HomeMy WebLinkAboutAgenda Report - July 18, 2001 I-01CITY OF LODI COUNCIL COMMUNICATION
AGENDA TITLE: That The City Council Approve A Revision In The Market Cost Adjustment Schedule_
MEETING DATE: July 18, 2001
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: That the City Council approve the revision to the Market Cost Adjustment
Schedule as attached.
BACKGROUND INFORMATION: As recently as two months ago there were dire predictions of blackouts for
up to every third day this summer. In order to provide reliable and un-
interruptible power to it's customers in the face of possible blackouts, the City of Lodi's Electric Utility Department
(EUD) purchased power resources within the last six months to have excess power supply available. At that time the
value of this excess capacity was projected by NCPA and others to have a value of up to $400/Mwh through the end
of this calendar year. The EUD entered into contracts at levels between $120 to $170 per Mwh which saved the City
over $12,000,000.00 compared to exposure to the spot market last winter.
The power markets have changed radically in the last two months due to price caps imposed by the Federal Energy
Regulatory Commission (FERC) on June 19, 2001. Wholesale market prices applicable to Northern California have
dropped significantly since the price cap policy has been in effect. Spot market prices for on -peak power have
generally ranged from $200 to $400 per Mwh this calendar year through early June 2001 for Northern California
delivery. Prices for the last two weeks have been on the order of $50 to $80 per Mwh. With these new price caps in
place, it appears that prices (spot and forward) will hold at $90 or lower. Given the contract purchases by EUD are
above these levels for the remainder of this calendar year, there is a significant increase in the EUD's power costs
which require the MCA to be revised upward. Beginning in 2002, the EUD has power contracts on the order of $65,
which may afford the ability to revise the MCA downward.
Lodi is not alone in facing new rate increases. Intervention by FERC in the power markets and the continuing effects
of the PG&E bankruptcy have driven up the costs of most NCPA members. Palo Alto has recently raised their rates in
excess of 40 percent and Roseville has announced a proposed increase of up to 20 percent. Lodi's proposed MCA
raises system average rates between 15 and 20 percent compared to current levels. Lodi's rates, as proposed, will
maintain an estimated 30% advantage over PG&E's current rates.
Electric Utility Department staff will continue to explore other means of reducing both bulk power and operating costs.
A full report and review of the MCA will be scheduled for a council meeting in October.
FUNDING: None required
Alan N. Vallow
Electric Utility Director
ANV/1st
C: City Attorney
Finance Director
APPROVED:
Dixon FI - i ana er
'9(IFOF,C�
APPLICABILITY:
CITY OF LODI
ELECTRIC UTILITY DEPARTMENT
SCHEDULE MCA
MARKET COST ADJUSTME
When in effect, this schedule is applicable to all areas served by the City and to all kilowatt-hours
billed under all rate schedules as defined under the special conditions of the rate schedules labeled
Purchased Power Adjustment. Generally, power supply costs will be recovered through application
of the base rates. In the event that substantial changes in projected power supply costs occur,
either increases or decreases, the Market Cost Adjustment will be activated to provide for
increases or decreases in the City's charges for electric service.
Rates:
The Market Cost Adjustment (MCA) is applied to specific classes as a cents per kWh charge by a
Market Cost Adjustment Billing Factor (MCABF). For some classes, the MCA may be zero. The
following schedule provides the MCABF by class.
MARKET COST ADJUSTMENT BILLING FACTOR
The Market Cost Adjustment Billing Factor by designated rate schedule,
in cents per kilowatt-hour, shall be shown in this Section. Certain classes
may have a tiered MCABF by level of monthly consumption.
Class
Cents per
kWh
Date
Effective
EA, EE under 300 kWh
2.5
August
1, 2001
EA, EE 301 to 600 kWh
3.5
August
1, 2001
EA, EE above 600 kWh
4.5
August
1, 2001
ED, EF
0
August
1, 2001
EM
0
August
1, 2001
EL
0
August
1, 2001
G1
3.0
August
1, 2001
G2
3.0
August
1, 2001
G3
1.9
August
1, 2001
G4
1.9
August
1, 2001
G5 1
1.3 1
August
1, 2001
11 1
0 1
August
1, 2001
Effective August 1, 2001
MCA -111 Ordinance No. 1701
RESOLUTION NO. 2001-176
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING
REVISION IN THE MARKET COST ADJUSTMENT SCHEDULE
WHEREAS, as recently as two months ago there were dire predictions of blackouts for up to
every third day this summer. In order to provide reliable and un -interruptible power to it's customers in the
face of possible blackouts, the City of Lodi's Electric Utility Department (EUD) purchased power resources
within the last six months to have excess power supply available. At that time the value of this excess
capacity was projected by NCPA and others to have a value of up to $400/Mwh through the end of this
calendar year. The EUD entered into contracts at levels between $120 to $170 per Mwh which saved the
City over $12,000,000.00 compared to exposure to the spot market last winter; and
WHEREAS, the power markets have changed radically in the last two months due to price caps
imposed by the Federal Energy Regulatory Commission (FERC) on June 19, 2001. Wholesale market
prices applicable to Northern California have dropped significantly since the price cap policy has been in
effect. Spot market prices for on -peak power have generally ranged from $200 to $400 per Mwh this
calendar year through early June 2001 for Northern California delivery. Prices for the last two weeks have
been on the order of $50 to $80 per Mwh. With these new price caps in place, it appears that prices (spot
and forward) will hold at $90 or lower. Given the contract purchases by EUD are above these levels for
the remainder of this calendar year, there is a significant increase in the EUD's power costs which require
the MCA to be revised upward. Beginning in 2002, the EUD has power contracts on the order of $65,
which may afford the ability to revise the MCA downward; and
WHEREAS, Lodi is not alone in facing new rate increases. Intervention by FERC in the power
markets and the continuing effects of the PG&E bankruptcy have driven up the costs of most NCPA
members. Palo Alto has recently raised their rates in excess of 40 percent and Roseville has announced
a proposed increase of up to 20 percent. Lodi's proposed MCA raises system average rates between 15
and 20 percent compared to current levels. Lodi's rates, as proposed, will maintain an estimated 30%
advantage over PG&E's current rates; and
WHEREAS, the Electric Utility Department staff will continue to explore other means of reducing
both bulk power and operating costs. A full report and review of the MCA will be scheduled for a Council
meeting in October.
NOW, THEREFORE, BE IT RESOLVED, that the Lodi City Council does hereby authorize a
revision to the Market Cost Adjustment (MCA) Schedule attached as Exhibit A.
Dated: July 18, 2001
I hereby certify that Resolution No. 2001-176 was passed and adopted by the Lodi City Council in
a regular meeting held July 18, 2001 by the following vote:
AYES:
COUNCIL MEMBERS — Hitchcock, Howard, Land and Mayor Nakanishi
NOES:
COUNCIL MEMBERS — None
ABSENT:
COUNCIL MEMBERS — None
ABSTAIN:
COUNCIL MEMBERS — Pennino
SUSAN J.BLACKSTON
City Clerk
2001-176
� OF,4
G� '0
F0
APPLICABILITY:
CITY OF LODI
ELECTRIC UTILITY DEPARTMENT
SCHEDULE MCA
MARKET COST ADJUSTMENT
When in effect, this schedule is applicable to all areas served by the City and to all kilowatt-hours
billed under all rate schedules as defined under the special conditions of the rate schedules labeled
Purchased Power Adjustment. Generally, power supply costs will be recovered through application
of the base rates. In the event that substantial changes in projected power supply costs occur,
either increases or decreases, the Market Cost Adjustment will be activated to provide for
increases or decreases in the City's charges for electric service.
Rates:
The Market Cost Adjustment (MCA) is applied to specific classes as a cents per kWh charge by a
Market Cost Adjustment Billing Factor (MCABF). For some classes, the MCA may be zero. The
following schedule provides the MCABF by class.
MARKET COST ADJUSTMENT BILLING FACTOR
The Market Cost Adjustment Billing Factor by designated rate schedule,
in cents per kilowatt-hour, shall be shown in this Section. Certain classes
may have a tiered MCABF by level of mon hly consumption.
Class
Cents per
kWh
Date
Effective
EA, EE under 300 kWh
2.5
August
1, 2001
EA, EE 301 to 600 kWh
3.5
August
1, 2001
EA, EE above 600 kWh
4.5
August
1, 2001
ED, EF
0
August
1, 2001
EM
0
August
1, 2001
EL
0
August
1, 2001
G1
3.0
August
1, 2001
G2
3.0
August
1, 2001
G3
1.9
August
1, 2001
G4
1.9
August
1, 2001
G5
1.3
August
1, 2001
11 1
0
August
1, 2001
Effective August 1, 2001
MCA -1/1 Ordinance No. 1701
Market Cost Adjustment
Proposed August 1, 2001 FICA
Revision
�rl y
Su or: Condi*ti*ons
Expected by NCPA
Thirty days of blackouts
Price pre -summer $200-400/Mwh
Summer prices: 5300-600/Mwh
Extreme price volatility
Hands off by FERC
High gas price
Current Conditions
Powerfgas prices declining forward
Gas prices declining
PG&E and Potential SCE bankruptcy
Legislative ®ulatory uncertainty
What will state role be:
Transmission?
