TVIC Meeting Pricing Committee August 22, 2017 Rate Change Update Cass Larson DSI Impacts Mike Hynes September 2017 TMFC Mike Hynes Rate Adjustment 2018 Mike Hynes FCA Proposals For Discussion Further Consideration Chr?itlogiltleJnBeEck/ General Service Proposed Revisions Mike Hynes Ideas on Addressing DER Discussion Rate Adjustment Discussion TVA Restricted Information - Deiiberatlve and Pre-Dedslonal aw i2 ?1.1 Rate Change Update WEPnc-mmeug-kgusn? 2'31? Customers Committed To DER 10 0 to 100?:- Walmart Gill GO 9?3 renewable - 87' companies to date 83* MARS A - Publicly stated renewable amzon mm Stated Renewable energy goals, but not Energy Goals w- . - Committed to accelerating . 154% ESESESLES procurement of wund and at 'f ENTER Utility scale solar energy Gal'mmugo?mmu i - 160+ members . Goal of growrng corporate 3W BA demand for renewables t. - 58 Signatures to date (Em Customers pursuing DER with or without supporting economics. TVA Restricted Information Deliberative and Pre-Decisional Privileged mammary-mi: an? I J- Bill Comparison: Electricity vs. Cell Phones While an electric bill is still driven by customer usage, cell phone bill charges 5 have transitioned to ?xed. TVA Restricted Information - Deliberative and Pre-Decislonal Privileged lemma-Luau? 2017 l5 Solar Installed Costs Continue To Decline - Solar energy is the fastest growing $333: distributed energy source in the valley (sum . . . . 3? ;m 04201210 supported by declining Installation i 633 012016 -, costs across all levels (residential, ?5 523 21% reduction . . . 55 i in: {a commerCIal, utIlIty scale) SJFF ii? jrEssentlally all "normal? large '.HF 1.3: commercual customers would benefit I . 1? l'l Hal ii economically from some amount 72:. a, m. 2512:. a m. a, 2r on-sute solar Installations 35d! Coup Ohm [Fit and Asa-hm and-uni ad Nu Pratt: - Proposed rate changes should :Iluladh provide improved economic signals that would reduce uneconomic bypass by about half TVA Restricted Information Deliberative and Pre-Dedsmnalz?rmmed aw i6 More Accurate and Modern Pricing Keep rates low if"? Ensure fairness in rates Bring more bill stability Allow companies and consumers to make more informed renewable energy decisions Stimulate economic growth TVA Restricted Information Deliberative and Pre-Decisional Privileged 2017 I 7 The Rate Change Letter What 3: Why Rate Change Fuel Cost Adjustment What: Reduce Standard Servrce Energy and a new What: Change the fuel cost adjustment allocation methodology is more wholesale ?xed-cost recovery component - sewice charge precrsely allocate luet to large MS class customers Whit: Improve the structure ?0 be more re?ective 0f actual Why: Proportronatly distnbute fuel costs as they are incurred costs and ensure rates reman as low as leasible Hydro_3dministration GO 5? (LGeneral Service Rates What: Move the hydro allocation adlustmenl ?0 the arilustment What: Decrease wholesa'e 688 680 and GSD rates Increase 83 andlor addendum @133, M80 and M80 rates Whit! Simp'ities the administrative process and allows the credit Why: Increase competitiveness of the generai servtce customer class 1 amounts to be balanced as re?ected by sales 9 Align Resale Rates What: Move the Environmental Adjustment Into the base rates on a What: Change resale rates to re?ect changes made at wholesale dollar for dollar basns Why: Enable LPCs to continue operating on a ?nancially sound basis Why: the rate adjustment process 91119,! ?implification Items What: Eliminate or phase out billing What: Includes changes to the Outdoor Lighting schedule BCD consolidation Why: Create and further