Jefferson County PUD

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Presented by:

Gary Saleba, PresidentEES Consulting, Inc.

A registered professional engineering and management consulting firm with offices in Kirkland, WA and Portland, OR

Commission Briefing on Cost of Service and Rate Design Issues

September 10, 2014

Overview of this Presentation2

Introductions and Session Objectives Overview of Rate Setting Process Revenue Requirements

Assumptions Results

Cost of Service Study Methodology Initial Results

Rate Design Inherited from PSE Rates Should Follow Costs Recommended Changes

Overview of Rate Setting Process

Step 1 - Aggregate Revenue

Requirement (How much?)

Step 2 - Perform Cost

of Service Study (Who should pay?)

Step 3 - Design Rates

(How to collect?)

Step 4 - Implement

Rates

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Based on 2015 Budget Load Forecast Based on BPA Forecast of Purchases Cash Basis

Includes debt service and all capital improvements funded from rates

Excludes City utility taxes from revenue and expenses Other revenues offset revenues to be collected from

rates Used for Cost of Service/Rates

Does not include funding from reserves, weather uncertainty, other factors that may impact the need for a rate change

Issues Level and use of reserves Funding source for capital improvements

Revenue Requirements

Cost Category 2015 Amount (million)

Revenues at Present Rates $30.1

Purchased Power from BPA $14.8

Operating Expenses $7.1

Taxes $2.1

Debt Service $5.8

Capital Funded from Rates $3.9

Other Revenue -$0.6

Net Revenue Requirement for COSA $33.2

Revenue Requirements (cont’d)5

Cost of Service Analysis Introduction

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Based on 2015 Revenue Requirement Costs Distributed to Customer Classes based on Cost

Causation Demand-related, Energy-related and Customer-related Requires Assumptions About Customer Usage for Each

Class Revenues Calculated Based on Current Rate Components

Expect Differences from PSE PSE has large service area with larger customers and

different density Also underlying differences due to power supply source

compared to PSE

Cost of Service Analysis Results7

Residential/Farm Classes Residential paying about 90% of costs Not much difference in costs between residential and

farm use Cost roughly 12.4 cents/kWh

General Service Classes General service paying 120% to 160% of costs Costs roughly 7.5 cents/kWh – not much difference

among current general service rate schedules Other Classes

Irrigation and lighting hard to measure in a COSA Interruptible schools paying less than general service,

but costs are higher PTP paying 99% of costs

Rate Design Issues

Continue with PSE Rate Form or Go to PUD-Specific Design?

Size of Customer Charge Blocking of Energy Charge Seasonality Number of Schedules Net Metering Street Lights Irrigation Rate Treatment Low Income/Elderly Rate Assistance

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Rate Design Detail

Schedule 7 – Residential

Raise the customer charge to meet expected COSA results? Eliminate or reduce the differential between blocks so that it

only reflects difference in BPA Tier 1 and 2 Reducing the Block 2 rate would require either an increase in

Block 1 rate or customer charge Example: $16.77 plus 8.62 cents or $23.60 plus 7.98 cents

Schedule 8 – Residential and Farm General Service

No need for a separate rate? No reason to believe their costs are different than typical

residential

Jefferson Clallam PUD Port Angeles

Customer Charge $7.49 $23.60 $16.77

First 600 kWh 8.5011 cents/kWh 6.90 cents/kWh 6.74 cents/kWh

Over 600 kWh 10.3589 cents/kWh

$9.66 per month

8.5189 cents/kWh

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Schedule 24 – General Service

Raise the customer charge to meet expected COSA results? Rate differential should match BPA differential Example: $22.90 plus 8.8 cents or $26.13 plus 8.62 cents

Schedule 25 – Medium General Service

Rate has too many components Suggest eliminating the blocks – not consistent with cost causation Change demand charge to reflect all peak demand (not just over 50 kW) Make sure demand and energy components match COSA to get right price

signals for load factor Not sure three GS rates are needed – combine with Rate 26

Rate Design Detail (cont’d)

Jefferson Clallam PUD Port AngelesCustomer Charge $9.66 $26.13 $22.90October – March 9.5072 cents/kWh 6.90 cents/kWh 6.77 cents/kWhOver 600 kWh 9.1974 cents/kWh

Jefferson Clallam PUD Port AngelesCustomer Charge $51.77 $54.29 $45.74Energy Rate April – September

8.6638 cents/kWh first 20,000

6.9280 cents/kWh over 20,000

October – March9.4791 cents/kWh first

20,0006.9280 cents/kWh first

20,000

5.33 cents/kWh 4.55 cents/kWh

Demand Rate April-September$6.01 per kW over 50 kW

October-March$9.01 per kW over 50 kW

$2.87 $3.89

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Schedule 29 – Seasonal Irrigation & Drainage Pumping Service

Rate has too many components Suggest eliminating the blocks – not consistent with cost

causation Change demand charge to reflect all peak demand (not just over

50 kW) Make sure demand and energy components match COSA to get

right price signals for load factor

Rate Design Detail (cont’d)

Schedule 29 – Seasonal Irrigation & Drainage Pumping Service

$9.56 per month

$4.35 per kW over 50 kW April-September

$8.83 per kW over 50 kW October-March

6.3718 cents/kWh first 20,000 kWh April-September

5.4831 cents/kWh over 20,000 kWh April-September

9.1225 cents/kWh first 20,000 kWh October-March

6.9678 cents/kWh first 20,000 kWh October-March

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Schedule 26 – Large General Service

Combine with Rate 25

Schedule 31 – Primary General Service

Combine with Rate 25/26 with primary meter discount?

Rate Design Detail (cont’d)

Jefferson Clallam PUD Port AngelesCustomer Charge $104.46 $144.57 $45.74Energy Rate 6.7061 cents/kWh 4.38 cents/kWh 4.55 cents/kWhDemand Rate April-September

$5.96 per kW over 50 kWOctober-March

$8.94 per kW over 50 kW

$4.47 $3.89

Jefferson Clallam PUD Port AngelesCustomer Charge $339.51 $144.57 $304.96Energy Rate 6.4918 cents/kWh

4.38 cents/kWh Sept – May4.57 cents/kWhJune – August

2.79 cents/kWhDemand Rate April-September

$5.76 per kW over 50 kWOctober-March

$8.64 per kW over 50 kW

$4.47 with unspecified contractual discount

$4.79

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Schedule 43 – Interruptible Total Electric Schools Eliminate rate? No benefit for interruptible customers with BPA as provider

Street Lights Rate for light Rate for pole What about specialty street lights?

Rate Design Detail (cont’d)

Schedule 43 – Interruptible Total Electric Schools

$339.51 per month

$4.60 per kW

Plus $3.89 per kW critical demand past 11 months

6.066 cents/kWh all energy

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Timing Change when new billing system is put in place Audit accounts and do customer bill analysis in mean time Work towards making sure customers are on the right rate

and have the proper meter

Rate Design Detail14

Summary/Conclusion15

Need to Finalize Budget and How to Pay for Capital/Reserve Fund Policy

Basic COSA is Sufficient for Now Simplify Rates Along with New Billing System, Minor

Adjustments Between Classes