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HomeMy WebLinkAbout14 Electric Rate Restructuring Agenda Item # 14 Public Utility District Y ACTION To: Board of Directors From: Mary Chapman Date: February 17, 2010 Subject: Consideration of Modifying the Contract with HDR Engineering, Inc. to Perform a Residential Electric Rate Restructuring Study 1. WHY THIS MATTER IS BEFORE THE BOARD Only the Board can hire a consultant or modify an existing contract over$15,000. 2. HISTORY During 2009, the Board awarded a contract to HDR Engineering, Inc (HDR) to perform a water rate study to assist the District in transitioning to metered water rates as required by AB2572. Increasing/changing of water rates is subject to the requirements of California Proposition 218. The Board held twelve separate public meetings to review various aspects of the new water rate structure and increased rates. Since the completion of the water rate study, the Board has directed staff to begin planning for an electric rate study to be performed during FY10. Under the current rate structure, residential customers (permanent residents and non-permanent residents) and commercial customers (small, medium and large) all pay a flat kilowatt- hour charge (different for each group) and a separate customer charge based on the size of their service. Additionally, our medium and large commercial customers pay a demand charge based on their highest energy demand during the month. In 1994, the District hired a rate consultant to perform an electric-rate study which became effective in February, 1995. The basic rate structure adopted at that time still remains in effect, except for periodic rate increases to cover increased District costs. Attachment 1 is a copy of the current electric rate structure. HDR Engineering, Inc. performed the 2009 Water Rate Study. At the February 3, 2010 Board meeting, the Board directed staff to obtain a proposal from HDR to perform additional electric-rate study services. 3. NEW INFORMATION Shawn Koorn of HDR has provided the District a quote (Attachment 2) to provide residential electric rate restructuring options and to review and comment on the District's commercial customer's current rate structure. This proposal is not to perform a full cost-of-service study as was done with water rates. The proposed restructuring options will compare the District's current residential rates to up to three alternative rate options and is intended to be revenue neutral to the District. 4. FISCAL IMPACT The cost to perform the scope of services is significantly less than a complete cost-of- service study and is estimated at $15,000. Mr. Koorn indicated that HDR is willing to enter into a lump sum not-to-exceed contract in the amount of$15,000. 5. RECOMMENDATION Authorize the addition of the proposed Scope of Services for Residential Electric Rate Restructuring outlined in the HDR Engineering, Inc.'s proposal dated February 9, 2010 in an amount not-to-exceed $15,000. 00, Mary Cha an Michael D. Holley Administrative Services Manager General Manager ATTACHMENT 1 TRUCKEE - Ordinance No. 2007 - 03 AMENDING THE ELECTRIC RETAIL RATES-AND ESTABLISHING THE CALIFORNIA SOLAR INITIATIVE CUSTOMER CHARGE WHEREAS District staff has prepared a budget for District operation for 2008; and WHEREAS, on November 7 and 19, 2007 a public hearing was held to receive comments from the public concerning the 2008 budget; and WHEREAS, the budget for 2008 recommends that electric retail rates be increased by 7% for the year 2008 and 3% for the year 2009 to cover increases in the costs of providing District services; and WHEREAS, on November 7 and 19, 2007 a public hearing was held to receive public comments on proposed electric rate increase; WHEREAS, the state of California has enacted The California Solar Initiative, through the signing of SB-1; and WHEREAS, the California Solar Initiative requires that electric utility companies must raise, through customer charges, a specified amount of money to fund the required solar rebate program; and WHEREAS, the Truckee Donner Public Utility District must raise $177,400 annually for the solar rebate program. NOW, THEREFORE, BE IT ENACTED by the Board of Directors of the Truckee Donner Public Utility District as follows: Section 1. Effective January 1, 2008, the following monthly electric rates shall be effective. Domestic Electric Rates: Permanent Residents Rate P 10 Customer Charge: per month $6.56 Energy Charge per kilowatt-hour $0.128 Domestic Electric Rates: Non-Permanent Residents Rate S 10 Customer Charge: per month $6.56 Energy Charge per kilowatt-hour $0.147 Small Commercial Rates Rate 15 Customer Charge: per month $12.72 Energy Charge per kilowatt-hour $0.154 Ordinance 2007-03 1 Medium Commercial Rates Rate 20 Customer Charge: per month $127.00 Energy Charge per kilowatt-hour $0.091 Demand Charge per kilowatt of demand $12.49 Large Commercial Rates Rate 25 Customer Charge: per month $557.06 Energy Charge per kilowatt-hour $0.094 Demand Charge per kilowatt of demand $11.93 Section 2. Effective January 1, 2009, the following monthly electric rates shall be effective. Domestic Electric Rates: Permanent Residents Rate P 10 Customer Charge: per month $6.76 Energy Charge per kilowatt-hour $0.132 Domestic Electric Rates: Non-Permanent Residents Rate S 10 Customer Charge: per month $6.76 Energy Charge per kilowatt-hour $0.151 Small Commercial Rates Rate 15 Customer Charge: per month $13.10 Energy Charge per kilowatt-hour $0.159 Medium Commercial Rates Rate 20 Customer Charge: per month $130.81 