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TOWN OF NEWCASTLE
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MEETING: General Purpose & Administration Committee
IATE: NOVEMBER 17, 1986
REPORT #: 1R._s$-26 FILE #:
SUB,JECT:
AMALGAMATION OF ELECTRICAL DISTRIBUTION
SYSTEM WITHIN THE TOWN OF NEWCASTLE
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and
Administration Committee recommend to Council the following:
1 . That report TR-88-86 be received; and
2. That no action be taken at this time with respect to
the almalgamation of the electrical distribution
system within the Town of Newcastle; and
3. That the matter be reviewed again in three years
in accordance with Provincial legislation, (Bill 123) ;
the Durham Municipal Hydro Electric Service Act, 1979.
BACKGROUND & COMMENT
At the Council Meeting of December 16, 1985, Resolution #C-656-85 was approved
which directed Staff to review the feasibility of the Newcastle Hydro-Electric
Commission assuming the responsibility of the distribution of electric power
over the whole of the Municipality.
. . .2
General Purpose and Administration Committee Page 2
TR-88-86
Subsequent discussions with the Newcastle Hydro-Electric Commission Manager revealed
that staff lacked the expertise in this area to do a proper review and that this type
of study would be undertaken by Ontario Hydro. In July of 1986, staff requested that
Ontario Hydro undertake a preliminary study to determine whether or not it is
financially feasible for the Newcastle Hydro-Electric Commission to take over the
Ontario Hydro distribution assets in the Town of Newcastle.
Attached you will find a copy of the Utility Re-structuring Study prepared by Ontario
Hydro and received in September of this year. The basic principle behind this
preliminary study is to provide a first cut analysis of the financial impact on the
customers, current and rural , if the Newcastle Hydro-Electric Commission were to
expand their service to cover all of the Town of Newcastle. The fundamental criteria
used in evaluating the feasibility of re-structuring must be one of benefit to the
customers, current and rural . Customers should see a long term benefit, from
re-structuring i .e. lower long term rates and improved service.
Study Results
From the estimates and assumptions used and from the required revenue to be
recovered, the existing Newcastle H.E.C. residential customers would experience an
overall average rate increase of 13.9% in 1987 as a direct result of the service
area expanding to cover all of the Town of Newcastle. This increase includes the
tentatively proposed 1987 increase to utilities wholesale rates of 4.6%.
The existing Ontario Hydro rural residential customers would see a 4.8% increase in
1987 due to re-structuring. This increase is equal to the proposed increase to
Ontario Hydro's Rural wholesale rates. Therefore, this preliminary study indicates
that rural customers would be indifferent to re-structuring from a rate standpoint.
i .e. no decrease in rates realized but rather an increase of 4.8%.
.. .3
General Purpose and Administration Committee Page 3
TR-88-86
Financial Expenses
The payment for approximately 9.5 million dollars of transferred assets is assumed to
be made over 25 years, at an annual interest rate of 10% (current market rates) .
Ontario Hydro will provide a long term, thirty year loan to Utilities, but Ontario
Hydro's current interest rate is at 13% and is not seen as a viable alternative.
Also, the Ministry of Municipal Affairs have advised staff that the current debt
carrying capacity for the Town of Newcastle is approximately eleven million dollars
and with the two mega-projects that we are now considering, which will require a
debenture issue of approximately 5.5 million dollars coupled with the 9.5 million for
the acquisition of assets from Ontario Hydro would certainly exceed the quota
established by the Ontario Municipal Board and, in all probability our request would
be denied.
On reviewing this study and the discussions with the Newcastle Hydro-Electric
Commission representatives it is staff's opinion that the Town not proceed with this
matter at this time. In addition, a copy of a letter from the Newcastle
Hydro-Electric Commission is attached, stating that they have entertained a motion
that they are opposed of the taking over of the rural system from Ontario Hydro at
this time and that this aspect be reviewed again in three years hence in accordance
with Provincial Bill #123.
The reason behind this action, is that from the information available there would not
be a substantial savings for either party should they procede with such an
undertaking at this time.
Respectfully submitted,
J.R. Blanchard,
Treasurer.
J RB G�
ENCLOS: �
Newcastle Hydro-Electric Commission
P.O. Box 130
Bowmanville, Ontario
H. Partner, Chairman l_1 C 3K9
R.L. Stevens,Vice-Chairman
W.M. Morrison, Member M.J. Watson- Manager
I.A. Hamilton, Member Telephone (416)623-4451-2
J.P. Winters, Mayor or 623-4625
September 17, 1986.
