Officials From Austin, San Antonio Voice Opposition to Bill Aimed at Revenue Transfers

April 12, 2023

by Paul Ciampoli
APPA News Director
April 12, 2023

Officials from the public power communities of San Antonio and Austin, Texas, recently voiced opposition to proposed legislation that would prevent municipalities from transferring revenue to their general fund from a public power utility if the transfer would result in a deficit for the utility or a rate increase for customers.

At issue is Texas Senate Bill 1110, which would also prevent public power utilities from including these general fund transfers as part of the utility’s cost of service study.

The Texas Senate Business and Commerce Committee on March 21 held a hearing on the legislation where a number of witnesses voiced opposition to the measure.

The prohibition on transfers proposed in the bill would be contrary to standard practices in the electric utility industry, said Mark Dombroski, Deputy General Manager and Chief Financial and Administrative Officer at Austin Energy.

“All electric utilities compensate their owners,” Dombroski said. “Municipal electric utilities make a general fund transfer to the city. Co-ops pay capital credits to their members. Investor-owned utilities pay dividends to their shareholders.”

He noted that Austin Energy returns a portion of its revenue to the community to reinvest. The utility’s general fund “is set according to a strict numeric formula established in 2012.” The formula “provides stability to the city and to the creditors by ensuring that rising costs or wholesale market volatility do not increase the transfer amount.”

Dombroski also noted that according to data from the Texas Public Utility Commission, Austin Energy’s rates are lower than the competitive market average and the utility’s latest AA- bond rating from Standard & Poor’s is well above the industry average.

“Competitively lower rates and high creditworthiness are evidence of our sound financial policies and prudent management,” he said. The legislation “would undermine our ability to prudently operate our electric utility and return that value to our community and customers as we have done for over 125 years.”

Also testifying in opposition to the bill was Ed Van Eenoo, CFO for the City of Austin.

He said at the hearing that over the past 10 years the city has seen funding from the general fund transfer grow by less than 1% on average, while Austin Energy’s wage and employee benefits costs over that same period have grown at much faster rates. “The point being that the general fund transfer has not been the primary driver” of the growth in Austin Energy’s budget.

“The transfer does, however, add stability and diversity to the city’s sources of revenue, which is viewed positively by bond rating agencies and allows the city to fund crucial general fund services while helping us to maintain a tax rate significantly lower than that of other major Texas cities.”  

Ben Gorzell, Chief Financial Officer for the City of San Antonio, who also serves as the city’s Supervisor of Public Utilities, also testified in opposition to the bill. San Antonio is served by public power utility CPS Energy.

He said that the legislation would require significant cuts to city services and/or tax increases “and upend a municipal utility model that has benefited the San Antonio community for more than 80 years.”

Those benefits, he noted, include reliable gas and electric service, competitive rates, a transparent governance model and a financial return that supports a lower property tax burden and funds basic services for the residents of San Antonio.

Gorzell also noted that “this past year the city chose to give back $50 million to CPS Energy ratepayers to soften the impact of the extreme heat, high natural gas prices and high inflation” experienced this past summer.

Jacksonville, Florida, City Council Resolution Critical of Legislation Aimed at Public Power

April 10, 2023

by Paul Ciampoli
APPA News Director
April 10, 2023

The City Council of Jacksonville, Fla., recently passed a resolution critical of legislation that would limit the ability of public power electric utilities to transfer revenues to cities’ general funds.

At issue are two bills, HB 1331 and SB 1380. The Florida Legislature’s current session began on March 7. Both bills as amended the afternoon of March 21 would take effect July 1, 2024, if signed into law by Florida’s governor.

On March 21, the Florida Municipal Electric Association said the legislation would substantially limit the ability of public power electric utilities to transfer revenues to cities’ general funds, which will inordinately affect rural, often economically distressed, communities that have a weaker tax base.

“Municipal utilities have constitutional authority to transfer revenue generated from assets owned and operated by the local government to the general government budget. These dollars are often used to provide residents with critical life and safety services, including police and fire departments,” said Amy Zubaly, Executive Director of FMEA.

