Pasadena Water and Power Electric Rates Workshop Cost

Pasadena Water and Power Electric Rates Workshop: Cost of Service Analysis and Rate Proposals

Agenda Pasadena Water and Power • • • Introduction Review of Rate Structure and Proposed Adjustments Customer Bill Impact Mitigation Strategies and Alternatives Rate Comparison to Other Utilities Cost of Service Analysis 2

Pasadena Water and Power 3 Year Rate Proposal: 2. 7%, 2. 4%, 2. 2% INTRODUCTION 3

Project Timeline Pasadena Water and Power Date Action Notes May 2012 – May 2013 ECOS analysis By Burns & Mc. Donnell June 2013 Burns & Mc. Donnell Report completed Staff update of ECOS model June – September 2013 November 2013 ECOS discussion with MSC December 2013 -January 2014 Staff review and update of data and ECOS model Updated discussion with MSC January 28, 2014 March 31, 2014 City Council Workshop May 2014 Set Public Hearing date June 2014 Public Hearing and rate approval July 1, 2014 Rate adjustment effective date 4 Actual FY 2013 financial results and 2014 budget

Purpose of Analysis and Rate Proposal Pasadena Water and Power Rate study last performed in 2002 Proposition 26 – requires that all rates and charges be cost-based Changes in City Council goals for renewable energy, other programs Changes in utility industry – distributed generation, electric vehicles Ensure fiscal responsibility and viability of electric utility Ensure rates are fair for all customers 5

Pasadena Water and Power REVIEW OF RATE STRUCTURE AND PROPOSED ADJUSTMENTS 6

Electric Rate Structure Pasadena Water and Power Major Cost Drivers Distribution and Customer Charges: • • Pass-through component: adjusted in accordance with provisions of Light and Power Rate Ordinance to offset changes in the cost of energy, transmission and public benefit programs Requires Council approval • • Call center, billing, customer service Distribution system operations and maintenance Debt service PAYGO for capital investment Energy Services Charge: • • Debt Service for GT 5 project Renewable energy premiums Cap and trade program Market gas and energy purchases Transmission Services Charge: • Operations, maintenance and portion of capital costs for transmission assets Public Benefits Charge: 7 • • Rebate programs Assistance programs

Revenue From Each Rate Component Pasadena Water and Power 8

Alignment with City Goals Pasadena Water and Power Maintain fiscal responsibility & stability • Cost Based Rates • Maintain Fiscal Health • Support City Programs Ensure Public Safety • Distribution Master Plan • Responsible Capital Investment Support & Promote Quality of Life & Economy • Accurate Meter Reads • Reliable Service Improve, Maintain & Enhance Infrastructure • Prudent Operations & Maintenance • Regulatory Compliance 9

Distribution and Customer Charges Pasadena Water and Power Number of Full Time Equivalent employees: Distribution Operations & Maintenance FTE: Distribution Capital FTE: Customer FTE: Administrative FTE: Total FTE 97. 2 74. 3 32. 3 39. 0 242. 8 10

Distribution and Customer Charges Rate Design/Modification Pasadena Water and Power Current $ Proposed D&C $ 8. 5¢/k. Wh D C Existing change in D&C by Tier Charge $6. 02 $12. 32 $24. 94 $35. 97 $45. 43 $56. 47 $67. 50 $89. 57 1. 5¢/k. Wh $7. 76 350 k. Wh Usage 0 -250 251 -350 351 -450 451 -550 551 -650 651 -750 751 -1000 1001> 11. 65¢/k. Wh $6. 30 $12. 61 $11. 03 $9. 46 $11. 03 $22. 07 105% 102% 44% 26% 24% 20% 33% • • 750 k. Wh Existing Distribution and Customer Charge rate structure does not meet cost of service practice PWP’s proposed recommendation provides more balanced impact among customer groups 11

Proposed Rate Adjustments: Distribution and Customer Charges Pasadena Water and Power 12

