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Home My WebLink About9 Attachment 1 COSA Overview and ResultsPRESENTED BY EES CONSULTING COST OF SERVICE OVERVIEW AND DRAFT RESULTS Presented by Amber Gschwend, Managing Director EES Consulting November 3, 2021 E E S C O N S U L T I N G a GDS Associates Company COST OF SERVICE COST OF SERVICE OVERVIEW DRAFT COSA ASSUMPTIONS AND RESULTS RENEWABLE RATE E E S C O N S U L T I N G a GDS Associates Company OVERVIEW OF UTILITY PLANNING PROCESS 3 Revenue Requirement Rate Design Cost of Service Customer/Load Actual/Forecast O&M Capital Budget Financial Planning E E S C O N S U L T I N G a GDS Associates Company COST OF SERVICE/RATE DESIGN STEPS Establish management goals and objectives Select time period(s) for study Develop revenue requirements –Retail rate revenues at present rates –Revenue requirement (expenses) Develop cost of service analysis –Load and customer data –Functionalize –Classify –Allocate Design rates 4 Step 1 - Aggregate Revenue Requirement (How much?) Step 2 - Perform Cost of Service Study (Who should pay?) Step 3 - Design Rates (How to collect?) Step 4 - Implement Rates E E S C O N S U L T I N G a GDS Associates Company WHY COST OF SERVICE? Generally Accepted as Fair and Equitable Avoids Interclass Subsidies Revenue is Aligned with Costs Can Provide Accurate Price Signals Proposition 26 5 E E S C O N S U L T I N G a GDS Associates Company TYPES OF COST OF SERVICE STUDIES Average Embedded Cost of Service –Cost basis –Rate base equals historic costs (accounting basis) –Revenue requirement equals actual or forecast annual cost –Tied to one specific test year (historic or forecast) –Results –Cost of service per customer class by cost component –Unit costs per cost component –Pros and cons –Reflects costs in the test year (historic or future) –Relatively simple to perform and explain –Widely used –May not reflect significant changes –May not send right price signals 6 E E S C O N S U L T I N G a GDS Associates Company TYPES OF COST OF SERVICE STUDIES (CONT’D) Marginal (Incremental) Cost of Service –Cost basis equals replacement/market price –Cost to install new poles, wires, etc. –Market-based power supply costs –Results in costs different than revenue requirements –Need to adjust to get appropriate rate level –May not reflect share of costs when incremental costs equals zero (i.e., no share of billing system since no added cost) –May be appropriate for new types of service (i.e., home security system) –Pros and cons –More accurate price signals –Good for power supply when there are significant cost fluctuations –Costs may change quicker than rates 7 E E S C O N S U L T I N G a GDS Associates Company DEVELOPING A COSA –STEP-BY-STEP APPROACH Collect Load and Customer Data –Number of customers –Kilowatt-hour sales / kilowatt sales –Customer service specifications Functionalize Costs (Revenue Requirement) Classify Costs to Cost Components –Customer-related / demand-related / energy-related Calculate Allocation Factors –Number of customers in class/total customers –Number of kWh in class/total kWh –Number of kW in class/total kW 8 E E S C O N S U L T I N G a GDS Associates Company COST OF SERVICE ANALYSIS –ALLOCATION BUCKETS 9 9 E E S C O N S U L T I N G a GDS Associates Company DISTRIBUTION SYSTEM CLASSIFICATION: MINIMUM SYSTEM OR 100% DEMAND Minimum System –Distribution is in place due to the fact that there are customers using the system regardless of load size –50% Customer, 50% Demand –Will place more costs on classes with larger number of customers (Residential) 100% Demand –Distribution system costs allocated based on customer class share of total system demand –Will place more costs on larger consumers (Large General Service) 10 E E S C O N S U L T I N G a GDS Associates Company DEVELOP A COSA –STEP-BY-STEP APPROACH (CONT’D) Allocate Assets and Expenses to Each Class on the Basis of Cost Causation Determine Revenue Excess or Shortfall by Class Calculate Unit Costs by Class of Service –$/kW –¢/kWh –$/customer/month Calculate Unbundled Cost by Class of Service –Production –Transmission –Distribution 11 E E S C O N S U L T I N G a GDS Associates Company TRADITIONAL RATE SETTING PRINCIPLES 12 Rates Should –Meet revenue requirement –Be cost-based –Be “just, reasonable and not unduly discriminatory or preferential” – “fair and equitable” –Be easy to understand and administer –Conform to generally accepted rate setting techniques –Provide revenue stability to the utility and rate stability to the customer E E S C O N S U L T I N G a GDS Associates Company KEY TO RATE DESIGN IS ALIGNING REVENUES AND RELATED COSTS 13 Customer 13% Demand 7% Energy 80% Retail Revenues Customer 14% Demand 44% Energy 42% Expenses: 100% Demand E E S C O N S U L T I N G a GDS Associates Company