proposed annual operating budget fiscal year 2017 fy17 gru budget 071… · proposed annual...

Proposed Annual Operating Budget Fiscal Year 2017

City Commission July 14, 2016

Agenda

• Budget Overview • Budget Highlights • Proposed Budget and Financial

Metrics • Forecasts • Rates and Charges

2

Strategic Initiatives • ERP (Enterprise Resource Plan) Integration: Work to develop

an IT infrastructure to serve as a reliable, value-added platform to manage GRU's informational requirements.

• Eliminate Barriers to Efficiencies: Identify areas affecting

GRU's ability to operate efficiently, such as joint support departments with the city, and work to mitigate, reduce or otherwise eliminate those barriers.

• Increase Competitiveness: Use elements of entrepreneurship, Continuous Improvement and other private-industry efficiency models to identify alternatives to current operational, administrative and construction activities through which GRU can reduce system revenue requirements and rates, lower debt or otherwise increase available resources to the organization.

3

Overview • Striving for competitive electric rates

– City Commission adopted goal of rates at ½ of one standard deviation above the mean of FMEA surveyed utilities ($119.51, GRU currently $130.40)

• Ongoing regulatory pressure in all systems • Desire to maintain/improve system reliability • Excellent customer value/customer service • Maintain financial strength • Continue to improve employee engagement

4

Budget Highlights Personnel • Deleted 2 of the FTEs unfunded in FY16 • Operating areas deleted unfunded positions and

vacancies to allow others to add positions needed to best serve our customers

• Included funding for 2 percent employee pay increase

• Increased vacancy factor from 3% to 6% to reflect current staffing

• Planned overfills to allow knowledge transfer prior to staff retirements

5

Budget Highlights • Included costs for SAP reimplementation (both Financial

and Billing Systems) – Approximately $5.2M in O&M 2016-2018 – Approximately $23M in Capital 2016-2018

• Lowered Combined Reserve Target by $10M • Used Commercial Paper for debt in 2017 and issue

Bonds in 2018 • Will seek to expand cost effective Commercial Paper

capacity to $100M in 2017 • Optimizing use of equity to minimize borrowing • Use excess UPIF toward debt service payment in

electric system

6

Electric System • No increase in revenue requirement

– During 2016 budget process, projected 2.0% increase in FY17

– Increased expense allocation beginning in FY16 – Operations’ expense projection consistent with FY16

budget – Use remainder of CR3 settlement – Use UPIF for debt service in FY17 & FY18

• Maintain Fuel Adjustment (FA) at 70 mills • No impact to any residential bill

7

Gas System • 9.0% percent increase to revenue requirement

– During 2016 budget process projected 4.75% increase in FY17

– FY16 sales and revenue projections to approximately 8% and 5.7% below forecast, respectively, due to mild winter

– Modified classification of expenses as Operation & Maintenance (O&M) instead of Capital where appropriate

– Increased expense allocation beginning in FY16 • Purchased Gas Adjustment (PGA) to remain at $0.23 per

therm. Fuel costs are rising and we will continue to monitor for appropriate time to revise

• Net impact to 25 therm residential bill of $2.25

8

Water System • 3.0% percent increase to revenue requirement

– During FY16 budget process projected 3.75% increase

– FY16 sales and revenue projections approximately 4.1% and 1.5% below forecast, respectively

– Increased expense allocation beginning in FY16 – Operations’ expense projection consistent with FY16

budget • Net impact to 7 kgal residential bill of 65¢

9

Wastewater System • 3.0% increase to revenue requirement

– During FY16 budget process projected 4.85% increase for FY17

– Increased expense allocation beginning in FY16 – Continued expenses related to regulatory changes

