Cost of Service Study and Rate Analysis. for. City of Lebanon, Missouri. Electric Department

Transcription

1 Cost of Service Study and Rate Analysis for City of Lebanon, Missouri Prepared By Craig R. Woycheese, CPA Craig R. Woycheese, CPA, MBA Senior Rate Analyst Phone: E Primrose Suite 200 Springfield, MO Fax:

2 CITY OF LEBANON, MISSOURI Electric Utility Cost of Service Study and Rate Analysis Executive Summary The study herein has been designed to examine the effectiveness of Lebanon s present electric rates in supporting the City s cost to provide services to its customers. The study was completed in conjunction with the pole inspection and electric system inventory to estimate the value of the electric system s plant assets using similar systems average costs and to integrate the plant valuation into the Cost of Service Study and Rate Analysis. Based on the valuation analysis, gross plant is estimated at $29,101,831. The study has analyzed the system revenues and expenses as they are incurred in the provision of service to the City s residential, commercial, and industrial customers. For the most recent calendar year ending December 31, 2016 (Test Year), the Electric Department experienced operating margin of $1,227,842. Adjustments were made to the calendar year revenues to reflect customer billings based on the City s billing records and the City s fiscal year June 30, 2017 budget for service charges and miscellaneous revenue. Additionally, adjustments were made to the calendar year operating expenses to reflect the City s budget except for wholesale power, depreciation, and PILOT expense. Wholesale power is adjusted to reflect Test Year purchases and forecasted rates provided by Missouri Public Utility Alliance (MPUA). Depreciation expense is adjusted to $825,163 based on the plant valuation and approved depreciation rates outlined in the Lebanon Mo Fixed Asset User s Manual. PILOT is estimated at five percent of customer billings. The adjusted revenue less expenses produces an initial Pro Forma operating margin of $287,188. The Cost of Service study is based on the initial Pro Forma income and expenses discussed above. It is recommended that a one percent increase be submitted to the City Council for action as outlined in Section of the Lebanon Code of Ordinances. Finally, we recommend that the City restructure its rate schedules to implement a service availability charge for each rate schedule. Report Sheet 1

3 INTRODUCTION Project Overview CITY OF LEBANON, MISSOURI Electric Utility Cost of Service Study and Rate Analysis The purpose of this Electric Cost of Service and Rate Analysis is to analyze the financial aspects of the Electric System of the City of Lebanon, specifically the revenues and expenses and the allocation of those expenses to the various customer classes. This study examines the appropriateness of current rates, rate design and customer classifications, and the adequacy of current revenues. Also, included in this study is an analysis of the revenue requirements for Lebanon s Municipal Electric Utility. Revenue requirements comprise the need for income to offset the City s expenditures such as normal operating expenses, capital improvements and additions, transfers to other funds and other non-operating expenses, the total of which is the cost of providing electric service; and to permit the continued replacement and expansion of its facilities. Examinations of the electric budget and capital improvement plans have been performed to provide recommendations as to the level of future revenue requirements. System Information The electric distribution system at the City of Lebanon is physically connected to ShoMe Power Electric Cooperative, however, wholesale power is supplied by MPUA. Basis for the Study As a basis for this study, we have relied upon historical budgeted data provided by the of the City of Lebanon, the terms and conditions of the wholesale power agreement with MPUA, actual and assumed operating characteristics for the and each of the customer classifications, and information obtained through discussions with City representatives. Structure of the Study In analyzing the cost of service for each of the customer classes, the system revenues and expenses are calculated first. The revenues are categorized into customer billings and other revenues. The expenses are categorized into energy supply expense and non-energy operating expenses. The non-energy expense is further divided into Report Sheet 2

