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City Light Rate Design-Review

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

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City Light Rate Design-Review

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  1. City Light Rate Design-Review Presentation to Review Panel January 2013

  2. Today’s Presentation • Policy Framework for City Light Rates • Rate Design – 2013 Rates

  3. 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

  4. 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%

  5. 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

  6. Overview of Rate Design

  7. 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

  8. 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.

  9. 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)

  10. Residential Rate Design:Inputs for 2013 City Rates

  11. Residential Rate DesignCity Rates, 2013 Goal: Balance 3 rate elements to meet policy goals & revenue requirement Step 1: Base Service Charge 50% MC Cust Svc x $42.3M = $21.2M $21.2M/369,234 meters/365 = $.1570/day City BSC Revenue = $17.4M (302,936 meters) Step 2: 2nd block rate 2012 rate + 6.8% + block differential = $.1071 [Note: MC ~ $.1052/kWh] $.1071 x 2nd block kWh = $134.3M Revenue Step 3:1st block rate Rev Req $208.9M-BSC $17.4M-2nd block $134.3M) /1st block kWh = $0.0466 2nd block rate $.1071/kWh BSC $.1570/day 1st block rate $.0466/kWh

  12. 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

  13. 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

  14. Minimum Charge Example Calculation Small General Service, 2013Marginal Costs

  15. 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

  16. 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

  17. Peak Demand Charge Example CalculationMedium General Service-Nonnetwork, 2013Marginal Costs

  18. Medium General Service Rate Design:MGS-City, Inputs for 2013 Rates 18

  19. 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

  20. 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

  21. Off-Peak Demand Charge = Transformer Ownership Discount

  22. Large General Service Rate Design:LGS-City, Inputs for 2013 Rates

  23. Large GS-City: Math, 2013

  24. Large (1,000-9,999 kW/month) and High Demand General Service (10,000+ kW/month)

  25. How LGS-City Rates x kW/kWh = LGS-City Revenue Requirement

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