streamline the billing process and improvements to the E88 reporting I Why: Simplily the administration and reporting process for TVA and LPCs WA Restricted Information - Deliberative and Pre-Decisional Privileged amateurs-Must: am i a Collaboration with Local Power Companies Rate Structure Evaluations - 1 penny or less Rate Case for Change Structure - Small Commercial LPC rates only Evaluat'o" - Optional end?use wholesale rates . The market is changing Case for Current . Reduction to on-peak only 3 - DER presentsachallengeto our Change State business model Allocate grid servnce charge to LPC 2 on top 200 hours - Current rates accelerate the issue - Change is needed at wholesale and retail and we need to move Collaboration Current State together - Focus has been on the energy reduction and grid service charge - General support on the direction - Mixed opinions on details - Have not discussed several other components in detail TVA Restricted Information - Deliberatlve and Pre-Declsional Privileged l9 Progress To Date Evaluating Rate Customer Structures Negotiations ?o?o?e-H The Case for Rate Change February Change Letter Board Approval WA Restricted Information Deliberative and Pre-Decisional Privileged mange-mm: me i: DSI Impacts WIC -m122. 2017- Direct Service Rates manna, TVA is committed to working 2012 2013 2014 2015 2016 . 1mm 0.04945 0.04703 0.04439 0.04171 0.03737 I Ic- ?rm 0.07391 0.0745 0.06758 0.07260 0.0735] . our progress over the last 5 years demonstrate commitment to competitive industrial rates - Direct Serve Commercial 5007000 GS DSI rates have essentially been Effoctlve Rate Comparison sow I flat. - Direct Serve Industrials rates MS DSI have decreased ~20% since arm 10:: 2:015 1010 2012 in partnership with TVIC, TVA to ensure large customers remain competitive TVA Restricted Information Deiiberative and Pre-Decisional Privileged macaw-Alma: 2017 . Discussion Today - Results FY13 FY19 Analysis Assumptions: 5 i - Assumes DSI - Class TMFC FY18F - TMFC FY18 Sept. forecast Rate Adjustment - Rate Adjustment FY2018, FY2019 TMFC Changes TMFC Changes - TVA Proposal - 2019 Rate Change TVA 2019 Rate change Proposals Total i TVA will demonstrate that the changes being discussed will not adversely impact industrial customer competitiveness . .. -- TVA Restricted Information Deliberative and Pre-Decisional Privileged 201? :13 Composite Impact - Results Updated_8/21 {251} Composite Impact FY2019 With All Changes Effective Rate With Fuel Base Rate Fuel Rate Fuel Rate LGS Contract 94 Incentives Fuel Base Rate increase?) Decrease (2) Changes (3) Changes (4) Demand (5) Net Change 2 2 5 5.00% 43.00% 4.00% 0.40% 1.00% 0.57% 6.5 2 4.5 5.00% 43.00% 4.00% 0.40% 1.00% 0.12% a 2 4 5.00% 43.00% 4.00% 0.40% 1.00% .0 40% 5.5 2 3.5 5.00% 43.00% 4.00% 0.40% 1.00% 4.02% 5 2 3 5.00% 43.00% 4.00% 0.40% 1.00% ?1 76% (1) Base increase - based on TVA's Long Range Finanoal Plan (2) Based on September 2017 TMFC and forecast (3) Based on TVA's Rate Change Proposals (4) Assumes 100% move [0 Parity on L63 (5) Reflects a MC View of the contract demand charge. not necessarily TVA's View of contract demand charges Even with some worst case assumptions, overall changes relative to 2017 are still favorable to. Large. industrial. customers WA Restricted Information Deliberative and Pre-Decisional Privileged 22. 2012 . September 2017 TMFC mammal: Amt!) 2017 Fuel Forecast per September TMFC Total Fuel Cost (Wholesale) - Histmy Forecast .. 21.5? . A 113021562150 21.53 22-11 HA Horn $5 $01 +Awr33c PC 2 1 191719- 19-334 13-37 .. 18.74117-971736! 11.941190173131314 1. 