Formula Rate Adjustments for FY 2015 - Energy and Public Benefits Charge Pasadena Water and Power 13

Energy Charge (Adjusted by formula) Pasadena Water and Power Supply FTE: 52 14

PBC Charge (Adjusted by formula) Pasadena Water and Power PBC FTE: 7. 25 15

Combined Projected Rate Adjustments Pasadena Water and Power Future adjustments to energy, transmission and PBC rates are uncertain: • Market costs for energy and gas • Renewable energy goals and costs • Results of IRP update • Transmission projects and costs • Efficiency and rebate program goals 8. 3% 2. 4% 2. 2% 16

Additional Rate Considerations Pasadena Water and Power Time of Use Adjust the time-of-use (“TOU”) pricing periods: Winter hours Summer hours Holidays and weekends are off peak hours Electric Vehicle Establish electric vehicle rates for single -family residential customers and multifamily residential customers. On-peak and off-peak rates shall be based on the price of market energy during the period. Feed-in- Tariff Minimum of 100 k. W to 1 MW renewable energy distributed generation. Incentivize customers to locate their CEC certified facilities at high load concentration areas within the distribution system. Contracts for up to 20 years. 17 Economic Development Rider Available to new and existing customers adding a minimum of 100 k. W to the system load. Customer must qualify for the City’s Economic Development Program. Eligible commercial customers will have two discount options.

Pasadena Water and Power CUSTOMER IMPACT 18

Residential Customers - Consumption Distribution Pasadena Water and Power 19

Rate Impact on Residential Customers Pasadena Water and Power 20

Residential Customer: 200 k. Wh Monthly Electric Bill Impact Pasadena Water and Power Proposed Bill 200 k. Wh Current Bill 200 k. Wh Account Summary Electric Service Detail $26. 31 Cust & Dist Charge Public Benefits Charge Account Summary $ 6. 02 Electric Service $32. 41 $1. 15 Energy Charge 200 kwh @ 0. 09323 $7. 76 Distribution Charge $3. 00 Public Benefits Charge $1. 37 $18. 65 Energy Charge Total $27. 46 Total $33. 78 Transmission Charge 200 kwh @0. 00821 Customer Charge $1. 64 200 kwh @ 0. 10006 $20. 01 Transmission Charge 200 kwh @0. 00821 $1. 64 Total $26. 31 Total $32. 41 $6. 32 21 (Monthly Summer Bill Excluding Tax and Surcharges)

Residential Customer: 300 k. Wh Monthly Electric Bill Impact Pasadena Water and Power Proposed Bill 300 k. Wh Current Bill 300 k. Wh Account Summary Electric Service Public Benefits Charge $42. 75 $1. 72 Service Detail Cust & Dist Charge $12. 32 Electric Service Energy Charge 300 kwh @ 0. 09323 Total $44. 47 Account Summary Customer Charge $7. 76 Distribution Charge $4. 50 Public Benefits Charge $2. 06 $27. 97 Energy Charge Total $46. 80 Transmission Charge 300 kwh @0. 00821 $44. 74 Service Detail $2. 46 300 kwh @ 0. 10006 $30. 02 Transmission Charge 300 kwh @0. 00821 $2. 46 Total $42. 75 Total $44. 74 $2. 33 22 (Monthly Summer Bill Excluding Tax and Surcharges)

Residential Customer: 700 k. Wh Monthly Electric Bill Impact Pasadena Water and Power Proposed Bill 700 KWH Current Bill 700 KWH Account Summary Electric Service $127. 48 Service Detail Cust & Dist Charge Account Summary $56. 47 Electric Service $129. 58 Service Detail Customer Charge Distribution Charge Public Benefits Charge $4. 02 Energy Charge 700 kwh @ 0. 09323 Total $131. 50 $46. 03 Public Benefits Charge $4. 80 $65. 26 Energy Charge Total $134. 38 Transmission Charge 700 kwh @0. 00821 $7. 76 $5. 75 700 kwh @ 0. 10006 $70. 04 Transmission Charge 700 kwh @0. 00821 $5. 75 Total $127. 48 Total $129. 58 $2. 88 23 (Monthly Summer Bill Excluding Tax and Surcharges)

