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Rate Design to Complement AMI Implementation in Danville,

VirginiaPresentation byDenise Sandlin

Support Services DirectorDanville, VA

APPA 2009 Business & Finance ConferenceDecision-Making on Advance Metering Infrastructure

(AMI)Tuesday, September 15, 8:30 – 10:00 a.m.

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Introducing Danville, Virginia

Web Siteshttp://www.danvilleutilities.com

http://ndanville.nethttp://www.danville-va.gov

http://www.discoverdanville.com

Size – City of Danville 44 sq. mi. Danville’s 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

Location -- Southside Virginia on the Virginia – North Carolina border

Population -- 45,400; metro area 107,000

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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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Danville’s 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 Danville’s future Smart Grid Provide benefits for Danville Utilities and its

customers Rate design strategies Comply with Danville’s adopted standards covered

under the Energy Act of 2005 and EISA 2007.

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Danville’s 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 Danville’s 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%

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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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Comments! Questions?

Denise SandlinSupport Services DirectorDanville Utilities1040 Monument StreetDanville, Virginia 24541Telephone: 434-799-6581e-mail: sandldl@ci.danville.va.us

Our program report is available upon request