Electric Rate Action ProposalFebruary 2017

Huntsville Utilities Rate History (2000 – present)

• October 2002• 5.5% to all rate classes impacting availability and demand/energy charges

• Residential availability increased $1.33 (from $3.67 to $5.00)

• Prior to this increase, last HU increase was in 1987 (15 years)

• October 2011• 3.5% to all rate classes impacting availability and demand/energy charges

• Residential availability increased $3.11 (from $5.77* to $8.88)

• May/October 2016 proposal• $4.90 residential availability increase ($13.78)

• $3.99 small commercial availability increase ($15.38)

• City Council requested alternatives

Council Recommendations

• Any rate increase should be spread across all rate classes

• Increases should be in both availability and usage charges

• Consideration given to impacts on fixed and low income ratepayers

• Retain multiple usage tiers to support conservation

February Rate Action Proposal

Across the board adjustment of 2.75%

• Availability, demand and energy increases for residential, general service commercial/industrial and outdoor lighting customers

Residential Customer impacts

• Availability increases $0.29 per customer per month from $8.88 to $9.17

• Energy rates increase $0.00246/kWh for 0-1,400 kWh and $0.00268/kWh for any additional kWh used

Revenue generated relies more on usage and minimizes availability impact

Estimated Monthly Residential Electric Bill Impact

Monthly Usage Current Proposed Increase

500 kWh $ 54.31 $ 55.83 $ 1.52

750 kWh $ 77.02 $ 79.16 $ 2.14

1,000 kWh $ 99.74 $102.49 $ 2.75

1,250 kWh $122.45 $125.82 $ 3.37

1,400 kWh $136.08 $139.81 $ 3.73

1,496 kWh $145.58 $149.57 $ 3.99

1,750 kWh $170.73 $175.40 $ 4.67

2,000 kWh $195.48 $200.82 $ 5.34

2,250 kWh $220.23 $226.24 $ 6.01

2,500 kWh $244.98 $251.66 $ 6.68

2,750 kWh $269.73 $277.08 $ 7.35

3,000 kWh $294.48 $302.50 $ 8.02

• Calculations include seasonal rates for Winter, Summer and Transition periods

• Includes Availability Increase of $0.29

• Includes Tier 1 (0-1,400 kWh) Increase of $0.00246/kWh

• Includes Tier 2 (additional kWh) Increase of $0.00268/kWh

• All numbers calculated using October 2016 fuel costs of $0.02293

Why Is A Rate Increase Needed?

• Electric system maintenance and improvements are required to ensure reliable service and meet the needs of our growing community

◊ HU was awarded a Diamond ranking (highest available) in the RP3 program from the American Public Power Association in 2016. RP3 recognizes utilities that demonstrate high proficiency in reliability, safety, work force development and system improvement.

• Funding for all expenses comes from sales revenue

• Current sales revenue is dependent on weather and customer behavior

• Supply and material costs have increased steadily over time

Rising Costs

Here are examples of items we purchase to keep the system operating and how the costs have changed from 2010 through 2016. We have limited control over these costs.

2010 2016 $ Increase % Change

75’ Concrete Pole $3,090 $3,315 $225 7.3%

2,000’ Reel of Cable $4,060 $4,620 $560 13.8%

Bucket Truck $167,500 $200,000 $32,500 19.4%

Substation Transformer $320,000 $414,000 $94,000 29.4%

Managing Costs

Despite the rising supply and material costs, Huntsville Utilities compares favorably with other TVA utilities in regards to operating costs per customer and per 1,000 kWh sold.

Source: TVA Distributor Financial Report for the Fiscal Year Ended June 2016 (preliminary)

Huntsville Utilities

Similar Utilities

Neighboring Utilities

All TVA Utilities

All TVA Municipalities

All TVA Cooperatives

O&M per Average Customer $255 $387 $286 $362 $359 $367

O&M per 1,000 kWh Sold $9 $14 $13 $14 $12 $17

Unexpected Costs

Gurley Area Damage from November/December Storms

Only 15% of Electric Revenue Pays for Op Costs

TVA85%

HU15%

Electric Sales Revenue

HU 100%

Water Sales Revenue

Gas Suppliers

38%HU

62%

Gas Sales Revenue

Partial List of Items Funded by the Rate Increase

• Substation Improvements

• Tree Trimming

• Distribution transformers

• Pole inspection and replacement

• General Development and Service Extensions

• Moontown• SE Water Plant• Redstone Gateway• County Line

• Madison Hospital • Northwest• Sunlake

Estimated Electric Bill Comparison (1,000 kWh)

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$96.96 $99.74 $102.49 $107.92 $108.44 $110.63 $112.28 $114.17 $118.16 $118.93 $123.83

Note: Calculations based on rate information available on individual local power company websites. October fuel costs used.

Projected Timeline

August 30, 2016

September 2016

September 2016

December

January 9, 2017

January 12, 2017

January 19, 2017

January 26, 2017

February 1, 2017

• Request Electric Board approval to present the rate adjustment to City Council

• Present rate adjustment to TVA for approval

• Individual meetings with each Council member

• Public notice

• Formal Public Hearing

• Council meeting

• City Council work session

• City Council vote

• Rate Implementation (Based upon Council approval)

Questions

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