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City of Port Angeles

Strategic Planning PresentationJune 7, 2011

Presented by:

Gary Saleba, PresidentEES Consulting, Inc.

A registered professional engineering corporation withoffices in Kirkland, WA; Bellingham, WA; and Portland, OR

Telephone (425) 889-2700 Facsimile (425) 889-2725saleba@eesconsulting.com

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Agenda

Introductions and Session Objectives

Background on EES Consulting, Inc.

Financial Impacts Of: Impact of the BPA Rate Increase Demand Side Management (DSM) Demand Response (DR) Other Financial Considerations Cost of Service Study (COSS)

Key Performance Objectives

Salient Comments and Closing

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About EES Consulting, Inc.

Registered Professional Engineering and Management Consulting Firm Formed in 1978 Offices in Bellingham, Kirkland, and Portland 30-40 Professional Staff – ½ Engineers, ½ Other Professionals Clientele Consists of Utilities, Large Industrial Customers, Regulatory

Commissions throughout North America Primary Lines of Business

Engineering design/construction management Resource and strategic planning Regulatory affairs/expert witness Rates / cost of service Demand side management

Background of EES Senior Consultants

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Impact of New BPA Rates on the City

New TRM Rates from BPA Beginning October 2011 “Tier 1” rate for lower-cost federal power resources (HWM) “Tier 2” rate for new load growth at market rates New TRM demand charge priced at market prices

Charges the incremental demand above grandfathered amount (CDQ)

Load following charge Charges and credits based on difference between City energy use and BPA’s hydro /

thermal resource shape

Overall power supply increase estimated at 12% starting October 2011 Equates to at least a 6% retail rate increase Will be adjusted every two years going forward

Overall transmission rate change estimated at 0%

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BPA Tiered Rate Methodology (TRM) Rates

TRM Includes a Large Flat Monthly Customer Charge (~90% of bill) in Addition to the Demand and Load Shaping Charges Below

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Impact of BPA Rate Increase

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Impact of New BPA Rates on the City

How to Deal with Growth Energy efficiency

Demand response

Everyone pays

New Large Single Load Policy

Financial Reserve Levels Significant power bill fluctuations (monthly variation up to $2 million) Existing rate stabilization fund Existing unrestricted cash balance

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Electric Unrestricted Cash Balance

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Demand Side Management

Demand Side Management has Two Primary Components: Energy efficiency

Demand response

The Target for Energy Efficiency could be to Keep the City’s Total Electricity Requirements Under HWM and Out of Tier 2

The Target for Demand Response could be to Control Peak Demand and Therefore Reduced TRM Demand Charges. Also Helps Reduce Capacity of Local Distribution Facilities.

Effective DSM Can Optimize Low-Cost Tier 1 Power from BPA and Reduced or Eliminate Demand Charges

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Energy Efficiency

Objective – The Objective for Offering Energy Efficiency Programs is to Delay or Avoid the Need to Purchase Tier 2 or Market-Priced Electricity

In 2009 EES Consulting Completed an Energy Efficiency Potential Assessment to Determine the Amount and Cost of Energy Efficiency Available to the City

The potential assessment indicated that 0.34 aMW of energy efficiency is available per year from the residential and commercial sectors at $30/MWh

Another 0.4 – 0.5 aMW per year is available from the industrial sector

In 2012 a Conservation Plan Will be Required by BPA

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Energy Efficiency– Strong Performance by City

Energy Efficiency Achievements FY07 - FY09

BPA-FundedBPA Funded

aMW2007

CustomersaMW/10,000

Customers

Cowlitz PUD 6.540 48,083 1.360

City of Port Angeles 1.088 10,623 1.024

Franklin PUD 0.917 21,299 0.431

Pend Oreille PUD 0.355 8,549 0.415

Richland 0.945 22,984 0.411

Lewis PUD 1.066 30,157 0.353

Tacoma Power 4.678 165,122 0.283

Snohomish PUD 8.540 315,437 0.271

Benton PUD 1.225 45,569 0.269

Inland Power 0.904 35,186 0.257

Clark PUD 3.958 180,043 0.220

Grays Harbor PUD 0.877 41,585 0.211

Clallam PUD 0.608 29,595 0.205

Mason PUD #3 0.536 31,940 0.168

Seattle City Light 5.178 383,127 0.135

TOTALS/AVG 37.415 1,369,299 0.273

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Energy Efficiency– Summary

The City has a Strong History of Energy Efficiency Achievements Low cost, high impact programs to date The City is one of the leaders in terms of savings per customer

Effective Energy Efficiency Programs Can Further Delay the Need for Tier 2 Purchases, Subject to Any New Large Single Loads

