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Home My WebLink About2.B.1. Electric Rate Update Report '2-B November 1_ _'006 R,wBE(1( Shakopee Public Utilities Commission Shakopee Public Utilities 255 Sarazin Street Shakopee. MN 55379 Commission Members: Subject: Electric Rate Update RepOl.t Transmitted ht:rewith is the report of our study of the retail electric rates for Shakopee Public Utilities ("SPU"). This study has been performed to determine recommended adjustments in Shakopee's retail electric rates. In this study_ we have examineJ the revenue requirements for Shakopee's electric utility. To remain fimlllcially sound. Shakopee's electric utility must produce sufficient revenues through its retail rates to cover its revenue requiremcnts_ We have also reviewed the cost-of-service analysis and the unbundled cost analysis developed in our 2003 Electric Cost-of-Service and U nbundlec\ R:lte Study_ We have designed Ilew dectric rates that rellect the results of our analyses. Section 3 of the report presents our recommendatiolls and the proposed rates_ Thank you fur the opportunity to have prepared this study for Shakopee. We would like to express our :lppreciation for the valuable assistance provided by Shakopee's staff during the performance of this study. Sincerely, R. W. BECK. INC. Dav icl A. Berg, P.E. Principal and National Director 1I\_llI",I",,,,\, 10 I III,:~"~ I' "il;~':' <":1\:11",1"-' "'rlll!, R:llt' SUld'. .:].:('1 ':'(;'!' Final Report Electric Rate Update Table of Contents Letler oj Transmiffa! Tobie ojContents List vlTob!es List oj Figures Section 1. llltr'oduction Section 2. Estimated Operating Results - Existing Rates Historical Power and Energy Requirements.......................--............................. 2-1 Estimnted Power and Em:rgy Requirements . ......................................._...........2-2 F:~;til11ated Revenue Requirements _. _ _...... _ _.. .................. -... -.. ......... ..-........- -.. ...-.. 2-2 Purchased Power Expenses...-.............-....-.........- - ................................2-3 MMPA Served Area __.._._.._.____..._..._.._________..__......_.._....................2-3 Xcel Served Area ................_........_...._....._.._....._..............-.........-..2-4 SPU Total Purchased Power Costs .................-.....-..-................. 2-5 Operating and Maintenance Expenses _...._....................-......-...-.......-....-- 2-6 Contributions to the City _............-...-.....-......-....-............-.........................2-6 Other Income and Expenses __..... _ _.. _..' _..""" _... _....... -.... -........................... 2-7 Cap ita 11m provements _ _ _ _.. _. _ _ _ _.. _ _ _.. _.. _ _ _ _. _ _ _ _ _.. - - - -. - - - -. -... - - -.... - -....... -..... -....... 2-7 \)ebt Serv ice ._.... _....... ............ _... ......,.._......" .........- ......... ....- ................... _.2-7 Net Revenue Requirements..... _.._.. _. _ _ _ _ _. _. _ .._.. _ __.. -..........-.. -... -... ....... .........2-7 Estimated Revenues - Existing Rates _..._......_...._.....___...._.........._.......__............. 2-7 Estimated Operating Results.. _... _......_ _....... _... _.......... -. - - -. -.. - -..... ......... ............... 2-8 Section 3. Proposed Rates Rate Design .._......... ........... ....... _....... ......... ...-. ............ .......... ......... .....-.............. 3-1 Rate Recommendations _........... _........... _............... -......... -........................ 