AGENDA MEMORANDUM

Meeting Date: November 23, 2009

From:                          Paul Kalv, Director, Electric Department

Subject:                      Ordinance amending section 22-196 of the code of ordinances pertaining to Electric Service Rates

Staff Recommendation:

Staff recommends adopting the proposed rates and revisions to the Bulk Power Cost Adjustment (BPCA), following adoption of resolution 8467 by the City Commission June 8, 2009, authorizing a professional services agreement with Utility Consulting Services (Consultant) to analyze electric rate costs and allocation.

Analysis:

The City of Leesburg engaged Doug Handley doing business as Utility Consulting Services, to perform certain rate analysis of the City’s electric rates and provide recommendations for consideration.  This study was intended to accomplish the following principal tasks:

• Rate Comparisons – Determine whether the City’s relative rate levels, by rate class and overall, are reasonable by comparison to other utilities.
• Annual Inflation Adjustment – Calculate the overall rate level increase necessary to implement the annual adjustment for 2009 as of January 1, 2010.
• Power Cost Recovery – Determine the appropriate amount of power supply costs to be recovered from base rates and the BPCA and allocate the base rate portion among the rate classes.
• Restructure Demand Rates – Evaluate and recommend potential restructured rates for general service demand rate class to (a) segregate the class according to size and (b) implement an appropriate price signal that more closely reflects the Florida Municipal Power Association’s (FMPA) demand charges and therefore encourages conservation and energy efficiency by large customers.
• Proposed Rates – Summarize the proposed rate adjustments by rate class and compare existing rates to proposed rates.

Rate Comparisons

The conclusion from the comparisons is that the City does not need to realign rate levels between rate classes since there are no significant cross subsidies between classes.

Annual Inflation Adjustment

The application of the annual rate increase has been delayed due to the current rate study.  With this in mind the inflation adjustment was changed from 1.70% to 2.04% to allow for implementation in January in lieu of November.  The effect is to spread the 1.70% over a ten month period instead of twelve.

Power Cost Recovery

The cost of wholesale power supply to the City is recovered from the City’s retail customers through a combination of the BPCA plus a portion of the base rates.  The BPCA can be adjusted monthly to recover the difference between the total cost of power supply and the amount recovered from base rates. 

Restructure Demand Rates

This report does not address potential changes to the existing general service demand rate structure.  Any proposed adjustments to this structure are to be revenue neutral; therefore timing and implementation of any changes are not time sensitive.

Proposed Rate Adjustments

Table 5 of the report presents the two proposed adjustments to existing rates, implementation of the annual inflation adjustment and an increase in the power cost recovery in the base rates.  The annual inflation adjustment has been previously discussed.  To develop the cost of power to be recovered from base rates, the energy related costs have been decreased by $.0699 per kWh and the demand related costs have been increased by a similar dollar amount associated with the pre-1973 cost of fuel described on page 5 of the report.  As a result, the calculation on table 4 indicates that the amount of power costs to be recovered from base rates for fiscal year 2009/10 should be $.05545.  Accordingly the base rate portion of the BPCA rate will be adjusted from $.05124 to $.05545 per kWh.   Since the proposed rates shown on table 5 under Power Cost Adjustment produce the same revenues as existing rates adjusted for inflation, the proposed rates are considered revenue neutral.

Summary of Recommendations

1) The City should apply the annual inflation adjustment in the future based on comparison of the following components:

a. The cumulative change in the GDP implicit price deflator index (2005 base year) from the second quarter 2007 value of 102.973 to the second quarter value of the adjustment year as reported no later than September 30 of the adjustment year; and

b. The cumulative rate level adjustments to base rates after July 2007. 

2) The City should apply the annual inflation adjustment to the amount of power costs included in base rates in accordance with the following formula:

a. (Existing power cost in base rates per kWh minus $0.00699 per kWh) times (1+inflation adjustment) plus $0.00699 per kWh

3) The City should adopt a revised tariff, as shown in Attachment B, to reflect the proposed allocation of power costs to base rates of $0.05545 per kWh.  Other proposed revisions to the BPCA tariff would clarify the application of the annual inflation adjustment and coordinate the application of the Load Reduction Credit Rider, a draft of which is shown as Attachment C. 

