Electric Rates Workshop: Cost of Service Analysis and Rate Proposals

1. Electric Rates Workshop:Cost of Service Analysis and Rate Proposals

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

3. 3 Year Rate Proposal: 2.7%, 2.4%, 2.2% Introduction

4. Project Timeline

5. Purpose of Analysis and Rate Proposal

6. Review of rate structure and proposed adjustments

7. Electric Rate Structure Major Cost Drivers • Distribution and Customer Charges: • Call center, billing, customer service • Distribution system operations and maintenance • Debt service • PAYGO for capital investment 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 • Energy Services Charge: • Debt Service for GT5 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 Requires Council approval • Public Benefits Charge: • Rebate programs • Assistance programs

8. Revenue From Each Rate Component

9. Alignment with City Goals • 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

10. Distribution and Customer Charges Number of Full Time Equivalent employees: Distribution Operations & Maintenance FTE: 97.2 Distribution Capital FTE: 74.3 Customer FTE: 32.3 Administrative FTE: 39.0 Total FTE 242.8

11. Distribution and Customer ChargesRate Design/Modification Current Proposed D&C $ $ 8.5¢/kWh D 11.65¢/kWh 1.5¢/kWh C $7.76 kWh 350 kWh 750 • 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

12. Proposed Rate Adjustments: Distribution and Customer Charges

13. Formula Rate Adjustments for FY2015- Energy and Public Benefits Charge

14. Energy Charge (Adjusted by formula) Power Supply FTE: 52

15. PBC Charge (Adjusted by formula) PBC FTE: 7.25

16. Combined Projected Rate Adjustments • 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%

17. Additional Rate Considerations Time of Use Electric Vehicle Feed-in- Tariff Economic Development Rider • Available to new and existing customers adding a minimum of 100 kW to the system load. • Customer must qualify for the City’s Economic Development Program. • Eligible commercial customers will have two discount options. Adjust the time-of-use (“TOU”) pricing periods: Winter hours Summer hours Holidays and weekends are off peak hours • Minimum of 100 kW 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. • 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.

18. customer Impact

19. Residential Customers - Consumption Distribution

20. Rate Impact on Residential Customers

21. Residential Customer: 200kWhMonthly Electric Bill Impact Current Bill 200 kWh Proposed Bill 200 kWh Account Summary Service Detail Account Summary Service Detail Electric Service $26.31 Public Benefits Charge $1.15 Total $27.46 Cust & Dist Charge $ 6.02 Energy Charge 200 kwh @ 0.09323 $18.65 Transmission Charge 200 kwh @0.00821 $1.64 Total $26.31 Electric Service $32.41 Public Benefits Charge $1.37 Total $33.78 Customer Charge $7.76 Distribution Charge $3.00 Energy Charge 200 kwh @ 0.10006 $20.01 Transmission Charge 200 kwh @0.00821 $1.64 Total $32.41 (Monthly Summer Bill Excluding Tax and Surcharges) $6.32

22. Residential Customer: 300kWhMonthly Electric Bill Impact Current Bill 300 kWh Proposed Bill 300 kWh Account Summary Service Detail Account Summary Service Detail Electric Service $42.75 Public Benefits Charge $1.72 Total $44.47 Cust & Dist Charge $12.32 Energy Charge 300 kwh @ 0.09323 $27.97 Transmission Charge 300 kwh @0.00821 $2.46 Total $42.75 Electric Service $44.74 Public Benefits Charge $2.06 Total $46.80 Customer Charge $7.76 Distribution Charge $4.50 Energy Charge 300 kwh @ 0.10006 $30.02 Transmission Charge 300 kwh @0.00821 $2.46 Total $44.74 (Monthly Summer Bill Excluding Tax and Surcharges) $2.33

23. Residential Customer: 700kWhMonthly Electric Bill Impact Current Bill 700 KWH Proposed Bill 700 KWH Account Summary Service Detail Account Summary Service Detail Electric Service $127.48 Public Benefits Charge $4.02 Total $131.50 Cust & Dist Charge $56.47 Energy Charge 700 kwh @ 0.09323 $65.26 Transmission Charge 700 kwh @0.00821 $5.75 Total $127.48 Electric Service $129.58 Public Benefits Charge $4.80 Total $134.38 Customer Charge $7.76 Distribution Charge $46.03 Energy Charge 700 kwh @ 0.10006 $70.04 Transmission Charge 700 kwh @0.00821 $5.75 Total $129.58 (Monthly Summer Bill Excluding Tax and Surcharges) $2.88

24. Small Commercial Customer Monthly Electric Bill Impact Current Bill 2,000 KWH Proposed Bill 2,000 KWH Account Summary Service Detail Account Summary Service Detail Electric Service $303.10 Public Benefits Charge $11.48 Total $314.58 Customer Charge $14.16 Distribution Charge $89.50 Energy Charge 2,000 kwh @ 0.09151 $183.02 Transmission Charge 2,000 kwh @0.00821 $16.42 Total $303.10 Electric Service $324.57 Public Benefits Charge $13.72 Total $338.29 Customer Charge $8.16 Distribution Charge $103.57 Energy Charge 2,000 kwh @ 0.09821 $196.42 Transmission Charge 2,000 kwh @0.00821 $16.42 Total $324.57 (Monthly Summer Bill Excluding Tax and Surcharges) $23.71

25. Large Commercial Customer Monthly Electric Bill Impact Current Bill 50,000 KWH; 150 KW Proposed Bill 50,000 KWH; 150 KW Account Summary Service Detail Account Summary Service Detail Electric Service $6,898.22 Public Benefits Charge $287.00 Total $7,185.22 Customer Charge $60.22 Distribution Charge $1,633.50 Energy Charge 50,000 kwh @ 0.09588 $4,794.00 Transmission Charge 50,000 kwh @0.00821$410.50 Total $6,898.22 Electric Service $7,606.87 Public Benefits Charge $343.03 Total $7,949.90 Customer Charge $20.27 Distribution Charge $2,031.10 Energy Charge 50,000 kwh @ 0.10290 $5,145.00 Transmission Charge 50,000 kwh @0.00821 $410.50 Total $7,606.87 (Monthly Summer Bill Excluding Tax and Surcharges) $764.68

26. Customer Assistance Programs

27. Electric Cost of Service Study Rate Impact Mitigation and ALTERNATIVES

28. Rate Mitigation Actions

29. Rate Option Impacts

30. Rate Adjustment History

31. PWP’s Proposed Rates Remain Comparable to Neighboring Utilities Electric rate comparison to other utilities

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

33. Next Steps

34. Electric Cost of Service Study Cost of service Analysis

35. Key Inputs to ECOS Financial Operational

36. Cost of Service Summary (in $millions) Burns & McDonnell Report(FY13 Based): Cost of Service $224.0 Non-rate Revenues $37.3 Revenue Requirement $186.7 Revenues required from electric rates.

37. Cost of Service Process

38. Financial Performance

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