3-1 Power Cost Adj ustment.......... _..................... _................. -. -..... -...... .................... 3-3 Estimated Operating Results at Proposed Rates.....-............-............................. 3-3 R,w'BECI( [,' -' Section 3 PROPOSED RATES Retail rate adjustments are generally made in response to revenue requirements and cost-of-service :ll1alyses. In Section 2 of this report, SPU's estimated annual operating results for the Study Period were presented. These operating results were developed utilizing SPU's existing rates. R. W. Beck also reviewed the results of the cost-of-service and unbundled cost analyses performed for SPU's Electric Department during its Electric Cost-of-Service and Unbunded Rate Study in 2003. R. W. Beck comp;lred costs from the last rate study with current costs to determine any changes th;!t would affect the cost-of-service. All of these factors have been considered in the development of the proposed rates included in this section of the Report. Rate Design Fen-ecasted revenues at current rates are expected to be sufficient to cover forecasted revellLlC requin'\11cills through the end of the Study Peric'd. New rates have been designed in be implemented in January 2007 to produce the same revenue per class as the existing r;ltes. However, the retail energy rates have been adjusted to incorporate no net elTect on revenues generatecl_ The retail energy rate was increased and the PCA rate was decreascd by the same amount. This adjustment to the retail energy and PCA rates was done to include the full estimated cost of power in the retail energy rate. j I Rate Recommendations 1_ Overall revenues from the Residential rate class have been kept the same. The monthly customer charge was increased to better reflect unbundled costs_ The energy rate was adjusted to account for the increased customer charge and the change in the peA base rate, as discussed in greater detail under "Power Cost Adjustment" later in this Section. 2_ Overall revenues from the Senior Citizen rate class have been kept the same. The energy rate was adjusted to account for the change in the PCA base rate, as discussed in greater detail under "Power Cost Adjustment" later in this Section. The monthly customer charge has not been changed, in line with R. W. Beck's recommendations in our 2003 Electric Rate Study to provide a lower rate to senior citizens through (l reduced monthly customer charge as compared to the regular Residential rate. Under this scenario, the Senior Citizen energy rate would be increased as needed over time to match the Residential energy rate and a reduced monthly customer charge would be maintained for the Senior Citizen rate_ A reduccd monthly customer charge is most beneficial to individuals that use low to 1ll11der:lte :1IlH'lInls of energy each ll1onth_ :-::1 R,w'BECK Section 3 3. The Watcr lleat rate class is closed to new customers. The Water Heat rate continues w he the same as the Residential rate. 4. Overall rC\cnues from the Commercial Service rate class have been kept the same. The monthly customer chargc \Vas increased to better reflect unbundled costs. The energy rate \Vas adi usted to account for the increased customer charge and the change in the peA base rate. as discussed in greater detail under "Power Cost Adjustmen(' later in this Section. 5. Overa II revenues from the Large General Service rate class have been kept the same. The monthly customer charge was kept the same. The demand rate was increased to better reflect unbundled costs. The energy rate was adjusted to account for the increased demand charge and the change in the PCA base rate, as discussed in greater detail under "Power Cost Adjustment" later in this Section. 