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Electric Rate Adjustments Public Hearing

The City Council item #14 set for June 10, 2019, proposes adjustments to electric rates, exempt from CEQA. Challenges include market volatility and declining sales, while capital funding faces obstacles. Opportunities arise from new developments and the termination of an IPP contract in 2027. The current rate structures don't align with industry changes, with sales forecast declining. Mitigation measures such as cost-cutting and revenue strategies have been implemented. Recommendations include filling the revenue gap through fair rate structures and a proposed grid access charge increase. Outreach efforts are in place to inform residents and businesses.

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Electric Rate Adjustments Public Hearing

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  1. Electric Rate AdjustmentsPublic Hearing City Council Item #14 June 10, 2019

  2. Recommendations Increase Power Cost Adjustment by 0.75 Cents per KWh effective July 1, 2019 Find that the recommended adjustments to the electric rates is exempt from CEQA; Open a Public Hearing to receive comment on recommended changes to the electric rates; Direct the City Clerk to report on the written comments received from the public; Close the Public Hearing; Approve the recommended changes to the electric rates; and Direct the City Attorney to prepare an amendment to the Light and Power Rate Ordinance implementing the proposed changes.

  3. Challenges and Opportunities • 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 • Opportunities: • Prudent use of reserves • Reduced debt service obligations beginning FY2023 ~ $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 • Current Rates and Rate Structures do not match Industry Changes

  4. Sales Forecast Declining Electricity Sales, MWH 16.5% decline Last Year’s Forecast Current Forecast

  5. Current Rate Structure EnergyCharge$0.0877 Nearly 58%of the rate structure is a pass-through PBC rate is also set by formula based on budgeted expenses Pass-through components: may be adjusted based on formulas, without City Council action, to offset changes in the cost of purchased energy and transmission. TransmissionCharge$0.0133 System Average Rate = $0.1754 per kWh Distributionand CustomerCharge$0.0675 Public Benefit $0.0069

  6. Rate Structure Challenges • 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 10% 44%

  7. FY 2020 Net Revenue RequirementsCombined $24.9 Million Shortfall

  8. Mitigating Actions Taken (FY 2019) • 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 MinimizeRate 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

  9. Proposal to Fill The Gap • Fair and equitable rates • Rate structure reflective of corresponding costs • Conduct cost of service study during FY2020 • Update revenue requirements • Develop new rate structures to match expenses • Include capital investment considerations

  10. Proposed Grid Access Charge

  11. Power Cost Adjustment Increase • 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

  12. Raise EUAP Assistance Level and Criteria 1Based 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. 2Income eligibility criteria updated annually by the CPUC Low-Income Oversight Board 3Greater of the two qualifying income levels Increase Benefit from $7.50 to $10 per month Increase Income Limits – More Will Qualify:

  13. Sample Bill Impact: Residential with 500 kWh Monthly Usage Net increase of $4.94, or 4.69% * Excludes local, State and other regulatory taxes Net increase of $2.44, or 2.32% for EUAP customers

  14. Bill Impacts Examples(Net impact of Grid Access Charge, PCA, Suspension of UG Surtax)

  15. Electric Bill Comparison: ResidentialExcludes Taxes and Surcharges

  16. Electric Bill Comparison: Small CommercialExcludes Taxes and Surcharges

  17. Outreach on Electric Rates • 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, NextDoor • 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

  18. THANK YOU

  19. Water and Power Bill Impact ExamplesExcludes UUT and State Surcharges • * 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

  20. Electric Bill Comparison: Medium Commercial

  21. Electric Bill Comparison: Large Commercial

  22. Slides 13 and 14 without Surtax Suspension follow…

  23. Sample Bill Impact: Residential with 500 kWh Monthly Usage Net increase of $9.24, or 8.8% * Excludes local, State and other regulatory taxes Net increase of $6.74, or 6.4% for EUAP customers

  24. Bill Impacts Examples(Net impact of Grid Access Charge, PCA, Suspension of UG Surtax)

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