Denton Municipal Electric FY 2018-19 Budget Presentation
Objectives • Load Forecast • Financial Assumptions • Commercial/Residential Comparison • Energy Cost Adjustment (ECA) • Financial Forecast • Debt • Purchased Power • Denton Energy Center (DEC) Proforma • Departmental Presentation, Including Capital Improvement Program (CIP) 2
Load Forecast Customers by Class Fiscal Year Residential Commercial Industrial Other Total 2010 39,819 -0.2% 4,734 1.8% 121 1.7% 499 3.5% 45,173 0.0% 2011 40,846 2.6% 4,846 2.4% 124 2.5% 426 -14.6% 46,242 2.4% 2012 42,054 3.0% 4,947 2.1% 124 0.0% 438 2.8% 47,563 2.9% 2013 43,572 3.6% 5,126 3.6% 127 2.4% 439 0.2% 49,264 3.6% 2014 44,241 1.5% 5,255 2.5% 127 0.0% 498 13.4% 50,121 1.7% 2015 44,203 -0.1% 5,130 -2.4% 124 -2.4% 602 20.9% 50,059 -0.1% 2016 45,163 2.2% 5,216 1.7% 135 8.9% 572 -5.0% 51,086 2.1% 2017 45,922 1.7% 5,294 1.5% 139 3.0% 560 -2.1% 51,915 1.6% 2018 46,864 2.1% 5,439 2.7% 141 1.4% 550 -1.8% 52,994 2.1% 2019 47,599 1.6% 5,496 1.0% 145 3.0% 572 4.0% 53,812 1.5% 2020 48,403 1.7% 5,575 1.4% 150 3.0% 578 1.2% 54,707 1.7% 2021 49,256 1.8% 5,665 1.6% 154 3.1% 581 0.5% 55,656 1.7% 2022 50,111 1.7% 5,756 1.6% 159 2.8% 586 0.9% 56,612 1.7% 2023 50,979 1.7% 5,847 1.6% 163 2.9% 592 1.1% 57,581 1.7% 2024 51,857 1.7% 5,936 1.5% 168 2.9% 599 1.1% 58,560 1.7% 2025 52,755 1.7% 6,029 1.6% 173 2.9% 605 1.0% 59,561 1.7% 3
Load Forecast MWh Sales and MW Peak Fiscal Year Residential Commercial Industrial Other Total Peak MW 2010 541,324 9.0% 256,435 1.8% 525,479 3.3% 35,167 5.5% 1,358,405 5.2% 339 6.9% 2011 569,711 5.2% 269,986 5.3% 544,448 3.6% 32,133 -8.6% 1,416,278 4.3% 350 3.2% 2012 537,631 -5.6% 263,474 -2.4% 535,160 -1.7% 33,418 4.0% 1,369,683 -3.3% 341 -2.6% 2013 541,109 0.6% 268,237 1.8% 535,984 0.2% 34,078 2.0% 1,379,407 0.7% 342 0.3% 2014 565,587 4.5% 279,720 4.3% 542,806 1.3% 32,945 -3.3% 1,421,058 3.0% 336 -1.8% 2015 576,810 2.0% 287,468 2.8% 565,632 4.2% 31,496 -4.4% 1,461,406 2.8% 347 3.3% 2016 552,695 -4.2% 289,030 0.5% 570,668 0.9% 20,924 -33.6% 1,433,317 -1.9% 349 0.6% 2017 555,350 0.5% 295,856 2.4% 582,670 2.1% 15,708 -24.9% 1,449,585 1.1% 337 -3.4% 2018 590,207 6.3% 294,144 -0.6% 578,769 -0.7% 15,428 -1.8% 1,478,548 2.0% 360 6.8% 2019 590,729 0.1% 300,549 2.2% 590,110 2.0% 14,856 -3.7% 1,496,243 0.9% 361 0.3% 2020 598,846 1.4% 304,459 1.3% 597,748 1.3% 14,930 0.5% 1,515,983 1.0% 370 2.5% 2021 607,962 1.5% 308,264 1.2% 604,681 1.2% 15,005 0.5% 1,535,911 1.0% 386 4.3% 2022 618,665 1.8% 312,207 1.3% 611,783 1.2% 15,080 0.5% 1,557,735 1.1% 403 4.4% 2023 629,168 1.7% 316,177 1.3% 618,980 1.2% 15,155 0.5% 1,579,481 1.1% 420 4.2% 2024 638,788 1.5% 320,394 1.3% 626,658 1.2% 15,231 0.5% 1,601,071 1.0% 438 4.3% 2025 649,066 1.6% 324,536 1.3% 634,197 1.2% 15,307 0.5% 1,623,107 1.1% 457 4.3% 4
