DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A
CONFIRMATION UNDER THE NCPA SHARED SERVICES PROGRAM
Effective Date: February —__, 2023
Project Description: Electric Cost of Service Analysis and Rate Design Recommendations Sponsor: Southern California Public Power Authority ("SCPPA") Participating SCPPA Member: City of Vernon/Vernon Public Utilities Consultant: NewGen Strategies and Solutions, LLC ("NewGen" or "Consultant") The Northern California Power Agency ("NCPA") and SCPPA executed a Shared Services Agreement effective August 1, 2015, authorizing among other things, the purchase or acquisition of goods and services by each Party or a Party's Members where provision has been provided in contracts for the other Party and its Members to avail themselves of goods and services offered under the contract or where either Party's bidder or Consultant is willing to extend prices to the other Party and its Members.
2. This is a Confirmation pursuant to the Shared Services Agreement and subject to the terms and conditions of that agreement, except as expressly provided herein.
3. Consultant, SCPPA, NCPA, and Participating SCPPA Member ("Participating Member") identified above, agree that Consultant shall provide the Services specified herein pursuant to the terms and conditions of the Multi-Task Consulting Services Agreement between the Northern California Power Agency and NewGen Strategies and Solutions, LLC ("Agreement") dated September 13, 2021.
4. The Participating Member for this Confirmation is the City of Vernon/Vernon Public Utilities ("Vernon") in the total amount of not-to-exceed $143,550.00 ("Maximum Amount") to be paid on a time and materials basis, which shall include all fees, costs, reimbursables, and expenses, for the services from NewGen Strategies and Solutions, LLC, described in paragraph 5. The not-to-exceed amount includes the proposal amount of $130,500.00, plus a ten percent contingency of $13,050.00. The dollar amount is not a guarantee that the full amount will be paid to Consultant, but is merely a limit of potential expenditures under this Confirmation.
Consultant shall provide notice to NCPA prior to and upon reaching the Maximum Amount. Any services provided by Consultant in excess of this authotization, and without prior execution of an amendment hereto by the Parties, shall be at Consultant's sole risk and without payment. For avoidance of doubt SCPPA, NCPA, and Participating Member shall not be liable for any unauthorized excess billings whatsoever.
5. The Participating Member requests the following described Shared Services in the dollar amount specified. NCPA agrees to contract with NewGen Strategies and Solutions, LIC to provide the following Shared Services to the Participating Member:
NewGen Strategies, LLC shall provide an Electric Cost of Service Analysis and Rate Design Study, as specifically detailed in New Gen's proposal prepared for Vernon dated October 27, 2022, a copy of which is attached as Exhibit "A" and incorporated herein by reference. The services are requested to begin as soon as possible, and shall be completed by August 14, 2023.
Confirmation No. 0273
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A
6. The Participating Member agrees to pay for the services in the amount set forth in paragraph 4 above; plus, the administrative fees in the amount not-to-exceed $1,675.00 (calculated at $685.00 for development of the Confirmation and first month's processing, plus $165.00 per month for up to six additional months as costs are actually incurred), in accordance with the provisions of the Support Services Program Agreement. The Participating Member agrees to make monthly payments to NCPA, based on invoices received, for services satisfactorily performed and for authorized reimbursable costs incurred, upon receipt of an invoice from NCPA. The total amount expended under this Confirmation will not exceed $145,225.00.
7. Consultant acknowledges and agrees that Participating Member through this Confirmation obtains the benefits of the Agreement including the indemnities described in Section 5.2 wherein "Agency" is replaced by "Agency and City of Vernon/Vernon Public Utilities" throughout Section 5.2.
8. A Security Account deposit is not required for this Confirmation.
9. The representatives of Sponsor and Participating Member are as follows:
Sponsor Representative:
Michael S. Webster
Executive Director
Southern California Public Power Authority
1160 Nicole Court
Glendora, CA 91740
Participating Member Representative:
Todd Dusenberry
General Manager
Vernon Public Utilities
4305 S. Sante Fe Avenue
Vernon, CA 90058
IN WITNESS WHEREOF, the parties have signed this Confirmation effective as of the date first written above.