Jacksonville City Council Resolution

A resolution passed by the Jacksonville City Council in late March notes that Jacksonville’s public power utility JEA makes an annual contribution to city’s general fund in support of general governmental functions and operations of the consolidated City of Jacksonville.

Those include public safety and emergency services, parks and recreation programming and services, library services, local services and programs designed to mitigate costs and utility disruptions to customers who are neighbors in Jacksonville, and other operational services and expenses that may be paid using general fund dollars.

The JEA contribution to the city’s general fund for fiscal year 2022-2023 totaled $122,424,496 and supported a multitude of programs and services, the resolution said.

The resolution states that the City Council strongly opposes and urges the Florida Legislature to defeat passage of House Bill 1331 and Senate Bill 1380 “which would, together or individually, provide for a not-to-exceed cap on the transfers of municipal 30 electric, natural gas, water, or wastewater revenues to a municipal general fund to finance general government functions.”

This action “would only serve to further hamstring a local government’s ability to effectively utilize its financial resources to provide the programs and services it deems most appropriate to meet the needs of its community,” the resolution states.

“Our community-owned system works well, with a local board appointed by City Council and the mayor. Our board does a great job for all of our customers throughout Northeast Florida, ensuring that we have reasonable rates now and lasting solutions for the future,” JEA said in an April 5 statement to Public Power Current in response to the resolution.

“We really appreciate the Jacksonville City Council and our local legislators who are pushing back on this legislation,” the utility said.

Several other cities in Florida have also passed resolutions in opposition to the legislation.

Long Island Power Authority Board Approves Time-of-Day Rates Plan

March 31, 2023

by Paul Ciampoli
APPA News Director
March 31, 2023

The Long Island Power Authority Board of Trustees on March 29 voted to modernize electric rates for residential customers throughout Long Island and the Rockaways beginning in 2024 with a standard time-of-day rate and an optional super off-peak rate.

Customers will still have the option to stay on a flat rate.

“Time-of-Day Rates are an important rate modernization reform that will help lower customer bills and advance clean energy,” said Thomas Falcone, Chief Executive Officer of LIPA. “Once implemented in 2024, this initiative will save 80 percent of customers money even before changes to how or when they use electricity. By moving to Time-of-Day Rates, we can reduce carbon emissions and take the burden off the electric grid during the highest times of demand.”

With the new TOD rate, customers will pay different rates for electricity based on when they use it. Electric rates will be higher during weekdays from 3 p.m. to 7 p.m. (peak) but lower all other hours of the day and on weekends and holidays (off-peak). With the super off-peak rate, rates are further discounted in the (super off-peak) hours from 10 p.m. to 6 a.m. 

Most customers will pay the same or less under the TOD rate or super off-peak rate without changing their electricity usage or habits because. These customers already conduct most activities during discounted off-peak periods, which make up 88 percent of hours throughout the year.

While developing the TOD proposal, LIPA proactively sought feedback and received input from customers and stakeholders. Through the process, LIPA evaluated best practices from other utilities across the U.S. that have successfully implemented TOD Rates for their customers, beginning as early as 2018. In California, public power utility SMUD has implemented time-of-day rates.

The LIPA TOD rate design was collaboratively developed with input from the Department of Public Service, the New York State Energy Research and Development Authority, the New York Solar Energy Industries Alliance and consumer advocates such as the Utility Intervention Unit, and the Public Utilities Law Project.

LIPA’s service provider, PSEG Long Island, will be conducting extensive outreach to all customers before they are transitioned into the new rate. Customers will receive 90-, 60-, and 30-day notices, which will include information about the different plans, how to optimize their rates, and details regarding a bill protection guarantee.

To help customers transition to the new plan, LIPA is offering a one-year bill protection guarantee for a customer’s first year on the TOD Rate (or Super Off-Peak Rate). If a customer’s electric bill on the TOD Rate (or Super Off-Peak Rate) is higher after 12 months than it would have been under the Flat Rate, LIPA will automatically refund (in the form of a bill credit) the difference for the entire 12-month period.

