TVA and HU Rate Actions September 2018 2 TVA Rate Actions 3 TVA - PowerPoint PPT Presentation

TVA and HU Rate Actions September 2018

2 TVA Rate Actions

3 TVA Rate Change Key Components • TVA implements a fixed grid access charge for local power companies on their monthly power bill based on rolling 5 year historical energy volumes (similar to an availability charge). • Reduction of energy rates by $0.005/kWh to offset the fixed component. • TVA puts in place default retail rates to send price signals to address reduced consumption and distributed generation (solar, onsite generators, etc.). The default rates would flip our current residential rate structure from inclining block to declining block. • Minor cost-based changes – hydro credit re-alignment, fuel cost changes. Rate structure changes are passed on by TVA as regulator and are not subject to Council Approval but must be signed by the Mayor (power contract amendment).

4 TVA Rate Action Summary 1. Huntsville Utilities submitted a rate change election form requesting to defer the TVA rate change implementation until October 1, 2019. 2. City Council approved the rate change power contract amendment prior to October 1, 2018 to avoid the default TVA retail rates and defer the rate change. 3. Huntsville Utilities, TVA and City Council must agree upon a retail rate action prior to October 1, 2019. TVA has not stipulated that the retail rate action must be declining block. Our plan is to make adjustments to our current rate structure. Huntsville Utilities is one of only four local power companies in the Valley to have an inclining block rate structure for residential customers. 4. In addition to the rate change, TVA is going to implement a 1.5% rate increase effective October 1, 2018.

5 Huntsville Utilities Rate Action

6 Why Is A Ra hy Is A Rate Incr te Increase Needed? ease Needed? • TVA requires that we take some action prior to October 1, 2019 to avoid default rates. • Supply and material costs have increased steadily over time. • Electric system maintenance and improvements are required to ensure reliable service and meet the needs of our growing community. • Technological advancements that will enable us to better serve our customers have resulted in Huntsville Utilities undertaking some of the largest capital projects in our history.

7 Costs Continue to Rise Here are examples of items we purchase to keep the system operating and how the costs have changed from 2010 through 2018. We have limited control over these costs. 2010 2018 $ Increase % Change % Per Year 75’ Concrete Pole $3,090 $3,590 $500 16.2% 2.03% 2,000’ Reel of Cable $4,060 $5,800 $1,740 42.9% 5.36% Bucket Truck $167,500 $240,000 $72,500 43.3% 5.41% Capacitor Bank $4,401 $6,265 $1,864 42.4% 5.30%

8 Managing the Financial Position Progress comes at a cost (amounts shown will be incurred in the next 5 years): • New Construction Projects - $39,234,000 • Fiber - $36,500,000 • AMI - $31,745,000 • Infrastructure repairs and maintenance - $21,240,000 • Transformers - $10,300,000 And standard operating costs must continue to be covered: • Purchased power - $2,189,000,000 • Employee expenses - $236,609,000 • Tax Equivalents - $63,971,000 • Bond debt service - $32,137,000

9 Onl Only 15% of y 15% of Electric R Electric Revenue Stays a enue Stays at HU t HU

10 2019 Strate 2019 Str tegic Plan gic Plan Organizational Mission Vision Values Focus Areas Goals Workforce Demonstrate Performance Community Prudent Stewardship Customer Satisfaction Strengthen Trust Deliver Excellent Respect our in Huntsville Customer Do What’s Right System Reliability Customers Utilities Experiences Financial Stability Develop Engaged Get Better and Effective Organizational Everyday Employees Excellence

11 Aw Awar ard-Winning R inning Relia eliability bility • HU was awarded the highest available ranking in the Reliable Public Provider Program (RP3) from the American Public Power Association. RP3 recognizes utilities that demonstrate high proficiency in reliability, safety, work force development and system improvement. No other utility in Alabama has achieved Diamond status. • January 18, 2018 saw the highest demand on record (1,451 MW). Out of roughly 178,000 electric customers, approximately 220 were impacted by outages that morning (0.1%). • The average customer had power 99.9993% of the time during that 3 day peak event.

