Blog Archive

Friday, February 23, 2018

February 27, 2018 Board Meeting





TENTATIVE AGENDA
GLASGOW ELECTRIC PLANT BOARD 
FEBRUARY 27, 2018, 6:00 PM

0.5 SWEAR IN NEW BOARD MEMBER


1. MINUTES OF PREVIOUS MEETING


2. ANALYTICS REPORT FOR MONTH OF JANUARY

3. REPORT ON MARCH 2018 FCA


4. REPORT ON RATE DESIGN FUNDAMENTALS 


5. CONSIDER FULL REPORT ON 2017 RETAIL RATE EFFECTIVENESS


6. CONSIDER RS AND TRS RATE CHANGES TO ACCOMPLISH $5        CUSTOMER CHARGE REDUCTION


7. NEW/OLD BUSINESS

A. RESPONSES TO AUDIT RFP - TURNED OVER TO CITY
8. ADJOURN



MEMORANDUM
                                                                                                                  
                                                                                               
                                                                                     
TO:                       Members of Glasgow Electric Plant Board                 
                                                                                               
FROM:                  William J. Ray, PE                 
                                                                                               
DATE:                  2/22/2018    
                                                                                                                  
SUBJECT:            Board Meeting Information                                          


                                     
Preamble
February is the shortest month of the year, but it finds us trying to accomplish a staggering array of objectives. We completed an expedited application for PEER certification at the behest of the Kentucky Energy and Environment Cabinet (we are waiting to hear on that application’s success), we completed the promised analysis of all of our retail rates (you’ll see all of that at the meeting), and we worked with TVA to get approval for the promised $5 customer charge reduction for the residential customers. That is a lot for one month, especially February!

We will welcome D.T. Froedge to the board this month. I will be prepared to do another rate design review, if anyone wants to hear it again. If not, we will jump straight into the many slides it is going to take to display the findings of our 2016 and 2017 rate effectiveness reviews. When this is done, and when you deal with our recommendations for the $5 customer charge reduction, our list of promises to the Advisory Council and the Glasgow City Council will be complete.

The meeting might be a bit long, depending on the level of questions that you have about my rate presentation, so try to grab a snack before you arrive. Now, let’s move on to this month’s agenda!



March 1 FCA
As we continue the third year of our new retail rate designs, March 1 will bring us a large increase in overall power cost due to an increase in the FCA. The FCA calculation always trails actual TVA fuel expenditures by a couple of months, so March will see us all paying for the extra fuel TVA had to purchase to cover the demands of the extremely cold weather. The March 2018 FCA is going to increase to 2.175 cents per kWh, and that increase, when blended with our other wholesale costs, will bring about a roughly 4% increase in overall energy costs to us and our customers. As usual, I am attaching the narrative on the FCA from the TVA portal. On March 1, the energy component of our retail rates will be adjusted to reflect this decrease to the wholesale cost of energy.
         
Rate Design Fundamentals

Since we recorded that meeting and gave D.T. access to the recording, you all may feel it unnecessary to spend time on that material again. I am fine with that, but I will be prepared to delve back into the subject if anyone thinks it worthwhile.

Retail Rate Effectiveness
At the meeting we will present our findings on the effectiveness of our electric power retail rates for the last year. It is very clear that this sort of review needs to be conducted annually. We found some issues that have now existed for two years, simply because we didn’t get the chance to conduct the review after 2016 ended. We were consumed with the attacks on us, and the need to defend ourselves, during much of 2017, and that relegated the rate review to a lower priority. To complicate matters more, the board acted to create and offer an optional rate which created a new volumetric variable into the equation. As a result, two years elapsed before we got to accomplish the review.

It is not fair to ask board members to become rate design experts, so the presentations we will have at the meeting will not be highly technical. Rather, we will use graphics to illustrate the bottom line findings relative to each of our retail rates. This will still take a considerable number of slides, because we have six retail rates (not counting the outdoor lighting tariff) to review.

I will not be asking you to take action on curing the deficiencies we found in the analysis, yet. We still need to understand what the Kentucky Legislature’s pension reform decisions will do to our need for revenue, along with TVA’s decision on wholesale rates to become effective in October. Action on updating the rates in a way that will produce more revenue will have to come later in the year, when more of the variables are known. However, I do want you to see the kind of changes that will be necessary later in the year as you approach the decision that will be in front of you at the meeting – dealing with the last element of our agreement with the Advisory Council and the City Council – that of reducing the residential customer charge by $5. It is clear that you need to weigh these issues together so that everyone understands the likely flow of rate changes which will occur in 2018 if we are to meet our promises and respond to our fiscal realities.