Customers will be migrated to the new TOD rate plan in phases beginning in 2024 and continuing through 2025. Starting in the Fall of 2023, customers will also have the option to both voluntarily opt into the time-of-day rate and super off-peak rate early or opt out entirely and remain on the current flat rate.

LIPA said that the electricity that is generated off-peak emits up to 50 percent less carbon than the electric generation needed to serve peak demand from 3 p.m. to 7 p.m. during weekdays. The power plants that run during peak periods need to be highly flexible to turn off and on quickly and are less efficient than plants optimized to run all the time, it said.

By reducing demand during peak periods, LIPA can reduce the capacity and runtime of less efficient power plants and avoid the need to expand the electric grid’s capacity. As LIPA operates on a not-for-profit basis, those savings are then passed on to customers under this program. 

Under the TOD rate, customers will also have the ability to save even more money by making small changes in their daily routine that conduct energy-intensive activities—such as doing laundry or charging electric cars —in off-peak hours. For instance, a customer on the TOD Rate could save approximately $4 per month by doing their laundry and $43 per month by charging their electric vehicle during off-peak hours.

LIPA previously held two public hearings in Nassau County and Suffolk County, and members of the public also had the opportunity to speak in front of the LIPA Board of Trustees at its regularly scheduled meetings. Additionally, written comments were accepted and provided to the Board for consideration before the vote.

For more information, visit https://www.lipower.org/time-of-day/

Florida Municipal Electric Association Details How Legislation Will Undercut Public Power

March 21, 2023

by Paul Ciampoli
APPA News Director
March 21, 2023

Legislation working its way through the Florida Legislature would substantially limit the ability of public power electric utilities to transfer revenues to cities’ general funds, which will inordinately affect rural, often economically distressed, communities that have a weaker tax base, the Florida Municipal Electric Association said on March 21.

“Municipal utilities have constitutional authority to transfer revenue generated from assets owned and operated by the local government to the general government budget. These dollars are often used to provide residents with critical life and safety services, including police and fire departments,” said Amy Zubaly, Executive Director of FMEA.

At issue are two bills, HB 1331 and SB 1380. The Florida Legislature’s current session began on March 7. Both bills as amended the afternoon of March 21 would take effect July 1, 2024, if signed into law by Florida’s governor.

“Prohibiting or limiting general fund transfers would eliminate a city’s right as the utility owner to earn a reasonable return on the investment in its utility systems, a recognized right of every utility owner and operator, to provide an essential service and promote a higher quality of life in their communities,” Zubaly said.

The bills “will have innumerable unintended consequences for millions of Florida residents and businesses receiving utility services from a municipality. The legislation will undoubtedly raise costs and diminish the quality of life, through reduced services provided or higher taxes, for millions of Floridians already struggling with the burdens of inflation.”

Historically, public power utilities in Florida have, under their constitutional Home Rule Authority, transferred enterprise fund revenue from assets owned and operated by the local government to the general government budget.

The transfer rate varies city by city based on operating expenses, debt service costs, and the desired level of reinvestment in the assets owned. Municipal utilities focus on reinvestment in their communities.

RMLD Customer Bill Increase to be 40 Percent Less than Forecasted

March 13, 2023

by Paul Ciampoli
APPA News Director
March 13, 2023

The increase to Reading Municipal Light Department’s 2023 customer bills is estimated to be 40 percent lower than originally forecasted, the Massachusetts public power utility recently said.

This is due to lower wholesale energy costs, which are passed through to customers. “RMLD diligently manages its power supply portfolio to allow for customers to benefit from downward pressure while ensuring reliability,” it said.

RMLD notified customers in January that average monthly bills were estimated to increase by an average of 9 percent across all rate classes with the rate change effective March 1, 2023.  However, lower fuel, capacity, and transmission costs will help keep 2023 monthly bills only 5 percent above 2022 monthly bills, averaged across all rate classes.

