2018-025 ECA RCA Rate AdjustmentsDate: March 2, 2018 Report No. 2018-025
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Denton Municipal Electric Energy Cost Adjustment Rate (ECA) and Renewable Cost
Adjustment (RCA)
EXECUTIVE SUMMARY:
The ECA/RCA is set by the Public Utility Board (PUB) and approved by City Council. The
ECA/RCA is reviewed on a quarterly basis and adjusted as needed to recover the variable cost of
energy delivered to Customers and to maintain the Electric Department in a financially sound
position.
Staff will be providing several ECA/RCA balance strategies/options to City Council for review
and approval during the budget process.
BACKGROUND:
There are explanations of the three calculations involved in developing the ECA/RCA rate
charged to electric customers.
The ECA/RCA Balancing Account Calculation is calculated monthly to determine the total
amount of ECA/RCA revenue that has been collected from customers. This balance is used to
determine if the ECA/RCA rate should be adjusted. The calculation is below:
The ECA/RCA Balancing Account is calculated using the following formula:
ECA/RCA Balancing Account = (actual plus projected ECA/RCA revenue earned from
customers) minus (projected energy cost)
The actual ECA/RCA Rate is computed with the Energy Cost Adjustment Calculation. The
calculation is based on projected energy cost plus the balancing account described above divided
by the projected kWh sales to customers. The calculation is below:
ECA/RCA Rate applied to Customer kWh Usage = [(Projected Energy Cost) plus
(ECA/RCA balancing account)] divided by (projected kWh sales)
The amount charged to customers on their bill for ECA/RCA is called the Energy Cost
Adjustment Charge Calculation. This calculation takes the customer’s monthly kWh usage
and multiplies it by the ECA/RCA Rate which results in the dollar amount each customer is
charged for energy. The calculation is below:
The dollar amount on each Customer’s bill for energy usage = monthly kWh usage by
customer times the ECA/RCA Rate.
Date: March 2, 2018 Report No. 2018-025
As of January 31, 2017 the ECA/RCA Balancing Account has a balance of $7.3 Million. During
the FY 17-18 Budget process, staff discussed with PUB and City Council allowing the balance in
this account to accumulate in order to pay off debt service or fund capital projects.
The current ECA/RCA Rate Schedule states that “The DME General Manager or his/her
designee shall calculate the ECA/RCA Balancing Account monthly. In the event that the
ECA/RCA Balancing Account calculated during the last month of each fiscal quarter (December,
March, June and September) is over/under collected by $5,000,000 or more during the next
quarter, the DME General Manger or his/her designee may recommend to the PUB any action to
maintain DME in a financially sound position.”
During the budget process for Fiscal Years 14-15 through 16-17, the Public Utility Board and
City Council approved the strategy to over-collect the ECA/RCA and use the over-collection to
pay down debt.
In September 2015, $6.5 Million was used to pay down Texas Municipal Power Agency
(TMPA) Capital Appreciation Bonds (CABS) Debt Service along with $3.5 Million from
Reserves. In Sept 2016 $12 Million was used to pay down callable debt.
DME’s share of the TMPA CABS Debt Service was $64 Million paid out over five years.
The first payment was made in 2013 for $11.2 Million and paid out of operating reserves.
The second payment was made in 2014 for $12.5 Million and paid out of operating
reserves.
The third payment was made in 2015 for $13.4 Million and was financed with General
Obligation Refunding Bonds which will be paid off in 2024.
The fourth payment was made in 2016 for $13.4 Million -- $6.5 Million was paid with
ECA/RCA over-collection, $3.5 Million was from Reserves and $3.4 Million was
financed with General Obligation Refunding Bonds which will be paid off in 2024.
The fifth payment was made through demand payments in Fiscal Year 2016-2017.
DISCUSSION:
ECA/RCA’s are used to smooth extreme fluctuations in power supply related cost. When the
balance is over collected, the ECA/RCA balance can be used to cover power supply cost when
cost are high. If the ECA/RCA balance becomes under collected, it can be recovered over time
by making relatively minor adjustments to the ECA/RCA rate as opposed to large swings if there
were no ECA/RCA.
CONCLUSION:
Staff will be providing several ECA/RCA balance strategies/options to City Council for review
and approval during the budget process.
ATTACHMENT:
Electric Rate Schedule ECA/RCA
Date: March 2, 2018 Report No. 2018-025
STAFF CONTACT:
Antonio Puente, Director of Finance
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