Corporation of the Town of Newcastle,
40 Temperance Street,
Bowmanville, Ontario.
L1C 3A6
Attention: Mr. John Blanchard,
Treasurer
Dear Sir:
Subject: Amalgamation of Electrical Distribution System
Within the Town of Newcastle
This is to advise you that the Newcastle Hydro-Electric Commission
have enacted a motion whereby they are opposing the take over of the
rural system of Ontario Hydro at this time and that this aspect be re-
viewed again three years hence in accordance with Provincial Bill #123 .
The reason behind this action, is that from the information avail-
able, there would not be a substantial savings for either party should
they proceed with such an undertaking at this time.
Yours very truly, __
Xle
H. Partner,
Chairman,
Newcastle Hydro-Electric Commission.
HP/mw
c.c. - M.J. Watson, Manager
- J. Pattrick, Office Supervisor
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INTRODUCTION 1
In July of 19869 the Town of Newcastle requested that Ontario Hydro
undertake a preliminary study to determine whether or not it is finan.cial-ly
feasible for the Newcastle H.E.C. to take over the Ontario Hydro distribution
assets in the Town of Newcastle.
This study was made in accordance with Provincial Legislation, (Bill
123) "The Durham Municipal Hydro-Electric Service Act, 1979" 9 which requires a
review of the distribution and supply of power within the Town of Newcastle at
least once in every three years. If the Council of the Town of Newcastle were
in flavour of restructuring after analyzing this preliminary study, a detailed
study should be carried out, after which the Council must determine by
resolution whether or not it is financially feasible to extend the Hydro
utility operation to the municipal boundary. The expansion is subject to
Ontario Hydra's approval .
1
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THE 8TUDY Z
A summary of the results of this preliminary study is attached. The basic
principle behind this preliminary study is to provide a first cut analysis of
the financial impact on the customers, current and rural , if Newcastle H.E.C. 's
service area were to be expanded to cover all of the Town of Newcastle.
This study attempts to determine the consolidated costs incurred by the
"restructured" Newcastle H.E.C. when supplying the customers within its
municipal boundary. Once these costs are determined along with the required
working capital level , the appropriate revenue requirement to keep the utility
functioning is- determined. An operating forecast for 1987 and 1988 has been
prepared, see Appendix A.
After this step has been reached, the process is similar in structure to
the annual rate setting studies with which Newcastle H.E.C. and Ontario Hydro
have been involved. Basic similiarities area
i)current rates are applied to the prior years (estimated rural and
town) consolidated statistics, and the revenue which may be realized
by the use of these rates is determined.
D rates are adjusted, within Ontario Hydro guidelines where possible,
to achieve the revenue requirement determined by the utility costs
and working capital level , see Appendix B.
3) typical bills are calculated using the proposed rates to determine
the impact on the customers and on the generic customer
classifications, see Appendix C.
The fundamental criteria used in evaluating the feasibilty of restructuring
must be one of benefit to the customers, current and rural . Customers should
see a long term benefit from restructuring, is. lower long term rates and
improved service.
i
STUDY RESULTS Q
From the estimates and assumptions used, and from the required revenue to
be recovered, the existing Newcastle N.E.C. residential customers -would
experience an overall average rate increase of 15.9% in 1987 as a direct
result of the service area expanding to cover all of the Town of Newcastle.
This increase includes the tentatively proposed 1987 increase to utilities'
wholesale rates of 4.6%.
The existing Ontario Hydro - Rural residential customers would see a
4.9% increase in 1987 due to restructuring. This increase is equal to the
proposed increase to Ontario Hydro's rural wholesale rates. Therefore, this
preliminary study indicates that rural customers would be indifferent to
restructuring from a rates standpoint.
The level of service most likely will decline for a few years following
restructuring.. The great need to upgrade lines in the Western portion of the
Town will require far more resources (employees and equipment) than has been
included in this study. The study has not included additional field staff or
inventory necessary to continue this upgrading program , as the bulk of the
work will be completed in a 3 to S years. The current service center could not
accommodate the neccessary staff or equipment required to maintain the current
level of service to the "restructured" customer. It has been assumed that a
surplus line truck would be purchased.
