HomeMy WebLinkAboutA004 - Letter to Electric Services' Customers dated November 13, 2012 CITY OF
Ames
Smart Choice
November 13, 2012
Dear Electric Services' Customer:
City of Ames Electric Services is dedicated to the economical and reliable production and
delivery of electricity to all of its customers. To that end the utility works diligently to insure
that our costs adequately support our system infrastructure. We also strive to create rates
that best serve our customers, the utility, and the community.
Over the course of 2011 the utility conducted a cost of service and rate study that
provided information on how each customer class is performing in terms of cost to serve
versus revenue collected. The study also included recommendations on how we might
effectively restructure rates. The report will be used as a guide to structure Electric
Services' rates to better establish beneficial power use which will support and strengthen
the utility going forward.
The study indicated that even though a restructuring of rates has not been addressed
since 1982, Electric Services rates adequately cover the cost to serve customers in all
classes. The study did, however, conclude that the current rate structure is inadequate to
serve the utility and the customer. As a result, new rates are being proposed to the Ames
City Council.
What will this mean to you? The good news is that within a customer class the new rates
are revenue neutral, meaning no additional dollars will need to be collected. While no rate
class increase is necessary, the way in which the utility collects revenue will change.
Basically, we will be moving from a rate that emphasized kilowatt-hour (kWh) energy over
kilowatt (KW) demand, the new rates will effectively do the opposite. The new rate will
also replace KW demand billing with kilovolt-amp (M) demand billing.
Typically, under the new rates, large customers will see an increase in the kVA demand
charges along with a subsequent decrease in kWh energy charges. The monthly
Customer Service charge has also been adjusted to more adequately reflect meter
reading and administrative costs. This new rate structure, while not leading to increased
costs within any customer class will allow the utility, and customer, to more effectively
focus on the actual driver behind having to add new generation, kVA demand.
Another change is the way in which the utility accounts for poor customer power factor.
Currently, there is a penalty of an additional 1 '/2 percent added to the customer billing KW
demand for every 1 percent the power factor is below 90 percent. While the new rate
does away with the power factor penalty, it does account for power factor as it now moves
from billing on KW demand to kVA demand. KVA reflects both useful and waste capacity
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requirements within a facility. Customers with poor power factor will no longer see a
penalty on their bill; however, poor power factor will lead to increased kVA charges.
113
As an example: If a customer has a demand of 100 KW an ac or o 88 percent
they would currently see their billing demand rise to&W. KVA is arrived at by dividing
the KW demand by the power factor and would lead in this case to a billing kVA of 113
kVA. As you can see, it will still be important to look at power factor and correct it if it is
poor. Keep in mind Electric Services has a rebate in place to assist you with power factor
correction by paying half of the equipment cost to improve it.
Currently, demand charges for your customer class are administered in a declining
structure ranging from $5.00 per KW to $4.05 per KW during summer and $3.58 per KW
to $2.64 per KW during winter. Kilowatt-hour energy is also accounted for by a declining
structure ranging from $.0646 per kWh to $.0411 per kWh during summer and $.0551 per
kWh to $.0387 per kWh during winter. Along with the cost for KW demand and KWh
energy is the energy cost adjustment (ECA) reflecting utility fuel procurement. The ECA
adds an additional $.025 per kWh bringing the cost per kWh to around $.09. The
customer charge is currently $48 per month.
The new proposed rate will increase the customer service charge to $150 per month. The
rate will also increase kVA demand charges to $10.30 per kVA during summer and $7.70
per KVA during winter. The kWh energy cost will be a flat $.0619 all year. The ECA has
been reset to zero, The result is that most customers in your class will not see an
increase in their monthly bill and may even see a small decrease. Please see the
enclosed rate comparison estimate.
The decision to move to billing for kVA is driven by our commitment to providing
exceptional service to all citizens of Ames, and as such, is a necessary action. Electric
Services recommends you work with your electrician on installing correction equipment to
raise the power factor should it be determined it is negatively affecting your bill.
In an effort to give you the opportunity to ask questions and to fully understand what these
changes mean for your facility, the new rate will be discussed at the Ames City Council
meeting November 27th. We encourage you to attend one of these meetings.
Feel free to contact Steve Wilson at 239-5177, or meat 239-5171, with questions. I thank
you for your attention in this matter.
Sincerely,
Donald Kom, Director
City of Ames Electric Services