference between the current level of rate revenues received from each class of service, and
the allocated cost of service for each class.
The cost of service will also provide average unit costs, orcost-based rates, which are important to the development of final rate
designs. Average unit costs provide the District with an understanding of the cost/rate relationship between demand, energy and
customer related costs. Average unit costs provide a $/kW, it/kWh and $/customer/month average cost. In summary, these average
unit costs will provide "cost of service" based units that will be used as the starting point for the development of the final proposed
rates. It should be noted that the proposed cost of service is not an un-bundled analysis.
At the conclusion of the development of the draft cost of service analysis HDR will meet with the District project team to review the
results of the cost of service analysis, along with results of Tasks 3.
Expected District Staff Support for Task 4:
• Provide additional data, or data refinements, as determined during the development of the draft cost of service analysis.
• Participate in a half -day project meeting to review the results of the draft cost of service analysis.
Deliverables as a Result of Task 4:
• Review of the customer classes of service.
• An equitable allocation of the revenue requirement to the various classes of service.
• A summary of the average unit costs (cost -based rates) for the various customer classes of service.
• A review of the draft cost of service results with Department staff at a half day meeting (combined with the Task 3 project
meeting).
Task 5—Rate Design Analysis
A starting point for the rate design process is to gain an understanding of the rate design goals and objectives the District is striving
for in this study. These objectives may include ease of administration, simplicity, revenue stability, efficient use (conservation), etc.
Understanding the District's rate design objectives at the onset will assist HDR in the development of alternative rate designs.
In designing the rate options, the cost of service information and average unit cost information will be utilized as a starting point. As
a part of this task, the District's present rate designs will be reviewed to verify that they conform to contemporary rate -setting goals
and objectives. Up to two (2) rate designs will be developed for each class of service identified in the cost of service analysis. HDR
will review the rate design objectives of the District (e.g., revenue stability, conservation) and provide rate structure alternatives that
are designed to meet those objectives. For each rate design alternative developed, a bill comparison and graph will be provided that
shows a comparison between the present bill and the proposed bill at various levels of usage. Bill comparisons are useful in assessing
the potential impacts to a wide variety of customers.
At the conclusion of this Task, HDR will meet with the District project team to review the alternative rate designs to select the
preferred rate alternative to present for implementation.
Expected District Staff Support for Task 5:
• Discuss with H DR the District's rate design goals and objectives.
• Assist, as necessary, in the development of the rate structure alternatives and bill comparisons.
• Attend a two hour project meeting to review and discuss the rate structure alternatives.
• Selection of the preferred rate structure alternative.
Deliverables as a Result of Task 5:
• Up to two (2) rate structure alternatives for each customer class of service identified in the cost of service analysis.
• Bill comparisons for each of the rate structure alternative developed.
• A two hour project meeting at the District's offices to review and discuss the rate structure alternatives.
Truckee Donner Public Utility District
Electric Cost of Service and Rate Study
Task 6—Study Documentation
At the completion of the analysis HDR will provide the District with a written report detailing the development of the cost of service
and rate study. The report will review the development of the study methodology, key assumptions, recommendations, and detail
of the analyses completed for the District. Included within the report will be a Technical Appendix which will include the technical
analysis used to develop the proposed rates. The draft report will be provided to the District for review and comment in electronic
form. District comments and edits will be incorporated into the final report and provided to the District. Up to three (3) bound copies
of the final report will be provided to the District along with an electronic version.
Expected District Staff Support for Task 6:
• Review and comment on the draft rate study report.
Deliverables as a Result of Task 6:
• An electronic version of the draft rate study report.
• Up to three (3) bound copies, and one (1) electronic version, of the final rate study report.
Task 7—Public Presentations
As part of the cost of service and rate study HDR will participate in up to two (2) meetings with the District Board. The first meeting
will be a workshop setting to present the information to the Board and request policy input to finalize the study. The second meeting
will be the public hearing to present the final results of the study to the Board for implementation. HDR will provide the District with
the presentation information prior to the meeting for review.
Expected District Staff Support for Task 7:
• Review the draft presentation materials.
• Coordinate with HDR on the timing of the presentations.
Deliverables as a Result of Task 7:
• Up to two (2) public presentations of the rate study results and recommendations.