The rate increases in subsequent years would be in the range of 4 - 7% and
would depend strongly on the wholesale rates. The operating forecast is shown
i.n Appendix A. The restructuring is assumed to occur on January 11 1981 in
order to show the direct impact to customers in the upcoming year.
4
The "target" working capital level for 1987 is chosen as 15%. Operlting
below this level is not advisable and a level in the range of 16 to 20% is
preferred. Newcastle H.E.C. has worked around the 15% level in recent years.
While this report indicates financial effects of restructuring, a more
detailed analysis may be appropriate before a. final decision s is made to
proceed. While we feel that the numbers are representative of what would
happen upon restructuring, cost elements and certian statistical elements have
been estimated based on particular assumptions, and may be refined.
Summary of Average Rate Impacts Caused by Restructuring
% Working Capital 15% Overall Residential general
% change in utility customers 15.6% 15.9% 15.6%
% change -in area customers 2.6% 4.8% - 0.4%
Probable Impacts due to Proposed Wholesale Rate Increases for 1987
Overall
% change in utility customers 4.6%
% change in area customers 4.8%
Net Overall Changes to Residential Customers solely due to Restructuring
Net M of Cust.
% change in utility customers 11.3% 4993
% change in area customers 0.0% 5138
ASSUMPTIONS. ESTIMATES AND BASIS OF CALCULATIONS 5
As this study is a first cut analysis of financial impacts on the customers
of the proposed restructured Newcastle H.E.C. there are numerous estimates and
assumptions incorporated into it. The greatest variance is present in the
estimates for the rural portion of the restructured utility. As the municipal
boundary of the Town of Newcastle includes only one-third of the Ontario Hydro
Rural "Lakeshore" Area it has been difficult to allocate with any great
accuracy the incurred costs or the obtained revenues.
The present and forecasted years of the study contain the following
estimates and assumptions:
LOAD Q LOAD FACTOR
Estimated 1985 demands (KW) for the Newcastle-Rural and Newcastle H.E.C.
were combined at 95% coincidence, then escalated at a 5% growth rate per year
for each year until 1989.
Newcastle H.E.C. (1985)
average KW 25,294. 1 KW
total KW.H 154,2409541.0 KW.H
load factor 69.6%.
Newcastle-Rural (1985)
average KW 22,490.4 KW
total KW.H 12794699260.0 KW.H
load factor 64.7% 10 year historical average for
former Bowmanville Area.
6
Newcastle-Restructured(1983)
average KW 46,660.0 KW A 93% coincidence)
total KW.H 281 ,709,801.0 KW.H
load factor 68.9%
Therefore, power costing loadsi 469660.0 KW for 1985
48,993.0 KW for 1986
51 ,443.0 KW for 1987
54,015.0 KW for 1988
56,715.0 KW for 1989
SERVICE REVENUE
The 1987 service revenue figure is set to cover costs and achieve the
target level of working capital . The value for other revenue is 2.9% of service
revenue which is taken from analysis on historical data obtain from Newcastle
H.E.C. financial statements.
POWER COST
The 1987 cost per kw is taken from Ontario Hydro (O.E.B. ) predictions. The
1988 and 1989 forecasted values are escalated by 4.0% to simulate the
tentatively proposed rate increases.
7
CONTROLLABLE EXPENSES
A 1984 base value of 4114.08 per customer was obtained by taking the mean
of the controllable expenses of all the municipal electric utilities. This
value was chosen as a conservative figure.
This base value was escalated at 5% per year to a 1987 figure of $131.20
per customer, along with 4137.76 and 4144.65 for 1988 and 1989 respectively.
CAPITAL EXPENDITURES & DEPRECIATION
The 1984 value for electrical plant for the expanded utility $12,203,707
was taken as the sum of Newcastle H.E.C. 's electrical plant value estimated at
45,309,707 and the estimated value, after subtracting retail equity, of Ontario
Hydro's transferred assets of $69896,000. Newcastle H.E.C. 's increase in
electrical plant (actual plus forecast) from 1984 to 1986 was approximately
7.7% per year , and Ontario Hydro's Rural . assets in the Town of Newcastle
increased for the same period at 15% per year. The increase in capital for the
rural assets should be treated as an investment towards current and future
customer requirements near the Oshawa boundary. Therefore, this trend should be
maintained to secure adequate service to those customers.