4 customer and demand expenses. In the same manner, the energy supply expense is further divided into energy and demand expenses. Rate base, which is net plant plus working capital, is divided in the same manner as non-energy operating energy expenses. Revenues, expenses, and rate base are allocated to each rate class. The operating margin for each rate class is evaluated based on a rate of return of the allocated rate base to each class to determine the equitability of the rates for each customer class. Unit costs were also calculated for each customer class on the allocation of revenue and expenses to the classes. The unit costs and revenues are essential in structuring rates that provide fair rates of return for the total system and for each individual customer class. Time Span of Study The test year was established as twelve months ending December 31, The study was extended through the current calendar year using test year customer billings and the fiscal year June 30, 2017 budget. Correspondingly, there are 19 additional years on a pro forma basis. The cost studies in this report are forward looking, using the past City financial records as a guide. In this regard, they are a planning tool and will provide a reasonable indicator of financial results for future years if expenditures are kept in line with general inflation. The results of this study should be regularly compared to audited financial results as they become available so that the two reports become complimentary. Results Initially, total system revenues and expenses were tabulated and evaluated to determine the adequacy if the system rate of return. Based on the results of this evaluation, determinations were made whether there is a need for a revenue increase, decrease, or no change at all. This evaluation was then extended to the individual customer classes. Section D Sheet 1 of the study herein shows the revenues, expenses, and rates of return for the first pro forma year, during which the utility is forecasted to have an operating margin of $287,187 on revenues of $24,994,449. The rate base is forecasted as $16,664,815. The overall rate of return on the rate base is 1.7% and the operating margin as percent of revenue is 1.1%. Report Sheet 3

5 Overall, the revenue is adequate to recover operating expenses. However, it is recommended that the City Council review a one percent increase for calendar year 2018 to offset the s downward trend in rate of return and decrease in cash reserves due to capital improvements. Existing Rates and Rate Recommendations The present rates charged by the City are summarized in Section B Sheets 1 and 2. Exhibit 1 is a copy of the City s current rate ordinance. Exhibits 2 5 are reprints of comparative rates from electric systems in Missouri. This information has been gathered by the U.S. Department of Energy through its Energy Information Administration (EIA). All the comparative information is for calendar year The City s reported rates and some of the reported rates are likely to have increased since that time. We have not made an independent verification of any of the data, but present it for informational purposes. Please note that the rates shown do not always include sales and franchise taxes. There is no standard for earnings in the municipal electric utility business. Levels of operating income and cash reserves are products of careful consideration of the individual members governing boards who have the legal fiduciary duty to protect the assets of the utilities they oversee. A high level of cash reserves for municipal electric utilities is recommended to provide for replacement of aging facilities, expansion of the system, addition of capacity, and to meet emergency needs such as damage from tornados or ice storms. It is recommended to consider a cash reserve policy to justify cash reserves to customers and the council. The benefits of a cash reserve policy are it provides a detailed description of the methodology, maintains adequate reserve levels with changes in management and councils, and encourages periodic reviews of cash levels. The following provides a basic model to determine minimum cash reserves: Five Risk Factors to Consider % Risk to Allocate Amount O&M Expenses (less Power Costs and Depreciation) 12.3% $ 418,207 Power Costs 13.1% 2,677,921 Historic Investments in Assets 2.0% 582,037 Annual Debt Payment 0.0% 0 Total Five-Year Capital Plan 20.0% 1,200,000 Total of Five Risk Factors $4,878,165 Report Sheet 4

6 As discussed above, Lebanon s ordinance provides for an annual one percent rate adjustment to be reviewed by City Council. It is recommended that City Council review a one percent adjustment for calendar year 2018 to provide for adequate operating margins and to limit future annual cash deficits. Rate Design Cost of service and rate design are two very different sets of calculations. The cost of service section of this report analyzed the cost to provide service to each separate class of customers served by the City. The design of rates is intended to collect revenue that recovers the cost to provide service to each class and to equitably collect a margin sufficient to provide for emergencies, system expansion, and cash flow necessary for day to day operations. Rate design involves the making of public policy as well as engineering and economics. The City s existing rate structure is comprised of energy charges that differ for each class of customer, and a minimum monthly charge. There is also a demand charge for large customers. This is beneficial both for the utility and the customer because it allows the customer some measure of control over the cost of energy based on the number of hours of operation. It is desirable to minimized the amount of cross-subsidy among customer classes so that the utility is not over-reliant on a customer or class of customer for its revenue needs. As an example, if industrial customers provide a subsidy to the residential class and a major business closes, relocates, or sharply curtails its usage, there will be negative effects on the other customers. First, the other customers would have to make up for the loss of business load and, second, the other customers would have to make up for the additional subsidy that was being provided by the business, causing a larger increase than would be necessary. When rate amounts of the various classes are set with similar rates of return, downturns in the general economy with have a much less negative effect on the utility and its customers. The determination of rate design changes is a more of a matter of public policy than engineering or economics. To the extent that changes towards levelization are possible, they should be made. Presently, there are cross-subsidies among Lebanon s several classes of customers. To get the rate of return levelized the following adjustments would have to be made: Report Sheet 5