NORTHERN CALIFORNIA POWER AGENCY
By:
RANDY S. HOWARD
General Manager
Approved as to form.
TANE E. LUCKHARDT
General Counsel
Confirmation No. 0273
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A
NEWGEN STRATEGIES AND SOLUTIONS, LLC
•DocuSigned by:
By:
SCOTT BURNHAM, Director
Sponsor's Acknowledgement and Agreement
By signing this Task Order, SCPPA agrees that it is responsible for payment to Consultant for all fees and expenses invoiced by Consultant in accordance with Section 5, above, and will be responsible for all payment obligations incurred in connection with the work performed at the direction of or on behalf of Participating SCPPA Member, City of Vernon/Vernon Public Utilities. SCPPA agrees to indemnify, defend, and hold NCPA and all NCPA members harmless for payment for work performed at the direction of, and for the exclusive benefit of Participating SCPPA Member.
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY
By:
Michael E. Webster, Executive Director
Approved as to form:
Armando Arballo, Assistant General Counsel
Participating SCPPA Member's Acknowledgement and Agreement Participating SCPPA Member, City of Burbank/Burbank Water and Power, agrees to indemnify, defend and hold harmless NCPA, and all other members and their respective directors, officers, agents, representatives, nployees, successors and assigns from and against any and all losses, injuries, costs and expenses, damage ens, claims, or liabilities, including reasonable attorneys' fees, incurred by NCPA in connection with th ork performed for the benefit of, or on behalf of, Participating Member pursuant to the Agreement «cept for the gross negligence or willful misconduct of NCPA or such other NCPA members and the
CITY OF VERNON/VERNON PUBLIC UTILITIES
Todd Dusenberry, General Manager
And
City Attorney
Confirmation No. 0273
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-B8BB-AFOFB88A751F EXHIBIT "A" TO CONFIRMATION NO. 0273
225 Union Boulevard
Suite 450
NewGen Lakewrood, CO 80228
Strategies & Solutions Phone: (720) 633-9514
October 27, 2022
via email
Jessica Balandran
City of Vernon Public Utilities
4305 Santa Fe Avenue
Vernon, CA 90058
Subject: Electric Cost of Service Analysis and Rate Design Study Proposal Dear Ms. Balandran:
The pace of change in the utility market is accelerating, directly impacting your ability to respond and provide quality rates and service to your customers. Navigating the challenges of long-term power generation decisions, maintaining customer satisfaction, and the sheer amount of data available to drive decision making is overwhelming. How do you optimize data analysis to identify and inform the best strategic approach to deliver the right rates, services, address stakeholder demands, and ensure public trust?
Our approach to your Cost of Service Analysis (COSA) incorporates your data, market, and community to provide an integrated view designed to allow you to make long-term decisions with confidence. Our personnel have both intensive and extensive experience in all financial and management facets of municipal utilities. We leverage innovative modeling technology and market expertise to solve your most complicated issues. We design strategies to ensure they are responsive, transparent, and reliable while paving the way for successful buy-in across all your stakeholders.
NewGen is pleased to submit this proposal to the Vernon Public Utilities (VPU) for their Electric COSA and Rate Design Study (Study). Enclosed you will find a brief company history, a summary of our qualifications, the project team, and our proposed scope of work.
NewGen Company History and Background
NewGen is a management and economic consulting firm established in 2012 and specializing in serving the utility industry and market. NewGen primarily serves public sector utilities and provides nationally recognized expertise in financial feasibility studies, including municipalization efforts, utility cost of service analysis and rate design studies, depreciation and appraisal studies, litigation support for state and federal regulatory proceedings, utility financial planning, and stakeholder engagement for electric, water, wastewater, solid waste, and natural gas utilities.
New Gen employs over 50 professional and administrative staff, with 12 ownership members and a Board.
Our current staff has the capability to work on simultaneous assignments, and we have the capacity to add staff and/or expand support from a network of teaming partners if needed. Newgen has 13 offices located nationwide.
