Title
Resolution - Approval to Amend Tariff and Business Rules - Base Power Charge - D Thompson
Other Info
Submitted By: David Thompson
Department: Markets
Financial Impact and Cost/Benefit Considerations:
Recommended changes to the Base Power Charge to align with the Cooperative’s forecasted expense for power purchase costs. Increase of revenue from the adjustment to the Base Power Charge is forecast to be approximately $105M in 2024; expenditures of staff time is not anticipated to be impacted.
Discussion
The Tariff and Business Rules of the Cooperative currently include a Base Power Charge which recovers the power purchase costs and other costs incurred in connection with the development and management of the Cooperative’s power supply to serve the membership’s electric energy requirements.
The Base Power Charge attributable to power purchase cost is largely driven by the energy and ancillary service costs in the ERCOT market as well as the ERCOT market performance of the generation fleet and portfolio of the Cooperative’s primary power supplier the Lower Colorado River Authority (LCRA). Additionally, the fixed costs associated with power purchase costs, including those costs for operation of generation facilities passed through by LCRA, have experienced a continuing trend of cost increases for materials, labor, contractor expense, and interest expense.
From the ERCOT Independent Market Monitor (IMM) State of the Market reports, the total ERCOT Market costs for energy and ancillary services from 2020 to 2022 have risen from $11.5 billion to $31.6 billion. This represents a 175% increase or almost a tripling in cost. PEC secures its power supply for its members electric requirements through its purchased power contracts which are correlated to the many factors that impact ERCOT market prices and the total cost to loads.
Given this ERCOT market outlook, an increase of $0.014000/kWh to the amount of the Base Power Charge is recommended to ensure adequate cost recovery. This increase will be added to the Flat Base Power Charge and the Time-Of-Use Base Power Charge beginning on October 1, 2023.
The net impact to most members will be an increase of $0.007000/kWh or approximately $8.75 per month for an average member that uses 1,250 kWhs per month (with the Temporary Winter Storm Surcharge in the amount of $ 0.007000 per kWh expiring on September 30, 2023). This will be a 6.2% net increase to the average member’s monthly bill from bills issued before September 30, 2023.
PEC recommends adding a description of the components of the Base Power Charge formula to the Tariff and Business Rules that will be used as the basis for any recommended future adjustments to the Base Power Charge.
Tariff amendment and effective date is shown below:
• Base Power Charge, Section 500.1.7 - Effective for all bills issued on and after October 1, 2023
Body
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE COOPERATIVE that the Cooperative approves the amendments to the Tariff and Business Rules as attached hereto with such changes, if any, as were approved by the Board, to become effective for all bills issued on and after October 1, 2023; and
BE IT FURTHER RESOLVED that the Chief Executive Officer, or designee, is authorized to take all such actions as needed to implement this resolution.