18m 1 ,1 21 r.15 1' 5 :1 1; 1i)! if 6817.181733?szsnin?al??l?l 17.1H5TVA Restricted Information Deliberative and Pre-Decislonal Privileged mammary-mm am Is Fuel Forecast per September 2017 TMFC Historical and Forecast TMFC If you pay 6 cents, fuel IS Month 12 ?um End 2017 :2 man End man l1 Fuel Ch 0 15m .0426 42m 30 A: of your total bIll Oct 2025: 10?8? ?0347 Nov 2 039: 1 me .o 311 15 3-. Dec. 2196c 1718: 41 1713 21 111. Jan 2111: 116% -0 3-15 16 Feb 1935: 1 7m 4: 260 13 111. Ma! 1 799: 1 72R -0 .4 396 11152: 1 720: 1:12 7 1-1 May 1388: 1 7118: 411-10 -7 4% Jm 13556 1731: 013-1 72". am 2 07011 1 was6651?. 1 716: .o 152 -8 1% Am 19:51: 17131: 41252 13 as Fudunponlonalb?l 81301015013012} Nethnpact - . . - - . . .3996 am. .395 - - 35.? 4 6% 00% .4 6% Effective Rate Fuel Fuel as a 96 of ?0?5 ?52% 0 01? ?52? 7.00 2.00 28.6% 45'. -5915 0 cm 599. sov- -6 5-. as -a 5% 6.00 2.00 33.3% 55-1. me our. 7215.00 2.00 40.0% 11) Based on WA's 5mm 2017 armorecasl 4.00 2.00 50.0% 3.50 2.00 57.1% Forecast TMFC. results in favorable forindustrials MCPra'IgMeemg 4.119114122301111: TVA Restricted Information Deliberative and Pre-Decisional Privileged Fuel Forecast per September 2017 TMFC Fuel Impact - Based on September Forecast Effective Rate Fuel Base Rate Fuel Rate B4 Incentives Fuel Base Rate Increase Decrease Net Change 7 2 5 0.00% 43.00% 3.71% 5.5 2 4.5 0.00% 43.00% 4.00% 6 2 a 0.00% 43.00% 4.33% 5.5 2 3.5 0.00% 43.00% 4.73% 5 2 3 0.00% 43.00% -5.20% (1) Based on TVA's September 2017 TMFC and forecast Forecast TMFC results in favorable bill impacts for industrials TVA Restricted Information - Deliberative and Pre-Decisional anileged mammary-Amman Rate Adjustment 2018 Rate Adjustment For FY2018 As communicated at the All-Customer Meeting: - Anticipated to be consistent with prior year approaches - Shortly after TVA Board decides FY2018 budget, TVA will provide base rates to IAMs for communication with customers WA Restn'cted Information Deliberative and Pre-Deosmnal Privileged mammary-m2: 2011 20 I FY2018 Base Rate Adjustment Impact Base Rate& Fuel Impact - Composite Change Effective Rate With Fuel Base Rate 84 Incentives Fuel Base Rate increase (1) Net Change 7 2 5 2.50% 1.79% 6.5 2 4.5 2.50% 1-73% 6 2 1: 4 2.50% 1.67% 5.5 2 3.5 2.50% 1.59% 5 2 3 2.50% 1-50% (1) Base Increase - assumption based on TVA's Long Range FinanCIal Plan Potential TVA rate adjustment impact based on history and anticipated rate action 1 TVA Restricted Information - Deliberative and Pre-Decisionai Privileged melanomas-m2: 2017 I21 Base Rate Adjustment Fuel Impact Base Rate& Fuel Impact - Composite Change Effective Rate With Fuel Base Rate Fuel Rate B4 Incentives Fuel Base Rate Increase (1) Decrease (2) Net Change 7 2 5 2.50% 43.00% -1 93% 6.5 2 4.5 2.50% 43.00% -2.27% 6 2 4 2.50% 43.00% 2.67% 5.5 2 3.5 2.50% 43.00% 3.14% 5 2 3 2.50% 43.00% -3 70% (1) Base Increase - assumption based on TVA's Long Range FInancuaI Plan (2) Based on TVA's September 2017 TMFC and forecast The combination of base rate fuel forecast remain favorable for large industrials TVA Restricted Information - Deliberative and Pre-Decismnal Privileged WPme-mtn 2017 I 22 FCA Proposals Under Consideration meanness-mm 2m 21 Fuel Cost Proposals Why Pursue? Dispatch cost used in RCA calculation. To more accurately reflect who is causing the cost to be incurred. Class Allocations Ensure each class is paying their fair share of fuel . I I related costs. TVA Restricted Information Deliberative and Pre-Declslonal Privileged 2cm .2. Fuel Cost Changes Under Consideration Resource Cost Allocation (RCA) How it works Changes to Consider A Dispatch Cost Used in