Economics | Strategy | Stakeholders | Sustainability
www.newgenstrategies.net
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-B8BB-AF0FB88A751F Ms. Balandran
October 27, 2022
Project Team
Our project team consists of highly experienced financial and management consultants. All team members have significant and recent experience in the development of rate strategies, analyzing and integrating advanced metering infrastructure (AMI) meter data, financial planning, development of cost of service analysis (COSA) studies, rate design, and California specific rate issues. Furthermore, Mr. Tony Georgis, our Project Manager with more than 20 years of experience, has extensive experience in California, with VPU, and with the public process including stakeholder engagement, education, and training. Mr. Georgis has also completed multiple COS studies and strategic planning studies in California including Glendale Water and Power, Palo Alto Utilities, Alameda Municipal Power, Merced Irrigation District, Burbank Water and Power, Pasadena Water and Power, and Clean Power Alliance CCA. Mr.
Georgis will be supported by Meghan Helper and other consultants as needed to execute the Study.
Tony Georgis, Energy Practice - Managing Partner
Project Role: Project Manager
Mr. Tony Georgis is Managing Partner of NewGen's Energy Practice and brings more than 20 years of experience in engineering and economic analyses for the energy, water, and waste resources industries. His work includes various assignments for private industry, local governments, and utilities including sustainability strategy, strategic planning studies, stakeholder engagement, financial and economic analyses, COS and rate studies, energy efficiency, and market research. Mr. Georgis has managed multiple utility COS and rate design studies including the development of revenue requirements, unbundling costs, classifying costs, and allocation factors. Mr. Georgis has also supported and led expert witness testimony in Texas, California, Florida, and Indiana.
Meghan Helper, Sr. Consultant
Project Role: Consultant and Analyst Support
Ms. Meghan Helper joined the firm in 2019 and assists on cost of service and rate design projects, with an emphasis on data driven analytics. Ms. Helper has supported the Project Team members with in-depth analysis of revenue projections by customer class, analysis of rate impacts and rate scenarios, and development of COSA and Rate Design models for client use. She is adept at Microsoft Excel applications and managing large data sets to develop cost allocations and determine rate revenue. She has a M.S. in Engineering and Technology Management, as well as a B.S. in Geophysical Engineering from the Colorado School of Mines.
Scope of Work
Phase 1: Load Forecast
Task 1: Load Forecasi and Support for COSA and Resource Planning In support of VPU's upcoming Integrated Resource Pian (IRP) and financial forecast supporting the COSA, NewGen will develop an hourly load forecast through 2045. The load forecast will include hourly system level data representing net energy for load to serve retail customers through 2045. This forecast will be used at an annual system level to provide load growth forecasts in the financial model, while the hourly data will be used by VPU's IRP consultant to deliver forecasted capacity requirements, energy needs, and Vernon 2022 Rate Study Proposal 10.27.22
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power supply costs. VPU's IRP consultant may adjust or provide sensitivity analysis on the NewGen load forecast to evaluate varying levels of electric vehicle (EV) or fleet vehicle charging penetration on the system. The load forecast will include the following:
• Review existing load forecast (s) that have been prepared for the City's service territory. • Weather, economic conditions, seasonal patterns, retail electricity prices, demand projections for the Southern California and Los Angeles basin, and other demographic trends as input into an econometric model to forecast load.
• Historical weather data such as heating degree days (HDD) and cooling degree days (CDD), for a weather station closest to city of Vernon. For the weather variables in the energy and demand forecasts to reflect "normal" conditions, at least 20 years of data will be evaluated.
Economic historical and forecast data for Los Angeles County will be obtained from the California County-Level Economic Forecast dataset that is published by the Office of State Planning of the California Department of Transportation Economics Branch. Though this dataset includes several economic variables, VPU's load forecast will include Manufacturing Employment, Real Industrial Production, and Total Taxable Sales in the regression analysis for the load forecasts.
Review of the City's energy efficiency and demand-side management programs and its anticipated impacts on the net demand forecast. Anticipated impacts of energy efficiency and DSM programs (type, size, etc.), transportation electrification, and distributed energy resources adoption as provided by VPU will be reflected in the recommended demand forecast. • Hourly "normal (1 in 2)" and "severe (1 in 10)" demand and energy forecasts for system level inclusive of all customer classes such as residential, commercial, industrial, and municipal. • System level demand and energy forecasts, inclusive of residential, commercial, industrial, and municipal sectors.
