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Home My WebLink About1999-03-29 PacketCity of Ukiah Electric Utility Workshop Industry Restructuring March 29, 1999 Purpose of this Workshop 1. Review AB 1890 Requirements relative to Public Utilities. Discuss Information Required to Formulate a Decision Prior to July 1, 1999. e Study the Impact of Various Rate Strategies that could Influence the Decision. AB 1890 Ma~or Provisions for Municipal Utilities Mandates A Minimum Level of Funding of Public Benefits Programs Expenditures equal to the Percentage of total revenues spent by the lowest of the three IOUs in Calendar Year 1994 (Approximately 3.0%). For the City of Ukiah this means approximately $ 350,000 per year through March 31, 2002. The Funds can be spent as determined by the Governing Board in one or more of the following programs: DSM/Conservation Programs New Investment In Renewable Technology Research and Development Low Income Assistance Must hold a Public Hearing by July 1, 1999 for Governing Board to determine Retail Competition Alternative. Retail Competition must be approved in Order to Receive State Sanctioned CTC Collection of CompetitionTransition Oharge Contingent on: Retail competition must start by January 1,2000 Must be completed by December 31,2010 Must turn over control of Transmission to the Independent System Operator Yearly Notification on Bills of Amount of General Fund Transfers I ...... I I--I-- o o o o c~ f,'~llll. 1~,1111. 08/IIZ 6l/1// 811l!1. 1.11;11. 9l/l// ~11111. 1,11111 l~l/llZ 1 l/ilL Ol/;/Z §O/I/Z 80/l/Z ZO/I/Z gO/l/Z gO/l// BO/I/Z ~O/I/Z I0/1//. O0/I/Z GG/l/Z I]O/I/Z I--I '' I " I I--I-- · · · 5 ~5 o ~ o o tt'~l l ll. f,~,llll ?,'~111l 1~,1111. O'~llll- 61/l/Z Zlllll gl/l/Z l~llllZ I. |lllZ ~,. , 00/1// ZO/I// 90/1//. ~0/1// I~0/l//. I~0/l// ~O/l/Z lO/IH 00/1//. 60II. Il I--I " '1 I .....I ...... I "1 ~ I I ' I .....I : I ' I "1 I I ,-- ,-- ,-- v- ~- ~- ~' 0 0 0 d d d d d d d d d d d d d d d d f, Jllll l]llll O~/l/Z 811111. IllJll 911ill. gl/I// J, lllll ~,11111. ~,11lll 11111l 01/l// eOVl// ZO/J//. gO/l// t, Oll. lZ E;O/IIZ i~O/llZ 10/1// 00/l// RATE COMPONENT SUMMARY Rate Component · Generation and Transmission Budaet Dollars Rate Portion % of Rate NCPA Lake Mendocino Western Contract Tanc* Sub-Total Generation and Tansmission $6,406,800 $.064 / Kwh 49% $2,335,294 $.023 / Kwh 19% $ 800,000 $.008 / Kwh 6% $ 93,200 $.001 / Kwh 1% $9,635,294 $. 096 / Kwh 75% Distribution Revenue Projects Operating Expense Admin. & Eng. Sub-Total Distribution $ 259,000 $.003 / Kwh 2% $ 915,100 $.009 / Kwh 7% $ 383,161 $.004 / Kwh 3% $1,557,261 $.016 / Kwh 12% Indirect Expenses Other Admin. Exp. Public Benefits Sub-Total Indirect Expenses $1,327,071 $.013 / Kwh 10% $ 354,012 $.004 / Kwh 3% $1,681,083 $.017 / Kwh 13% Total all Electric Expenses $12,873,638 $. 129 / Kwh** 100% Total Projected Kwh Sales 99,171,227 * Tanc Expenditures included in Budget with NCPA ** $.129 represents approved 98/99 fiscal year budget that includes one time extraordinary expenses. Current System average Cost is $.1256 / Kwh. OPTIONS UNDER CONSIDERATION I , OPEN SERVICE AREA TO COMPETITION IN JULY 1,2000 AND COLLECT STATE ALLOWED CTC. . OPEN SERVICE AREA TO COMPETITION AS QUICKLY AS ECONOMICALLY POSSIBLE. , DO NOTHING NOW AND CONSIDER OPENING SERVICE AREA TO COMPETITION WHEN RATES ARE AT MARKET AND COMPETITION IS BETTER DEFINED. . ACHIEVE MARKET RATES AS QUICKLY AS POSSIBLE AND DO NOT OPEN THE SERVICE AREA TO COMPETITION. _OPEN SF_._BVICE AREATO COMPETITION ON July 1,2000 Benefits Customers will have Choice of Energy Service Providers for the generation portion of their bill. Customers could receive lower utility rates. Risks Large customers may leave the service area. Loss of revenue could require increased rates, which would cause other customers to leave service area. Beginning of a Death Spiral and Debt Default. City could be responsible for measuring, billing and collection of other providers' services. Rates must be Unbundled requiring additional costs for staffing, new computer hardware and billing software modifications to handle third party billing. The City of Ukiah would be the default service provider. Although, customers have left the system, the City would be required to maintain enough energy to supply those customers should their provider fail. It would be necessary to reduce operating expenditures by approximately $2.0 million in 2002. A total reduction of $4.0 million would be required without collection of the CTC. .Conclusions Risks to opening the service area to competition are significant. Required reduction in operating expenditures can not be acheived. Customers with the Hiahest Probability of Chanaina Service Providers Customer Revenue Loss County of Mendocino $466,088 Ukiah Unified School District $45O ,62O Ukiah Valley Medical Center Safeway Food For Less $438,067 $271,527 $250,000 Albertsons $202,897 Walmart $193,019 Kmart $165,659 Mervyn's J.C. Penneys Total $ 90,716 $ 56,736 $2,585,329* * Represents 20.5% of total revenues. Generation portion of revenue would be $1,938,997. LLI o ~ o b o c:/ c~ c~ o o L - --I I '" I--I--t I-- . 