Newcastle H.E.C. 's 1984 depreciation was at 4% of plant value, therefore
this was extended to the restructured utility and it 's 1987 plant value of
$16,353, 148 representing a depreciation of $661 ,403. Depreciation for 1988 and
1989 was taken as the previous year 's _depreciation plus 4% of the current
year 's capital expenditure.
e
FINANCIAL EXPENSES
Financial expense (interest portion of debt repayment) for the existing
Newcastle H.E.C. is forecasted to continue for short term. The payment for the
approximately f9.5 million dollars of transferred assets is assumed to be made
over 25 years, at an annual interest rate of 10.0% (current market rates) .
Ontario Hydro will provide a long term ( 30 year ) loan to utilities but
Ontario Hydra's current interest rate is at 13% (current imbedded cost of debt)
and was not seen as a viable alternative.
CONTRIBUTED CAPITAL
Contributed capital is a highly volatile figure. Newcastle N.E.C. has
experienced a range of $13,500 to #94,700 per year in the recent past. The
figure used for restructured Newcastle H.E.C. for 1987 was $2089900 which
represents an increase of greater than 200% over 1985. This large increase
attempts to represent the known subdivision development outside the current
Newcastle service area and contributions which would be made to the utility.
These figures are highly variable and are used with a low confidence level
attached to them.
DEBT RETIREMENT
Debt retirement for the existing Newcastle H.E.C. was assumed to continue.
The principle portion of the transferred assets for an amortization period of
20 years or less would increase the financial burden, therefore a 25 year loan
was used.
9
WORKING CAPITAL AS PERCENT OF NET EXPENSES
The appropriate value of working capital for a utility varies with the cash
flow and inventory characteristics of the utility. When working capital
includes unbilled revenue, working capital as a. percent of net expenses could
be expected to lie between 109. and 25%.
Newcastle H.E.C. 's figure is presently in the vicinity of 15%.
For this preliminary analysis, the service revenue was adjusted to produce
a particular level of working capital of 15% for 1987 only. The reported
working capital of a recently expanded utility could be viewed as being
overstated because the "cash" portion of reported residential revenue is low.
This is due to the timing of cash flows, from "new" residential customers to
the utility and from the utility to Ontario Hydro; there is a delay in the cash
received by the utility but no delay for the cash transmitted to Ontario Hydro
for the power purchased. The greater the utility expands due to restructuring,
the larger this cash shortfall will be. Newcastle's initial shortfall would be
equal to between 1 and 1.5 month's of ex-Ontario Hydro residential revenue. The
restructured utility may be hard pressed or "cash poor" initially. For this
reasons, and other reasons, the utility may consider borrowing for one to two
years to cover this cash shortfall .
For each of the forecasted years, working capital equals the prior year 's
working capital plus the current year 's source of funds less application of
funds. The 1986 working capital is the. existing Newcastle H.E.C. 's forecasted
working capital.
A P P E N D I X A
operating forecast
vi )
NEWCASTLE HEC -EXPANDED BOUNDARIES - ALTERNATIVE NO. 1
% OF NET EXPENSES 15.0% 1986 1997
LOAD (kW)= 248?6 51443
CONTROLLABLE COSTS PER CUSTOMER= t121 11:1
CAPITAL EXPENDITURES PER CUSTOMER= Elva t16'l
forecasted I-----------------------restructured-------------------1
(per iuly .16th)
11186 1981 1988 199? ?990 _.
Lllk, tkla- 443 34,j,3 5•:,715 5,3.51512
L]AD
SE,;biCE FEicNUE; 7;1,12 p
-tFVICE a.EvENUE 3i6._4S 16.'°U.!'!'!! 1?,t2-4,315t 21,042,"02
1THER It '.CjUE 118?,867 JtL.l a 5611,'33 612,3,33 h53,
T,)TaL F:EYE.1 1UE 7,180,1415 13,862,150 20,:22,123 21,658.6±,0 23,1115,361
COST
.DEMAN0 1per 0) 129.36 .315.60
.ENERGI loer e(ii 114,+11 111.39
.SHARED (per k:W) 0,5? 1).00
.TOTAL !per k.Wj 243,114 254.X,3 ._,. 218.42 291.:5
.COST 6,073,1311+ 13,11'?l. 2 7 14,378,645 15,192,067 17,344.421
OF'EFi1T1NG E;;P•ENSE=
.FEWER 'r_RCNaSEii 5,q['0,140 5,1'?2,1167 17,:12,421
CONTROLLABLE 632,664 1,574,55' :,6•_7 117 1,763,412 71.551
,DEPRECIATION 25_.i:c_ 1161.4!)5 145,`,:8? 83.3.?18 726,18?