• Summary of assumptions and source of data used in the load forecast.
Phase 1 will begin immediately upon authorization to proceed and will include a targeted data request to deliver the load forecast prior to the remaining Phases of the project.
Phase 1 Deliverables:
* VPU System Level Load Forecast
Phase 2: Financial Forecast and Electric Cost of Service Analysis Task I: Project Startup and Kickoff
Immediately upon authorization to proceed, we will begin gathering detailed information via a Data Request related to VPU's operations and financials in support of the Study. The Data Request will include financial and operational data such as VPU's budget, audited financials, billing database, system characteristics, customer class information, and asset data. As VPU provides the data, NewGen will review the initial responses and identify any gaps or additional data needs prior to the kickoff meeting. NewGen will hold a virtual kickoff meeting with VPU staff and the core NewGen team to review the overall project and schedules, document VPU's rate strategy and goals, discuss emerging rate trends, and review outstanding data needs/revisions.
Vernon 2022 Rate Study Proposal 10.27.22
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October 27, 2022
NewGen will also discuss and collaborate with VPU to develop the functionality and key inputs/assumptions for the 10-year financial forecast model (2024-2033). The financial forecast model will be critical in projecting financial performance, capital financing structures and needs, annual cash requirements, reserves, needed rate changes, and related financial key performance indicators (KPls) (e.g., debt service coverage ratios, minimum cash on hand, etc.). This discussion will also include the definition or evaluation of different scenarios and sensitivities VPU wants to evaluate over the forecast period to better mitigate risks and understand impacts to rates and KPI performance. One of the more critical outcomes of the kickoff meeting is the discussion regarding the financial strategy and integration of the Malburg Generating Station (MGS) debt financing structure with the financial forecast model.
Task 2: Development of Financial Forecast Model and Revenue Requirement NewGen will develop a Microsoft Excel-based financial model based on the VPU budgeting system and chart of accounts to support periodic updates, automation, and alignment with the eventual COSA and other VPU planning models. The financial model will forecast revenues by customer class and expenses for 10 years to evaluate potential rate, debt, changes in loads, capital impacts, or other items as desired by VPU. Our model includes a "dashboard" designed to manage, manipulate, and evaluate large amounts of data instantaneously. The dashboard easily conveys the key financial metrics, load profile changes, customer impacts, and rate structures to customers, staff, and Boards to facilitate more informed decision making. The dashboard allows for dynamic scenario analyses, which provides VPU flexibility in determining the appropriate mix of rate changes, capital projects, debt issuances, or other variables to meet budgetary or capital constraints and to inform defensible decision making. The customized tools allow for dynamic and complete analysis of the various inputs/variables and produces easy-to-understand tables and graphs that aid VPU in communicating to various stakeholders engaged in the project. An example of our financial modeling and dashboard for prior clients is included in the attached figure.
Model Dashboard Examples, KPIs
Debr Service Coverage Cash Balences
Combined System 1OT Test inputs for annual
rate chanses
Proposed Debt isluenees
During the model development process, designated VPU staff will be included in progress updates and will provide feedback on draft versions of the model via Microsoft Teams virtual meetings. The financial model will be used to develop the 10-year financial forecast and Test Year Revenue Requirement (TY RR) used in the COSA.
Vernon 2022 Rate Study Proposal 10.27.22
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-B8BB-AF0FB88A751F Ms. Balandran
October 27, 2022
As part of this task, NewGen will attend an onsite meeting to primarily focus on the financial strategy for the next 5 to 10 years and optimize rate changes, cash balances, and debt service to support VPU's goal of providing the lowest electric rates in California. This discussion will focus on the MGS debt financing strategy and power supply and other scenarios that will impact the forecasted electric rates. The meeting will also discuss financial impacts of the following:
• Renewable energy portfolio requirements, the current status of compliance, and future purchases, as necessary.
• Compliance with reserve balances, days of cash on hand, and debt coverage requirements. • Net metering program.
• Effect of distributed generation.
• Electric vehicle program.
• Updated data center customer projections.
• Green Tariff rate.
