Rate Design to Complement AMI Implementation in Danville, Virginia

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Rate Design to Complement AMI Implementation in
Danville, Virginia

• Presentation by
• Denise Sandlin
• Support Services Director
• Danville, VA
• APPA 2009 Business Finance Conference
• Decision-Making on Advance Metering
  Infrastructure (AMI)
• Tuesday, September 15, 830 1000 a.m.

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Introducing Danville, Virginia
Location -- Southside Virginia on the Virginia
North Carolina border Population -- 45,400 metro
area 107,000
Size City of Danville 44 sq. mi.
Danvilles service area 500 sq. mi. History --
Founded in 1793, incorporated in 1830, initially
a tobacco textile manufacturing
center Government Structure -- Council-Manager
Municipal Utilities Publicly owned and
operated Services -- Typical municipal utility
services plus natural gas, electricity, and
telecommunications
Web Sites http//www.danvilleutilities.com http//
ndanville.net http//www.danville-va.gov http//ww
w.discoverdanville.com
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What is AMI?

• Advanced Metering Infrastructure (AMI) refers to
  systems that measure, collect and analyze energy
  usage, from advanced devices such as electricity
  meters, gas meters, and water meters through
  various communication media.

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Advanced Metering Infrastructure (AMI) Benefits

• Two-way communication with every customer enables
• Remote meter reading
• Home area networks
• Remote connect/disconnect service switches
• More detailed data, more real time
• Newer, more accurate meters
• Financial Benefits
• Compliance Improvements
• Service Improvements
• Accurate outage assumptions
• Business development

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Danvilles AMI Deployment Objectives

• 18 - month deployment
• Replace all electric and water meters and gas
  registers 81,434
• Build on our existing and planned fiber network.
• Support Danvilles future Smart Grid
• Provide benefits for Danville Utilities and its
  customers
• Rate design strategies
• Comply with Danvilles adopted standards covered
  under the Energy Act of 2005 and EISA 2007.

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Danvilles Meter Replacements
City County Total
Electric 24,448 20,131 44,579
Water 19,384 19,384
Gas 16,607 864 17,471
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City of Danvilles Meter Districts
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Adjacent County Meter Districts
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Benefits for Danville Utilities

• At least 15 minute data from electric meters and
  hourly data from gas and water
• Outage and restoration notifications for
  customers
• Voltage monitoring for sags and surges prior to a
  customer complaint
• Reduced misread and hi/low bills
• New rate structures
• Improved system planning for distribution
• Tamper notification
• Reduced labor costs
• Remote disconnects and connects
• Improved safety for employees

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Benefits for Customers

• Manage their own energy usage and costs
• New and improved customer service
• Help stabilize rates
• More accurate billing with the elimination of
  estimated reads and data entry errors
• No need to access customer property
• Improved outage response time and information
• Offer new programs and services
• New payment options

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AMI System Investment
Total System Total City Rural
Estimated AMI Investment 14,355,015 11,007,597 3,347,418
Less One time Cash Flow Savings (4,398,724) (2,507,047) (1,891,677)
Funding Requirement 9,956,291 8,500,550 1,455,741
Annual Savings 2,728,481 2,256,003 472,478
Simple Payback Period (years) 3.6 3.8 3.1
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AMI SystemFinancing
Electric Water/WWT Gas
Total Cost 8,027,033 4,700,441 1,627,541
Contribution from Fund 4,432,000 300,000 141,000
Debt Funding 3,595,033 4,400,441 1,486,541
Bond Term Interest Rate 20 year 5.00 20 year 5.00 20 year 5.00
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Summary of Rate Design Strategies

• Reduce debt financing requirements based on
  one-time savings due to AMI
• Reduce customer charges based on annual savings
  due to AMI

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AMI SystemOne-Time Savings
Cash Flow Advance (From a 10 to 2 day billing period) 2,968,906
Bi-Monthly to Monthly Billing Cash Flow Advance 1,429,817
Total Estimated One-Time Savings 4,398,723
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AMI System Annual Savings
Unbilled Water and Energy Losses 1,112,985
Theft 905,971
Meter Reading Labor 399,220
Service Switch Field Labor 310,305
Total Annual Savings 2,728,481
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Customer Charge Reduction

• Customer charges due to AMI Savings
• Water Customers Total Reduction is 3.00 per
  meter/month
• Electric Customers Total Reduction is 3.20 per
  meter/month
• Phased-in implementation
• 1.00/1.20 as of July 1, 2009
• 1.00 as of January 1, 2010
• 1.00 as of July 1, 2010

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Benefits of Customer Charge Reduction

• Visible and tangible connection
• Timing coincides with benefits
• Good Faith effort to our customers
• Solidified support for AMI project from
• Danville Utility Commission and City Council

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Implications ofGoing Forward

• Budget balancing
• Funding and revenues will be lower
• Need to realize AMI savings in the form
• of reduced costs
• Data management
• Special rate design e.g. time-of-use
• Customer communication
• In-home displays and Internet access

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Summary

• Danville is making a big leap in technology and
  practices
• These improvements allow the utilities to capture
  significant cost-savings
• Cost-savings will be passed on to consumers
  through lower customer charges and other rates
  (due to lower debt service)

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Denise Sandlin Support Services Director Danville
Utilities 1040 Monument Street Danville, Virginia
24541 Telephone [phone] e-mail
sandldl_at_ci.danville.va.us
Our program report is available upon request