TRUCKEE-DONNER PUD DRAFT ELECTRIC COSA RESULTS 14 E E S C O N S U L T I N G a GDS Associates Company REVENUE REQUIREMENT CY 2022 Revenues Present Retail Rate Revenues $28,234,941 Other Income 1,919,840 Total Revenues $30,154,781 Expenses Power Supply $13,659,000 Distribution $6,782,308 Customer Accounts and Services $1,955,730 Administration and General $4,876,340 Rate Funded Capital $10,397,910 Debt Service $476,290 Transfer To (From)Reserves ($6,150,187) Total Expenses $31,997,664 Surplus (Deficiency)in Funds ($1,842,882) Required Retail Rate Increase (Decrease)6.5% Power Supply 36% Distribution 18% Customer Accounts and Services 5% Administration and General 13% Rate Funded Capital 27% Debt Service 1% DRAFT E E S C O N S U L T I N G a GDS Associates Company FORECAST REVENUE REQUIREMENT 2022 2023 2024 2025 Retail Rate Revenue at Current Rates $28,234,941 $28,376,116 $28,659,877 $28,946,476 Forecast Revenue Requirement $30,077,824 $31,469,067 $34,962,307 $33,930,954 Rate Change over Current Rates 6.5%10.9%22.0%17.2% 16 2022 and 2023 Expenses as Budgeted 3.5% Non-Power Escalation for 2024-2025 DRAFT E E S C O N S U L T I N G a GDS Associates Company COSA RESULTS: MINIMUM SYSTEM Present Rate Revenues Net Revenue Requirement Surplus/ (Deficiency) in Present Rates Revenue to Cost Ratio Rate Change Permanent Residents $7,509,975 $8,286,316 ($776,342)90.6%10.3% Non-Permanent Residents 8,551,625 10,391,059 (1,839,434)82.3%21.5% Small Commercial 4,091,429 3,476,637 614,792 117.7%-15.0% Medium Commercial 1,891,849 1,736,513 155,336 108.9%-8.2% Large Commercial 1,322,694 1,631,031 (308,337)81.1%23.3% Public Authority 3,504,023 3,092,395 411,628 113.3%-11.7% Pumping/Water Dept 1,296,447 1,381,630 (85,183)93.8%6.6% Temp Power 36,443 49,412 (12,969)73.8%35.6% Sec Lights 30,456 32,831 (2,375)92.8%7.8% TOTAL $28,234,941 $30,077,824 ($1,842,882)93.9%6.5% 17 DRAFT E E S C O N S U L T I N G a GDS Associates Company COSA RESULTS: 100% DEMAND Present Rate Revenues Net Revenue Requirement Surplus/ (Deficiency) in Present Rates Revenue to Cost Ratio Rate Change Permanent Residents $7,509,975 $7,902,205 ($392,230)95.0%5.2% Non-Permanent Residents 8,551,625 9,719,882 (1,168,256)88.0%13.7% Small Commercial 4,091,429 3,552,215 539,214 115.2%-13.2% Medium Commercial 1,891,849 1,945,651 (53,802)97.2%2.8% Large Commercial 1,322,694 1,922,724 (600,030)68.8%45.4% Public Authority 3,504,023 3,362,860 141,163 104.2%-4.0% Pumping/Water Dept 1,296,447 1,589,643 (293,197)81.6%22.6% Temp Power 36,443 49,514 (13,071)73.6%35.9% Sec Lights 30,456 33,129 (2,673)91.9%8.8% TOTAL $28,234,941 $30,077,824 ($1,842,882)93.9%6.5% 18 DRAFT E E S C O N S U L T I N G a GDS Associates Company RECOMENDATIONS Phase in large rate changes over time Minimize rate design changes when making large rate adjustments. These small changes will mitigate customer bill impacts 19 E E S C O N S U L T I N G a GDS Associates Company RENEWABLE RATE 20 E E S C O N S U L T I N G a GDS Associates Company GREEN RATE PROGRAMS IN CA Load Serving Entity Program Name Rate City of Palo Alto Green Program 100%Renewable $0.002/kWh surcharge Sacramento Municipal Utility District (SMUD) Greenergy 50%Renewable 100%Renewable $4/month Surcharge $8/month Surcharge Alameda Municipal Power Voluntary Renewable Power Program 100% Renewable $0.002/kWh surcharge Residential $20/month for 1 MWh block Commercial Marin Clean Energy Light Green 60% Renewable Deep Green 100% Renewable Local Sol 100% Local Solar Standard Rates $0.01/kWh surcharge Based on Feed In Tariff (FIT) San Francisco Water Power Sewer (Hetch Hetchy) Green Tariff 100% Renewable $0.008/kWh Surcharge 21 E E S C O N S U L T I N G a GDS Associates Company DISTRICT 2019 POWER COSTS Cost $/MWh Stampede $241,622 $19.71 Landfill Gas $2,079,990 $90.15 Wind $3,015,181 $72.21 VEYO Heat Recovery $684,573 $96.09 Other Pooled Costs $4,015,767 $47.64 Transmission $1,160,001 $6.88 Misc. (WREGIS, Margin)-$300,962 Total $10,896,172 $64.66 22 Landfill Gas 15% Hydro (Small and Stampede) 8% Market Purchases 31% Natural Gas 6% Wind 27% CHP 5% Unspecified 8% E E S C O N S U L T I N G a GDS Associates Company RESOURCES: AVERAGE COSTS 2016-2020 Average Cost $/MWh Differential $/MWh Landfill Only $89.43 $20.13 Wind Only $73.45 $4.15 Wind + Landfill $79.10 $9.79 Total Power Supply $69.30 23 Recommended Rate $/kWh Adder Specific Resource:Landfill Gas $0.0200 E E S C O N S U L T I N G a GDS Associates Company REVENUE IMPACTS, 1.0% PARTICIPATION Customer Class Participating Customers Green Rate $0.02/kWh Primary Residential 48 $8,915 Secondary Residential 76 $8,148 Small Commercial 12 $4,461 Medium Commercial 1 $5,787 Large Commercial 1 $22,827 Total 138 $50,137 24 The energy represented in the table is 2,500,000 kWh or about 1.5% of the District’s annual retail load. THANK YOU 25