• Updated outdoor LED lighting rate.
Test Year Revenue Requirement
Using the financial model and scenario analysis, NewGen will collaborate with VPU staff to develop the TY RR based on a five-year revenue requirement projection. This TY RR to be included in the COSA will include all costs the utility must collect through rates for the fiscal year (FY) 2023-2027 period. It will also include any known and measurable adjustments necessary to account for material or significant changes to the VPU system, such as large new data center customers added, changes in off-system sales, or generation resource/market fluctuations. NewGen recommends utilizing a cash basis and methodology for the TY RR. We plan on a virtual meeting to review and make final revisions to the forecasting model and finalize the TY RR.
Task 3: Cost of Service Analysis
Based on the results of the financial forecast and TY RR, NewGen will begin developing the cost of service model. There are three key steps to completing the COSA: 1) unbundle or functionalize the revenue requirement into utility functions (i.e., production, transmission, distribution, and customer); 2) classify costs (i.e., energy, demand, and customer); and 3) allocate the costs to the customer classes. Included throughout the three steps of the COSA is the creation of allocation factors to support the allocation of shared costs to different functions or classifications and the eventual customer class allocation factors to allocate the final costs of service to each customer class.
The COSA model will use basic Excel tools such as reference tables, drop-down menus, and lists for inputs and adjusting selections such as allocation methodologies or specific allocators. The COSA model and three interconnected components are graphically depicted and described in further detail below.
Vernon 2022 Rate Study Proposal 10.27.22
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-BBBB-AF0FB88A751F Ms. Balandran
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Component A Component B Component C
Cost Cosbratior Cost Alocation Factors
Revenue Requirement
O&M
Debt Service
Transfers / Taxes Transmission I purave 1l 3 Coloradord Pesti Capital
Small Commercial Large Commercial Agriculture / Irrigation Lighting Expenditures
Net Margin
Total Revenue
1l Customer Servie 11 We Cat. Service
Requirement Customer Meter Reache Wit Lust Meters
11 Cus.Acccuntirg If We Cuse. Service
Cost of Service Model
Component A- Fonctiosel Vubswolng
Functional unbundling provides detailed descriptions of the utility's TY RR by core utility function. Account information is provided by and aligned with VPU budget accounts as applicable. For each item, if adjusted, the amount of the adjustment is identified with an associated work paper. Once the detailed TY RR has been established, the amount is assigned to the production, transmission, distribution, and customer functions. Assignments are made either through direct assignments or other allocation methodology.
The results of the Component A analyses for each function of the TY RR are expressed on a functional basis.
Component 8- Sub-functional Unbundling and Classication of Costs Sub-functionalizing the production, transmission, distribution, and customer functions developed in Component A provides additional detail and accuracy to VPU's costs. Sub-functionalization may include separation of distribution costs into primary and secondary voltages for any customers served at those voltages. Additionally, costs are classified as demand related, energy related, customer related, or a direct assignment. Similar to functionalizing, sub-functionalization is accomplished either through directly assigning costs or other cost allocation methodology. Specific allocation factors are found at the bottom of each functional worksheet. Component B analyses result in VPU's TY RR expressed on a functional basis for each cost classification (e.g., Production Demand or Production Energy Costs).
Component C-Allocated Cosi-of-Sarvice
Using the information developed in Component B, the TY RR is now subtotaled by sub-functionalized and classified cost. The TY RR is then allocated to each of the proposed rate classes using various customer class allocation methodologies. These allocation methodologies or allocators are developed in alignment with the cost classification. For example, production demand costs are allocated utilizing the customer's contributions to system demand such as 4- or 12-coincident peak (4 or 12CP) and production energy allocated by customer class contribution to net energy for load.
Work Papers
Work Papers for supporting adjustments and allocations used in Components A, B, and Care included in the model for reference. These Work Papers generally include supporting calculations such as customer Vernon 2022 Rate Study Proposal 10.27.22
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class contributions to system load and peak demands, minimum system calculations for customer and demand classifications of the distribution costs, asset-related data such as transformer inventory or miles of lines, and/or purchased power cost breakdown.