4) The City should adopt revised base rates for the residential, general services non-demand and general service demand rate classes as discussed within the report and shown on table 5.

5) The City should revise the various lighting rates to implement a 2.04% inflation adjustment and an increase in the base rate component of power costs to $0.05545 per kWh.

6) The City should revise, adopt and submit to the PSC electric rate tariffs reflecting the proposed rate changes.

7) The City and the consultant should evaluate the potential restructuring of the general service demand rate class on a revenue neutral basis immediately following the adoption of the proposed rates.

8) The City should develop a proposed energy efficiency and conservation rider to fund certain qualifying system wide cost saving programs from the savings to be realized by such programs. 

Options:

1.  Adopt the recommendations of the consultant; Or,

2.  Such alternative action as the Commission may deem appropriate

Fiscal Impact: 

With the exception of the annual inflation adjustment associated with the GDP implicit price deflator index the proposed adjustments are revenue neutral. 

Submission Date and Time:    11/19/2009 4:47 PM____

Department: _Electric _____________ Prepared by:  _Paul Kalv__________                      Attachments:         Yes__X_   No ______ Advertised:   ____Not Required ______ Dates:   __________________________                      Attorney Review :       Yes___  No ____ _________________________________            Revised 6/10/04

Reviewed by: Dept. Head ________ Finance  Dept. __________JB______                                    Deputy C.M. ___________________                                          Submitted by: City Manager ___________________

Account No. _________________ Project No. ___________________ WF No. ______________________ Budget  ______________________ Available _____________________

ORDINANCE NO._______________

AN ORDINANCE OF THE CITY OF LEESBURG, FLORIDA, AMENDING SECTION 22-196 OF THE CODE OF ORDINANCES PERTAINING TO ELECTRIC RATES; ESTABLISHING UPDATED RATES FOR ELECTRIC; PROVIDING FOR RATES TO BE EFFECTIVE JANUARY 1, 2010; PROVIDING FOR CONFLICTS AND PROVIDING AN EFFECTIVE DATE. 

BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:

SECTION 1.

            Section 22-196 of the Code of Ordinances of the City of Leesburg, Florida is hereby amended to read as follows:

Sec. 22-196.  Electric rates; schedules; adjustments; deposits.

The rates for the furnishing of electrical service by the city shall be as follows:

(1)   Rate schedule RS, residential service.

e.   Rate per month.

Customer charge . . . $10.41      $10.62

All kwh, per kwh . . . 0.07642    0.08129

 (2)   Rate schedule GS, general service, nondemand.

d.   Rate per month.

Customer charge . . . $10.41       $10.62

All kwh . . .               0.08345     0.08847

(3)   Rate schedule GSD, general service, demand.

f.   Rate per month.

Customer charge . . .     $22.11    $22.57

All kw, per kw . . .            9.11      10.51

All kwh, per kwh . . . 0..04066      0.04149

SECTION 2.

All ordinances or parts of ordinances which are in conflict with this ordinance are hereby repealed, to the extent necessary to alleviate the conflict, but shall continue in effect insofar as they are not in conflict herewith, unless repeal of the conflicting portion destroys the overall intent and effect of any of the conflicting ordinances, in which case those ordinances so effected shall be hereby repealed in their entirety.

SECTION 3.   

If any portion of this ordinance is declared invalid or unenforceable, and to the extent it is possible to do so without destroying the overall intent and effect of this ordinance, the portion deemed invalid or unenforceable shall be severed herefrom and the remainder of this ordinance shall continue in full force and effect as if it were enacted without including the portion found to be invalid or unenforceable.

SECTION 4. 

This ordinance shall become effective upon passage

PASSED AND ADOPTED at the regular meeting of the City Commission of the City of Leesburg, Florida, held on the ______ day of ______________, 2009

                                                                            __________________________

                                                                             Mayor

ATTEST:

__________________________

City Clerk