12 Significant Improvements to Customer Care   Changed the billing & payment cycle to Improved Call Center Performance, include mailing a separate Final Notice to answering 85.7% of call in less than 60 customers and eliminating the need for a seconds  customer to request a payment extension. Implemented Virtual Hold, September 2016  Call Escalation Process Implemented in  Request for New Service can be made online September 2016 with 3 rd Party Consumer Credit Check  CHAT coming in Fall 2018  Call Abandon Rate down from 16.1% in 2015 allowing us to reduce deposits for to 1.3% in 2017 approximately 50% of customer applying online  Expanded payment options for all customers  Registration Kiosk installed at the Main  51 WU Bill Pay Locations with extended Office to improve efficiency and reduce hours  customer wait time by 90 seconds. Self-Service Payment Kiosk (3 are 24/7)  Pay-By-Text and Recurring Credit/Debit Card  Continue to improve the customer Payments now offered experience through training, post  Annually, more than 10,000 Agency Grants transaction survey and call monitoring processed for a total of $2.6 million dollars in program customer assistance

13 Helping Those Most In Need Huntsville Extreme Energy Makeover Huntsville Home Uplift Program  Huntsville Utilities invested $26,000 on  This is a two year partnership with TVA the writing of a grant for the purpose of and Huntsville Housing Authority improving the homes of low income residents  TVA and HHA are providing $500,000 each year for the next two years  The winning of this grant resulted in being awarded TVA funding totaling  146 homes upgraded in FY18 totaling $12,040,000 $620,000 and expect over 100 more  In Madison County we upgraded over homes next year 1,138 limited income owned homes  These programs are an effort to develop  This grant took place over a 26 month a sustainable approach to better the period from late 2015 through FY 2017 lives of limited income Huntsville Utility customers

14 Promoting Energy Efficiency in Our Community New Homes Program Home Energy Survey Program  1,364 homes certified to State of  523 homes surveyed in the past calendar Alabama Energy Code during the past year. $119,735 in customer rebates paid calendar year through TVA funds. Operation Green Team Foundation  31 upgrades totaling $110,000 made to homes of low income residents

15 Residential Utility Bill Comparison $379.34 $400.00 $350.00 $311.38 $306.27 $295.84 $294.31 $291.26 $286.19 $267.01 $259.63 $300.00 $223.60 $250.00 $200.00 $150.00 $100.00 $50.00 $- Source: MLGW 2018 Utility Bill Comparisons for Selected Cities (Only Electric, Water and Gas estimates used)

10.00 15.00 20.00 25.00 30.00 5.00 - Source: The Tennessean (USA Today, 24/7 Wall Street) based on 2016 EIA information. Average Price 9.51 Louisiana Washington 9.68 HU 2016 Idaho Arkansas North Dakota Oklahoma Price of Kentucky 10.65 Tennessee Oregon Nebraska Utah of Elec Montana North Carolina Texas Electr Mississippi Missouri Wyoming West Virginia tricity ( Virginia South Dakota icity (¢ per kW Georgia Florida Indiana Nevada Colorado Ohio Arizona Iowa 12.61 Alabama r kWh) f Illinois South Carolina New Mexico Minnesota Kansas for Al Delaware Maryland r All S Pennsylvania Wisconsin Michigan New Jersey l Sta Maine Vermont tate New York California tes Rhode Island Massachusetts New Hampshire Connecticut Alaska 29.50 Hawaii 16

17 Availability Increases vs Usage Increases Availability • Charge designed to recognize that customers have the benefit of utility service even if they don’t use it (service is available upon demand) • Ideally should recover fixed costs • Stable source of revenue with limited weather impacts • With TVA moving to fixed component, becomes more critical for cost recovery Usage • Charges for customer consumption (demand and energy) • Ideally should be a pass through, but realistically is very difficult to achieve • Riskier option, because of the volatility of weather and declining usage patterns there are higher upsides and lower downsides • Structure (single, inclining, declining) plays a key role with efficiency and bill predictability

18 Residential Electric A esidential Electric Availa vailability bility Char Charge ge $45.00 $30.00 Average $17.73 $15.00 $9.17 $0.00 Based on TVA information, Huntsville Utilities currently has the 5 th lowest availability charge out of 154 utilities.

19 Commercial A Commer cial Availa vailability Char bility Charges ges Small Commercial Customer Charge $50.00 $40.00 Average $23.40 $30.00 $11.70 $20.00 $10.00 $0.00 Medium Commercial Customer Charge $400.00 $350.00 $300.00 $250.00 $200.00 Average $150.00 $89.98 $100.00 $55.35 $50.00 $0.00

20 Commercial A Commer cial Availa vailability Char bility Charges ges Large Commercial Customer Charge $1,600.00 $1,400.00 $1,200.00 $1,000.00 $800.00 $600.00 Average $309.35 $400.00 $158.15 $200.00 $0.00