7 Rate Class Dollar Adjustment Percent Adjustment Rate of Return Residential $383, % 2.7% Commercial 1 $84, % 2.7% Commercial 2 ($194,089) -5.4% 2.7% Commercial Industrial ($95,937) -3.4% 2.7% Industrial 1 ($177,343) -7.9% 2.7% Industrial 2 ($10,808) -0.2% 2.7% City Use $0 0.0% -29.4% Lighting $9, % 2.7% The above adjustments would be revenue neutral to the system, but would have significant customer impact and should be considered for long-term rate planning. At the present time, no revenue changes are recommended to each class, but it is recommended that management and council consider the cross-subsidies in future rate adjustments. Summary Our analysis of the cost of service for the City s electric system and for each of the customer classes has indicated that the present level of revenue should be reviewed annually as outlined in the ordinance to determine its adequacy to meet the City s overall needs and obligations. Our recommendations are listed below: 1. Increase rate levels by one percent for the 2018 calendar year to offset a downward trend of rate of return and provide positive cash flows. 2. For the one percent increase, consider increasing the service availability charges only. 3. Restructure rates as shown in Section B Sheets 1 and 2 to include a service availability charge for each rate class and remove the winter/summer rates where feasible. 4. In future rate adjustments, consider undertaking the cross-subsidies among the rate classes. Report Sheet 6