Task 8—Computer Model and Training
At the conclusion of the study, HDR will provide the District with the final cost of service and rate model. The rate model will be
developed in Microsoft Excel specifically around the District's budgeting and customer characteristics. HDR will provide a half -
day training on the use of the cost of service and rate model as well as a summary user manual to assist the District in future
model updates.
Expected District Staff Support for Task 8:
• Have key staff participate in ahalf-day of model training.
Deliverables as a Result of Task 8:
• Final cost of service and rate model.
• User manual discussing the approach to updating the model.
• Half -day training for District staff at the District's offices.
The above tasks conclude the proposed scope of services to develop the cost of service and rate study. If District staff requests
additional services, they will be provided on a time and material basis at current hourly rates. This proposed scope of services can be
modified to meet the specific needs of District.
07
Truckee Donner Public Utility District rNbL Mlbk
Electric Cost of Service and Rate Study
Provided below is a brief discussion of each of the project team members for District's analysis.
Shawn Koorn, Project Manager —Shawn will provide overall project management, review of the analyses, as well as provide
analytical support and guidance for the development of rate study. Shawn will also provide all public presentation to the District
Board. Shawn provided a similar role on the prior studies completed for the District by HDR.
Kevin Lorentzen, Senior Financial Analyst —Kevin will assist in the development of the analysis. Kevin assisted in the prior
residential electric rate structure review as well as prior water rate analyses.
Josiah Close, Financial Analyst —Josiah will develop the rate model for the District. Josiah has assisted utilities across the U.S. in the
development of utility rates and charges. Josiah previously assisted in water analyses completed for the District.
Kirk Dewey, Engineering Assistance —Kirk will provide assistance in the development of the cost of service and rate designs as well
as provide QA/QC on key elements of the study. Kirk is HDR's Power Market Services Director.
The District has developed a project time schedule for the study with a start date in July 2018 and a completion of the technical
analysis in September of 2018 and public presentations in October and December of 2018. Based on the outline provided by the
District the following time schedule has been developed.
2018 Electric Rate Study
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Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
7/1/2018 12/30/2018 Task 1 Project Management
7/15/2018 8/5/2018 Task 2 Kick -Off and Data Collection
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7/22/2018 8/19/2018 Task 3 Revenue Requirement Analysis
8/12/2018 9/9/2018 Task 4 Cost of Service Analysis t®
9/2/2018 9/23/2018 Task 5 Rate Design Analysis M*A I
9/30/2018 12/23/2018 Task 6 Study Documentation '-
Task 7 Public Presentations (2) i € 0 ! 13
7/22/2018 10/14/2018 Task 8 Computer Model and Training
As a note, this timeline is compressed given the technical analyses necessary to complete the study and develop proposed rates. HDR
will work with the District and make every attempt to meet the District's schedule. Key to meeting the schedule is the timely receipt
of the data, the quality of the data, and ability to schedule project meetings with the District team.
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Truckee Donner Public Utility District
Electric Cost of Service and Rate Study
6
Our proposed hourly rate schedule by job classification is provided below. These rates will be in effect through December 31, 2018.
Our proposed hourly rate schedule by job classification is provided below. These rates will be in effect through December 31, 2018.
HOURLY RATE SCHEDULE
Project Manager
$265/Hour
Senior Financial Analyst
$200/Hour
Financial Analyst
$125/Hour
QA/QC & Engineering Assistance
$250/Hour
Admin./Clerical
$130/Hour
The billing rates shown cover payroll cost,
employee benefits, and HDR overhead and profit.
Based on the hourly billing rates, and the previous scope of services, provided below is a summary of the estimated fees for the
services discussed above.
TASK
TOTAL
LABOR
Task 1 - Project Management
$2,310
Task 2 - Initial Project (Kick -Off) Meeting and Data Collection
11830
Task 3 - Revenue Requirement Analysis
71990
Task 4 - Cost of Service Analysis
11,380
Task 5 - Rate Design Analysis
61490
Task 6 - Study Documentation
41360
Task 7 - Public Presentations (2)
5,140
Task 8 - Computer Model and Training
21630
Grand Total Labor
$42,130
EXPENSES
Total Expenses (Travel, Printing, etc.)
5 655
GRAND TOTAL FEE ESTIMATE
$47,785
The above fee estimate is based upon the scope of services previously developed. Should the District request any additional out of
scope services under this contract, the out of scope services will be provided at the hourly billing rates stated above. HDR is willing
to negotiate a final fee based on a final scope of services. Portions of this proposal can be expanded or reduced in conformance with
scope adjustments and as mutually agreed upon in writing by the District and HDR.
