Virginia Energy Purchasing Governmental Association

(VEPGA)

Primer On Rate Design Concepts & PracticesAnd

Explanation of VEPGA Rates & Schedules(What you need to know)

MAY 9, 2013

Presented by:

Glenn A. WatkinsSenior Economist/Executive V. President

Technical Associates, Inc.9030 Stony Point Parkway, Suite 580

Richmond, Virginia 23235

Section I:

Primer On Rate Design Concepts & Practices

Step 1: Set Overall Revenue Requirement

Step 2: Assign Revenue Responsibility to Classesand/or Rate Schedules

General Considerations To Assign Revenue Responsibility

Conceptually•Marginal Costs•Embedded Costs (Fully Allocated Cost)•Value of Service

Other Considerations•Prices Relative to Other Utilities•Percent Change from Current (Legacy Rate)•Policy and Politics •Judgment, Negotiations, Representation and Perceived “Fairness”

General Considerations To Assign Revenue Responsibility

Conceptually•Marginal Costs•Embedded Costs (Fully Allocated Cost)•Value of Service

Other Considerations•Prices Relative to Other Utilities•Percent Change from Current (Legacy Rate)•Policy and Politics •Judgment, Negotiations, Representation and Perceived “Fairness”

General Class Definitions•Residential•Small Commercial•Medium Commercial•Large Commercial/Industrial•Interruptible•Real Time Pricing•Street & Area Lighting

General Class Definitions•Residential•Small Commercial•Medium Commercial•Large Commercial/Industrial•Interruptible•Real Time Pricing•Street & Area Lighting

RATE DESIGN CONCEPTS & ELECTRIC TERMS OF ART --- SYSTEM COST COMPONENTS ---

CapacityCosts

Variable Costs

RATE DESIGN CONCEPTS & ELECTRIC TERMS OF ART--- BASIC RATE ELEMENTS ---

Demand & Energy ChargeRate Structures

• Flat Rates (Per kW or kWh)

• Inverted and Declining Blocks– Price Per Unit Increases or Decreases as Total kW or kWh

Increases

• Diurnal and Seasonal Time of Use

• Load Factor Based (Energy Use of Demand Blocking)

• Voltage Differentiation (Sub-transmission, Primary, & Secondary voltage)

Section II:

Explanation of VEPGA Rates & Schedules

Revenue Collection Within VEPGA Rates

I. BASE RATES

II. RIDERS

• Fixed Rates Per Contract• Pre-2008 Generating Units• Distribution• Company Overhead

Automatic Recovery (Updated Annually)

•Fuel•Transmission•New Generation Projects (existing generation in base rates)

VEPGABase Rate Schedules

SCHEDULE DESCRIPTION

100 Miscellaneous Light & Power

110 All-Electric Service & Dual Fuel Systems

120 Water & Sewage Pumping & Sewage Disposal

122 Time-of-Use

130 Large Miscellaneous Light & Power

131 Thermal Storage

132 Large Misc. Light & Power – Variable Pricing

SCHEDULE DESCRIPTION

102 Traffic Signals & Control

150 Roadway, Directional & Area Lighting – High Pressure Sodium

151 Roadway, Directional & Area Lighting – Incandescent, Mercury Vapor & Urbanlites

152 Street Lighting Fixtures on Bridges & Overpasses

153 Street Lighting – Special Fixtures

154 Customer-Owned Lighting Facilities (Operating Only During Night-Time Hours)

Metered Services Lighting Services

SCHEDULE DESCRIPTION

SGCM Stand-by Generator

SGCM-1 Stand-by Generator (Grandfathered)

Complimentary Services

VEPGA Metered Rate Schedules (Base Rates)

RATE SCHEDULES

100 110

W/O

DemandW/

DemandW/O

DemandW/

Demand 120 122 130 131 132

Approx. mWh 999,100 538,700 173,100 0 2,410,700 125,200 166,000

# of Accounts 12,750 5,250 2,700 0 1,000 20 70

Average Annual kWh/Account 78,300 102,500 64,000 0 2,400,000 6,260,000 2,375,000

RATE ELEMENT

Distribution

Customer Charges $5.66 $5.66 $5.66 $5.66 $5.66 $8.11 $78.50 $78.50 $141.69

Demand Charges None None None None None Flat/kW Declining/kW Declining/kW Declining/kW (voltage diff.) (voltage diff.) (voltage diff.)

Reactive Demand None None None None None None Flat/kVAR Flat/kVAR None

Energy Charges Flat/kWh Flat/kWh Flat/kWh Flat/kWh Flat/kWh None None None None

Electricity Supply (Production)

Demand Charges None None None None None Seasonal Flat/kW Inverted/kW 1/ Inverted/kW1/ Inverted/Kw

(Seasonal TOU

Ratchet)(Seasonal TOU

Ratchet) (voltage diff.)

(Annual Ratchet)

Energy Charges Flat/kWh kWh per kWSeasonal Flat/kWh

kWh per kW Seasonal

Diurnal Flat/kWh

Seasonal Flat/kWh Declining/kWh Declining/kWh

Critical Day Designation

(Declining) (Declining) (TOU)/kWh

1/ Flat per kW charge less declining demand credit, which results in an inverted rate per kW.

VEPGA Riders

Rate Schedule

Rider 100 110 120 122 130 131 132 Lighting

Transmission (Rider T) Energy Energy Energy Demand Demand Demand Demand Energy

Generation

Virginia City Hybrid (Rider S) Energy Energy Energy Demand Demand Demand Energy Energy

Bear Garden (Rider R) Energy Energy Energy Demand Demand Demand Energy Energy

Warren County (Rider W) Energy Energy Energy Demand Demand Demand Energy Energy

Bio-Mass Facilities (Rider B) Energy Energy Energy Demand Demand Demand Energy Energy

Fuel (Rider A) Energy (All Rate Schedules Same Rate)