• Ongoing management expenses for Sweetwater Wetlands Park

• Biosolids Dewatering and Reuse to comply with City/County agreement

• Net impact to 7 kgal residential bill of 80¢

10

GRUCom

• SBAC Fiber Optic System Expansion • Revenue projections adjusted to market

– Increased expense allocation beginning in FY16

• Right-sizing and Right-Placing GRUCom – Asset Reallocation

11

Projected Future Revenue Requirement Increases

12

2017 2018 2019 2020 2021 2022

Electric 0.00% 2.00% 2.00% 2.00% 3.00% 3.00%

Gas 9.00% 3.00% 3.00% 5.00% 5.00% 5.00%

Water 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Wastewater 3.00% 3.00% 3.00% 3.00% 4.00% 4.00%

PROPOSED BUDGET AND FINANCIAL METRICS

13

Combined System Total Non-Fuel O&M

14

Budget 2016 Projection 2016 Budget 2017 Budget 2018

$105,274,411 $116,829,775 $120,580,558 $125,290,926

Budget 2016 Projection 2016 Budget 2017 Budget 2018

$93,626,410 $84,000,000 $78,588,285 $72,597,012

Combined System Total Capital

Budget Overview

Proposed Residential Rate Summary – Standard Usage

System Usage July 2016

Bill Base Rate

Change Fuel

Change Proposed FY17 Bill

Electric 1000 kWh $130.40 $0.00 $0.00 $130.40

Gas 25 therms $ 30.39 $2.25 $0.00 $ 32.64

Water 7 kgal $ 29.85 $0.65 $0.00 $ 30.50

Wastewater 7 kgal $ 52.40 $0.80 $0.00 $ 53.20

Total $243.04 $3.70 $0.00 $246.74

15 Assumes FA of $0.070/kWh and PGA of $0.23/therm

Proposed Residential Rate Summary – Average Usage

System Usage July 2016

Bill Base Rate

Change Fuel

Change Proposed FY17 Bill

Electric 789 kWh $103.41 $0.00 $0.00 $103.41

Gas 18 therms $24.60 $1.63 $0.00 $26.23

Water 4,000 gallons $18.60 $0.65 $0.00 $19.25

Wastewater 4,000 gallons $33.80 $0.50 $0.00 $34.30

Total $180.41 $2.78 $0.00 $183.19

16 Assumes FA of $0.070/kWh and PGA of $0.23/therm

O&M and Capital to Change Revenue Requirement for Rates

System Electric Gas Water Wastewater

O&M 1.1M 124K 280K 350K

Capital 20M 2M 5M 6M

17

To decrease requirement by 1 percent, O&M or Capital would need to decrease by:

FY17 Revenue Classification Dollars in Thousands

18 18

FY17 Expense Classification Dollars in Thousands

19 19

FY17 Non-Labor Expense Detail

20 20

21

FY16 Sales Results Through May Actual

October – May FY2016 Budget

Absolute Difference

Percentage Difference

Electric - Retail MWh 1,075,731 1,047,911 27,819 2.7% Electric - Wholesale MWh 138,031 134,888 3,143 2.3% Electric - Total (Native) MWh 1,213,762 1,182,799 30,962 2.6%

Electric - Retail Base Rate Revenue ($000) $78,354 $77,288 $1,066 1.4% Electric - Wholesale Base Rate Revenue ($000) $2,443 $2,570 -$127 -4.9%

Electric - Total Base Rate Revenue ($000) $80,796 $79,857 $939 1.2%

Natural Gas - Retail Therms 15,120,704 16,442,107 -1,321,403 -8.0% Natural Gas - Base Rate Revenue ($000) $9,451 $10,024 $573 -5.7%

Water - Total kGal 4,336,555 4,523,963 -187,408 -4.1% Water - Total Revenue ($000) $21,030 $21,358 -$328 -1.5%

Wastewater - Total kGal 3,038,251 3,131,426 -93,175 -3.0% Wastewater - Total Revenue ($000) $25,560 $26,124 -$564 -2.2%

21

FINANCIAL METRICS

22

Debt Service Coverage

23

Fixed Charge Coverage

24

Days Cash on Hand

25

Days Liquidity on Hand with proposed additional Commercial Paper capacity

26

Reserves – Combined

27

28

Reserves – Combined Excluding GRUCom

Reserves – Electric

29

Reserves – Gas

30

Reserves – Water

31

Reserves – Wastewater

32

Reserves – GRUCom

33

FORECASTS

34

Forecast Overview • Econometric approach used to develop projections

of number of customers, unit sales, and revenues. • GRU Billing Records and System Logs • Demographics: Bureau of Economic and