Energy Charge per kilowatt-hour $0.094 Demand Charge per kilowatt of demand $12.86 Large Commercial Rates Rate 25 Customer Charge: per month $573.78 Energy Charge per kilowatt-hour $0.097 Demand Charge per kilowatt of demand $12.29 Section 3: Effective January 1, 2008, the following monthly so.lar initiative customer charge shall be effective. Domestic (both permanent and non- permanent) $0.60 _ Small Commercial $5.00 Medium Commercial $10.00 Large Commercial $15.00 Ordinance 2007-03 2 Section 4. If no protest is made pursuant to Public Utilities Code Section 16078, then this ordinance shall be effective January 1, 2008 and January 1, 2009. Section 5. The Clerk of the District shall immediately cause a copy of this ordinance to be published in a newspaper of general circulation and posted in three places within the District. Section 6. The provisions of other Ordinances shall remain if effect to the extent that they do not conflict with this ordinance. PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility District at a meeting duly called and held within the District on the nineteenth day of November 2007 by the following roll call vote: AYES: Directors Aguera, Hemig, Sutton and Taylor NOES: Director Thomason ABSTAIN: None ABSENT: None TRUCKEE DONNER PUBLIC UTILITY DISTRICT Y Tim F. Taylor, PrT-Sident/of the Board ATTEST: John i rich, Cler of tAe- card Ordinance 2007-03 3 Attachment 2 ONE COMPANY Man.y Solutiopl., February 9, 2010 Mr. Stephen Hollabaugh Assistant General Manager Truckee Donner Public Utility District PO Box 309 Truckee, California 96160 Subject: Residential Electric Rate Restructuring Scone and Fee Estimate Dear Mr. Hollabaugh: The Truckee Donner Public Utility District(District)has requested technical assistance from HDR Engineering, Inc. (HDR)to provide residential electric rate restructuring options and provide review and comment on the commercial customer's current rate schedules. This letter proposal will provide the District with a summary of the proposed scope of services, HDR's staffing for the analysis, an estimated fee, and a schedule to complete the services. Scope of Services In order to complete the services requested by the District the following proposed scope of services has been developed. Task 1—Initial Project Meeting (Conference Call) Task Objective: Determine the appropriate data needs and discuss the key assumptions, goals and objectives with District staff to achieve a mutual understanding of the goals, objectives, issues and concerns related to the analysis. The initial project meeting will allow for a discussion of the various alternatives that the District is interested in reviewing. In addition,the data requirements for the analysis can be discussed during this meeting. It is proposed that the project meeting take place via conference call. Expected District Staff Support for Task 1: ■ Have key staff participate in a 2 hour kick-off meeting. ■ Discuss possible rate structure alternatives. Deliverables as a Result of Task 1: ■ Discussion of possible rate structure alternatives. ■ Identification of data needs to complete the analysis. HDR Engineering,Inc. SW 108m Avenue NE Phone.(42514W620C Suite 1200 Fax.(4251453.1107 Bellevue.WA 98004-5549 wwwhdrinctw Task 2— Review Residential Customer Data Task Objective: Review and analyze the District's residential electric consumption data. Identify potential changes to the District's electric rate structure based on energy use characteristics. The first step in the development of rate alternatives is to gain an understanding of the usage patterns of the customers impacted by any rate structure change. As a result,the residential customer monthly usage data will be reviewed to identify potential break points based on: on/off peak use, seasonality, average use, etc. This review will also separate the permanent residents from the non-permanent residents. At this time it is assumed that the separate rate schedules for these customers will be maintained. However, given the results of the usage data review,the rate structures may vary. Expected District Staff Support for Task 2: ■ Provide monthly residential customer usage data and current rate schedules. ■ Provide as needed assistance in clarification of data. Deliverables as a Result of Task 2: ■ Review of the residential usage data. ■ Summary of the analysis that will be used for the rate structure alternatives. Task 3—Development of Residential Rate Structure Alternatives Task Objective: Provide up to three alternative rate options for the District to consider. Upon completion of the review of the customer data, HDR will develop up to three residential rate alternatives for the District to consider in addition to the current rate structure. It should be noted that the rate alternatives developed will be revenue neutral. That is,the level of revenue generated by the current rates for the residential customers will also be generated by the rate alternatives. The rate alternatives will be developed through the insight gained from the review of residential data and discussions with District staff. After a review and discussion by District staff, HDR will incorporate any necessary changes to the rate alternatives and provide final rate alternatives for presentation to the District Board. Expected District Staff Support for Task 3: ■ Provide input on the results of the review of the customer data. ■ Take part in a conference call with HDR to discuss and review rate options. Deliverables as a Result of Task 3: ■ Provide the District with up to three rate