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Item No:                    2.

 

Meeting Date:           January 29, 2013

 

From:                          Paul Kalv, Electric Director               

 

Subject:                      Recommendation to authorize Optional Time Differentiated Electric Service Rate Plans enabled by the AMI and Related Technology Initiatives that are designed to reduce Leesburg’s power supply costs and enable customers to save money.

 

 


Staff Recommendation:

Staff recommends authorizing the Optional Time Differentiated Electric Service Rate Plans enabled

by the AMI and Related Technology Initiatives that are designed to reduce Leesburg’s power supply

costs and enable customers to save money.

 

Analysis:

Executive Summary

During the last four years, staff has worked diligently to develop and implement strategies focused on reducing the utility’s largest single expense, the cost of wholesale power supply, and more specifically, the monthly Coincident Peak demand related costs. In 2006, “demand” expenses were 33% of Leesburg’s total power supply expense and for FY 2011-12 the “demand” costs were 54% of Leesburg’s total power supply expenses even though the demand reduction management strategies that Leesburg implemented during the period achieved a 4% reduction from what those expenses would have been without demand management.  Reducing the Peak Demand is seen to be even more significant because the demand related expenses are determined by Leesburg’s electric customers’ power usage during the one “Coincident Peak” hour of every month.

 

Looking forward to FY 2013 and beyond, demand related expenses are anticipated to continue to be more than half of Leesburg’s power supply costs.

 

Information gathered from tracking the historical coincident peak hour since 2005 very strong and predictable patterns emerged to identify and predict when the coincident peak hour was likely to occur.  Not surprisingly during the summer months (April through October), the “peak-hour” occurs between 3:00pm and 5:00pm on the hottest afternoon.  Similarly, during the winter months (January and February), the peak-hour occurs between 7:00am and 9:00am on the coldest mornings.  Peaks during the “shoulder months” between winter and summer (November, December, and March) are less predictable, but will generally follow the morning or afternoon peak hours.  During a few of these shoulder months, when there is neither a hot afternoon nor cold morning, the peak can  actually occur between 6:00pm and 7:00pm caused by the automatic operation of street lighting.

 

Since 2008, electric utility staff has developed and implemented strategies to mitigate the relatively high and continuously increasing cost of the capacity and delivery costs of Leesburg’s monthly wholesale power supply bill.  Since these strategies were first implemented in 2009 these strategies have resulted in cumulative power supply savings of more than $5 million.

 

The new communicating electric meters have been reporting electric usage in 15 minute increments since they were installed during July and August 2012 and the back office systems necessary to support optional time differentiated rate plans are expected to be operational during March 2013.  This combination of new technologies will enable us to offer our customers electric rate plans that more closely correspond to the actual cost of wholesale power and will provide the appropriate price signals to enable residential and small commercial customers to make purchasing decisions based on a price that more accurately reflects the actual cost of the electricity being used.

 

While families and small commercial customers are similar, they are not alike.  They may have different needs, different abilities and it for those reasons that it is appropriate to maintain the existing “flat rate” and also offer rate plans that encourage electric usage to be shifted away from “on-peak” periods, when costs are higher to “off-peak” periods, when costs are lower.

 

Background

During 2008, staff recognized the need to reduce Leesburg’s demand related costs by taking actions that were within the utility’s control and during April 2009, Conservation Voltage Optimization (CVO) was first deployed reducing the wholesale power supply bill by $34,427that month.  Since that humble beginning, the cumulative savings from CVO has grown to $1,848,000. 

 

The Commission supported staff’s recommendation to install new equipment on existing city emergency generators to gain benefits from exercising those generators during hours that were potential “peak” hours each month. The cumulative savings from that strategy has reached $2,538,860. 

 

The Commission also supported a new rate plan to encourage large commercial customers to similarly exercise their generators or reduce their demand during potential peak hours and Leesburg is sharing those savings with those customers.  The Commission authorized a new “Load Reduction Credit Rider” (LRCR) rate plan that shares half of the wholesale power supply saving with any commercial customer that can reduce 100 kW of load when requested by the utility during hours that are potential peak hours.  LRMC was the first commercial customer to request service under the LRCR and since that time two Publix supermarkets, Wal-Mart, and the new LRMC Data Center also requested to take service on the LRCR.  Cumulative savings from this strategy have now resulted in $905,944 in wholesale power supply costs of which $452,972 has been rebated to the customers that created the savings.

 

Summary of the Proposed New Electric Rate Offerings

 

The additional rate plans that are proposed for consideration at this time are for residential customers only.  Staff is planning to bring similar rate plans for consideration by the Commission in FY 2013-14 after a baseline of electric usage patterns are developed for non-residential customers.

 

Staff has introduced and the Commission has supported demand response strategies since 2009 and together we have been growing those programs since that time.  The current proposed optional rate plans are the appropriate next steps to offer our customers choices designed to help them control their energy consumption and save money.

 

 A more complete description for each rate plan follows this initial overview of the proposed rate plans:

 

·         Two Time of Use rates with static on-peak and off-peak rates and periods for each month

·         Load Reduction Credit-2 similar to the LRCR for large commercial customers, where the date and the time of a Load Reduction event is generally not known more than a day in advance of calling the event and the amount of the credit will be determined by the actual monthly billing amount and the actual measured load the customer reduced by the customer during the “coincident-peak hour.”

·         Residential Load Management Credit (RLMC) providing a fixed monthly credit based on the appliance the utility is allowed to control.

 

Staff and our Rate Consultant have prepared these three additional rate plans for your information and consideration.  We are currently working with our Smart Grid partner, GE Digital Energy, and other business partners to integrate the back office systems, complete the appropriate test and validation processes, train our Customer Service staff in the use of the new business systems.

 

Because of the complexities associated with these new offerings, staff proposes to request approval of the two Time of Use rate structures at this time.  The date on which these rate plans will be available to residential customers has not yet been finalized.

 

Additionally, staff is continuing to apply lessons learned by other utilities that have traveled this new path of partnering with customers for our mutual benefit, and as we learn more about what is working well and what is not working so well, we may propose modifications to the LRCR-2  and RLMC for your consideration prior to finalizing those rate plans.

 

Options:

1.  Authorize rate plan as presented; or,

2.  Such alternative action as the Commission may deem appropriate

 

Fiscal Impact

Expenses are included in the Smart Grid Investment Grant with benefits to be determined.

 

Submission Date and Time:    1/25/2013 3:18 PM____

 

Department: _Electric________________

Prepared by:  Sabrina Hubbell_______                     

Attachments:         Yes____   No __X___

Advertised:   ____Not Required _____                     

Dates:   __________________________                     

Attorney Review :       Yes___  No _X__

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head _Paul Kalv_

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________