Business Research • Economics: IHS Global Insight • Temperatures and Rainfall: National Weather

Service – Gainesville Regional Airport • Uses of the Forecasts: Budgeting, Facilities

Planning, and Regulatory Reporting 35

36

0

20,000

40,000

60,000

80,000

100,000

120,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Electric Customers

Residential Non-Residential 2016 Forecast

37

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Electric Energy SalesMegaWatt-hours

Residential Non-Residential Sales for Resale 2016 Forecast

38

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Natural Gas Energy SalesTherms

Residential Non-Residential 2016 Forecast

39

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Water SalesThousand Gallons (kgal)

Residential Non-Residential University of Florida 2016 Forecast

40

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Fiscal Year

Wastewater BillingsThousand Gallons (kgal)

Residential Non-Residential 2016 Forecast

RATES AND CHARGES

41

Fuel Adjustment

42

• Proposed FY17 fuel adjustment rate $0.070/kWh • Levelization balance as of May 31, 2016 $ 14.8M • Projected balance as of September 30, 2016 $ 14.5M • Projected balance as of September 30, 2017 $ 9.75M • 10% of FY16 Electric fuel budget $ 15.1M • -5% of FY16 Electric fuel budget ($ 7.6M)

43

$9.8M

-$10.0M

-$5.0M

$0.0M

$5.0M

$10.0M

$15.0M

$20.0M

$25.0M

0

20

40

60

80

100

120

140

Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Leve

lizat

ion

Bala

nce

FA ($

/MW

h)

Levelization Balance FY15 and FY16 Actual/Projections with +10%/-5% Band

And Levelized & Unlevelized Fuel Adjustment Rate

Levelization Balance

FA Unlevelized

FA Levelized

+10 of budget

+5 of budget

-5% of budget

Actuals Projection

Residential Electric 1,000 KWh – Standard Usage Comparison

With FMEA Comparison Target June 2016

Residential Electric 789 KWh – Average Usage Comparison

June 2016

General Service Non-Demand Electric Bill Comparison

1,500 KWh June 2016

46

General Service Demand Electric Bill Comparison

30,000 KWh, 75 KW June 2016

47

Large Power Electric Bill Comparison 430,000 KWh, 1,000 KW

June 2016

48

Proposed Residential Natural Gas Rates

49

Billing Component 2016 Rate Proposed

2017 Monthly Customer Charge $9.75 No Change

Energy Charge ($/therm) $0.540 $0.63

MGPCRF (Depot Park) ($/therm) $0.0556 No Change

PGA ($/therm) $0.23 No Change

Residential Natural Gas Bill Comparison 25 Therms June 2016

50

$30.39 $32.10 $32.64

$38.31

$43.71 $44.91 $46.50 $48.66

$51.60 $53.17

$57.96

$0

$10

$20

$30

$40

$50

$60

$70

Residential Natural Gas Bill Comparison 18 Therms – Average Use

June 2016

51

Proposed Small Commercial Natural Gas Rates

52

Billing Component 2016 Rate Proposed

2017 Monthly Customer Charge $20.00 No Change

Energy Charge ($/therm) $0.540 $0.620

MGPCRF (Depot Park) ($/therm) $0.0556 No Change

PGA ($/therm) $0.23 No Change

Small Commercial Natural Gas Bill Comparison 50 Therms June 2016

53

$57.29 $61.28

$65.28

$79.06 $79.63 $85.87 $87.34 $88.00

$93.27

$101.70

$112.48

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Proposed Commercial Natural Gas Rates

