Burlington, Vermont 05401

Jennifer Wallace-Brodeur, Chair

Scott Johnstone, Vice-Chair

Jan Harris

Sarah Judd

Robert Herendeen

To: All BED ratepayers and citizens of Burlington

Date: March 2008

We are pleased to present Burlington Electric Department’s Performance Measures Report for 2007. We have been preparing these reports since 1998 for the benefit of the Burlington City Council. Each year, BED conducts a comprehensive self-examination and presents the findings in this report. Performance measurement helps us achieve several important goals for the organization:

The indicators included in this report are relevant to BED’s mission, and they are comparable with earlier years, external norms and other utilities. They are based on verifiable data.

The measures chosen and the data reported represent a small fraction of the information available from managers at BED. If you would like clarification or additional information, contact BED at 802-658-0300.

At BED, we are proud of our 103-year history as a publicly owned utility. While we are constantly making efforts to improve our efficiency and productivity, we are always mindful of reliability and safety. The overall condition of our utility is sound. Much of the reason for our success can be attributed to two important factors: being a publicly owned utility and hiring qualified and committed employees.

Burlington Electric (BED) is a department of the City and an essential part of Burlington’s infrastructure. But BED is more than that. As a public utility, BED is an expression of the community’s commitment to:

In addition to not-for-profit rates, BED offers customers the right to participate directly in the most important decisions about the future of the utility. This illustrates the importance of community-based decisions about our energy future because they reflect local values such as renewable energy (residents supported the construction of the McNeil Generating Station more than 20 years ago); energy efficiency (residents approved an $11.3 million bond to help reduce energy consumption in 1990); and environmental protection (reduced consumption means less pollution).

We’re proud to serve Burlington and will continue to be responsive to the community. This report is intended to help explain what we do and to help us measure our progress over time. We invite your comments and suggestions.

BED provides electric service to more than 16,000 residential customers and 3,700 commercial and industrial customers. For a variety of reasons, including a

very large number of students, BED’s turnover in residential accounts is close to 5,000 per year. This is a remarkable amount of account management for a utility of this size and contributes to somewhat higher than average customer service costs.

On the other hand, BED has two large customers that represent 29% of total sales. Not surprisingly, commercial and industrial customers use much more electricity than residential customers and account for 67% of revenues.

All customers expect certain fundamental services — reliable and safe electricity, professional and courteous service, and affordable bills. Each customer group has unique needs, however. That’s why we have tailored all of our programs and services to meet the needs of each group.

Like all Vermont utilities, BED is required to submit a quarterly Service Quality and Reliability Plan (SQRP) to the Department of Public Service. The SQRP establishes standards for a variety of performance criteria, including the number of incorrect bills, worker injuries, customer notification of outages, and the time required to restore power following an unscheduled outage. Other categories are related to customer service and power reliability.

Each utility is expected to meet these minimum performance standards. BED performed far better in most categories than required and had no violations at all in some areas. However, BED's number of lost time incidents is higher than expected. The good news is that it has declined significantly in the last few years and continues to go down due to an increased focus on training. The severity of these incidents (time lost) appears high because of two injuries that resulted in substantial time away from work.

BED will continue to work hard on service quality and reliability. We know our customers expect no less.

The 22.86% rate increase in 2006 pushed the average

rate for all BED customers above the 1995 peak. The average overall rate is now higher than the statewide average for the first time since 1996.

Between 1995 and 2006, the average rate for BED customers grew by 8.2%, while the statewide average grew by 19.8%.

Although rates are an

important indicator, they tell only part of the story. A customer's bill reflects the rate times the amount of electricity used. Thus, customers who are more efficient and use less power have lower bills.

Even after the rate increase, BED’s residential rates were still 8% lower than the statewide average in 2006.

In addition to low rates, Burlington residents have reduced their electric use through energy efficiency (see p.5). The combination of low rates and declining usage has produced relatively stable bills for Burlington residents.

Average residential bills in

Burlington were 27% less than the statewide average in 2006.

In 2006, an average Burlington residential customer paid $254 less per year than the statewide average. Overall, this represents aggregate savings of $4.1 million in 2006 - money that can be saved or spent in the local economy. These savings help lower housing costs, which is important in Burlington's tight housing market.

Note: Some of the difference in usage and bills reflects the high number of relatively small rental units in Burlington.

actually 10% lower in 2006 than in 1990. This is especially noteworthy in contrast to the rising costs of other energy sources. For example, according to the U.S. Department of Energy, the inflation-adjusted price of natural gas for residential customers in 2006 was 59% higher than in 1990.

After significant declines in the late 1990s, average commercial and industrial rates went up 15% in 2006. As a result, the average rate (revenue per kilowatt-hour) increased 1.5% between 1995 and 2006 (11.64 cents to 11.82 cents). During the same period, the statewide average increased 15% (8.69 cents to 10.0 cents).