“RMLD actively manages its power supply. Our current portfolio has 85 percent locked under fixed contracts with the remaining 15 percent purchased in open markets,” said RMLD General Manager Greg Phipps. “Mild New England winter weather lowered regional natural gas demand which lowered regional open market wholesale electricity costs.  RMLD is passing that savings along to our customers.”

Based on the most recent estimate, monthly bills beginning in March 2023 are estimated to only increase by the following amounts for each rate class: 6.2% for residential customers, 3.9% for residential time-of-use customers, 8.3% for commercial customers, 1.6% for industrial time-of-use customers, and 2% for schools. 

Rates are calculated based on the cost of service to serve each rate class, based on rate studies.

Florida Lawmakers Introduce Bills That Would Place Public Power Utilities Under PSC Regulation

March 7, 2023

by Paul Ciampoli
APPA News Director
March 7, 2023

Legislation has been introduced in the Florida Legislature that would give state utility regulators the ability to regulate public power utilities with customers outside city boundaries.

The bills are HB 1331 and SB 1380. The Florida Legislature’s current session began on March 7. Both bills would take effect July 1, 2023, if signed into law by Florida’s governor.

In essence, both bills seek to place municipal utilities selling retail electric or natural gas service to customers outside their city limits under the full regulation of the Florida Public Service Commission (PSC), among imposing other significant limitations.

“Municipal electric utilities were created to ensure communities had access to affordable, reliable power through an entity that was locally owned, locally controlled and locally operated. Florida’s 33 municipal utilities do that and more,” said Amy Zubaly, FMEA Executive Director in response to the legislation. “Everything Florida’s municipal utilities do is centered on making their communities stronger and the quality of life better for their family, friends and neighbors.”

SB 1380 would revise the definition of the term “public utility,” traditionally inclusive in Florida of investor-owned utilities subject to PSC regulation, to include a municipality supplying electricity to any electric retail customer receiving service at a physical address located outside its corporate boundaries. Under the proposed legislation, full PSC regulation over municipal electric and gas utilities that serve outside-the-city customers would continue for at least five years.

Going substantially further in its restrictions on municipal electric and gas utilities, HB 1331 mirrors the provisions of SB 1380 and also creates a new statutory provision authorizing outside-the-city surcharges on utility customers of up to 10 percent, with the surcharge based on the percentage of customers located outside municipal boundaries.

Additionally restricting are the provisions in the proposed legislation that authorize, but limit, transfer to the city general fund from municipal electric or gas utilities. The legislation imposes limitations on percentages of transfer to the general fund for both inside- and outside-city customers. Of great concern is a provision specifying that the use of general fund transfer is limited to only public utility purposes, or perhaps, a total ban on earning a reasonable return on utility expenses.

“We have grave concerns regarding the proposed legislation that would add additional state regulation to municipal utilities and its impact on our communities and the affordability of customers’ rates,” Zubaly continued. “We look forward to working with the bill sponsors to address any outstanding issues.”

The 2023 Florida Legislative Session runs through May 5.

Lincoln Electric System’s Rates Continue to Rank Among Lowest in the U.S.

February 24, 2023

by Paul Ciampoli
APPA News Director
February 24, 2023

A nationwide study shows that Lincoln Electric System’s rates continue to rank among the lowest in the country based on 2021 data, the Nebraska public power utility said on Feb. 23.

LES’ annual competitive market study determined that the utility ranked 3rd best for the lowest residential all-in price and 16th best for the lowest average all-in price among 87 cities surveyed nationwide when including all retail sectors, said Joe Cocklin, manager, LES Rates and Analytics.

The study is a comprehensive report of electric utility metrics allowing LES to benchmark its performance with other utilities.

“This study is an effort to monitor our affordability and reliability,” Cocklin said. “We like to provide our customers an annual comparison to show our competitiveness with rates of other U.S. electric utilities.”

Additionally, LES ranked 8th for most stable rates over the past 10 years. In the area of reliability, without major event days of adverse weather, LES ranked 1st overall. The average total time a customer experienced a non-momentary power interruption in 2021 was 17.1 minutes.

