PURPOSE

Staff is requesting the Burbank City Council (Council) to approve the addition of Article X, Section 11, �Standby Service� to the Burbank Fee Schedule, which would establish Standby Service electric rates for Burbank Water and Power�s (BWP�s) electrical customers.

BACKGROUND

An electric utility�s cost of providing electric service differs for different groups of customers such as residents, small businesses and large businesses. Burbank Water and Power (BWP) is positioning itself to be able to offer electric rates that are cost-of-service based for all of its customer classes. In future study sessions with the Burbank City Council (Council), BWP will present options on how it might phase-in cost-of-service based rates while at the same time giving each customer class a decrease in the total electric rate. (Some customer classes would see larger decreases than others.)

Previous discussions with Council on cost-of-service based rates assumed that customers would continue to receive their electric power through the utility�s wires even if, had Burbank gone along with deregulation, customers might have chosen a generation source other than BWP.  Attention focused on achieving cost-of-service based rates for BWP�s largest customers, for which equitable rate adjustments were most needed. With continued Council approval, BWP hopes to complete these efforts in FY 2004/05.

An important cost-of-service issue had not been addressed: What rate should customers pay who self-generate, but who continue to remain connected to BWP�s system for back-up or supplemental power? It would seem fair that they pay a reduced electric rate. But, if such customers were to avoid paying BWP�s electric rates entirely, then they would not be helping to support the electric system on which they still rely. The other Burbank customers would be subsidizing them.

At present, the Standby Service electric rates have been implemented administratively in Section 3.21 of BWP�s Rules and Regulations for Electric Service, �Standby or Auxiliary Service to Private Electrical Plants, Schedule A� (Attachment 1). However, Schedule A is outdated. It does not adequately recover BWP�s costs of providing standby service, nor does it adequately reflect the regulatory climate of today�s utility industry. Staff is proposing to update the Standby Service electric rates and to incorporate it in the Burbank Fee Schedule.

ANALYSIS

Customers who rely on BWP to provide standby service are relying on:

• The power lines and electric stations making up BWP�s power distribution system 

• The power plants in the BWP Yard (currently the Lake 1, Olive 1 and Olive 2 plants) that stand ready to supply power in the event of an interruption of power flowing into Burbank from the outside

The Standby Service electric rates are designed to recover from these customers their share of the O&M and fixed ownership costs of these facilities, including administrative costs and public benefit charges.

Scope of Standby Service Rates. The Standby Service rates exclude three important cases:

• Customers with less than 20 kW of their own on-site generation, which corresponds to customers that are too small for meters that measure kW demand 

• Customers that use their on-site generation only when BWP service is not available, or when doing less than 48 hours of testing per year 

•  Customers with renewable energy systems (such as solar and wind) up to 250 kW, a demand level that defines BWP�s large customer group.

The Standby Service rates include three types of service for customers which operate 20 kW or more of their own generation:

• Back-Up Service:  BWP electric service during an unscheduled outage of the customer�s on-site generation to replace power ordinarily generated by the customer.   

• Maintenance Service:  BWP electric service during a scheduled outage of the customer�s source of on-site generation to replace power ordinarily generated by the customer. 

• Supplemental Service: BWP electric service on a regular basis to supplement the customer�s power requirement in addition to that ordinarily supplied by the customer�s on-site generation facilities.

• The full text of Section 11 (Attachment 2) contains more detailed and technical language regarding these three types of service.

Standby Service Rate Elements for Back-Up Service and Maintenance Service. The Standby Service rate elements for Backup Service and Maintenance Service are the monthly Demand Charge and the Energy Cost Adjustment Charge (ECAC). (The full text of Section 11 contains more detailed and technical language regarding these rates for these two types of service.)  The monthly Demand Charge, $16.28 per kilowatt (kW) of Billing Demand, is the sum of four elements:

• The Schedule P Demand Charge for large commercial customers receiving power at more than 2,400 volts (Schedule P primary service), which is currently $7.82/kW.

• The Schedule P primary service Energy Charge, currently $0.00949 per kilowatt-hour (kWh), multiplied by 500 kWh per kW of billing demand. (The 500kWh/kW figure is typical for customers that install self-generation.) The resulting product is $4.75/kW.

• The amounts that would be payable by a Schedule P primary service customer for Street Lighting, based upon a monthly usage of 500 kWh per kW of Billing Demand. This calculates to $0.74 per kW at present. 

• The amounts that would be payable by a Schedule P primary service customer for all applicable taxes and surcharges, based upon a monthly usage of 500 kWh per kW of Billing Demand. This calculates to $2.97 per kW at present.

The Billing Demand is the nameplate capacity of the customer�s generation facilities.

The ECAC is the same as that for Schedule P customers, $0.0935 per kWh, except during an Energy Cost Crisis, when the ECAC would be equal to the average variable cost of the most expensive 10 megawatts (MW) of resources actually operated by BWP: 

• In the case of utility-operated resources, the ECAC would become the variable fuel cost (in $/kWh) plus $0.01/kWh. 

• In the case of purchased power, the ECAC would become the purchased power rate (in $/kWh), plus any required wheeling cost (in $/kWh), plus $0.01/kWh. 

An Energy Cost Crisis would occur on any day when the variable cost of purchased power exceeds $0.10/kWh, or the cost of natural gas exceeds $10 per million BTU.  The BWP General Manager would notify all Backup Service and Maintenance Service customers by email the day ahead of any day when the day-ahead prices reach these levels, and on the same day when the same-day market prices reach these levels.

Standby Service Rate Elements for Supplemental Service. All customers taking Supplemental Service would be billed under the appropriate rate schedule for their level of connection: 

• Customers connected through transformers with less than 250 kilovolt-amperes (kVA) of capacity would be billed under Schedule C.

• Customers connected through transformers with more than 250 kVA of capacity would be served under Schedule P.

For Supplemental Service, the Billing Demand is the customer�s actual demand, less the nameplate capacity of the customer�s generation facilities. A Demand Ratchet would keep the Billing Demand for Supplemental Service at or above 70% of its maximum value during the previous twelve months. (The full text of Section 11 contains more detailed and technical language regarding the rates for Supplemental Service.)

FISCAL IMPACT STATEMENT

Adopting the Standby Service electric rates would have a neutral fiscal impact, and would enable BWP to recover the costs of serving standby service customers without having to pass them on to non-standby service customers.

RECOMMENDATION

Staff recommends that Council add Article X, Section 11, �Standby Service� to the Burbank Fee Schedule. With Council approval, this addition will be incorporated into the proposed FY 2004/05 Burbank Fee Schedule, which will be presented to Council at its June 8, 2004 meeting.

GLS:eh

L:\Davis\Memos-04\Standby Service Electric Rates.doc

Attachment 1.   Section 3.21 of BWP�s Rules and Regulations for Electric Service,                                �Standby or Auxiliary Service to Private Electrical Plants,                                                     Schedule A�

Attachment 2.   Proposed Section 11 for Article X of the Burbank Fee Schedule

c:    D. Hanway

       R. Morillo

       J. Fletcher

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