In the VPU COSA model, a key Work Paper will summarize the customer consumption data. Where or if VPU's interval data is very limited or not representative of a class, other proxy data such as AMI data from other Southern California Utilities, Southern California Edison (SCE) load profiles, and VPU's SCADA or feeder hourly data for each of the customer classes can be used in the evaluation of the existing customer classes' consumption characteristics. NewGen has experience revising and integrating large AMI data sets from California utilities to evaluate customer segmentation, load profiles, contributions to monthly system peak demands, and class load factors. In fact, NewGen has developed market leading rate models, which leverage AMI data to better incentivize and manage utility system load profiles through the use of rates.
COSA Instructions and Integrated QA/QC
NewGen also has proven experience building models that are adopted and utilized long term by our clients. Our Team will apply our experience developing embedded instructions and guidance that can be accessed within the model's customized menus for VPU's staff to reference in updating and checking the data and calculation validity. Embedding the instructions and checking within the model enhances the user experience, improves accuracy, and helps ensure knowledge transfer for those working in the model.
Custom ribbons in Excel will be created to provide functionality and instructions in addition to pop-up windows with additional capability to "drill down" into specific areas for instructions. Error checking will also include the ability for update notifications, user updates logs, and version control/dates. Examples of the instructions and automated checking of calculations are included in the following graphics.
Using the unbundled COSA model structure also provides VPU additional insight into calculating the key COSA elements driving the full cost recovery of rates. This insight and our COSA model structure will quickly and easily provide the detailed components to create eventual base rates and fuel adjustment rates in addition to other rate variations or options. Additional, dynamic COSA and rate analysis within the unbundled COSA results include the development of seasonal cost bases, demand side management incentives, voltage discounts, cost-based wheeling rates, net metering, stand-by, feed-in, and electric vehicle rates. The COSA and related Work Papers will also provide all the data required to evaluate and compare the fixed and variable costs (e.g., customer/demand and energy-related costs) with the fixed and variable revenues by customer class. Our COSA model integrates our experience as expert witnesses and provides a robust defense and compliance with California-related requirements (e.g., Proposition 26).
A draft COSA and model will be provided to and reviewed with VPU for initial feedback and approval prior to completing the COSA. NewGen will also hold a virtual review meeting with VPU staff to review the COSA results and begin initial training on the use of the model. Feedback from the meeting and any modifications requested from VPU will be integrated into the final COSA model and results as needed.
The COSA results and VPU policy input in Phase 2 regarding rate strategies and incentives will guide Phase 3 rate design for net metering, electric vehicle, time of use (TOU), and other VPU desired rates. Upon finalizing the results of the COSA, NewGen will have a virtual meeting with VPU to discuss and review COSA results for each customer class comparing the revenue requirement for each class with associated Test Year revenues.
Phase 2 Deliverables:
• Data Request
Vernon 2022 Rate Study Proposal 10.27.22
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• Virtual Kickoff Meeting
Periodic virtual meetings and related project progress meetings * Financial forecast model development with dynamic dashboard and scenario analyses with on-site meeting to finalize the forecast and rate changes
• TY RR development and review with VPU staff via a virtual meeting * Review of VPU Interval meter or proxy utility class load data profiles to support development of customer class load profiles and characteristics (e.g., load factors, non-coincident peaks, coincident peaks)
• COSA development including functionalization, classification, and allocation of the TY RR • Virtual meeting with VPU to discuss and review COSA results for each customer class comparing the revenue requirement for each class with associated Test Year revenues Phase 3: Elestric Rate Designs
Phase 3 of the Study will include the rate design model, reports, and stakeholder engagement to communicate the results and solicit input.
Task I: Rate Design
The final analytical step in the Study is developing the rate design model, billing impacts, and final recommended rates to stakeholders. Phase 3 includes designing base rates and related adjustments (e.g., Energy Cost Adjustment or ECA) for each customer class and confirming their ability to fully recover the TYRR. Rates will be designed to follow and support a broader VPU rate strategy discussed during the kickoff meeting and align with the COSA results with the breakdown of customer, demand, and energy- related costs for each customer class. Furthermore, new or refined rate structures or policies (e.g., electric vehicle, public EV charging, net metering, and standby rates) identified in the Request for Proposals (RFP) and through discussions with VPU staff will also be integrated into the rate design model.
