| Background: |
On October 16, staff informed the council that an
additional rate increase beyond July 2001, would not be necessary. Staff
did indicate that it would be appropriate to apply the new BPA wholesale
rates to the City's rate model to determine if a rate redesign was needed.
This work has been completed by using the R. W. Beck rate model. When the
rate model was developed in 1998, the process resulted in some major changes
to rates which ensure that the various customer classes were each paying
their appropriate share of costs and also that certain classes were not cross
subsidizing other rate classes. It is important to note that rate design
is partially art and partially science, as a number of estimates go into
developing modeling assumptions. However, the City's model does give as accurate
information as possible. The analysis and subsequent rate redesign that was
accomplished in 1998 generally achieved the goal of eliminating subsidizes
between customers classes.
Because BPA has made major changes to their wholesale billing process
since 1998, staff felt that the analysis needed to be run again to see if
new inequities were created by BPA's new rates. Fortunately, the model runs
with the new data did not suggest that any major rate redesign was needed.
Therefore with one exception, staff would propose that the existing rate
structure remain intact.
The proposed change would be to the rates charged to commercial customers.
The current rate structure is a declining block structure. This means the
price of energy (kWh's) declines as usage increases. The current winter energy
charge for single-phase commercial customers is:
| First 3,000 kWh's |
......$.05687/kWh |
| Next 17,000 kWh's |
......$.04074/kWh |
| Balance of kWh's |
......$.03819/kWh |
This type or rate structure is contrary to the conservation ethic
the City encourages and goes counter to the remainder of City rates classes
which are increasing block rates where kWh's in the last block are more costly
than the initial blocks.
The new rate would be redesigned so that it is revenue neutral for
the class of commercial customers as a whole, which means that the overall
collections from the class would remain the same as before the redesign.
This change is needed because it is the only class that has declining blocks.
This change would also give the right pricing signal to customers and encourage
them to pursue energy efficiency. As part of the proposed budget, staff is
proposing a rate increase on July 1. Because final numbers from BPA concerning
the amount of the Cost Recover Adjustment Clause (CRAC) aren't available
yet, the magnitude of this increase is not known. |