Generation?
clii
Dramatic Change in Markets
FERC soft price caps imposed in
June
Market all times capped
Caps thru next Fall 20,02
Prices now $40 to $1 0:0
Much less volatility
Requires a $10 million Lodi power
supply adjustment
L470
$60
$50
$40
H
m
$30
g
400. $20
$10
$0
PG&E Citygate Spot Gas Prices-
$60
rices-
O O O O O O rr T r T r T T
O O O O O O O O O O O O O
O! OBD ti to w .
cc O r Nrr�- t j M �! to ti
�" T T
V
Forward Prices for NP15
$450 1
$400
$350
$300--l-
$250
April 9, 2001 . May 9, 2001
-
--June 8, 2001 `July 9, 2001
$200
$150
$100
$0
r N N N N Co M M M 1A iA 1A
a a a a a a � i a a r V ar a
.�_
AWIM I ILIPA tb-�Wwj I L!, LA REA AIM.
Bought long to insure stability
Avoided about $19 million winter
market exposure
Tiered Market Cost Adjustment
Ernphasiae Conservation
Orae Year contracts $120-170/Mwh
IM0
Residential EA/EE
0-300 kwh: 2.5 cents/kwh
300-6Q0 kwh 3.5 cents/,kwh
Over 600 kwh 4,5 cents/kwh
G1/G2
3.0
cents
per
kwh
G3/G4
1.9
cents
per
kwh
G5
1.3
cents
per
kwh
; � E
Market Cost Adjustment
Lifeline customers exempt
9- -
Charged on a per kWh basis
Residential Tiered Rate
Conservation based rate
Higher kwh = higher $1'kwh for Residental
! � S ��1100
Dl�
Market Cost Adjustment
Recovers power costs
not collected in rates
Sarni -Annual to Quarterly
Customers may receive
a charge or credit
True up annually
MCA by Class
Requires temporary rate change from current
levels: Bill Impact
EA/EE 8%
Low Income 0%
G1 8%
G2 8%
G3/G4 16%
.c
Gas 14%
Contractil-I 0% & "rallf,
Utility Rate Increases
Approved
SCE & PG&E: 40-50%
Palo Alto 44%
Seattle/Tacoma over 30%
Roseville pending
Lassen (CA): 44%
Proposed
BPA: 45%
&j, ty
Residential Bill Impact
Residential (EA) August 131"11 @ 665 kwh
Base Rate $76.65
First MCA: $88.07 +15%
Proposed MCA: $94.66 +7%
PG&E Bill $207 29% higher than proposed
m
$130.00
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
r
Residential (EA) Summer Bill (665 kwh) ;sky
Base Rate
First MCA
Proposed MCA
PG&E
Large Residential Bill
Impact
Residential (EA) August Bill @ 1,000
kwh
Base Rate $116.32
First MCA: $134.32 +15%
Proposed MCA: $152.32 +13%
PG&E Bill $207.88 36% higher than
proposed
tr�v
& fl-cv I -k_
Small Commercial (Gil) Bill
Impact
Commercial G1 August Bill @ 1,425 kw:h
Base Rate: $191.80
First MCA: $22:0.30 +15%
Proposed MCA: 234.55 +6%
PG&E: $299.74 +29% over proposed
�,-VVZ4/"104
9
Small Commercial (G1) Billri�son M i
Compa Summer at 1,425 Ic�
��
Medium Commercial (G2)
Bill Impact
G2 August bill @ 28,320 kwh
Base Rate:$2,894
First MCA: $3,461 +18^/a
Proposed MCA: $3,744 +g%
PG&E: $4,937 +yg% over proposed
�,-VIIT41'01
�T11.1'�y
$4 {000.NV
$3!50/.00
$3,000.00
F$ZSKYY
Medium Cormmr+cial (G2) Simmer Bill Comparison /At 21%3io wh
3
w"ti:' w �����M- w
;i*
Large Commercial (G3/G4)
Bill impact
G3 August bill @ 42,280 kwh
Base Rate:$5,367
First MCA: $6,227 +16%
PG&E: $7,621 +yZ^/o over proposed
Biu Co rpaion MBB m CommerdW TOU (G3) at 4k%28P kwh
Large TOU (G5) Bill Impact
G5 August bill @ 350,000 kwh
Base Rate: $33,500
First MCA: $38,045 +14%
PG&E: $50,197 +32% over proposed
liiiL
MCA Summary
Proactive response to
market uncertainty
Still competitive to PG&E by 20-30%
Rate change temporary;PG&E 7+ years
Credit rating protection
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