PRELIMINARY MUNICIPAL UTILITY FEASIBILITY STUDY
REPORT August 2020PRELIMINARY MUNICIPAL UTILITYFEASIBILITY STUDYCity of Chicago, IllinoisPREPARED BY:ECONOMICSSTRATEGYSTAKEHOLDERSSUSTAINABILITYw w w . new genst r at e g i e s . ne t
Table of ContentsBullet List Report SummaryExecutive SummarySection 1 INTRODUCTION . 1‐1Preliminary Feasibility Study . 1‐1Phase I Feasibility Study Elements . 1‐1Feasibility Study Process . 1‐2Policy Assessment . 1‐4ComEd Data Request . 1‐4Asset Value Estimate . 1‐4Estimated Severance Costs . 1‐5Stranded Costs . 1‐7City of Chicago Electric Load . 1‐7ComEd Retail Rates . 1‐82020 Average Retail Rate for ComEd . 1‐8Section 2 FINANCIAL MODEL DEVELOPMENT . 2‐1Financial Model Assumptions . 2‐3Distribution‐Related Assets / Severance Costs . 2‐3Start‐Up Costs for Municipal Electric Utility Operation . 2‐4Continuing MEU Operation . 2‐4Section 3 PUBLIC POLICY ASSESSMENT . 3‐1Municipalization Effort . 3‐1Existing Electricity Market / Applicable Legislation . 3‐1Municipal Aggregation . 3‐2Franchise Agreement – Policy Implications . 3‐2Summary of Relevant Policy Efforts by the City . 3‐4Section 4 CONCLUSIONS AND RECOMMENDATIONS . 4‐1List of AppendicesABPro Forma Financial Analysis ResultsPolicy Assessment Summary MatrixEconomics Strategy Stakeholders Sustainability
Table of ContentsList of TablesTable 1‐1 Valuation Estimate for Electric Distribution Plant Located within the Cityof Chicago . 1‐5Table 1‐2 Preliminary Severance Estimate for City of Chicago ( Million) . 1‐6Table 1‐3 Current ComEd Rate Tariffs for Delivery Services to Customer Classes inthe City. 1‐8Table 1‐4 Average Delivery Rate for ComEd Customers in Chicago . 1‐9Table 2‐1 MEU Financial Model Results for Year 1 (Base Case Scenario) . 2‐2Table 2‐2 Estimated Start Up Costs for Chicago Utility ( 000) . 2‐4Table 2‐3 Estimated Operations Costs for Chicago Utility ( 000) . 2‐5Table 2‐4 Estimated Annual Non‐Operating Expenses for Chicago Utility ( 000) . 2‐6iiCity of Chicago ‐ FINAL 082820
Report SummaryStudy Background NewGen Strategies and Solutions, LLC (NewGen) conducted a preliminary investigation into theestablishment of a municipal electric utility to serve the residents and businesses of the City ofChicago, which is currently provided service by Commonwealth Edison Company (ComEd). The intent of this Preliminary Feasibility Study (Study) is to determine if the City should continuewith its efforts to establish a locally controlled municipal electric utility. This Study developed a financial feasibility analysis as well as a review of the City’s public policyobjectives as they relate to electric utility operations. Because the State of Illinois has established retail choice for electric customers to choose theirenergy supplier, this Study focused on an analysis of the estimated costs of electric deliveryservice for a proposed City utility compared to ComEd.Study Findings The financial pro forma cash flow model developed for this Study to determine the financialfeasibility of creating a municipally owned electric utility for the City indicates that the averageannual electricity delivery rate for the City‐owned system would be greater than the averageComEd delivery rate for each year over the Study period (2020‐2039). A review of various scenarios analyses suggests the difference in average delivery rates betweenthe City‐owned system and ComEd is primarily due to the substantial estimated investmentrequired to sever the City electric distribution system from the ComEd system (severance costs).NewGen did not prepare an engineering assessment of the severance cost, as the costs for whichwould be significant, and it was not included in the scope for this preliminary Study. The City has established several strategic goals and objectives that relate to electric utilityoperations. A municipally‐owned utility may help to achieve many of these goals; however, it maytake the City many years to establish its own utility. Alternatives to municipalization exist whichmay be consistent with the City’s strategic goals and its overall public policy objectives.Study Recommendations: If the City were to continue consideration of municipalizing the ComEd electric distribution system,it is recommended that it conduct additional analyses regarding potential severance costs. The City should review its public policy objectives as they relate to electricity usage to ensure theyare consistent with its current and future policies. The City should consider the inclusion of specific public policy, energy‐related goals, and objectivesin its negotiations with ComEd regarding possible renewal of its Franchise Agreement. NewGen recommends that the City not pursue municipalization of the ComEd system at this time,as the financial feasibility suggests higher annual average retail delivery rates for City service thanthe projected ComEd rates and the City can likely achieve many of its public policy objectiveswithout acquiring the ComEd system assets.Economics Strategy Stakeholders Sustainability
