1997 AGN NOV 12 I01 - Laserfiche WebLink

Browse Search

All revenues indicated on the bill would go to the City except for the Energy Charge, and in some cases a portion or all of the Transmission Charge. Such non -City revenues would be transferred to the Energy Service Provider selected by the customer. The energy cost is the only component over which the customer could make a direct choice. For example, if the sample customer above could find an energy supply at 2 cents per KWH, that customer would save $2.00 or about 3.5% on their bill. The State Public Benefit Charge would have no sensitivity to such a savings because it is based on KWH usage. However, a percentage -of -bill` charge such as the Public Safety Tax would be sensitive to any reduction in the amount of the charges. The basic risk that faces the Colton Electric Utility, whether direct access is implemented or not, is if one or more of its component or existing rates is higher than that of the competition. To avoid such a risk requires at least a two -fold strategy: Increase the number of KWH distributed by the system by an additional 20% to 25% after the new hospital 'begins operating at its full electrical load. This spreads the fixed costs of the Distribution and Competition Transition Charges over a larger number of KWHs. The result is a lower rate per KWH for those two components. Optimize the financing and use of the City's existing generation and transmission assets and contracts, thereby positioning the City to match or beat other electric service providers in the highly competitive period that will begin on January 1, 2002. The implementation of this strategy requires (1) retention and load expansion of existing customers, (2) attracting new customers to the City, (3) refinancing generation and transmission debt service, and (4) negotiating adjusted payment schedules with our power supply contractors. Direct access is being provided to all California electricity customers in the service territories of the investor owned utilities (IOU's) on January 1, 1998. Publicly owned electric utilities, such as the City of Colton's, are not required to provide their customers direct access. As long as all customers, but especially the large customers, perceive that the City is providing service at a cost less than or equal to that available in IOU territories, such a policy would not encounter any serious opposition. The fundamental issue is that the IOU's, under direction of the State, have been directed and enabled to reduce the cost of electricity by at least 20% by the year 2002. Colton's electricity customers might see themselves as disadvantaged if they were not given access to similar savings. Staff recommends that the City Council approve the establishment of the Competition Transition Charge in order to enable, but not necessarily approve and begin, direct access in six or more months from now. The primary benefit of approving direct access is the customer perception that they control who their energy provider is, whether they actually save any additional money by doing so or not. The customer will also perceive that the City is not obstructing that opportunity, but proactively transferring control to them. An unwillingness to transfer control will likely be suspicious to the public, and may actually increase customer flight. if direct access were brought about by customer activism. There are few downsides to direct access. The primary ones are administrating customer churn and providing consumer protection. Staff sees no financial risk because the purpose of the Competition Transition Charge is to give the utility the ability to be financially indifferent to who customer obtains energy from. Direct access does not change the utility's basic obligation to remain competitive with other sources of electric service.