.SNOT N -C-!TNT N.C. 115,61111 3,J5C1 116,77411 21_) ?,61311
,TOTAL 7 '?1'7.7114 ;5,3.9,yc1 16,753,3'_8 18,310. 7 20,',33,;,92
3-OURCE OF FUNG3
FETiR'd 131 521 3.562.4633 3,469.425 •3,3.116.:5.5
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9.4.' i': 914
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„t ItiANL 'L E.F.-JI-ER
,NET INCLINE 113,029 _.611,111111 2,527,673 _,407,203 2,24:,83;
PERCENT OF REVENUE 2.U."s 13.9% 12,51 11.14 9.7'r:
.NET GEFREC•N 246,451 653,049 736,313 824,756 ;17,1:6
.NEW OEBENTURE3 4 0
.CONTRIBUT. CAP'l 166,664 208,?00 219',:,45 230.312 ::41.328
.TOTAL 556,944 3,473,051 3,483,631 3,462,281 3,402.750
AFPLICATION OF FUNDS
.DEBT RETIR'T-PAST 13,319 13,139 13,139 13,139 13,139
.DEBT RETIR'T-7,A. 0 93.819 103,435 114,037 125,1126
.DEBT RETIR T-OTHER 0 0 0 0 tj
.,DEBT RETIR T-TOTAL 13,319 106,?53 116,574 121,176 138,865
.EXPENDITURES 584,491 2,004.334 2,104,551 2,209,778 2,320,261
.TOTAL 597,810 2,111,292 2,221,125 2,336,954 2,459,132
WORKING CAPITAL (Dec. 31)
.TOTAL 816,943 29345,174 3,607,880 4,733,207 5,676,825
.'r'. OF NET EXPENSE 12.01 15.01 21.31 25.7% 28.3%
.NET EXPENSE 6.790,135 15,618,000 16,958,291 13,426,631 20,035,439
CUSTOMERS 5,620 12,002
A P P E N D I X 8
rate study for restructured utility
I
v�
Study 4 RATE ADJUSTMENT SUMMARY
01-Jan-87
UTILITY: NEWCASTLE GENERAL RATES AND STATISTICS
SIZE/N0. BILLED ENERGY OR DEMAND RATES
.PRESENT PROPOSED PRES. PROP.
-----------------------------------------------------------------------------------
RESIDENTIAL CLASS
MINIMUM BILLS 979 41097 0 4.20 4.70
KWH-FIRST BLOCK 250 28806337 0 7.80 9.20
KWH-BALANCE BLOCK 122282793 0 4.48 5.15
F.R.W.H. X 510hours 0 0 25.20 28.90
OTHER X 360HOURS 470 0 17.40 19.90
-------------- --------------
TOTAL RESIDENTIAL 151130697 151130697
GENERAL CLASS
KW-BALANCE BLOCK 171667 0 3.47 4.30
KW-TRANSF. ALLNCE. 154955 0 0.45 0.45
KWH-MIN. BILLS 739 92750 0 4.20 4.70
KW-MIN. BILLS 34742 0 0.45 0.55
KWH-FIRST BLOCK 250 4773447 0 7.80 9.20
KWH-SECOND BLOCK 12250 51723952 0 4.82 5.55
KWH-THIRD BLOCK 1305000 0 0 0.00 0.00
KWH-BALANCE BLOCK 63793800 0 3.43 3.83
-------------- --------------
SUB-TOTAL 120383949 120383949
.NT./LARGE USER
KW-BALANCE BLOCK 0 0 0.00 0.00
KW-TRANSF, ALLOWANCE. 0 0 0.00 0.00
KWH-BALANCE BLOCK 0 0 0.00 0.00
-------------- --------------
SUB-TOTAL 120383949 120383949
MISCELLANEOUS-kWh 0 0
KW-F.R.W.H. X 510HOURS 0 0 25.20 28.90
-------------- --------------
TOTAL GENERAL 120383949 120383949
STREET LIGHTING Q W) 1732 6025 0 15.82 18.10
SENTINEL LIGHTS QW) 57 939 0 17.40 19.91
-------------- --------------
UTILITY TOTAL 274021506 274021506
-------------- --------------
-------------- --------------
