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HomeMy WebLinkAboutAttachment 1 - Proposed Electric AMI Opt-Out ProgramTruckee Donner Public Utility District AMI Opt-Out Cost Analysis 1 Technical Memorandum To: Joe Horvath, Truckee Donner PUD From: Kevin Lorentzen, HDR Date: May 8, 2019 Subject: Electric Meter Opt-Out Program Costs 1.0 Purpose Advanced Metering Infrastructure (AMI) is a system that connects individual customer meters to the utility’s enterprise software so that the utility can monitor electrical usage real time, better manage electrical resources, and more efficiently detect and find electrical outages. AMI also provides the utility the ability to remotely read customer meters for billing purposes, without having to drive by in a vehicle, which reduces meter reading costs and provides environmental benefits. AMI meters emit radio frequency (RF) to create a mesh network that enables data to be transmitted to the utility. Truckee Donner Public Utility District (District) has been in the process of installing AMI meters since April, 2018 with completion scheduled for the end of 2019. Recently some customers have expressed concern to the District with possible health impacts of the radio frequency (RF) that AMI meters transmit and receive. This document does not address if an AMI meter does or does not have health impacts or other purported deleterious customer impacts. This memorandum compiles costs required to serve the new AMI Opt-Out customers since their electric usage must be obtained and recorded manually by District personnel. These identified costs for meter reading are then used in a cost of service framework establishing equitable rates that cover the costs for the Opt-Out class to ensure that other classes of service do not subsidize the Opt-Out class. 2.0 Estimated Costs The key advantage for implementing AMI is to efficiently conduct tasks that had previously been more time consuming and or labor intensive. Manual meter reading is inefficient, and prone to reading errors. This is particularly true for the District’s service area considering the large accumulations of snow fall which can make reading meters challenging or even dangerous. In addition to the labor hours for manual meter reading, the District incurs vehicle operating & maintenance costs and increased risk from vehicle accidents. Adding this class of service is expected to result in additional customer service and billing costs. Meter reading costs were estimated with assumptions involving multiple variables including service areas, factoring in reading time, travel time, additional time for inclement weather, and transportation costs. Established meter reading costs were first developed on a monthly basis Attachement 1 Truckee Donner Public Utility District - AMI Opt-Out Meter Analysis 2 and then multiplied by 12 consistent with the District’s practice of monthly reads. The estimated meter reading costs assumed an average of 39 minutes for roundtrip travel to read one meter with an additional 4 minutes added for each meter read in the same neighborhood. The calculated time is then multiplied by reading costs of $111.38 per hour which includes labor, benefits, and overhead costs. An important part of the meter reading costs estimate is that there is a recognition of cost savings if more than one meter is read in the same neighborhood. Due to the same neighborhood factor the overall costs per read falls as more customer meters are read per neighborhood. Assuming an even distribution of Opt-Out customers the range of per customer costs range from $65/month for 10 customers to $40/month for 100 customers. The AMI system is largely automated and manual reads required additional time to process bills due to the need for manual processing. As a result customer service personnel spending additional time to process and produce Opt-Out monthly bills. The fully burdened cost per hour of the billing supervisor is $90.64 per hour. Estimating 5 minutes per bill, Opt-Out customers incur additional costs of approximately $7.60 per bill per customer. Again these costs are specifically attributable to the Opt-Out customers and should be assigned to them alone. 3.0 Cost of Service Analysis The reason cost of service studies are conducted is to establish fair and equitable rates and charges. It would be impossible to establish rates and charges for each individual customer so customers are generally grouped in homogenous customer groups with unique customer characteristics so that to each customer the rates and charges reflect actual costs as accurately as possible. As demonstrated in the previous section of this memorandum, Opt-Out customers are unique since manual meter reading costs are far more time consuming and costly than other customers with AMI meters. Customers electing to opt-out generate a higher cost of service. A separate customer class was created to protect non Opt-Out customers from any cost shift impacts. A mechanism within the cost of service framework to deal with costs that benefit only one particular customer is the process of Direct Assignment of costs. Opt-Out customer were assumed to be an average residential customers due to the lack of information related to specific customer characteristics on which a costs of service is based. It is estimated that no more than 0.5% of District customers (65) would elect to opt-out. These customers were subtracted from the residential customer class for the cost of service analysis. The results of the cost of service study show a need for an increase of monthly charges of about $50 is necessary to recover the additional costs to service the Opt-Out customer class. The additional costs to serve Opt-Out customers varies by customer, not electrical usage, which is why the additional costs to service Opt-Out customers impacts the customer charge and not the Energy charge. Table 1 shows the difference between the permanent Residential rate and the Opt-Out customer class and the impact to the customer charge. It is advisable to list the difference as a separate opt-out charge line item for customer billing purposes. Truckee Donner Public Utility District - AMI Opt-Out Meter Analysis 3 Table 1 Permanent Residents Rate Opt-Out Permanent Rate Difference Between Opt-Out and non-Opt-Out Customer Charge $/Month $16.18 $66.34 $50.16 Energy Charge $/kWh $0.132 $0.132 $0.000 4.0 Initial Opt-Out Setup and Exit Costs As mentioned previously, there are additional costs the District will incur that are associated with setting up customers with Non-AMI meters as well as customers exiting the Opt-Out customer class. It is advisable that these costs be recovered by the customer responsible. This is similar to the type of charge as a regular installation charge where the charge is intended to recover the labor and materials to install the average meter. To establish these fees average costs are estimated since it is unrealistic to charge the customer the actual cost. The District anticipates the need for installation of a standard digital meter without a radio module for Opt-Out customers. Table 2 provides the estimated costs to install a standard digital meter. Table 2 Standard Opt-Out Installation Opt-Out Exit Charge Account Setup/Exit Costs $37.77 $37.77 Meter Installation Costs 83.54 83.54 Meter Costs 35.72 0.00 Total Costs $157.03 $122.31 5.0 Conclusions The fundamentals of rate making prescribe that the cost of a commodity should equal the cost of its production. The costs of service analysis is the process of setting rates among customer classes at a level that reflects the equitable costs to provide that service. There is a significant impact to the overall cost for customers who choose to Opt-Out of the AMI meter program. These costs are caused by the customers who Opt-Out and the additional costs should be borne by those customers through increased charges or fees as provided in this memo. An important consideration is that the analysis is based on best estimates available at the time of the writing of this technical memorandum. The District should revisit the costs and the resulting rates in the future so that they can be adjusted to reflect actual costs.