B-2 Large General Service (LGS) Rate Application Large General - - PDF document

B-2 BC HYDRO

LGS RATE EXHIBIT

Large General Service (LGS) Rate Application Large General Service (LGS) Rate Application Technical Workshop Technical Workshop

November 6, 2009 November 6, 2009

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Technical Workshop Objectives Technical Workshop Objectives

• Orientation to the application lay-out and format
• Overview of what BC Hydro is proposing
• Outline the key assumptions used in the application
• Overview of the MGS and LGS Account Tools

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Agenda

1) Application Organization 2) Proposed Large General Service (LGS) Rate 3) Proposed Medium General Service (MGS) Rate 4) LGS Customer Examples 5) Overview of Account Tools 6) Conservation, Pricing Principles and Assumptions 7) Administrative, Implementation and Evaluation Details 8) BCUC Regulatory Timetable

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Organization of the Application

Table of Contents Chapter 1 – Application Chapter 2 – Direct Testimony of Lisa Coltart Chapter 3 – Direct Testimony of Sylvia von Minden Chapter 4 – Direct Testimony of Ren Orans Chapter 5 – Direct Testimony of Bob Steele

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Organization of the Application … continued

Appendices A ELGS Tariff Provisions B ELGS Class Characteristics C Comparison of TSR, RIB, LGS and MGS D Customer Consultation E Phase 1 – Customer Engagement Report F Phase 2 – Customer Engagement Report G Implementation H Survey of General Service Rates I Evaluation of Alternative Generic Rate Structures J Segmentation K Baseline Determination L LGS Bill Volatility M MGS Design Alternatives N MGS Pricing Methodology O LGS Pricing Methodology P Conservation Estimating Methodology Q MGS and LGS Modelling Assumptions R Draft Procedural Order S Draft Final Order T Draft Tariff Sheets

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Key Phases of Customer Consultation

Figure D-1

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Existing LGS Class Average Electricity Rate*

• The existing LGS (ELGS) average electricity rate (based on total monthly bill
• f energy, demand and basic charges) shows two clear patterns:
• Customers below 150 KW see an average rate that declines
• Customers above 150 KW see an average rate that is relatively flat

* Based on F2008 energy rates Figure 3 – 4 Average Electricity Rate

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Segment Existing Class into Medium and Large GS Segment Existing Class into Medium and Large GS

Conservation Rates currently in place.

Flat Rate Design (Phase-in) Two-Part Design (Phase-in)

(35-150 kW) (> 150 kW) % represent proportion of BC Hydro’s domestic load (2009)

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Generic Two-Part Energy Rate Structure

Figure 2 - 2

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Key Design Features of the BCH Two-Part Rate

1 4 3 2 Figure 3 - 6

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Monthly, Formulaic, 3-Year Rolling Average Baselines

Figure 3 - 5

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Price Limit Bands

• Bill impacts … same consumption; different rate structures
• Bill volatility … same rate structure; different consumption

Price Limit Bands:

• Proposed at 80:120% of Baseline
• kWh changes from Baseline outside of these bands

will be charged at the appropriate Part One rate

• Estimate that ~80% of LGS bills will remain within these

bands

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Anomaly Rule (Example: Calculating HBL for January 2015)

Consumption 70,000 kWh Consumption 100,000 kWh Consumption 30,000 kWh Jan 2012 Jan 2013 Jan 2014

Less than half the consumption of next lowest month (Jan 2012) January 2014 (lowest use is <50% of next lowest month (January 2012), therefore is excluded from the baseline calculation As a result, January 2015 HBL = (70,000+100,000)/2 = 85,000 kWh

Consumption

Table 1 - 1

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Transitional Features of the Two-Part Rate

1 2 Figure 3 - 6

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Initial Baseline for the Two-Part Rate

Figure 3 - 8

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Phase-In to LRMC

Fiscal Period Part-2 Energy Rate (cents/kWh) F2011 and 2012 6.88 F2013 9.42 Table 3-2 Part-2 Energy Rate

LRMC Prices In Various Rate Structures:

• TSR Tier 2 price:

7.36 cents/kWh

• RIB Step 2 price:

8.27 = 7.36 cents/kWh x losses

• LGS Part 2 price:

9.42 = 7.36 cents/kWh x inflation x losses

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Two-Part Rate Example Examples of changes to a customer’s monthly energy portion of their bill under the two-part rate. Customer has baseline of 160,000 kWh for the month (average kWh for the LGS class). Situations illustrated:

• Actual use = baseline
• Use 5% less than baseline
• Use 5% more than baseline

Using F2011 tariff rates.

