Pasadena Water and Power Electric Rate Adjustments Public

Pasadena Water and Power Electric Rate Adjustments Public Hearing City Council Item #14 June 10, 2019

Recommendations Pasadena Water and Power 1. Find that the recommended adjustments to the electric rates is exempt from CEQA; 2. Open a Public Hearing to receive comment on recommended changes to the electric rates; 3. Direct the City Clerk to report on the written comments received from the public; 4. Close the Public Hearing; 5. Approve the recommended changes to the electric rates; and 6. Direct the City Attorney to prepare an amendment to the. Power Light. Cost and Powerby. Rate Ordinance implementing Increase Adjustment 0. 75 Cents per KWh effective July 1, 2019 the proposed changes. 2

Challenges and Opportunities Pasadena Water and Power • Challenges: Rapidly Changing Utility Industry > > Declining sales and insufficient “pay as you go” capital funding On-peak market prices lower than off peak hours High energy price volatility due to Aliso Canyon Gas Storage Prescriptive legislation and regulations Current Rates and Rate Structures do not match Industry Changes • Opportunities: > > Prudent use of reserves Reduced debt service obligations beginning FY 2023 ~ $8 million IPP contract terminates in 2027 New loads from new development: § Electric vehicles, new construction, existing customers’ expansion > Local power plant - a hedge against market price volatility 3

Sales Forecast Pasadena Water and Power Declining Electricity Sales, MWH 16. 5% decline Last Year’s Forecast Current Forecast

Current Rate Structure Pasadena Water and Power Nearly 58% of the rate structure is a pass-through PBC rate is also set by formula based on budgeted expenses System Average Rate = $0. 1754 per k. Wh Energy Charge $0. 0877 Transmission Charge $0. 0133 Distribution and Customer Charge $0. 0675 Public Benefit $0. 0069 5 Pass-through components: may be adjusted based on formulas, without City Council action, to offset changes in the cost of purchased energy and transmission.

Rate Structure Challenges Pasadena Water and Power • Rate Structure Misalignment > Fixed vs. Variable portions of the rate need adjustment > Compensation for excess generation higher than actual costs > Insufficient cost recovery for stand by services Actual Distribution Cost Structure Current Distribution Rates 10% 56% 44% 90% Fixed Variable Fixed 6 Variable

FY 2020 Net Revenue Requirements Combined $24. 9 Million Shortfall Pasadena Water and Power Distribution (Infrastructure) & Customer Energy (Commodity) Operations & Maintenance and Energy Costs (excluding Depreciation) $42. 5 $90. 8 Debt Service Costs (Principal & Interest) $10. 5 $11. 7 Pay-go Capital Requirements $30. 5 $4. 0 $83. 5 $106. 5 $1. 7 $0. 8 Net Revenue Requirement $81. 8 $105. 7 Revenues from Current Rates $69. 5 $93. 1 ($12. 3) ($12. 6) Cost-of-Service Total Cost-of-Service Non-Rate Revenues Shortfall 7

Mitigating Actions Taken (FY 2019) Pasadena Water and Power • Cost Cutting: > > Manage vacancies – limited recruitments Reductions in controllable services and supplies Refinance current debt without increase the term of payment Use cash to fund infrastructure investment • Draw-down of Reserves to Minimize Rate Increase: > SCPPA Project Stabilization Account Utilization > Stranded Investment Reserve > Utility Undergrounding Surtax funds • Additional Revenues: > Higher cost recovery from CAISO > Sale of environmental attributes > EV infrastructure to spur electric sales • Social Responsibility: > Free energy saving advice/devices/equipment for low income and small businesses 8

Proposal to Fill The Gap Pasadena Water and Power • Fair and equitable rates • Rate structure reflective of corresponding costs • Conduct cost of service study during FY 2020 > Update revenue requirements > Develop new rate structures to match expenses > Include capital investment considerations 9

Proposed Grid Access Charge Pasadena Water and Power Customer Class Number of Customers Proposed Monthly Charge Projected Annual Revenue Residential 57, 500 $4. 50 $3. 1 million Small Commercial 7, 600 $17. 00 $1. 5 million Medium Commercial 900 $250 $2. 7 million Large Commercial 165 $1, 500 $3. 0 million Total 66, 195 $10. 3 million 10