Study # 4 RATE ADJUSTMENT SUMMARY
O1-Jan-87
UTILITY: NEWCASTLE REVENUE CALCULATIONS STATS FOR 1985
CALCULATED NET REVENUE DIFFERENCE
PRESENT RATES PROPOSED RATES AMOUNT PERCENT
---------------------------------------------------------------------------------------------------
RESIDENTIAL CLASS
MINIMUM BILLS $4,112 $4,601 $490 11.9
KWH-FIRST BLOCK $2,246,894 $2,650,183 $403,289 17.9
KWH-BALANCE BLOCK $5,478,269 $6,300,009 1821,740 15.0
F.R.W.H. $0 $0 $0 NA
OTHER $8,178 $9,353 $1,175 14.4
-------------- -------------- --------------
'`1TAL RESIDENTIAL $7,737,453 $8,964,147 $1,226,694 15.9
GENERAL CLASS
KW-BALANCE BLOCK $595,684 $738,340 $142,655 23.9
KW-TRANSF. ALLNCE. 369,1301 ($69,730) $0 0.0
KWH-MIN. BILLS 43,104 $3,473 $370 11.9
KW-MIN. BILLS $15,634 $19,108 $3,474 22.2
KWH-FIRST BLOCK $372,329 $439,157 $66,828 17.9
KWH-SECOND BLOCK $2,493,094 $2,871,7t4 $378,619 15.2
KWH-THIRD BLOCK $0 $0 $0 NA
KWH-BALANCE BLOCK. $2,188,127 $2,444,323 $256,196 11.7
-------------- -------------- --------------
SUB-TOTAL $5,598,243 $6,446,385 $8489142 15.2
INT./LARGE USER
KW-BALANCE BLOCK $0 $0 $0 NA
KW-TRANSF. ALLNCE. $0 $0 $0 NA
KWH-BALANCE BLOCK $0 $0 $0 NA
-------------- -------------- --------------
SUB-TOTAL $0 $0 $0 NA
MISCELLANEOUS
KW-F.R.W.H. $0 $0 $0 NA
-------------- -------------- --------------
TOTAL GENERAL $5,598,243 $6,446,385 $848,142 15.2
STREET LIGHTING $27,400 $31,349 $3,949 14.4
SENTINEL LIGHTS $992 $1,135 $143 14.4
-------------- -------------- --------------
UTILITY TOTAL $13,364,088 $15,443,016 $2,078,928 15.6
Study 4 0 P E R A T I N 6 F 0 R E C A 5 T
01-Jan-87
UTILITY: NEWCASTLE 1 AT EXISTING RATES }
1985 1986 1981 1988 `
LOADS KW
LOCAL GEN./PURCH.
POWER COSTING 25,294 24,896 51,443 54,015
LOAD FACTOR 69.6 69.6 68.9 68,9
REVENUE
TOTAL SERVICE / KW 274,53 280.79 280.79 280,79 .
TOTAL SERVICE 6,942,344 6,990,548 14,444,680 15,166,812
OTHER 185,962 189,867 559,120 598,818
TOTAL 7,128,306 7,180,415 15,003,800 15,765,690
POWER COST
^EMAND 124.44 129.36 135.60 141,72
0GY 109.75 114.58 118.89 '124.99
TOTAL 234.74 243.94 254,49 266.71
DEMAND-ENERGY COST 6,073,130 13,091,729 14,406,341
SPECIFIC FAC.-LN 15,432 17,610 0 0
SPECIFIC FAC.-ST 0 0 0 0
OTHER 0 0 0 0
OPERATING EXPENSES
POWER PURCHASED 5,958,634 6,090,740 13,091,729 14,406,341
LOCAL GENERATION 0 0 0 0
CONTROLLABLE EXPENSE 590,486 682,602 1,574,662 1,637,649
DEPRECIATION 229,604 252,062 661,405 745,587
AMORTIZATN-CONT.CAP. 61236 5,611 81356 8,774
TOTAL 6,772,488 7,019,793 15,319,440 16,780,803
SOURCE OF FUNDS
7 TURN 355,818 160,622 (315,640) (1,015,113)
rINANCIAL EXPENSE 16,792 16,792 951,368 941,752
EXTRAORDINARY ITEMS (+/-) (200,375) 0 0 0
NET INCOME 539,401 143,830 (1,267,008) (1,956,865)