8 Report Exhibit 1 Sheet 1 of 12

9 Report Exhibit 1 Sheet 2 of 12

10 Report Exhibit 1 Sheet 3 of 12

11 Report Exhibit 1 Sheet 4 of 12

12 Report Exhibit 1 Sheet 5 of 12

13 Report Exhibit 1 Sheet 6 of 12

14 Report Exhibit 1 Sheet 7 of 12

15 Report Exhibit 1 Sheet 8 of 12

16 Report Exhibit 1 Sheet 9 of 12

17 Report Exhibit 1 Sheet 10 of 12

18 Report Exhibit 1 Sheet 11 of 12

19 Report Exhibit 1 Sheet 12 of 12

20 2015 Utility Bundled Retail Sales- Total (Data from forms EIA-861- schedules 4A & 4D and EIA-861S) Entity State Ownership Customers Sales Revenues (Thousands Average Price (Count) (Megawatthours) Dollars) (cents/kwh) City of Ava - (MO) MO Municipal 1,538 59,608 2, City of Sikeston - (MO) MO Municipal 9, ,649 19, City of Kennett - (MO) MO Municipal 5, ,603 10, Citizens Electric Corporation - (MO) MO Cooperative 27,005 1,570, , Missouri Rural Electric Coop MO Cooperative 5, ,529 16, Central Missouri Elec Coop Inc MO Cooperative 10, ,992 24, Webster Electric Coop MO Cooperative 18, ,809 28, City of Carthage - (MO) MO Municipal 7, ,499 24, City of West Plains - (MO) MO Municipal 6, ,048 14, Cuivre River Electric Coop Inc MO Cooperative 62,060 1,265, , City of Sullivan - (MO) MO Municipal 3, ,579 8, City of Lebanon - (MO) MO Municipal 7, ,053 22, SE-MA-NO Electric Coop MO Cooperative 5, ,732 9, Gascosage Electric Coop MO Cooperative 9, ,270 16, City Utilities of Springfield - (MO) MO Municipal 112,821 2,991, , City of Poplar Bluff - (MO) MO Municipal 9, ,513 32, North Central MO Elec Coop Inc MO Cooperative 4, ,709 14, Consolidated Electric Coop MO Cooperative 7, ,755 21, Union Electric Co - (MO) MO Investor Owned 1,203,538 35,875,728 3,209, City of Monett - (MO) MO Municipal 4, ,329 18, City of Farmington - (MO) MO Municipal 7, ,503 18, City of Fulton - (MO) MO Municipal 5, ,188 13, Barry Electric Coop MO Cooperative 9, ,316 16, KCP&L Greater Missouri Operations Co. MO Investor Owned 318,150 7,970, , Howell-Oregon Elec Coop, Inc MO Cooperative 23, ,156 37, Black River Electric Coop - (MO) MO Cooperative 24, ,563 42, City of Rolla - (MO) MO Municipal 9, ,307 27, Laclede Electric Coop, Inc MO Cooperative 36, ,605 60, City of Columbia - (MO) MO Municipal 48,382 1,162, , Ozark Border Electric Coop MO Cooperative 39, ,488 67, Trenton Municipal Utilities - (MO) MO Municipal 3,096 85,531 8, Macon Electric Coop MO Cooperative 11, ,964 22, Three Rivers Electric Coop MO Cooperative 22, ,147 36, Crawford Electric Coop, Inc MO Cooperative 19, ,737 29, Boone Electric Coop MO Cooperative 31, ,266 53, Intercounty Electric Coop Assn MO Cooperative 30, ,844 51, City of Hannibal - (MO) MO Municipal 8, ,966 25, City of Cameron MO Municipal 3,329 76,917 7, West Central Electric Coop Inc - (MO) MO Cooperative 13, ,744 24, Carroll Electric Coop Corp - (AR) MO Cooperative 11, ,774 13, Farmers Electric Coop, Inc - (MO) MO Cooperative 12, ,483 29, City of Mount Vernon - (MO) MO Municipal 2,226 69,200 6, New-Mac Electric Coop, Inc MO Cooperative 17, ,175 38, Chillicothe Municipal Utils MO Municipal 4,559 98,746 10, City of Marshall - (MO) MO Municipal 5, ,686 17, City of Kirkwood - (MO) MO Municipal 9, ,384 21, Kansas City Power & Light Co MO Investor Owned 275,805 8,432, , Platte-Clay Electric Coop, Inc MO Cooperative 23, ,468 51, Southwest Electric Coop, Inc MO Cooperative 40, ,828 56, City of Lamar - (MO) MO Municipal 2,481 60,609 6, Atchison-Holt Electric Coop MO Cooperative 2,668 63,375 6, Grundy Electric Coop, Inc MO Cooperative 6, ,284 12, SEMO Electric Cooperative MO Cooperative 15, ,343 33, Ozark Electric Coop Inc - (MO) MO Cooperative 32, ,459 52, Co-Mo Electric Coop Inc MO Cooperative 31, ,978 46, Empire District Electric Co MO Investor Owned 150,549 4,059, , Barton County Elec Coop, Inc MO Cooperative 6, ,953 16, Osage Valley Elec Coop Assn MO Cooperative 15, ,662 29, City of Jackson - (MO) MO Municipal 7, ,121 16, Callaway Electric Cooperative MO Cooperative 12, ,914 23, City of Harrisonville - (MO) MO Municipal 4,744 98,023 11, White River Valley El Coop Inc MO Cooperative 43, ,226 83, Pemiscot-Dunklin Elec Coop Inc MO Cooperative 8, ,747 19, Howard Electric Coop MO Cooperative 3,510 49,007 5, City of Macon - (MO) MO Municipal 2,981 79,090 9, Sunnova MO Behind the Meter City of Nixa - (MO) MO Municipal 9, ,191 17, Lewis County Rural E C A MO Cooperative 7, ,238 13, Sac-Osage Electric Coop Inc MO Cooperative 10, ,070 17, Clay County Electric Coop Corp MO Cooperative City of Independence - (MO) MO Municipal 56, , , Ralls County Electric Coop MO Cooperative 6, ,858 14, United Electric Coop, Inc - (MO) MO Cooperative 9, ,179 20, Tri-County Electric Coop Assn MO Cooperative 6,327 88,157 12, Adjustment 2015 MO Other 71,908 1,496, ,467.8 Report Exhibit 2 Sheet 1 of 1