alternatives to consider. HDR Eegineefieg,Inc. Task 4— Review the Commercial Customer Rate Structures Task Objective:Review and analyze the District's commercial electric consumption data. Identify potential changes to the District's electric rate structure and rate classes based on energy use characteristics and provide feed back to the District on how their rates compare to industry standards. To provide adequate feedback for the review of the commercial rates, it is necessary to analyze customer usage patterns to identify potential groupings of commercial customers based on energy use. After reviewing the commercial data, HDR will provide feedback to the District regarding how their rate structures compare to industry standards, and provide potential changes that could be made to accomplish the Districts goals. Expected District Staff Support for Task 4: ■ Provide commercial customer usage data, both energy and demand, and current rate schedules. Deliverables as a Result of Task 4: ■ A review of the commercial customer usage data. ■ Summary of any potential changes to the commercial rate structures, based on customer energy use and demand,to the District's various commercial rate classes. Task 5— Public Presentations Task Objective: Present the draft, and final rate designs, to the District's Board of Directors. At the completion of task four, HDR will present the draft results to the District's Board of Directors. After final adjustments to the rate design alternatives are completed, HDR will present the final results of the residential rate options. Expected District Staff Support for Task 5: ■ Provide input on the results of the review of the customer data. Provide preferences on the types of rate designs the District would prefer to see in the three rate design options. ■ Take part in a meeting with HDR to discuss and review rate options. Deliverables as a Result of Task S: ■ Attend and present the results of the rate alternatives and commercial review to the District Board. Task 6— Letter Report Task Objective: Provide the District with a letter report which provides a summary of the analysis that was completed for the District. HDR Engineering,Inc. At the completion of the analysis HDR will provide the District with a letter report detailing the analysis. This will include a summary of the residential and commercial usage patterns, a discussion of the possible residential rate alternatives, a summary of the commercial rate review, and the final proposed residential rates. HDR will provide the District with a draft report for review and comment. Once the comments have been received, HDR will incorporate those comments into a final report and provide the District with an electronic copy of the final letter report. Expected District Staff Support for Task 6: ■ Comment on the draft letter report. Deliverables as a Result of Task 6: ■ An electronic draft letter report. ■ A final electronic letter report. This completes the proposed scope of services. Should the District request additional services in addition to those presented above they can be provided at current billing rates on a time and material basis. Project Team Shawn Koorn, Project Manager Overall project management will be provided by Shawn Koorn. In this position, Shawn will provide overall quality control for the project and present the results to the District's Board. Shawn has recently been the project manager on several electric rate study analyses for utilities across the United States. Shawn was also the project manager for the recently completed water cost of service analysis recently completed by HDR for the District. Kevin Lorentzen, Financial Analyst Kevin Lorentzen will provide the bulk of the data analysis and rate design analysis. Kevin specializes in the area of financial planning and rates. Kevin has recently been involved in the development of several electric cost of service models and developed the model for the District's water cost of service analysis. Proposed Time Schedule In discussion with District staff it has been determined that the analysis will be completed over the next three month period. During this time, HDR will present the draft, and final, rate alternatives to the District staff and Board, and provide a letter report detailing the analysis. NOR Engineering,Inc. Estimated Project Fees Based on the scope of services provided above, the following labor and expense estimates are provided for the District's analysis. Summary of the Estimated Labor and Expenses Fees: Task 1 —Initial Project Meeting $650 Task 2—Review Residential Customer Data 1,750 Task 3 —Development of Residential Rate Alternatives 4,000 Task 4—Review of Commercial Rate Structures 2,500 Task 5 —Public Presentations 2,500 Task 6—Letter Report 1,650 Total Labor Fees $13,050 Plus: Expenses $1,950 Total Labor and Expenses 15 00 HDR is willing to enter into a lump sum not to exceed contract for the proposed services. Should the District request any additional services, the services will be provided at the applicable hourly billing rates. All portions of this letter proposal can be expanded or reduced as mutually agreed upon in writing by the District and HDR. Summary The information provided above has detailed HDR's scope and fee for the District's residential rate restructuring and commercial rate structure review. Should you have any questions or require additional information or detail regarding this request,please do not hesitate to me. Sincerely, HDR ENGINEERING, INC. (AI- Shawn Koorn Project Manager HOR Engineering,Inc.