HomeMy WebLinkAbout2016.10.26 Conservation Commission Agenda Packet ASHLAND CONSERVATION COMMISSION
Meeting Agenda
October 26, 2016 — 6:00 PM
Community Development Building, Siskiyou Room
51 Winburn Way
1. Call to Order
2. Consent Agenda
2.1. Minutes September 28, 2016 Commission meeting
3. Announcements 0 0 min)
3.1. Next Regular Meeting: December 14, 2016
3.2. Upcoming Sub-committee meetings
3.3. Other Announcements from Commissioners
4. Public Forum (10 min to be evenly divided by public wishing to speak)
5. Reports / Presentations/Updates (45 min)
5.1. Council Update- Councilor Rosenthal (5 min)
5.2. City Conservation Programs and Operations—Hanks(5 min)
5.3. Downtown Recycling Pilot Program Update—Buck/Biegel-Coryell(10 min)
5.4. SOU Quarterly Update—Biegel-Coryell (Recology in January) (5 min)
5.5. Grey water Subcommittee Update—Weir(10 min)
6. Old Business (15 min)
6.1 Commission Monthly Column in Sneak Preview (5 min)
a. December—Holiday waste prevention ideas(draft in packet for approval)
b. January—CEAP Update—Need author
c. Feburary-??
6.2 Climate & Energy Action Plan—Project Update (10 min)
6.3 Earth Bowl—Discussion/Decision for 2017—Weir(15 min)
7. New Business
7.1 Electric Department— Cost of Service Study(report in packet)
8. Wrap Up (5 min)
8.1 Items to be added to next agenda
8.2 Adjournment
CITY 0, F
Minutes for the Conservation Commission
September 28,2016
Page 1 of 3
MINUTES FOR THE ASHLAND CONSERVATION COMMISSION
Wednesday, September 28, 2016
Siskiyou Room, 51 Winburn Way
1. Call to Order
Chair Bryan Sohl called the meeting to order at 6:00 p.m.
Commissioners Jaime Rosenthal, Risa Buck, James McGinnis, Roxanne Beigel-Coryell, and
Mark Weir were present. Councilor Rich Rosenthal and staff member Adam Hanks were present.
Commissioner Cara Cruickshank arrived late. Commissioner Marni Koopman was absent.
2. Announcements
The next commission meeting will be October 26, 2016.
Group decided to combine the November and December meetings into one meeting on
December 14, 2016.
3. Public Forum
Huelz Gutchen— stated cement makes lots of carbons, but the whole world needs to use it until a
better option comes up. Recently, people have been building wooden high rises —this is pretty
cool. He described the three parts of energy and how 2/3 of our energy signature could be made
zero with the use of solar panels, particularly used to run homes and cars. Now we can do zero-
net, autonomous, no wire to the outside homes. There are two builders in town who he has talked
to who have thought about stopping building until they can learn these new systems. He stated
there are two types of homes; those built and those yet to be built. Autonomous homes can be
built with the new technology. Energy upgrades are really hard to do, so most folks don't which
means it's better to build these things from the start. He hopes that things like energy audits of
homes will be required to be on real estate notices. Portland it working to make this a
requirement. Once they succeed we can follow their model in creating our ordinance.
4. Reports/Presentations/Updates
Open Burning Ordinance and Regulations—Fire Marshal Margueritte Hickman gave a
presentation regarding the history of our current open burning ordinance and what regulations
and permit requirements are involved with open burning in Ashland.
Group asked Hickman questions regarding types of vegetation allowed to be burned. Hickman
stated that other than woody fuels in the Wildfire Hazard zone, the only other things allowed to
be burned are noxious weeds like Himalayan Blackberries. They are allowed to be burned
because transporting them increases the possibility of seeds spreading.
Commissioner Cara Cruickshank arrived 6:40 p.m.
Buck asked questions regarding consideration of alternatives to burning. Hickman stated that as
the things which are allowed to be burned are so limited, further reductions have not been
seriously considered. Weir asked if the limited amount of permits issued(10 or so per year) an
amount that the Fire Department is comfortable with maintaining? Hickman stated that as
Ashland's burn permit numbers are so small compared to other towns, she feels they are at an
Minutes for the Conservation Commission
September 28,2016
Page 2 of 3
acceptable level. She reminded the group that Ashland continues to offer lots of great wildfire
fuels reduction opportunities like the Wildfire Mitigation fuels drop-off days in conjunction with
Recology.
Group thanked Hickman for her presentation.
Quarterly Updates—Group determined that the following quarterly update schedule should be
re-started:
SOU—October
Recology—Nov/Dec combo meeting
School—January(only if School Administration is willing to appoint a representative in time)
Council Update— Councilor Rosenthal stated that electric rates will be discussed at the October
31 St study session.
Group discussed when the liaisons for commissions for 2017 will be determined. Rosenthal
stated that he expects this to occur in late January or early February.
City Conservation Programs and Operations—Hanks gave information regarding an upcoming
update of the BPA energy efficiency implementation manual. In effect, they will be spending
more to aid commercial energy efficiency programs and less on residential.
5. Old Business
Sneak Preview Column—Hanks stated that due to some timing issues the October edition space
was used for the SOCAN and Rogue Climate press release. November is still set to be the, "Meet
Your Commissioners" article. December will be a holiday waste reduction article written by
Jamie Rosenthal. Group discussed the possibility of using January to give a history and timeline
of the CEAP process as a lead up to the Council's consideration of the plan in February.
Climate &Energy Action Plan— Sohl stated the open house was good, though there was limited
attendance. McGinnis stated he appreciated the way the event was set up which lead to good
discussions. He appreciated Rosenthal reiterating that the action plan creation is just the
beginning of the process.
Group discussed the challenges with attendance—marketing, date, weather, location, "middle-of-
process" low-interest, etc.
The next open house is December 7th and public meetings continue several times a month
between now and then.
6. New Business
Earth Bowl—Weir stated that holding the event would be a matter of finding the balance
between the effort required to plan it and the payout in educating the community. Group
discussed ways to alter the previous event planning to make it more effective/easier to manage
on limited time resources. Group expressed concerns that every member of the group may be too
busy with other activities to devote enough to make this successful. They did acknowledge that it
Minutes for the Conservation Commission
September 28,2016
Page 3 of 3
is a worthwhile event.
Hanks stated that Energy Trust is offering kits to middle schools to help with energy efficiency
education, which may help the committee feel okay with not devoting their limited resources to
the schools.
Buck asked if there was a way to partner with Rogue Climate or SOCAN to hold the event? Weir
agreed to get in contact with those groups and report back at the next commission meeting.
Grey-Water Usage—Buck stated that she was contacted by Molly Winters from Recode, which
has been tracking grey-water permits issued in Oregon. 30 have been issued, 11 of which are in
Ashland. Group discussed why Ashland has such a large concentration of the permits, what
education events were held in the past and how they can possibly help motivate more grey-water
use.
