HomeMy WebLinkAboutPACKET Town Board Study Session 2016-05-24
Tuesday, May 24, 2016
TOWN BOARD 5:00 p.m. – 6:30 p.m.
STUDY SESSION Rooms 202/203
5:00 p.m. Dinner Served.
5:15 p.m. Electric Rate Study Overview and Recommendations.
(Director Bergsten, Superintendent Lockhart & Shawn Koorn/HDR)
6:15 p.m. Trustee & Administrator Comments & Questions.
Operating Agreement with EVRPD for Golf Course Operations.
6:25 p.m. Future Study Session Agenda Items.
(Board Discussion)
6:40 p.m. Adjourn for Town Board Meeting.
Informal discussion among Trustees concerning agenda items or other Town matters may occur before this
meeting at approximately 4:45 p.m.
AGENDA
May 24, 2016
Overview of the
Electric Rate Study
Presented by:
Shawn Koorn
Associate Vice President
HDR Engineering, Inc.
2
Overview of the Presentation
•Overview of the rate setting process
•Review preliminary rate study results
•Receive Board input
•Next steps
3
Approach to Setting Cost-Based Rates
Cost of Service
Rate Design
Revenue Requirement
Compares the revenues of the
utility to its expenses to determine
the overall level of rate adjustment
Equitably allocates the revenue
requirements between the various
customer classes of service
Design rates for each class of
service to meet the revenue needs
of the utility, along with any other
rate design goals and objectives
4
Overview of the Revenue Requirement
• Determines the level of revenues to prudently
support operating and capital needs
Compares utility
revenues to
expenses
• Legally required debt service coverage ratios
• Prudent renewal and replacement funding
• Adequate reserve levels
Uses prudent
financial planning
criteria
• Five year projected time period
• Focus is on the next three year rate setting period
Reviews a specific
time period
• No transfer of funds from other Town funds
• Rates need to support operations
Utility is analyzed
on a “stand-alone
basis”
5
Revenue Requirement –
“Cash Basis” Approach
+O&M Expenses
+Taxes
+Debt Service (P+I)
+Capital Projects Funded from Rates
=Revenue Requirement
–Miscellaneous Revenues
=Balance Required from Rates
=Total Capital Improvement Projects
–Outside Funding Sources
3 Long-Term Borrowing
3 Contributed Capital
3 Reserves
3 Grants
=Capital Projects Funded from Rates
(i + P) Ann. Depr. Exp.
6
Overview of Cost of Service
What is cost of service?
•Analysis to equitably allocate the revenue requirement to the
various customer classes of service
Why cost of service
•Generally accepted as “fair and equitable”
•Avoids subsidies
•Revenues track costs
•Can provide an accurate price signal
Objectives of Cost of Service
•Determine if subsidies exist
•Develop average unit costs
6
7
Approach and Summary
of the Cost of Service Analysis
•Based on the Town’s system and customer
characteristics
–Coincidental demand (kW)
–Non-coincidental demand (kW)
–Energy (kWh)
–Customer
•Develop allocation factors for each customer class of
service based on actual customer data
–Residential
–Small commercial
–Large commercial
•Results in unit costs that are used to develop the
proposed rates
8
Overview of the Rate Design
8
Reflect the
findings of the
revenue
requirement and
cost of service
analyses
Meet the pricing
goals and
objectives of the
Town
Produce sufficient
revenues to meet
the target
revenues of the
utility, and each
class of service
Are cost-based
and equitable
9
Key Assumptions of the Study
Revenue Requirement
•Starting point is the adopted 2016 Budget
–O&M is escalated by annual inflationary factors
–Projected expenses over the 5-year review period
•Developing a capital funding plan
–Based on the current capital improvement plan
Cost of Service
•Allocate 2016 revenue requirement
–Functionalize costs (general plant, distribution)
–Classify costs into the appropriate component (energy,