6. Overall rcvcllues from the !8rge Industrial Service rate class have been kept the same_ The Illonthly customer charge was kept the same. The demand rate was increased to better reflect unbundled costs. The two block energy rate was adjusted to account for the increased demand charge and the change in the PCA bnse r8te. as discussed in greater detail under "Power Cost Adjustment" later in this SeCliun 7_ Over,lll rn'CllllCS l"rom the Dual Fuel and the Air Conditioning rate classes have been k;:pt thc s,lme. Ihe enugy rate was adjusted to account for the change in the PC A hasl' 1;11 c- ,IS discussed in greater detai I under "Power Cost Adjustment" later in this Snli\ll1 Ihe (me cenl per kWh energy rate differential between both these classes alld till: I\l:sidential enngy rate was maintained. 8. The peA b;lSC rate was ch~lIlgcd to adjust for the full estimated cost of power being illcluded in the retail energy rate. The existing PCA base rate is $0.042]. The proposed PCA base rate is $0.0635. All retail rates have been designed assLlming the rroposcd peA base rate of $0.0635_ The follo\\ i 11~' tab Ie sho\Vs the pruposcd e Icctric rates. .)-:2 Sh~lk"llL"c: t i I I I !e~ HI""J ExhIbit 3-A :-:'lul.:oper Public Ulililies, ;\linnpsOI,1 Electric Oper;lling ReslllL~ (Pf"Oposed Rates) HI::.lorlCiJl ESllmated Operating Revenue '001 2002 ,00) ,004 2005 12006 2007 2008 2009 2010 Residential S6.b~~ 7S:> 5n 19,052 57758,062 $S.5)O,905 $] 0,246,851 $9,962,595 $13,\91,741 $]3,777,477 $14,395,812 $15,036,443 Commercial ] 1.4~'.070 10,487,264 I1.H2.342 \],001,87 ] 16,574,841 14,369,571 20,786,283 22.079,647 23,639,457 25,328,886 Uncollectible Accounts 147927) (60030) (49437) (52465) 152 465) 1524651 (52465) (52465) Total Sales of ElectnclIy ]8.IIOS53 17,806,3]6 ] 9.052,477 2],472,746 26,772,255 24,279,701 33,925,560 35,804,659 37,982,805 40,312,864 Forfeited Discounts ],0.196 100,886 133,690 134,901 177,467 175,000 178,500 182,070 185,711 189,426 Free Service to City )4.353 49,871 53.982 60,4] ] 65_086 70,000 7],400 72,828 74,285 75,770 Power Cost Adjustment 0 7,860,989 (12,087) 429,38] 1.862,755 2,663,624 Conservation Program ] 79.837 257442 292 075 321 803 lli...ll2 481 185 507748 542 527 596 582 643 513 rotal 18,504. ~39 18,214,515 19.532,224 2] ,989,86] 27,425,921 32.866,875 34,671,12] 37,031,465 40,702.138 43,885,197 Operating Expenses Oper & Maintenance Purchased Power 12,9S4.805 12,487,784 12,863,870 14,619,686 18,791,944 24,154,995 25,573,659 27,426,179 30,501,172 32,976.743 Distribution Operation 185_008 235,128 285,469 319537 277,194 348,245 356.254 364,448 372.831 381,406 Distribution Sys Maint 274.887 343,898 26],666 496,511 461,057 450,000 460,350 470,938 481,770 492,850 Maint of General Plant ] ] 7.535 143 845 ] ]0417 171 697 193 589 210.000 lltlN 219771 224 826 229 997 Total Oper & Maint 13,5(.'_235 13,210,655 13,511,422 ] 5,607,431 19,723,784 25,163,239 26,605,093 28,481.336 31,580,598 34,080,996 Customer Accounts Meter Reading 65,729 68,081 86,] ]3 65,387 75,724 78,411 80,215 82.059 83,947 85,878 eust Records & Collection 162,373 196,245 120,022 202,369 219,5]7 233,812 239,190 244,691 250,319 256.076 Bad Debts I ~.376 128,388 Energy Conservation J 09458 220 508 287 582 285 264 1ll.ill- 481.185 507,748 542,527 596,582 643,513 Total Customer Accounts ).