The $5 Customer Charge Reduction
Last month we thoroughly discussed the tough question of where to collect the revenue necessary to provide the $5 per month customer charge reduction benefit promised in our agreement with the City Council. This month I will present an actual tariff, approved by TVA, to accomplish the directive you gave me at the January meeting.

After considering all of the options, you directed me to create, and seek TVA approval, for a tariff change to our RS and TRS rates, that would collect the revenue necessary to fund the reduction, from the same class of customers that will get the benefit. The vehicle we have chosen to accomplish that task is to increase the kWh adder for delivery by an amount sufficient to collect $5 more through the kWh charge from the average consumer in the RS and TRS residential rate customers. Copies of the first pages of the proposed tariff sheets, showing the proposed changes, are included at the end of this narrative.

The good things about this solution are that it collects the revenue from the same class that enjoys the benefit, so no cross-class subsidy is required, and very low kWh usage customers will pay in less than $5 but still get the full $5 reduction in customer charge.

The unattractive elements of this solution include the fact that this move adds even more volumetric risk to our rates (the very thing we recognized as a danger and took steps to eliminate) and, for customers who use higher levels of kWh, they will pay more in additional kWh cost than the $5 customer charge reduction that they will receive.

These good and bad elements of this decision seem to be necessary for us to finally accomplish each of the elements of the agreements we reached last year. We will discuss the details of this at the meeting, but if you implement the recommendation, everything is in place to effectuate this change on April 1.

To meet the new Kentucky law regarding municipal utilities, I will need to deliver a written report on the rate change to the City on the day after our meeting. Further, I will need to appear at the next meeting of the Glasgow City Council to give a verbal report on the rate change, although the council will not have the power to approve or disapprove of the change.
 

Reports
The Finance Committee of the City of Glasgow asked us to solicit proposals, using our usual RFP process, for an independent audit of Glasgow EPB for the next three fiscal years. We issued the RFP and got proposals from Alexander, Thompson, Arnold and from Carr, Riggs & Ingram. We forwarded those proposals to Brad Groce, the committee chair, and are awaiting their decision on the chosen firm.


Conclusion
Well, that ought to be more than enough to set your head to spinning for this month. Let me know if you have any questions before the meeting.








































Thursday, February 1, 2018

Coincident Peak Notice

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for February's peak electric demand to occur on Friday, February 2nd between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.
Friday, January 19, 2018

January 23, 2018 Board Meeting



TENTATIVE AGENDA
GLASGOW ELECTRIC PLANT BOARD 
JANUARY 23, 2018


1. MINUTES OF PREVIOUS MEETING


2. ANALYTICS REPORT FOR MONTH OF DECEMBER


3. REPORT ON FEBRUARY 2018 FCA


4. REPORT ON iPAY MATTERS 


5. CONSIDER APPOINTMENTS TO PROGRAMMING COMMITTEE


6. DISCUSS RATE EFFECTIVENESS STUDY AND OPTIONS FOR $5 CUSTOMER CHARGE


7. CONSIDER RATE STABILIZATION AGREEMENT ON INSURANCE


8. NEW/OLD BUSINESS

9. ADJOURN

Preamble
We begin another year with much the same intensity that we’ve maintained over the last two years. Though it would be nice to settle in for a bit and give our newer board members more time to learn more about our work, that peaceful period just isn’t in the cards right now. This month we have been battling Mother Nature, and changes to our cable television lineup, right along with our work to accomplish the terms of our agreement with the Advisory Council and the City Council, and all of these tasks have been quite difficult.

We are doing the annual review of the effectiveness of our retail electric rates and working to present them to you, along with recommendations on how to also achieve the $5 reduction to some Customer Charges, at this meeting. While it would be nice to wait for D.T. Froedge to arrive before we delve into that, the schedule, if we are to accomplish this by April, is unforgiving. We need to go over this in January, present actual, fleshed out, rate designs in February for your approval, and then get a number of TVA required tasks completed before April 1. There is no slack time in the schedule.

The meeting might be a bit long, depending on the level of questions that you have about my rate presentation, so try to grab a snack before you arrive. Now, let’s move on to this month’s agenda!