Resource Cost Allocation (RCA) - Top 20 MW of Stack Current FCA Methodology Dispatch Cost Used in Resource Cost Allocation (RCA) - Top 100 MW of Stack Fuel Cost Class Allocations: - Standard Service, - General Service BCDs, - Manufacturing 8005 Fuel Cost Class Allocations: - Standard Service, - ALL BCDs Continuous improvement in Fuel Allocations from Average Cost to Top 100 to Top 20 TVA Restricted Information Deliberative and Pre-Decisional Privileged 25 Resource Cost Allocation How it Works 570 25,000 - system is dispatched based on $60 A economics. Using least cost principles. mg - RCA methodology recognizes changes in 540% hourly dispatch cost. 10.000 $20 a: . a 5.000 3 - RCA methodology recognizes differences In 51? 3 0 class level consumption patterns. 7320,? mm mm mm 7/27/54 - RCA methodology allocates fuel cost to as . . . an classes based on a load weighted recognition RCA ?3:555? sagas. rotatimeragei Of hourly dispatCh 00513. Total Load (M'Wl'l) 2,474,397 767,051 3,241,445 Resource (201(5) $84,335,046 $24,187,392 - RCA is used as an energy cost allocator mam 77m 213% mm a I Allocatnr . Within TVAs annual cost of serwce study gram 52m ?m . Average Rat RCA ensures proper cost allocation to those mif??ri; 523-97 523-97 gustomers. that cause the fuel cost to be incurred glam; 50-44 we 50-00 TVA Restricted Information Deliberative and Pre-Declsional Privileged immune?mm zen iza Top 100 MW Vs Top 20 MW Large manUfaCtU ring There are not signi?cant differences in moving to .r a Top 20, because there has 5, Top 100 . not been large dlfferences ?Top 20? - in Top 20 Top 100. 53900 . sum 5 . 52500 $1950 a i 531W . - . 52190 E51300 a. If .r ., swan ?51750 {If . . 51700 5:100 $1650 I. 51611? I m? were Jun-16 Aug-15 acme Dena fen-1i" awn tun-u] tam-d) MS Cuslmn [PE-based] MSCuslml?s TVA Restricted Information Deliberative and Pre-Decisional Privileged am In Top 100 MW Vs Top 20 MW Recent History . Dispatch Used in RCA calculation. . Historically, there have not 1 been signi?cant differences TOD 100 - more TOP 20 {i volatile than Top 100 TVA Restricted Information Deliberative and Pre-Decisional privileged ?BMW-man" l2? WEI Top 100 MW Vs Top 20 MW Standard Service There are not signi?cant differences in moving to TOP 100 Top 20, because there has ?Top 20,. not been large differences Top 20 Top 100. 1.. Ill . 521m arm-.1 i . I r? 5205:: "t I. . - 520m ,3 '5 -. in? I hil- J??51950 u- ?r ,i lit] {1 519.00 I. ?Illr 1 ?l {?lthy Ii?urn '$17.00 516.50 51600 Apr 15 Jun 15 M516 0:116 Dec 16 Feb-17 Apr 17 sum: mun] msslavP-hwdl SS NSC-based! SSIBVP based: TVA Restricted Information - Deliberative and PreDecisional Privileged mpnagqu-mlv 2m? 129 Separating into LGS LMS i 0 Class Allocations If BCD was separated .. into LGS LMS, then there would be minor changes to LGS LMS fuel rates. - LGS would have a slight increase - LMS would have a slight decrease ?-ws Ms MOI ?a.r.s um TVA Restricted Information -- Deliberative and Pre-Declsional' Privileged I30 Combination of Both Recommendations Moving to a Power Supply Cost allocator (within RCA) and separating BCDs into Large General Service Large Manufacturing Service would have minimal impact on all rate classes but improve cost recovery. Combination of Changes LPC Standard Service General Service Customers Manufacturing Service Customers Average Impact - 5 Yrs. $0.08 $0.16 -$0.23 Impact (5) - 5 Yrs. I 54,098,658 6,215,661 47,882,997 Average Fuel Cost $21.50 $20.66 $20.43 Change In Fuel Cost 0.36% 41.77% Analysis conducted over April 2011 March 2017 TVA Restricted information Deliberative and Pre-Decisional Privileged Fuel