Electric and Water Cost of Service Study January 30, 2019 - PowerPoint PPT Presentation

Board of Commissioners Rate Hearing Electric and Water Cost of Service Study January 30, 2019 Presented by: Angie Sanchez Virnoche, Vice President and Principal Sergey Tarasov, Project Manager

Discussion Outline  Overview of rate study process  Results for electric and water utilities  Water system development fee update  Next steps  Discussion/ Input FCS GROUP Page 2

Overview of the Rate Setting Process FISCAL MANAGEMENT POLICIES Step 1 ECONOMIC ASSUMPTIONS DEFINE CAPITAL NEEDS & FUNDING: RATE REVENUE REQUIREMENT OPERATING & POWER Contributions COSTS • Reserves • Rate Funding • CUSTOMER STATISTICS COST OF SERVICE (COSA) Step 2 ELECTRIC WATER CUSTOMER M & S BASE DEMAND ENERGY PEAK FIRE CUSTOMER DEFINE CUSTOMER ALLOCATE COSTS TO CUSTOMER CLASSES CLASSES Step 3 VARIABLE FIXED RATE DESIGN CHARGES CHARGES FCS GROUP Page 3

Legal Authority for Rate Setting  RCW 54.24.080  (1) The commission of each district which shall have revenue obligations outstanding shall have the power and shall be required to establish, maintain, and collect rates or charges for electric energy and water and other services, facilities, and commodities sold, furnished, or supplied by the district. The rates and charges shall be fair and, except as authorized by RCW 74.38.070 and by subsections (2) and (3) of this section, nondiscriminatory, and shall be adequate to provide revenues sufficient for the payment of the principal of and interest on such revenue obligations for which the payment has not otherwise been provided and all payments which the district is obligated to set aside in any special fund or funds created for such purpose, and for the proper operation and maintenance of the public utility and all necessary repairs, replacements, and renewals thereof.  (3) In establishing rates or charges for water service, commissioners may in their discretion consider the achievement of water conservation goals and the discouragement of wasteful water use practices. FCS GROUP Page 4

Key Assumptions  Study period 2019 – 2024  Projected rate revenue based on customer statistics plus growth – Growth varies by customer class  2019 budget used as baseline – various escalation factors used for future years  New debt – revenue bonds  Power (Electric only) – 5.00% biannual increases starting in FY2020  Fiscal policies: – Operating reserve: 35% of annual O&M & 20% of annual power expense – Capital reserve: target a percentage of original cost of assets • 1% for Electric & 2% for Water – System reinvestment: phase-in up to 100% of annual depreciation – Debt service coverage: target of 1.75x, minimum of 1.25x FCS GROUP Page 5

Scenarios  Scenario 1 – Minimize up-front rate increases – Greater reliance on debt  Scenario 2 (recommended) – Phases in system reinvestment funding, up to depreciation, over 5 years – Less reliance on debt  Scenario 3 – Fund system reinvestment at depreciation starting in 2019 – Least reliance on debt – Higher front end rate increase FCS GROUP Page 6

ELECTRIC UTILITY

Step 1: Key Components Electric Description (2019-2024) Existing Rate Revenue $11.0M - $11.1M O&M Expenses $5.5M - $6.5M Total Power $5.5M - $6.5M Existing Debt Service $0.6M New Debt Service $0.1M - $0.4M Rate-Funded System Reinvestment $0.1 - $1.8M Total CIP (2019 to 2024) $17.8M  $17.8 million in capital projects to be funded by fund balances, rate-funded system reinvestment, new revenue bonds, grants, and tax proceeds  Two new revenue bonds – $1.1M in 2020 – $4.0M in 2022 FCS GROUP Page 8

Step 1: Revenue Requirement Forecast Description 2018 2019 2020 2021 2022 2023 2024 Annual Rate Increase 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Sample Residential Monthly Bill - 1,100 kWh $ 106.24 $ 113.68 $ 121.63 $ 130.15 $ 139.26 $ 145.87 $ 151.71 Average Monthly Increase - $ $ 7.44 $ 7.96 $ 8.51 $ 9.11 $ 6.61 $ 5.83 FCS GROUP Page 9

Step 2: Electric Cost Classification Costs that vary with the total consumption (flow) of the electricity over a specified period of Energy time. Measured in kilowatt-hours (kWh’s) Costs predicated upon the maximum rate of use required at one point in time. Demand may be coincident or non-coincident to the system peak demand. Demand is measured in Demand kilowatts (kW’s) Fixed costs associated with having a customer on the system. These costs vary with the Customer addition or deletion of customers, and not consumptive use – metering/billing/ account services FCS GROUP Page 10

Step 2: Cost of Service Phase-In  Phase in cost of service from 2019 to 2024 – Residential and General Service Non-Metered increase at a higher rate than overall average – General Service Metered and Large Industrial increase at a lower rate than overall average – Cannabis tied to market rates (BPA Load Shaping) Annual Rate Design Targets Cost of Service Phase-In 2019 2020 2021 2022 2023 2024 Residential 9.08% 8.89% 8.72% 8.56% 5.51% 4.37% General Service Non-Metered 11.60% 11.60% 11.60% 11.60% 9.00% 9.00% General Service Metered 2.25% 2.25% 2.25% 2.25% 1.95% 1.95% Large Industrial 3P (Metered) 0.55% 0.55% 0.55% 0.55% 0.45% 0.45% Yard Lighting 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Street Lighting 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Overall Rate Increase 7.00% 7.00% 7.00% 7.00% 4.75% 4.00% Note : Yard and street lighting annual rate adjustments set to overall annual rate increase FCS GROUP Page 11

