HomeMy WebLinkAboutElectric Deregulation Workshop The City
ofAzusa
AZUSA
GHT & WATER
For Quality of Life
MAY 12, 1999
TO: HONORABLE MAYOR AND CITY COUNCIL
VIA: Rick Cole, City Manager/Cc
FROM: Joseph F. Hsu, Director of Utilities a'
RE: ELECTRIC DEREGULATION WORKSHOP—PRESENTATION MATERIAL
Attached please find the agenda and a copy of presentation material that will be presented to you
next Monday in the electric deregulation workshop for your preview. Should you have any
questions or need additional information, please do not hesitate to call me at ext.5219.
i\2,/
( 1L1
729 N. Azusa Avenue P.O. Box 9500 Azusa, California 91702
626/812-5208 (phone) 626/334-3163 (fax) utilities@azusa.ca.gov(e-mail)
AGENDA
ELECTRIC DEREGULATION WORKSHOP
6:30 P.M., MAY 17, 1999
AUDITORIUM
1. Status of deregulation and update on L&W Financial Plan adopted in January 1997.
2. Major issues requiring future city council and city manager's input and direction.
a. Retail Choice implementation
b. General fund transfer
c. Governance
3. "When shall Azusa open for Retail Choice?" A workshop this fall for detail discussion.
A
" ELECTRIC
DEREGULATIOI`I
WORKSHOP
CITY OF AZUSA
MAY 1 7, 1 999
Current Status ofElectricity
in ,Industry Evolution California
Successes
• The reliability of the electricity supply has
not been affected by the deregulation
• Deregulation has provided choices to a
significant portion of large commercial /
industrial customers
• It appears that IOU's will be able to
recover 100% of the stranded cost
Current Status ofin Electricity
Industry Evolution California
. Failures
• Very few small customers are electing the
choices, since there are not many choices for
them
• Savings under deregulation have been dismal
• The market is undergoing the growing pain
* Different forms of market monopolization have
surfaced (market power issues)
• High level of inefficiencies still exist due to the
newness of the market structure
AnticiDated Changes in the
Market Structure
Lifting the retail rate cap (SDG&E in
summer 1999, SCE , PG&E to follow)
Ancillary Services Market redesign to
control the exercise of market power
Municipal utilities participation in the
California restructured electricity market
City of Azusa's Participation in
the New Market Structure
❑ Operational transition from SCE has been
completed as of Dec. 31 , 1998
❑ Azusa is a certified scheduling coordinator in
conducting business with the CAISO
❑ Azusa is very active in finding market
opportunities to the benefit of its customers
Updated Strategic
Financial Plan
Summary
As of today, we are on target to eliminate
Azusa's stranded investment by July 1 ,
2002
Azusa's Palo Verde debt payment has
been accelerated , which will result in
somewhat lower annual net income in the
next few years
All assumptions under the plan have so far
been on target
USE AND SOURCE OF MONEY FOR
RATE STABILIZATION FUND •
RATE STABILIZATION
ANNUAL INTEREST USE OF FUND YEAR-END
FY NET INCOME a@ 6% MONEY BALANCE
97/98 $7,000,000
98/99 $1,500,000 $465,000 $0 $8,965,000
99/00 $2,000,000 $597,900 $0 $11,562,900
00/01 $2,400,000 $765,774 $0 $14,728,674
01/02 $2,800,000 $967,720 $0 $18,496,394
02/03 $0 $1,109,784 ($2,750,000) $16,856,178
03/04 $0 $1,011,371 ($2,750,000) $15,117,549
04/05 $0 $907,053 ($1,626,420) $14,398,182
05/06 $0 $863,891 ($1,626,420) $13,635,652
06/07 $0 $818,139 ($1,626,420) $12,827,371
07/08 $0 $769,642 ($1,626,420) $11,970,594
08/09 $0 $718,236 ($1,626,420) $11,062,409
09/10 $0 $663,745 ($1,626,420) $10,099,734
10/11 $0 $605,984 ($1,626,420) $9,079,297
11/12 $0 $544,758 ($1,626,420) $7,997,635
12/13 $0 $479,858 ($1,626,420) $6,851,073
13/14 $0 $411,064 ($1,626,420) $5,635,717
14/15 $0 $338,143 ($1,626,420) $4,347,440
15/16 $0 $260,846 ($1,626,420) $2,981,867
16/17 $0 $178,912 ($1,626,420) $1,534,359
17/18 $0 $92,062 ($1,626,420) ($0)
TOTAL $8,700,000 $12,569,882 ($28,269,882)
ELECTRIC UTILITY REVENUE REQUIREMENT
FULL SCALE COMPETITION ERA
POWER DISTRIB. GENERAL USE OF RATE TOTAL PROJECTED
RESOURCE O&M&A&G FUND STABILIZATION REVENUE RETAIL RATE
FY BUDGET BUDGET CONTRIBUTION (*) FUND(**) REQUIREMENT (C/KWH)
02/03 $12,765,152 $3,684,926 $1,522,231 ($2,750,000) $15,222,309 6.76
03/04 $12,886,304 $3,777,049 $1,545,928 ($2,750,000) $15,459,281 6.81
04/05 $11,708,667 $3,871,475 $1,550,414 ($1,626,420) $15,504,135 6.75
05/06 $11,832,253 $3,968,262 $1,574,899 ($1,626,420) $15,748,994 6.79
(*)contribution to general fund plus in-lieu-taxes continues at 10%of gross retail revenue
(**)use of money from rate stabilization fund to supplement generation debt service payment
Major Policy
Issues to be
Addressed
General Fund Transfer Policy
� Retail rate reduction will necessarily mean
lesser contribution (in absolute terms) under
the current general fund transfer policy
� It will require concerted efforts of the City to
put in place a viable financial plan for the
next few years to ensure a smooth transition
to competition
3
Governance
1
The city may need to re-examine the
governance structure of its business
enterprises to better prepare for the
challenges of competition , in
particular electric competition
Retail Choice Implementation
The city will need to decide in the
near future a retail choice model
that will benefit all of Azusa 's
customers in the provision of
electrical services
Retail Choice Implementation
Policy issues will need to be
addressed before a retail
choice model can be
decided upon
When shall Azusa open for
retail choice?
N
le
N
Major Implementation Issues to
g
be Addressed
I• nfrastructure requirements
• Consumer protection measures
u The rules of competition
u- Timing
cnm
m
a Marketing
A workshop this fall will
address the implementation
issues in detail