Cost Proposals Move from BVP to P80 at the time of the wholesale rate change RECOMMENDATION Modi?cations to Fuel Cost Allocation Classes: - Standard Service, - General Service BCDs includes TGSA - Manufacturing 8003 includes TGSA TVA Restricted Information - Deliberative and Pre-Decisional Privileged Ra?a?ansxs w: 20" I32 Combination of Fuel Related Changes TMFC Wholesale Rate Change Proposal Impacts Effective Rate With Fuel Fuel Rate B4 Incentives Fuel Base Rate Changes (1) Net Change 7 2 5 4.90% -0.29% 6.5 2 4.5 4.00% 0.31% 6 2 a 4.00% -0-33% 5.5 2 3.5 4.00% 036% 5 2 3 4.00% 040% (1) Based on proposals assomated with TMFC 8. FY2018 Wholesale Rate Change The combination of recommended fuel charges are favorable to large industrials TVA Information Deliberative and Pre-Decisional Priviieged meantime-Mamas: :33 General Service Proposed Revisions 2m? 5" General Service Proposals Why Pursue? EVALUATIONS revenue to cost relationship Guiding Principles Cost Based Rates To more accurately reflect Minimize Uneconomic Bypass Bypass by these customers shifts extra costs to non- participants WA Restricted Information - Deliberative and Pre-Deosional Privileged at: swam?mu am 135 History LGS Above Cost Parity Revenue to Cost Comparison - Fiscal Year 2013 Revenue to Cost Comparison - Fiscal Year 2015 s90 - i'iHJ Sid Service 0.99 551.01 580 mi 6 ecu 1.17 ~s'5099 65031.19 Siamese 1' cacnul ucacnua .. Gamma - 65:01.23 . SrdSemce 0.99 55 1-00 . . 1C ?59 HBCD 1.05 Macomf.nacno.9s m'?mu? 550 ado 0.99 :50 0 HBCO 1.5&0 $50 S90 $40 $50 S70 13'! 595 Revenue to Cost Comparison - Fiscal Year 2014 $90 I 63mm in Cm? Revenues collected from large mm mm general service customers .. 0. have exceeded costs allocated m? to them for man ears . 27540 $50 $60 $70 580 $90 ?ital TVA Restricted Information Deliberative and Pre-Decisional Privileged mammals?mm 201? I 36 General Service Cost of Service FY2016 Revenue to Cost Comparison - Fiscal Year 2016 $90 a? . {If 55 1.03 . x" if; $30 ., BCD 1.15 Sg 1.01 3 $70 - (3 1.19 we) ?55 1.01 ?on frLarge general servrces customers paid $46 $50 ?$50-97 5?30 0-90 million or 18% more than y/ BCD 0.95 their costs In FY 2016 $40 I 1 1 . 1 $40 $50 $60 $70 $30 $90 Unit Cost (s/MWh) TVA Restricted Information Deliberative and Pre-Declsional Privileged Immune-Mamet: :37 Achieving LGS Parity Large General Service Class Four Approaches for achieving revenue - Sales are $299 million for FY 2016 *0 cost Parity Recent prior years sales ranged 1- PamWWIth 805$ allocated to from $285 million to $347 million standard same 2-. Half parity with costs: allocated to standard service - Customers pay rates ~18?/o above costs - Recent prior years excesses . . - - ranged from 15% to 31% based on 3. Full parlty WIth costs allocated to multiperspective cost of service standard and manufacturing studies 4. Half parity with costs allocated to standard and manufacturing - Cost of parity is approximately $46 million Pricing guiding principles have at the core ?Cost based rates? we Restricted Information - Deliberative and Pre-Decisional Privileged mammary-m2: 2017 . Revenue To Cost Parity Full, Paid by ss LMS Revenue to Cost Comparison - Fiscal Year 2016 $90 - 55 1.$60 0.4% increase standard service and manufacturing service rates $40 $50 $60 $70 $80 $90 Unit Cost TVA Restricted Information Deiiberative and Pre-Decisional Privileged am I39 Revenue To Cost Parity Half, Paid by ss LMS Revenue to Cost Comparison - Fiscal Year 2016 $90 55 1.03 $80 .v - 3 570 BCD 1.10 .33) 55 1.02 . 5 $50 0.2 /0 Increase . standard service $50 ego-?65? 8CD 0.90 and manufacturing servrce rates /,xchoo.