54

Billing Component 2016 Rate Proposed

2017 Monthly Customer Charge $45.00 No Change

Energy Charge ($/therm) $0.380 $0.440

MGPCRF (Depot Park) ($/therm) $0.0556 No Change

PGA ($/therm) $0.23 No Change

Commercial Natural Gas Bill Comparison 300 Therms June 2016

55

$244.68 $258.61 $262.68

$305.62

$369.84 $378.39 $378.95 $390.68 $403.00

$478.07

$517.81

$0

$100

$200

$300

$400

$500

$600

Proposed Commercial Large Volume Natural Gas Rates

56

Billing Component 2016 Rate Proposed

2017 Monthly Customer Charge $400.00 No Change

Energy Charge ($/therm) $0.230 $0.270

MGPCRF (Depot Park) ($/therm) $0.0556 No Change

PGA ($/therm) $0.23

No Change

Large Volume Natural Gas Bill Comparison 30,000 Therms

June 2016

57

$15,809 $15,868 $17,068 $17,431

$18,774 $21,064 $21,079

$23,350 $24,388

$31,169

$38,863

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

Proposed Water Monthly Customer Charges

Based on Meter Size

58

Meter Size 2016 Rates Proposed

FY17 5/8” and 3/4” $9.20 $9.45

1” $9.40 $9.65

1.5” $12.25 $12.50

2” $19.50 $20.00

3” $74.00 No change

4” $100.00 No change

6” $140.00 No change

8” $200.00 No change

10” $275.00 No change

Proposed Residential Water Rates

59

Billing Component 2016 Rate Proposed 2017 Monthly Customer Charge (5/8” or 3/4” meter)

$9.20 $9.45

Usage Charge ($/1,000 Gallons) Tier 1 (0-4,000 Gallons) Tier 2 (5,000-16,000 Gallons) Tier 3 (over 16,000 Gallons)

$2.35 $3.75 $6.00

$2.45

No Change No Change

Proposed Residential Irrigation Rates

60

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge (5/8” or 3/4” meter) $9.20 $9.45

Usage Charge ($/1,000 Gallons) Tier 1 (0-12,000 Gallons) Tier 2 (over 12,000 Gallons)

$3.75 $6.00

No change No change

Residential Water Bill Comparison 7,000 Gallons

June 2016

61

$13.71 $15.81 $16.41

$20.87 $21.04 $21.54 $21.83 $23.28 $23.31 $23.37

$27.35 $29.85 $30.50

$32.07 $33.60

$38.73 $40.35

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Residential Water Bill Comparison 4,000 Gallons – Average Use

June 2016

62

Proposed Multi-Family Water Rates

63

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge Based on Meter Size

Based on Meter Size

Usage Charge ($/1,000 Gallons)

$3.45

$3.75

Proposed Commercial Water Rates

64

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge Based on Meter Size

Based on Meter Size

Usage Charge ($/1,000 Gallons) $4.60 No Change

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge Based on Meter Size

Based on Meter Size

Usage Charge ($/1,000 Gallons) $3.85 No Change

Commercial Irrigation

$47.18

$61.70 $63.93 $68.40 $74.39

$83.06 $91.60

$109.22 $113.57 $115.35

$122.24 $124.70 $124.95

$135.94 $137.95

$155.81 $165.41

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Commercial Water Bill Comparison 30,000 Gallons

June 2016

65 Based on 5/8” or 3/4” meter

Proposed Residential and Commercial Wastewater Rates

66

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge $9.00 $9.10

Billing Charge ($/1,000 Gallons) $0.85 $0.95

Billing Component 2016 Rate Proposed 2017

Monthly Customer Charge $9.00 $9.10

Billing Charge ($/1,000 Gallons) $6.20 $6.30

Reclaimed Water

$32.76

$40.70 $43.44 $43.95 $44.08 $45.02 $45.56 $45.81 $46.33 $47.71 $48.82 $50.37

$52.40 $53.20 $53.73 $55.11 $56.72

$60.35

$0

$10

$20

$30

$40

$50

$60

$70

Residential Wastewater Bill Comparison 7,000 Gallons

June 2016

67

Residential Wastewater Bill Comparison 4,000 Gallons – Average Use

June 2016

68

$0

$50

$100

$150

$200

$250

$300

Commercial Wastewater Bill Comparison 30,000 Gallons

June 2016

69

Proposed Revision to Methodology for Multi-family Wastewater

• Currently Wastewater volume billed is based on residential winter max method

• Proposing billing wastewater based on 95% of water use each month, as commercial wastewater is billed