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Two-Part Example – Actual Use = Baseline

F11 Prices Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.18 1,211 $ All additional kWh 145,200 3.94 5,721 $ 160,000 Total Energy Bill ($) 6,932 $ F11 Prices Part 1: Baseline Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.17 1,209 $ All additional Baseline kWh 145,200 3.93 5,706 $ 160,000 Part 1 Energy Bill 6,916 $ Part 2 : Energy (Credit) or Charge Energy difference from Baseline (+ 20%) 6.68

• $

Energy (below) 80% or above 120% of Baseline 3.93

• Part 2 Energy Bill
• $

Total Energy Bill 6,916 $ Unit Cost (¢/kWh) 4.3 Proposed Two-Part Rate Structure minus Existing LGS Rate Structure ($) (16) $

No Part 2 Charge

• r Credit

Current LGS Rate Structure Proposed Two-Part Rate

Variance due to revenue neutral rates

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Two-Part Example – Actual Use 5% Below Baseline

F11 Prices Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.18 1,211 $ All additional kWh 137,200 3.94 5,406 $ 152,000 Total Energy Bill ($) 6,616 $ F11 Prices Part 1: Baseline Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.17 1,209 $ All additional Baseline kWh 145,200 3.93 5,706 $ 160,000 Part 1 Energy Bill 6,916 $ Part 2 : Energy (Credit) or Charge Energy difference from Baseline (+ 20%) (8,000) 6.68 (534) $ Energy (below) 80% or above 120% of Baseline 3.93 Part 2 Energy Bill (534) $ Total Energy Bill 6,381 $ Unit Cost (¢/kWh) 4.2 Proposed Two-Part Rate Structure minus Existing LGS Rate Structure ($) (235) $

Part 2 Credit

Current LGS Rate Structure Proposed Two-Part Rate

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Two-Part Example – Actual Use 5% Above Baseline

F11 Prices Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.18 1,211 $ All additional kWh 153,200 3.94 6,036 $ 168,000 Total Energy Bill ($) 7,247 $ F11 Prices Part 1: Baseline Energy Charge kWh cents / kWh Energy $ First 14,800 kWh 14,800 8.17 1,209 $ All additional Baseline kWh 145,200 3.93 5,706 $ 160,000 Part 1 Energy Bill 6,916 $ Part 2 : Energy (Credit) or Charge Energy difference from Baseline (+ 20%) 8,000 6.68 534 $ Energy (below) 80% or above 120% of Baseline 3.93 Part 2 Energy Bill 534 $ Total Energy Bill 7,450 $ Unit Cost (¢/kWh) 4.4 Proposed Two-Part Rate Structure minus Existing LGS Rate Structure ($) 203 $

Current LGS Rate Structure Proposed Two-Part Rate

Part 2 Charge

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MGS Flat MGS Flat Rate

Rate –

– F2016 Average Electricity Rate per kWh F2016 Average Electricity Rate per kWh

• Figure 2 – 3 below shows the average electricity rate per kWh for customers

in the MGS class with different levels of demand

~70% of accounts ~30% of accounts

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For the new MGS class a Flat Energy Rate is Proposed For the new MGS class a Flat Energy Rate is Proposed

Phase-in to a flat rate from current declining block Table N-12 provides the estimated prices as the rate structure flattens

Fiscal Year MGS Tier 1 (cents/kWh) MGS Tier 2 (cents/kWh) F2010 (current) 7.69 3.70 F2011 8.12 4.05 F2012 8.39 4.52 F2013 8.80 5.32 F2014 9.13 6.40 F2015 9.23 7.71 F2016 9.25 9.25

Maximum Rate Restructuring Impact (See Table 2-1)

N/A CARC + 2% CARC + 4% CARC + 6% CARC + 8% CARC + 10% CARC + up to10%

CARC = Assumed Class Average Rate Changes can arise from any or all of the following: revenue requirement changes, changes in rate rider, and cost of service rate re-balancing

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MGS Bill Impacts Due to the Restructuring Alone These bill impacts assume no changes in consumption. 30% of accounts “pay more” than under current structure

• All remain under bill impact thresholds
• Average annual bill increase is ~ $2,800 on a bill of $32,000 or

around 8.75%; if we remove the effect of CARC, the effect of restructuring alone is an average annual increase of 2%.