EXECUTIVE SUMMARYIn the fall of 2019, the City of Chicago engaged NewGen Strategies and Solutions, LLC (NewGen) to conducta preliminary investigation into the establishment of a municipal electric utility (MEU) to serve theresidents and businesses of the City of Chicago, Illinois (Chicago or the City). Commonwealth EdisonCompany (ComEd), a wholly‐owned subsidiary of Exelon Corporation, currently provides retail electricsupply and delivery services to the City. The intent of this Preliminary Feasibility Study (Study) is todetermine if the City should consider establishment of a locally controlled MEU. This includes thedevelopment of a financial feasibility analysis as well as a review of the City’s public policy objectives asthey relate to the electric utility operations in the City.NewGen developed a financial pro forma cash flow model to determine the financial feasibility of creatinga MEU for the City. The financial model estimates the cash needs of the City’s electric utility, as describedherein, to provide electric delivery services to its customers. The projected operating revenues (i.e., theutility’s revenue requirement) are designed to recover the utility’s costs for operations, capitalinvestments, and debt service, as well as any margin required to meet its financial obligations. The totalMEU revenue requirement is divided by the total energy sales in kilowatt hours (kWh) to determine an“average system retail delivery energy rate.”The average system rate is a metric utilized to compare the potential costs of operating the MEU to thecosts of continuing to obtain delivery service from ComEd. The preliminary financial feasibility analysissuggests that the average annual MEU delivery rate would be greater than the average ComEd deliveryrate for each year of the Study period (2020‐2039). A review of various scenario analyses suggests thisdifference in average rates is primarily due to the substantial estimated investment required to sever theMEU system from the ComEd system. As discussed herein, the severance costs are estimated to beapproximately 3.9 billion and is driven primarily by transmission and substation equipment costs.NewGen did not prepare an engineering assessment of the severance cost. The costs to conduct anengineering assessment would be significant and were not included in the scope for this preliminaryfeasibility Study. If the City were to continue consideration of municipalizing the ComEd distributionsystem, it is recommended that the City conduct additional analyses regarding the potential severancecosts.The City has initiated several strategic planning efforts to address specific environmental and social publicpolicy objectives. A municipally‐owned utility may serve to achieve some of these goals and objectives.However, it could take many years for the City to acquire the electric distribution facilities within the Cityfrom ComEd and establish its own utility. The City should review its public policies as they relate toelectricity usage to ensure they are consistent with its current goals and objectives. The City may be ableto achieve some of its public policy objectives with continued service through ComEd. The City shouldconsider the inclusion of specific energy‐related public policy goals and objectives in its negotiations withComEd regarding possible renewal of its Franchise Agreement.NewGen recommends that the City not pursue municipalization of the ComEd system at this time as thefinancial feasibility suggests higher average retail delivery rates for MEU service than the projected ComEdrates and the City can likely achieve its public policy objectives without acquiring the assets of ComEd.Economics Strategy Stakeholders Sustainability
Section 1INTRODUCTIONIn the fall of 2019, the City of Chicago (City), through its Department of Law (DOL) and Department ofAssets, Information, and Services (AIS), engaged NewGen Strategies and Solutions, LLC (NewGen) toconduct a preliminary investigation into the establishment of a municipal electric utility (MEU) to servethe residents and businesses of Chicago. Commonwealth Edison Company (ComEd), a wholly‐ownedsubsidiary of Exelon Corporation, currently provides delivery services as well as default electric supply toChicago. Terms and conditions regarding ComEd’s responsibilities specific to the City and service inChicago are provided in the “Ordinance and Agreement between the City of Chicago and CommonwealthEdison Company,” effective January 1, 1992, herein referred to as the “Franchise Agreement.” This reportprovides the results of a Preliminary Feasibility Study (Study) conducted by NewGen.Preliminary Feasibility StudyThe intent of this Preliminary Feasibility Study is to determine if the City should consider establishing alocally controlled MEU. NewGen’s scope of work, as documented in this Report, includes thedevelopment of a financial feasibility analysis as well as a review of the City’s public policy objectives asthey relate to electric utility operations in Chicago. NewGen designed the scope of work to beaccomplished in a phased approach. Phase I results are presented in this Preliminary Feasibility Study,which provides an initial evaluation to determine the costs / benefits of establishing a MEU and anassessment of the City’s existing electricity‐related public policy goals. If the City decides to proceed withits municipalization efforts, more in‐depth analyses will be performed in Phase II.The analysis developed in the Preliminary Feasibility Study utilizes confidential and non‐confidential datato determine potential average system electric rates associated with a MEU for the City. The public policyreview endeavors to provide a review of the City’s public policy objectives as they relate to certain aspectsassociated with electric utility operations. These aspects include providing affordable and reliable power,promoting environmental stewardship, supporting economically disadvantaged communities, supportingminority‐ and woman‐owned businesses, and encouraging investments in new technology. The intent ofthis report is to determine if the financial and policy analysis warrant moving forward with additionalmunicipalization efforts, including potential Phase II efforts.Phase I Feasibility Study ElementsThe following highlights the Phase I Feasibility Study elements: Develop an assessment of the City’s existing and future public policy goals and objectives as theyrelate to the electric utility operations. Determine an initial estimate of the value of ComEd assets utilizing publicly available andconfidential data as well as the provisions of the City’s existing Franchise Agreement with ComEd. Estimate the cost of severance and review reintegration issues, utilizing publicly available andconfidential data, including data provided by ComEd pursuant to the Franchise Agreement.Economics Strategy Stakeholders Sustainability
Section 1 Determine preliminary estimated start‐up, financing, operations and maintenance (O&M), andadministrative and general (A&G) costs utilizing publicly available data and NewGen professionalexperience. Project estimated costs (average rate revenues) of providing MEU service (i.e., revenuerequirement), compared to the costs (average rate revenues) under continued ComEd service. Prepare a report that presents the results of the Preliminary Feasibility Study. Attend an on‐site or on‐line meeting to present the Phase I Preliminary Feasibility Study results, asrequested.Feasibility Study ProcessThe Phase I Feasibility Study was initiated with a conference call in November 2019. The City providedconfidential and non‐confidential information, including a copy of its existing Franchise Agreement,historic Franchise Annual Reports prepared by ComEd for the City and submitted to the City as specifiedin the Franchise Agreement, and other relevant information. Information was also obtained fromComEd’s Federal Energy Regulatory Commission (FERC) filing requirements, including ComEd’s FERC Form1 Annual Report, and ComEd rate filings to the Illinois Commerce Commission (Commission). The City andNewGen had continuing communication to facilitate review of Study results and address concerns raisedduring the Study process.The State of Illinois initiated retail choice for electric customers in 1997 (Electric Service Customer Choiceand Rate Relief Law and subsequent amendments, collectively referred to herein as the Customer ChoiceLaw). Essentially, this legislation allows customers the opportunity to obtain their power supply from anentity other than ComEd or Ameren Illinois (the two main investor‐owned utilities in the state) and isgenerally referred to as “retail choice” in the electric industry. According to a report by the NationalConference of State Legislatures, approximately 35% of ComEd customers were served by an alternativepower supply in 2018. Customers are still provided electric delivery service through their incumbentutility, such as ComEd, which continues to own, operate, and maintain the electric delivery system. Thelegacy generation function was divested from the incumbent utilities into separate non‐regulated entitiesor subsidiaries of larger companies. For example, Exelon Corporation, the parent company of ComEd,owns generation assets in Illinois and other states. One provision within the amendments to the CustomerChoice Law allows municipal entities to aggregate the supply load within their municipal boundaries andsolicit