Truckee Donner Public Utility District IML
Electric Cost of Service and Rate Study
Our Financial Services Group is led by nationally recognized experts in the area of utility cost of service and ratemaking. It is therefore
not surprising that HDR has attained a national reputation in the area of financial planning and rates arena and a more detailed
discussion will demonstrate why we can make this claim. Our qualifications center around six key areas. They are as follows:
Practical Work Experience within Utilities
HDR personnel have been involved in every facet of actual utility operations. Prior to consulting, many of our employees have spent
considerable time working for a utility or municipality. This understanding of the day-to-day workings of a utility is invaluable in
attempting to work with clients and manage projects in an efficient and cost effective manner. We understand the challenges of
limited time and budgets and, therefore, work with our clients to provide the most efficient and cost-effective solutions.
Breadth of Consulting Services Provided by the Project Team
HDR, by virtue of being amulti-disciplinary engineering and consulting firm has a number of individuals with highly specialized
expertise, such as financial planning and rates. While one of the areas that HDR does specialize in is financial planning, cost of
service, and rates, HDR does not lose sight of the overall need for good utility management and engineering practices. When
necessary, HDR can draw on the other areas of expertise that are contained in the firm. Some of these other areas of consulting
services include resource planning, environmental and civil engineering and design services. This diversity simply adds breadth of
knowledge and expertise to all of our projects. HDR has experts available in every area of utility operations and management.
Depth of Experience in Rate Related Issues/Projects
HDR personnel have performed hundreds of water, wastewater, electric, stormwater, solid waste and natural gas rate studies
throughout the U.S. and Canada. We have assisted numerous public municipal utilities and privately owned regulated utilities in
developing cost of service models, and in analyzing various cost allocation structures and frameworks. We have also successfully
conducted numerous time differentiated and seasonally differentiated rate studies. When needed, we provide expert witness
testimony services in both public utility commission hearings and litigation cases. By virtue of working with a wide variety of utilities
(large and small) and in a variety of locations, we have an intimate understanding of the trends and practices occurring in the utility
industry. Our experience and knowledge of the utility industry and current practices brings great creditability our analyses and
resulting recommendations. This diversity simply adds breadth of knowledge and expertise to all of our projects.
Teaching Experience I�at�a'�ur
As nationally recognized experts, HDR staff teaches a number of courses and workshops on the subjectRom lltv%, inrf tacu
of financial planning, revenue requirements, cost of service and rate design. Shawn Koorn, the proposed
project manager for the District's study, is co -instructor for the American Water Works Association -
(AW WA) Financial Management Seminar. This 3-day seminar is dedicated to the issues of the theory
and methodologies associated with utility financial planning, cost of service and rates. In addition, HDR _
staff have been active in developing publications and manuals in this area of expertise. HDR personnel
are contributing authors to the AW WA M1 Manual, Principles of Water Rates, Fees and Charges, the M34 -
Manual, Water Rate Structures and Pricing, and the AW WA M54 Manual, Developing Rates for Small Systems. W%A
Presentation/Communication Skills
Ultimately, the most important task of any financial planning or rate study is presenting the results of the study to the policymaker
and the public. Our project team excels in this area. We believe this is based upon our three -step approach to presentations. First,
at the start of the study, we attempt to educate the policymaker about the process and issues to be reviewed during the study.
Next, we try to take the complex analysis and "boil it down" to a few key issues. Highlighting the decisions required and keeping the
policymakers focused on the key issues, and policy decisions needed, is important. Finally, we always present a number of options
to the policymaker, and most importantly, we provide reasonable and feasible recommendations for adoption. Our ability to explain
complex concepts in a simple and easily understood manner is demonstrated each time we are asked to teach a workshop or seminar
on financial planning and rates, such as the AWWA Financial Management Seminar.
