city light rate design-review
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City Light Rate Design-Review. Presentation to Review Panel January 2013. Today’s Presentation. Policy Framework for City Light Rates Rate Design – 2013 Rates. Resolution 31351 (May 2012) General Policy Framework. Covers rate setting, rate design and marginal cost allocation - PowerPoint PPT PresentationTRANSCRIPT
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City Light Rate Design-Review
Presentation to Review PanelJanuary 2013
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Today’s Presentation
Policy Framework for City Light Rates
Rate Design – 2013 Rates
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Resolution 31351 (May 2012)
General Policy Framework Covers rate setting, rate design and marginal cost
allocation
Some objectives may conflict—balance needed
Efficient use of resources—appropriate shares of costs
Predictability from year to year
Public involvement—information and participation
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Resolution 31351 Rate Design Policies
Encourage efficient use of power supply and distribution resources (rates based on marginal cost)
Higher rates for higher consumption (blocks of energy)
Residential 1st block of energy-essential needs, priced below average cost of service
No declining demand charges
Time-of-use rates where feasible
Low-income rates lower by at least 50%
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Resolution 31351Limitations
Does not cover every aspect of cost allocation and rate setting
Other guidelines: Historical decisions by Council Seattle Municipal Code Suburban franchise agreements
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Overview of Rate Design
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Review of Basic Energy Terms Watt: a measurement of the rate of electricity use Kilowatt (kW): standard unit of electric power = 1,000
watts, a short-term measure of maximum demand Kilowatt-hour (kWh): a measure of the flow of electricity
over an hour--10 100-watt lights on for 1 hour = 1 kWh
Example: Flow of Energy
0
5
10
15
20
25
30
35
1 2 3 4 5 6 7 8
Time
kW
h
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Review of Basic Rate Schedule Terms Energy charge: a charge per kWh.
Demand charge (aka “capacity charge”): a charge per peak (“instanteous” or “maximum”) kW.
Base service charge (aka “customer charge”): a charge that is billed whether any electricity is used or not. Applies to SCL residential classes.
Minimum charge: a charge that is billed only if the amount billed for energy use is less than this amount. Like BSC but applies to SCL non-residential classes.
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Residential Rate Design: Translating Council Policy Guidance to Rates Second block rate should “reflect”
marginal cost of energy to the customer
First block rate should be below average cost of service
BSC should equal 50% of marginal customer cost (recovery of billing/account/meter reading costs)
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Residential Rate Design:Inputs for 2013 City Rates
Annual kWh load (MWh) 2,483,852
First block load (MWh) 1,229,639
Second block load (MWh) 1,254,213
# Meters (City + suburbs) 369,234
MC of customer service (City + suburbs)
$42.3M
Revenue Requirement $208.9M
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Residential Rate DesignCity Rates, 2013
Goal: Balance 3 rate elements to meet policy goals & revenue requirement
Step 1: Base Service Charge50% MC Cust Svc x $42.3M = $21.2M $21.2M/369,234 meters/365 = $.1570/dayCity BSC Revenue = $17.4M (302,936 meters)
Step 2: 2nd block rate2012 rate + 6.8% + block differential = $.1071[Note: MC ~ $.1052/kWh]$.1071 x 2nd block kWh = $134.3M Revenue
Step 3: 1st block rateRev Req $208.9M-BSC $17.4M-2nd block
$134.3M) /1st block kWh = $0.0466
2nd block rate $.1071/kWh
1st block rate $.0466/kWh
BSC $.1570/day
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Residential Rates: Structure Two energy blocks
Low-cost first block of kWh (10/day Summer, 16/day Winter) Higher-cost second block of kWh
Base service charge (BSC)
2013 Residential-City Rates
1st block per kWh $0.0466
2nd block per kWh $0.1071
BSC/day $0.1570
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Low-Income Residential Rates Same structure as regular Residential
(1st & 2nd block energy charges, BSC)
Set at 40% of average Residential rate by jurisdiction
Adjusted 2nd block:1st block relationship to encourage energy conservation
------------------------------------------------No. low-income customers: 14,000+ (4%)Rate subsidy 2013: $9.3M
