Sound and Stable Utilities
FY 2016-17 Council Goal: Sound and Stable Utilities
From the City Manager's budget message:
Having well-run, reliable, and low-cost City-owned utilities has proven to be an economic advantage to Roseville over the years. As a full-service city, Roseville owns and operates its own electric, water, wastewater, and solid waste utilities through Roseville Electric Utility and Environmental Utilities (EU). Key utility decisions are under the control of a single entity, which makes the planning, development and operation of utility services more efficient, synergistic, and reliable. This benefits customers with rates among the lowest in the region, the highest levels of reliability and quality with a relentless focus on planned expansion, and proactive renewal or replacement of utility assets.
Legislation and Regulation
While the City owns and operates a number of diverse utility services, the one aspect all City utilities have in common is external regulation. Each of our utility services are highly regulated by state and federal agencies and routinely subject to legislative and judicial orders which are expensive and sometimes interfere with local control. The City deals with this reality strategically on two fronts:
1) The City develops and drives a comprehensive legislative and regulatory platform and the City promotes balanced and pragmatic approaches. We work hard to understand the issues, develop relationships, and advance or protect our customer’s interests accordingly. The City is a leader of several legislative advocacy alliances on the regional, state, and federal level that combine the strength of their unified voice to advocate for utility customers.
2) While new regulations can be challenging and costly to implement, the City actively looks for opportunities that derive increased value from regulations to further benefit our customers. Because our utilities operate as integrated businesses, we can sometimes turn what might look like a daunting regulatory mandate into a synergistic business opportunity. An example of this is our organic food waste to biogas energy program currently under development that will leverage our need to divert organic solid waste against our ability to convert this waste to energy at our wastewater treatment plants.
Highlights of each utility’s focus areas for FY2016-17 are listed below.
Roseville Electric Utility
Community Solar—Roseville Electric Utility is in the mid- stages of planning and building its first community solar project. The goals of the project are to allow interested customers to purchase solar electricity from the project and to provide the utility with local, renewable energy, to count towards the State of California’s requirement for 50 percent renewable electricity by 2030. The preliminary site selection is adjacent to the Roseville Energy Park, as was envisioned over 10 years ago when we began construction for the power plant. Estimated completion of the community solar project is in 2017. Depending upon customer interest and demand, more community solar projects may be planned for in the future.
Advanced Metering Infrastructure (AMI) or “Smart Meters” —Most homes and businesses in California have smart meters that measure multiple aspects of their electricity and natural gas usage at any time of the day or night. Smart meters can measure the time of day that energy is used, send messages to customers with information about their usage and allow customers to check usage, during the month, instead of after the fact when they receive their bill. Until recently, there was not a compelling business case for Roseville Electric Utility to install smart meters. After thorough study and evaluation, the utility has established strong business reasons to move forward with smart meters for all electricity customers. The benefits of smart meters are: improved distribution system reliability, enhanced customer program offerings, lower operational costs, and better tools to predict and plan for customer demand. In 2016, Roseville Electric Utility will prepare a plan to install smart meters. The plan will incorporate significant public outreach efforts and activities throughout the community. Upon City Council approval, roll out of smart meters to Roseville customers is expected to begin in 2018.
Electric Rate Plans—Keeping with the City Council’s priority for sound and stable utilities, Roseville Electric Utility implemented a two-year rate plan that ensures cost- based, fair and equitable rates, while maintaining highly reliable service to our customers. The rate plan, which includes two rate restructuring changes, effective January 1, 2016 and 2017, includes no overall rate increases, only restructured rates to better reflect the cost of electricity services and to fairly allocate costs between fixed and variable costs. The next rate proposal is expected to be completed in 2017, with an estimated effective date of January 2018 or later.
Because of average or above average precipitation levels near the City’s hydroelectric power plants, Roseville Electric Utility doesn’t anticipate the need for the hydroelectric surcharge for FY2016-17. The ordinance allowing an electric surcharge was adopted in 2009 as a way to partially fund the purchase of replacement electricity that was not provided from hydroelectric resources due to lower-than-average precipitation.