February 1 FCA
As we continue the third year of our new retail rate designs, February 1 will bring us a small increase in overall power cost due to a small increase in the FCA. Since energy sales have been off slightly (that will change dramatically when January is accounted for), compared to what TVA anticipated, and hydro generation was considerably lower than anticipated, fuel costs were a bit higher, and that is the root cause of the smallish FCA increase. The February 2018 FCA is going to increase about 0.5% to 1.844 cents per kWh. As usual, I am attaching the narrative on the FCA from the TVA portal. On February 1, the energy component of our retail rates will be adjusted to reflect this increase to the wholesale cost of energy.
         
Report on iPay Matters

The product delivers these benefits to the customers, and EPB benefits as well. The progress we have made of the last couple of years in reducing our bad debts written off is largely attributed to the iPay product reducing our exposure. However, weather events like what we have experienced this month, threaten to decrease the benefits we are getting from the creation of the iPay product.

We will discuss this more fully at the meeting, but issues have arisen due to the very nature of the pre-pay product. According to the rules we set forth for the product, the customer accepts full responsibility for monitoring their credit balance on their account. They accept the terms which include automatic termination of the services covered by their iPay account, whenever the balance in the account falls below zero. Obviously, this is the nature of pre-pay, and it is the only way that EPB can hope to protect its fiscal status when there is no deposit held with respect to an account. If one is on pre-pay, and they do not pre-pay to purchase their services, then the services are terminated.

The severe weather has brought many surprises to many of the iPay users. First, their energy usage has been dramatically higher, requiring more money deposited to the accounts to maintain a positive balance. Next, even though we strongly advise customers not to do so, many come by nearly every day to place a small amount of money on their account. When road conditions are such that these daily visits become impossible, they are faced with a negative balance on their account, which, by our rules and their agreement, results in service termination. If the weather is frigid, those terminations could have many negative results to health and property.

Though we have stepped in many times over the last two weeks to keep services active, even though the customers have agreed to automatic termination, we are breaking our own policies and exposing our other customers to new bad debt risk. While we understand that one side of this problem is a simple monetary one, we also recognize that the other side of the issue deals with health and welfare of many customers. There is no clear proper response to the conditions that have developed this winter. We can discuss this further during the meeting.   

Programming Committee Member Replacements
The terms of Terrell Alexander and Beverly Vance expire at the end of January. Terrell is finishing his first full term. Beverly was appointed to fill the unexpired term of Janice Crenshaw, so she hasn’t served two full terms yet. The board has been limiting these appointments to two full terms, so you have some options, and, of course, the two full terms limitation is one previous boards have created and can be modified. Both of these folks have been great members of the committee, but you should be pondering their replacement, or reappointment now.

Retail Rate Effectiveness and the Path to the $5 Customer Charge Reduction
The only recommendations of the Advisory Council, empaneled last year to come up with recommended changes to EPB’s policies and retail rates, which have not been addressed are on the agenda this month. We finally have sufficient data to complete the first annual recommended analysis of our retail rates. We are also now able to make recommendations on how to implement the requested $5 reduction to the Customer Charge for low kWh usage residential customers. The discussion of these two matters will be somewhat lengthy and detailed.

I will start the discussion by giving everyone a refresher course on retail electric rate design, and the forces acting upon Glasgow that led the board to approve our sweeping rate changes two years ago. I have new graphics that should help refresh the experienced board members and help the newer members catch up on what transpired.

After the refresher, we will move into the review of the effectiveness of the existing retail rates. This will satisfy one of the Advisory Council recommendations and it will also provide a good foundation for recommended adjustments to our rates that should be before you at the February meeting.

Finally, we will use the refresher course and the presentation on existing rate effectiveness, to open the discussion on methods that might be used to produce the $5 Customer Charge reduction. This is the last outstanding Advisory Council recommendation that we have yet to address, and it is one of the toughest. Since we are a not-for-profit municipal corporation, we cannot simply finance a benefit, that will cost about $30,000 per month, by reducing dividends to stock holders. Rather, we will have to harvest that $30,000 per month from somewhere else to be able to provide the $5 reduction to all residential customers.

So, the tough question before you will be the decision on where to collect the revenue necessary to provide that benefit. Should we raise some rates to commercial and industrial customers and use that to provide benefits to the residential customers? Should we, instead, adjust residential energy rates so as to collect an average of $5 more from each customer so that money can be used to reduce the Customer Charge?