10
Truckee Donner Public Utility District
Electric Cost of Service and Rate Study
Rate/Modeling Expertise
The ability to communicate information in a clear and understandable manner relates directly
back to the development of a rate model. All rate models developed for our clients in ExcelT" are
built from the "ground up" and built specifically for the client using their specific budget format,
customer classes of service, plant assets, etc. In developing models this way, HDR is providing
the most customized model possible; no two rate studies should ever look "identical" given all the
unique circumstances and situations with each utility. Given that, HDR's focus is on models that
are technically sophisticated, yet simple to understand, follow and update. While dashboards and
graphs are certainly an important part of the modeling process, and the most visible part of any
model, the most critical portion of the model is the technical analysis and how well it is tailored to
be reflective of the client's system and needs. HDR's models have been well received by our clients
and we have successfully trained a number of clients to update their rate model (analysis) with
little or no outside assistance. As can be seen, the combination of our knowledge and experience
make us highly qualified in the area of financial planning and rates.
A brief sampling of projects and clients that may be similar to the District's needs is provided below. While no two clients or projects
are ever identical, this abbreviated list of projects and clients provides evidence for our claim of technical and professional expertise in
this area.
Electric and Water Rate Studies —HDR has provided financial services to the Town since 2006. _ Town of Estes Parlc
Initially a 10-year financial projection was developed for the water utility, to determine the impact 170 MacGregor Avenue
of facilities improvements on rates. Three years later a comprehensive water rate study was Estes Park, CO 80517
completed to determine cost -based and equitable rates. A rate transition plan was developed to Mr. Reuben Bergsten
each full funding with the least impact to customers. Capital funding from rates was gradually Utilities Director
increased to aid in meeting debt service coverage and for funding replacement projects. Tap fees (970) 577-3588
and water rights fees were also updated. HDR also completed comprehensive electric rate studies
for the town in 2009 and 2015. Each of the electric rate studies reviewed the customers classes of
service and rate structures. During the 2015 study the overall objective was to increase the revenue stability. To accomplish this, HDR
worked with Town staff to revise the rate structure energy, demand, and customer charges. The results of each study were presented
to the Town Council for review and approval.
Electric and Water Rate Study —Over the last twenty years, HDR has worked extensively with
Hope Water & Light on its water and electric rates. In 2014, HDR is completed a comprehensive
water and electric rate study update, which included an update to the power cost adjustment (PCA)
surcharge. Prior to that, our assistance first occurred in the early 1990's there were significant
subsidies occurring between the utilities, and the rates that were in effect were not cost -based. HDR
reviewed the water and electric rates and developed an approach to end the subsidies between the
tilities while at the same time minimizin the im act of the changes to customers We provided
105 North Elm Street
Hope, Arkansas 71801
Ms. Charlotte Bradley
Financial Manager
(870) 777-3000
ug P
presentations to H WL's Board of Director's on these changes and they were adopted by the Board. Since then, we have assisted
HWL in establishinnew wholesale water rates for customers, and in evaluating the sale of water to a new large industrial user. Thi
g s
included the negotiation of a long-term water rate for the customer.
Water Rate Studies and Residential Electric Rate Restructuring — In 2009, HDR conducted a Truckee Donner fr 4W?
comprehensive water rate study for the District. At that time, the major focus of the study was 11570 Donner Pass Road
the establishment of metered rates, as the District was metering all water customers that met the Truckee, CA 96161
financial requirements of the District's water utility. Since that time, HDR has assisted in water rate Mr. Michael Holly
updates in 2013 and 2015. In addition, HDR has assisted the District in the review of miscellaneous General Manager
water related fees and charges. In addition to the water rate and fee assistance, HDR assisted the (530) 582-3916
Board in the review of alternative residential electric rate structures. HDR developed alternatives for
the Board to consider that maintained the target revenue. HDR has worked extensively with the District staff and Board and presented
at multiple public hearings for the District.
i.
Attached as Appendix B to this proposal is a list of HDR's cost of service and rate study clients. This provides the District with a better
understanding of our depth of experience.
11
I IF
EDUCATION
B.S., Business Administration
Central Washington
University
B.S., Economics,
Central Washington
University
PROFESSIONAL
ASSOCIATION
American Water Works
Association, Member
American Public Power
Association/Northwest,
Member
EXPERTISE
Utility Rates/Cost of Service
Financial Planning
Capital Planning
Cost -Benefit Analyses
Shawn Koorn is an Associate Vice President and Professional Associate
with HDR. He provides financial planning, cost -benefit analysis and
economic review towards development of rate and cost of service studies for
electric, wastewater, water, stormwater, and solid waste, utilities. This
information is communicated utilizing technical abilities and presentation
skills in a clear and concise manner.