Small Commercial Customer Monthly Electric Bill Impact Pasadena Water and Power Proposed Bill 2, 000 KWH Current Bill 2, 000 KWH Account Summary Electric Service $303. 10 Service Detail Account Summary Customer Charge $14. 16 Distribution Charge $89. 50 Electric Service $324. 57 Customer Charge Distribution Charge Public Benefits Charge $11. 48 $8. 16 $103. 57 Public Benefits Charge $13. 72 Energy Charge Total $314. 58 Service Detail 2, 000 kwh @ 0. 09151 Energy Charge $183. 02 Total $338. 29 Transmission Charge 2, 000 kwh @0. 00821 2, 000 kwh @ 0. 09821 $196. 42 Transmission Charge $16. 42 2, 000 kwh @0. 00821 Total $303. 10 $16. 42 Total $324. 57 $23. 71 24 (Monthly Summer Bill Excluding Tax and Surcharges)

Large Commercial Customer Monthly Electric Bill Impact Pasadena Water and Power Current Bill 50, 000 KWH; 150 KW Account Summary Electric Service Proposed Bill 50, 000 KWH; 150 KW Service Detail $6, 898. 22 Customer Charge Distribution Charge Account Summary $60. 22 Electric Service $7, 606. 87 Customer Charge $1, 633. 50 Distribution Charge Public Benefits Charge $287. 00 $20. 27 $2, 031. 10 Public Benefits Charge $343. 03 Energy Charge Total $7, 185. 22 Service Detail 50, 000 kwh @ 0. 09588 Energy Charge $4, 794. 00 Total $7, 949. 90 Transmission Charge 50, 000 kwh @0. 00821 50, 000 kwh @ 0. 10290 $5, 145. 00 Transmission Charge $410. 50 50, 000 kwh @0. 00821 Total $6, 898. 22 $410. 50 Total $7, 606. 87 $764. 68 25 (Monthly Summer Bill Excluding Tax and Surcharges)

Customer Assistance Programs Pasadena Water and Power Name of Programs Average Monthly Usage (k. Wh) Benefits No. of Accounts 0 - 100 101 - 200 201 - 300 301 - 400 401 - 500 501 - 600 601 - 700 701 - 1000 > 1000 Basic $7. 50 credit/month (after taxes) 3, 568 123 641 941 741 442 282 138 191 69 Cares $7. 50 credit/month (after taxes) and Public Benefits Charge Credit 514 23 93 120 90 65 38 33 34 18 Cares Plus $7. 50 credit/month(aft er taxes) and PBC Credit and Utility User Tax 1, 788 111 369 425 266 189 143 100 130 55 Medical Equipment Based $7. 50 credit/month (after taxes) 55 1 2 5 4 7 9 8 11 8 5, 925 258 1, 105 1, 491 1, 101 703 472 279 366 150 Total No. of Accounts 26

Pasadena Water and Power Electric Cost of Service Study RATE IMPACT MITIGATION AND ALTERNATIVES 27

Rate Mitigation Actions Pasadena Water and Power Energy $9 million from 2011 FERC settlement o Provides equity funding for GT 5 repowering project Increased efficiency of GT 5 repowering project o Efficiencies effective beginning FY 2016 Transmission Apply any settlement funds from Los Angeles for overcharges o Approved by City Council in October 2013 Managed Costs • • Careful management of vacancies and workforce size Maximum lifecycle for vehicles and equipment Refunding opportunities for outstanding bonds Restrict travel and training for maximum benefit 28