0 0 ~ 0 o. o o o o o o o o o d d [g/I//. gIlIIl. [ I./[/Z >- ouuz § 60/[/Z GO/U/ gO/U/. !~0/[//. gO/L// gO/U/ LO/U/ O0/[/i 66/[/l .OPEN SERVICE AREA AS QUICKLY AS ECONOMICALLY POSSIBLE Benefits Customers will have Choice of Energy Service Providers for the generation portion of their bill. Customers could receive lower utility rates when Service area is opened. Significant reduction in operating cost would not be required. .Risks Large customers may leave the service area. Loss of revenue could require increased rates, which would cause other customers to leave service area. Beginning of a Death Spiral and Debt Default. City could be responsible for measuring, billing and collection of other providers' services. Rates must be Unbundled requiring additional costs for staffing, new computer hardware and billing software modifications to handle third party billing. Tile City of Ukiah would be the default service provider. Although, customers have left the system, the City would be required to maintain enough energy to supply those customers should their provider fail. Federal Legislation could force open market competition as soon as 2003. Conclusions . Market rate could be achieved by 2007. Additional operating reductions would be required to offset revenue leakage from customers leaving the system. This alternative is achievable, but risks are significant. l?,1111. 0~1111. §11|11. Bi/J//. /. l/l//.. gllllJ, gl/IlL lzllllJ. ~,llJlZ. ~,11111. I. I/I./Z. ~ OI/I/Z. ~'~ 60/1// 801ii/ LO/II/ 90/l// gO/l//. I;'O/I./Z, E:O/I/Z ~O/I./Z. I,O/I/Z. O0/I/Z. t~§l J l J. 8~tlZ I "I I-~1i '" I~1' ' I~1~1 I "I ' I ...... I ...... I I I~ ,r- ,,-- ,r- ,r-. ~ ?-. r-. 0 0 0 0 d d d d d d d d d d c~ d d d d d q~)l .~ed $ I;~111l I]IllZ OZ/l// 611111 i]1111l Zl/l/Z 9lllll ~lllll VI/l// f, lllll 8llllZ Ot/I/L §O/IH gO/IlL ZO/ll/ 90/l/Z ~0/1//. I~O/I/Z i~O/[// lO/l// 66/i/Z 86/1//. '1 D_Q_~THtNG AND C__~_S/DER :OPENIN_G_THE_S__-~YI_I_I_C_E AREA WHEN RATES AR~MAB_K_E___T_AND_C~MPEZI2rlON I_S_B_ETTER L2EFINED_ Benefits Customers will have Choice of Energy Service Providers for the generation portion of their bill as rates allow. Customers would receive lower utility rates over time. Significant reduction in operating cost would not be required. City would have time to prepare for any additional infrastructure improvements that would be required. Risks Large custonners may leave the service area at some time in the future. City could be responsible for measuring, billing and collection of other providers' services. Rates must be Unbundled requiring additional costs for staffing, new computer hardware and billing software modifications to handle third party billing. The City of Ukiah would be the default service provider. Although, customers have left the system, the City would be required to maintain enough energy to supply those customers should their provider fail. Federal Legislation could force open market competition as soon as 2003. Conclusions Market rate could be achieved by 2019. A decreased amount of operating reductions would be required to offset revenue leakage from customers leaving the system. This alternative is achievable, but risks are significant. lU I- W t, glllZ Og/l/i §Il[Ii Ol/l/z 9l/[/Z J/J/J/l. I~[/I/Z [ l/l/Z >- ouuz § 6o/l/Z lO/il/ 90/I/Z gO/l/Z t, Ol l /l I~o/[//. go~Ii/ lO/[/l o01[11. 66/l/Z ACHIEVE MARKET RATES_AS_QUICKLY. AS POSSIBLE AND, DO NOT OPEN ~_E RVlCE_ AREA Benefits Customers would receive competitive rate as quickly as possible. Significant reduction in operating cost would not be required. Risks Federal Legislation could force open market competition as soon as 2003. C~nclusions Market rate could be achieved by 2007. Additional operating reductions would not be required to offset revenue leakage from customers leaving the system. This alternative has limited risk and gives the City of Ukiah to give competitive to customers. This alternative is staff's recommended strategy. Z Z >. I~'g/I.//-/- gg/l//-/- gZ/I.//- I.Z/L//_.. Og/I./L 6L/I./L GL/L//- LLII./L 9I/L/L gl,/llL l~l./I./L gl/I./L l I. II,/Z >- OilLIL 'o 60/I./Z i~O/I./Z /-/-O/I./Z 90/l/L gO/L//- I~0/I.//-/- SO/I./L gO/I./Z 1.0/I.//. O0/I./L 66/L//-/- 86/ll/_