Shawn's experience involves all analytical aspects of the utility financial
planning and rate setting process. These include the development of
revenue requirements, cost of service, and rate design studies for clients. He
is highly capable and understands the finer technical issues involved with
each project, as well as the broader economic issues that today's public and
private utilities are facing.
Shawn has been involved in some unique and challenging projects. Most
recently, Shawn has recently completed several electric, water, sewer, and
solid waste rate studies. Shawn has assisted utilities in the development of
electric cost of service rates to help determine the impact of BPA's tiered
rate methodology. He has also extensive experience in establishing
wholesale and retail cost allocation and rates. With retail and wholesale
customers, it is critical that the costs be allocated such that the wholesale
customers do not receive any costs associated with distribution related
facilities. Shawn has also developed unbundled analyses for electric and
water utilities to determine the cost of providing service. Shawn has worked
with a number of stormwater utilities and has established rates based upon
lot size, impervious area and runoff coefficients (development density).
Shawn has also developed a number of conservation -based water rate
structures including water budget rate structures.
YEARS WITH HDR Shawn also has extensive experience with regulatory filings before public
18 Years service commissions. He has recently developed testimony to support water
and sewer rate studies before two different public service commissions. His
experience and knowledge of "generally accepted" rate setting techniques
allows him to develop excellent testimony to support his client's position.
Shawn is a co -instructor for the AWWA Financial Management Seminar.
This three day seminar discusses the theories and methodologies used to
establish cost -based rates. Shawn has also presented numerous papers on
financial planning and rate setting topics for utilities. Shawn is also a
contributing author for the AWWA M54 Manual, Developing Rates for Small
Systems.
EDUCATION
B.S., Business, Finance,
University of Idaho
REGISTRATIONS
American Water Works
Association (AWWA)
Washington Financial
Officers Association (WFOA),
Education Committee
EXPERTISE
Utility Rates/Cost of Service
Financial Planning
Capital Planning
Cost -Benefit Analyses
Forecasting
Budgeting
Legislative Analysis
HDR Tenure
8 Years
Kevin Lorentzen has more than 13 years of experience municipal finance for
local government and as a consultant to small and large municipalities.
As senior project manager and financial analyst for HDR, Kevin has
extensive experience in cost of service studies, rate design, capital and
financial planning, funding, and policy analysis. Throughout his career, he
has provided several presentations in an organized and effective style to
colleagues, key decision makers, and elected officials. His broad knowledge
and experience allows him to provide quality, comprehensive services to
utilities.
While at the City of Bellevue, Kevin was the Fiscal Long -Range Planning
Administrator responsible for the overall fiscal health of the City. His
responsibilities included forecasting a diverse revenue stream over $200
miIlion, providing technical support for ratings agency presentation resulting
in the reaffirmation of AAA bond rating, economic analysis support for the
planning department for master planning purposes, worked with city
departments including Utilities providing general guidance in economics and
forecasting.
Kevin has taught classes at both Government Finance Officers Association
(GFOA) and Washington Finance Officers Association (WFOA). In 2015
Kevin co -taught the two-day GFOA Forecasting course and a financial
modeling course at WFOA.
Kevin has been developing complex financial, rate and cost benefit analysis
models for a number of clients. Some clients include large regional water
utilities in Canada, the City of Bellevue, Jordan Valley Water Conservation
District, and the City of Norfolk, VA. For these utilities, and numerous smaller
utilities, Kevin has developed easy to use spreadsheet models that he has
trained clients to use.
Kevin's experience also includes system valuations, bond feasibility studies
and detailed cost benefits studies for engineering, System Development
Charge analysis, and planning studies.
EDUCATION
B.S. Finance,
Oregon State University
PROFESSIONAL
MEMBERSHIPS
American Water Works
Association, Member
Washington Finance
Officers Association
EXPERTISE
Utility Financial Planning
Cost of Service
System Development
Charges/Impact Fees
YEARS WITH HDR
5 Years
Josiah Close, a Financial Analyst with HDR, specializes in the area of utility
financial planning, cost of service, rate setting, and system development
charges. Josiah is highly experienced in developing complex financial
planning and utility rate studies. He is very proficient in financial modeling
and in the analysis of complex data sets and information.
