Slide 1: Options to Eliminate Seasonal Rates
OPTIONS TO ELIMINATE SEASONAL RATES Customer Commitment & Hydro One Seasonal Rate Elimination Stakeholder Session | Hydro One Networks Inc. | June 10, 2015
Slide 2: OEB Direction
OEB Direction • In EB-2013-0416 Decision OEB determined the Seasonal customer classification is no longer justified. • Hydro One to bring forward a plan for the elimination of the seasonal class by August 4, 2015. • Plan should propose a phase-in period for those customers expected to experience a t
Slide 3: Seasonal Class
Seasonal Class Monthly # of Consumption # of Consumption Customers Range Customers <50 23,140 200-400 28,120 50-100 25,954 400-800 21,205 100-150 21,117 800-1200 9,762 150-200 14,382 >1200 10,810 3
Slide 4: Breaking up the Seasonal Class
Breaking up the Seasonal Class • Seasonal customers included as part of Density Review and included in defining density zones • 2016 forecast Seasonal customers by density class R2: 83,900 R1: 70,300 UR: 270 TOT: 154,490 0-50 50- 100- 150- 200- 400- 800- 1200- >1600 100 150 200 400 800 1200 1600 Con
Slide 5: Cost Allocation
Cost Allocation • 2016 model updated to reflect Board Decisions • Includes all changes approved for 2015 model • Updated for 2016 revenue requirement • “Seasonal Status Quo” • 2016 model updated to reflect elimination of the Seasonal class • Updated # of customers and kWh for UR, R1 and R2 to includ
Slide 6: Cost Allocation Model (CAM) Results
Cost Allocation Model (CAM) Results Seasonal Status Quo UR R1 R2 S GSe GSd UGe UGd StLg SnLg USL DG ST Rev * 101.5 338.7 514.9 115.1 162.5 127.7 20.2 27.0 11.7 7.0 3.6 2.8 47.5 Cost 80.5 285.0 557.2 110.8 160.1 148.4 22.6 31.1 13.2 7.7 2.9 6.6 54.3 R/C 1.26 1.19 0.92 1.04 1.02 0.86 0.89 0.87 0.88 0.
Slide 7: Impacts of Eliminating Seasonal Class
Impacts of Eliminating Seasonal Class Typical Seasonal Status Quo Seasonal Eliminated Rate Monthly Change in Total Bill Change in Total Bill Class Consumption 2015-2016 2015-2016 (kWh/kW) $ % $ % UR 800 ($0.37) -0.3% ($0.95) -0.7% R1 800 $1.04 0.6% $0.88 0.5% R2 800 $5.85 3.2% $5.20 2.8% S to UR 400
Slide 8: Seasonal to R2 Impacts
Seasonal to R2 Impacts Breakout of impacts on Seasonal customers moving to R2 rate class # of 2015 2016 kWh Cust Monthly Monthly Change Change Bill Bill $ % 50 13,800 42.22 78.44 36.22 85.8 100 14,600 53.09 87.99 34.90 65.7 150 11,500 63.97 97.54 33.58 52.5 200 7,800 74.84 107.10 32.25 43.1 400 14,7
Slide 9: Bill Impact Mitigation
Bill Impact Mitigation • No impact mitigation required for Seasonal moving to UR and R1 residential rate classes • Mitigation required for Seasonal moving to R2 • Mitigation options considered: 1. “Phase-in Via Credits”: move to full R2 rates in 2016 and apply credits to limit impacts to 10% 2. “Pha
Slide 10: Phase-in Via Credits
Phase-in Via Credits Seasonal to R2 Bill Impacts 2015 Rates kWh 2015 2016 Change % 2016 Bill Credit S F=$28.62 Total Total 15 to Change Mitigated to Limit V=$0.0764/kWh Bill Bill 16 Bill Impact to (2015 + 10%) 10% R2 F=$65.52 50 42.22 78.44 36.22 85.8 46.44 32.00 V=$0.0424/kWh 100 53.09 87.99 34.90
Slide 11: Option 1: Phase-in Via Credits
Option 1: Phase-in Via Credits • Credits required until 2021 for lowest consumption, shorter period for higher consumption • Use of average consumption for customers in 0-150 kWh range (i.e. 75 kWh) would result in a 2016 credit of $30.80 – This is within +/- $3 of credits for all customers within r
Slide 12: How to fund the credits paid to Seasonal R2 customers?
