Presentation is loading. Please wait.

Presentation is loading. Please wait.

Contributions In-Aid and Development of Fees Utility Financial Solutions Mark Beauchamp, CPA, CMA, MBA President 616-393-9722.

Similar presentations

Presentation on theme: "Contributions In-Aid and Development of Fees Utility Financial Solutions Mark Beauchamp, CPA, CMA, MBA President 616-393-9722."— Presentation transcript:

1 Contributions In-Aid and Development of Fees Utility Financial Solutions Mark Beauchamp, CPA, CMA, MBA President 616-393-9722

2 Contribution in Aid Polices Many policies are not based on economics but on policies that connect customer’s without considering the financial impact to existing rate payers. Examples: Investing $15,000 to connect a residential customer Using a times revenue policy for a 15 mW Ethanol plant Not contributing to expansion of hospital that will increase electrical use

3 Example of Electric Line Extension Policies Based on Annual Revenues Some charge the difference between underground and overhead Some contribute a per foot maximum amount Some provide it free of charge

4 Industry Trend Many Utilities are moving toward policies that places a value on a customer Considers the contribution margin of the customer Risk of investing money to serve the customer Objective Investment to connect customer is a good investment for the utility and will benefit existing customers of the system

5 Customers Contribution per kWh

6 Utility Investment per kWh

7 Utility Investment per kWh by Load Factor

8 Contribution Margin - Subdivision

9 Key Assumptions Discount Rate Typically equal to Rate of Return Target for Utility Length of time to recover investment Based on perceived risk of investment Residential 5-9 years Commercial 4-5 years Industrial 3 years

10 Perceived Risks Company going out of business Facility burning down Co-Generation Wind Mills/Solar/Fuel Cells Alternative fuels

11 Fees NSF Check Charge Late Payment Charges Disconnect/Reconnect Truck Rental Charges Pole Attachment Fees

12 Biggest Problem with Fees Once set not looked at again for years Results in drastic changes Set-up a program and set fees annually

13 Pole Attachment Fees Cable TV Companies were typically subsidized by the electric utility and allocated the cost of 1 foot in the center of the pole - Annual rates were typically under $5.00 per year Telecommunications Act allows utilities to remove the subsidy and charge the common costs of the pole to all attachments – Annual rates range from $15.00 - $30.00 FCC has a formula to help determine the pole attachment fees APPA has a program you can purchase to determine fee Communication companies have substantially increased the number of attachments to utility poles Review and audit the number of attachments

14 Late Payment Fees Can vary by utility – Need to have sufficient incentive for customers to pay on time Some utilities have a fixed Late Payment charges that does not vary Some utilities use discounts if bill paid on time – i.e. 10% discount Discounts cause utility to lose money when discounts are applied to fuel adjustment charges Most common are: 10% late payment charged only once on outstanding balance 1.5% - 2.0% late payment charges on outstanding balances

15 Calculation of Disconnect/ Reconnect Fees Issues: Should you charge customers when doing electrical work on their homes? Should you charge customer for disconnection when initiated by utility?

16 Return Check Charge Issues: You may be charged a discounted fee from the bank for a customers return check Most Utilities determine charge by surveying area businesses

17 Vehicle Fees Step one: Calculate per hour costs for Annual/Fixed costs Step two: Calculate per mile costs for variable costs Step Three: Add Administrative/Overhead Costs A Number of Assumptions Must be Used

18 Vehicle Rental Fees – Step One:

19 Vehicle Rental Fees – Step Two

20 Vehicle Rental Fee

21 Pricing of Fees and Charges Ralph Carlson APPA Business and Financial Conference Minneapolis, Minnesota September 17-20, 2006

22 SMUD Fee Policy Reflect costs incurred Updated each year Average costs for three most recent years Proposed changes reviewed by Rates Policy and Procedures Committee

23 Categories of Charges Connection Charges Line Extensions Basic Service Facilities Special Facilities Charges Non-standard (value-added) equipment Deposits and Fees

24 Connection Charges Line ExtensionsAll Customer ClassesNo Charge Commercial New Construction* <3 mW of connected load at secondary or primary voltage Per kW of service panel rating or service panel upgrade $40.00 Commercial Upgrade Service >3 mW of connected load, dedicated facilities and all transmission and network level service Estimated cost of service Site Specific Meter and Service Standard installation for existing panel and meters already in service NoneNo Charge Residential New Construction All new residentialPer new residential lot$1,050.00

25 Special Facilities Option 1Option 2Option 3 Monthly Lease with Advance 10-year Renewable Lease One-Time Payment Average Life Minimum Advance per $1,000 Monthly Cost per $1,000 Cost at beginning of each 10 th year per $1,000 Cost per $1,000 10-14$200$24.15$2,148$4,375 15-19$150$17.25$1,534$3125 20+$100$12.94$1,151$2,344 Transmissio n 20+ $100$11.64$1,036$2,109

Download ppt "Contributions In-Aid and Development of Fees Utility Financial Solutions Mark Beauchamp, CPA, CMA, MBA President 616-393-9722."

Similar presentations

Ads by Google