Prior to joining HDR, Josiah worked as a fiscal analyst for the State of
Washington Department of Social and Health Services. His experience with
the State further developed his financial modeling skills and placed a high
level of importance on attention to detail and accuracy. His work with the
State enhanced his Excel TM spreadsheet skills, and he is a highly skilled
Excel TM modeler and user.
Since joining HDR, Josiah has been responsible for developing and updating
a variety of spreadsheet analyses to support revenue requirement, cost of
service, and rate design studies. Josiah works on complex studies, including
a comprehensive water rate study, which contains a wholesale water rate
component. This comprehensive study includes the development of revenue
requirements, cost of service, and rate design.
Currently, Josiah is working with a California utility on the evaluation of
volumetric sewer rates. In performing this evaluation, he is working with
different databases of information. He recently provided a similar study in
which the drought in California had impacted the water consumption and
wastewater flow estimates. He worked with precipitation and water
consumption data to determine a reasonable estimate of wastewater flows.
Since joining HDR, Josiah has gained experience in working with water,
wastewater, and solid waste utilities. He has worked with and reviewed
budget and asset record documents to support the technical analyses he
has been conducting.
EDUCATION
Bachelor of Science,
Electrical Engineering,
North Dakota State
University, 1988
Associate of Arts,
Engineering Technology,
Fergus Falls Community
College, 1985
REGISTRATIONS
Professional Engineer -
Electrical, North Dakota,
United States, No, PE-3477
Professional Engineer -
Electrical, South Dakota,
United States, No, 9087
PROFESSIONAL
MEMBERSHIPS
Institute of Electrical and
Electronics Engineers
(IEEE), Senior Member
Mr. Dewey has over 30 years of experience designing substations, transmission
lines, and overhead and underground distribution lines. He also has extensive
experience in electrical system planning studies, such as long range master plans,
short-term construction work plans, and protective coordination/sectionaling studies.
He has also experince in cost of service and electrical rate studies, protective relaying
stuides, construction management, power quality analyses, SCADA integration, and
system mapping projects.
Currently, Mr. Dewey is the Distribution Practice Leader for HDR out of the Bismarck,
North Dakota office where he and his team are responsible for a variety of power
related projects and strategic planning for HDR's distribution program.
Bakken Area Program Management
Mr. Dewey served as the client manager for two cooperatives that are in the heart of
the Bakken oil shale development area in northwest North Dakota, Mountrail-Williams
Electric Cooperative and McKenzie Electric Cooperative. Combined, these two
cooperatives system peak load has grown from 90 MW in 2007 to nearly 800 MW in
2016. During this enormous growth period, Mr. Dewey helped guide the HDR teams
that planned, designed, and managed construction of 500 miles of 115 kV
transmission line, 80 substations, and 2500 miles of overhead and underground
distribution line that were required to serve the growth. He was instrumental in
establishing new design standards for their larger transmission lines, substations and
distribution lines. Substation design changed drastically during this time from simple
rural tap subs to ring -bus and breaker -and -a -half designs with multiple large
transformers. Distribution overhead and underground line designs were updated to
accommodate large conductor 25 kV 600-amp circuits necessary to service large
commercial, industrial and residential subdivisions.
Transmission and Distribution Line Design
Institute of Electrical and Over the past 29 years, Mr. Dewey has been involved in all aspects of several
Electronics Engineers overhead and underground 115, 69, and 41.6 kV transmission projects for a variety of
(IEEE), Power Engineering clients in North and South Dakota. He has also planned for the need and then
Society, Member designed and managed construction for countless overhead and underground 4 to 25
kV distribution line projects for a variety of clients. His distribution line experience
includes design and specification development for new industrial and subdivision
layouts, pad -mount switchgear requirements, cable and duct bank sizing, cable
pulling analyses, capacitor bank sizing, protective device settings, foundation design
and system grounding studies.
Substation Projects
Mr. Dewey has served as project manager for several industrial, urban, and rural
distribution substations with various bus type arrangements depending on location
and need. Theses substation were typically between 5 and 50 MVA capacity with up
to 115 kV high -side voltages and 2.4 to 25 kV low -side voltages. Two recent projects
required medium voltage duct bank design for exiting feeders involving multi -
conductor runs of cable per phase to serve 15 and 30 MW gas plant compressor
loads at 13.8 kV.