$40 $50 $60 $70 $80 $90 Unit Cost TVA Restricted Information Deliberative and Pre-Decisional Privileged MPmm-wm 2W 1 *0 General Service Proposals Reduce rates to allocate to Standard Service and LMS ?Amount to be determined RECOMMENDATION Target reductions in revenues to On-peak energy charge and Block 1 off-peak energy charge TVA Restricted Information - Deliberative and Pre-Decisional Privileged mi! i LGS Proposed Changes - Illustrative 3 L65 PrOposal Impacts Effective Rate With Fuel L68 B4 Incentives Fuel Base Rate Changes (1) Net Change 7 2 5 0.40% 0.29% 5.5 2 4.5 0.40% 0.28% 6 2 I 4 0.40% 0.27% 1' 5.5 2 3.5 0.40% 0.25% i 5 2 3 0.40% 0.24% (1) Assumes 100% movement to parity Assumes 100% parity movement Even under worst case assumption on LGS, impacts to large industrials is minor WA Information Deliberative and Pre-Decisnonal Privileged mammary-wanna: I u! Proposed BCD Pricing Changes Intent - intended to make industrials (large customers) uncompetitive - 151g intended to discourage industrial expansions - Intended to reflect cost of providing service better pricing) - Intended to reduce the uneconomic DER penetration across the Valley - Intended to reduce the risk of stranded cost and cost shifting - Intended to prevent subsidies from non-participants to DER participants proposal was intended to meet the guiding principles of rate design. TVA Restricted Information - Deliberative and Pre-Decnsronal Privileged mam-1mm Mat-15122.29" :13 Ideas on Addressing DER 2cm Ideas on Addressing DER - Contract demand charge Presented in June July 2017 TVIC meetings - Further differentiate declining block energy rates - Blocked demand charges . Modification to excess taking pricing - Combination of approaches There are MANY different ways to improve pricing for BCDs. TVA Restricted Information Deliberative and Pre-Decisional Privileged 2917145 Contract Demand Charge Simple and straight forward Reflects system costs especially in cases where TVA was requested to build to serve customer - Capacity Transmission Bill impacts - Minimal, as previously demonstrated TVA has indicated willingness to consider a reset of current Customer contract demands - no further discussions have taken place at this time Contract demand charges are one way, which TVA thinks meets rate design objectives TVA Restricted Information - Deliberative and Pre-Decisional Privileged 2017 :85 Further Declining Block Rates - Illustrative only Increased complexity - Examples include First 100 hours use of On-peak Off-Peak MSD On-Peak Max On-Pk Energy Off-Pk Block 1 Off-Pk Block 2 Off-Pk Block 3 Summer 9.98 1.56 0.05291 0.02855 0.00265 0.00208 Winter 9.05 1.56 0.04179 0.03071 0.00265 0.00208 Transition 9.05 1.56 0.03156 0.03156 0.00265 0.00208 MSD On-Peak Max Energy 31 On-Pk Energy 82 Off-Pk Block 1 Off-Pk Block 1A Off-Pk Block 2 Off-Pk Block 3 Summer 9.98 1.56 0.07291 0.03291 0.04855 0.00855 0.00265 0.00208 Winter 9.05 1.56 0.06179 0.02179 0.05071 0.01071 0.00265 0.00208 Transition 9.05 1.56 0.05156 0.01156 0.05156 0.01156 0.00265 0.00208 Bill Impacts - Would have to be determined, but would likely favor high load factor customers over lower load factor customers Increased number of blocks add complexity (billing, rate schedules, communication) TVA Restricted Information Deliberative and Pre-Deomonal Privileged 20" Blocked Demand Charges - Illustrative only Increased complexity - Examples include First 100 hours use of On?peak Off-Peak MSD On-Peak Max On-Pk Energy Off-Pk Block 1 Off-Pk Block 2 Off-Pk Block 3 Summer 9.98 1.56 0.05291 0.02855 0.00265 0.00208 Winter 9.05 1.56 0.04179 0.03071 