21 2015 Utility Bundled Retail Sales- Residential (Data from forms EIA-861- schedules 4A & 4D and EIA-861S) Entity State Ownership Customers Sales Revenues (Thousands Average Price (Count) (Megawatthours) Dollars) (cents/kwh) City of Sikeston - (MO) MO Municipal 7, ,118 7, City of Kennett - (MO) MO Municipal 4,781 74,193 5, City of Ava - (MO) MO Municipal 1,194 10, Webster Electric Coop MO Cooperative 17, ,872 22, Cuivre River Electric Coop Inc MO Cooperative 60, ,680 84, SE-MA-NO Electric Coop MO Cooperative 5,596 78,917 7, Gascosage Electric Coop MO Cooperative 8, ,446 12, Central Missouri Elec Coop Inc MO Cooperative 10, ,843 15, City of Poplar Bluff - (MO) MO Municipal 7, ,362 11, City of Lebanon - (MO) MO Municipal 5,784 79,917 7, City of Sullivan - (MO) MO Municipal 3,088 39,304 3, Laclede Electric Coop, Inc MO Cooperative 33, ,803 48, Ozark Border Electric Coop MO Cooperative 32, ,019 50, City of Fulton - (MO) MO Municipal 4,658 52,099 4, City of West Plains - (MO) MO Municipal 5,078 58,920 5, City Utilities of Springfield - (MO) MO Municipal 97,733 1,009,462 99, Howell-Oregon Elec Coop, Inc MO Cooperative 21, ,562 28, Black River Electric Coop - (MO) MO Cooperative 20, ,697 28, West Central Electric Coop Inc - (MO) MO Cooperative 13, ,184 23, Barry Electric Coop MO Cooperative 8, ,635 11, Crawford Electric Coop, Inc MO Cooperative 18, ,623 26, Carroll Electric Coop Corp - (AR) MO Cooperative 10, ,356 11, SEMO Electric Cooperative MO Cooperative 10, ,807 17, City of Carthage - (MO) MO Municipal 6,409 74,968 7, Three Rivers Electric Coop MO Cooperative 20, ,543 28, Consolidated Electric Coop MO Cooperative 7, ,766 11, City of Kirkwood - (MO) MO Municipal 8,685 96,742 9, Intercounty Electric Coop Assn MO Cooperative 29, ,415 44, City of Lamar - (MO) MO Municipal 2,039 20,859 2, City of Monett - (MO) MO Municipal 3,848 42,369 4, City of Rolla - (MO) MO Municipal 7, ,558 10, Southwest Electric Coop, Inc MO Cooperative 37, ,248 48, Boone Electric Coop MO Cooperative 30, ,968 41, Platte-Clay Electric Coop, Inc MO Cooperative 20, ,786 34, City of Farmington - (MO) MO Municipal 6,129 79,342 8, Missouri Rural Electric Coop MO Cooperative 4,746 61,991 6, City of Cameron MO Municipal 2,815 29,323 3, Ozark Electric Coop Inc - (MO) MO Cooperative 29, ,866 43, New-Mac Electric Coop, Inc MO Cooperative 17, ,317 29, Trenton Municipal Utilities - (MO) MO Municipal 2,612 31,598 3, City of Columbia - (MO) MO Municipal 41, ,458 46, Co-Mo Electric Coop Inc MO Cooperative 28, ,020 38, KCP&L Greater Missouri Operations Co. MO Investor Owned 278,740 3,371, , Chillicothe Municipal Utils MO Municipal 3,751 40,539 4, Osage Valley Elec Coop Assn MO Cooperative 15, ,270 26, Union Electric Co - (MO) MO Investor Owned 1,043,603 12,903,233 1,463, City of Marshall - (MO) MO Municipal 4,968 48,121 5, Pemiscot-Dunklin Elec Coop Inc MO Cooperative 5,648 88,139 10, City of Mount Vernon - (MO) MO Municipal 1,836 17,959 2, City of Hannibal - (MO) MO Municipal 7,546 77,699 9, Macon Electric Coop MO Cooperative 9, ,168 14, Callaway Electric Cooperative MO Cooperative 12, ,831 20, City of Jackson - (MO) MO Municipal 6,154 72,624 8, Grundy Electric Coop, Inc MO Cooperative 5,679 68,310 8, City of Harrisonville - (MO) MO Municipal 3,984 40,954 4, Farmers Electric Coop, Inc - (MO) MO Cooperative 11, ,862 19, White River Valley El Coop Inc MO Cooperative 36, ,056 55, Howard Electric Coop MO Cooperative 3,378 41,683 5, North Central MO Elec Coop Inc MO Cooperative 4,362 48,665 6, Kansas City Power & Light Co MO Investor Owned 243,292 2,474, , Sac-Osage Electric Coop Inc MO Cooperative 10, ,124 15, Empire District Electric Co MO Investor Owned 126,909 1,639, , City of Nixa - (MO) MO Municipal 8,540 87,881 11, Barton County Elec Coop, Inc MO Cooperative 5,032 75,043 9, Clay County Electric Coop Corp MO Cooperative Lewis County Rural E C A MO Cooperative 6,361 76,425 10, Citizens Electric Corporation - (MO) MO Cooperative 24, ,579 39, City of Macon - (MO) MO Municipal 2,503 25,724 3, City of Independence - (MO) MO Municipal 51, ,041 69, Atchison-Holt Electric Coop MO Cooperative 2,337 23,599 3, Ralls County Electric Coop MO Cooperative 5,433 73,406 10, United Electric Coop, Inc - (MO) MO Cooperative 9, ,728 17, Tri-County Electric Coop Assn MO Cooperative 5,732 67,018 10, Sunnova MO Behind the Meter Adjustment 2015 MO Other 59, ,402 78,936.8 Report Exhibit 3 Sheet 1 of 1