Cruickshank/Buck m/s to reestablish the grey water subcommittee. Discussion: Buck, Weir,
Cruickshank, and Sohl all volunteered to be members of the subcommittee. Voice Vote: all ayes.
Motion Passes.
Composting Classes—Weir stated that the vermiculture class he taught was attended by eight
people and that it went well. Having the class as part of the Parks and Recreation programing
seemed to make attendees have more buy-in. Group discussed ways to promote the upcoming
classes.
7. Wrap Up
Group requested that the following topics be on the upcoming agenda:
• SOU Quarterly update
• Earth Bowl
• Grey Water subcommittee update
Meeting adjourned at 7:56 p.m.
Respectfully submitted,
Diana Shiplet
Executive Assistant
For most of us, the holiday season represents a magical time of togetherness, giving,
and celebration. Holiday gatherings and celebrations are a wonderful reason to bring
loved ones together for good times and memorable bonding. But these events also
come at a cost beyond the average $800 each American spends on gifts alone.
From Thanksgiving to New Year's Day, household waste increases by more than 25%.
Did you notice that your trash cart already seems fuller than it usually does? According
the EPA, the added food waste, shopping bags, packaging, wrapping paper, bows, and
ribbons all add up to an additional 1 million tons a week in our landfills. That's an awful
lot of trash for the sake of good tidings.
So what can we do to reduce the amount of holiday waste produced while we're doing
all that eating, drinking and being merry? We shouldn't have to skip celebrating
altogether to enjoy this time of year, but we should consider the impacts of our
traditions, and choose less wasteful options when we become aware of them. Make
your holiday season even greener by following some of these 5 environmentally friendly
holiday season tips!
Buy Rechargeable Batteries. Did you know that about 40% of all battery sales occur
during the holiday season? Consider trimming your holiday wasteline by choosing
rechargeable batteries instead. Rechargeable batteries produce less waste because
they can be recharged with a simple battery charger and reused hundreds of times. An
added benefit to choosing rechargeable batteries is that they are surprisingly easy to
recycle. And, because these batteries can be recharged and reused numerous times,
they contribute less waste to landfills.
Party Responsibly. Go Green! `Tis the season for entertaining! Instead of relying on
disposable plates, napkins, cups, and utensils during for your holiday parties, this year,
throw a fun party and keep it green at the same time. Impress your friends and loved
ones with a creative, low-cost and environmentally conscious holiday bash and skip the
disposables. Try using reusable plates, cups, utensils, and cloth napkins instead, and
let your guests know why - maybe they'll be hosting their next get-together the same
way!
Green Shop `Til You Drop. Maximize your cheer and minimize your waste during all
your holiday shopping! Pass on plastic bags which are not easily decomposed and
contribute towards the degradation of the environment. A plastic bag can take from 15
to 1,000 years to break down, depending on environment. Moreover, the cost to recycle
plastic bags outweighs their value. Opt to take your reusable cloth bags along with you
on shopping trips instead of relying on a store to contain your purchases in bags they
provide.
That's A Wrap. Unfortunately, wrapping paper is high in clay content and low in paper
content which makes it difficult to recycle. There are all kinds of ways to wrap holiday
gifts without using up and throwing out new wrapping paper each year. Consider using
earth-friendly gift wrapping alternatives, such as newspapers (comic sections work
great!), scarves, handkerchiefs and bandanas, or old posters and maps.
Don't Trash Your Tree. After the holidays, instead of throwing your Christmas tree in the
trash, consider having your tree picked up at the curb. Real Christmas trees are
biodegradable, which means they can be easily reused or recycled for mulch and other
purposes. Recology will start collecting trees at the curb the week of January 9th. There
is no charge for Christmas tree collection until January 23rd when the fee will be $5 per
tree. Please visit RecologyAsh land.corn for more information on tree pickup.
During the holiday season, and all year, each of us can make a huge difference, and
give mother earth the gift that keeps on giving, by limiting the amount of waste we
produce each holiday season. So please consider taking on some new green traditions
this year. Happy holidays!
DRAFT 10/14/2016
Ashland CEAP :
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to , deari er e r,,'gy.
Energy used for buildings and transportation makes up half of Ashland's historic greenhouse gas
emissions. Most of these emissions are from the combustion of natural gas by residential and
commercial buildings, electricity consumption, and gasoline used to fuel residential on-road travel.
Addressing energy-related emissions requires a combination of reduced and cleaner energy use.
Ashland's current energy source is largely sourced from clean hydropower purchased from Bonneville
Power Administration (BPA; 81%). Switching existing fuels, like natural gas and gasoline,to cleaner fuels
such as low-carbon electricity can lower the overall emissions profile of current energy use and reduce
reliance on foreign fuels. Furthermore,the introduction of new clean energy sources, such as local
renewable energy, as well as increased energy efficiency, can help offset the increased electricity loads
caused by fuel switching and increased cooling demands anticipated under future climate change.These
actions in combination act synergistically to reduce total energy-related emissions.
The following Climate and Energy Action Plan strategies are cornerstones of this clean energy transition:
• Support cleaner energy sources.
• Enhance resiliency to fluctuations in energy markets and supply.
• Support more efficient vehicles.
Example actions within these strategies include supporting community solar projects, installing smart
grid technologies, and introducing actions and initiatives that accelerate fuel switching such as electric
vehicle infrastructure requirements and codes.
2. Maximize water and einergy efficiency, and r-eu��se.
The production and use of energy and water resources within the built environment greatly affects
Ashland's carbon emissions and vulnerability to climate impacts. Energy used by buildings contributes
almost a third of Ashland's greenhouse gas emissions. Water consumption for residential and
commercial buildings and surrounding green spaces put considerable demand on community water
resources, which may become scarcer and in higher demand as temperatures increase and summer
water availability declines.
Reducing water and energy resource use associated with Ashland's built environment will cut emissions,
ease loads on the utility, and help secure resource supply and resiliency in a changing climate.The
introduction of cleaner energy sources can reduce energy-related emissions to an extent, but improved
energy efficiency will also be required to achieve deep emission reductions. In some cases, cutting
emissions through energy efficiency improvements can be more cost-effective than adding new
renewable energy sources.The following Climate and Energy Action Plan strategies support water and
energy efficiency:
• Encourage increased building energy efficiency.
• Adapt buildings to a changing climate.
1
DRAFT 10/14/2016
• Manage and conserve community water resources.
Example actions within these strategies include adjusting land use codes and incentives to support
resource-efficient design and water reuse and/or on-site storage systems, sponsoring building energy
retrofit programs and water conservation rebate programs, introducing rate-based incentives, and
providing educational materials aimed at awareness and behavior change. The introduction of passive
and heat-tolerant building principles can also reduce cooling energy needs during heat waves and
minimize heat-related public health impacts.
n S i„�i��,,, d r c h i ma „u,,,,,, .,,,, ° 'e n d I y I a t„i s e a ri d Sri a n a g,,,,,,,,a rn ,�ri't
The use and management of Ashland lands play a significant role in both reducing greenhouse gas
emissions and preparing for climate impacts. Development that promotes transit, bicycle, and
pedestrian modes of transport reduce emissions from on-road vehicles,which account for the majority
of transportation-related emissions. Proper management and conservation of land resources can also
provide important ecosystem services like water storage and flow attenuation, shade, and biodiversity
that make the city and its resources more resilient to threats posed by climate change.