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Minimum Charge Example Calculation Small General Service, 2013
Marginal Costs
Customer Service Cost 4,108,434$ Forecast No. of Meters 43,326 No. of days 365 Minimum bill/day 0.26$
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Small General Service (< 50 kW/month):
Structure, Policy and Rate Design
Translating Policy into Rates: Min. charge = 50% of MC of customer service No BSC allows more $ in energy charge (closer to MC)
Math: Revenue Requirement $ / forecast kWh = ¢/kWh $72.6 M / 1,014,087,866 kWh = $0.0716
Structure 2013 Rates
Flat energy rate/kWh $0.0716
Minimum charge/day $0.26
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Peak Demand Charges - Policy Medium, Large, High Demand GS
Marginal Cost of: Transformers – 100% Service drops – 100% Transformer losses – 50% Remaining distribution*
Non-network – 10% Network – 5%
*In-service area transmission, substations, wires, meters
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Peak Demand Charge Example Calculation
Medium General Service-Nonnetwork, 2013
Marginal Costs
Transformers 4,437,296$ 100% 4,437,296$ Service Drop 697,870 100% 697,870 ISA Transmission 10,208,966 10% 1,020,897 Substations 6,922,594 10% 692,259 Wires 37,748,632 10% 3,774,863 Meters 185,236 10% 18,524 50% Transformer Losses 241,977 241,977 Total Dist for Demand Charge 10,883,686$ Annual Billing kW 5,097,804 Demand Charge/kW 2.13$
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Medium General Service Rate Design:MGS-City, Inputs for 2013 Rates
Annual kWh load 1,612,580,914
Annual kW of peak demand 4,319,940
Revenue Requirement $100.5M
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Medium General Service: City(50 kW – 999 kW/month): Structure &
Policy
Translating Policy into Rates: Min. charge = 50% of MC of customer service Demand charges incorporate more MC of distribution
Math: Demand: $2.13 x 4,319,940 = $9.2M Rev Req $100.5M - $9.2M = $91.3M Rev Req Energy Energy charge: $91.3M/1,612,580,914 kWh = $.0566
Structure 2013 Rates
Flat energy rate/kWh $0.0566
Flat demand rate/kW $2.13
Minimum charge/day $0.62
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Large and HD General Service Translating Policy into Rates:
Min. charge = 50% of MC of customer service
Peak kW rate: See Demand Charge slide
Off-peak kW rate = Transformer ownership discount rate
Peak/offpeak kWh rate differential: Peak/offpeak MC energy
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Off-Peak Demand Charge = Transformer Ownership Discount
$ in thousands 2013
Capital Cost for Transformers $7,135
Inflation factor (2011=1.0) x 1.040
Inflated Capital Cost $7,418
Effective Tax Rate = 10.9550% x 1.10955
Total Capital Cost with Taxes $8,231
Annualization Factor = 0.05102 x 0.05102
Annualized Capital Cost $420
Percent capital cost subject to O&M = 88% x 88%
Capital Cost Subject to O&M $371
O&M % of Annual Capital Cost = 5.11% x 5.11%
Annualized O&M Cost $19
Total = Annualized Capital Cost + Annualized O&M Cost $439
Total Annual Billing kW 1,903,627
Transformer Discount ($/kW) $0.23
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Large General Service Rate Design:
LGS-City, Inputs for 2013 Rates
Annual kWh load 788,787,927
Peak 486,452,338
Offpeak 302,335,589
Annual kW of demand 1,934,459
Peak 1,913,958
Offpeak 20,501
Revenue Requirement $48.1M
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Large GS-City: Math, 2013
Rate kW Revenue ($M)Peak kW Revenue 1.52$ 1,913,958 2.9$ Offpeak kW Revenue 0.23$ 20,501 0.005$ Revenue from kW Rates 2.9$
Total Revenue Req. 48.1$ Less Revenue from kW Rates 2.9$ Rev Req from kWh Rates 45.2$
kWhOffpeak kWh Rate: A. Rev Req from kWh Rates 45.2$ Divided by: 1.5 x Peak kWh 729,678,507 Plus Offpeak kWh 302,335,589 B. Total Divisor 1,032,014,096 Offpeak kWh Rate (A/B) 0.0438$
Peak kWh Rate: 1.5 x Offpeak kWh Rate 0.0657$
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Large (1,000-9,999 kW/month) and High Demand General Service (10,000+ kW/month)
Structure LGS City 2013 Rates
Peak energy charge/kWh $0.0657
Off-peak energy charge/kWh $0.0438
Peak demand charge/kW $1.52
Off-peak demand charge/kW $0.23
Minimum charge/day $16.39
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How LGS-City Rates x kW/kWh =
LGS-City Revenue Requirement
Rate kW/kWh Revenue ($M)Peak kW Revenue 1.52$ 1,913,958 2.9$ Offpeak kW Revenue 0.23$ 20,501 0.005$ Revenue from kW Rates 2.9$
Peak kWh Revenue 0.0657$ 486,452,338 32.0$ Offpeak kWh Revenue 0.0438$ 302,335,589 13.2$ Revenue from kWh Rates 45.2$
Total Revenue Requirement 48.1$