Inherent in Phase 3 is a review of existing VPU revenue recovery from rates and comparison with COSA results for any recommended structural modifications or adjustments. NewGen will design rates for a period of one to five fiscal years (as determined by a phased-in or gradualism approach to rate changes) to fully recover VPU costs over that same period and ensure financial performance by tracking KPls, such as annual over/under recovery, reserve levels, and debt coverage. Our rate design effort will also include recommendations on the use of gradualism where needed to phase in structural rate changes (e.g., shifts from energy to demand charges) and larger rate increases for specific customer classes if needed.
After completing the recommended rates, the revenue adequacy of the new rates will be proven by forecasting and calculating the annual rate revenue generated for each customer class and comparing it to the class and total system COSA. Average bills and related impacts for every monthly bill in each class will automatically be calculated to compare existing, COSA-based, and recommended new rates. The results of the initial rate design will be presented and discussed via a virtual meeting or virtual meetings with VPU staff. Based on feedback from the rate review, we will revise or provide an optional or alternative rate design scenario such as a phase-in of rate changes or adjustments in customer/demand/energy rate components.
Billing impacts for all customers in each rate class will be included in the model in addition to rate curves (i.e., effective rates over a range of load factors) for each class and rate change. Benchmarking or bill Vernon 2022 Rate Study Proposal 10.27.22
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comparisons with neighboring utilities will be provided as well to compare VPU's current and proposed rates. These comparisons will be included in sample sets of customers within each class and included on all rate curves to compare rates over varying load factors and demand to better understand VPU's competitive position(s). The model will also summarize on a class-by-class and aggregate system basis the fixed/variable revenues compared to fixed/variable costs to inform any fixed cost recovery concerns.
These billing impacts and related model functionality provide significantly more detail and data on the true impacts of rate changes rather than simply communicating average bills or impacts to the 10 largest customers. While the NewGen rate models are extremely user friendly, NewGen has included a 4-hour virtual meeting training session to ensure VPU staff can and will use the model in the future. The figures below represent NewGen's modeling capabilities and visual dashboards we incorporate into our rate models for billing impact and benchmarking analyses.
Histogram Funstions"
Teave nabes bbal or defort.
Residential (E01) Rate
istogiem Type: stone Phase 1 Monthly Difference (8)
Phase: Rums • | 12,000
Bin Size: Co 2
Min: 10,000
Pisse 3
Max: Teta
B,COO
Histogram Resuits
in Size $1.49 6,000
Min: $0.96
Max: $72.51 4,000
Median. $8.02
Not Shown: 0
2,000
90 $35.76 $38,73 $43.73 $44.69 $47 67 $50.65 SS3 63 $56.68 $59.59 $62.57 S65.55 $68.53 $71.52 Residential Rate
COS and Current Rates
Si 1809 18000
140000
120/80
penny
Si::200 00s(30-9213e)
60.000
50.3100
seno
550 1,500 2,000 2,5097 5500 3,5083
Menthly With
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Benchmarking
NewGen will demonstrate the competitiveness of the current and proposed VPU rates by benchmarking the rate recommendations and COS results to selected utilities.
Review and Update TOU Rates and Rate Periods
NewGen will review existing TOU on/off/mid peak periods and evaluate their design against VPU local system peak and pricing signals in addition to power supply pricing and California Independent System Operator (CAISO) peak signals. While VPU does not have 15-minute interval data for all customers, we will work with VPU to get interval data for the largest TOU classes and/or utilize proxy load profiles applied to the large commercial customer class loads. NewGen will provide a dynamic TOU model to allow for the evaluation of alternative TOU rate periods and on/off peak pricing signals.
Specially Rates
New Gen will review existing electric rules and tariffs, including special rate schedules such as interruptible rates, economic development rate (EDR), renewable portfolio standard (RPS) pass-through procedure, ECA procedure, added facility charges, etc.
For distributed energy resources, NewGen will:
• Develop a set of rules and rates for distributed energy resources customers consistent with the City's net energy metering (NEM) program.