Option 1: Phase-in Via Credits How to fund the credits paid to Seasonal R2 customers? • Fund monthly credits via monthly debits to formerly Seasonal in all residential rate classes that would otherwise see bill impacts of less than 10% E.g. Formerly Seasonal moving to R1 kWh 2015 2016 Bill Debit to
Slide 13: Option 1: Pros and Cons
Option 1: Phase-in Via Credits PROS: • Easy to communicate to customers • Impacts of eliminating Seasonal class clearly visible to customers • Credits targeted to only those Seasonal R2 customers that need them • Shortest possible phase-in period by maintaining 10% impacts until Seasonal rates fully
Slide 14: Option 2: 8-Year Phase-in of Rates
Option 2: 8-Year Phase-in of Rates 2015 Rates Seasonal to R2 S F=$28.62 kWh 2015 2016 Change % V=$0.0764/kWh Total Bill Total Bill 15 to 16 Change R2 F=$65.52 50 42.22 45.92 3.71 8.8 V=$0.0424/kWh 100 53.09 55.80 2.70 5.1 150 63.97 65.67 1.70 2.7 200 74.84 75.54 0.70 0.9 2016 Rates 400 118.34 115.02
Slide 15: Option 2: Pros and Cons
Option 2: 8-Year Phase-in of Rates PROS: • Easy to communicate to customers • Easy to implement CONS: • Disproportionate impacts across Seasonal R2 customers, with bill reductions for high volume Seasonal R2 customers while other seasonal within class see bill increases • Year-round R2 residential c
Slide 16: Option 2b: 8-Year Phase-in (modified)
Option 2b: 8-Year Phase-in (modified) 2016 2017 2018 2019 2020 2021 2022 2023 R2 Fixed ($/mnth) 65.52 65.52 65.52 65.52 65.52 65.52 65.52 65.52 S-R2 Fixed ($/mnth) 33.23 37.84 42.45 47.06 51.67 56.28 60.89 65.52 Fixed charge lost $2.7M $2.3M $1.9M $1.5M $1.1M $0.7M $0.3M $0 revenue Variable (c/kWh)
Slide 17: Mitigation Summary & Recommendation
Mitigation Summary & Recommendation • OEB Direction Guiding • Prior experience with mitigating large bill impacts • Fairness (cost causality, simplicity, lack of controversy) Principles • Provides for full recovery of utility’s costs • Can be efficiently administered Option Key Features 1. Phase-in
Slide 18: RRRP
RRRP OEB decision is that RRRP cannot be applied to customers that do no meet year-round residency status (e.g. formerly Seasonal) • RRRP was formerly known as RRA, which began in 1982. From the outset RRA did not apply to Seasonal customers • O.Reg.442/01 came into effect in 2001 and RRA became RRR
Slide 19: Feedback on Presentation
Feedback on Presentation • Any questions of clarification? • Are there other options? • Are there other pros and cons associated with the options identified? • What option do stakeholders prefer? • Any other advice or considerations for August 4th report? 19
Slide 20: Options to Eliminate Seasonal Rates
OPTIONS TO ELIMINATE SEASONAL RATES Customer Commitment & Hydro One Seasonal Rate Elimination Stakeholder Session | Hydro One Networks Inc. | June 10, 2015
Slide 21: Guiding Principles
Guiding Principles • OEB direction • Fairness • Minimize costs of the reclassification • Minimize overall billing and meter reading costs while meeting customer needs 21
Slide 22: Billing and Meter Reading
Billing and Meter Reading Hydro One depends on both manual (36K) and automatically read (115K) meters to collect information for seasonal billing (151K customers*) Manual Meter Reading Automated Meter Customer Billing Challenges: Reading Challenges: Information: • Accessibility: distance, terrain, •
Slide 23: Scenarios Considered
Scenarios Considered Hydro One investigated three different scenarios for elimination of the Seasonal Rate class and movement of the customers into appropriate residential classes. Scenario A Retain Seasonal Billing and Meter Read Frequencies Scenario B Adopt Residential Billing and Meter Read Frequ
Slide 24: Scenarios Considered - A
Scenarios Considered - A SCENARIO A – RETAIN SEASONAL BILL/READ FREQUENCIES • Move each seasonal class customer into the appropriate residential class – urban (UR), medium (R1) or low density (R2) – based on their specific density characteristics • Retain the current default billing and meter readin
Slide 25: Scenarios Considered - B
Scenarios Considered - B SCENARIO B – ADOPT RESIDENTIAL BILL/READ FREQUENCIES • Move each seasonal class customer into the appropriate residential class – urban (UR), medium (R1) or low density (R2) – based on their specific density characteristics • Adopt the current default billing and meter readi
Slide 26: Scenarios Considered - C - Hybrid
