12/5/2023 Item#6
City Council
SITA CARACARE
Item 6
CITY OF RTC 23-1117: Adoption of a
Resolution Amending Rate
1852 Schedules for Electric
THE MISSION CIT Services
SILICON
• VALLEY
POWER
CITY OF SANTA CLARA
Public Outreach
• Energy Task Force meeting with Key Customers (May 2023) • Energy Alert list to Key Customers (October 2023)
• Notification to Public Schools and State Agencies (October 2023) • Email blast to City and SVP subscribers, GovDelivery (November 2023) • Social Media posts - X (formally Twitter), Facebook, Nextdoor (November 2023) • Newspaper Notice - Silicon Valley Voice, Mercury News (November 2023) • Monitor Social Media for questions and comments
POST MEETING MATERIAL
1 12/5/2023 Item #6
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Funding and Rates
• SVP primarily funded by both Rates and Load
Development Fee or other developer contributions Customer Mix - Retail Sales • Load Development Fee was increased up to 160% Commercial Residential 2%
Municipal
• FY 2022/23 - $580 Million Retail Sales Revenues 6%
0.4%
- Residential $35 million
- Industrial customers $522 million
• Sales expected to double in the next 10 years
Industrial
• Likely that most other utilities will see higher rate 91.6% increases over the next few years
→M SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Need for Continued Rate Increases
• SVP forecasts rate increases will be higher than
inflation over the next few years
• Factors affecting all utilities
- Equipment & Material costs
- Power Purchase Agreements: Renegotiation of up to
50% cost increase
- Market Volatility - Continued elevated Natural Gas
and Power futures
- Transmission Access Charges (TAC): Trending at
4%-5% higher per year
- Higher anticipated construction costs
2 12/5/2023 Item # 6
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Proposed Rate Increase
• Reserves - Recovery from historic gas prices last fiscal year - Maintain O & M and Rate Stabilization Reserves at minimum levels - New Infrastructure reserve only at 50% of minimum
- Maintain Bond ratings
60% or $166M increase in Load Cost (Purchase Power) in FY 2022-23 over FY 2021-22 Offset by higher generation revenue ($130M resource sales from SVP owned and/or contracted) Double and triple digit increases in costs of materials & equipment examples:
- Recent $81M purchase of receiving station transformers - Increase of approximately 30% or $24+ million from 2-3 years ago - Overhead distribution transformers have increased over 200% between 2021 and 2023.
- Increase of over 35% in costs of wood poles between 2021 and 2023
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Increase to All Customers
• Cost increases triggering this rate increase proposal have been incurred on behalf of all classes of existing customers
• This approach is proposed for both policy and legal reasons • If the City were to apply the rate increase unequally it could be classified as a tax under Proposition 26.
• Under Proposition 26, a service rate is not a tax if it is imposed for a specific government service provided directly to a ratepayer • Therefore, it is legally required that the increased cost of service be spread equally among the various classes of ratepayers. 3 Item # 6
12/5/2023
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Proposed Rate Increase
• 10% increase effective January 2024
• Significant increases on some of SVP costs (also
affecting other utilities)
• Average residential electric bill will increase by
approximate $6.45 per month
• Average largest industrial (CB-6) electric bill will
increase by approximate $250,000 per month
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Monthly Bill Comparisons
with Proposed 10% Increase
2024 Residential Customer Change
Low User (300 kWh) Average (430 kWh) High User (1,000 kWh) Current Rate $44.56 $64.58 $152.33
$49.02 $71.03 $167.54
Proposed Rate
$4.46 $6.45 $15.21
Increase
2024 Commercial/Industrial Customer Change
Large Commercial / Large Industrial Very Large Industrial 5 Largest Industrial Small Business Small Industrial
C1 CB-3 CB-6 CB-6
CB-1
(1,000 kWh) (2,000,000 kWh) (19,500,000 kWh) (41,000,000 kWh) (500,000 kWh)
Current Rate $228.75 $82,310 $302.443 $2,556,815 $5,072,590 Proposed Rate $251.60 $90,529 $332,611 $2,811,974 $5,578,861 $22.85 $8,219 $30.168 $255,159 $506,271
Increase
4 12/5/2023 Item # 6
MY SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Rate Comparison with 10% rate increase
Class of Service SVP Average Rates PG&E Average SVP Lower than SVP Lower than effective 01/01/24 Total Rates PG&E ($/kwh) PG&E (%)
($/kwh)* effective 09/01/23
($/kwh)**
Residential D-1 E1 $0.216 56%
$0.166 $0.382
Small Commercial C-1 B-1 $0.117 32%
$0.247 $0.364
Large Commercial CB-1 B-10S $0.158 47%
$0.181 $0.339
Small Industrial CB-1 B-19S $0.117 39%
$0.181 $0.298
Large Industrial CB-3 B-20P $0.086 35%
$0.164 $0.250
Very Large Industrial CB-6 B-20P $0.104 42%
$0.146 $0.250
• Average rates based on estimated usage for each class of service, including surcharges. Average rates are provided for general reference. Individual customer's average rate will depend on customer's applicable kw and kwh.