power to serve that load (Municipal Aggregation). The result of the retail choice legislation impactsthe analysis conducted for this Study, as discussed herein.ComEd’s residential and commercial electric bills in Chicago have two primary categories of cost recovery,in addition to taxes and fees, for the electricity that powers homes and businesses. The first is a SupplyCharge, which is either provided by an alternative retail electric supplier (ARES) or, if the customer doesnot elect to receive supply from an ARES, from ComEd as default supply. ComEd’s default supply isprocured for it by a state agency, the Illinois Power Agency.1 The second cost recovery category is fordelivery/distribution services, the most significant of which is the Delivery Charge. The Delivery Chargerelates to recovery of ComEd’s costs for delivering power from the power supplier to the retail customer.The focus of this Study is on the municipal acquisition of ComEd’s distribution‐related assets within theCity, whereby the City would become a “distribution utility” and procure generation and transmission1Municipalities may elect to implement municipal aggregation, in which case the customer’s supply may bethrough a supplier that is selected by the municipality.1‐2City of Chicago ‐ FINAL 082820
INTRODUCTIONservices from other providers as appropriate. For the purposes of this Study, it is assumed that a portionof the transmission cost is recovered in the Delivery Charge; however, those costs are not anticipated tobe material to this analysis. Further study of the transmission services provided by the power supplierand those provided by the electric delivery utility is recommended if the City decides to move forwardwith additional review.Various taxes and fees are also added to the to the customer’s bill. These charges include cost recoveryfor various program fees (environmental cost adjustments, renewable portfolio standard charges, zeroemissions standard, and energy efficiency2) as well as other fees and taxes (franchise costs, state taxes,municipal taxes). This Study did not review the basis for the taxes and fees. It is assumed the programfees are mandated or approved by the Commission, the franchise payment is consistent with the termsof the Franchise Agreement, and the state and municipal taxes are the results of various legislation andregulations enacted by the appropriate jurisdiction.Since customers in Chicago can independently choose their power supply provider, it is assumed that theSupply Charge portion of the customer bill may not change regardless if the City of ComEd owns thedistribution system. Therefore, an analysis of power supply costs was excluded from this Study.The ability to select a power supply provider has a dramatic impact on the feasibility associated with thepotential for municipal ownership of the utility. Prior to deregulation in Illinois and in other statejurisdictions that maintain integrated utilities, a major source of the typical retail rate differential betweenmunicipally‐owned and investor‐owned systems was the cost recovery of the rate of return and
The intent of this Preliminary Feasibility Study (Study) is to determine if the City should continue with its efforts to establish a locally controlled municipal electric utility. This Study developed a financial feasibility analysis as well as a review of the City’s public policy
Study. The purpose of the Feasibility Study Proposal is to define the scope and cost of the Feasibility Study. Note: To be eligible for a Feasibility Study Incentive, the Feasibility Study Application and Proposal must be approved by Efficiency Nova Scotia before the study is initiated. 3.0 Alternate Feasibility Studies
i. Definition of Utility Mapping. ii. History of Utility Mapping. iii. Objectives of Utility Survey & Mapping in Malaysia. iv. The scope of Utility Mapping in standard guidelines for underground utility mapping. v. The role of utility owner, surveyor and JUPEM in underground utility mapping. 1 UNDERSTAND THE UTILITY QUALITY LEVEL ATTRIBUTES i.
Our reference: 083702890 A - Date: 2 November 2018 FEASIBILITY STUDY REFERENCE SYSTEM ERTMS 3 of 152 CONTENTS 1 INTRODUCTION 9 1.1 EU Context of Feasibility Study 9 1.2 Digitalisation of the Rail Sector 9 1.3 Objectives of Feasibility Study 11 1.4 Focus of Feasibility Study 11 1.5 Report Structure 12 2 SCOPE AND METHODOLOGY 13
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The Pearson Edexcel Level 3 Advanced GCE in Business is designed for use in schools and colleges. It is part of a suite of GCE qualifications offered by Pearson. These sample assessment materials have been developed to support this qualification and will be used as the benchmark to develop the assessment students will take. P v 3 1 2014 2014 2. P v 3 1 2014 2014 3 General marking guidance .