70% of accounts “pay less”

• Average annual bill decrease due to restructuring is 2.5%

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Overview of Account Tools MGS Account Tool LGS Account Tool

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Description

• Each “Account Tool” is set up with the rate

structures proposed in the Application as well as the modelling assumptions used in the Application

• Each is “populated” with a range of customer

scenarios, in each new class

• Model provides for the selection of a consumption

profile and for the LGS Account Tool selection of an annual percent decline (conservation) or percent increase in energy consumption

• Also can manually input consumption

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MGS

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LGS

• 1. User selects a historical consumption scenario
• Scenarios 1 to 9 are preset on varying consumption levels
• Manual entry for historical consumption (by month) also available
• 2. User selects a consumption rate of change (e.g. 0% growth per year)

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LGS

• 3. Result shows energy charges
• Compares the energy charges that would have been experienced at the

current declining block structure with the new two-part rate structure

• Detailed accounting of consumption and charges
• Forecasting range is between F11 to F15

*Example shown is growth of 0% for the 50th percentile LGS account. Please refer to the tool for more details.

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Conservation Methodology

MGS:

Conservation is the product of: – Energy associated with marginal price change – % change marginal price – Elasticity

LGS:

Conservation is the product of: – All energy minus total energy for monthly bills when bill exceeds Price Limit Band – % change in marginal price – Elasticity MGS and LGS – also deduct conservation from CARC with no rate structure change

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Conservation Estimates for Proposed Rate Structures Conservation Estimates for Proposed Rate Structures

Conservation estimates for the proposed rate structures are higher than the ELGS forecast in the 2008 LTAP Tables 5-1, 5-2 and 5-3 provide MGS and LGS conservation estimates and compare them to the estimate used in the 2008 LTAP for the ELGS class

Fiscal Year MGS Conservation (GWh) LGS Conservation (GWh) Total (GWh) F2011 5 135 140 F2012 55 515 570 F2013 100 940 1040 F2014 160 1220 1380 F2015 240 1495 1735

Estimated ELGS Conservation in 2008 LTAP

230 355 325 310 350

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Pricing Methodology – Principles Applied

MGS and LGS:

• maintain revenue neutrality with today’s rate structure

MGS:

• Set Tier 2 rate, which is limited by the maximum rate

restructuring impact

• Calculate Tier 1 residually

LGS:

• Set Part 2 Based on Phase-in LRMC (see next slide)
• Calculate Part 1 (Tier 1 and Tier 2) residually

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Long Run Marginal Cost Assumptions and Calculations

Fiscal Year Inflation (%) Line Losses LRMC based on F2006 Call (cents/kWh) LRMC based

• n 12 cent

proxy (cents/kWh) LGS Part-2 Energy Rate (cents/kWh)

2006 7.36 2007 2.3 6% & 6% 8.46 2008 1.4 6% & 6% 8.58 2009 1.2 6% & 6% 8.68 2010 2.0 6% & 6% 8.85 12.00 2011 2.1 6% & 6% 9.04 12.25 6.68 2012 2.1 6% & 6% 9.23 12.51 6.68 2013 2.1 6% & 6% 9.42 12.77 9.42 2014 2.1 13.04 11.37 2015 2.1 13.31 13.31

Table Q - 3 and Table Q - 4

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Additional Highlights

LGS Accounts:

• Accounts with insufficient history 2005 – 2007
• New accounts: 90% Part 1 plus 10% Part 2

All Accounts:

• Migration rules
• Implementation - 6 months required from BCUC Order to Launch.

Key drivers of timeline:

– Billing System – Customer Support – Two new rate structures

• Evaluation:

– 2 control groups – MGS and LGS – 36 months until LGS report to BCUC

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BCUC Regulatory Timetable

Round 1 IRs Due BCUC Intervenors November 12 November 16 Filing of Assistance/Cost Award Budgets November 18 BC Hydro Round 1 IR Responses Due December 7 Procedural Conference December 8 Round 2 IRs Due From All December 17 BC Hydro Round 2 IR Responses Due January 22, 2010 Intervenor Evidence (if any) Filed February 1, 2010 IRs on Intervenor Evidence Due From All February 10, 2010 Intervenor IR Responses Due March 2, 2010