Strategies in the Climate and Energy Action Plan that support climate-friendly land use and management
include the following:
• Make Ashland more bike-and pedestrian-friendly to reduce dependence on vehicles.
• Support better public transit and ridesharing.
• Support more climate-friendly development and land use.
• Promote ecosystem resilience.
• Manage ecosystems and landscapes to minimize climate-related health impacts.
• Manage and conserve community water resources.
Actions within these strategies include transit-oriented development and the provision of pedestrian
and bicycle infrastructure.Also, improved management and conservation of lands that provide habitat
for vulnerable species, enhance tree canopy and green space, use and store water efficiently and
effectively, and minimize wildfire damage will help prepare the city for changes in temperatures, water
availability, and wildfire risk.
a r b o n 4
-, ,,,,,s.I-Reduce COIISUrnptlolll Of
The production and delivery of goods and services consumed by Ashland households contribute to
almost half of Ashland's greenhouse gas emissions.These goods and services include food; goods like
furniture, home construction materials, electronics, and clothing; and the production of transport fuels,
natural gas, and electricity. Certain foods, such as meats, are more carbon-intensive to produce than
other foods like dairy and grains, and therefore contribute the largest proportion of food-related
emissions.
Despite the large contribution of household consumption to Ashland's greenhouse gas footprint,the
City of Ashland has little direct control over household purchasing behavior, and therefore City-initiated
options to reduce emissions from this source are limited. Strategies in the Climate and Energy Action
Plan that contribute towards reducing consumption of carbon-intensive goods and services include the
following:
2
DRAFT 10/14/2016
• Reduce consumption.
• Support sustainable and accessible local production and consumption.
Actions within these strategies that promote reduced consumption include facilitating marketplaces for
reuse and sharing such as tool-lending libraries and reuse fairs; expanding the construction and
demolition debris diversion code; sustaining local food production such as through farmer's markets and
community gardens; and distributing outreach and education materials on the impacts of consumer
choices.
,,,, EcIt.ic.ate n m I° anc]a governrnent.
Reducing greenhouse gas emissions and building resilience to climate impacts in Ashland is a
communitywide effort. Everyone, including residents, businesses, organizations, institutions, and
departments within the City itself, must understand what is needed and work together to take action.
This strategy involves the City working closely internally and with the public, local stakeholder groups,
and other jurisdictions and agencies to communicate climate priorities, coordinate action, and inspire
change. The City must also continue to learn from and listen to these parties to ensure that actions are
coordinated, relevant, and effective. Specific strategies within the Climate and Energy Action Plan that
support this education and coordination effort include the following:
• Educate and empower the public.
• Educate and empower City staff.
• Mainstream climate considerations.
• Enhance City communication and coordination to minimize public health impacts.
• Enhance City communication and coordination to minimize public safety impacts.
• Promote a sustainable local economy that minimizes emissions and vulnerability.
6. 1............ead by exarnple.
Although emissions from Ashland City operations make up a relatively small proportion of the
community's overall greenhouse gas emissions, City leadership in reducing its own operational
emissions can inspire community action, enhance operational efficiencies, and reduce costs.This
strategy involves the City taking actions to reduce its own carbon footprint and make City operations
more climate resilient, including by training internal staff, optimizing City facilities, and improving
equipment and purchasing processes. Strategies in the Climate and Energy Action Plan that support this
City leadership include the following:
• Maximize efficiency of City facilities, equipment, and operations.
• Increase the efficiency of City fleet and employee commuting.
• Improve sustainability of City operations and purchases.
• Conserve water use within City operations.
• Optimize city operations/programs to minimize employee health impacts.
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Utility Financial Solutions,LLC
October 2016
Mark Holden
Director of Electric Utility, Telecom and IT
City of Ashland Electric Department
90 N. Mountain Ave
Ashland OR
Dear Mr Holden;
We are pleased to present the Summary Report for the electric cost of service study and financial
projection for the City of Ashland Electric Department (Ashland). This report was prepared to provide
Ashland with a comprehensive examination of its existing rate structure by an outside party.
The specific purposes of this rate study are:
• Determine electric utility's revenue requirements for fiscal year 2018
• Identify cross-subsidies that may exist between rate classes
• Recommend rate adjustments needed to meet targeted revenue requirements
• Identify the appropriate monthly customer charge for each customer class
This report includes results of the electric cost of service study and financial projection and
recommendations on future rate designs.
This report is intended for information and use by the utility and management for the purposes stated
above and is not intended to be used by anyone except the specified parties.
