Proposed Environmental Programs Cost Adjustment Factor budget for fiscal year 2018

The Environmental Programs Cost Adjustment Factor (EPCAF), implemented by SRP in November 2009, is used to track revenues and recover expenses relating to:

  1. Energy efficiency and demand reduction programs adopted by SRP;
  2. Renewable energy resources obtained or developed by SRP; and
  3. Improvements and initiatives that are not otherwise recovered through base prices that specifically relate to carbon dioxide emissions reductions as directed by the SRP Board, including, without limitation, those undertaken as a result of legislation or by regulation.

The EPCAF is a component of all SRP retail price plans. Last year, the Board approved two temporary reductions to the EPCAF price. These temporary reductions, adopted to balance the collection in the EPCAF, reflect SRP's ability to meet its sustainability goals at a lower-than-expected cost to customers.

First in June 2016, the Board voted to temporarily reduce the EPCAF price from $.0055/kWh to $.0044/kWh for the summer peak billing cycles (July 2016 through August 2016). Then in December 2016, the Board voted to temporarily decrease the price from $.0055/kWh to $.0049/kWh for certain winter billing cycles (January 2017 through April 2017) and from $.0055/kWh to $.0039/kWh for the 2017 summer and summer peak billing cycles (May 2017 through October 2017).

Equivalent temporary $/kW reductions were also approved for the E-27 and E-27P price plans, under which the EPCAF is collected through the demand charge. Starting with the November 2017 billing cycle, the EPCAF price will return to $.0055/kWh, and the $/kW charge under the E-27 and E-27P price plans will likewise return to the levels in effect prior to the temporary reduction implemented in July 2016.

The Board establishes each fiscal year's EPCAF expenditure budget on an annual basis. On March 16, 2017, management will present the following draft of the proposed EPCAF expenditure budget for the fiscal year 2018, which begins on May 1, 2017, to the Board's Finance and Budget Committee. The proposed budget reflects an overall increase to the EPCAF budget of about $11.4 million or 7.7% over the fiscal year 2017 EPCAF budget.

Specifically, Energy Efficiency expenses are proposed to increase by about $5.4 million or 13.5%, and Renewable expenses are proposed to increase by about $6 million or 5.5%. The Renewable expense increase comes from the solar purchase category (which is proposed to increase by about $7.9 million (40.7%), partially offset by a landfill gas plant agreement that ended in fiscal year 2017.

On March 28, 2017, the Board is expected to consider final approval of the EPCAF expenditures budget as part of the overall budget approval process. At this time, management is not recommending any changes to the EPCAF price for fiscal year 2018 above and beyond the temporary reductions approved by the Board in December 2016.

The proposed EPCAF budget (subject to revision during the Board's budget approval process) is as follows:

Environmental Programs Cost Adjustment Factor (EPCAF)
Proposed Budget for Fiscal Year 2018 (May 1, 2017 - April 30, 2018)

Sustainable Portfolio FY18 Budget ($000)

Renewables
Renewable Energy Research and Development 150
Solar Water Heating and Solar Payment Obligations 4,385
Demonstration Projects 189
Hydro 323
Wind Purchases 27,149
Geothermal Purchases 41,843
Renewable Energy Credit (REC) Purchases 700
Solar Purchases 27,226
Landfill Gas, Biomass and Other 11,220
Renewable Capital-Related Costs 1,568
Total Renewables $114,753

Energy Efficiency Programs
Residential 23,158
Commercial 21,805
Total Energy Efficiency $44,963

Total

$159,716