The third part of the presentation will attempt to allow you to see the impacts of these options, so you can render a decision on which route you feel is best for us to pursue. My team will have a lot of work to do after your decision, as we will need TVA approval, and I will have to present our recommendation to the City Council as well. We want to get all of this done such that we can make whatever changes you deem necessary for implementation on April 1. That means every day will count throughout the upcoming months.

 
Progress on Advisory Council Recommendations
This seems a bit redundant since many of the paragraphs above already deal with this subject, but just to keep our consistency on including this in our discussion until all items are completed, here it is. I won’t repeat all here in their entirety, but will use shorter summary terms for each item. The information presented here will be repeated and expounded upon at the meeting for your consideration.



1.    Tiered Customer Charge Based Upon Usage. This is the toughest one of the recommendations for us to make progress on, but we did discuss it enough to target a $5 reduction in the customer charge for the lowest usage “tier,” as recommended by the Advisory Council. I’m afraid that this decision has been misinterpreted by some as a promise to lower all customer charges by $5. The Council asked for a tiered customer charge with reduction for the lower kWh usage customers. That is the job we are working on as directed to my team at the August Board meeting. Additionally, TVA is going to start charging us a new wholesale customer charge, and since our present rate architecture collects all of the money we need to operate the grid from the customer charge, the base customer charge will have to cover this new expense. That is not even recognizing the possible $400,000 annual cost increase that Kentucky Retirement might saddle us with. A $5 credit would soften those increases and provide the gradualism, as we slowly reduce that credit over the next few years, but that credit will have to be funded by an increase somewhere else. Please remember, the EPB is a non-profit corporation which does not have the financial resources to simply reduce any charge without offsetting that reduction with an increase to another charge to balance the ledger. As discussed extensively above, we are about to address this item.

2.         Revisions to Variable Rate. The requested revisions have already been implemented, effective August 1. The council asked us to limit our peak predictions to a maximum of 4 days per month. Accepting that recommendation causes us to move away from the technically elegant architecture of the former infotricity rate, wherein everyone pays their pro-rata share of the monthly peak hour, no matter when it occurs. The new limitations we accepted create risk of paying TVA for a peak hour which is not properly predicted and shared among all customers. That risk is monetary and we must create a fund balance to use when those missed predictions occur, because TVA must be paid regardless of the accuracy of our predictions.


3.         Alternative Rate Considerations. This is one of the most unusual recommendations from the Council. The suggestion here is that we poll our customers (we assume just those actually using the Alternative Rate - TRS and TGSA1) to ascertain their interest in modifying the rate to introduce time-of-use elements to the rate. This feels odd because everyone we know that went to the Alternative Rate, did so because they sought the solace and simplicity of an old-style kWh rate with fixed kWh charges. Still, we agreed to pursue each of the recommendations, so we sent out first class mail survey to about 1,500 folks on the alternative rate. We got the forms back from 14 customers. Most of those responses asked for the alternative, or “flat” rate, to be altered by adding a time-of-use element to the rate. As a result of this response, I believe we can count this recommendation as satisfied and that the rate design, as it stands, is preferable to an overwhelming majority of those using it.

4.         Improvement to RoundUp Product. The recommendation here was quite simple. We were asked to modify the product such that anyone interested in participating could choose a fixed amount to be automatically added to their monthly bill and then donated to Community Relief. The objective here seems to have been to gather more funds for the use of Community Relief, by increasing the amount donated by a participant beyond the sub-one dollar amount achieved by simple rounding up of the bill to the next highest even dollar. We found that the software could easily be adapted to do this and we have already accomplished this change. We still need to create marketing to better inform the customers of this change, and that is in process.

5.         Annual Rate Review. The recommendation was that we conduct an annual review of the effectiveness of all retail rates, and recommend changes based upon that review. This is a great suggestion that is already on-going. This month we will have a presentation on rate effectiveness based upon data from 2017 consumption and billing.

            6.         Expand Education Initiatives. This recommendation is the one which surprised us the most. The Council recommended that we use multiple media outlets and create a speaker bureau which would allow us to provide energy usage and savings advice to a wide variety of meetings and groups throughout Glasgow. Honestly, we felt we were already doing that, and, a lot of the feedback we have been getting has been negative as many folks feel they do not need to be educated. However, since we accepted this recommendation, and since you instructed me to redouble our efforts to educate our customers, we are on the case. We have already conducted, two full blown educational sessions lead by Jeff Christian, a former director from Oak Ridge National Laboratory, and someone considered to be an expert in the energy efficiency field. The event was heavily advertised with special arrangements for transportation via city bus and individual transport for those with transportation needs. Mr. Christian did a fantastic job speaking at the two forums on August 31, however, less than 30 total customers attended. Other educational efforts will continue.