The recent rate increase was driven largely by expiring contracts at old prices and the need to replace them with contracts at new (higher) market rates. BED has one remaining long-term contract set to expire in 2009 (7MW), but the majority of impacts from the deregulated markets are already built into our rates.

CVPS and GMP have not yet absorbed as much of the new market prices because of their existing Hydro Quebec and Vermont Yankee contracts. When the contracts expire in 2012, those utilities will have to replace them at market prices. At that point, their rates (and the statewide average) will very likely catch up with BED’s increases.

The bottom graph shows a comparison of BED's overall rates with other New England states. To the extent electric rates are a real or perceived issue for economic development, Burlington is in excellent shape within the region.

In any case, rates are still only half the picture. Along with the efforts to reduce rates, BED’s Energy Services staff have helped C&I customers reduce their consumption through energy efficiency initiatives (see p.5). The combined effect is powerful.

Burlington voters approved an $11.3 million energy efficiency bond in 1990. BED invested those funds wisely and the results are described below. BED customers (like all others statewide) pay a small monthly charge that supports BED’s energy efficiency efforts.

Altogether, BED has invested $15.9 million in energy efficiency, and has leveraged another $15.9 million in private funds from our customers. Almost all of these dollars recirculate in the local economy. The effect has been dramatic.

Overall electricity use in 2007 was only 1% greater than in 1989. Thus, we are meeting the needs of a growing local economy with about the same amount of electricity as we used 18 years ago. The efficiency investments saved Burlington customers $8.1 million in 2007 alone.

These investments helped Burlington avoid the release of 35,238 tons of CO₂ in 2007, equivalent to removing 8,195 cars from the highways.

All customers pay for efficiency

investments in their bills, so BED has programs tailored for all rate classes. The graphs at left and below show the distribution of resources and savings.

BED's Energy Services staff worked with dozens of customers in 2007 to implement efficiency projects that save energy, enhance facilities, and improve competitiveness. Total customer savings were $782,960. For example:

BED has worked with Fletcher Allen Health Care for years to maximize the energy efficiency of the hospital. In 2007 alone, 1,000 fluorescent fixtures were replaced with more efficient ones. 

The common area fluorescent lighting at the Maltex Building on Pine Street was retrofitted using Super T8 fluorescent technology. This provides significant energy savings because the common areas are illuminated for many hours every day. T8’s have higher light levels and a more aesthetically pleasing light quality. 

The Ski Rack on Main Street is now using more than 200 Halogen Infra-Red lamps in the track lighting over the sales floor.  Halogen IR’s use 20% less energy and have a 40% longer life. The Ski Rack is saving on lighting and bulb replacement costs along with air conditioning costs because the new lights produce less heat.

BED's "demand response" efforts expanded in 2007.  BED partnered with EnerNoc, an independent energy services company, to offer large commercial customers an easy way to reduce electric load during summer peak periods when the system is stressed and power costs are at their highest. UVM, Fletcher Allen, Verizon, Blodgett, Marriott, Edlund, and BED use on-site generators and/or turn off equipment during these periods. This helps reduce power costs for all customers across New England, as power prices during peak periods can be very expensive.  

The Commercial Smartlight lease program assists many small businesses by replacing incandescent lights with leased compact fluorescent bulbs. Cumulative energy savings are worth about $663,000 per year.

An interruption of power is considered an outage if it exceeds five minutes. Outages are either planned or unplanned. Planned outages are generally shorter in duration, affect a smaller number of customers, and are warned in advance giving customers time to prepare. Planned outages allow BED personnel to safely perform routine maintenance, upgrade facilities, and eliminate old infrastructure. Unplanned outages usually impact a larger number of customers, occur without warning, cost more to repair, and are generally longer in duration. Common causes include weather, equipment failure, and animal or tree contact.

BED is in the middle of a multi-year capital improvement campaign to improve reliability. These investments are paying dividends as BED experienced 22% fewer unplanned outages than in 2005.

BED’s power supply mix reflects a number of considerations including cost, reliability, diversity of fuel sources, and economic and environmental impacts. While cost is always critical, other factors influence purchase decisions, including fuel supply, diversity, credit risk and environmental impact. BED has been successful at maintaining comparatively low and stable rates, while also continuing our commitment to renewable fuels and, to the extent possible, keeping money in Vermont.

Today, 66% of BED’s energy needs come from renewable energy resources. This is noteworthy considering that the rest of New England gets less than 10% of its energy from renewable supplies. Burlington’s renewable supply is made up of wood and hydro resources from Vermont and New York. BED seeks to increase its investment in renewable generation, including new wind generation projects.

development, it recognizes that more can and should be done. As a result, BED is actively working with several renewable project developers within Vermont and in the broader New England region. The ultimate goal is to develop a long-term renewable supply portfolio serving 100% of BED’s resource needs at stable and predictable energy prices. But while BED wants more renewable power, development continues to be challenging. For example, wind is the most promising type of renewable power in Vermont and the most cost effective relative to other sources, but the process of implementation is moving very slowly. 

