07-10-2015 BPU RPT 09 - Laserfiche WebLink

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.: A I I k V r: I .4 '. r RIVERSIDE PUBLIC UTILITIES 61& P U B L I C U T I L I T I E S Board Memorandum BOARD OF PUBLIC UTILITIES DATE: JULY 10, 2015 ITEM NO: 9 File ID — 15 -2155 - C SUBJECT: AGREEMENT FOR PROFESSIONAL CONSULTANT SERVICES FOR ELECTRIC COST OF SERVICE ANALYSIS AND RATE DESIGN PROJECT FOR $125,000 ISSUE: The issue for Board of Public Utilities consideration is to approve a Professional Consultant Services Agreement for an Electric Cost of Service Analysis and Rate Design Project for the Electric Utility. RECOMMENDATION: That the Board of Public Utilities approve a Professional Consultant Services Agreement with Leidos Engineering, LLC., of Denver, Colorado in an amount of $125,000 for the purpose of conducting an Electric Cost of Service Analysis and Rate Design Project. BACKGROUND: The electric industry is rapidly evolving. To address these changes, electric utilities are changing their business models. As Riverside Public Utilities (RPU) plans for its future, a cost of service analysis and rate design project is necessary for financial planning purposes as well as to design future rate adjustments. RPU has identified issues in determining revenue requirements and designing rates due to the changing electric utility industry. These issues include: • Changing Regulatory and Climate Conditions — The impacts of distributed generation and renewable energy portfolio requirements need to be considered along with changes in local, state and federal regulatory requirements. Cost Components — The costs of production, transmission, distribution and capital improvements to meet the Electric Utility's aging infrastructure needs, debt service and contributions to the general fund are all components of rates. These components will be analyzed in a comprehensive cost of service analysis to determine current and forecasted overall revenue requirements. While a majority of the Electric Utility's costs are fixed, most of the revenue from retail sales are variable. The project will consider the ability to adequately recover fixed costs as conservation and energy efficiency cause sales to decrease. • Cost Allocation Between Customer Rate Classes —It is essential to identify the cost to serve the City's customers and to ensure equitable allocation of cost responsibility among the customer classes. • Conservation and Energy Efficiency — Future pricing will be based on the new cost of service analysis and will consider the impact of conservation and energy efficiency goals. RPU's previous electric cost of service analysis was completed in 2010. Because of the significant changes in the electric industry, an updated electric cost of service analysis and rate design project is necessary to address the issues in determining revenue requirements and designing future rates.