demand, customer)
–Allocate costs to customer classes (residential, commercial)
Rate Design
•Current rate structure is maintained for all customers
–Customer charge, energy charge (kWh), and demand
charge (kW) where applicable
Revenue Requirement
Analysis
11
Revenue Requirement – Draft Results
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2016 2017 2018 2019 2020 2021
Revenue Requirement - ($000s)
Total O&M Expenses Taxes & Transfers Debt Service
Rate Funded Capital Current Total Revenue
12
Revenue Requirement - Summary
•Revenue adjustments are necessary
–Annual O&M expenses
–Capital improvement to maintain the system
–Existing annual debt service
–Taxes and Transfers
•Bond required reserves
–90 days of O&M
Rate Transition Plan 2016 2017 2018 2019
ProposedRate Adjustments 6.25%5.50%5.50%5.00%
Cost of Service
Analysis
14
Cost of Service – Draft Results
15
Cost of Service – Summary
Minor cost differences between the customer
classes of service
Reflects customer usage and facility
requirements
Results in fair and equitable rates
Provides the Board with information for rate
structure policy decisions
Cost of service is one tool in the rate making
tool box
Rate Design Analysis
17
Overview of the Current Electric Rates
•Current rate structure
–Fixed customer charge
•Varies by class of service
–Also varies by season for some customers
–Energy Charge (kWh)
•Varies by class of service
–Also varies by season for some customers
–Demand Charge (kW)
•Varies by class of service where applicable
–Also varies by season for some customers
18
Overview of the Proposed Rate Design
•Maintain current rate structure
–Only the level of the rates has been adjusted
•Increasing customer charge (fixed charge)
–Better reflection of fixed costs on the system
•Other rate components (kWh and kW)
were adjusted to meet the target rate
revenue
•Proposed rates will result in resetting the
Power Cost Adjustment (PCA)
–Purchase Power Rider
19
Residential Rate Design –
Present and Proposed Rates
2016 2017 2018 2019
Proposed Rate Adj 6.25%5.50%5.50%5.00%
Residential $/Mo.
Customer Charge $6.70 $9.70 $12.70 $15.70 $18.70
$/KWh
Energy Charge $0.10075 $0.11055 $0.11210 $0.11405 $0.11570
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Residential Demand
Customer Charge $/Mo.
Sept - April $7.70 $11.15 $14.60 $18.05 $21.50
May - Aug 6.70 9.70 12.70 15.70 18.70
Energy Charge $/KWh
Sept - April $0.06021 $0.06775 $0.07070 $0.07375 $0.07670
May - Aug 0.10075 0.11337 0.11830 0.12341 0.12834
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Demand Charge $/KW
Sept - April $10.62 $11.95 $12.45 $13.00 $13.50
May - Aug 0.00 0.00 0.00 0.00 0.00
Present
Rates
20
Residential Rate Design –
Present and Proposed Rates (cont.)
2016 2017 2018 2019
Proposed Rate Adj 6.25%5.50%5.50%5.00%
Residential Energy TOD $/Mo.
Customer Charge $7.70 $11.15 $14.60 $18.05 $21.50
Energy Charge $/KWh
On-Peak $0.11900 $0.13650 $0.14150 $0.14700 $0.15200
Off-Peak 0.05946 0.06820 0.07070 0.07345 0.07595
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Residential Basic TOD
Customer Charge $/Mo.
Sept - April $7.70 $11.15 $14.60 $18.05 $21.50
May - Aug $6.70 $9.70 12.70 15.70 18.70
Energy Charge $/KWh
On-Peak $0.11946 $0.13400 $0.14000 $0.14750 $0.15200
Off-Peak 0.09567 0.10731 0.11212 0.11813 0.12173
Sept - April 0.10075 0.11301 0.11807 0.12440 0.12819
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Present
Rates
21
Residential Rate Design –
Bill Impacts
Present
Rates 2016 2017 2018 2019
@ 700 kWh / Month $82.66 $87.09 $91.17 $95.54 $99.69
$0
$20
$40
$60
$80
$100
$120
Residential Monthly Bill Impacts
22
Commercial Rate Design –
Present and Proposed Rates
2016 2017 2018 2019
Proposed Rate Adj 6.25%5.50%5.50%5.00%
Small Commercial $/Mo.