\9_936 613,221 593,717 553,020 706,384 793,408 827,152 869.278 930,848 985,467 Admin & General Admin & Gen Salaries 1<)1.072 259,343 266,32iS 318,009 386,265 408,409 475,000 544,000 615,000 690,000 Office Supplies & Expense :"l).i91 66,678 71,868 87.483 74,873 98,604 100,872 103.192 105,565 107,993 0'J1~;de Services Ii 2.069 270,025 398,964 177.177 : 59,929 190,000 175,000 200,000 200.000 200,000 Insurance :-9.U2I 72,094 64,047 1U.02: 105,752 92,000 95,220 9~,S::J 102,007 105,572 Emplcyee Pension J:--O..i05 524,055 6!'1,309 676,402 743,91 ) 833,021 862,177 892,353 923,586 955,911 Mise. & General l!iS_;)4~ 97732 ]S] 771 i i 5 27~ 23 2 696 i 92,800 197,,4 701 770 206411 211,159 T olal Admin & Gene!:11 C}}7.607. : 28992.7 l 567287 i 457429 I 703 42~ 1814834 L2Qi..5-9l 2 039 86~. 2152564 2270635 Total Oper & MmntenanLC 14)~::-;qn8 15,1 \3,804 15.bS2.426 ] 7,617.880 22,] 33,596 27,771,482 29,337,748 31,390,482 34,664,010 37,337,098 Depreciation 6::1.:.71(; 683,311 S 16.408 ] ,021.048 1.182,164 1,400,000 1,500,000 1,633,333 !,733,JD 1,900,000 AmOlt of Plant AcqUISitIon i ~~,()_O1 Jil..,004 ~);\.Q04 ~).Q91 63,il.Q4 63 003 63 003 63 003 63 003 ~.ill!1 Total Oper Expenses I S.5S()()J 8 ]5,860,119 l().)(,unS ]8.70].932 23)78,764 29,234,485 30,900,751 33,086,818 36,460,346 39,300,101 Operatmg Income 2:1"'.1:--'"::'1 2,354,396 :!.970,3So \.287.929 4,047.]57 3,632,390 3,770,369 3,944,647 4,241,792 4,585,095 Non-Operating (Rev)/Exp Rental & Miscellaneous 1'1)')47) (114,098) (2)5,603) (112,40] ) ( 153,424) ( 175,000) (175,000) (175,000) (175,000) (175,000) Investment Income 16:'[1.1 ]8) (604,960) 1'80,817) 1124,788) (223,779) (350,000) (275,000) (275,000) (275,000) (275,000) Rent from Water Dept. 0 0 (90,000) (90,000) (90,000) (90,000) (90,000) (90,000) Interest Expense.Existing Debl 9,\1.482 1,219,963 I S3,]45 1,118,968 1,048,558 1,103,798 1,078,698 1,053,048 1,025,985 998,119 Interest Expense.New Debt 0 0 0 Amort of Debt Issue Costs 20,831 20,83\ 33,837 54,237 82,905 86,540 86,540 86,540 86,540 86,540 Gain on Disposition of Propertv 0 (427,314) 0 0 0 0 0 Interest Chg to Construcl (91)874) LlQDlli UJ 0 979} Lill..llil Q il. Q Q Q Q Total Non-Oper (Rev)/Exp 111.1..174 356,015 589,583 822,499 236,946 575,338 625,238 599,588 572,525 544,659 Capital Contributions (366,014) ( 636,140) (563,82]) (521,992) (521,992) (521.992) (52\ ,992) (521,992) Transfer to City 791.592 542,133 588,326 633,613 788,282 945,755 995,292 1,059,705 1,159,132 1.245.567 Depree on Contrib Assets Q Q Q Q Q Q Q Q Q Q Net Income 1,938,255 1,456.248 2,158,491 2.467,957 3.585,750 2.633,289 2,671,831 2,807,346 3,032,126 3,316,862 Net Income os 11/" of Rev 10.5'Y" 8_0% 11.1% 11.2% 13.1% 8,0% 7.7% 7.6% 7.40/11 7.60/. Operating Rev Reqrnts (I) $16,5<<>51)84 $16,758,267 $17,739,747 $20, 158,044 $24,403,992 $30,233,586 $31.999,290 $34,224,119 S37.670,012 $40,568,335 Cosh Reserves Beginning of Year Cash Reserves $11,277,815 $11,234,108 $\ 0,828.942 S 10,662,624 $11,781.087 Plus Net Income 2,633,289 2,671,831 2,807,346 3,032.126 3,316,862 Plus Depreciation 1,400,000 1,500,000 1,633,333 1,733,333 1,900.000 Plus Amort of Plant Acquis 63,003 63,003 63,003 63.003 63,003 Capital Improvements (3,500.000) (4,000,000) (4,000,000) (3,000,000) (5,000.000) Exist Debt Service Principal (640000) (640 000) (670000) illQ,QQQl (730 000) End of Year Cash Reserves $11,277,815 $11,234.108 $10,828,942 $10,662.624 SIl.78\,087 S II ,330,952 (I) Operating Revenue Requirements equall)pt:mting expenses, non-operaLlllg. revenues and expenses, capital conlnbutions and transfers to the City P\003292 Shakopee\01-000 1 C ~m 1 01 \Data Analytical\elec opel__2006_proposcd rates\Opel Results R. W Beck, Inc