22 2015 Utility Bundled Retail Sales- Commercial (Data from forms EIA-861- schedules 4A & 4D and EIA-861S) Entity State Ownership Customers Sales Revenues (Thousands Average Price (Count) (Megawatthours) Dollars) (cents/kwh) City of West Plains - (MO) MO Municipal ,767 2, City of Sikeston - (MO) MO Municipal 1, ,133 7, Webster Electric Coop MO Cooperative ,937 6, North Central MO Elec Coop Inc MO Cooperative ,044 8, City of Kennett - (MO) MO Municipal ,124 4, City of Ava - (MO) MO Municipal 298 4, West Central Electric Coop Inc - (MO) MO Cooperative ,560 1, City Utilities of Springfield - (MO) MO Municipal 14,822 1,565, , SE-MA-NO Electric Coop MO Cooperative ,029 1, Consolidated Electric Coop MO Cooperative ,563 2, Barry Electric Coop MO Cooperative 1,280 50,081 4, Intercounty Electric Coop Assn MO Cooperative ,250 5, City of Lebanon - (MO) MO Municipal 1,314 63,904 5, KCP&L Greater Missouri Operations Co. MO Investor Owned 39,162 3,240, , Boone Electric Coop MO Cooperative ,147 6, Three Rivers Electric Coop MO Cooperative 1,676 65,017 5, Union Electric Co - (MO) MO Investor Owned 155,680 14,679,191 1,275, Crawford Electric Coop, Inc MO Cooperative 1,150 33,162 2, Howell-Oregon Elec Coop, Inc MO Cooperative 2,261 57,561 5, City of Carthage - (MO) MO Municipal 1,156 67,438 6, City of Monett - (MO) MO Municipal ,507 4, Central Missouri Elec Coop Inc MO Cooperative ,710 1, Black River Electric Coop - (MO) MO Cooperative 3, ,999 11, City of Poplar Bluff - (MO) MO Municipal 1, ,032 15, Callaway Electric Cooperative MO Cooperative ,083 3, Carroll Electric Coop Corp - (AR) MO Cooperative ,418 1, Grundy Electric Coop, Inc MO Cooperative ,876 3, City of Columbia - (MO) MO Municipal 6, ,718 45, Trenton Municipal Utilities - (MO) MO Municipal ,461 2, Chillicothe Municipal Utils MO Municipal ,503 4, Gascosage Electric Coop MO Cooperative ,838 2, Howard Electric Coop MO Cooperative 132 7, City of Rolla - (MO) MO Municipal 1,409 48,658 4, Missouri Rural Electric Coop MO Cooperative ,255 3, Farmers Electric Coop, Inc - (MO) MO Cooperative 1,121 43,977 4, Lewis County Rural E C A MO Cooperative ,813 3, City of Cameron MO Municipal ,546 2, Laclede Electric Coop, Inc MO Cooperative 3, ,738 10, Southwest Electric Coop, Inc MO Cooperative 2,933 78,580 7, City of Mount Vernon - (MO) MO Municipal ,355 2, City of Sullivan - (MO) MO Municipal ,489 1, Kansas City Power & Light Co MO Investor Owned 31,517 4,435, , City of Kirkwood - (MO) MO Municipal 1, ,978 10, New-Mac Electric Coop, Inc MO Cooperative ,067 4, Osage Valley Elec Coop Assn MO Cooperative ,392 3, Ozark Electric Coop Inc - (MO) MO Cooperative 2,520 81,409 8, Cuivre River Electric Coop Inc MO Cooperative 1,118 35,538 3, Co-Mo Electric Coop Inc MO Cooperative 2,340 63,255 6, Platte-Clay Electric Coop, Inc MO Cooperative 2,692 59,695 6, Ozark Border Electric Coop MO Cooperative 6, ,661 14, City of Lamar - (MO) MO Municipal ,750 4, Sac-Osage Electric Coop Inc MO Cooperative ,749 1, White River Valley El Coop Inc MO Cooperative 6, ,534 24, Macon Electric Coop MO Cooperative 1,310 31,038 3, Atchison-Holt Electric Coop MO Cooperative ,616 1, Clay County Electric Coop Corp MO Cooperative City of Fulton - (MO) MO Municipal ,158 4, Empire District Electric Co MO Investor Owned 23,358 1,554, , City of Marshall - (MO) MO Municipal ,344 6, United Electric Coop, Inc - (MO) MO Cooperative ,451 2, City of Harrisonville - (MO) MO Municipal ,069 6, City of Jackson - (MO) MO Municipal ,423 5, City of Farmington - (MO) MO Municipal ,977 2, City of Macon - (MO) MO Municipal ,668 3, Ralls County Electric Coop MO Cooperative ,199 2, Barton County Elec Coop, Inc MO Cooperative 1,445 42,352 4, City of Hannibal - (MO) MO Municipal 1,066 29,032 3, Citizens Electric Corporation - (MO) MO Cooperative 2, ,598 13, Pemiscot-Dunklin Elec Coop Inc MO Cooperative 1,282 29,441 3, City of Nixa - (MO) MO Municipal ,262 2, City of Independence - (MO) MO Municipal 5, ,906 56, Tri-County Electric Coop Assn MO Cooperative ,139 2, SEMO Electric Cooperative MO Cooperative 5,246 91,732 12, Adjustment 2015 MO Other 11, ,131 63,831.7 Report Exhibit 4 Sheet 1 of 1