KIRK DEWEY F)
Cost of Service/Rate Analysis Studies
Mr. Dewey has completed several electrical Cost of Service and Rate Analysis
studies for rural electric cooperatives and municipalities to review the functional cost
for providing electrical services to various rate classifications and recommend rate
structures that generate required sufficient revenue to meet the utilities operation
needs.
Electrical Studies, Load Flow and Fault Current
Numerous electrical load flow and fault current studies have been completed for both
urban and rural distribution systems. These studies typically involved modeling the
existing distribution system, assigning appropriate load to each segment of line, and
documenting final load flow and fault current results. Urban system studies have
been completed for municipalities like Valley City Public Works and New Ulm Public
Utilities, as well as for electric cooperatives that serve growing urban load centers,
including Verendrye Electric Cooperative (Minot, ND), Capital Electric Cooperative
(Bismarck, ND) and Mountrail-Williams Electric Cooperative (Williston, ND). Rural
system studies have been completed for numerous electric cooperatives, including
Burke -Divide, KEM, McKenzie, McLean, Mor-Gran-Sou, Slope, and West Central
Electric Cooperative. These studies sometimes included analyzing the impact of
starting large motors on the distribution system and how to efficiently serve industrial
plants and oil field development areas.
Protective Device Coordination Studies
System coordination studies have been completed for electrical systems including
New Ulm Public Utilities, Valley City Public Works and many of the electric
cooperatives in North and South Dakota. In these studies, protective devices were
analyzed to insure they coordinated and that each device was rated to handle
available fault and load current, while detecting down -line faults with in its zone of
protection.
System Planning
Numerous long range master plans and short-term construction work plans have
been completed for various electric utilities. These projects involved analyzing how
the existing system handled present and projected load, based upon specific design
criteria. Then a plan was developed documenting what system improvements were
needed at specific times to insure the electrical system would reliably serve the
projected load. Long Range Master Plans have recently been completed for several
electric cooperatives experience tremendous growth due to oil and gas related
development within their service territories. These cooperatives include Mountrail-
Williams, Burke -Divide, McKenzie and Slope Electric Cooperative. In addition, long
range plans have been completed recently for Verendrye and Capital Electric
Cooperative, both of whom serve high growth urban areas. Short-range plans that
cover more specific and detailed construction plans for the upcoming two to four
years have been completed for all of the aforementioned electrical cooperatives.
0
Y , y
Truckee Donner Public Utility District IMN
Electric Cost of Service and Rate Study
ether Public Utility, Municipal and Co -up Clients
PARTIAL CU ENT UST OF UIII LILT FIfdANCIAL PLAIJNI NG AND RATE/FEE STUDI ES
HDR has worked extensively and srxcessfully with utilities
across the U.S. and Canada an water, sewer and stormwater
rate and capdty fee studies. The following is a partial list of
our clients and the services provided
Rate52udie5fFlndnaa? PIa�S
C3p3r3tyFee
StLd
e;
Water Sewer Electdc Stonnwater
VJMzr Sewer
St mv,at=r
AldarneaodWaterD�strct[Wa) e;
AaxhorageMterand Wastewater utlifies(AK) C:
AlpineSpr;ngsCountyWaterDtnSVCtICA) 4 C
City of Anacortes (WA) •
city of Austin (TX) t;
City of Bellewe [WA) Q
City of Bel moat (CA)
City of Bentonvi to (AR) a
City of Bi g B ear take DW P (CA) •
Big Bear Area Reg"a na i Wastewater Autho rty (CA) e
Big Bend E'edecCooperative (WA)
City of Bou lde r (CC) •
JtyofBozemanIMT) a •
City of Brar;son [MO) f •
City of Ere merto n (WA) • •
Broad Creek Pub:icService Ustri,ct [K) f •
City of canon C ity (CO) • •
Chelan County PUD (WA) • •
Chesterfeldcountyutlities(VA) a • •
CitycfCheyenne(WY) f • • •
Clarksvi'e Lghtand Water(AR) • f
City of cmurd'A'ene (ID) ! f
conaay Corporation (AR) • •
City of Corpus Cristi ('IX) • •
Co Wl t z Cou my PU D (WA) • •
City of Decatur( IL) •
Des wo nes Waterworks (IA) f
Denver Water [CC) • i
DubF,nSan Ramon SerYces District (CA) f • • •
East Bay MU Rep al Ltd IityINStr t (CA) •
El Dorado Irrigation District f •
City ofEjertsburg(WA) • f •
City ofEkCityICK) f •
EPCORWater Services (City ofEdmonton,AB) •
City of Ed Monds ( WA) •
Truckee Donner Public Utility District IJ
Electric Cost of Service and Rate Study
RateStudiesJPinandalPla�ns Capaci��r=_ Studies
Water Sewer Electric Stomtwater Water __fiver Stormwater
City of Edmonton JAB) t'
Eugene Water and E`ectric (OR)
City of Everett(WA)
City of Fayetteu Ile (AR) •
City of Fo:som(CA) • tpc-
City of Foxboro( MA) •
City of Fresno i
City of G"tiette (WY) i
GoldentieartUtlities(AK) • !
