1 strategic plan | 2013 - 2018 may 2011. 2 decisions on rates, budgets, investments, programs and...

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Strategic Plan | 2013 - 2018

May 2011

Decisions on rates, budgets, investments, programs and services for six years (2013-2018)

The Strategic Plan will guide our focus on accountability to ratepayers and customers

SWOC,FinancialBaseline

SWOC,FinancialBaseline

May May Winter 2011

Winter 2011

OctOctSeptSept

InitialDraft of

Strategic Plan

InitialDraft of

Strategic Plan

Add’tlOutreach

Add’tlOutreach

CouncilAdoptsCouncilAdopts

20112011

Objectives &

Initiatives

Objectives &

Initiatives

ReviewPanel

Formed

ReviewPanel

Formed

MayMay

InterimOutreachInterim

Outreach

NOWNOWTimeline

SummerSummer

DevelopAlternatives,

Refine Initiatives

DevelopAlternatives,

Refine Initiatives

2010

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Municipal EnterpriseExcellence

Assets

Customers/Ratepayers

Workforce

What are City Light’s strengths, weaknesses, opportunities and challenges?

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Assets


Workforce


6


AssetsWorkforce



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Assets



Workforce

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Assets


Workforce

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“Financial Baseline” Assumptions· Same level of service to customers· Generally the same operating methods· Same level of operating risk · Meet known regulatory and other requirements

What if we keep doing the same things we are doing today, where do we end up with rates?

Average System Rate (Example Only)

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2012 2013 2014 2015 2016 2017 2018

ce

nts

pe

r K

Wh

BaselineBaseline

Alternative(s)Alternative(s)

Utility Rates “101”: A very simplified view

101010

Rates are set to cover utility operating costs, based on expected customer demand for energy.

Estimated customer usageEstimated customer usage

Utility costs (net of non-customer revenues)


= rate/Kwh= rate/Kwh

· Continuing need for infrastructure renewal

· Costs to purchase power under current long-term power purchase contracts

· Rates of inflation in costs of supplies,services, construction, labor, benefits

· Growth in demand

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Our baseline rate projection considered:

Estimated customer usage

Estimated customer usage



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2010 Revenue Requirement

O&M InflationTaxes and Other

Power Costs (includes wholesale revenue)

Debt Service Costs for Existing Debt

$400

$500

$600

$700

$800

$900

$1,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Re

ve

nu

e R

eq

uir

em

en

t ($

M)

Rate Increases

Debt Service Costs for Projected New

Debt

4.1%

4.3%

5.7%

3.5%

3.2%

4.3%

2.7%

4.3%

2011-12 Budget Changes

Rate Impact with Status Quo: Estimated ~4% Annual Increases

~4%~4%

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City Light’s Low Rates: A Comparison

* Assumes monthly usage of 710 kwh at residential rates (which are higher than the system average rate shown)

** Tacoma’s system average rate includes customers taking service at the Transmission level.

Comparison of Pacific NW Electric Utility Rates

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101112

Av

g R

eta

il R

ate

(c

en

ts/k

Wh

)

2011 Estimated Average System Rate(cents/kWh) **

6.75 5.92 7.56 9.69 8.25 9.14 10.18

Difference from Seattle (in cents/kWh) -0.82 0.81 2.94 1.51 2.39 3.43

2011 Typical Residential Bill* ($/Month) 52.04 52.65 62.92 71.55 59.39 80.08 84.68

Seattle Tacoma SnoPUD Puget Avista Portland US Avg

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Average residential monthly costfor Seattle residents

Average Monthly Residential Bill

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10.00

20.00

30.00

40.00

50.00

60.00

70.00

2011 2012 2013 2014 2015 2016

∆$2.27∆$2.27 ∆$2.02∆$2.02 ∆$3.33∆$3.33 ∆$2.71∆$2.71 ∆$2.69∆$2.69

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Sample Small and Medium General Customer Monthly Cost

Sample Small Customer Monthly Bill(Monthly Consumption of ~1,600 kWh)

$-

$20

$40

$60

$80

$100

$120

$140

$160

2011 2012 2013 2014 2015

Avg Monthly Bill

Sample Medium Customer Monthly Bill(Monthly Consumption of ~4,700 kWh & 60 kw)

$-

$50

$100

$150

$200

$250

$300

$350

$400

$450

2011 2012 2013 2014 2015

Avg Monthly Bill

∆$4.82∆$4.82 ∆$4.00∆$4.00 ∆$6.56∆$6.56 ∆$5.28∆$5.28 ∆$15.30∆$15.30 ∆$12.58∆$12.58∆$20.97∆$20.97 ∆$16.83∆$16.83

Sample Large Customer Monthly Bill(Annual Consumption of ~2,800,000 kWh & ~5,500 kW)

$-

$50,000

$100,000

$150,000

$200,000

$250,000

2011 2012 2013 2014 2015

Avg Monthly Bill

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Sample Large Customer Monthly Cost

∆$7,465∆$7,465 ∆$6,125∆$6,125∆$8,425∆$8,425∆$10,246∆$10,246

1. Significant ongoing reinvestment necessary to maintain infrastructure supporting current levels of service.

2. Purchased power costs will continue to rise.

3. Rates likely to remain among the lowest in the nation / region.

4. Key focus on increasing efficiency of operations to reduce costs.

5. This “base case” doesn’t fully address all identified challenges: We need to take action and not accept the status quo projection.

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“Status Quo” projected forward:Conclusions

Priorities Objectives Specific Actions

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What should be our focus for the next 5-6 years?


Assets


Workforce

(12)(4) (~40)

Customers

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Proposed Objectives

1. Provide greater rate predictability

2. Balance multiple policy goals in rate design

3. Anticipate and exceed customer service expectations

4. Promote environmental stewardship

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Proposed Objectives

5. Ensure a safe work environment

6. Attract, train and retain a high performance workforce

Workforce

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Proposed Objectives

7. Provide reliable, safe, cost-effective electric service to our customers

8. Maintain a stable, cost-effective, environmentally responsible power supply portfolio

9. Incorporate technology to meet future customer needs

Assets

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Proposed Objectives

10. Improve communication about, and support for, City Light’s strategic priorities

11. Implement best practices in business processes and technology across the utility

12. Ensure fiscal strength

Municipal Enterprise Excellence

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Questions?

1. Are the proposed objectives the right things for City Light to focus on in its Strategic Plan? Why or why not? What is missing? What questions do you have?

2. Select 1 or 2 proposed objectives and give us feedback on what success looks like in your view: What should City Light do to achieve these objectives?

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What do you think?

1 strategic plan | 2013 - 2018 may 2011. 2 decisions on rates, budgets, investments, programs and...

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