Large Commercial Rate Simplification

Transcription

1 Large Commercial Rate Simplification Presented to: Key Account Luncheon Red Lion Hotel Presented by: Mark Haddad Assistant Director/CFO October 19, 2017

2 Most Important Information First There is no rate increase associated with this change This means the utility will not get any additional revenue There are some customers who will see increases in their bills The utility has plans to assist affected customers Up to two-year phase in for affected customers This change only affects the Large Commercial customer class which is the 500+ largest customers in Redding. This does not affect any of the other 43,600 Residential and Small Commercial customers

3 City Council Action History June 2015 Postponed rate restructure until 2017 February 2017 Restarted process September 5, 2017 Ended total rate restructure project Directed staff to bring back a proposal for a simplification of the Large Commercial rate structure Key Point-This proposal was to be revenue neutral. No rate increase to the customer class. Some customers though, are negatively affected. October 17, 2017 Set a public hearing for Nov 7, 2017

4 Fixed and Variable Costs vs. Revenues (Total System) Fixed vs. Variable Costs Fixed vs. Variable Revenue 36% 64% Fixed Costs Variable Costs 82% 18% Fixed Revenues Variable Revenues

5 River versus Lake

6 Load Factor and the Need for Demand Charges Load factor is the average demand (energy) divided by peak demand during a specific period of time Higher % load factor spreads fixed costs over more energy Load Factor % = Energy (kwh) Demand kw Hours 6

7 MEGAWATT DEMAND 2016 Load Duration Curve All Hours ALL HOURS IN YEAR

8 Demand Charge Justification Example Generating Station High Voltage Transmission New Industrial Load (30MW) Requires New Generation Investment $60M over 20 Year Life $3M Annual Fixed Cost Residential Customer Commercial Customer Distribution Substation Industrial Customer Transmission Substation

9 MegaWatts (MW) Load Factor Large Industrial Examples Customer A High Load Factor (75%) Customer B Low Load Factor (30%) 35 Peak Load by Month Customer A Customer B Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 9

10 Energy Only Rate (Under Collecting) Customer A Maximum Demand of 30MW 75% Load Factor Bill Component Bill Rate Annual Revenue Energy Rate ($/kwh) $ Total Energy Usage (Annual Sum) 196,000 MWh Total Annual Bill $18,680,000 Total Cost to Serve (Energy plus new Power Plant) $18,680,000 Annual Excess / (Shortfall) $0 Customer B Maximum Demand of 30MW 30% Load Factor Energy Rate ($/kwh) $ Total Energy Usage (Annual Sum) 80,000 MWh Total Annual Bill $7,624,000 Total Cost to Serve (Energy plus new Power Plant) $9,400,000 Annual Excess / (Shortfall) ($1,776,000) or (19%)

11 Energy Only Rate (Over Collecting) Customer A Maximum Demand of 30MW 75% Load Factor Bill Component Bill Rate Annual Revenue Energy Rate ($/kwh) $ Total Energy Usage (Annual Sum) 196,000 MWh Total Annual Bill $23,030,000 Total Cost to Serve (Energy plus new Power Plant) $18,680,000 Annual Excess / (Shortfall) $4,350,000 or 23% Customer B Maximum Demand of 30MW 30% Load Factor Energy Rate ($/kwh) $ Total Energy Usage (Annual Sum) 80,000 MWh Total Annual Bill $9,400,000 Total Cost to Serve (Energy plus new Power Plant) $9,400,000 Annual Excess / (Shortfall) $0

12 Energy and Demand Customer A Maximum Demand of 30MW 75% Load Factor Bill Component Bill Rate Annual Revenue Energy Rate ($/kwh) $0.07 Total Energy Usage (Annual Sum) 196,000 MWh Demand Rate ($/kw) $16.70 Total Demand Charge (Annual kw * Rate) $5,277,200 Total Annual Bill $18,997,200 Total Cost to Serve (Energy plus new Power Plant) $18,680,000 Annual Excess / (Shortfall) $317,200 or 1.7% Customer B Maximum Demand of 30MW 30% Load Factor Energy Rate ($/kwh) $0.07 Total Energy Usage (Annual Sum) 80,000 MWh Demand Rate ($/kw) $16.70 Total Demand Charge (Annual kw * Rate) $3,490,300 Total Annual Bill $9,090,300 Total Cost to Serve (Energy plus new Power Plant) $9,400,000 Annual Excess / (Shortfall) ($309,700) or (3.3%)

13 Simplified Large Commercial Rates Bill Component Bill Rate Notes Network Access Charge $140/month Old Large Commercial Rate Structure Energy Rate Demand Charge $0.1679/kWh or $0.0809/kWh $29.65/kW or $32.95/kW Higher rate is applicable to first 15,000 kwh in each month The actual demand rate charged is the lesser of $29.65/kW or a calculation which is: (kwh usage 15,000)/kWh usage X $32.95 Applicability 15,000 kwh usage in 3 of the last 12 months New Large Commercial Rate Structure Network Access Charge $140/month No change from current Energy Rate $0.098/kWh Demand Charge $20/kW 1/3 decrease Applicability 25kW demand in 6 of 12 months or more than 75kW

14 % of Total Customers Segmented by Annual Load Factor 35% 30% 25% 20% 15% 10% 5% 0% 0% to 5% to 10% to 15% to 20% to 25% to 30% to 35% to 40% to 45% to 50% to 55% to Greater than 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 60% Annual Load Factor Cust Bill Decrease Cust Bill Increase