The McNeil Station is dispatched by ISO New England,

which controls all of the region’s power plants. The decision to run an individual plant is based on regional demand, reliability needs, and the bid price, which reflects fuel costs at each plant.

Note: McNeil was dispatched more often in 2000 for regional transmission reliability.

ISO does not consider the total cost of producing power; it excludes "externalities" (environmental and secondary economic impacts). For example, McNeil uses a renewable fuel, so it doesn’t deplete a limited resource. Because the wood fuel comes from the region, the money supports the local economy. And because wood contains no sulfur, McNeil’s emissions are less harmful than oil or coal.

Several states have developed markets for "green" energy so BED will be able to sell additional McNeil power and renewable energy credits, increasing revenues. The additional revenues will help BED maintain stable rates and will benefit those involved in supplying wood to the plant.

All power plants that burn fuel emit certain substances into the air. Until we completely switch to pollution-free technologies like wind, solar and hydro, we must continue to reduce demand whenever possible. For now, burning wood produces significantly less pollution than other fuels.

McNeil's wood harvesting standards are comprehensive, field-proven means to harvest biomass fuel sustainably, and have been used as a model in developing forest certification programs. In 2007, McNeil Station purchased 418,000 tons of wood; 89% harvest residue, 9% sawmill residue, and 2% recycled wood. McNeil foresters plan and monitor harvests on more than 5,000 acres per year in VT, NY, NH, and Quebec. These plans include protection of critical wildlife habitats and wetlands. For example,

McNeil has run the Waste Wood Depot since Jan. 1, 2006. The volume of clean waste wood has increased by 50% in these two years (to 5,450 tons). Diverting this wood from landfills means 22,000 cubic yards per year of conserved landfill space and more than $80,000 per year of fuel savings at McNeil.

Approximately 5,000 of our 16,000 residential customers change locations each year, which is a primary driver of customer service costs. BED has managed to stabilize these costs over the last six years. Adjusted for inflation, the cost per customer has declined 23% since 1998. Among other things, this reflects considerable savings from consolidating job functions and the productivity of our staff.

The average cost of maintaining BED's distribution system is about $1.6 million per year. In addition, BED makes long-term investments to improve the system, to extend its useful life, and to accommodate new development. Capital projects include equipment upgrades, line extensions and new underground conduits and cables.

BED has budgeted more money recently for this critical part of the business. These investments improve system reliability and reduce unplanned outages. Distribution system efficiency measures (e.g., conversion from 4.16 KV to 13.8 KV, etc.) have reduced line losses and will save about $419,000 annually.

Note: The spike in capital expenditures in 2001 resulted from three major projects occurring at the same time. They included a line extension for Fletcher Allen's new facilities and the reconstruction of the underground systems downtown and in the Birchcliff Parkway neighborhood.

The administrative costs of running BED rose from 1995 through 1998 due in part to the

one-time costs of an employee buyout. Since then, BED has improved its efficiency and realized the benefits of reduced staffing. Since 1996, staffing has been reduced from 164 to 124 employees.

As a municipal entity, BED is not required to pay property taxes. However, BED makes an annual payment in lieu of taxes (PILOT) that makes us the largest property taxpayer in the City. BED also collects a 3.5% franchise fee for the City.

This is significant because these payments come from all customers (and the joint owners of the McNeil Station), including nonprofit entities such as UVM and Fletcher Allen that don’t pay property taxes. This is a more equitable distribution of the burden of financing City operations and is an important benefit of public power.

If not for BED’s PILOT and the City franchise fees, the combined property and school tax rate would be about $0.08 higher than it is today. That means a family with a $200,000 home saves about $168 per year in property taxes, while paying only $24 in franchise fees, a savings of $144 per year.

One of the benefits of the decision to build the McNeil Generating Station is that a considerable amount of money remains in Vermont and the region. In addition to providing 36 jobs for Vermonters at the Plant, BED’s wood fuel purchases also contribute to the Vermont economy, supporting North Country landowners, processors and haulers. It is especially noteworthy that much of this activity has occurred in the northernmost counties of Vermont, where most economic indicators lag behind the rest of the state.

In addition, sustainable harvesting of wood fuel results in environmental benefits and a reliable long-term fuel source. A sustained market for low-grade wood at McNeil allows landowners to improve the future value of their woodlands. This encourages residents to own and maintain undeveloped forestland, which provides many public benefits such as clean water, wildlife habitat and land for recreation.

The economic impact of BED’s operations includes payroll, local taxes, wood purchases, and other power purchased within Vermont. BED’s total direct contribution to the Vermont economy over the past 10 years has been $276 million.

The indirect benefits are significant as well. For example, buying wood in the region has a powerful "multiplier effect" as the money circulates through the economy. BED and the Joint Owners spent $14.5 million for wood at the McNeil Plant last year. Using multipliers from the U.S. Commerce Department, these purchases led to $8.3 million in additional economic activity, including $4.4 million in wages for 161 jobs. This is a substantial benefit for Vermont.