Rate Impacts of Various DSMProgram Designs

Dave Lamont

EEU Budget Negotiations

April 10, 2006

Model Design

• Based on 2004 revenues and sales

• Losses attributed to Sales and DSM impacts are adjusted to VELCO

• Base load forecast assumes no new DSM after 2008

• Base load growth (no DSM) assumed to be 1.5%

Model Design

• 2004 Base revenues separated into VY, HQ, and IPP plus “everything else”

• Revenues are adjusted going forward for impacts of contract expirations as well as incremental market purchases and sales. “Everything else” escalated at inflation (2.5%)

• Model used ICF avoided cost study, including ICAP cost projections

Model Design

• RR includes DSM budgets for ‘06 – ’08

• Revenue requirements (RR) adjusted for T&D expenditures above base peak load

Scenarios

• Model used DSM scenarios as presented by EVT at the 12/3/2005 workshop

• A second set was developed which assumed 2008 savings levels continued through 2025 with costs escalated at inflation (2.5%)

• Savings estimates incorporated EVT decay function

• DSM costs expensed in each year

Results

• Rates increased

• Revenue requirements (including DSM costs) decreased

Base CaseBase Case: Currently Committed EVT Programs as proposed    

Costs 2006 2007 2008 TOTAL Cost/ MWh

Current EEU $16.7 $17.6 $18.2 $52.5  

GWh Savings 2006 2007 2008 TOTAL  

Current EEU

61

71 81

213 $246.02

Rate and Bill Impacts 3 Year programs  Programs continued at 2008

levels    

Levelized Rate 2006 - 2015 $0.1305   Levelized Rate $0.1320  

Rate Change 2006 - 2015 23.7% Rate Change 1.10%  

NPV Rve Req 2006 - 2015 $5,720 NPV Rev Req $5,673  

Revenue Requirement Change 41%   Rev Req Change -0.81%  

Scenario 1: Modest increment with current strategies, as presented at 12/1 PSB Workshop

Costs 2006 2007 2008 TOTALCost/ MWh

Current EEU $16.7 $17.6 $18.2 $52.5  

Scenario 1 Increment $1.4 $3.3 $5.5 $10.1  

Scenario 1 Total $18.0 $20.9 $23.7 $62.6  

% Increase 8% 19% 30% 19%  

     

GWh Savings 2006 2007 2008 TOTAL  

Current EEU 61 71 81 213 $246.02

Scenario 1 Increment 6 12 26 44 $227.21

Scenario 1 Total 67 83 107 258 $242.77

% Increase 9% 17% 33% 21%  

   

Rate and Bill Impacts 3 Year programs   Programs continued at 2008 levels    

Levelized Rate 2006 - 2015 $0.1307 Levelized Rate $0.1325  

Rate Change from Base Case 0.10% Rate Change 1.49%  

NPV Rve Req 2006 - 2015 $5,689 NPV Rev Req $5,608  

Rev Req change from Base Case -0.53%   Rev Req Change -1.96%  

Scenario 2: Double spending in 2008, as presented at 12/1 PSB Workshop  

Costs 2006 2007 2008 TOTAL Cost/ MWh

Current EEU $16.7 $17.6 $18.2 $52.5  

Scenario 2 Increment $3.4 $8.8 $17.2 $29.5  

Scenario 2 Total $20.1 $26.5 $35.4 $82.0  

% Increase 21% 50% 95% 56%  

     

GWh Savings 2006 2007 2008 TOTAL  

Current EEU 61 71 81

213 $246.02

Scenario 2 Increment 13 34 75

122 $241.69

Scenario 2 Total 74 105 156

335 $244.44

% Increase 21% 48% 93% 57%  

   

Rate and Bill Impacts 3 Year programs  Programs continued

at 2008 levels    

Levelized Rate 2006 - 2015 $0.1307 Levelized Rate $0.1332  

Rate Change from Base Case 0.16% Rate Change 2.01%  

NPV Rve Req 2006 - 2015 $5,681 NPV Rev Req $5,526  

Rev Req change from Base Case -0.67%   Rev Req Change -3.38%  

Scenario 4: Implement existing contract spending and strategies with current funding, PLUS as much additional cost-effective investment over next 3 years w/o policy constraints  

Costs 2006 2007 2008 TOTAL Cost/ MWh

Current EEU $16.7 $17.6 $18.2 $52.5  

Scenario 4 Increment $20.8 $61.3 $88.1 $170.1  

Scenario 4 Total $37.4 $78.9 $106.3 $222.6  

% Increase 125% 348% 484% 324%  

     

GWh Savings 2006 2007 2008 TOTAL  

Current EEU 61 71 81 213 $246.02

Scenario 4 Increment 36 105 147 288 $591.21

Scenario 4 Total 97 176 228 501 $444.26

% Increase 59% 148% 181% 135%  

   

Rate and Bill Impacts 3 Year programs   Programs continued at 2008 levels    

Levelized Rate 2006 - 2015 $0.1332 Levelized Rate $0.1439  

Rate Change from Base Case 2.07% Rate Change 10.24%  

NPV Rve Req 2006 - 2015 $5,706 NPV Rev Req $5,744  

Rev Req change from Base Case -0.24%   Rev Req Change 0.43%  

Scenario 5: Ramp up to annual spending of $52.5 million (three times current level) in 2008; Maintain current policies for up to 2 times spending, then unconstrained.  

Costs 2006 2007 2008 TOTAL Cost/ MWh

Current EEU $16.7 $17.6 $18.2 $52.5  

Scenario 5 Increment $3.4 $13.9 $34.3 $51.6  

Scenario 5 Total $20.1 $31.5 $52.5 $104.1  

% Increase 21% 79% 188% 98%  

   

GWh Savings 2006 2007 2008 TOTAL  

Current EEU 61 71 81 213 $246.02

Scenario 5 Increment 13 75 214 301 $171.07

Scenario 5 Total 74 146 295 515 $202.13

% Increase 21% 105% 264% 141%  

 

Rate and Bill Impacts 3 Year programs  Programs continued at 2008

levels    

Levelized Rate 2006 - 2015 $0.1311 Levelized Rate $0.1356  

Rate Change from Base Case 0.44% Rate Change 3.88%  

NPV Rve Req 2006 - 2015 $5,673 NPV Rev Req $5,533  

Rev Req change from Base Case -0.81%   Rev Req Change -3.25%