Sincerely,
r
Utility Financial Solutions, LLC
Mark Beauchamp
CPA, MBA, CMA
185 Sun Meadow Ct
Holland, MI 49424
•
Utility Financial Solutions,LLC
TABLE OF CONTENTS
1. Introduction............................................................................................................................................3
2. Cost of Service Summary........................................................................................................................4
UtilityRate Process...................................................................................................................................................4
UtilityRevenue Requirements..................................................................................................................................4
ProjectedCash Flow .................................................................................................................................................5
MinimumCash Reserve............................................................................................................................................5
DebtCoverage Ratio.................................................................................................................................................6
Rateof Return...........................................................................................................................................................6
RecommendedRate Track........................................................................................................................................7
Cost of Service Summary Results..............................................................................................................................7
Costof Service Results..............................................................................................................................................8
DistributionCosts .....................................................................................................................................................9
PowerSupply Costs.................................................................................................................................................10
CombinedCost Summary.......................................................................................................................................10
3. Functionalization of Costs.....................................................................................................................11
Transmission...........................................................................................................................................................11
Distribution.............................................................................................................................................................12
DistributionCustomer Types..................................................................................................................................12
Customer-Related Services.....................................................................................................................................12
AdministrativeServices ..........................................................................................................................................12
SystemLosses.........................................................................................................................................................13
4. Unbundling Process..............................................................................................................................14
DistributionBreakdown..........................................................................................................................................14
Customer-Related Cost Breakdown........................................................................................................................15
PowerSupply Cost Breakdown...............................................................................................................................15
5. Significant Assumptions........................................................................................................................16
Forecasted Operating Expenses .............................................................................................................................16
LoadData................................................................................................................................................................16
Annual Projection Assumptions..............................................................................................................................16
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 1
•
Utility Financial Solutions,LLC
SystemLoss Factors................................................................................................................................................17
RevenueForecast ...................................................................................................................................................17
6. Recommendations and Additional Information...................................................................................18
Accountant's Compilation Report................................................................................................................20
LIST OF FIGURES
Figure 1— Breakdown of Distribution Costs ................................................................................................14
Figure 2— Breakdown of Customer Costs....................................................................................................15
LIST OF TABLES
Table 1 — Financial Statements (without rate adjustments)..........................................................................4
Table 2 — Projected Cash Flows (without rate adjustments).........................................................................5
Table 3 — Minimum Cash Reserves (without rate adjustments)....................................................................5
Table 4— Projected Debt Coverage Ratios (without rate adjustments)........................................................6
Table 5 — Rate of Return Calculation .............................................................................................................7
Table 6— Recommended Revenue Adjustments...........................................................................................7
Table 7 —Cost of Service Summary................................................................................................................8
Table 8—Average Cost per kWh vs. Average Revenue per kWh...................................................................8
Table 9 — Distribution Costs by Customer Class (COS)...................................................................................9
Table 10— Power Supply Costs by Customer Class......................................................................................10
Table 11—Total Costs by Customer Class....................................................................................................10
Table 12— Breakdown of Ashland Cost Structure .......................................................................................14
Table 13— Projected Operating Expenses for 2018—2022..........................................................................16
Table 14— Projection Annual Escalation Factors 2018—2022.....................................................................17
Table 15— Recommended Rate Adjustments 2018— 2022..........................................................................18
Table 16—Cost of Service Summary Results ...............................................................................................18
Table 17—Customer Charge Comparison ...................................................................................................19
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 2
Utility Financial Solutions,LLC Summary Report
1. Introduction
This report was prepared to provide the City of Ashland Electric Department (Ashland) with an electric
cost of service study and financial projection and a comprehensive examination of its existing rate
structure by an outside party. The specific purposes of the study are identified below:
1) Determine electric utility's revenue requirements for fiscal year 2018. Ashland's revenue
requirements were projected for the period from 2018 — 2022 and included adjustments for
the following:
a. Projected power costs
b. Capital improvement plan projected over next five years
2) Identify cross-subsidies that may exist between rate classes. Cross-subsidies exist when
certain customer classes subsidize the electric costs of other customers. The rate study
identifies if cross-subsidies exist and practical ways to reduce the subsidies. The cost of service
study was completed using 2018 projected revenues and expenses. The financial projections
are for the period from 2018—2022.
3) Recommend rate adjustments needed to meet targeted revenue requirements. The primary
purpose of this study is to identify appropriate revenue requirements and the rate adjustments
needed to meet targeted revenue requirements. The report includes a long-term rate track
for Ashland to help ensure the financial stability of the utility in future years.
4) Unbundled electric rates. The cost of providing electricity to customers consists of a number
of components, including power generation, distribution, customer services,transmission, and
transfers to the general fund. Electric unbundling identifies the cost of each component to aid
the utility understanding of its cost structure.
5) Identify the appropriate monthly customer charge for each customer class. The monthly
customer charge consists of fixed costs to service customers that do not vary based on the
amount of electricity used.
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 3
Utility Financial Solutions,LLC Summary Report
2. Cost of Service Summary
Utility Rate Process
Ashland retained Utility Financial Solutions to review utility rates and cost of service and make
recommendations on the appropriate course of action. This report includes results of the electric cost of
service and unbundling study and recommendations on future rate designs.
Utility Revenue Requirements
To determine revenue requirements, the revenues and expenses for Fiscal Years 2014, 2015 and 2016,
2017 budget were analyzed, with adjustments made to reflect projected operating characteristics. The
projected financial statements are for cost of service purposes only.
Table 1 is the projected financial statement for the Electric Department from 2018-2022. The 2018 rate
of return calculation established an operating income target of$514k (See Table 5).
Operating income for 2018 is projected at $(861)k and increases to $(1.9)M in 2022. Operating income
is one target that helps to determine if rate adjustments are needed. The following pages review cash
flow and other factors which can be important indicators.
Table 1- Financial Statements (without rate adjustments)
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Operating Revenues:
Electric Sales
Intergovernmental 184,500 189,113 193,840 198,686 203,653
Charges for Services 141466,358 141498,322 141529,240 14,553,779 14,578,179
Other Charges for Services Revenue(not rates) 260,350 266,859 273,530 280,368 287,378
Miscellaneous 1111788 112,035 112,273 1121463 112,652
Total Operating Revenues $ 15,022,996 $ 15,066,327 $ 15,108,884 $ 15,145,297 $ 15,181,862
Operating Expenses:
Purchases
Electric-Supply $ 6,886,756 $ 6,901,972 $ 7,055,024 $ 7,349,618 $ 7,361,940
Electric-Transmission 9571477 957,477 976,626 1,015,691 1,015,691
Total Power Supply Expense $ 7,844,232 $ 7,859,449 $ 8,031,651 $ 8,365,309 $ 8,377,631
Distribution
Electric-Distribution $ 3,500,018 $ 3,587,519 $ 3,677,207 $ 3,769,137 $ 3,863,365
Total Distribution Expense $ 3,500,018 $ 3,587,519 $ 3,677,207 $ 3,7691137 $ 3,863,365
Other Operating Expenses(Revenues)
Admin-Conservation $ 739,153 $ 757,631 $ 776,572 $ 795,987 $ 815,886
Electric-Supply(non BPA) 97,990 100,440 102,951 105,525 108,163
Franchise Fee 11472,671 1,476,518 11480,277 111483,415 11486,556
Allocations
Central Service-Power Supply(non BPA) 385,060 394,687 404,554 414,668 425,034
Central Service-Distribution 857,095 878,522 900,485 922,997 946,072
Use of Facilities Charge-Distribution 133,250 136,581 139,996 143,496 147,083
Technology Debt-Distribution 541,300 541,300 541,300 541,300 541,300
Depreciation Expense 313,406 325,406 349,406 373,406 3971406
Total Other Operating Expenses $ 4,539,924 $ 4,611,085 $ 4,695,541 $ 4,780,793 $ 4,867,500
Total Operating Expenses $ 15,884,175 $ 16,058,053 $ 16,404,398 $ 16,915,239 $ 17,108,497
Operating Income $ (861,179) $ (991,725) $ (1,295,515) $ (1,769,941) $ (1,926,635)
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 4
Utility Financial Solutions,LLC Summary Report
Projected Cash Flow
Table 2 is the projected cash flow for 2018-2022, including projections of capital improvements as
provided by Ashland. Changes in the capital improvement plan can greatly affect the cash balance and
recommended minimum cash reserve target. The cash balance for 2018 is projected at $163k and
$(6.85)M in 2022. The recommended minimum cash reserve level for 2018 is $3M and $3.25M for 2022.