• More accurate billing and revenues

70

WATER AND WASTEWATER FEES

71

Proposed Water & Wastewater Inspection Fees

72

Water Wastewater

2016 Proposed

2017 2016 Proposed

2017

Flat Fee $710 $730 $1,280 $1,320

$/LF (Linear Foot)

$2.31 $2.38 $5.69 $5.86

Proposed Tapping Fees

73

Size 2016 Proposed

2017

1.5” $940 $970

2” $940 $970

4” $4,750 $4,890

6” $5,110 $5,270

8” $5,920 $6,100

12” $9,430 $9,710

STREET LIGHTING RATES

74

Proposed Lighting Rate Changes Fixture Description Current FY16 Rate Proposed FY17 Rate

100W High Pressure Sodium $7.75 $8.37

150W High Pressure Sodium $8.25 $9.18

250W High Pressure Sodium $10.25 $11.80

50W alternative LED - general use $19.35 $14.95

100W alt LED - general use $20.83 $16.88

150W alt LED - general use $24.01 $20.55

50W alt LED - mass change out $6.29

100W alt LED - mass change out $8.06

150W alt LED – mass change out $10.46

FIT CHARGES

Current FIT Charges • Two registers (1 meter) for every FIT Installation

– Register 1 measures on-site consumption – Register 2 measures energy delivered to GRU system

• FIT systems are compensated for energy placed on GRU system based on Register 2’s reading

• Currently FIT systems are charged a monthly fee based on system size and customer type (4 different rates)

– Exception are systems installed 2009 and 2010 which are not currently billed a customer charge

• Although minimal, FIT systems have not been charged for their consumption

77

Proposed FIT Charges

• Two rates for administrative fees – Based on size of system (not customer type)

• Systems ≤10KW (Small FIT) - $14.25/Mo • Systems >10kW (Large FIT) - $29.50/Mo

• Rates for consumption will be assigned to Register 1 that will mirror GSND pricing & taxing

• All FIT systems will be charged fees

78

Residential Basket of Services Standard Usage

79 1,000 kWh of Electricity, 25 Therms of Gas, 7,000 Gallons of Water, & 7,000 Gallons of Wastewater

Residential Basket of Services Average Usage

80 789 kWh of Electricity, 18 Therms of Gas, 4,000 Gallons of Water, & 4,000 Gallons of Wastewater

Residential Basket of Services Customer Charge

81 Tampa does not have a customer charge for water and wastewater.

Proposed Residential Rate Summary

System Usage July 2016

Bill Base Rate

Change Fuel

Change Proposed FY17 Bill

Electric 1000 kWh $130.40 $0.00 $0.00 $130.40

Gas 25 therms $ 30.39 $2.25 $0.00 $ 32.64

Water 7 kgal $ 29.85 $0.65 $0.00 $ 30.50

Wastewater 7 kgal $ 52.40 $0.80 $0.00 $ 53.20

Total $243.04 $3.70 $0.00 $246.74

82 Assumes FA of $0.070/kWh and PGA of $0.23/therm

Proposed Residential Rate Summary – Average Usage

83 Assumes FA of $0.070/kWh and PGA of $0.23/therm

System Usage July 2016

Bill Base Rate

Change Fuel

Change Proposed FY17 Bill

Electric 789 kWh $103.41 $0.00 $0.00 $103.41

Gas 18 therms $24.60 $1.63 $0.00 $26.23

Water 4,000 gallons $18.60 $0.65 $0.00 $19.25

Wastewater 4,000 gallons $33.80 $0.50 $0.00 $34.30

Total $180.41 $2.78 $0.00 $183.19

Recommendation

• The Board recommend that the City Commission direct the City Attorney to draft, and the Clerk of the Commission to advertise an ordinance to adopt the recommended rates, fees and charges for Electric, Water, Wastewater and Gas.

84