Scenarios Considered - C - Hybrid SCENARIO C – HYBRID • Move each seasonal class customer into the appropriate residential class – urban (UR), medium (R1) or low density (R2) – based on their specific density characteristics • Consider average monthly consumption and annual usage patterns, meter rea
Slide 27: Scenarios Considered - C - Hybrid
Scenarios Considered - C - Hybrid High Usage Medium Usage Low Usage 27
Slide 28: Seasonal Load Profiles – High Usage
Seasonal Load Profiles – High Usage • Represents 12% of all seasonal class customers (18K) • 2K (11%) of these are read manually or have unreliable automated reads • Annual electricity consumption is similar to average year round residential customers (800 kWhs/month) • Load profile over the year is
Slide 29: Seasonal Load Profiles – High Usage Recommendation
Seasonal Load Profiles – High Usage Recommendation • Leave customers on existing seasonal billing frequency if paper based but move to residential billing frequency if on e-billing • Increase manual meter read frequency to 4 times per year for TOU exempt customers • Review eligibility for billing/me
Slide 30: Seasonal Load Profiles – Medium Usage
Seasonal Load Profiles – Medium Usage • Represents 45% of all seasonal class customers (68K) • 6K (9%) of these are read manually or have unreliable automated reads • Annual electricity consumption is lower than average year round residential customers • Load profile over the year is different than
Slide 31: Seasonal Load Profiles – Medium Usage Recommendation
Seasonal Load Profiles – Medium Usage Recommendation • Leave customers on existing seasonal billing and meter read frequency if paper based but move to residential billing frequency if on e-billing • Review eligibility for billing/meter read frequency on same frequency as Dx rate application 31
Slide 32: Seasonal Load Profiles – Low Usage
Seasonal Load Profiles – Low Usage • Represents 43% of all seasonal class customers (65K) • 28K (43%) of these are read manually or have unreliable automated reads • Electricity consumption is much lower than average year round residential customers • Load profile over the year is the same pattern a
Slide 33: Seasonal Load Profiles – Low Usage Recommendation
Seasonal Load Profiles – Low Usage Recommendation • Move customers to 2 bills and 1 read per year frequency if paper based but move to residential billing frequency if on e-billing • Review eligibility for billing/meter read frequency on same frequency as Dx rate application 33
Slide 34: Scenario C Hybrid: Proposed Frequencies and Potential Savings
Proposed Bill and Meter Read Frequencies and Potential Savings Scenario C “Hybrid” Average # of # TOU & Non- Incremental Incremental Incremental Monthly Seasonal TOU/Read Bill / Read Cost of (Savings) of (Savings) of e- Usage Customers Reliability Frequency Meter Reads Paper Bills Bills @ Accounts @
Slide 35: Recommendation
Recommendation Scenario C with the proposed bill and meter read frequencies is the recommended option for the following reasons: 1. Satisfies the guiding principles of: meeting OEB direction, fairness, minimizing costs of the reclassification and minimizing overall billing and meter reading costs wh
Slide 36: Recommendation (cont'd)
Recommendation (cont’d) Scenario C with the proposed bill and meter read frequencies is the recommended option for the following reasons: 3. Maximizes billing and meter reading frequencies within reasonable cost parameters . Billing and meter reading frequencies reviewed in conjunction with Dx rate
Slide 37: Feedback on Presentation
Feedback on Presentation • Any questions of clarification? • Are there other options? • Are there other pros and cons associated with the options identified? • What option do stakeholders prefer? • Any other advice or considerations for August 4th report? 37
Slide 38: Conditions of Service
Conditions of Service As part of the implementation of the OEB direction on the seasonal customers Hydro One will be updating our Conditions of Service. Some examples: Section 1.6: Customer Rights and Obligations: No Charge Outage for Upgrade or Maintenance of Customer Equipment for Safety Reasons H
Slide 39: Impact of OEB Move to "All-Fixed"
Impact of OEB Move to “All-Fixed” • Comparison of impacts from moving to all-fixed • Seasonal customers moving to R1 with Seasonal eliminate only marginally better off than maintaining Seasonal Status Quo • Seasonal customers moving to R2 with Seasonal eliminated are much better off with maintaining