Table 2- Projected Cash Flows (without rate adjustments)
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Projected Cash Flows
Net Income $ (855,886) $ (991,861) $ (11296,193) $ (11770,349) $ (11926,770)
Depreciation Expense/Amortization 313,406 325,406 349,406 373,406 397.0406
Subtract Debt Principal (21,714) (21,714) (21,714) (21,714) (21,714)
Cash Available from Operations $ (564,194) $ (688,170) $ (968,502) $ (11418,657) $ (11551,079)
Estimated Annual Capital Additions 576,050 600,000 6001000 6001000 600,000
Net Cash From Operations $ (1,140,244) $ (1,288,170) $ (1,568,502) $ (21018,657) $ (21151,079)
Beginning Cash Balance $ 1,303,054 $ 162,810 $ (1,125,360) $ (21693,862) $ (4,712,519)
Ending Cash Balance $ 162,810 $ (11125,360) $ (21693,862) $ (41712,519) $ (61863,598)
Total Cash Available $ 162,810 $ (1,125,360) $ (2,693,862) $ (4,712,519) $ (6,863,598)
Recommended Minimum $ 3,037,822 $ 3,080,294 $ 3,137,714 $ 3,215,368 $ 3,232,382
Minimum Cash Reserve
Table 3 details the minimum level of cash reserves required to help ensure timely replacement of assets
and to provide financial stability of the utility. The methodology used to establish this target is based on
certain assumptions related to a percentage of operating expense, historical investment, capital
improvements, and debt service to be kept in cash reserves. Based on these assumptions,Ashland should
maintain minimum of$3M in cash reserves for 2018 and $3.25M in 2022.
Table 3- Minimum Cash Reserves (without rate adjustments)
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Minimum Cash Reserve Allocation
Operation&Maintenance Less Depreciation Expense 12.3% 12.3% 12.3% 12.3% 12.3%
Purchase Power Expense 12.3% 12.3% 12.3% 12.3% 12.3%
Historical Rate Base 3% 3% 3% 3% 3%
Current Portion of Debt Service Payment 100% 100% 100% 100% 100%
Five Year Capital Improvements-Net of bond proceeds 20% 20% 20% 20% 20%
Calculated Minimum Cash Level
Operation&Maintenance Less Depreciation Expense $ 952,587 $ 970,668 $ 989,179 $ 1,008,065 $ 1,027,413
Purchase Power Expense 964,841 966,712 987,893 1,028,933 1,030,449
Historical Rate Base 502,521 520,521 538,521 556,521 574,521
Current Portion of Debt Service Reserve 22,664 22,393 22,121 21,850 -
Five Year Capital Improvements-Net of bond proceeds 595,210 600,000 600,000 600,000 600,000
Minimum Cash Reserve Levels $ 3,037,822 $ 3,080,294 $ 3,137,714 $ 3,215,368 $ 3,232,382
Projected Cash Reserves $ 162,810 $ (1,125,360) $ (2,693,862) $ (4,712,519) $ (6,86%598)
Projected cash balances fall below the recommended minimums during the projection period.
City of Ashland Electric Department
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Debt Coverage Ratio
As Ashland has no bond debt and minimal other debt this section is included for educational purposes
only so readers can be informed if considering debt. Debt coverage ratio can be ignored from the point
of view of a current target.
Table is the projected debt coverage ratios with capital additions as provided by Ashland. The coverage
required in bond ordinances is typically 1.15— 1.20, however the minimum recommended debt coverage
ratio is established at 1.35 — 1.40 for projection purposes a 0.20 premium to ordinance. Maintaining a
higher debt coverage ratio is good business practice and helps to achieve the following:
• Helps to ensure adequate funds are available to meet debt service payments in years when sales
are low due to temperature fluctuations.
• Obtain higher bond rating, if revenue bonds are sold in the future, to lower interest cost.
Table 4— Projected Debt Coverage Ratios (without rate adjustments)
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Fixed Cost Coverage Ratio
Cash Available for Debt Service $ (541,258) $ (665,506) $ (946,109) $ (1,396,536) $ (1,529,229)
Off System Debt - - - - -
Total Available $ (541,258) $ (665,506) $ (946,109) $ (1,396,536) $ (1,529,229)
Debt Service Including Off System Debt $ 22,936 $ 22,664 $ 22,393 $ 221121 $ 21,850
Fixed Costs Coverage Ratio (23.60) (29.36) (42.25) (63.13) (69.99)
Minimum Fixed Costs Coverage Ratio 1.4 1.4 1.4 1.4 1.4
Debt coverage is adequate for the projection period without changes in rates as the debt is minimal and
not subject to ordinances or coverage covenants.
Rate of Return
The optimal target for setting rates is the establishment of a target operating income to help ensure the
following:
A. Funding of the inflationary increase on the assets invested in the system. The inflation on the
replacement of assets invested in the utility should be recouped through the Operating Income.
B. Funding of depreciation expense.
C. Adequate rate of return on investment to help ensure current customers are paying their fair share
of the use of the infrastructure and not deferring the charge to future generations.
D. Funding of interest expense on the outstanding principal on debt. Interest expense is below the
operating income line and needs to be recouped through the operating income balance.
As improvements are made to the system,the optimal operating income target will increase unless annual
depreciation expense is greater than yearly capital improvements. The revenue requirements for the
study are set on the utility basis. Table 5 identifies the utility basis target established for 2018 is $514k
and increases to $594k in 2022.
City of Ashland Electric Department
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Table 5— Rate of Return Calculation
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Target Operating Income Determinants
Net Book Value/Working Capital $ 7,398,546 $ 7,673,140 $ 7,923,734 $ 8,150,329 $ 8,352,923
Outstanding Principal on Debt 86,857 65,143 43,429 211714 -
System Equity $ 7,311,689 $ 7,607,997 $ 7,880,306 $ 8,128,614 $ 8,352,923
Target Operating Income Allocation
nte rest on Debt 1.41% 1.46% 1.56% 1.87% 0.00%
System Equity 7.02% 7.01% 7.02% 7.06% 7.11%
Target Operating Income
nte rest on Debt $ 111221 $ 950 $ 679 $ 407 $ 136
System Equity $ 513,175 $ 533,305 $ 553,421 $ 573,539 $ 593,671
Target Operating Income $ 514,397 $ 534,255 $ 554,100 $ 573,946 $ 593,807
Projected Operating Income $ (861,179) $ (991,725) $ (1,295,515) $ (1,769,941) $ (1,926,635)
Rate of Return in% 7.0% 7.0% 7.0% 7.0% 7.1%
Recommended Rate Track
The study identifies increasing current revenues in 2018, and increase annually thereafter to maintain
debt coverage ratios and minimum cash targets. Table 6 is a summary of the financial results detailing
the recommended revenue adjustments required to meet target operating income.