X OF REVENUE 7.6 2.0 -8.4 -12.4
NET DEPRECIATION 223,368 246,451 653,049 736,813
DEBENTURES - LOANS 0 0 0 0
CONTRIBUTED CAPITAL 94,730 166,664 208,900 219,345
OTHER 1+!-) 21,748 0 0 0
TOTAL 879,247 556,945 (405,059) (11000,701)
APPLICATION OF FUNDS
DEBT RETIREMENT 13,319 13,319 106,958 116,574
EXPENDITURES 939,593 584,491 2,004,334 29104,551
OTHER 3 0 0 0
TOTAL 952,915 597,810 21111,292 21221,115
WORKING CAPITAL DEC. 31
EXCLUDING INVENTORY 784,947 744,082 (11172,269) (41994,101)
INVENTORY 239,526 239,526 239,526 239,526
TOTAL 1,024,473 983,608 (11532,743) (41754,575)
X NET EXPENSE 15.6 14.5 -9.8 -28.0
NET EXPENSE 6,565,912 61790,14 15,617,759 16,985,742
i
I
Study 4 0 P E R A T I N 6 FORECAST
01-Jan-81
UTILITY: NEWCASTLE ( MONTHS AT PROPOSED RATES )
1905 1986 1987 1988 -
LOADS KW
LOCAL GEN./PURCH. 0 0 0
POWER COSTING 24,896 51,443 54,015
LOAD FACTOR 69.6 68.9 68.9
REVENUE
TOTAL SERVICE / KN 362.98 280.79 356.13 362.98.
TOTAL SERVICE 6,990,548 18,320,396 19606365
OTHER 189,967 559,120 598818
TOTAL 7,180,415 18,879,516 20205183
POWER COST
DEMAND 129.36 135,60 141.72
iER6Y 114.58 118,89 '124.99
TOTAL 243.94 254.49 266.71
DEMAND-ENERGY COST 6,073,130 13,091,729 14,406,341
SPECIFIC FAC.-LN 17,610 0 0
SPECIFIC FAC.-ST 0 0 0
OTHER 0 0 0
OPERATING EXPENSES
POWER PURCHASED 6,090,740 13,091,129 14,406,341
LOCAL GENERATION 0 0 0
CONTROLLABLE EXPENSE 682,602 1,574,662 1,637,649
DEPRECIATION 252,062 661,405 745,5B7
AMORTIIATN-CONT.CAP. 5,611 81356 01774
TOTAL 7,019,793 15,319,440 16,780,803
SOURCE OF FUNDS
"7TURN 160,622 31560,076 3,424,380
. iNANCIAL EXPENSE 16,792 951,368 941,752
EXTRAORDINARY ITEMS 0 0 0
NET INCOME 143,830 21608,708 2,482,628
X OF REVENUE 2.0 13.8 12.3
NET DEPRECIATION 246,451 653,049 736,813
DEBENTURES - LOANS 0 0 0
CONTRIBUTED CAPITAL 166,664 208,900 219,345
OTHER 0 0 0
TOTAL 556,945 3,470,657 31438,786
APPLICATION OF FUNDS
DEBT RETIREMENT 13,319 106,958 116,574
EXPENDITURES 584,491 2,004,334 2,104,551
OTHER 0 0 0
TOTAL 597,810 21111,292 29221,125
WORKING CAPITAL DEC. 31
EXCLUDING INVENTORY 744,082 21103,446 31321,107
INVENTORY 239,526 239,526 239,526
TOTAL 983,608 2,342,972 3,560,633
% NET EXPENSE 14.5 15.0 . 21.0
NET EXPENSE 61790,134 15,617,759 16,985,742
I
Study 4 RATE OF RETURN
U1-Jan-87
UTILITY: NEWCASTLE I AT EXISTING RATES )
1985 1986 1987 1988
RETURN 355,818 160,622 (315,640) (11015,113)
RATE BASE
TOTAL PLANT 51117,063 6,301,554 17,886,748 19,991,299
ACCUM. DEPRECIATION 21059,486 2,311,548 31438,092 4,183,679
CONTRIBUTED CAPITAL 187,029 353,693 562,593 781,938
AMORTIIATN-CONT.CAP, 15,776 21,387 29,743 38,517
YEAR-END ASSET BASE 3,486,324 3,657,700 13,915,806 15,064,199