0.00265 0.00208 Transitlon 9.05 1.56 0.03156 0.03156 0.00265 0.00208 MSD Orr-Peak Bl On-Peak 32 Max On-Pk Energy Off-Pk Block 1 Off-Pk Block 2 Off-Pk Block 3 Summer 11.98 9.98 1.56 0.03291 0.00855 0.00265 0.00208 Winter 10.86 9.05 1.56 0.02179 0.01071 0.00265 0.00208 Transition 10.86 9.05 1.56 0.01156 0.01156 0.00265 0.00208 Bill Impacts - Would have to be determined, but would likely favor high load factor customers over lower load factor customers Blocked demand charges can be used to collect ?up-front costs? in Block 1 WA Restricted information Deliberative and Pre-Decisional Privileged mr?mlm- mum" =48 Modifications To Excess Demand Pricing improper pricing signals Base Charges Customer Charge $1,500 per delivery point per month Administrative Charge: $350 per delivery point per month Demand Charges: Summer Period Onpeak Demand 58 72 per kW of onpeak billing demand per month. plus Maximum Demand $1.43 per kW per month of maximum billing demand. plus Excess Demand $8.72 per kW per month of the amount. If any. by which the customer's onpeak billing demand exceeds its onpeak contract demand or (2) the customer's offpeak billing demand exceeds its offpeak contract demand. whichever is higher. Consumer Behavior Lower excess demand rates may result in unintended consequences TVA Restricted Information Deliberative and Pre-Decistonat Privileged mammals-m2: am I *9 Combinations Of Approaches Complexity no more than increased number of block rates Off-Pk Block 1 Off-Pk Block 2 Off-Pk Block 3 MSD On-Peak Max On-Pk Energy Summer 9.98 1.56 0.05291 0.02855 0.00265 0.00208 Winter 9.05 1.56 0.04179 0.03071 0.00265 0.00208 Transition 9.05 1.56 0.03156 0.03156 0.00265 0.00208 MSD On-Peak Max Contract Demand On-Pk Energy 81 On-Pk Energy EOff-Pk Block 1 Off-Pk Block 2 Off-Pk Block 3 Summer 9.98 1.56 1.27 0.07291 0.03291 0.02855 0.00265 0.00208 Winter 9.05 1.56 1.27 0.06179 0.02179 0.03071 0.00265 0.00208 Transition 9.05 1.56 1.27 0.05156 0.01156 0.03156 0.00265 0.00208 Bill Impacts Would have to be determined, but would likely favor high load factor customers over lower load factor customers Combination approaches add complications (billing, rate schedules, communication) isu TVA Restricted Information - Deliberative and Pre-Decisional Privileged Contract Demand Charge Illustrative ONLY LGS Contract Demand Charge - ILLUSTRATIVE Effective Rate With Fuel Contract 84 Incentives Fuel Base Rate Demand (1) Net Change 7 2 5 1.00% 0.71% 5.5 2 4.5 1.00% 0.69% 6 2 4 1.00% 0.67% 5.5 2 3.5 1.00% 0.64% 5 2 3 1.00% 0.60% (1) Re?ects a TVIC view of the contract demand charge Assumes a TVIC, View of contract demand charges Does NOT re?ect TVA's v_iew. TVA Restricted Information Deliberative and Pre-Decisional Privileged 20" l51 LGS Proposed Changes - Illustrative LGS Proposal Impacts Effective Rate With Fuel L68 B4 Incentives Fuel Base Rate Changes (1) Net Change 7 2 5 0.40% 0-29% 6.5 2 4.5 0.40% 0.28% 6 2 4 0.40% 0.27% 5.5 2 3.5 0.40% 0-25% 5 2 3 0.40% 0.24% (1) Assumes 100% movement to parity Assumes 100% movement to parity for Large General Service Customers TVA Restricted Information Deliberative and Pre-Dedsional Privileged Mum? 2w 52 . Assume FY2019 Base Rate Adjustment FY 2019 Base Rate Adjustment - ILLUSTRATIVE Effective Rate With Fuel Base Rate 34 Incentives Fuel Base Rate Increase (1) Net Change 7 2 5 5.00% 3-57% 6.5 2 4.5 5.00% 3-46% 2 5 2 4 5.00% 3-33% 5.5 2 3.5 5.00% 3.18% 5 2 3 5.00% 3.00% i (1) Assumption based on TVA Long Range Financial Plan Combined long range ?nancial impact of FY2018 FY2019 relative to FY2017 TVA Restricted Information Deliberative and Pre-Decisional