Table 6— Recommended Revenue Adjustments
Projected Adjusted Target
Fiscal Rate Projected Projected Operating Operating Projected Cash Recommended
Year Adjustments Expenses Revenues Income Income Balances Minimum Cash
2018 6.90% $15,983,993 $ 16,021,174 $ 371181 $ 514,397 $ 1/061/170 $ 31050,128
2019 2.75% 16,200,713 16,496,007 295,294 5341255 11064,512 31097,882
2020 2.75% 16,591,249 16,983,654 3921404 5541100 11189,252 31160,751
2021 2.75% 171147,575 17,4781199 330,623 573,946 1/277/106 31244,012
2022 2.75% 17,387,713 17,986,935 599,222 593,807 11658,269 31266,806
Cost of Service Summary Results
A cost of service study was completed to determine the cost of providing service to each class of customers
and to assist in design of electric rates for customers. A cost of service study consists of the following
general steps:
1) Determine utility revenue requirement for test year 2018
2) Classify utility expenses into common cost pools
3) Allocate costs to customer classes based on the classes' contribution to utility expenses
4) Compare revenues received from each class to the cost of service
The cost of service summary is included as Table 7 which compares the projected cost to serve each class
with the revenue received from each class. The "% change" column is the revenue adjustment necessary
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 7
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to meet projected cost of service requirements. The cost of service summary uses the current rates
including any adjustment factors.
Table 7-Cost of Service Summary
Projected
Customer Class Cost of Service Revenues % Change
Residential Single-Phase $ 8,343,058 $ 71410,275 12.6%
Seasonal Residential Single 75,378 60,785 24.0%
Telecommunications 73,981 68,342 8.3%
Outdoor Lighting 19,156 19,703 -2.8%
Commercial Service Single Phase 11907,280 11720,561 10.9%
Commercial Service Three Phase 31333,918 31168,263 5.2%
Governmental Service Single Phase 132,089 100,297 31.7%
Governmental Service Three Phase 475,225 438,354 8.4%
Municipal Service Single Phase 1511481 1221475 23.7%
Municipal Service Three Phase 440,310 479,332 -8.1%
Governmental Large Service 890,057 877,970 1.4%
Total $ 15,841,934 $ 141466,358 9.5
Cost of Service Results
Table 8 shows the average cost of service per kWh and compares the cost to the average revenue per
kWh for each customer class.
Table 8-Average Cost per kWh vs. Average Revenue per kWh
Cost of Projected
Service Revenues
Customer Class $/kWh $/kWh
Residential Single-Phase $ 0.0965 $ 0.0857
Seasonal Residential Single 0.1066 0.0859
Telecommunications 0.1185 0.1095
Outdoor Lighting 0.0960 0.0988
Commercial Service Single Phase 0.1060 0.0957
Commercial Service Three Phase 0.0897 0.0852
Governmental Service Single Phas, 0.1345 0.1021
Governmental Service Three Phas, 0.1052 0.0971
Municipal Service Single Phase 0.1361 0.1100
Municipal Service Three Phase 0.0795 0.0865
Governmental Large Service 0.0762 0.0752
Cost differences result from usage patterns of customers and how each class of customer used facilities
based on load data provided by Ashland.
City of Ashland Electric Department
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Distribution Costs
Separation of distribution costs help identify distribution charges for each customer class and the fixed
monthly customer charge. Distribution charge includes the following costs:
• Operation and maintenance of distribution &transmission system
• Contributions to general fund
• Customer service
• Customer accounting
• Meter reading
• Billing
• Meter operation & maintenance
• Administrative expenses
The distribution charges consist of two components:
• Monthly customer charge to recover the costs of meter reading, billing, customer service, and
a portion of maintenance and operations of the distribution system.
• Distribution rate based on billing parameter, (kW or kWh) to recover the cost to operate and
maintain the distribution system. Table 9 identifies the cost-based distribution rates for
customer classes.
Table 9— Distribution Costs by Customer Class (COS)
Monthly Customer
Customer Class Charge Distribution Rate Billing Basis
Residential Single-Phase $ 14.09 $ 0.0296 kWh
Seasonal Residential Single 16.50 0.0418 kWh
Telecommunications 19.45 0.0330 kWh
Commercial Service Single Phase 43.46 11.45 kW
Commercial Service Three Phase 103.90 10.35 kW
Governmental Service Single Phase 51.68 10.16 kW
Governmental Service Three Phase 155.98 11.19 kW
Municipal Service Single Phase 58.97 12.75 kW
Municipal Service Three Phase 127.75 10.64 kW
Governmental Large Service 1,635.79 11.17 kW
City of Ashland Electric Department
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Power Supply Costs
Table 10 identifies the average cost of providing power supply to customers of Ashland.
Table 10- Power Supply Costs by Customer Class
Customer Class Demand Billing Basis Energy Billing Basis
Residential Single-Phase $ 0.0077 kWh $ 0.0392 kWh
Seasonal Residential Single 0.0100 kWh 0.0391 kWh
Telecommunications 0.0109 kWh 0.0394 kWh
Commercial Service Single Phase 2.80 KW 0.0393 kWh
Commercial Service Three Phase 2.51 KW 0.0394 kWh
Governmental Service Single Phase 3.14 KW 0.0394 kWh
Governmental Service Three Phase 3.39 KW 0.0394 kWh
Municipal Service Single Phase 3.29 KW 0.0392 kWh
Municipal Service Three Phase 3.38 KW 0.0394 kWh
Governmental Large Service 2.79 KW 0.0385 kWh
Combined Cost Summary
Table 11 identifies the cost of service rates for each customer class. Charging these rates would directly
match the cost of providing service to customers identified in this study.
Table 11-Total Costs by Customer Class
COS COS
Current Average Customer COS Monthly Conservation Customer
Customer Class Charge Charge Charge Charge
Residential Single-Phase $ 9.62 $ 14.09 $ 3.21 $ 10.87
Seasonal Residential Single 9.62 16.50 5.60 10.89
Telecommunications 17.23 19.45 3.49 15.96
Commercial Service Single Phase 20.29 43.46 7.81 35.65
Commercial Service Three Phase 49.95 103.90 36.07 67.83
Governmental Service Single Pha! 17.23 51.68 18.00 33.68
Governmental Service Three Pha! 101.01 155.98 87.73 68.25
Municipal Service Single Phase 18.79 58.97 8.37 50.60
Municipal Service Three Phase 54.72 127.75 59.73 68.02
Governmental Large Service 21639.36 1,635.79 11413.90 221.89
City of Ashland Electric Department
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3. Functionalization of Costs
Delivery of electricity consists of many components that bring electricity from the power supply facilities
to the communities and eventually into customer facilities. The facilities consist of four major
components: transmission, distribution, customer-related services, and administration. Following are
general descriptions of each of these facilities and the sub-breakdowns within each category.
Transmission
The transmission system is comprised of four types of subsystems that operate together:
1) Backbone and inter-tie transmission facilities are the network of high voltage facilities through
which a utility's major production sources are integrated.
2) Generation set-up facilities are the substations through which power is transformed from a
utility's generation voltages to its various
transmission voltages. Terminology of Cost of Service
3) Sub-transmission plant consists of lower
volts e facilities to transfer electric ener FUNCTIONALIZATION—Cost data arranged
g gy by functional category (e.g• power supply,
from convenient points on a utility's transmission, distribution
backbone system to its distribution system.