City of Harm. ton (MT)
Hanover County Dept. of Pub! c unities (VA) • •
City of V:"Isboro (OR) •
Hope Water and light [AR) • •
City of Iowa Cty(LA) • •
fordanva"eyWaterCorservancyDistri<t (UT) i
Kaupuletu water company [HI) •
City of Ka spoil (hfr) ! !
City of Ken nely'i ck(WA) i •
Las Gai; in m Va-i ey Sanitary District (CA) •
City of On Coln [NE) i •
City of Logan( UT) •
Marshal town Water Works [IA) •
City of WNfrknvi1'e (OR) !
MedfardWater Cornrnission [OR) •
City of Medford Regional W3stFw3ter [OR) !
City of Mesa [AZ) !
Mesa Consol'dated Water Dsirct (CA) •
Minneapol'sWater Worlu (MN) •
City of Mount'akeTerrace (WA) • •
Monroe County W3terAuthority(NY) i
N atb n a l P ar k servi ce [D.C_) •
Nevada Irrigation District (CA) i
Northstar cSD (CA) •
Northwest Arkansas Con_se rvat io n Authority (AR)
City of No rfo! k (VA) •
CityofcekHarbor(WA) ! • •
Olympic Vi_w Waterand sewer DsteCt (WA) • f ! t
OtayWater Cistr:ct • • !
City of Pa'm9r [AK) i •
Passaic VaI ey WaterComm sfion IN!) •
Padre Dam Ntril(fpal WaterDI, strict (CA) i !
City of Pasco (WA) • • •
City of Port Angeles (VJA) • • i i •
city of Porto! a ( CA) i •
Port) and Water a ure au •
City of Puya sl up (WA) • • ! ! ! !
Ranch o Mur etta CSD [CA) •
CityofREAdley[CA) 0 0
Truckee Donner Public Utility Disfric[ �� ��
Electric Cost of Service al7d Rate Study
Rat=_ Stud ies/Fi na no a' F ans
Ca F a a ty � e Studi e=
Water
Samr
CCrtfiC Storinwater
Water Saw=.r Stormwatsr
Ro. rs Water Uti 1 Itle s (AR)
•
City of Richland (WA)
•
Sacramento 5uburbanWater Distict(CA)
•
City of 5a i nt John (New Brunswick)
•
City of Sand point ( ID)
•
•
City of San Luis Obispo (CA)
•
•
City of Sa nt a Cr uz (CA)
•
City of seaTac (WA)
513gt Cou my PUD (WA)
•
•
Sourt h Tah oe PU D I CA)
•
i
City of Stockton (CA)
i
•
SweetwaterAuthority (CA)
!
swkwater(Saskatchewan)
•
Seattle P ubi k uV17ties
•
City of 5,OUX F3 1.3 (SD)
•
SoosCreekWaterand Seri%er"fi.Ct[WA)
•
•
City of Spokane (WA)
•
•
i+
City of St flwater (CHIC)
•
Taco ma POASr (WA)
•
Tacoma Water (WA)
•
R
Tahoe City PUD(CA)
i
•
s
Tua-atn Valley Water Distract (OR)
•
i
Truckee Dor er PUD ICA)
i
UtiPtySerVicesofAlaska (AK)
•
•
City of MI!a WaI la (WA)
•
City of WasiIaIAK)
i
City of Westiordan (UT)
•
Westsound utility Vistrict(WA)
!
•
City ofWhtefish(MT)
•
t
Vi:iage of Winnetka (IL)
•
•
City of Wood'and (CA)
•
•
i
•
WoodinVi:`eWater Dstrct(WA)
•
•
City of Wrangel (AK)
•
i
•
21