APPENDIX B TO PROPOSED ADJUSTMENTS TO SRP S STANDARD ELECTRIC PRICE PLANS EFFECTIVE WITH THE NOVEMBER 2012 BILLING CYCLE COST COMPARISON DATA

Transcription

1 APPENDIX B TO PROPOSED ADJUSTMENTS TO SRP S STANDARD ELECTRIC PRICE PLANS EFFECTIVE WITH THE NOVEMBER 2012 BILLING CYCLE COST COMPARISON DATA SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT JULY 12, 2012

2 TABLE OF CONTENTS INTRODUCTION... 1 PRICING AND FINANCIAL COMPARISONS... 2 SRP CUSTOMER SERVICES... 5 ENERGY EFFICIENCY & SUSTAINABILITY... 8 GENERATION ASSETS... 9 CORPORATE OPERATIONS SERVICES INTERNAL SERVICES BENCHMARKS HUMAN RESOURCES SALARIES AND WAGES PER CUSTOMER i

3 COST COMPARISON DATA INTRODUCTION This document is intended to supplement management s pricing proposal contained in Proposed Adjustments to SRP s Standard Electric Price Plans Effective with the November 2012 Billing Cycle. It provides comparisons of SRP s prices, performance and other key indicators against utility industry peers as well as internal cost and performance trends. The key indicators fall into the following general categories: Pricing Credit ratings Customer service Sustainability Portfolio (Renewable Energy and Energy Efficiency) Operating costs (with an emphasis on generating assets) Other internal operating costs. Benchmarking across other utilities always presents a challenge due to the fact that it is difficult to obtain exact apples-to-apples comparisons and explaining differences between entities is complicated for the following reasons: Capitalization policies vary between Investor Owned Utilities (IOU) and Public Power. IOU s have an incentive to capitalize costs, as they earn a return on those assets for their shareholders. Regulatory Commission policies vary by state. Public Power entities like SRP are not regulated by a state commission but rather by an elected Board of Directors. Public Power entities vary in purpose. Some do not own any generation. SRP constantly strives to improve its performance by improving unit costs and focusing employee attention on controllable expenses such as labor, materials, transportation, business travel and contracted services. SRP s pricing compares favorably to other utilities in the Southwest Region and its commitment to excellent customer service and reliability is evidenced by the number of times that it has been recognized as an industry leader through the J.D. Power annual survey of electric utilities. Work continues on analyzing and acting on cost performance and trends across the company to assure that substantive improvement continues into the future. 1

4 Cents per kwh COMPARATIVE COST DATA PRICING AND FINANCIAL COMPARISONS Electricity prices are a strong indicator of the cost to provide service. The following graph compares SRP s current and proposed overall average prices with those of other regional utilities. Both SRP s current and proposed prices compare favorably to the other utilities. For information on other recent or expected pricing actions, see page 23 of the Proposed Adjustments to SRP s Standard Electric Price Plans. Price Comparison by Company Overall Prices cents per kwh San Diego Gas & Electric Southern California Edison Los Angeles Department of Water & Power El Paso Electric (NM) Arizona Public Service Co. Public Service of New Mexico Salt River Project (proposed) Nevada Power Salt River Project (current) Unisource Energy Public Service of Colorado Tucson Electric Power Sierra Pacific (NV) Pacificorp (UT) Source: Dept. of Energy EIA-826 Reports for 12 months ending February 29, 2012 Current prices effective May Proposed prices potentially effective November

5 Cents/KWh COMPARATIVE COST DATA PRICING AND FINANCIAL COMPARISONS If SRP s prices are compared to the prices of other goods and services as measured by the Consumer Price Index (CPI) since Fiscal Year 1998, SRP s prices have provided an excellent value for the customer dollar. The graph below shows that with the proposed price adjustment, the inflation-adjusted price for SRP electricity is competitive with overall prices charged over 15 years ago Inflation Adjusted Price of Electricity Fiscal Year 2012 Dollars FY13 and FY14 prices reflect the proposed 4.8% overall increase. 3

6 PRICING AND FINANCIAL COMPARISONS SRP has one of the highest credit ratings among the public power/municipal entities. A high credit rating allows SRP to borrow at more favorable rates, reducing costs for customers. Company Standard & Poor s Moody s Memphis LG&W AA+ Aa2 SRP AA Aa1 Omaha Public Power District AA Aa1 Orlando Utilities Commission AA Aa1 San Antonio CPS AA Aa1 Jacksonville Electric Authority AA- Aa2 Santee Cooper AA- Aa3 Seattle City Light AA- Aa2 Los Angeles Department of Water & Power AA- Aa3 Austin Energy A+ A1 Sacramento Municipal Utility District A+ A1 Long Island Power Authority A- A3 Source: Senior Unsecured Debt Ratings as rated by Standard & Poor s and Moody s agencies 4

