Consultants present cost'of'service findings: residential under'collecting, commercial classes over'collecting; staff to pursue phased rate-design work

Consultants from FCS reviewed the FY27 cost-of-service analysis for Boulder City utilities and identified a notable misalignment between how the utility collects revenue and how it incurs costs. Paul Quinn, who led the electric cost-of-service portion, said the analysis breaks costs into four functions (power generation, transmission, distribution and customer-related) and then into three cost pools (energy, demand, customer) to allocate costs to classes.

"The big question that Cost of Service answers is, what does it cost us to serve our different customer groups?" Paul Quinn said. FCS'calculated that distribution-related costs make up a large share of the city's electric costs and that residential customers are currently under-collecting relative to cost-to-serve: "residential, their revenue is about 82% of what it costs us to serve that customer class as a whole," he said.

FCS presented two practical next steps. First, a phased approach to rate-design changes rather than abrupt, across-the-board shifts: consultants suggested increasing fixed monthly customer charges toward cost-based levels over time and studying demand-based rates where metering permits it. Paul noted that the current monthly residential customer charge ($12.50) is well below a simple illustrative cost-based estimate (roughly $38) and that moving fixed costs into a monthly charge would alter who pays what.

Second, FCS recommended testing structural options in the model toolset and prioritizing changes that deliver meaningful dollar impacts. Examples discussed included: a) shifting some energy recovery from a single uniform energy charge to a tiered energy structure so lower-cost hydro resources are allocated differently; b) re-evaluating the tiered delivery charge that currently applies to residential customers; and c) harmonizing delivery and demand charges for commercial customers that have demand metering.

Angie Hamrick of FCS said the draft report will be delivered to council after the Aug. 25 meeting and that consultants can provide class-by-class revenue deltas for committee review. "Our plan is to get that draft report to you, most likely right after the August 25 meeting," she said.

Committee members asked for additional data and context before the UAC makes formal recommendations on rate design: they requested clearer historical basis for legacy rate choices, examples of meter-size and account-driven charge differences, and modeled customer impacts under specific design scenarios. Staff and consultants said the full models and templates will be delivered as part of the study so the committee and the public can evaluate phased changes ahead of any council decisions.

Next steps: FCS will provide the draft report to council (target: after Aug. 25); staff plans to compile a work plan for UAC review that prioritizes the rate-design items with the largest impacts (metering, fixed charge, demand treatment and conservation incentives) and to return to the UAC with modeled options in the coming months for public review and comment.