LES is ranked 10th lowest overall for the average monthly residential bill. A typical residential customer paid an average of $82.99 on their monthly LES bill (less than $3 per day), which is 31% less than the U.S. average of $121.01. LES’ affordability is further shown by its 17th-place ranking for the lowest residential bill as a percentage of household income.

Cocklin said LES’ low rates are attributed to several factors, including low-cost generating resources and LES’ ongoing efforts to improve operational efficiency across all LES business units.

To learn more about LES’ study and its methodology, visit LES.com/Rates.

Report Says Cost Based Rates Are Needed To Make Heat Pumps Competitive

February 14, 2023

by Peter Maloney
APPA News
February 14, 2023

Switching to cost based or cost reflective utility rates would make heat pumps competitive with natural gas heating and speed electrification, according to a new report.

The report, Heat Pump-Friendly Cost-Based Rate Designs, was done by Brattle Group for the Energy Systems Integration Group, a nonprofit organization that marshals the expertise of the electric industry’s technical community to support grid transformation and energy systems integration and operation.

In the white paper, the Brattle analysts analyzed a proprietary dataset of natural gas and electricity usage for 80 single-family residential customers of a large investor-owned utility with relatively high electricity rates and cold winters.

The analysis showed that the operating cost gap was positive, that is, the cost of operating heat pumps was higher for all 80 customers under default electricity rates than the cost of using natural gas-fired heating systems.

Heat pumps are more efficient than natural gas-based heating systems and their costs are expected to decline over time, but right now heat pumps are often more expensive to install and operate, the report noted.

However, the analysis also showed that cost based rate designs can improve the economics of heat pumps by making electric heating bills lower than natural gas heating bills.

“Moving to one of the three alternative rates flips all 80 customers from a positive cost gap to a negative cost gap, in which energy costs for operating the heating equipment are lower post-electrification,” the authors wrote.

Under rate II, the first alternative rate studied – rate I was the default rate – the fixed charge component of a customer’s bill was increased and the volumetric charge was lowered. The result was a reduction in customer heating bills sufficient to turn the operating cost gap negative for all customers.

Switching to a time of use day/night structure (rate III) or a demand-based structure (rate IV) resulted in even larger negative operating cost gaps with rate IV showing the largest reductions in electric heating bills for the sample of 80 single-family residential customers, the report found.

“These results reflect the fact that all of the alternative rate designs are better aligned with the marginal cost of generating and delivering power, compared to the default residential rate design, which typically is not,” the authors said. “In many jurisdictions across the country, retail electricity prices are largely disconnected from the marginal costs.”

The authors also noted that there was a large variation both geographically and temporally. “To the extent that retail prices are above the short-run marginal costs because a large portion of the fixed costs of delivering power are also collected through volumetric rates, this creates a distortion in price signals and leads to suboptimal levels of electricity consumption and adoption of new customer sited technologies,” they said.

One of the unintended consequences of such default electric rates, the report found, is the slower adoption of heat pumps because the use of heat pumps increases total electricity consumption and, therefore, electricity bills, making the use of heat pumps uneconomic under typical volumetric default rate structures.

The authors noted, however, that as electric system conditions evolve, and summer-peaking systems become winter peaking systems with increasing levels of building electrification, rate structures may need to be refreshed if they are to continue to reflect actual costs.

While alternative rates can make adoption of heat pumps more economic for many customers, the report’s authors said it is important to note the implications of those rates for customers’ other electric loads.

For some of the customers in the sample, switching to time-of-use rates (rate III) would increase their electricity bills by about $200 per year even before any electrification, the report found. For some other customers, switching to one of the demand-based rates would reduce their bills by about $100 per year before electrification.

The report recommended that utilities develop screening tools to determine which customers might benefit from alternative rates and market those rates accordingly. The report also recommended that utilities develop data analytics tools to identify customers who may be getting close to replacing their heating systems and contact them before they make an investment decision.