7 SRP CUSTOMER SERVICES SRP Customer Service Achievements and Enhancements The following list details some of SRP customer service recognitions and service enhancements in recent years. SRP is committed to decreasing costs and increasing efficiencies where possible while still maintaining excellent service for customers. Customer Satisfaction & Service Recognition J.D. Power Highest in Residential Electric Service 12 out of the last 13 years in the Western U.S. J.D. Power Highest in Business Electric Service 6 out of the last 9 years in the Western U.S. In 2012, Recognized nationally for service excellence as a J. D. Power Customer Service Champion. A cross-industry special report has identified SRP as one of only 50 brands recognized as J.D. Power 2012 Customer Service Champions, based on customer feedback attesting to their service excellence. (Source: J.D. Power & Associates) Received J. D. Power Call Center Certification every year since Customer Satisfaction & Service Enhancements ( ) Provided customers with ability to report power outages through the Interactive Voice Response (IVR) system, on the web, or by using a mobile device. Installed a public outage map on the web. Provided customers with ability to make a bill payment by using a mobile device. Provided customers with or text notifications to confirm their turn-on orders. Expanded residential call center service hours to 24/7. Provided customers with e-notifications of outages in their area. Provided customers with real-time e-notifications to confirm receipt of bill payments. 5

8 Calls per Labor Hour COMPARATIVE COST DATA SRP CUSTOMER SERVICES Customer Services Cost per Customer Fiscal Year 2013 Dollars The graph below illustrates SRP s cost for providing customer service over the past seven years. The cost is represented here on a per customer basis. Since 2009, SRP s efforts to cut costs have resulted in savings. Frontline Calls per Labor Hour The graph below demonstrates ongoing productivity improvements. Through efficiency measures, SRP customer service has been able to address more customer calls per hour worked by SRP customer service representatives. 6

9 SRP CUSTOMER SERVICES Write-Offs Write-off refers to the revenues SRP is unable to collect from delinquent or abandoned accounts. This figure is decreasing due, in part, to the following factors: increased customer participation in the prepaid M-Power program, nearly full deployment of smart meters that allow for more expedient disconnects on delinquent accounts, and increased scrutiny at the front end of the credit cycle. Write-off illustrated by bars and write off as a percent of revenues by the line 7

10 ENERGY EFFICIENCY & SUSTAINABILITY The following graph shows the amount of energy savings, in kwh per dollar spent, on energy efficiency programs offered to customers. In Fiscal Year 2011, SRP realized kwh of energy savings per dollar which is about 3 kwh/$ spent better than the next best performing company. Energy Efficiency Programs - Energy Savings per Dollar Spent SRP FY11 Actual Baltimore Gas & Electric Fortis BC APS 2010 Actual (w/o Perf. Incentive) Alliant Energy WPL (WI) MidAmerican Energy Manitoba Hydro Alliant Energy IPL (MN) Detroit Edison BC Hydro Commonwealth Edison Xcel Energy Minnesota Lincoln Electric System Fort Collins Utilities Avista Utilities Xcel Energy Colorado NV Energy Puget Sound Energy Idaho Power Seattle City Light San Diego Gas & Electric Southern California Edison Consolidated Edison Alliant Energy IPL (IA) National Grid Source: E Source Utility DSM Budget and Goals study (2010 Energy Efficiency Programs)

11 GENERATION ASSETS This table shows the current net book value per kilowatt of capacity of SRP s owned generation assets by type. It demonstrates the benefits of maintaining SRP s legacy generating assets to try to achieve long life and avoid costly replacements. Owned Resources Original Installed Cost (OIC) Owned Resources Accumulated Depreciation Owned Resources Current Asset Net Book Value Owned Resources Current Asset Megawatts (MW) Owned Resources Net Book Value/kW New Build Capital Cost ($/kw) Coal $3,365,432,182 $1,730,014,485 $1,635,417,697 2,206 $741 $2,839 Nuclear $1,192,347,507 $1,050,278,976 $142,068, $206 $5,796 Gas $1,712,810,848 $440,773,689 $1,272,037,159 2,849 $446 $1,273 Hydro $112,941,179 $48,404,591 $64,536, $239 $2,256 TOTAL $6,383,531,716 $ $311,4059,975 6,013 New Build Capital Cost Source: SRP s Q212 Technology Assessment Program (TAP) which is produced using EPRI data. SRP data as of April 30,

12 GENERATION ASSETS This chart provides a comparison of the average cost SRP pays for coal as compared to regional and national averages. SRP s average cost as shown here is weighted by its portion of each of the participation plants. SRP compares favorably in the Southwest and nationally. SRP(1) ($/MMBtu) Arizona(2) ($/MMBtu) 5 States(3) ($/MMBtu) Western U.S.(4) ($/MMBtu) Nation(5) ($/MMBtu) st Quarter $1.992 $2.050 $2.019 $1.836 $ Calendar Year $1.901 $1.899 $1.904 $1.732 $ Calendar Year $1.775 $1.798 $1.787 $1.621 $ Calendar Year $1.626 $1.809 $1.724 $1.537 $ Calendar Year $1.651 $1.734 $1.628 $1.486 $2.022 Source: EIA-FERC 923 forms SRP(1) - The average price is weighted for SRP's portion of each of the participation plants Arizona(2) - Includes all of the coal-fired generating stations located in Arizona 5 States(3) - Includes all of the coal-fired generating stations located in Arizona, Nevada, Utah, New Mexico and Colorado Western U.S.(4) - All of the coal-fired generating stations west of the Mississippi River Nation(5) - All coal-fired generating stations in the continental U.S. Note: Due to possible reporting differences, comparisons between regions may not be consistent 10