CLASSIFICATION—Assignment of
4) Radial transmission facilities are those that functionalized costs to cost components
are not networked with other transmission (e.g. demand, energy and customer
lines but are used to serve specific loads related).
directly.
ALLOCATION_Allocating classified costs to
Operation of the transmission system also consists of each class of service based on each class's
providing certain services that ensure a stable supply contribution to that specific cost
p g pp Y
of power. These services are typically referred to as component.
ancillary services. The Federal Energy Regulatory DEMAND COSTS—Costs that vary with the
Commission (FERC) has defined six ancillary service maximum or peak usage. Measured in
charges for the use of transmission facilities. For kilowatts (kW)
Ashland, these charges will be passed-through charges ENERGY COSTS—Costs that vary over an
by the control area operator. Ancillary services consist extended period of time. Measured in
of the following: kilowatt-hours (kWh)
• Mandatory Ancillary Service Charges: CUSTOMER COSTS—Costs that vary with
the number of customers on the system,
Reactive Supply and Voltage Control e.g. metering costs.
Regulation and Frequency Response
DIRECT ASSIGNMENT—Costs identified as
Service
Energy Imbalance Charges
belonging to a specific customer or group
Operating Reserves Spinning of customers.
Operating Reserves Supplemental
Reactive Power Supply
City of Ashland Electric Department
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Power losses from use of transmission system
Distribution
The distribution facilities connect the customer with the transmission grid to provide the customer with
access to the electrical power that has been generated and transmitted. The distribution plant includes
substations, primary and secondary conductors, poles, and line transformers that are jointly used and in
the public right-of-way.
Substations typically separate the distribution plant from the transmission system. The substation power
transformer "steps down" the voltage to a level that is more practical to install on and under city streets.
Distribution circuits are divided into primary and secondary voltages with the primary voltages usually
ranging between 35 kV and 4 kV and the secondary below 4 kV.
Distribution Customer Types
Sub-transmission customers are served directly from the substation feeder and bypass both the
secondary and primary distribution lines. The charges for this type of customer should reflect the cost of
the substation and not include the cost of primary or secondary line charges.
Primary customers are typically referred to as customers who have purchased, owned, and maintained
their own transformers that convert the voltage to the secondary voltage level. The rates for these
customers should reflect the cost of substations and the cost of primary distribution lines and not include
the cost of secondary line extensions.
Secondary customers have the services provided by the utilities directly into their facilities. The utility
provides the customer with the transformer and the connection on the customers' facilities.
Customer-Related Services
Certain administrative-type services are necessary to ensure customers are provided service connections
and disconnections in a timely manner and the facilities are in place to read meters and bill for customer
usages. These services typically consist of the following components:
• Customer Services — The cost of providing personnel to assist customers with questions and
dispatch personnel to connect and disconnect meters.
• Billing and Collections—The cost of billing and collections personnel, postage, and supplies.
• Meter Reading—The cost of reading customers' meters.
• Meter Operation and Maintenance—The cost of installing and maintaining customer meters.
Administrative Services
These costs are sometimes referred to as overhead costs and relate to functions that cannot be directly-
attributed to any service. These costs are spread to the other services through an allocator such as labor,
expenses, or total rate base. These costs may consist of City administrative expenses, property insurance,
and wages for higher level management of the utility.
City of Ashland Electric Department
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System Losses
As energy moves through each component of the transmission and distribution system,some of the power
is lost and cannot be sold to customers. Losses vary based on time of day and season. Typically, as system
usage increases or ambient temperature increases, the percentages of losses that occur also increase.
These losses are recovered from distribution customers through an analysis of the peak losses that occur
in the system. The average system losses and unaccounted for energy for Ashland are approximately
4.1%. (Typical municipal system losses are approximately 5.4%)
City of Ashland Electric Department
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4. Unbundling Process
The cost of power supply, distribution, and customer services are identified as part of the unbundling
process and are the first step in determining unbundled charges to customers. The total revenue
requirements of$15.85M are separated into four categories identified in Table 12.
Table 12— Breakdown of Ashland Cost Structure
Utility Costs
Power Supply $ 71844,232
Distribution $ 41406,582
Franchise Fee $ 11472,671
Customer $ 21118,448
$ 15,841,934
Ashland is projected to expend 49% of its total costs toward power supply. Distribution related costs are
28%; franchise fee is 10% and customer service 13%. These components are broken down into each of
the subcomponents and are identified in the following sections.
Distribution Breakdown
Distribution rates consist of a number of different components. Total distribution-related costs of 4.4M
for 2018 are broken down into the main components including substations,transformers, and distribution
lines. Figure 1 shows the breakdown of distribution components identified in the study.
Figure 1— Breakdown of Distribution Costs
Distribution Cost
Substations
27
Distribtion Linies
Transrm ers
..........................�6 Techin ol i Debt
Distribution
2
Each of these components is allocated to customer groups based on certain factors established in the
study. These factors are based on the efficiency of each customer class and the time of day or the season
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 14
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the electricity is used. Other factors are also considered, such as the length of line extensions to reach
certain customer classes.
Customer-Related Cost Breakdown
Ashland total expenses for customer-related costs are $2.12M for 2018. The cost is broken down
into the components identified in Figure 2.
Figure 2—Breakdown of Customer Costs
Customer Costs
Services 'I
6% Meter O&M
12%
Conservation
35'% Meter Reading
16%
Customer
Service/Billing
31%
Power Supply Cost Breakdown
Power supply costs for 2018 were made up of purchased power expenses.
City of Ashland Electric Department
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5. Significant Assumptions
This section outlines the procedures used to develop the cost of service and unbundling study for Ashland
and the related significant assumptions.
Forecasted Operating Expenses
Forecasted expenses were based on 2014, 2015 and 2016, 2017 budget adjusted for power supply costs
and inflation. The table below is a summary of the expenses used in the analysis; the projected operating
expenses include an adjustment for any city contributions.