* This comparison does not factor in the additional user tax charge levied in most PG&E service jurisdictions (typically 5%). Santa Clara customers are not charged these additional fees. • SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
SVP with 10% Increase vs PG&E Rates
Class of SVP Rate PGE Rate Class of SVP SVP
Service Increase Increase Service Lower Lower
2016-24 2016-23 2016 2024
Residential 45% 80% Residential 46% 56%
Commercial 42% 65% Commercial 21% 32%
Large Comm 45% 77% Large Comm 35% 47%
Small Indus 45% 81% Small Indus 24% 39%
Large Indus 41% 77% Large Indus 18% 35%
• Does not include proposed PG&E rate increase
10 5
12/5/2023 Item # 6
• SILICON
POWER.
CITY OF SANTA CLARA
Support for Customers
• The California Electric Market has been difficult over the last few years (Covid, Gas Prices, Power Prices, Materials, Equipment)
• Previous 5 (18-22) years SVP rate increase was an avg ot 2.2% a year • In May/June 2020, during Covid, SVP provided a residential energy efficiency credit of $30 to every residential customer ($1.4 Million)
• SVP applied and received funding from the California Arrearage Rate Assistance Program on Feb 8, 2022
- SVP received $1.3 million
- Provided support for almost 8,000 residential customers • As part of mid-year rate increase SVP provided a credit in 2023 - $30 amount for all residential meters ($1.5 Million)
- $70 for all C-1 commercial meters ($400,000)
• In total SVP has provided $4.2 Million of support for residential customers over the last - SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Support for Customers
• Increased and added Rate Assistance Programs
discount for first 300 kWh, 25% rate discount from 300-800 kWh - Medical Rate Assistance (MRAP) - 25% discount with no cap on the usage • Energy Efficiency Rebates and Programs still available 12 6
12/5/2023 Item # 6
SILICON
› VALLEY
POWER.
CITY OF SANTA CLARA
Recommendation
Adopt a Resolution amending Rate Schedules for Electric Services to Increase Electric Rates and Charges in Each Rate Schedule by Ten Percent (10%), effective January 1, 2024.
City Council
SITA CLARADARA
Item 6
RTC 23-1117: Adoption of a
Resolution Amending Rate
Schedules for Electric
1852
Services
THE MISSION CITY
7 12/5/2023 Item # 6
SUALLEY VALLEY
POWER.
CITY OF SANTA CLARA
Back Up Slides
Only used for
questions as needed
• SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Rates and Customer Base
• Benefits of having a large customer base - economy of scale
• Major capital costs are spread through all customers
(example - residential customers are only responsible
for 3.7% of the cost to rebuild SRS and KRS)
• Allowed us to construct DVR and Gianera which
provide cheaper and reliable in-town power supply
• Has allowed us to have large ownership of major
NCPA projects such as the Geothermal Energy and
Lodi Energy Center which helps stabilizing rates
• Allowed us to "go after" large PPA's which results in better prices
8 12/5/2023 Item #6
SILICON
9 VALLEY
POWER.
CITY OF SANTA CLARA
Industrial Rate
• Industrial Rates Include Demand Charge in addition to Customer Charge Customer Charge - recovers customer-related fixed costs, which include capital and O&M expenses for service poles, overhead and underground service wires, meters, meter reading, billing, customer service, etc.
• Demand Charge - recovers fixed costs that don't vary with energy usage, which include capital and operating costs for substations, transformers, distribution wires, transmission wires, power generation, and debt service for capital financed, etc. • CB-6 rate has the highest customer charge and demand charge and must be included to calculate the average rate - the fixed charges (customer charge + demand charge) is approximately 30% of the average bill
SVP provides average rates on the website for rate schedules that account for all charges
17 - SILICON
› VALLEY
POWER.