Rate Option Impacts Pasadena Water and Power 29

Rate Adjustment History Pasadena Water and Power Electric Rate Adjustments since 2005 Rate Component When Last Adjusted Rate Action Transmission Services Charge July 2006 Reduced approximately 0. 3¢ per k. Wh Public Benefits Charge July 2008 Increased by approximately 0. 3¢ per k. Wh Energy Charge (PCA) October 2010 Distribution and Customer Charge July 2012 Increased by 0. 5¢ per k. Wh Increased by approximately 0. 3¢ per k. Wh 30

Pasadena Water and Power PWP’s Proposed Rates Remain Comparable to Neighboring Utilities ELECTRIC RATE COMPARISON TO OTHER UTILITIES 31

Bill Comparisons for Residential Customers Pasadena Water and Power Darkest shade indicates higher comparative bill at given level of usage. For example, at 200 k. Wh/month, Riverside is the highest and Burbank is the lowest. PWP will be mid-range in comparative bills except at the 400 and 500 k. Wh levels of consumption. 32

Next Steps Pasadena Water and Power March 2014 Date April 2014 April - May 2014 July 2014 Action Item City Council Workshop Customer education and feedback, City Council field reps, district meetings, public library event, Chamber of Commerce, large customer groups, social media postings, media updates MSC Action Item – rate proposal and recommendation to set public hearing City Council – set public hearing date City Council Action Item – Consider rate proposal Rate action effective 33

Pasadena Water and Power Electric Cost of Service Study COST OF SERVICE ANALYSIS 34

Key Inputs to ECOS Pasadena Water and Power Financial Operational Adopted FY 2014 Operating Budget Annual Revenue Requirements: Based on forecasted cost escalations and known changes in annual costs Capital Improvements: Capital expenditures based on adopted FY 2014 Capital Budget Debt Service: Based on principal and interest payments on currently outstanding revenue bonds and projections of debt service General Fund Transfer: Annual transfer of 9% (included in rate of return requirement) Rate Base Return Requirement: A rate base calculated by adding the net utility plant in service and construction work in progress to a working capital allowance of 60 cash days of operations and maintenance expenses, and subtracting capital contributions Sales Growth: Energy sales are forecast as flat (unchanged) during seven year financial forecast Customer Growth : Modest projected growth of <1% for each class; historical average relationship between energy sales and number of customers expected to continue in the future System Load: Based on projected annual energy sales with distribution loss of about 5% (typical industry average for utilities with similar energy resources) Load Shape and Peak Demand: Forecast of customer classification-specific energy sales and peak demand are based on 3 -years historical data for FY 2009 - 2012 and budget year projections for FY 2013 35

Cost of Service Summary (in $millions) Breakdown of cost-of-service Pasadena Water and Power Non-rate Revenues Labor/Burden $30. 4 Wholesale Sales Services and Supplies, Internal Services, and Other Operating Costs $19. 2 Climate Change Revenues Energy Costs $93. 6 Investment Earnings and Other Non-operating Revenues $8. 2 Transmission Costs $26. 0 Total Non-rate Revenues $40. 0 Public Benefits programs PTO Transmission Revenues $18. 9 Debt Service $19. 5 General Fund Transfer $16. 5 Burns & Mc. Donnell Report (FY 13 Based): Cost of Service $224. 0 Non-rate Revenues $37. 3 Revenue Requirement $186. 7 $6. 1 $14. 3 $7. 8 Depreciation and Amortization Total cost-of-service $11. 4 $231. 9 Revenues required from electric rates. 36 Revenue Requirements (in million $) Total Cost-of. Service Less: Non-rate Revenues Revenue Requirements $231. 9 - 40. 0 $191. 9

Cost of Service Process Pasadena Water and Power 37

Financial Performance Pasadena Water and Power 38

Prioritization of Rate Components Pasadena Water and Power Debt Service Coverage Distribution and Customer Rates and Demand Ratchet PBC Time of Use and Electric Vehicle rates Distributed Generation & Net Metering (FIT) Green Power Premium Economic Development Demand Response Pay-go Rate of Return and General Fund Transfer Higher Lower 39