Financial Assumptions • Pay off $28.6 Million of 2010 TMPA Related Callable Scrubber Debt – February 2019 • No Base Rate Change • TCRF suspended – Re-evaluated annually • ECA maintained at 0.0341 per kWh in FY 2018-19 • Update ECA Ordinance to Reflect DEC Costs • Reduced Purchased Power Cost • Reduce Capital Improvement Program (CIP) • Debt Fund a portion of Transmission CIP and Cash Fund remaining CIP 5
Denton Municipal Electric Cost Containment Strategies How is DME able to accomplish FY18-19 recommendations: Reduced Purchased Power Costs ($37 Million) – Below are major changes: • DEC Net Revenue ($20 Million) • Reduced TMPA Expenses (-$22 Million) Reduced CIP • For FY 18-19, from $45 Million (projected) to $23 Million FY 17-18 • Cash Funding $24 Million of CIP (Budget Amendment) • Using approximately $10 Million of unspent Revenue Bonds to fund FY 17-18 CIP 6
Future Emphasis • Management of Transmission & Distribution system expansion program • Operation and maintenance of Denton Energy Center • Update of Energy Risk Management Policy (Phase II) • Bid and acquire modern Energy Trading and Risk Management System (ETRM) • Acquisition of new renewable energy projects to meet 100% renewable goal – Participation in solar RFP process with five municipal electric utilities – Issuance of Denton RFP for additional solar and/or coastal wind • Continued focus on making electric distribution system reliability enhancements and circuit “sweeps” by DME distribution crews • Manage overall power supply portfolio under constrained ERCOT electricity market conditions 7
$160 CITY AND OTHER "FULL SERVICE" UTILITIES' $150 RESIDENTIAL AVERAGE RATE COMPARISON (1200 kWh) $140 DME DME $129.26 $130 PROPOSED $124.74 $120 $110 $100 $90 $80 $70 City of New COSERV City of Bryan City of Garland City of City of Denton AUSTIN City of Denton San Antonio City of City of City of College Braunfels Brownsville 3.5% Decrease ENERGY FY 2018 Greenville Lubbock Station 8
Average Monthly Bill Comparison - Based on 1200 kWh/mo Includes DME 3.5% Rate Decrease Scenario (Yellow) - 5/3/18 Refresh On May 3, twenty-one retailers and four Cities had rates higher than DME DME DME PROPOSED $129.26 $124.74 9
Commercial/Residential Comparison • An outside consultant is in the process of finalizing DME’s “Cost of Service” (COS) study for 2018 • Preliminary results show that Residential customers are paying less than their calculated cost-of-service • Commercial customers, on the other hand, are paying more than their pure share of DME’s costs 10
ECA Change The current ECA Rate Schedule authorizes the use of the ECA to pay for projected energy costs. It does not specifically address the Denton Energy Center. Therefore, staff proposes to amend the language to authorize the inclusion of DEC debt and operating expenses. Since the DEC will replace a purchased energy cost, it is appropriate to allow the ECA to include these items. • ECA Balance as of 9/30/17 = $10.3 Million • ECA Balance as of 3/31/18 = $7.4 Million • Estimated Balance as of 9/30/18 = $7.8 Million • The ECA will be updated quarterly with PUB and City Council approval 1 1