CITY OF SANTA CLARA
Residential/Industrial
Rate Comparison
Average Rate in 2022
Data Year Utility Name Residential Industrial
2022 LADWP $0.2224 $0.1882
2022 City of Palo Alto $0.1742 $O.1508
2022 City of Roseville $0.1629 $0.1110
2022 SMUD $0.1674 $0.1167
2022 Santa Clara - SVP $0.1389 $0.1207
9 12/5/2023 Item # 6
SILICON
• VALLEY
POWER.
CITY OF SANTA CLARA
Summary of Sales
Revenue % of
Category MWh % of MWh
(millions) Revenue
Residential 261,000 5.8% $35.0 6.0%
Commercial 102,000 2.3% $20.2 3.5%
Industrial 4,097,000 91.5% $522.2 90.1%
Other 16,000 0.4% $2.0 0.4%
Total 4,476,000 100.0% $579.4 100.0%
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Capital Project Funding
• Funded through Load Development Fees (new customers), SILICON Rate Payers (existing customers), or combination of both VALLEY Fiscal Year POWER
• Funding split depends on whether the project is adding CITY OF SANTA CLARA 2021/2022 capacity or replacing infrastructure Residential Connection & Commercial Load Development Fee Analysis
• Complete analysis available on the website
• Example - Scott Receiving Station
• Replacement of end-of-life equipment and expansion to accommodate growth
• 38% Load Development Fee and 62% Rate Payers
• Project Construction estimated at $100 million
• $62 million from rate payers (existing customers)
• $55.8 million from Industrial
• $3.7 million from Residential
• $2.5 million from Commercial
10 12/5/2023 Item # 6
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Restricted Funds
Fund Funding Use Examples
Low income and equity programs, renewable energy, research & Public Benefits Charge 2.85% charge on utility bill development, energy efficiency and efficient electrification programs, and electric education and outreach
SVP receives LCFS credits for Annually ~ %20 proceeds goes to fund Clean Fuel Rewards State Low Carbon Fuel Standard EV adoption and kwh usage of Program, 50% must be used for equity programs Like the Via ride Program (LCFS) EV stations - SVP sells credits share or other equity Disadvantaged Communities programs, EV on the market to fund programs rebates eBikes, public EV infrastructure build out CARB approved use of funds (must have a pre-approved or Green House Gas (GHG) SVP must sell allocated carbon approved GHG reduction metric)- energy efficiency programs, owances at the cap and tra renewable energy, climate credits, building and transportation reduction program iction (quarter
electrification, limited new bike lanes and pathways.
SILICON
VALLEY
POWER.
CITY OF CANTA CLARA
Future Reserve Analysis
and Cost of Service Study
• Reserve Analysis
- Three consultants have responded to Request for Proposal - Consultant Assessment of SVP's financial position
- Scope of Work: Evaluate risks, power costs, market information, environmental regulations, and best practices to make recommendations about SVP's reserves and cash position and addressing potential rate impacts
- Contract is anticipated to be awarded early 2024
• Cost-of-Service Study
- SVP will be issuing an RFP for a consultant to perform a Cost-of-Service Analysis. - Analyze costs and equitably assign those costs to customers in proportion with the cost of serving those customers
- Contract is anticipated to be awarded early 2024
22 11
12/5/2023 Item # 6
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Revenue from Rate Increase
Total Revenue = $28.7M
$3.1M
$14.3M
$11.3M
• Current Year Expenses Reserve Transfer Market Volatility
SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
Rate Comparisons
California Utilities (>10,000 Customers)
2022 Average System Rates ($/kWh)
= 032522
San Diego Gas & Electric Co
Pacific Gas & Electric Co. : 0.28363
Bear Valley Electrie Service • 0.28026
Southern California Edison Co - 0.21724
Los Angeles Department of. • 0.21012
City of Glendale T 0.20869
• 0.19367
City of Parsons
City of tod • 0.19258
Alameda Munt/pal Power
- 0.18627
Anilkes banner gule
City of Banning • 0.17776
Lassen Municipal Utility District
warpanstr • 0.17175
City of tompoc • 0. 700-
City of Redding 1 0.16720
Citv al Colton - 0.16459
City of Azusa - 016251
Ciry of Riverside - 0.16034
city of Burbank Water and... • 0.15762
Imperial irrigation District 10 1567
City of Anaheim • 0.15654
Sacramanto Municipal Util Dist - 0.15331
Merced Irrigation District
• 0.14571
city of Roseale
Modesto krigation District - 0,14417
Turlock Irrigation District - 0.13921
City of Santa Clara - 0.12277 4
0.00000 0.10000 0.15000 0.20000 0.25000 030000 0.35000
0.05000
Based on Form EIA-861, Annual Electric Power Industry Report, collects data from distribution utilities and power marketers of electricity.
