2018 Rate Change Proposal

Transcription

1 2018 Rate Change Proposal Thursday, Customer Service Center, Rubicon Room Powering forward. Together.

2 2018 Rate Change Proposal Summary Released Chief Executive Officer and General Manager s Report and Recommendation on Rates and Services on Jun 21, Economic Development Rate (EDR) Tariff, Development Fees (Rule 16), Hydro Generation Adjustment (HGA), Residential System Infrastructure Fixed Charge (SIFC) proration. Hosted two public workshops at SMUD Headquarters Tuesday, Jul 17, 10:00 am Thursday, Jul 26, 6:00 pm Public Hearing at the SMUD Board Aug 6:00 pm Introduce Draft Rate Resolution Aug 6:00 pm Decision on draft resolution on Sep 20,

3 Proposed changes This rate process does not include a rate increase Economic Development Rate Increase and extend the EDR. Change contract period and qualification requirements, offer new discounts. Development Fees (Rule 16) Offset fees charged to business customers for required SMUD infrastructure. Hydro Generation Adjustment Modify Hydro Rate Stabilization Fund and add precipitation cap to calculation. Prorate Residential System Infrastructure Fixed Charge Automatically prorate for customers who receive less than 27 days of service. 3

4 Why are we proposing these changes? We want to make it easier to do business with SMUD We want to encourage the economic development and vitality of the region We believe it s the right thing to do for our customers 4

5 Why is this good for all customers? New holistic approach Growing commercial and industrial customers supports regional economic development efforts These adjustments will encourage investment in our community from outside the region Attracting new customers will allow fixed costs to be distributed among a greater number of customers Current vacancy rate is very low, these changes will stimulate the development of new commercial spaces 5

6 Economic Development Rate

7 What is an Economic Development Rate? An Economic Development Rate (EDR) is an incentive used by utilities to attract, retain, and promote growth and expansion of businesses within their service area. New businesses with large electricity use receive a discount on standard rates, which helps reduce the cost of doing business. 7

8 Economic Development Rate Current issues Brookings Institution Assessment: The region is deficient in a strong economic base of competitive industries and lacks robust job growth. Recent economic growth has not benefited all of our customers equally. Slow adoption of existing EDR due to limited discount and restrictive eligibility requirements. Although SMUD provides some of the lowest rates in California, other competing states offer significantly lower utility rates. Limited growth of customer base means increases must be absorbed by fewer customers. 8

9 Proposed changes Increase term from 5 to 10 years Increase discount Provide customer choice: Level discount for first 5 years, then declining discount for the last 5 years OR a slightly lower level discount for 10 years The greatest economic discount rate will be offered for those companies that locate in designated disadvantaged communities Remove the following requirements: Industry (NAICS code restriction) Jobs Threshold Full Service (must get all energy from SMUD) 3 rd party verification 9

10 Size Term Economic Development Rate Industry Requirements Job Requirements Full Service Requirement Discount Current 300kW+ 5 years Limited to 14 industries 50 FTE jobs, 25 areas of high unemployment Yes Year 1-5%, Year 2-3%, Year 3-1%, Years 4 & 5-0% Two options for customers to choose: Proposed 300kW+ 10 years No limitations No minimum requirement No Standard EDR Opt A: 6% for years 1-5, declining 1% per year for years 6-10 Opt B: 4.5% for 10 years Rate for Disadvantaged Communities Opt A: 8% for years 1-5, declining 1.5% per year for years 6-10 Opt B: 6% for 10 years 10

11 Proposed discount options Proposed Economic Development Rate Discount Options Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Option 1 Discount Option 2 Discount 6% 6% 6% 6% 6% 5% 4% 3% 2% 1% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% Proposed Economic Development Rate Discount Options for Disadvantaged Communities Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Option 1 Discount 8% 8% 8% 8% 8% 6.5% 5% 3.5% 2% 0.5% Option 2 Discount 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 11

12 Development Fees

13 Development fees Proposed changes Amend connection fee (Rule 16) to create a fee offset for work performed by SMUD Provide a per kw offset of development fee for Commercial/Industrial/Mixed Use projects 300kW or greater Set the 2018/2019 fee offset at $125 per kw Evaluate the per kw fee amount yearly (based on SMUD system and financial impacts) 13

14 Hydro Generation Adjustment

15 Hydro Generation Adjustment (HGA) What is the Hydro Rate Stabilization Fund? When our region experiences a wet year, savings from excess hydro generation are deposited into the Hydro Rate Stabilization Fund (HRSF). During dry years, SMUD draws down this fund to assist with the cost of purchasing more expensive replacement energy for our customers. When this fund reaches $0, a surcharge is added to our customer s bill, and is removed a year later (unless the dry years continue). 15

16 Hydro Generation Adjustment (HGA) Proposed changes Add cap of 80 of precipitation (rain and snow) to calculation Precipitation above 80 inches typically does not translate into more electricity as the excess water tends to spill over the dams, bypassing our generators. Increase total HRSF cap from 5% to 6% of budgeted annual gross retail revenue Provides greater financial protection during extended dry water years Give the SMUD Board of Directors authority to decide on the use of savings derived from high hydro generation such as: Refund customers the surplus funds Repurpose funds for needed projects Reduce the need for future rate increases 16

17 System Infrastructure Fixed Charge

18 What is the SIFC and what is the change? The System Infrastructure Fixed Charge (SIFC) recovers some of the fixed costs of the infrastructure for the power delivery system. The current residential SIFC is $20.30 per month. Currently, customers who receive less than 27 days of service pay the full SIFC. This proposal automatically prorates the SIFC for customers receiving less than 27 days of service. 18

19 Customer Outreach & Engagement

20 Customer Outreach through Direct Engagement Approximately 100 community and business representatives received information at public outreach meetings - SMUD representatives presented rate information at 6 different collaborative meetings, where over 65 organizations were represented 10 state legislators whose districts include portions of the SMUD service area were offered informational meetings including information on the rate proposals 47 elected officials were mailed information packets SMUD provided information about the rate proposal via , mail, newsletters, advertising, social media and smud.org SMUD hosted 2 public workshops that were attended by approximately 10 members of the public 20

21 Customer Feedback about Rate Proposal 2 calls were received during the outreach period 10 substantive customer comments were received 1 alternative rate proposal was received Customer Responses Appreciate SMUD for proactive approach to driving regional economic development SMUD should continue investing in disadvantaged communities and urban corridors SMUD should use plainer language when proposing rate changes Key Areas of Interest Allowing developers currently in the queue to take advantage of new Rule 16 fee structure, if approved Jobs requirement for EDR Definition of Disadvantaged Communities 10 written comments were received and posted on smud.org 21

22 Letters of Support from Customers on Economic Development and Rule 16 Changes SMUD received letters of support from the following agencies Downtown Sacramento Partnership s Board of Directors Mohanna Development Company Heller Pacific Inc. (Managing Partner ICE BLOCKS) The City of Rancho Cordova Folsom Economic Development Corporation City of Elk Grove/EDDT County of Sacramento, Office of Economic Development Franklin Boulevard Business Association 22

23 Need more information? Visit smud.org/rateinfo Read the Chief Executive Officer and General Manager s report on smud.org questions or comments to contactus@smud.org or call For tips on energy management, visit smud.org For residential customer service, call We welcome your questions and comments! For commercial customer service, call

24 Questions? Powering forward. Together.