5.3. ERMUSR 12-15-2009 - Laserfiche WebLink

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a localized customer base. This puts a municipal utility in a unique situation to design rates and programs to specifically benefit their customers. There is already awareness within ERMU to use the positives of being a municipal utility to create an environment where ERMU, the customers, and the City of Elk River (City) all benefit. In November 2009, the utilities approved a Low Load Factor Rate Adjustment clause to be added to the demand tariff beginning in 2010. There is also an opportunity to partner with City to create rates and programs to encourage local economic development. This will be further explored and presented to the Utilities Commission in the near future. As the economy turns around, it is mutually beneficial for ERMU and the City to promote local economic development and to help expedite local economic recovery. Two years ago, Great River Energy (GRE) changed their billing to a critical price time-of--use structure. This change shifts the risks of volatile cost of energy due to time-of--use to their customers. A number of years ago, Connexus Energy did implement a residential time-of--use rate (which has since been cancelled). This type of rate works well to discourage and curtail energy usage during critical price times if cost information is effectively communicated to the end user. In the case of ERMU, our rate design does not communicate this information to the end user. Part of communicating this is providing the customer with cost information to make informed decisions about when to use energy. But also, the rate design needs to pass on the cost associated with the critical peak time to the end user. Even if the customer is informed, the use habits may not change unless there are cost implications to the end user. To implement atime- of-use rate structure involves a significant investment in the metering and billing aspects of the company. And although it may not be economically feasible or publically acceptable to pass on these critical peak time-of--use prices, inevitably this is the direction the electric industry is heading. This will be driven partially by wholesale power costs and partially by legislation. It is important for ERMU to keep this in mind for future metering and billing upgrades. Customer education would be critical in implementing time-of--use billing. 2 Net Meterin~Land Backup Power Tariffs Elk River Municipal Utilities recently connected its first photovoltaic supplemented customer and has a few wind turbine supplemented customers. These customers have net energy billing so when their on-site generation exceeds their usage, the surplus is sold back to ERMU at the retail rate. With government tax credits and incentives, these types of installations will occur in greater frequency. In the future, there may be legislation that would require utilities to pay the customers a premium fee for the surplus energy transferred back to the system. Elk River Municipal Utilities also promotes its wind power program. In 2008, 0.24% of the total energy sales were made through this program. Elk River Municipal Utilities doesn't currently have any "backup" power customers. This would require the customer to have self generation that would be economically feasible to run 24-7. Or it would require the customer to have primary power from another utility. At this time ERMU does not have a "backup" tariff. This is something that could be addressed if the need should arise. We do have shared substation agreements with other utilities. The reimbursement for energy usage is dictated by contract. 3 Renewable Portfolio Standards and Carbon Legislation The State mandated renewable requirements do not directly affect ERMU. Our renewable requirements are covered by GRE through 2018 when our wholesale power contract with Connexus Energy ends. This will be considered as ERMU continues to research power