ECA Change • Current calculation: Projected Energy Cost + ECA Balancing Account Projected kWh Sales • Proposed calculation: Net DEC Expenses 1 + Projected Energy Cost + ECA Balancing Account Projected kWh Sales 1 Revenue less Debt Service and Operation & Maintenance Cost 1 2
Denton Municipal Electric 5 Year Forecast Actual Estimate Proposed Projected Projected Projected Projected 2017 2018 2019 2020 2021 2022 2023 Revenues Base Rate Revenues $87.3 $86.0 $84.5 $85.6 $86.7 $88.0 $89.2 TCRF Revenues 4.2 5.6 - - - - - ECA Revenues 49.4 50.7 51.0 52.1 54.8 58.5 59.4 Rate Revenues $141.0 $142.2 $135.5 $137.7 $141.5 $146.5 $148.6 Non-rate Revenues 31.6 40.9 44.0 46.8 52.1 60.0 62.3 Subtotal $172.6 $183.2 $179.5 $184.5 $193.6 $206.6 $210.9 Planned Use of Reserves - 13.8 27.6 - - 0.3 - Total Revenues $172.6 $196.9 $207.1 $184.5 $193.6 $206.8 $210.9 Expenditures Purchased Power & Fuel $88.8 $76.6 $45.8 $40.9 $38.5 $42.1 $42.9 Transmission of Power 4.2 5.6 12.5 13.0 13.5 14.0 14.5 Operations & Maintenance 22.4 30.0 34.3 35.0 36.0 37.1 38.1 Cost of Service Transfers 12.4 12.5 14.2 14.6 15.0 15.5 15.9 ROI & Franchise Fee 13.1 14.0 15.1 15.5 16.1 16.9 17.3 Debt Service 29.1 34.4 40.7 49.5 49.6 49.4 48.7 Debt Defeasance - - 28.6 - - - - Revenue Funded Capital - 24.0 15.9 15.2 24.4 31.8 23.0 Total Expenditures $170.1 $196.9 $207.1 $183.6 $193.1 $206.8 $200.4 Net Income $2.5 $0.0 $0.0 $0.9 $0.5 $0.0 $10.5 Base Average Revenue $/kWh 0.0602 0.0582 0.0565 0.0565 0.0565 0.0565 0.0565 Transmission Cost Recovery Factor $/kWh 0.0029 0.0038 0.0000 0.0000 0.0000 0.0000 0.0000 Energy Cost Adjustment $/kWh 0.0361 0.0341 0.0341 0.0344 0.0357 0.0376 0.0376 0.0992 0.0961 0.0906 0.0909 0.0922 0.0940 0.0941 Total Average Revenue $/kWh Working Capital + Operating Reserve + TCRF & ECA $76.9 $64.1 $39.2 $45.2 $45.7 $45.5 $56.0 1 3 Debt Coverage Ratio - 1.25 1.54 1.01 1.40 1.33 1.34 1.34 1.57
DME Debt As of 9/30/17 (in Millions) FY 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 Total DME Principal & Interest* $34.4 $40.7 $54.3 $53.5 $52.7 $51.2 $49.8 $47.1 $41.6 $41.3 $40.9 $40.1 $40.2 $37.6 $36.0 $34.5 $31.7 $31.7 $31.8 $31.8 $13.7 $13.8 $13.8 $13.8 $13.8 $13.8 $13.8 $10.4 $6.5 $3.5 $939.7 TMPA Principal & Interest $23.1 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $1.7 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $60.5 Total Principal & Interest $57.5 $42.4 $56.0 $55.2 $54.4 $52.9 $51.5 $48.8 $43.3 $43.1 $42.6 $41.8 $41.9 $39.3 $37.7 $36.2 $33.4 $33.4 $33.5 $33.5 $15.4 $15.5 $15.5 $13.8 $13.8 $13.8 $13.8 $10.4 $6.5 $3.5 $1,000.3 * Approximately 40% of DME GO/CO Debt is for Transmission Projects NOTES: 2010 TMPA Scrubber debt is included above in years 2018 - 2025 $16.9 Million of capitalized interest is offset by revenue bond proceeds As of 9/30/18, Principal & Interest balance will be $905.4 Million 1 4
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