The City has Significant Energy Efficiency Potential

Energy Efficiency Programs May Cause Upward Rate Pressure Initially Initial program and incentive costs ($500K - $1M) BPA to double funding in October 2011 City has spent $300,000/year of ratepayer funds each of the last 2 years Those who participate will pay less, even if rates increase In the long run, rates will be lower

Overall the City Can Serve More Customers with the Same kWh

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Demand Response (DR)

Demand Response is a Way to Control Utility Peak Demand by Offering Incentives to Shift or Reduce Individual Customer Peaks at Critical Times

Current City DR Project List

• Automated Metering Infrastructure (AMI) Installation

• Residential DR Pilot

• Commercial & Industrial DR Pilot

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Demand Response (DR): Advanced Metering Infrastructure

Goals and Objectives

• To provide the City the ability to implement DR

Project Summary

• AMI installation the first step to implementation of DR

• City replacing all electric and water meters with AMI

• Installation to be complete by end of 2011

• Total project cost approximately $4.4 million

Project Status

• Installation currently under way

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Demand Response (DR): Residential DR Pilot

Goals and Objectives

• Reduce City’s local demand above its specified CDQ

• Reduce wholesale power supply costs to residential customers

• Minimize perceived impact (e.g., discomfort) to residential customers

• Maximize residential customers’ acceptance of DR

• Delay or eliminate BPA transmission system upgrades

DR Project Summary

• Perform economic evaluation of DR equipment (e.g., water heater controls, home area networks and thermal storage devices) installed at residential properties against a baseline control group following 1 year of data collection

• Expected savings for pilot group = 387 kW/month

Project Status

• Delayed until AMI installation and testing complete, data collection to begin 2012

Project Co-Funding From BPA

• $426,000

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Demand Response (DR): Commercial & Industrial DR Pilot

Goals and Objectives

• Delay or eliminate BPA transmission system upgrades

• Reduce the City’s local demand above its specified CDQ

• Reduce wholesale power supply costs to the City’s electric utility customers

• Work with BPA to reduce demand on BPA’s transmission system using OpenADR communications protocol

DR Project Summary

• Evaluate the cost effectiveness of DR equipment (e.g., process controls) installed at 9 commercial and industrial facilities following 1 year of data collection

• Expected savings for pilot group = 3.2 MW

Project Status

• Customer agreements currently under review

Project Co-Funding From BPA

• $298,000

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Demand Response (DR): Summary

The City has a Very Active DR Strategy Infrastructure is being built

Pilot studies underway

The AMI System will Enable the City to Better Optimize and Minimize Customer Peak Demand

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Other Financial Considerations

Will The City Purchase the Fiber Optic Network?

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Cost of Service Study (COSS) – TRM Study

Cost of Service Study – Performed in July 2010 Focus on TRM and Retail Rate Design NOT COSS Rates

Revenue requirement study showed - 5.3% increase needed 2.3% approved by City Council

Cost allocation showed – no major realignment needed However- does not take into account post-2011 power supply rates

Rate design goals Collection of fixed costs Cost based Price signals

TOU Demand rates

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Cost of Service Study (COSS)

Seasonal Time-of-Use was the City Council Approved Rate Design for All Customer Classes (~200 commercial customers with demand rate)

Winter and summer seasons Customer base charge

Peak, shoulder, and off-peak energy charge

Inclining block demand rate (only applies to ~200 commercial customers)

Demand rate: 95% similar to current rates, 5% at new demand rate (avg. $9.5/kW)

Similar to City’s current Municipal water pump rate design

Sends Correct Price Signal Without too Much Complexity

Encourages Customers to: Shift loads to lower-priced off-peak hours

Reduces peak demand and winter energy consumption

Peak and Off-Peak Periods Should Reflect BPA’s Time of Use Periods Demand may be modified to reflect City’s requirements

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Updated BPA Peak Hours, Off-Peak Hours, Shoulder Hours and Demand via 24-Hour Time Clock

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Electric Rate Design Including Season Rates (Winter/Summer)

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Financial Consider building operating reserves beyond minimums necessary

Energy Efficiency Cheapest option for load growth Continue pursuing cost effective programs

Demand Response Continue implementation Next is Pilot Program and evaluation

Rates Future rate increase should be applied only to the base charge to reduce

financial risk Develop New Large Single Load Policy Survey customers for interest in green energy rate options Conduct a cost of service analysis in 2013 after TRM is fully in place and 12

months AMI

Recommended Key Performance Objectives

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Conclusions/Salient Comments

If it Was Easy, It Would Have Already Been Done

If You Don’t Do It, Someone Else Will

Better to Have No Business than Bad Business

Better to be Roughly Right, than Precisely Wrong