15 Percentage of E7/E8 Customers Annual Bill Impacts - Percent 40% 35% 35.4% 30% 25% 23.9% 20% 18.5% 15% 10% 5% 0% 8.8% 4.0% 1.3% 1.8% 1.8% 0.0% Less than -20% to -15% to -10% to -5% to 5% to 10% to 15% to Greater than -20% -15% -10% -5% 5% 10% 15% 20% 20% Annual Bill Impacts (%) by Customer

16 Percentage of E7/E8 Customers Annual Bill Impacts - Dollars 35% 30% 29.2% 25% 25.0% 20% 15% 10.7% 11.3% 10% 7.1% 5% 4.8% 4.6% 4.2% 3.1% 0% Less than -$20,000 to -$10,000 to -$5,000 to -$1,000 to $1,000 to $5,000 to $10,000 to Greater than -$20,000 -$10,000 -$5,000 -$1,000 $1,000 $5,000 $10,000 $20,000 $20,000 Annual Bill Impacts ($) by Customer

17 Sample Effect 58% Load Factor Customer Search by List Search List Premise Number Annual Energy Annual Max Demand Annual Load Factor Current Revenue Proposed E7/E8 Revenue $ Change % Change Greatest_Decrease , % $ 26,334 $ 22,741 $ (3,593) -13.6% Current Rate Premise E7 Month Energy (kwh) Demand (kw) Monthly Load Factor Current Revenue Proposed E7/E8 Revenue $ Change % Change Jul-16 11, % $ 2,034 $ 1,758 $ (276) -13.6% Aug-16 11, % $ 2,007 $ 1,751 $ (256) -12.7% Sep-16 12, % $ 2,249 $ 1,951 $ (298) -13.2% Oct-16 12, % $ 2,168 $ 1,902 $ (266) -12.3% Nov-16 12, % $ 2,168 $ 1,896 $ (272) -12.5% Dec-16 13, % $ 2,477 $ 2,087 $ (390) -15.7% Jan-17 14, % $ 2,544 $ 2,124 $ (420) -16.5% Feb-17 12, % $ 2,242 $ 1,938 $ (304) -13.6% Mar-17 11, % $ 2,141 $ 1,884 $ (257) -12.0% Apr-17 11, % $ 2,081 $ 1,821 $ (260) -12.5% May-17 12, % $ 2,168 $ 1,854 $ (314) -14.5% Jun-17 11, % $ 2,054 $ 1,774 $ (280) -13.6%

18 Sample Effect 24% Load Factor Customer Search by Premise Number Input Premise Number Annual Energy Annual Max Demand Annual Load Factor Current Revenue Proposed E7/E8 Revenue $ Change % Change , % $ 47,623 $ 51,990 $ 4, % Current Rate Premise E7 Month Energy (kwh) Demand (kw) Monthly Load Factor Current Revenue Proposed E7/E8 Revenue $ Change % Change Jul-16 20, % $ 4,198 $ 4,536 $ % Aug-16 19, % $ 3,886 $ 4,234 $ % Sep-16 19, % $ 3,795 $ 4,277 $ % Oct-16 18, % $ 3,549 $ 4,075 $ % Nov-16 19, % $ 3,751 $ 4,198 $ % Dec-16 14, % $ 2,558 $ 3,905 $ 1, % Jan-17 20, % $ 4,102 $ 4,299 $ % Feb-17 20, % $ 3,988 $ 4,130 $ % Mar-17 20, % $ 4,099 $ 4,440 $ % Apr-17 21, % $ 4,196 $ 4,420 $ % May-17 24, % $ 4,822 $ 4,801 $ (21) -0.4% Jun-17 23, % $ 4,679 $ 4,675 $ (4) -0.1%

19 Why Now? Current Rate Structure Antiquated Is not industry standard We don t know of another utility with our current rate structure Lacks incentives for efficient use of energy Equity Customer charges should be based on the costs incurred Doing nothing may lead to future rate increases Distributed generation does not eliminate demands on system Proposed Rate Structure is Industry Standard Impact to those affected reduced in period of rate stability

20 Avg. Rate ($/kwh) Impacts of Existing Rate Design on Different Load Factor $0.25 Larger E7/E8 Customer kw Demand $0.20 $0.15 $0.10 $0.05 $- 10% LF 30% LF 50% LF 70% LF

21 Other Good News Federal Environmental Surcharge (FES) FES reduced in Sept 2017 back to 2013 level Reduced from $0.0047/kWh to $0.002/kWh Equates to a 1.5% decrease in the energy rate Solar Surcharge With program ending surcharge is recommended to be removed December 1, Equates to almost 1% decrease in the energy rate

22 Rate Forecast Elimination of 1.5% rate increase planned for 2018 Reasons include: Reorganization to save up to $1,000,000/year Refinance remaining bonds to save $600,000/year Shasta Lake contract renewal-additional $200,000/year Pipeline divestiture to save $350,000/year Increase in interest revenue-additional $450,000/year No further rate increase planned before 2020 With everything mentioned most customers will see electric bills lower in 2019 than in 2014.

23 Plans to Assist Customers Affected REU is modeling the effect of the rate change for all customers REU will proactively reach out to those affected by +5% to offer Commercial Energy Advisor Services Two-Year transition Customers will be put on the new structure January 1, 2018, however, some will start with a reduced demand charge. This will keep their immediate cost impact to 5% or less providing time to understand/adjust/invest/plan. 23

24 Recommendation to City Council Approve proposed Large Commercial rate structure simplification, including revised applicability criteria effective with the January 2018 billing cycle (Jan 3, 2018) End the Industrial Time-of-Use rate as well as other contract rates that are not Cost-of Service based. This does not affect Economic Incentive rates. Eliminate the 1.5% general rate increase that was included in our approved budget. Give the Electric Director authority to provide transitionary rate discounts to customers negatively affected. Transitionary discounts would end Dec 31, 2019