Step 3: COSA Unit Costs & Rate Design GS 1P GS 1P GS 3P GS 3P Large Industrial Unit Costs Residential (non-metered) (metered) (non-metered) (metered) (metered) Cannabis 2019 Energy - $/kWh $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 $ 0.0414 Demand - $/kW 2.94 5.57 4.51 7.67 6.13 5.91 7.06 Customer - $/Month 51.46 76.27 76.27 98.73 98.73 98.73 98.73 2024 Energy - $/kWh $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 $ 0.0483 Demand - $/kW 4.40 8.16 6.51 11.55 9.05 8.69 10.59 Customer - $/Month 73.59 114.17 114.17 145.39 145.39 145.39 145.39  Produce sufficient revenue to meet the overall financial requirements of the utility  Cost-based and equitable  Meets the goals and objectives of the utility  Proposed rate design changes – Aligns with class based COSA phase-in – Phase in basic (customer) charges to COSA through 2024 FCS GROUP Page 12

Step 3: Proposed Rates Basic (Customer) Charge - $ per month Class Existing 2019 2020 2021 2022 2023 2024 Residential $ 22.75 $ 30.00 $ 39.00 $ 49.00 $ 60.50 $ 68.00 $ 73.00 General Service Non-Metered - 1Ph 22.75 35.00 49.00 65.00 83.00 99.00 114.00 General Service Non-Metered - 3Ph 34.75 55.00 75.00 95.00 115.00 130.00 145.00 General Service Metered - 1Ph 32.50 47.00 62.00 77.00 92.00 103.00 114.00 General Service Metered - 3Ph 75.75 88.00 100.00 112.00 124.00 134.00 145.00 Large Industrial 3P (Metered) 108.25 115.00 122.00 129.00 136.00 141.00 145.00 Energy Charge - $ per kWh Class Existing 2019 2020 2021 2022 2023 2024 Residential $ 0.0759 $ 0.0782 $ 0.0796 $ 0.0808 $ 0.0812 $ 0.0821 $ 0.0839 General Service Non-Metered 0.0761 0.0772 0.0784 0.0796 0.0810 0.0820 0.0849 General Service Metered 0.0628 0.0634 0.0640 0.0647 0.0654 0.0661 0.0668 Large Industrial 3P (Metered) 0.0533 0.0535 0.0538 0.0540 0.0542 0.0544 0.0545 Demand Charge - $ per kW Class Existing 2019 2020 2021 2022 2023 2024 General Service Metered - Over 35kW $ 6.21 $ 6.25 $ 6.30 $ 6.35 $ 6.40 $ 6.45 $ 6.50 Large Industrial 3P (Metered) - Over 35kW 6.21 6.25 6.30 6.35 6.40 6.45 6.50 FCS GROUP Page 13

Step 3: Impacts – Residential Energy Use Total Monthly Charges kWh Existing 2019 2020 2021 2022 2023 2024 300 $ 45.52 $ 53.46 $ 62.88 $ 73.24 $ 84.86 $ 92.63 $ 98.17 600 68.29 76.92 86.76 97.48 109.22 117.26 123.34 900 91.06 100.38 110.64 121.72 133.58 141.89 148.51 1,100 106.24 116.02 126.56 137.88 149.82 158.31 165.29 Average 1,400 129.01 139.48 150.44 162.12 174.18 182.94 190.46 1,700 151.78 162.94 174.32 186.36 198.54 207.57 215.63 2,300 197.32 209.86 222.08 234.84 247.26 256.83 265.97 Energy Use Increase / (Decrease) to Total Monthly Charges kWh 2019 2020 2021 2022 2023 2024 300 $ 7.94 $ 9.42 $ 10.36 $ 11.62 $ 7.77 $ 5.54 600 8.63 9.84 10.72 11.74 8.04 6.08 900 9.32 10.26 11.08 11.86 8.31 6.62 1,100 9.78 10.54 11.32 11.94 8.49 6.98 Average 1,400 10.47 10.96 11.68 12.06 8.76 7.52 1,700 11.16 11.38 12.04 12.18 9.03 8.06 2,300 12.54 12.22 12.76 12.42 9.57 9.14 Energy Use Percent Increase to Total Monthly Charges kWh 2019 2020 2021 2022 2023 2024 300 17.44% 17.62% 16.48% 15.87% 9.16% 5.98% 600 12.64% 12.79% 12.36% 12.04% 7.36% 5.19% 900 10.24% 10.22% 10.01% 9.74% 6.22% 4.67% 1,100 9.21% 9.08% 8.94% 8.66% 5.67% 4.41% Average 1,400 8.12% 7.86% 7.76% 7.44% 5.03% 4.11% 1,700 7.35% 6.98% 6.91% 6.54% 4.55% 3.88% 2,300 6.36% 5.82% 5.75% 5.29% 3.87% 3.56% FCS GROUP Page 14

Comparative Residential Monthly Rates FCS GROUP Page 15

WATER UTILITY - CARSON SYSTEM