Customer Charge $9.85 $14.26 $18.67 $23.08 $27.49
$/KWh
Energy Charge $0.09804 $0.10910 $0.11195 $0.11520 $0.11815
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Small Commercial Energy TOD $/Mo.
Customer Charge $10.85 $15.71 $20.57 $25.43 $30.29
Energy Charge $/KWh
On-Peak $0.12356 $0.14400 $0.15000 $0.15600 $0.16150
Off-Peak 0.05417 0.06313 0.06576 0.06839 0.07080
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Large Commercial $/Mo.
Customer Charge $13.35 $19.33 $25.31 $31.29 $37.27
$/KWh
Energy Charge $0.04555 $0.05355 $0.05645 $0.05950 $0.06250
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
$/KW
Demand Charge $11.14 $13.10 $13.75 $14.45 $15.10
Present
Rates
23
Commercial Rate Design –
Present and Proposed Rates (cont.)
2016 2017 2018 2019
Proposed Rate Adj 6.25%5.50%5.50%5.00%
Large Commercial TOD $/Mo.
Customer Charge $15.70 $22.73 $24.29 $30.03 $43.82
Energy Charge $/KWh
On-Peak $0.06142 $0.07000 $0.07350 $0.07750 $0.08200
Off-Peak 0.03330 0.03795 0.03985 0.04202 0.04446
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Demand Charge $13.40 $15.25 $16.00 $16.85 $17.45
Municipal $/Mo.
Customer Charge $0.00 $0.00 $0.00 $0.00 $0.00
$/KWh
Energy Charge $0.09422 $0.10000 $0.10550 $0.11150 $0.11710
PCA 0.00776 0.00000 0.00000 0.00000 0.00000
Outdoor Lighting Area $/Mo.
Customer Charge $10.77 $15.59 $20.41 $25.23 $30.05
Present
Rates
24
Summary of the Rate Designs
•Rate structures reflect general industry
approaches
•No recommended changes to the rate
structures
•Proposed rates will:
–Reflect the revenue needs of the utility
•Developed for a multi-year period (2016 –
2019)
Rate Study Summary
26
Summary of the Electric Rate Study
•Revenue adjustments are necessary
–Need to meet O&M expenses
–Adequately fund renewal and replacement of the
system
–Maintain financial metrics
•Cost of service analysis resulted in minimal
cost differences
•Proposed rates were developed for a multi-
year period
–No rate structure changes are recommended at
this time
27
Next Steps…
•Receive Board input and
policy direction
•Finalize the rate study
•Present the study final
recommendations to the
Board
•Implement proposed
rates
–September 1, 2016
–January 1, 2017 - 2019
June 14, 2016 – Board Room
Update on Environmental Assessment
NEPA process – Loop.
June 16, 2016 – Conference Center
Board Strategic Planning Retreat
June 28, 2016
Vacation Home Task Force Update
Off Cycle Request for Funding from
Outside Organizations
July 12, 2016
Discussion of Town Hydrology Study
and Implications
August 30, 2016
Tentative Town/County meeting on
Vacation Rentals 9 & More
Items Approved – Unscheduled:
(Items are not in order of priority)
Update on Housing Needs and
Responses
Fish Hatchery Property Discussion
Broadband Take Rate Study Report
Development of Annexation
Philosophy and Policy
Review Revised Sign Code Draft
Briefing and Discussion of US 34
Rebuild Project with CDOT
Discuss the Role of Town Government
in Economic Development as it
Relates to the Estes Valley EDC and
Other Organizations
Briefing on Storm Drainage and Flood
Management Issues and Management
Options. Discussion of Storm Water
Utility.
Follow Up on Broadband Issues
Update on Community Center
Study Session Items for Board
Consideration:
Discussion of what items should be
discussed at the Committee level.
Future Town Board Study Session Agenda Items
May 24, 2016