Long Term Goals
Water Reliability—As parts of California come out of four years of drought, it brings into sharp focus the ongoing policy attention needed to address California’s ongoing water-supply challenges. Staff is developing a long-term integrated resource plan to ensure Roseville’s continued water-supply reliability, focusing on regulatory change and needed water infrastructure partnerships and investments. Special emphasis is on the development of an infrastructure plan to increase access to water from Placer County Water Agency. A high certainty level in future water supplies is a key factor to continued investment in our region leading to increased economic vitality, more high- valued and diverse jobs, and a rise in our region’s standard of living. Roseville continues to take a proactive stance on issues that both affect our water supply and protect our community’s and our rate payers’ interests. While we expect an adequate supply of surface water for the coming year, conservation measures are expected to continue, but at a reduced level. The ordinance for the water surcharge was adopted in 2009 as well and helps address bond covenants, revenue decline, and cost increases that are impacted from drought conditions. New rate cases will consider these impacts on costs and revenues and also take into account the need for higher economic reserves in support of potential operating risk, system emergencies, and fluctuating revenue streams, ensuring both reliability in supply and consistency in rates.
Effectively unwind from the four years of severe statewide drought and adjust drought stages and messaging accordingly.
Continue water reliability planning efforts for the Ophir Water Treatment System with Placer County Water Agency and others.
Comprehensively evolve our connection-fee program to include recycled water and water reliability projects for the future. Begin preparing for the next cycle of utility rate adjustments as needed ensuring stability across long-term financial plan and key fiscal policies.
Stay in front of external movements, including California Water Fix, long-term water use efficiency policy, and the State Water Resources Control Board’s tributary flow proceedings, to protect the City’s and region’s interests while forging new partnerships and alliances to advance northern California water reliability.
- Connection-Fee Program—Roseville has a long standing policy that growth pays its way and brings new water supplies to benefit the entire City, not just the proposed development. In addressing the issue of paying for regional water reliability, the City continues to use a combination of developer-paid fees (through connection fees and/or community facility districts) and water-user rates as appropriate means to finance the projects. EU is currently in the planning process to review the next generation of connection fees to address water reliability and recycled water. To accomplish this, EU will be proposing a number of approaches or options internally and externally for meeting current and future needs. EU expects extensive outreach and education efforts as fees in general are sensitive, and connection fees can be difficult to understand.
- Recycled Water—In the upcoming fiscal year, EU will initiate an effort to develop a long-term strategy to transition recycled water from the wastewater utility to the water utility. Since its inception in the 1990s, we have learned that incentivized rates for recycled water are no longer required because demand for recycled water outstrips supply, and recycled water service is now depended upon and planned like other utilities. The strategy will support recycled water service plans that include rehabilitation funding and the development of a construction fund for building major transmission, storage, and pumping infrastructure—much like how the other utilities operate.
Solid Waste Utility
- Waste-to-Energy Program—In 2014, the California state legislature passed AB 1826, which requires the diversion of organics from landfills. Initial stages of these regulations will take effect mid-2016, focusing on the largest producers in the City. As a result, EU’s solid waste division will collect and handle this waste stream to comply with these regulations. The City is completing the necessary outreach, rate design, and operation processes to implement this program. Coincidently, the long-planned expansion of the Pleasant Grove Wastewater Treatment Plant is about midway through the design phase and features infrastructure to better deal with biosolids, including anaerobic digesters. It turns out that anaerobic digestion processes can be improved by 30 percent by adding organic food waste and fats, oils and grease, increasing methane gas production which can be converted to electricity (to meet or offset power needs) or compressed natural gas (CNG). As solid waste is in the process of converting its collection truck fleet to renewable CNG to meet AB 32 carbon emission regulations, this is a promising business opportunity. Furthermore, by working with regional partners in the Western Placer Waste Management Authority and the South Placer Wastewater Authority, EU might be able to avoid costly regional infrastructure improvements and benefit customers in south Placer County by leveraging and optimizing this capability. Before investing in these projects, detailed business case studies will be prepared to understand the economics of the program in addition to the traditional design and technical specifications to test these concepts.
Utility Exploration Center
Roseville’s utilities will continue the important public engagement they do through the Utility Exploration Center. In FY2016-17, the utilities are initiating the process to design new interior exhibits and develop the IDEAscape at the Utility Exploration Center. The project is planned for completion in late summer 2018.