This survey is a census of all United States electric utilities. Release date: October 5, 2023 12 12/5/2023 Item #6
•SILICON
VALLEY
POWER.
CITY OF SANTA CLARA
S&P Global Rating Raised SVP's Long-
Term Credit Rating to AA- from A+
• Reflects Standard & Poor's view of SVP's prudent financial practices resulting in strong cover of fixed costs for the utility, robust liquidity, and manageable debt. Additional highlights noted include:
• healthy annual growth in demand which continues to expand • highly competitive rates with weighted average rate at 70% of state average
• Power supply diversity including owned generation, power purchase agreements, and market purchases
• Appropriate actions to support healthy governance including five-yea policy at fong sV sheging prateement plans and risk management • Note: Fitch Rating remains at AA- rating.
13 12/5/2023 Item #Lo
Melissa Lee
From: Michael Domeniconi <[email protected]>
Sent: Sunday, December 3, 2023 7:13 PM
To: Mayor and Council
Subject: SVP Proposed Rate Increase
Follow Up Flag: Follow up
Flag Status: Completed
a deen get from [email protected]. Learn why this is important To the Mayor and Councilmembers:
Say "NO" to SVP proposed increase.
A 25% increase in one year is unjustified and suggests that SVP is poorly managed.
Why is SVP asking you to approve an an increase to take effect in less than 30 days? Is there some kind of financial emergency? Or do they just hope no one will notice at this time of year?
I think it's time that the council conduct an in-depth review of SVP and it's operations.
And it's time to stop residential users from subsiding the data centers by adding a surcharge for commercial operations based on power consumption. Is this possible, or has SVP signed contracts that make it impossible.
Michael Domeniconi
POST MEETING MATERIAL
1 12/5 2023 Item#l
Melissa Lee
From: Tahir Naim <[email protected]>
Sent: Monday, December 4, 2023 10:34 AM
To: Mayor and Council
Subject: SVP Residential Rate Increase Proposal and Alternatives Hi,
I understand tomorrow SVP proposal to increase residential rates will be reviewed by Council.
Please note that SVP's annual reports for years ending 6/30/2022 and 6/30/2023 are not available on the website. I wonder if they have been completed and signed off on by auditors. If not, perhaps the increase should be tabled until that information is publicly available.
The SVV reports and from what I see on the website (Rates and Fees | Silicon Valley Power), it's true, the more electricity a business consumes, the less it pays. While I can understand a volume discount up to some large threshold amount it does seem to me that there should then be a second threshold above which the rate increases. As with residences, such an increase would have the salutary effect of encouraging conservation of resources.
I also read that a great many more data centers are on their way to our fair city. Planning Comm'ner Cherukuru(sp?) has pointed out a number of times that while a benefit is a reduction in commute time congestion as few workers come to these sites, there is also a sales tax loss to our fair city.
I respectfully suggest two things:
POST MEETING MATERIAL
1 1. A charge to those businesses that have the effect of bringing little sales tax revenue relative to the amount of commercially- zoned land they occupy. Or to be simpler, since that's likely hard to measure initially, an annual data center business license fee that is a little less than the estimated sales tax loss, but does do something to make up for this loss.
2. That evaluation and implementation of step increases in rate charged for consumption be implemented so that our bottom line is strengthened and conservation is encouraged by our largest consumers. In this regard, it would be as well to learn not just what the data center saves relative to what PG&E earns, but also what is SVP's current profit margin and gross profit on these data center customers. If we're only breaking even (or loss leading) while apparently providing them a 40% plus savings on PG&E, then I respectfully suggest we close that savings gap first.
Sincerely,
Tahir J. Naim
Dist. 2
Rates and Fees | Silicon Valley Power
POST MEETING MATERIAL
2