Bonneville Power Administration to Use $350 Million in Funds for Power Rate Reductions

January 23, 2023

by Paul Ciampoli
APPA News Director
January 23, 2023

Bonneville Power Administration Administrator John Hairston recently adopted BPA staff’s proposal to allocate the fiscal year 2022 power reserves distribution clause amount of $500 million toward rate reduction and other high-value purposes, BPA said on Jan. 10.

Specifically, $350 million will be used to reduce FY 2023 power rates, while $100 million will be allocated to reduce debt or for revenue financing and $50 million will be used to prepay certain maintenance needs of existing fish and wildlife mitigation assets.

The RDC, a rate mechanism that implements an element of BPA’s Financial Reserves Policy, triggered for BPA’s Power Services based on FY 2022 end-of-year results. It allows the administrator to repurpose financial reserves when certain conditions are met.

The primary condition is that both the agency and the business line must exceed their upper days cash on hand thresholds — 90 days cash on hand for the agency and 120 days cash on hand for a business line.

Days cash on hand is the number of days a business can continue to operate using its own cash on hand with no new revenue. 

The amount above the thresholds can be used for debt reduction, incremental capital investment, rate reduction through a dividend distribution or any other high-value business-line-specific purpose determined by the administrator.

Originally scheduled for Dec. 15, 2022, the final decision on the Power RDC was delayed to allow time for staff to fully consider and respond to the extensive comments received during the public comment period, BPA said.

Long Island Power Authority Unveils Time-of-Day Rate Proposal

January 17, 2023

by Paul Ciampoli
APPA News Director
January 17, 2023

The Long Island Power Authority recently announced a proposal to modernize its electric rates for residential customers in 2024 with a standard time-of-day rate and an optional super off-peak rate. Customers will still have the option to stay on a flat rate.

Customers who try the new rates will receive a 12-month “Bill Protection Guarantee,” which means they will receive a refund if they would have paid less on a flat rate. The Bill Protection Guarantee would cover a customer’s first year on the TOD rate or super off-peak rate.

If after 12 months a customer’s electric bill on the TOD rate or Super off-peak rate is higher than it would have been under the flat rate, LIPA will automatically refund the difference for the entire 12-month period.

With the new TOD rate, customers pay different rates for electricity based on when they use it. Electric rates are higher during weekdays from 3 p.m. to 7 p.m. (peak) but lower all other hours of the day and on weekends and holidays (off-peak). With the super off-peak rate, rates are further discounted in the (super off-peak) hours from 10 p.m. to 6 a.m. 

LIPA said the plan would immediately reduce rates for more than 80 percent of customers without any changes to how or when they use electricity.

Under the proposal, customers “would have the ability to save even more money and support a cleaner electric grid by making small changes in their daily routine by conducting energy-intensive activities – such as doing laundry or charging electric cars – in off-peak hours,” it said.

“Time-of-Day rates are an important rate modernization reform that will help lower customer bills and advance clean energy,” said Thomas Falcone, Chief Executive Officer of LIPA. “Once adopted, this plan will save more than 80 percent of customers money while supporting our clean energy transition by reducing carbon emissions and taking the burden off the electric grid during the highest times of demand.”

Most customers will pay the same or less under the TOD rate or super off-peak rate without changing their electricity usage or habits because most customers already conduct most activities during discounted off-peak periods, which make up 88 percent of the hours throughout the year.

The TOD proposal was developed with input from the New York Solar Energy Industries Alliance, the Department of Public Service, the New York State Energy Research and Development Authority, and consumer advocates such as the Utility Intervention Unit, and the Public Utilities Law Project.

LIPA is inviting interested stakeholders to provide input on its rate modernization proposals. There will be two public hearings on February 21, 2023, where customers can sign up to speak. LIPA will also accept written public comments until February 27, 2023.

The proposal is scheduled for consideration at the March 29, 2023 meeting of the LIPA Board of Trustees.

Should the proposal be approved by the LIPA Board at the March meeting, there will be extensive communication to all customers before they would be transitioned into any new plan, including 90, 60, and 30-day notices, which will include information about the plans and how to optimize their rates as well as the Bill Protection Guarantee.