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Impact of New Large Loads on Economic Development: Rate Policy Analysis

In October, Port Angeles begins implementing tiered rates for excess load requirements. A new large single load requesting electric service could significantly impact retail rates. Questions arise about establishing high water marks for load growth and sharing incremental costs. The analysis projects 2012 rate impacts of a 2000 kW load and presents three rate policies to illustrate the effects on all retail customers. The policies vary based on power costs, load growth, threshold setting, and load size. Policy implications include establishing an NLSL policy, setting standards for new large city loads, and considering the role of job creation in power cost allocation.

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Impact of New Large Loads on Economic Development: Rate Policy Analysis

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  1. New Large Single Loads and Economic Development Considerations Draft Assessment

  2. Tiered Rates Methodology • In October, Port Angeles BPA’s tiered rate methodology begins • Under tiered rates, load requirements in excess of the City’s actual loads (“High Water Mark”) will be purchased at higher “Tier 2” prices • If a New Large Single Load (“NLSL”) requests retail electric service from the City, the power will be purchased at Tier 2 power prices • If rolled into the total utility revenue requirement, these higher power costs could have a significant impact on retail rates • Other BPA customer utilities are asking themselves two rate policy questions: #1: Should HWMs be established for each customer class with each customer class paying for its own load growth (i.e. the market power costs to serve above-HWM load)? #2: Where should the line be drawn with respect to sharing the incremental costs associated with serving NLSL with the City’s other retail customers?

  3. Projected 2012 Rate Impact of a 2000 kW New Large Single Load * Rate impacts shown above are due only to above-HWM power costs and do not include any future rate increases that may be required due to increases in non-power costs or BPA Tier 1 rate increases.

  4. Rate Policy Alternatives • Three potential rate policies included in this analysis to illustrate the rate impacts of NLSL power costs on all of the City’s retail customers under the potential rate policies • The table below summarizes the three policies with respect to the two critical questions stated on previous slide

  5. New Large Load Rate Policy Analysis • The rate impacts will vary depending on assumptions for: • Tier 2 power cost of serving above-HWM load • Load growth of each customer class • Where the threshold is set • Size of new large load • Test year (above-HWM load increases each year for customer classes with load growth)

  6. Policy Implications • Should the City establish a NLSL policy? • Existing regional standards are for metered loads exceeding 1000 kW • Should the City establish an intermediate “New Large City Load” standard below the existing NLSL guidelines? • Rate impacts could be felt by customers with new metered loads of less than 1000 kW • How should the number of new jobs created play a role in allocating power costs?

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