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MEMORANDUM
DATE: September 13, 2022
TO: Commissioner Anson Moran, President
Commissioner Newsha Ajami, Vice President
Commissioner Sophie Maxwell
Commissioner Tim Paulson
THROUGH: Nancy L. Hom, CFO/AGM Business Services
FROM: Charles Perl, SFPUC Deputy CFO
SUBJECT: 2022 Power Rates Study, Hetch Hetchy Power Transmission Cost of Service
This memo is in response to a Commissioner question from the May 24, 2022 Commission Meeting on the Hetch Hetchy Power rates adoption related to power transmission cost of service (COS).
The 2022 Power Rates Study recommended rates for the two years FY 2022-23 to FY 2023-24, with an average revenue requirement of $172 million per fiscal year. As noted in the below chart, the revenue requirement is made up of Power Supply, Transmission, Distribution, and Customer functions, with Transmission COS totaling about $54 million annually, representing 32% share of the revenue requirement. Drilling into transmission costs, access charges make up about 58% of costs, conductor (wires and associated equipment) costs at about 24% and substation costs at about 19%.
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2 Sub-functions percentages in the chart are rounded to the nearest 0.1% and may not add up due to rounding.
Transmission COS is allocated to customer classes based on their energy need as well as contribution to the system’s coincident peak. Nearly two-thirds of the transmission cost is allocated to Industrial customers, and the next 15% and 11% of the cost are allocated to Medium and Large Commercial customers, respectively. Residential and Small Commercial customers, with the least stress on the system, are allocated the remaining 10% of the Transmission cost of service.
Percentages in the chart are rounded to the nearest 1% and may not add up due to rounding.
The 2022 Power Rates Study’s scope included allocating expenditures at aggregated levels for functionalization and sub-functionalization and designing rates for customer classes based on their electric usage and demand. It did not review specific assets and their system operating contribution. If there is a desire to evaluate the cost of specific assets and their operating efficiencies, I would be happy to further discuss a future project with appropriate staff and consultant expertise.
Included for reference on the next page is the transmission sub-functionalization section from the 2022 Power Rates Study Report (Pages 3-7,3-8).
Please contact me if you have questions regarding this memorandum. Thank you.
3 2022 Power Rates Study Report Transmission Sub-Functionalization: