HomeMy WebLinkAboutReso 92-299 - Approve & Authorize the CM to sign Letter of Agreement dated 06/22/92 between COR & Economic Science Corp to Develop a weather normalized rate model for COR Electric Dept iI
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING AND AUTHORIZING THE CITY MANAGER TO SIGN THE
LETTER AGREEMENT DATED JUNE 22, 1992, BETWEEN THE CITY
OF REDDING AND ECONOMIC SCIENCES CORPORATION TO DEVELOP
A WEATHER NORMALIZED RATE MODEL FOR THE CITY' OF REDDING
ELECTRIC DEPARTMENT, IN AN AMOUNT NOT TO EXCEED
$24,100.00.
WHEREAS, at its meeting of May 19, 1992, City Council
i authorized the Electric Department to issue a Request for
Proposal for technical services to develop a weather-normalized
Electric Utility rate model, which will significantly enhance the
Department' s ability to develop rates based upon actual customer
energy consumption during prior years; and
WHEREAS, of the three proposals received, the proposal of
Economic Sciences Corporation was responsive, complete, and the
lowest priced; and
WHEREAS, the professional experience of Economic Sciences
Corporation and its understanding of the City' s needs should
result in completion of the weather-normalization project during
the requested-time frame and within budget; and
WHEREAS, the Electric Department requests that the contract
be awarded to Economic Sciences Corporation; and
WHEREAS, sufficient funds are available in the Electric
Department' s Fiscal Year 1991-92 Budget; and staff requests
Council approval to carry over this funding into the Fiscal Year
1992-93 Budget (Job Order No. 4801-09) ;
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of
the City of Redding as follows:
1. That the above recitals are true and correct.
,I y
2 . That the City Council hereby approves the attached
Letter Agreement dated June 22, 1992, between the City of Redding
and Economic Sciences Corporation, in an amount not to exceed
$24,100.
3 . That the City Manager of the City of Redding is hereby
authorized and directed to sign said Letter Agreement on behalf
of the City of Redding; and the City Clerk is hereby authorized
and directed to attest the signature of the City Manager and to
impress the official seal of the City of Redding thereto.
4. That the Director of Finance is authorized to carry
over the sum of $24,100 from the Electric Department' s FY91-92
Budget into the FY92-93 Budget.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the 7th day of July , 1992, and was duly
adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Arness, Dahl, Kehoe & Moss
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
i
i
t
CHARLIE MOSS, Mayor
City of Redding
A ST: FORM ROVED:
CONNIE S OHMAYER, 4ity Clerk ALL A. HAYS, City Attorney
2
Economic Sciences corporation
2120 University Avenue Berkeley, CA 94704
(510)841-6869 FAX(510)644-1943
June 22, 1992
i
,I
Tom Graves '
Electric Department
City of Redding
760 Parkview Avenue
'j Redding, California . 96001-3396
i
Dear Mr. Graves:
This Letter Agreement, when executed by both parties, will authorize Economic Sciences
Corporation (the "Contractor") effective 1992 as an independent contractor, to
I� perform services for the City of Redding (the "City") in accordance with the following terms
and conditions:
1. Services
Contractor agrees to perform the services and scope' of work set forth in.
Contractor's project proposal entitled "Proposal to Develop a WeatheryNormalized Rate:
Model for the City of Redding Electric Department," dated June '17, 1992, a copy of
j which is attached hereto as Exhibit A and incorporated herein,.(the "Services").
2. Rate of Payment for Services
Contractor will perform the Services to the satisfaction of the City, at the hourly billing
rates specified in Exhibit A, Section VI-- "Estimated Person Hours and Charges by Task
and Consultant". Total charges under this contract shall not exceed $25,000.
3. Terms of Payment =
Charges will be invoiced monthly and paid within 30 days of receipt of each invoice.
4. Independent Contractor
Contractor shall at all times act as an independent contractor with respect to the Services.
'i Neither Contractor nor Contractor's employees or agents shall be deemed to be or shall
represent themselves to be employees or agents of the City.
I
J
S. Information
All reports and other data prepared, compiled or obtained by Contractor in connection
with the performance of the Services shall be made available upon receipt to the City.
All such materials may be copied, reproduced or used in any manner which the City
deems appropriate. Upon receipt of materials specifically prepared for the City b)
Contractor, the City shall be entitled to use any of such materials in any manner whict.
the City, in its sole discretion, deems appropriate without restriction or accountability.
Materials prepared, compiled or obtained exclusively for the City shall immediatel}
;i become the sole property of the City:
6. Confidentiality
'I Contractor covenants and agrees to keep confidential any and all information concerning
1I the plans, operations, or activities of the City which may be divulged to Contractor by
any source in the course of the performance of the Services, and which is not already it
the public domain, except when specifically cleared by the City, in writing, for release.
The terms of this Paragraph 6 shall be continuing covenants which survive the
termination of this Agreement.
I
7. Employees
Contractor shall be solely responsible for the payment of compensation and for all state
and federal taxes, including,but not limited to employment taxes, workers' compensation
and any similar tax associated with employment of Contractor's personnel. Contractor
shall take appropriate measures to insure that its employees who perform the Services are
t
competent to do so and that they comply with Paragraph Six.
8. Termination
Services under this Agreement shall terminate upon the earlier of:
I '
(a) The completion by Contractor of the last of Contractor's services requested it
writing by the City hereunder; or
(b) The giving by the City to Contractor of written notice to the address set forth it
Paragraph 14 hereof that this Agreement is terminated.
Notice pursuant to subparagraph (b) of this paragraph shall be deemed given on the
earlier of the date of personal delivery or 48 hours after deposit of such notice, addresser]
as set forth in Paragraph 14 hereof, in the first class United States mail, postage
prepaid. If this Agreement is terminated pursuant to subparagraph (b) of this Paragraph,
Contractor will promptly invoice and the City shall, within 30 days of receipt thereof,
pay for any services performed and expenses incurred up to and including the date
notification of termination of this Agreement was given; provided however, that sucr
amounts shall be payable only for tasks completed to the satisfaction of the City.
2
i
i
i
9. Complete Agreement, Amendments, and Waivers
.i
This Agreement constitutes the entire agreement between the parties and supersedes all
'I oral negotiations and prior writings in respect of the subject matter hereof. This
agreement may be amended, modified or varied only by an instrument in writing signed
by both parties. No waiver of any provision hereof shall be effective unless in writing
signed by the party to be charged therewith.
10. Conformity With Laws and Safety
a) Contractor shall observe and comply with all applicable laws, ordinances, codes
and regulations of governmental agencies, including federal, state, municipal, and
local governing bodies, having jurisdiction over the performance of the Services
or any part thereof, including, without limitation, all provisions of the
it Occupational Safety and Health Act of 1970 and all amendments thereto, Equal
Opportunity and other related federal requirements, and all applicable federal,
iI state, municipal, and local safety and environmental regulations. All work
performed by Contractor must be in accordance with these laws, ordinances,
codes and regulations.
b) Contractor shall, while on or about the City premises, enforce such safety and
fire precautions as the City may prescribe for the protection of the City and other
personnel and property.
11. Insurance
Contractor shall provide and maintain in full force and effect during the term of this
Agreement:
a) Workers' compensation insurance in accordance with the Workers' Compensation
Law of the State of California; and
b) Comprehensive general liability insurance (including automobile liability
insurance covering owned, non-owned and hired automobile equipment) in the
amount of at least$1,000,000 to cover any claims or damages for acts committed
by Contractor or Contractor's employees or agents during the performance of the
Services.
I
12. Indemnity
Contractor shall indemnify and hold harmless the City, its officers and employees from
j and against any and all liability, loss, injury, death or damage to persons or property
J caused by Contractor's own or its employees' or agents' or subcontractors' negligent or
wrongful acts or omissions in connection with the performance of any Services.
�I
3
I
1
it
II
13. Assignment
Neither this Agreement nor any duties or obligations hereunder shall be assignable by
Contractor without the written consent of the City. Except for the prohibitions on assignment
contained in the preceding sentence, this Agreement shall be binding upon and inure to the
benefit of the heirs, successors or assigns of the parties hereto.
i
14. Notice
II
Notice shall be given to the parties at the addresses set forth below:
.i City: Tom Graves
Electric Department
City of Redding
al 760 Parkview Avenue
Redding, California 96001-3396
'I Contractor: Economic Sciences Corporation
2120 University Avenue, Suite 600
Berkeley, California 94704
Attn: B. F. Roberts
If this Agreement meets with your approval, please sign and return one original of this letter.
ECONOMIC SCIENCES CORPORATION
'I
i
F. Ro erts
1IPresident
j Agreed to this day of , 1992.
CITY OF REDDING
Name
FORM APPROVED
i Title
�I
i
CI�TO
i
I
4
EXHIBIT A
�I
PROJECT PROPOSAL: WEATHER NORMALIZED RATE MODEL
Contents
I. Project Objective and Scope
d
II. Critique of Redding's Existing Revenue Forecasting Procedure
I
III. Proposed Solution
a) New Weather Normalized Rate Model
b) Model Simulation and Analysis Software
IV. Project Work Plan and Schedule
V. Project Staff
VI. Estimated Person Hours and Charges by Task and Consultant
i
'I
it
i
it
I
WEATHER NORMALIZED RATE MODEL
.I
i�
I. Project Objective and Scope
The objective of this proposal is to describe the turn-key weather normalized rate model and
simulation software, documentation, and staff training that Economic Sciences Corporation
(ESC)proposes to provide to Redding's Electric Department. The model is designed to enhance
the accuracy of Redding's revenue forecasts by:
a) Adjusting the revenue forecast for the impact of weather, changes in rates (for both
demand and energy usage), economic activity, and other variables affecting the accuracy
it of the revenue forecast.
i
b) Explicitly incorporating the various rate structures and features contained in Redding's
tariffs such as demand charges, seasonal rates, block declining rates, peak and off--peak
rates, interruptible rates, power factor adjustments, etc.
In addition, the model is designed to:
I
c) Readily accommodate new rate designs that may be required to meet Redding's load
management objectives.
i
d) Be executable on an Everex 386/25 computer with input and output in a Lotus 1-2-3
it format.
e) Allow Redding's staff to evaluate the implications of alternative rate proposals and,._
unanticipated changes in weather, economic activity, and other factors affecting revenue
II. Critique of Redding's Existing Revenue Forecasting Procedure
A cursory review of Redding's current revenue forecasting procedure reveals the following
limitations to revenue forecasting accuracy (a detailed critique will be provided under the
contract):
n
'I a) The use of the average month concept based on non-weather adjusted data will lead to .;
errors in forecasting revenues to the extent that weather conditions during the previous
twelve months are different from normal weather conditions. This approach also
!i provides an imprecise reference point for benchmarking future revenue forecasts. It is
equivalent to attempts at navigating a boat towards a specific port without knowing the
II boat's initial coordinates.
.I
it b) The current procedure does not reflect the impact that rate changes (rate elasticity effects)
will have on demand, energy usage, and revenues. Failure to reflect rate elasticity
effects will cause the model to systematically under-forecast revenues during periods of
i rate decreases and to systematically over-forecast revenues during periods of rate
'I increases.
i
i
c) The current procedure does not explicitly reflect the rates in effect during each period
'! of the year (e.g., winter-summer rate differentials, peak versus off-peak rates), and
changes in the response of demand and energy usage by season and time-of-use(i.e., the
J price response during peak periods is different than the price response during off-peak
periods). This will lead to inaccurate revenue forecasts and will prevent Redding's staff
from assessing the implications of different rate structures (e.g., differentially varying
demand charges, time-of-use rates, marginal cost based rate designs, etc.).
111. Proposed Solution
i
a) New Weather Normalized Rate Model
ESC recommends the development of a new monthly weather normalized rate
forecasting model that is consistent with the structure of Redding's`energy and peak
demand models. This model will accomplish weather adjustment through the use of
monthly binary variables to capture the effects of normal weather, and variable
j reflecting deviations from normal monthly cooling and heating degree days to capture
the effects of abnormal weather.' The model will also reflect the effect of price,
economic activity, and other variables that affect demand and energy usage. It will
also include refinements of logic and expansion of detail as required for revenue
forecasting and analysis applications.
Logic refinements include the replacement of average electric rates with the
appropriately configured service charges, marginal energy rates, and demand charges.
For example, the existing residential energy forecasting equation will be modified to
include the marginal energy rate and the income variable will be corrected by`
subtracting the intra-marginal or fixed monthly service charge.
I
Expansion of detail will include the separate equations for energy usage for each rate
group by major consumption block and peak versus off-peak periods (as required).
Demand will also be modeled by consumption block for rate groups subject to
` demand charges. Both peak and off-peak energy and demand will be modeled for the
industrial time-metered rate group.
f
I
i
' Weather-adjusted historical electric sales(or demand) data are calculated by substituting the product of
the cooling degree day(or heating degree day)deviations from normal,times its regression coefficient,
II from the actual sales.
i
2
'I
I
!
I
b) Model Simulation and Analysis Software
I
The use of the new model for revenue forecasting, rate design, and other analyses
requires that the model be incorporated in a user-friendly simulation/analysis software
,i package. ESC recommends two software options for Redding.
'I i) ESC's Proprietary Rate and Revenue Model Management and Simulation Product,
RATEPRO
j Under this option, the estimated energy and demand equations described above
will be installed in Ratepro, which provides a Lotus-type menu user interface for:
data management and display, model modifications, forecast generation, and rate
design. Ratepro produces output files in Lotus format for interface with other
programs. Ratepro can be operated in three modes: evaluation, goal seeking,
j and optimization to give the Redding Electric Department the fullest set of
analytic capabilities.
i The evaluation mode enables users to generate forecasts and/or multiple scenarios
to evaluate the effects of changes in rate. parameters, weather conditions,
economic activity, etc. Any form of rate design--flat, block declining, inverted,
seasonal, peak- or off-peak--can be used for each customer class. Further, the
rate designs and equations used to forecast demand and energy usage may be
different from one period to the next. In evaluation mode, Ratepro also provides
facilities to calibrate forecasts to the last actual data point available (or group of
data points). This facility can be used to further enhance the weather
normalization adjustments embodied in the weather normal equations by adjusting
for prior forecast errors.
i
The goal seeking mode can be used to determine the adjustments to rate
parameters required to meet specific revenue requirements while maintaining
various relationships among the rate parameters. This process takes account of
i price elasticity responses to various rate parameter choices.
The optimization mode enables the user.to design rates that will best achieve any
!� specific objective that the City may wish to pursue. For example, the objective
of maximum economic efficiency would yield rate that are set' in inverse
proportion to relative customer price elasticities. Similarly; rate design for
N maximizing load factor can be explored.
!j ii) LOTUS 1-2-3 Model Simulation Program
Under this option, the estimated energy and demand equations will be coded into
a Lotus program for simulation and forecast generation. The capabilities of this
option will be essentially equivalent to those of the evaluation mode of Ratepro.
i 3
l�
i
i
The goal seeking and optimization modes will not be available because of the
I programming limitations of Lotus.
I
IV. Project Work Pian and Schedule
Economic Sciences Corporation is prepared to begin the project on July 8 and complete the
project no later than August 28, 1992. Meeting the completion date is contingent on timely
receipt (no later than July 15) of customer data tapes.
'I
The following schedule shows the sequence of project tasks:
Task 1 -- Review of existing methodology. July 8-10.
Task 2 -- Review of existing historical customer data. July 9-17.
The review of customer data will include: loading the data onto ESC's mainframe;
formatting the data into a time-series, relational database; sorting the data by rate
schedule, consumption block and tariff categories (i.e., service charge, energy charge,
demand charge, and power factor adjustment); and aggregating the data across
selected groups for modeling.
This process will define the customer categories to be separately modeled, and the
specific rate parameters relevant for each category. It will also organize the data for
convenient use in modeling and analysis. An evaluation of the adequacy of the City's
data for supporting the modeling effort will also be prepared.
Task 3 -- Perform weather normalization analysis.
I
3a) Design methodology
i) Specify refinements to Redding's existing energy and demand equation
structure. For example, the replacement of average rates with marginal rates
ij and equation modification to account for fixed charges and demand charges.
Design specific energy and demand equations for the customer categories
defined during Task 2. July 11-17.
i
ii) Specify the statistical estimation techniques to be used in themodelingprocess.
i This will most likely involve the use of pooling cross-sectional time-series
regression techniques to permit equation estimation using Redding's relatively
short time-series of monthly customer data (four to five years). The pooling
techniques will also exploit certain relationships between system level
parameters and parameters for the individual consumption blocks. For
example, the fact that system level price elasticities are weighted averages of
i
4
i
individual consumption block price elasticities, can be exploited using the
pooling techniques. July 15-24.
,i
3b) Implement methodology: estimate equations.
'i Equation estimation will be performed using the cross-section time-series pooled
regression procedures and other statistical facilities of ESC's proprietary
mainframe modeling product, EMS. July 25 - August 14.
3c) Program the estimated equations with Ratepro or Lotus for analysis and revenue
estimation.
�I
Whether the City elects to use the Ratepro or the Lotus software, the
programming effort will yield a turn-key menu driven product ready for use by
the Redding staff. August 14 - 19.
II
3d) Develop prototype analyses to be used as guides to City Staff in the use of the
new rate model.
I'
FSC personnel will develop prototype applications proposed by Redding staff as
the most relevant for demonstration of the new weather-normal rate model.
August 19 - 26.
3e) Develop mainframe-PC data transfer procedures.
To monitor revenue forecast accuracy and update forecasts, it will be necessary
to transfer monthly customer data (aggregated as required for the new revenue
forecasting model) from Redding's mainframe computer to the Electric
Department's PC. Similarly, to check whether the 25% maximum increase rule
has been violated for any customer, with any rate change, the transfer of rate
parameters back to the mainframe will be required. ESC will develop the
specifications and procedures for the two-way transfer. Some modifications of
Redding's mainframe programs may be required. These program modifications
could best be performed by Redding personnel and are not included in ESC's
i� work plan for the project. August 19-26.
Task 4 -- Documentation.of the weather normalization process. August 10 - 27.
Task 5 -- Training of City Staff. August 28.
,I
5
'i
11
I�
I
I
it
- V. Project Staff
I -
The key FSC personnel required to develop Redding's Weather Normalized Rate Model are:
Dr. Bill Roberts, Ms. Helen Chin, and Mr. Stuart Taylor. All three have prior experience in
working with Redding data and the Redding Electric Department Staff, through their
involvement in developing and defending (before the CEC) Redding's ER92 energy and demand
forecasting models and forecasts.
I
Bill F. Roberts, Ph.D.
President and Chief Economist
Dr. Roberts personally directs ESC's consulting projects and computer software development.
In his 22 years of academic and business experience, he has made innovative contributions
to the methodology of modeling regional economics, the demand for energy and
telecommunications services, and utility operations. He has also pioneered computer
modeling and model simulation software systems. He has often provided expert testimony
before regulatory, judicial, and legislative proceedings.
Dr. Roberts holds a Ph.D. in Economics from the University of.Minnesota. Prior to
founding ESC, he was on the faculty of the University of California at Berkeley.
I
i
i
I� Helen Chin
Vice President and Principal Consultant
I
I
Ms. Chin, an ESC employee since 1977, has extensive experience in developing regional
economic forecasting models, energy and peak load models, financial forecasting models, and
integrated strategic planning systems for electric and gas utilities. Ms. Chin is ESC's expert
on weather normalization procedures and statistical techniques.
Ms. Chin holds an M.A. in Economics from San Francisco State University. Prior to joining
ESC, she served as an Economic Analyst for the Federal Home Loan Bank of San Francisco
and for Pacific Gas & Electric Company.
Stuart Taylor
'I Director, Utility Information Services, and Senior Consultant
Mr. Taylor, an ESC employee since 1989, has substantial experience in the development of
large scale utility databases, in utility quantitative modeling, and in programming model
management and simulation software. Mr. Taylor has gained special knowledge on
Redding electricity data through his activities as Redding's ER92 liaison to the CEC.
i
i
Mr. Taylor holds a B.A. in Economics from San Diego State University. Prior to joining
ESC, he served as an international trade analyst with Pacific Rim Interface Member
Enterprises, Inc.
6
I
.I
f
VI. Estimated Person Hours and Charges by Task and Consultant
II
Task Hours Rate/Hour Estimated Cost
1) Review of Methodology
Roberts 4 $125 $ 500
Chin 8 100 800
$1,300
2) Review Customer Data
Roberts 2 125 $ 250
Chin 40 100 4,000
$4,250
� 3a) Design Methodology
Roberts 12 125 $1,500
Chin 12 100 1,200
$2,700
3b) Implement Methodology: Estimate Equations
Roberts 24 125 $3,000
Chin 36 100 3,600
Taylor 48 75 3,600
$10,200
3c) Program the Estimated Equations
Option 1 - RATEPRO
Chin 4 100 $ 400
;j Taylor 8 75 600
11 $1,000
Option 2 - LOTUS
Taylor 16 75 $1,200
Linn 20 37.50 750
u $1,950
3d) Develop Prototype Analyses
Roberts 2 125 $ 250
Chin 8 100 800
Taylor 8 75 600
$1,650
i
3e) Develop Mainframe-PC Data Transfer Procedures
Taylor 8 75 600
I' 7
1
i
i
I
I
II
I
Estimated Person Hours and Charges by Task and Consultant continued...
All-in
Task Hours Rate/Hour Estimated Cost
I
4) Documentation
Taylor 24 75 $1,800
5) Training
i Taylor 8 75 $ 600
i
TOTAL LABOR CHARGES
Option 1 : RATEPRO -- not to exceed $24,100
Option 2: LOTUS -- not to exceed 125 050
i
�I
�I
OTHER CHARGES
Mainframe computer resources No Charge
it
i
RATEPRO permanent license No Charge
II
Travel, etc. No Charge
i
I
All G&A expense coverage is included in the all-in hourly rates shown above.
,I I,
I
i
I
t
'I
i
i
it 8
j
:I