Power Cost Adjustment Increase Pasadena Water and Power • • Increase PCA by 0. 75 Cents per KWh – July 1, 2019 Estimated to generate additional $7. 8 million annually Pass through does not require City Council action Notification to ensure full transparency After proposed rate increases the remaining annual gap of $6. 8 million to be managed by • Internal efficiencies • Non-retail revenues • Prudent use of Energy Charge Reserve 11

Raise EUAP Assistance Level and Criteria Pasadena Water and Power • Increase Benefit from $7. 50 to $10 per month • Increase Income Limits – More Will Qualify: Household Size 1 person 2 people 3 people 4 people 5 people 6 people 7 people 8 people PWP Current 1 $36, 550 $41, 800 $47, 000 $52, 200 $56, 400 $60, 600 $64, 750 $68, 950 So. Cal Gas 2 $33, 820 $42, 660 $51, 500 $60, 340 $69, 180 $78, 020 $86, 860 Proposed 3 $36, 550 $41, 800 $47, 000 $52, 200 $60, 340 $69, 180 $78, 020 $86, 860 Based on lowest income criteria used by the City’s Housing and Community Development Division for the Rental Assistance Program stated in Section 17. 80. 020 of the City Zoning Code. Updated to 2019 values. 2 Income eligibility criteria updated annually by the CPUC Low-Income Oversight Board 3 Greater of the two qualifying income levels 1 12

Sample Bill Impact: Residential with 500 k. Wh Monthly Usage Pasadena Water and Power Monthly Bill at Current Rates Usage Customer Charge Monthly Bill with Proposed Adjustments 500 k. Wh Usage $8. 96 Customer Charge 500 k. Wh $8. 96 Energy Charge $46. 52 Energy Charge $50. 27 Distribution Charge $28. 62 Grid Access Charge $4. 50 Transmission Charge $6. 67 Transmission Charge Total Electric Services $6. 67 $90. 77 Total Electric Services Public Benefit Charge $3. 43 Public Benefit Charge Underground Surtax $3. 94 Underground Surtax UUT and State Surcharge $7. 11 UUT and State Surcharge Total Balance* * Excludes local, State and other regulatory taxes $105. 25 Total Balance* $99. 02 $3. 43 $0 $7. 74 $110. 19 Net increase of $4. 94, or 4. 69% Net increase of $2. 44, or 2. 32% for EUAP customers 13

Bill Impacts Examples (Net impact of Grid Access Charge, PCA, Suspension of UG Surtax) Pasadena Water and Power Residential Customers Monthly Usage (k. Wh) 350 500 750 1, 000 Current Bill $61. 64 $105. 25 $177. 88 $239. 43 Proposed Bill $67. 03 $110. 19 $182. 11 $243. 35 Net Change ($) $5. 39 $4. 94 $4. 23 $3. 92 Net Change (%) 8. 7% 4. 7% 2. 4% 1. 6% ($2. 60) ($4. 30) ($7. 12) ($9. 52) Impact of UUG Suspension Small Commercial Customers Monthly Usage (k. Wh) 500 1, 000 1, 500 2, 000 Current Bill $108. 72 $206. 84 $311. 28 $415. 69 Proposed Bill $126. 99 $225. 48 $330. 58 $435. 62 Net Change ($) $18. 27 $18. 64 $19. 30 $19. 93 Net Change (%) 16. 8% 9. 0% 6. 2% 4. 8% ($4. 97) ($8. 80) ($12. 63) ($16. 46) Impact of UUG Suspension 14

Electric Bill Comparison: Residential Excludes Taxes and Surcharges Pasadena Water and Power 15

Electric Bill Comparison: Small Commercial Excludes Taxes and Surcharges Pasadena Water and Power 16

