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HomeMy WebLinkAbout11 Workshop Electric Utility Rate Design WORKSHOP ITEM #11Study and Rate DesignElectric Utility Cost of Service Study and Rate DesignElectric Utility Cost of Service January 16, 2019 Electric Utility Rate Design 2016 Electric Utility limited rate structure design review •update2015 Water Utility rate study •Water Utility rate study 2013 •structure design review comprehensive rate 2010 Electric Utility •rates and feesand Water Utility Electric review the District’s cost of service and to provide rate design for in the past to Engineering, HDR District has contracted with The •Rate studies help ensure we meet that objective•cost of serviceThe District strives to ensure rates are set adequately to cover the •BACKGROUND / HISTORY Electric Utility Rate Design BACKGROUND / HISTORY Efficient operations•agreementsWell structured long term power purchase •since FY09not changed had Utility rates 01 Electric -Prior to Ordinance 2016•replacement SCADA •AMI Project•in FY19maximum and 3% FY18, in annually by 2% in FY17, 3% Utility rates Electric increasing 01 -2016the Board adopted Ordinance July of 2016 In •Electric Utility Rate DesignElectric Utility Rate Design BACKGROUND / HISTORY categoriesbased rate design alternatives for the rate -Developing cost•Reviewing rate classes and identifying potential changes •year revenue requirement-Developing a projected five•based rate designs-Establishing cost•The Study included the following services•Designfor a comprehensive Electric Utility Cost of Service and Rate The Board authorized a contract with HDR Engineering in July 2018 •Electric Utility Rate DesignElectric Utility Rate Design BACKGROUND / HISTORY Design rates to recover costs•Allocate the revenue requirement among customer classes•Determine the revenue requirement, or total cost of service•There are three key steps to the process:•allowed revenues and how those revenues are collectedThe Cost of Service and Rate Study process determines the utility’s •Electric Utility Rate DesignElectric Utility Rate Design NEW INFORMATION Cost of Service Study and Possible Rate Adjustment Timeline•Presented to the Board tonight•DesignHDR Engineering has prepared a draft Cost of Service Study and Rate •Public Hearing March with HDRBoard Workshop January CompleteInitial Study September BoardProposal to July Electric Utility Rate DesignElectric Utility Rate Design FISCAL IMPACT in future Board meetingsfiscal impact of changes to electric rates and fees will be considered There is no fiscal impact associated with this workshop item. The •Electric Utility Rate DesignElectric Utility Rate Design RECOMMENDATION to staffProvide input and feedback •Electric Utility Rate DesignElectric Utility Rate Design © 2014 HDR, all rights reserved.January 16, 2019 Truckee Donner PUD Electric Rate StudySummary of the Comprehensive Purpose of the Presentation Receive Board direction on next stepsReceive Board Feedback and input on the resultsRequirement, COSA, and proposed Rate DesignsPresent the draft results of the Revenue Overview of the rate setting process 10 Development of Cost RatesProposed ResultsDraft Final Revenue Requirement AnalysisCost of Service AnalysisRate Design 11 Based Electric Rates- Targeted Outcomes of the Electric Rate Study resultstarget revenue from the revenue requirement Develop proposed rate designs to collect the methodologiesDevelop utilizing generally accepted (reserves, DSC, rate funded capital)Reflect prudent financial planning criteria customer class characteristics)based rates (reflect -Develop equitable and costmaintain the PUD’s electric infrastructureProvide sufficient revenue to operate and 12 Revenue AnalysisRequirement Key Assumptions of the Revenue Requirement Analysis Maintained prudent financial metrics based on industry standards and PUD policyPrudent rate funding of renewal and replacement capital projects•Target debt service coverage•Capital Funding = No new debt, pay as you go basis (rate funded)Projected expenses based on Budget FY 2019 Escalated based on inflationary factors•AB 32 revenues will stop after 2021Rate revenues, rates Jan. 1, 2019, and customer characteristicsyear projection from 2020 to 2024-52021-Focus is on two year period of 2020 •14 Key Assumptions of the Revenue Requirement Analysis $2 millionReserve = Target is Unfunded Liability Purchased PowerTarget is 180 Days Rate Reserve = DepreciationTarget is Annual Replacement = Capital purchased powerof O&M including Target is 180 Days Operating Reserve = minimumscloser to target target levels to be Increased reserve 15(Continued)– Key Assumptions of the Revenue Requirement Analysis 16(Continued)– Summary of the Projected Revenue Requirements 2.7%2.7%2.7%2.7%2.7%Needed to Meet ExpensesRevenue Adjustment FY 2024FY 20232022FYFY 2021FY 2020 17 Conclusions on the Projected Revenue Requirements Proposed transition plan maintains key financial criteriaMoves closer to target reserve balances•Meets debt service coverage ratios•Rate adjustments are necessary to prudently fund the overall operating and capital needs of the electric utilityFund inflationary increases in O&M expenses•Fund necessary annual capital improvements•Propose annual rate adjustments of 2.7% for 2020 and 2021•18 Cost of Service Analysis Overview of a Cost of Service Analysis Develop average unit costs•Determine if subsidies exist•Objectives of Cost of Service Can provide an accurate price signal•Revenues track costs•Avoids subsidies•Generally accepted as “fair and equitable”•Why cost of service?various customer classes of serviceAnalysis to equitably allocate the revenue requirement to the •What is cost of service?20 •21 Conclusions on the Cost of Service Analysis Proposed rate adjustment across all classes of serviceNo significant cost of service issues in the 2020 test yearReview of customer classesLarge (more than 200 kW demand)•200 Kw demand)–Medium (50 •Small (under 50 Kw demand)•Commercial•Permanent Residents-•Permanent Residents Rate Design •23 Current Rates–Residential Customers combined to one class?Permanent Residents be -Should Permanent and Non•$0.151/kWhEnergy Charge •$14.10/MonthCustomer Charge •Permanent Residents-Non•$0.132/kWh Energy Charge •$14.10/MonthCustomer Charge •Permanent Residents Residential NCP FactorKwh Sales at Meter Permanent Residents-Non 200.0180.0160.0140.0120.0100.080.060.040.020.00.0NCP FactorKwh Sales at Meter Permanent Residents 180.0160.0140.0120.0100.080.060.040. 020.00.0 24 kwh Sales at Meter and NCP Factor (cont’d)- Proposed Year 2023 the energy charge would be $0.138/kWh for all•same energy charge for all residentialAlternative 2 the energy charge is a 3 Year transition to the •25 Alternative 1 and 2Customer Charge Adjustment–Residential Rates 2020 Proposed Residential Bill Comparisons Rate design shows rate adjustment in the customer charge only•26 Status Quo–Alternative 1 – 2020 Proposed Residential Bill Comparisons energy charge by year 2023Rate design energy charge transitions over three years to same •Rate design shows rate adjustment in the customer charge only•27 Year 1 of 3 Year Transition to Same Energy Charge Permanent-Combined Permanent & Non–Alternative 2 – •28 Current Rates–Customers Commercial $12.29/kWDemand Charge •$0.097/kWhEnergy Charge •$1,196.79/MonthCustomer Charge •Large Commercial•$12.86/kWDemand Charge •$0.103/kWhEnergy Charge •$272.84/MonthCustomer Charge •Medium Commercial•$0.159/kWhEnergy Charge •$27.32/MonthCustomer Charge •Small Commercial Commercial NCP FactorkWh Sales at Meter Large Commercial 140.0120.0100.080.060.040.020.00.0NCP FactorkWh Sales at Meter Medium Commercial 140.0120.0100.080.060.040.020.00.0NCP FactorKwh Sales at Meter Small Commercial 140.0120.0100.080.060.040.020.00.0 29 kwh Sales at Meter and NCP Factor (cont’d)- Proposed Commercial Rates 30 Energy and Demand Charge Adjustment– 2020 Proposed Commercial Bill Comparisons Rate design shows rate adjustment in the energy charge only•31 Small Commercial - 2020 Proposed Commercial Bill Comparisons Rate design shows rate adjustment in the energy and demand charge only•32 Medium Commercial - 2020 Proposed Commercial Bill Comparisons Rate design shows rate adjustment in the energy and demand charge only•33 Large Commercial - •34 Conclusions on the Rate Design Commercial rate structureRecommend maintaining •Commercial rate•year transitionEnergy charge 3•Residential ratePermanent into one and NonCombine Permanent Alternative 2 •Remain status quoAlternative 1 •Residential rate •the rate structureNeed to determine any changes in •practices and approachescontemporary and reflect industry Overall rate structures are