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Report
Jefferson County PUD
Preliminary Cost of Service and Rate Design Results
December 9, 2014
Presented by:
Gary Saleba, President
EES Consulting, Inc.
A registered professional engineering corporation with offices in the
Seattle and Portland metropolitan areas
Telephone (425) 889-2700 Facsimile (425) 889-2725
[email protected]
EES Consulting
EES
Agenda

Objectives

Review of Rate Setting Process

Electric Rate Study Assumptions

COSA Results

Electric Rate Design Policy Input Needed

COSA Results and Proposed Rate Options

Specific Electric Rate Design Proposals

Summary of Electric Rate Study Policy Issues

EES Recommendations

Pole Attachment Rate

Water/Wastewater Results

Water/Wastewater Recommendations

Questions / Answers
2
Objectives


Review Equity of Current Cost of Service Analysis (COSA) and Rate
Design

Goal is every customer pays fair share

Cost allocations driven by usage, density and delivery voltage
Rate Restructuring

Simplify current rate schedule structures and administration

Make rates PUD-specific

Address local concerns
3
Objectives (cont’d)

Traditional Rate Setting Principles/Bonbright Principles






Rates should meet revenue requirement
Rates should be cost based
Rates should be easy to understand and administer
Rates and the cost allocation process should conform to generally
accepted rate setting techniques
Rates should provide revenue stability to the utility and rate stability
to the consumer
RCW Legal Requirements (80.28.005)

Fair, just, reasonable and sufficient
4
Review of Rate Setting Process
Step 1 Aggregate
Revenue
Requirement
(How much?)
Step 2 Perform Cost
of Service
Study (Who
should pay?)
Step 4 Implement
Rates
Step 3 - Design
Rates (How to
collect?)
5
Electric Rate Study Assumptions

June 2013 –May 2014 Actual Loads

Calendar Year 2015 Test Period/Budget

Revenues Calculated Using Current Rates and Billing Determinants

Forecast O&M Expenses per 2015 Budget

Power Supply and Production Expenses Based on BPA
Rates/Projected Loads

Debt Service Assuming No New Debt

Capital Improvement Projects per the Budget and Funded by Rate
Revenues and Reserve Fund
6
COSA Results
Summary of Revenue Requirement
Revenues
2015
2016
2017
2018
$30,126,902
$30,781,403
$31,049,687
$31,409,098
$617,573
$636,100
$655,183
$674,839
$30,744,475
$31,417,503
$31,704,870
$32,083,937
Generation
$14,838,505
$16,085,205
$16,437,055
$17,315,982
Transmission
$1,344,426
$1,384,759
$1,426,302
$1,469,091
Distribution
$3,198,066
$3,294,008
$3,392,828
$3,494,613
$800,000
$824,000
$848,720
$874,182
Administration and General
$1,809,579
$1,863,866
$1,919,782
$1,977,376
Capital Projects
$3,892,000
$4,757,000
$2,637,500
$2,447,500
Taxes
$2,103,500
$2,166,605
$2,231,603
$2,298,551
Interest and Debt Service
$5,800,000
$5,800,000
$5,800,000
$5,800,000
Total Expenses
$33,786,076
$36,175,443
$34,693,790
$35,677,294
Surplus (Deficiency) in Funds
-$3,041,600
-$4,757,940
-$2,988,920
-$3,593,358
Fund Balance (prior to rate increase)
$9,365,275
$4,607,335
$1,618,415
-$1,974,942
9.9%
15.1%
9.4%
11.2%
Present Rate Revenues
Other Income
Total Revenues
Expenses
Customer Accounts and Services
Total Required Increase (Decrease)
7
Electric COSA Results
Revenue to Cost Ratios
Revenues at Current
Rates
Adjusted Ratio
Minimum System
Adjusted Ratio
100% Demand
$18,754,671
89.1%
88.9%
477,348
75.7%
89.4%
General Service (24)
4,070,992
165.0%
192.9%
Small Demand (25)
1,891,428
146.5%
132.3%
Large Demand (26)
675,410
149.1%
134.5%
Primary (31)
915,562
134.2%
113.3%
Irrigation (29)
7,472
26.7%
21.0%
Interruptible Schools 43
460,912
77.2%
65.3%
Street & Hwy Lighting
187,204
71.3%
81.5%
2,685,903
100.7%
100.7%
$30,126,902
100.0%
100.0%
Residential (7)
Farm Service (8)
PTP
TOTAL
Accurate to +/- 10%
8
Electric Rate Design Policy Input Needed

Determine Overall Rate Adjustment




Determine Method for Allocating Rate Increase Across Classes




How much and when to adjust rates
May want small increase over multiple years or one time increase
Timing depends on policy direction and software upgrades
Across-the-board
COSA based
Move toward +/- 10 percent
Develop Proposed Rates






PSE rates do not reflect JPUD costs
Appropriate to simplify and combine some rate schedules
Evaluate size of customer charge
Consider eliminating block rates and seasonal differentials
What to do about net metering and senior, disabled and/ or low income
discounts
New large single load policy
9
COSA Results and Proposed Rate Options
Residential
Comparison of Rates to Unit Costs
Basic Charge ($/day)
Energy Charge ($/kWh)

Present
Minimum System
$7.49
$0.08511 (1st 600 kWh)
$0.103589 (over 600 kWh)
$29.63
100 Percent
Demand
$9.03
$0.0961
$0.1174
Proposed Rate Options

COSA indicates above-average rate increase

Increased customer charge justified by COSA and comparable utility rates

Implement minimum bill?

