GVEA recommends shifting costs from
industry to small customers

Regulatory Commission of Alaska, Question 15: Please describe how this general rate filing meets GVEA's ratemaking objectives.

Brian Newton, Answer 15: Certainly. In this filing, GVEA proposes to increase its revenue requirements and continue its current Operating Times Interest Earned Ration (OTIER) of 1.79 in order to maintain financial stability and improve the financial integrity of the utility. The revenue increase is achieved through a rate design that considers the results of a cost-of-service study, incorporates the cost causer-cost payer philosophy, and is fair and equitable under the circumstances currently being faced by the utility and its members. As discussed in more detail in the testimony of GVEA Witness Tomczyk, the results of the cost-of-service study indicated that residential customers' rates were under-collecting their representative share of the utility's costs by 13.2 percent, and the large industrial customers' rates were over-collecting their representative share of the utility's costs by 4.7 percent. Moving to rates that would reflect the "true" cost-of-service was determined by the GVEA Board and management to be too drastic at this time, given the economic circumstances currently faced by members. Consequently, the Board concluded that a balancing of ratemaking principles was in order and decided that a gradual moving towards rates that reflect the cost-of-service (i.e., the cost causer-cost payer principle) was more appropriate for purposes of setting rates in this general rate filing.

Testimony of Brian L. Newton, GVEA President and CEO
to the Regulatory Commission of Alaska
September 30, 2008
Revenue Requirement and Cost-of-Service Studies, filed by GVEA, Tariff Revision TA190-13

Golden Valley Electric Association 2008 Electric System Rate Study
Current Cost of Service and Proposed Rates (Draft)

Residential Current Cost of Service Proposed
Customer Charge ($/Month) $15.00 $20.87 $17.50
Energy Charge ($/kWH)(1) 0.11389 0.08547 0.08134
Fuel and Purchased Power Charge ($/kWH)(1) 0.08877 0.13290 0.13007
Percent Rate Change - Normalized 2007 TY Results   13.7% 7.0%
       
GS-1 Small Commercial Current Cost of Service Proposed
Customer Charge ($/Month) $20.00 21.74 $20.00
Energy Charge ($/kWH)(1) 0.11189 0.07730 0.08090
Fuel and Purchased Power Charge ($/kWH)(1) 0.08877 0.13282 0.13007
Percent Rate Change - Normalized 2007 TY Results   6.4% 6.4%
       
GS-2 Large Commercial Current Cost of Service Proposed
Customer Charge ($/Month) $56.38 $32.38 $30.00

Energy Charge ($/kWH)(1)

     

0-15,000 kWH

0.09927 0.01391 0.04244

Over 15,000 kWH

0.07762 0.01391 0.04244
Fuel and Purchased Power Charge ($/kWH)(1) 0.08877 0.13205 0.13007
Demand Charge ($/kWH) $9.03 $19.99 $10.24
Demand Ratchet 70% 70% 70%
Percent Rate Change - Normalized 2007 TY Results   3.0% 3.0%
       
GS-3 Industrial (3) Current Cost of Service Proposed
Customer Charge ($/Month) $180.00 $306.02 $300.00
Energy Charge ($/kWH)(1) 0.06495 0.01340 0.02057
Fuel and Purchased Power Charge ($/kWH)(1) 0.08877 0.12914 0.13007
Demand Charge ($/kWH) $14.06 $17.04 $16.00
Percent Rate Change - Normalized 2007 TY Results   -5.1% 0.0%

(1) Adjusted from 2007 TY cost of service levels to be consistent with June 1, 2008 COPA charge of 8.877
(2) Existing GS-2(1) and GS-2(2) classes combined
(3) Existing GS-2(3) customer class.