Jefferson County PUD

Preliminary Cost of Service and Rate Design Results

December 9, 2014

Presented by:

Gary Saleba, PresidentEES Consulting, Inc.

A registered professional engineering corporation with offices in theSeattle and Portland metropolitan areasTelephone (425) 889-2700 Facsimile (425) 889-2725saleba@eesconsulting.com

EES

ConsultingEES

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

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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

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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

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Review of Rate Setting Process

Step 1 - Aggregate Revenue

Requirement (How much?)

Step 2 - Perform Cost of Service Study (Who

should pay?)

Step 3 - Design Rates (How to

collect?)

Step 4 - Implement

Rates

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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

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COSA ResultsSummary of Revenue Requirement

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Revenues 2015 2016 2017 2018

Present Rate Revenues $30,126,902 $30,781,403 $31,049,687 $31,409,098

Other Income $617,573 $636,100 $655,183 $674,839

Total Revenues $30,744,475 $31,417,503 $31,704,870 $32,083,937

Expenses        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

Customer Accounts and Services $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

Total Required Increase (Decrease) 9.9% 15.1% 9.4% 11.2%

Electric COSA ResultsRevenue to Cost Ratios

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Revenues at Current Rates

Adjusted RatioMinimum System

Adjusted Ratio100% Demand

Residential (7) $18,754,671 89.1% 88.9%

Farm Service (8) 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%

PTP 2,685,903 100.7% 100.7%

TOTAL $30,126,902 100.0% 100.0%

Accurate to +/- 10%

Electric Rate Design Policy Input Needed

Determine Overall Rate Adjustment 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

Determine Method for Allocating Rate Increase Across Classes 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 OptionsResidential

Comparison of Rates to Unit Costs

Present Minimum System 100 Percent Demand

Basic Charge ($/day) $7.49 $29.63 $9.03

Energy Charge ($/kWh) $0.08511 (1st 600 kWh)$0.103589 (over 600 kWh) $0.0961 $0.1174

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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

Specific Electric Rate Design ProposalsCommercial/Industrial

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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

Specific Electric Rate Design ProposalsOther 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

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Specific Electric Rate Design ProposalsOther 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

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Specific Electric Rate Design ProposalsOther 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

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Summary of Electric Rate Study Policy Issues

Revenue Requirement Size of increase – one time or multiple increases Timing of increases

COSA 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

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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

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Rate Design Increase all customer charges

Residential to $15 - $20/month Minimum bill an option at $25/month

Commercial/Industrial 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

Break at 100W Special contract with City

Discounts 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

EES Recommendations (cont’d)

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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

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Water/Wastewater Results

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Summary of Water/Wastewater 2015 BudgetConverted 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 $1,878,378

Operating Income $115,601

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

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Questions / Answers

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