AVERAGE ASSET BASE 2,693,162 3,572,012 13,915,806 14,490,003
WORKING CPTL. ALLWNC 984,887 1,018,520 2,342,664 2,547,861
RATE BASE 3,618,049 4,590,532 16,258,470 17,037,864
^TE OF RETURN 9.7 3.5 -1.9 -6.0
Study 4 RATE OF RETURN
01-Jan-87
UTILITY: NEWCASTLE 1 AT PROPOSED RATES )
1985 1986 1987 1988
RETURN 355,818 160,622 3,560,076 31424,380
RATE BASE
TOTAL PLANT 5,717,063 6,301,554 17,886,748 19,991,299
ACCUM. DEPRECIATION 2,059,486 2,311,548 3,438,092 4,183,679
,ONTIBUTED CAPITAL 187,029 353,693 562,593 781,938
AMORTIZATN-CONT.CAP. 15,776 21,387 29,743 38,517
YEAR-END ASSET BASE 3,486,324 3,657,700 13,915,006 15,064,199
AVERAGE ASSET BASE 2,693,162 3,572,012 13,915,806 149490,003
WORKING CPTL. ALLWNC 984,BB7 1,018,520 21342,664 2,547,861
RATE BASE 3,678,049 41590,532 16,258,470 17,037,864
RATE OF RETURN 9.7 3.5 21.9 20.1
j
Study 4 KEY I N 0 1 C A T 0 R 5
01-Jan-87
CURRENT PROPOSED
-----------------
RATE Of RETURN: 3.5 21.9 X RATE BASE
WORKING CAPITAL: 14.5 15.0 X NET EXPENSE
X RATE INCREASES BY CLASS
-------------------------
RESIDENTIAL: 15.9 X
GENERAL SERVICE (< 5000 KW l: 15.2 X
INT./LRG. USER: NA X
UTILITY TOTAL: 15.6 X
A P P E N D I X C
comparative bills for original Newcastle customers
i
I
Study 1 4 -v% (�
COMPARISON OF MONTHLY BILLS - RESIDENTIAL 01-Jan-87 -�- `-
PROPOSED
CONSUMPTION (current) (proposed) COST CHANGE CHANGE
c/kw.h X $
MINIMUM BILL $4.20 14.70 - - 11.90% $0.50 -
250 $19.50 $23.00 9.20 17.95% $3.50
500 $30.70 132.38 6.48 5.477, $1.68
750 $41.90 145,26 6.03 8.02X $3.36
1,000 153.10 $58.14 5.81 9.49X $5.04
1,250 $64,30 $71.02 5,68 10.45% $6,72
1,500 $75,50 183.90 5.59 11,137 $8.40
2,000 $97.90 $109.66 5.48 12.01% $11.76
3,000 $142,70 $161,18 5.37 12.95% $18.48
COMPARISON OF MONTHLY BILLS - GENERAL SERVICE
PROPOSED
LOAD CONSUMPTION (current) (proposed) COST CHANGE
KW KW.H c/kw.h X
2.5 500 $31.55 $36,88 7.38 16,89%
10 1,000 $55.65 $64.64 6,46 16.15%
2,000 $103.85 $120,16 6.01 15.71X
31000 $152.05 $175.68 5.86 15.54%
25 2,500 $127.95 $147.92 5.92 15.61%
5,000 $24B.45 $286,72 5,73 15,40%
7,500 $368,95 $425.52 5.67 15.33X
50 10,000 $489.45 1564.32 5.64 15.30%
15,000 $695,70 $798,91 5.33 14.84X
20,000 $867.20 $990.49 4,95 14.22%
100 20,000 $1,040.70 $1,205.54 6.03, 15.847
30,000 $1,383.70 $1,588.70 5,30 14,82%
40,000 $1,726,70 $1,971.86 4.93 14.20%
500 150,000 $6,887.70 $7,907.02 5.27 14.80%
200,000 $8,602.70 $9,822.82 4.91 14.18%
250,000 $10,317.70 $11,738,62 4.70 13,771
1,000 300,000 $13,767.70 $15,804,92 5.27 14.80%
400,000 $17,197.70 $19,636.52 4.91 14.18%
500,000 $20,627.70 $23,468.12 4.69 13.77%
5,000 1,500,000 $68,807.70 $72,921.15 4.B6 5,98%
2,000,000 $85,957.70 $90,071,15 4.50 4.79%
2,500,000 $103,107.70 $107,221,15 4.29 3.99%