Remainder of increase to energy charge

Move to flat energy rate, or reduce block rate differential to be consistent
with flat rates for BPA purchases and comparable utility rates?

Schedule 8 not needed if Schedule 7 moves to flat rate
10
Specific Electric Rate Design Proposals
Commercial/Industrial

Existing Rates





Schedule 24 – No demand charge, seasonal energy charge
Schedule 25 – Seasonal demand charge >50 kW, seasonal and declining block
energy charge
Schedule 26 - Seasonal demand charge >50 kW, flat energy charge
Schedule 31 - Seasonal demand charge >50 kW, flat energy charge
Proposed Rate Options





COSA indicates below-average rate increase
Establish 2 rates – with and without demand charge
Schedule 24 customer charge increased and consider eliminating or reducing
seasonal energy differential to better match BPA costs
Schedule 25/26/31 – consider having demand charge cover all kW (not just
amount over 50 kW), consider eliminating or reducing seasonal differences,
eliminate declining block structure
Handle primary service through discount to demand and energy charges rather
than separate rate
11
Specific Electric Rate Design Proposals
Other Classes

Irrigation



Current rates are complicated with declining block energy rates and
seasonal for both demand and energy
Consider move to general service rate
Interruptible Schools



Less benefit of interruption to JPUD than to PSE
Only paying 65% -75% of Costs
Consider move to general service rate
12
Specific Electric Rate Design Proposals
Other Classes (cont’d)

Lighting





Simplify rates with each rate reflecting a range of usage rather than one rate
for each type of light
Differentiate rates based on who owns the pole
Comparable utility rates

0  100W
= $10/month

100W 
= $15/month

Pole 
= $ 5/month
Port Townsend street lights

Put on same schedule as above

Monthly charge for balance of City-related lighting costs
Port Townsend Paper



Pass through of BPA charges plus admin fees and taxes
Apply standard % rate increase to administrative fees
Need to re-evaluate when Clallam PUD transaction finalized
13
Specific Electric Rate Design Proposals
Other Classes (cont’d)

Net Metering




Historical practice – 100 kW cap/ .5%of peak load or 500 kW total
Current issues with net metering
Options for going forward
Discounts


Disabled/senior existing
Low income possible






$500K to $1M in discounts
$3 to $6 per month to recover from others
Staff addition at 1 FTE to administer
$.50 per month
Consider forgiving the customer charge as the crediting mechanism
New Large Single Loads




Less than 10 MWa
Issues with BPA-tiered rates
Options
Other PUD precedents
14
Summary of Electric Rate Study Policy Issues

Revenue Requirement



COSA



Size of increase – one time or multiple increases
Timing of increases
Move towards COSA results
Go across the board
Rate Design








Simplify/consolidate/eliminate
Size of customer charge/minimum bill
Blocking
Seasonality
Net metering
Discounts
Street lights
New large single load rate
15
EES Recommendations

Revenue Requirement



10% one time increase
Implement in CY 2015
COSA


Go across the board next year
Move to +/- 10% of COSA in subsequent years where rate design changes
are revenue neutral
16
EES Recommendations (cont’d)

Rate Design

Increase all customer charges



Commercial/Industrial









Break at 100W
Special contract with City
Discounts


0 – 50 kW without demand meter
Greater than 50 with demand meter
Discount for primary metering
Eliminate farm, irrigation and school rates
No blocking or seasonality
Lighting rate with and without pole


Residential to $15 - $20/month
Minimum bill an option at $25/month
Policy call on who/how much
Like waiving customer charge as method of crediting
Should implement new large single load policy before PUD needs it
Net metering


Policy call
Current policy generous for those using it
17
Pole Attachment Rate



Methodology

Follows Washington State Regulations (RCW 54.04.045)

Based on PSE records for number of poles and plant values

Average gross plant per pole times carrying cost

Assignable space divided by average 3 contacts per pole
Resulting Rates

Current rate of $12 per attachment

RCW based rate equals $25.03 per attachment

Added revenues of $152,000
Recommendation

Raise rate to $15 - $20 per attachment

Refine needed input data

Raise rate to full RCW rate next year
18
Water/Wastewater Results
Summary of Water/Wastewater 2015 Budget
Converted to Cash Basis
Present Rate Revenues
$1,961,506
Other Charges
$32,473
Interest Income
$2,000
Total Operating Revenues
$1,995,979
Purchased Water
$16,000
Operations
$450,000
Maintenance
$360,000
Customer Accounts
$118,853
Customer Service
$130,000
Admin & General
$107,184
Maintenance Gen Plant
$60,000
Capital funded from rates
$90,000
Long-term debt cost
$451,796
Taxes
$95,545
Total Operating Expenses
Operating Income
$1,878,378
$115,601
19
Water/Wasewater Recommendations

No Rate Increase Needed to Cover Cash Basis

Work Towards Eliminating Customer Charge Difference Between
Systems

Quimper=$21.50, Group A=$17.50, Group B=$20.00

Option 1: change all to $20.00 right away, reduces revenues roughly $20,000

Option 2: Raise Group A to $19.50 and Group B to $21.50, adds roughly $30,000
and raise Group A again the following year

Consumptive Rates and Commercial Rates are the Same for All
Systems, No Changes Needed

Continue to Keep Different SDC’s by System Due to Historic Basis for
the Charge

No Change to Wastewater Rate of $26
20
Questions / Answers
21

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