Table 13- Projected Operating Expenses for 2018-2022
Description Projected 2018 Projected 2019 Projected 2020 Projected 2021 Projected 2022
Operating Expenses:
Purchases
Electric-Supply $ 6,886,756 $ 6,901,972 $ 7,055,024 $ 7,349,618 $ 7,361,940
Electric-Transmission 9571477 9571P477 976,626 1,015,691 1,015,691
Total Power Supply Expense $ 7,844,232 $ 7,859,449 $ 8,031,651 $ 8,365,309 $ 8,377,631
Distribution
Electric-Distribution $ 3,500,018 $ 3,587,519 $ 3,677,207 $ 3,769,137 $ 3,863,365
Total Distribution Expense $ 3,500,018 $ 3,587,519 $ 3,677,207 $ 3,769,137 $ 3,863,365
Other Operating Expenses(Revenues)
Admin-Conservation $ 739,153 $ 757,631 $ 776,572 $ 795,987 $ 815,886
Electric-Supply(non BPA) 97,990 100,440 102,951 105,525 108,163
Franchise Fee 11472,671 11476,518 11480,277 1,483,415 1,486,556
Allocations
Central Service-Power Supply(non BPA) 385,060 394,687 404,554 414,668 425,034
Central Service-Distribution 857,095 878,522 900,485 922,997 946,072
Use of Facilities Charge-Distribution 133,250 136,581 139,996 143,496 147,083
Technology Debt-Distribution 541,300 541,300 541,300 541,300 541,300
Depreciation Expense 313,406 325,406 349,406 373,406 3971406
Total Other Operating Expenses $ 4,539,924 $ 4,611,085 $ 4,695,541 $ 4,780,793 $ 4,867,500
Total Operating Expenses $ 15,884,175 $ 16,058,053 $ 16,404,398 $ 16,915,239 $ 17,108,497
Operating Income $ (861,179) $ (991,725) $ (1,295,515) $ (1,769,941) $ (1,926,635)
Power supply costs from 2018-2022 are based on Ashland's current charges adjusted for system growth
factors and inflation.
Load Data
Load data is one of the most critical components of a cost of service study. Information from the billing
statistics were used to determine the usage patterns of each customer class after reconciling revenues
with financial statements to ensure a good basis for development of the study.
Annual Projection Assumptions
The kWh sales forecast is based on FY2016 actual adjusted for 0.0625%growth. Table 14 details growth,
inflation of expenses, changes in purchase power costs and interest earned on investments.
City of Ashland Electric Department
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Table 14— Projection Annual Escalation Factors 2018—2022
Purchase Purchase
Fisca I Power Power I nvestment
Year Inflation Growth Change Transmission I nco me
2018 2.5% 0.2% 6.0% 4.0% 0.5%
2019 2.5% 0.2% 0.0% 0.0% 0.5%
2020 2.5% 0.2% 2.0% 2.0% 0.5%
2021 2.5% 0.2% 4.0% 4.0% 0.5%
2022 2.5% 0.2% 0.0% 0.0% 0.5%
System Loss Factors
Losses occurring from the transmission and distribution of electricity can vary from year to year depending
upon weather and system loading.
Revenue Forecast
The revenue forecast was based on FY2016 usages adjusted for growth rate assumptions.
City of Ashland Electric Department
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6. Recommendations and Additional Information
We recommend that the utility move toward cost of service for each customer class.
The study indicates rate adjustments are needed to meet minimum cash and operating income targets.
To ensure the utility meets financial targets and remains financially stable, the rate track identified in
should be considered:
Table 15- Recommended Rate Adjustments 2018-2022
Projected Adjusted Target
Fiscal Rate Projected Projected Operating Operating Projected Cash Recommended
Year Adjustments Expenses Revenues Income Income Balances Minimum Cash
2018 6.90% $15,983,993 $ 16,021,174 $ 371181 $ 514,397 $ 1/061/170 $ 31050,128
2019 2.75% 16,200,713 16,496,007 295,294 5341255 11064,512 31097,882
2020 2.75% 16,591,249 16,983,654 3921404 5541100 11189,252 31160,751
2021 2.75% 171147,575 171478,199 330,623 573,946 1/277/106 31244,012
2022 2.75% 17,387,713 17,986,935 599,222 593,807 11658,269 31266,806
The cost of service study identified some customer classes are subsidizing other customer classes. We
recommend Ashland moves toward cost of service using a bandwidth of plus or minus 2%. Using the 6.9%
rate adjustment, this would result in no customer class given a rate increase greater than 8.9% and the
lowest increase would be 4.9%. Table 16 identifies the cost of service charges compared with the
projected current revenues for each class. Classes that indicate a lower % change than the total
percentage change are providing subsidy to other customer classes, conversely customer classes with a
higher% change than the total percentage are receiving subsidy.
Table 16-Cost of Service Summary Results
Projected
Customer Class Cost of Service Revenues % Change
Residential Single-Phase $ 8,3431058 $ 71410,275 12.6%
Seasonal Residential Single 75,378 60,785 24.0%
Telecommunications 73,981 68,342 8.3%
Outdoor Lighting 19,156 19,703 -2.8%
Commercial Service Single Phase 11907,280 11720,561 10.9%
Commercial Service Three Phase 3,333,918 31168,263 5.2%
Governmental Service Single Phase 132,089 100,297 31.7%
Governmental Service Three Phase 475,225 438,354 8.4%
Municipal Service Single Phase 1511481 1221475 23.7%
Municipal Service Three Phase 440,310 479,332 -8.1%
Governmental Large Service 890,057 877,970 1.4%
Total $ 15,841,934 $ 141466,358 9.5
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 18
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Ashland may consider movements in the customer charges to move toward cost of service based customer
charges to help ensure fixed distribution charges are collected in the customer charge. Table 17 compares
the total cost of service monthly customer charges with the current charges. By charging cost of service
rates for the monthly charge Ashland reduces it risk associated with power usage fluctuations due to
weather etc.
Table 17—Customer Charge Comparison
Current Average Customer COS Monthly
Customer Class Charge Charge
Residential Single-Phase $ 9.62 $ 14.09
Seasonal Residential Single 9.62 16.50
Telecommunications 17.23 19.45
Commercial Service Single Phase 20.29 43.46
Commercial Service Three Phase 49.95 103.90
Governmental Service Single Pha! 17.23 51.68
Governmental Service Three Pha! 101.01 155.98
Municipal Service Single Phase 18.79 58.97
Municipal Service Three Phase 54.72 127.75
Governmental Large Service 2,639.36 1,635.79
City of Ashland Electric Department
Cost of Service & Electric Unbundling Study Page 19
Utility Financial Solutions
185 Sun Meadow Ct.
Holland, MI 49424
Phone: 616-393-9722
Fax: 616-393-9721
Accountant's Compilation Report
Governing Body
City of Ashland Electric Department
The accompanying forecasted statements of revenues and expenses of the City of Ashland Electric
Department (utility) were compiled for the year ending December 31, 2018 in accordance with guidelines
established by the American Institute of Certified Public Accountants.
The purpose of this report is to assist management in forecasting revenue requirements and determining
the cost to service each customer class. This report should not be used for any other purpose.
A compilation is limited to presenting, in the form of a forecast; information represented by management
and does not include evaluation of support for any assumptions used in projecting revenue requirements.
We have not audited the forecast and, accordingly, do not express an opinion or any other form of
assurance on the statements or assumptions accompanying this report.
Differences between forecasted and actual results will occur since some assumptions may not materialize
and events and circumstances may occur that were not anticipated. Some of these variations may be
material. Utility Financial Solutions has no responsibility to update this report after the date of this report.
This report is intended for information and use by the governing body and management for the purposes
stated above. This report is not intended to be used by anyone except the specified parties.
UTILITY FINANCIAL SOLUTIONS
Mark Beauchamp, CPA, CMA, MBA
Holland, MI
October 2016