Privileged 2011 53 Updated 8/21/2017 Composite Impact FY2019 Composite Impact FY2019 With All Changes Effective Rate With Fuel Base Rate Fuel Rate Fuel Rate LGS Contract 34 Incentives Fuel Base Rate Increase 11) Decrease (2) Changes (3) Changes Demand Net Change 7 2 5 5.00% 43.00% 4.00% 0.40% 1.00% 0 57% 5.5 2 4.5 5.00% 43.00% 4.00% 0.40% 1.00% 0 12% 6 2 4 5.00% 43.00% 4.00% 0.40% 1.00% .0 40% 5.5 2 3.5 5.00% 43.00% 4.00% 0.40% 1.00% .1 02% 5 2 3 5.00% 43.00% 4.00% 0.40% 1.00% -1 76% (1) Base Increase - based on TVA's Long Range Financial Plan (2) Based on TVA's September 2017 TMFC and forecast (3) Based on TVA's Rate Change Proposals (4) Assumes 100% move to Parity on L65 (5) Re?ects a MC new ol the contract demand charge, not necessarily TVA's new 0t centred demand charges Even with some worst case assumptions, overall changes relative to 2017 are still favorable to Large industrial customers TVA Restricted Information - Deliberative and Pre-Decislonal Privileged meanness-manna rs: Appendix 1 I Relationship of Solar Shapes to Discussion Understanding Solar Shapes 2011 55 Solar Impacts - Background Customer TN state prison hour loads modeled Higher load factor similar to many Modelin- conducted to better understand DER and revenue im acts Solar Shape taken from 2015 Integrated Resource Plan (used to determine solar offset) TVA Restricted Information Deliberative and Pre-Decisional Privileged 21 mu 157 Summer Solar Shape ?5.0.60 . I'll Red?n in On-pk kw Loss' In off-pk energy 0 9 ?Solar - Oil-peak :ISular - Out-main -Cqum?r Oct-mat in run. Demand alumni Benign! Inknda Red?n in Max kW Loss in on-pk energy Solar installations at Large customer facilities will produce a reduction in revenue TVA Restricted Information - Deliberative and Pre-Decislonal Privileged 2W Isa Winter Solar Shape Intern! Demand 8 0.60 0.30 - 0N - Oil-veal: - (In-peak -Cu?umer Oil-um?; -Cutlumuv Oll'pl'dil ?Il 4 rm Datum! Red?n in On-pk kW Red?n in Max kW Loss in on-pk energy Loss in off-pk energy Solar on Large customers produce larger off-peak revenue reduction than on-peak reduction WA Restricted Information Deliberative and Pre-Decisional Privileged 2m: to Transition Solar Shape . clam." - Oil-peak 3 I . I {El-Snl-Ir-Dnopuah I -Cuslomur CHI-IMMI- ?Custumm Doom-ah I . i I Demand 5 - a 8 Imml Demand Inducd I'll 20 21 22 23 24 Red?n in On-pk kW 0 Loss in off-pk energy 0 Red?n in Max kW 0 Loss in on-pk energy - Revenue reductions from solar on large customers in transition months vary by month 1 WA Restricted Information Deliberative and Pre-Decisional Privileged [50 Overall Impacts of Solar Shapes Customer A. of Customer's solar energy is in off-peak hours B. ~50% of on-peak energy is in summer when on? peak energy rates are the highest. C. ~75?Er'h of Customer's on~peak demand savings are in summer season, when rates are highest. On-Pk Demand Energy as On-Pk as 96 of Total Month Demand Energy as 96 of Total of Total Energy Annual (132,915) (165,977) (84,281) (1.145) (14,979) (1,744) (8.990) (549} (21,304) (115,629) (141,724) (132,915) (87,657) (12415) (67,999) (14,979) (1,744) (549) (21,395) (115,629) (77.55} (31,478,910) (29,753,017) (23,000,812) (19,127,833) (7,555,662) (4,686,258) (5,227,509) (8,256,186) (10,764,711) (27,451,626) (30,433,612) (33,201,595) (71,839,005) (73,941,303) (58,672,889) (54,074,147) (45,308,500) (34,937,764) (42,266,244) (49,000,294) (65,017,183) (68,025,532) (77,995,688) (72,464,58210% 1196 11(689,338) (532,937) (230,937,732) (713,543,132) 100% TVA Restricted Information - Deliberative and Pre-Decislonal Privileged 10096 24% MCHagWeuq-Mmt?j?inst