23 2015 Utility Bundled Retail Sales- Industrial (Data from forms EIA-861- schedules 4A & 4D and EIA-861S) Entity State Ownership Customers Sales Revenues (Thousands Average Price (Count) (Megawatthours) Dollars) (cents/kwh) City of Ava - (MO) MO Municipal 46 44,646 1, City of Sikeston - (MO) MO Municipal 18 92,398 4, Missouri Rural Electric Coop MO Cooperative 4 121,283 6, Central Missouri Elec Coop Inc MO Cooperative 2 122,439 6, Union Electric Co - (MO) MO Investor Owned 4,254 8,272, , Citizens Electric Corporation - (MO) MO Cooperative 102 1,172,260 67, Barton County Elec Coop, Inc MO Cooperative 4 31,558 1, Black River Electric Coop - (MO) MO Cooperative 2 25,867 1, Macon Electric Coop MO Cooperative 3 76,758 4, Gascosage Electric Coop MO Cooperative 2 32,986 2, Crawford Electric Coop, Inc MO Cooperative 3 5, Farmers Electric Coop, Inc - (MO) MO Cooperative 7 87,644 5, New-Mac Electric Coop, Inc MO Cooperative 5 67,791 4, Intercounty Electric Coop Assn MO Cooperative 6 34,179 2, KCP&L Greater Missouri Operations Co. MO Investor Owned 248 1,358,329 87, Ralls County Electric Coop MO Cooperative 1 9, Cuivre River Electric Coop Inc MO Cooperative ,998 17, SE-MA-NO Electric Coop MO Cooperative 11 16,786 1, Barry Electric Coop MO Cooperative 2 15,600 1, Atchison-Holt Electric Coop MO Cooperative ,160 1, SEMO Electric Cooperative MO Cooperative 12 44,804 3, City of Carthage - (MO) MO Municipal ,093 10, City of Poplar Bluff - (MO) MO Municipal 11 76,119 5, City Utilities of Springfield - (MO) MO Municipal ,931 30, Three Rivers Electric Coop MO Cooperative 13 29,587 2, Consolidated Electric Coop MO Cooperative 87 94,426 6, Kansas City Power & Light Co MO Investor Owned 996 1,522, , Boone Electric Coop MO Cooperative 7 67,151 4, City of Farmington - (MO) MO Municipal ,184 8, Ozark Border Electric Coop MO Cooperative 13 24,808 1, Ozark Electric Coop Inc - (MO) MO Cooperative 1 10, City of Sullivan - (MO) MO Municipal ,786 4, Howell-Oregon Elec Coop, Inc MO Cooperative ,033 3, City of Columbia - (MO) MO Municipal ,520 19, Co-Mo Electric Coop Inc MO Cooperative 1 9, City of Fulton - (MO) MO Municipal 60 59,931 4, City of Lebanon - (MO) MO Municipal ,232 9, Trenton Municipal Utilities - (MO) MO Municipal 2 23,472 1, Empire District Electric Co MO Investor Owned ,763 71, City of Monett - (MO) MO Municipal ,453 8, City of Marshall - (MO) MO Municipal 7 70,221 5, City of Cameron MO Municipal 6 22,048 1, City of Hannibal - (MO) MO Municipal ,235 12, City of Independence - (MO) MO Municipal 11 50,829 4, City of Kennett - (MO) MO Municipal , White River Valley El Coop Inc MO Cooperative 9 47,636 4, City of Rolla - (MO) MO Municipal ,091 12, Laclede Electric Coop, Inc MO Cooperative 14 27,064 2, City of West Plains - (MO) MO Municipal ,361 6, City of Mount Vernon - (MO) MO Municipal 21 22,886 2, Chillicothe Municipal Utils MO Municipal 23 7, Platte-Clay Electric Coop, Inc MO Cooperative 8 117,987 11, Grundy Electric Coop, Inc MO Cooperative 5 12,098 1, City of Jackson - (MO) MO Municipal 7 26,074 2, City of Nixa - (MO) MO Municipal 39 37,048 3, City of Macon - (MO) MO Municipal 5 22,698 2, Pemiscot-Dunklin Elec Coop Inc MO Cooperative 1,664 46,167 5, Sac-Osage Electric Coop Inc MO Cooperative City of Kirkwood - (MO) MO Municipal 1 7, Adjustment 2015 MO Other ,471 14,699.3 Report Exhibit 5 Sheet 1 of 1