Outreach on Electric Rates Pasadena Water and Power § Web pages – City’s home page and PWPweb. com § On line bill calculator – made available on 5/10 § E-newsletters: § Residential E-newsletter, Watts Current – May Issue § Commercial E-newsletter, The Conduit – May Issue § Council Liaisons § Chamber of Commerce § PWP social media, City of Pasadena SM, Next. Door § Announcement on City’s phone tree § KPAS/ Pasadena Media - slide § Print - La Opinion (3 issues) § Flyer created in English/Spanish and distributed on 5/15/19: § City libraries § Community Centers § City Commissions 17

Pasadena Water and Power THANK YOU 18

Water and Power Bill Impact Examples Excludes UUT and State Surcharges Pasadena Water and Power Customer Class and Monthly Usage Current Monthly Bill Estimate Proposed Monthly Bill Estimate* Net Change Water Electric Total $ % $48. 47 $98. 13 $146. 60 $52. 64 $102. 44 $155. 08 $8. 48 5. 8% $81. 68 $375. 93 $457. 61 $89. 43 $392. 86 $482. 29 $24. 68 5. 4% $768. 50 $8, 492. 62 $9, 261. 12 $855. 10 $8, 854. 90 $9, 710. 00 $448. 88 4. 8% Single-Family Residence Water: ¾” meter connection using 11 billing units Electric: 500 k. Wh usage Small Commercial Water: 1” meter connection using 17 billing units Electric: 2, 000 k. Wh usage Medium Commercial Water: 3” meter connection using 143 billing units Electric: 50, 000 k. Wh usage; 150 k. W demand * Monthly bill estimates include the proposed Water and Power rate adjustments for Fiscal Year 2020: • Eliminate the Inside/Outside City water rate differentials effective July 1, 2019 • Increase the water Distribution & Customer charges and eliminate the seasonal rates effective August 1, 2019 • Implement the electric fixed distribution rate and increase the Power Cost Adjustment charge effective July 1, 2019 • Suspend the Utility Undergrounding Surcharge effective July 1, 2019 • Excludes Water D&C and PWAC adjustments effective July 1, 2020 19

Electric Bill Comparison: Medium Commercial Pasadena Water and Power 20

Electric Bill Comparison: Large Commercial Pasadena Water and Power 21

Pasadena Water and Power • Slides 13 and 14 without Surtax Suspension follow… 22

Sample Bill Impact: Residential with 500 k. Wh Monthly Usage Pasadena Water and Power Monthly Bill at Current Rates Usage Customer Charge Monthly Bill with Proposed Adjustments 500 k. Wh Usage $8. 96 Customer Charge 500 k. Wh $8. 96 Energy Charge $46. 52 Energy Charge $50. 27 Distribution Charge $28. 62 Grid Access Charge $4. 50 Transmission Charge $6. 67 Transmission Charge Total Electric Services $6. 67 $90. 77 Total Electric Services $99. 02 Public Benefit Charge $3. 43 Underground Surtax $3. 94 Underground Surtax $4. 30 UUT and State Surcharge $7. 11 UUT and State Surcharge $7. 74 Total Balance* * Excludes local, State and other regulatory taxes $105. 25 Total Balance* $114. 49 Net increase of $9. 24, or 8. 8% Net increase of $6. 74, or 6. 4% for EUAP customers 23

Bill Impacts Examples (Net impact of Grid Access Charge, PCA, Suspension of UG Surtax) Pasadena Water and Power Residential Customers Monthly Usage (k. Wh) 350 500 750 1, 000 Current Bill $61. 64 $105. 25 $177. 88 $239. 43 Proposed Bill $69. 63 $114. 49 $189. 23 $252. 87 Net Change ($) $7. 99 $9. 24 $11. 35 $13. 44 Net Change (%) 13. 0% 8. 8% 6. 4% 5. 6% N/A N/A Impact of UUG Suspension Small Commercial Customers Monthly Usage (k. Wh) 500 1, 000 1, 500 2, 000 Current Bill $108. 72 $206. 84 $311. 28 $415. 69 Proposed Bill $131. 96 $234. 28 $343. 21 $452. 08 Net Change ($) $23. 24 $27. 44 $31. 93 $36. 39 Net Change (%) 21. 4% 13. 3% 10. 3% 8. 8% N/A N/A Impact of UUG Suspension 24