Insurance Package Rate Stabilization Offer
We have been buying our Workers’ Compensation and General Liability insurance coverage from Kentucky League of Cities for several years. Every so often we have solicited competitive bids for our coverage, but we have never gotten a competing offer that was attractive compared to the coverage and the service we get from KLC (they are represented locally by Pedigo-Lessenberry).

Recently they made an offer to effectively freeze our rates until 2020 if we enter into an agreement with them to stay with them for two more years. We are inclined to recommend that we accept this offer. The down side would be that if you decided to direct me to write specs and solicit competitive bids again, we would not be able to do that until 2020. I look forward to your thoughts on this matter at the meeting.

Conclusion

Well, that ought to be more than enough to set your head to spinning for this month. Let me know if you have any questions before the meeting. 
Tuesday, January 16, 2018

Coincident Peak Notice

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Wednesday, January 17th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.
Tuesday, January 9, 2018

Happy New Year EPB Internet Customers!

We have just given EPB internet customers a New Year’s gift! The 12 MB internet service was just upgraded to 15 MB and the 40 MB service just got kicked up to 50 MB! These improvements will improve all your internet activities, and the really cool part is that there is no additional charge.

In order enjoy this upgrade, all you must do is reboot your cable modem.  Just unplug the power, wait 30 seconds, and plug it back up. Once the modem comes back on-line you will have the newly upgraded speeds. That’s it!


Enjoy this latest upgrade from Glasgow EPB, as we continue our tradition of bringing you the future…faster!
Thursday, January 4, 2018

2018 Cable Television Changes Finalized

In a Special Meeting on Thursday, January 4, 2018, Glasgow EPB board members met to again consider the matter of paying the rate increase demanded by WHAS, or, in the alternative, dropping the channel. The Board had already decided to drop WSMV and WTVF on January 1, but was still considering the final offer from WHAS until the Special Meeting.

This was a very difficult decision to make. The Board was faced with a necessary rate increase of $2.95 per month if all three broadcast channels (likely to take effect in April) were removed, or an increase of about $6.20 per month if WHAS’s offer were accepted. The Board was evenly split on the question, with half of the Board feeling that keeping access to a Kentucky based broadcast station like WHAS, essential for EPB customers to keep fully abreast of Kentucky news, weather, and sports. The other half of the Board was more focused on the need to keep the cable rate increases smaller by dropping some channels who have asked for the largest rate increases, leaving customers the option of getting the Louisville news programming from streaming video sources. Eventually, the tie was broken by the Board Chairperson, who voted to drop WHAS in favor of lower rates.

This decision will become effective Monday, Jan. 8th, when the cable lineup will be altered as follows:
·         Ch. 16 will become Trinity Broadcast Network (formerly on Ch. 22)
·         Ch. 22 will become CSpan (formerly on Ch. 98)
·         Ch. 23 will become CSpan2 (formerly on Ch. 99)
·         Ch. 25 will become Zap2It Scrolling Guide (formerly on Ch. 36)
·         Ch. 36 will become NBC Sports  (formerly on Ch. 42)
·         Ch. 42 will become newly added WE (Women’s Entertainment)
·         Ch. 81 will be newly added as Sundance
·         Ch. 82 will be newly added as IFC (International Film Channel)
·         Ch. 114 The Justice Network will be removed
·         Ch. 144 will become newly added MeTV (currently dark and formerly LAFF TV)
·         Ch. 185 will be removed (currently dark & formerly UP TV)
·         Ch. 195 WHAS 24/7 Weather will be removed
·         Ch. 196 will be removed (currently dark & formerly News5+
·         Ch. 542 WHAS-HD will become FS1-HD (formerly on Ch. 522)
·         Ch. 522 will be removed (currently FS1-HD)
·         Ch. 558 will be removed (currently dark & formerly WSMV-HD)

·         Ch. 559 WTVF-HD (currently dark) will become Nat. Geo Wild HD

Coincident Peak Notice

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Friday, January 5th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.
Monday, January 1, 2018

Coincident Peak Notice

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for January's peak electric demand to occur on Tuesday, January 2nd between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.