Restructure the electric rates to fully account for all costs and benefits associated with the increasing distributed energy resources.
Tarifts
NewGen will update the Master Tariff Sheets for all rates designed as part of this Study. If rates are phased in over multiple years, NewGen will provide updated Master Tariff Sheets for each year or phase of rates.
Task 2: Model Training
NewGen will also consolidate the in-depth training for the COSA and rate design models in Task 2. This includes a full-day meeting training for both models for the selected VPU staff. Training will include reviewing the overall structure and organization of the model, where and how instructions are included in the model, now to update the model, and use of the variables within each model. This in-depth training will build on and augment the initial COSA model training in Phase 2.
Task 3: Draft and Final Reports
Task 3 will document the work, analyses, conclusions, and recommendations of the COSA and Rate models and full Study. NewGen will provide a draft report for the Study including rate recommendations, and findings from Phase 2 and Phase 3 for VPU's Staff to review. A conference call will be held with VPU staff to discuss the draft report and any comments or modifications staff may have. NewGen will incorporate comments and feedback in a final report for VPU.
Task 4: Meetings and Presentations
NewGen will develop a PowerPoint presentation summarizing the findings, conclusions, and recommendations of the Study. A copy of the presentation will be provided to VPU for review and Vernon 2022 Rate Study Proposal 10.27.22
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-BBBB-AF0FB88A751F Ms. Balandran
October 27, 2022
feedback prior to any meetings or presentations. NewGen has included attendance for two in-person presentations in the cost estimate. NewGen will present the Study results to:
* One presentation to the City Stakeholders (City Administration and Finance), the Chamber of Commerce, and the City of Vernon Council.
• Six presentations to customers and other stakeholders.
Phase 3 Deliverables:
• Rate design model with integration of full billing database and billing impacts by customer, by class, including EDR, ECA, RPS and NEM
• TOU Rate model
• Periodic virtual meetings and related project progress meetings • Full-day virtual COSA and rate design model training session with VPU staff • Draft and final COSA and rate design report
• Seven in-person stakeholder meetings
Cost Estimate
NewGen proposes to complete this project on a time and materials basis with a not-to-exceed budget of 130,500 for the scope of work contained herein including reimbursable travel expenses. NewGen wi nvoice on a monthly basis according to the hours charged to the project and the NewGen 2022 Hourl Rates and incurred travel-related expenses.
NewGen Cost Estimate
Item Total
Phase 1
Task 1: Load Forecast $24,000
Phase 2
Task 1: Project Startup and Kickoff $3,500
Task 2: Financial Model and TY RR $22,000
Task 3: Cost of Service Analysis $19,900
Phase 3
Task 1: Rate Design $21,000
Task 2: Model Training $3,000
Task 3: Draft and Final Reports $8,400
Task 4: Meetings & Presentations $28,700
Total $130,500
Vernon 2022 Rate Study Proposal 10.27.22
DocuSign Envelope ID: 772FAC97-F1D7-4343-8E37-B7E6605D162A DocuSign Envelope ID: 0AFB89A2-F219-4F65-B8BB-AF0FB88A751F Ms. Balandran
October 27, 2022
Additional Services
NewGen can provide additional services as needed for VPU and this COSA effort or other management or economic analyses. If or as additional services are desired and requested from VPU, NewGen's hourly rates by position are included in the attached Table.
NewGen Strategies and Solutions
2022 Billing Rates
Position Houriy Billing Rate
Partner $235 - $370
Principal $235 - $360
Senior Manager $225 - $270
Manager $180 - $225
Senior Consultant $150 - $180
Consultant $125 - $150
Administrative Services $110
Note: Billing rates are subject lo change based on annual reviews and salary increases.
Schedule
We are prepared to begin work immediately on this assignment after receiving notice to proceed assuming rates to be in effect July 1, 2023. We will meet this schedule based on the above identified work plan, dependent on the availability and quality of source data provided by VPU.
Sincerely,
NewGen Strategies and Solutions, LLC
"Deousigned by:
Tony Georri
— ЗАСТОАЗСТЕЗНЕЕ
Tony Georgis
Managing Partner, Energy Practice
Vernon 2022 Rate Study Proposal 10.27.22
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