13 GENERATION ASSETS Below is a regional comparison of total generation production costs, which includes fuel and purchased power and operations and maintenance costs. SRP compares favorably when all factors are taken into consideration. Production Costs Generation (MWh) Average Cost El Paso Electric $412,626,604 11,648,267 $35.42 SRP $1,378,175,796 34,614,811 $39.81 Arizona Public Service $1,475,751,539 33,596,724 $43.93 Tucson Electric Power $676,442,184 13,873,311 $48.76 Nevada Power $1,134,847,372 18,456,360 $61.49 Southern Cal Edison $4,789,608,198 70,641,909 $67.80 San Diego Gas & Electric $2,122,223,816 29,933,035 $70.90 Source: FERC Form No. 1, 2011 Note: Due to possible reporting differences, comparisons between companies may not be consistent 11

14 CORPORATE OPERATIONS SERVICES INTERNAL SERVICES BENCHMARKS SRP compares business processes and performance metrics to industry peers and best practices from other industries through benchmark studies. The table references examples of benchmark metrics used to compare cost efficiency measures in SRP s Corporate Operations Services, which includes functions such as purchasing, warehousing, transportation services, facilities management and investment recovery. Category Cost Reduction Savings as a Percent of Total Spend Total Cost Benefit of Investment Recovery Ratio of Inventory to Plant & Equipment Facility Headquarters Maintenance Cost for Gross Square Feet Annual Cost per Vehicle (On Road Units) Survey Results (Median) * SRP data excludes owned inventory for Palo Verde Nuclear Plant as well as Water inventory. Note: Due to possible reporting differences, comparisons between companies may not be consistent Notes: The Center for Advanced Purchasing Studies (CAPS) Research is a nonprofit research organization dedicated to supply and supply chain issues. CAPS Research is jointly sponsored by the Institute of Supply Chain Management and the W.P. Carey School of Business at Arizona State University. The study is an annual survey sent to participating companies. The most recent survey was completed and published December Investment Recovery Association is a professional organization for managers of surplus and idle assets and a diverse group of suppliers to the industry. Their corporate members are members of the Global Fortune 1000 and government organizations, representing various industries. Investment Recovery (IR) is the practice of recouping the value of assets no longer needed by a company by identifying and reusing or disposing of surplus assets. The CAPS Research Investment Recovery 2011 Performance Benchmarking Report was released on April 8, The report data is based on 2010 figures (Fiscal Year 2011). Internal Study for Inventory Value to Plant & Equipment is conducted through SRP Purchasing as part of the inventory optimization efforts. SRP collects published financial information from thirteen utilities. The list of comparative companies was provided by Finance. The SRP data is filtered to exclude owned inventory for the Palo Verde Nuclear Plant as well as the Water inventory. International Facilities Management Association is the world s largest and most widely recognized international association for professional facility managers, supporting more than 22,655 members in 78 countries. This report presents calendar year 2010 benchmarking findings and results for SRP Facilities Services. The data was compiled by Facilities Issues, an independent benchmarking company. Utilimarc is a North American fleet consulting and technology solutions firm. Utilimarc serves large, diverse, complex fleet clients in the government, utility, and private sectors. Annually, Utilimarc conducts a FleetAnswers Benchmarking Survey, specifically targeting fleets of utilities. The 2011 survey included 50 utilities nationwide. Benchmark data includes fleet cost, fleet make-up, and productivity. 12 SRP 1.42% 2.57% $6.8M $7.7M Source 2011 CAPS Research Utility Benchmark Study 2011 Investment Recovery Association Benchmark Survey 2.31% 1.76% * 2011 Utility Comparison $1.84 $ International Facilities Management Association Utility Benchmark Survey $18,692 $17, UtiliMarc Benchmark Survey

15 HUMAN RESOURCES SALARIES AND WAGES PER CUSTOMER The following graph shows SRP salaries and wages on a per customer basis over a four year period. The solid line shows the full cost including sick, vacation, and holiday leave (SVHL) and the broken line illustrates salaries and wages excluding SVHL. During this time period, SRP salaries and wages have remained relatively flat. $350 Salaries and Wages per Customer $300 $250 $200 $150 $100 $50 $0 2007/FY /FY /FY /FY11 SRP incl SVHL SRP excl SVHL Note: Navajo Generating Station and Association labor are excluded 13