24 Section A: Balance Sheet and Cash Analysis Sheet(s) Description 1 Balance Sheet Summary 2 Capital Improvement Plan 3 Cash Flow Analysis 4 Rate Base and Rate of Return Section B: Rates City of Lebanon, Missouri Cost of Service Study Table of Contents Sheet(s) Description 1-2 Summary of Electric Rates 3 Bill Comparison - Residential Service (Summer Rates) 4 Bill Comparison - Residential Service (Winter Rates) 5 Bill Comparison - Commercial 1 Service (Summer Rates) 6 Bill Comparison - Commercial 1 Service (Winter Rates) 7 Bill Comparison - Commercial 2 Service (Summer Rates) 8 Bill Comparison - Commercial 2 Service (Winter Rates) 9 Bill Comparison - Commercial-Industrial Service (Summer Rates) 10 Bill Comparison - Commercial-Industrial Service (Winter Rates) 11 Bill Comparison - Industrial 1 Service 12 Bill Comparison - Industrial 2 Service Section C: Income Statement Sheet(s) Description 1-3 Summary of Test Year and Pro Forma Revenues and Expenses 4 Depreciation Expense 5-7 Trial Balance Detail of Income and Expenses Section D: Cost of Service Study Sheet(s) Description 1 Summary of Cost of Service Study - Existing Rates and Pro Forma Operating Expenses 2 Summary of Cost of Service Study - Unit Costs 3 Allocation of Operating Expenses By Rate Class 4 Allocation of Rate Base By Rate Class 5 Allocation of Customer Cost By Rate Class 6 Allocation of Expense Accounts to Customer Component 7 Allocation of Customer-Related Rate Base By Class TOC 1

25 Cost of Service Study Table of Contents 8 Allocation of Customer-Related Plant Accounts 9 Allocation of Line Transformer Plant 10 Customer Allocation Factors Demand Allocation Factors 13 Customer Rate Base and Expense Allocation to Lighting Summary of Expense Accounts with Payroll Allocation 16 Summary of Estimated Plant Accounts Asset Listing Section E: Load Data Sheet(s) Description 1-3 Analysis of Revenue By Rate Class 4 Summary of Test Year Load Data By Rate Class 5-6 Summary of Test Year Load Data By Rate Code 7 Detail of Load Data By Rate Code - Winter Residential Service (WRS) 8 Detail of Load Data By Rate Code - Summer Residential Service (RES) 9 Detail of Load Data By Rate Code - Winter Commercial 1 Service (SEH) 10 Detail of Load Data By Rate Code - Winter Commercial 1 Service (SDH) 11 Detail of Load Data By Rate Code - Winter Commercial 1 Service (TSH) 12 Detail of Load Data By Rate Code - Summer Commercial 1 Service (SE) 13 Detail of Load Data By Rate Code - Summer Commercial 1 Service (SD) 14 Detail of Load Data By Rate Code - Summer Commercial 1 Service (TSE) 15 Detail of Load Data By Rate Code - Winter Commercial 2 Service (DLH) 16 Detail of Load Data By Rate Code - Winter Commercial 2 Service (LEH) 17 Detail of Load Data By Rate Code - Winter Commercial 2 Service (TLH) 18 Detail of Load Data By Rate Code - Summer Commercial 2 Service (LE) 19 Detail of Load Data By Rate Code - Summer Commercial 2 Service (TLE) 20 Detail of Load Data By Rate Code - Winter Commercial-Industrial Service (IEH) 21 Detail of Load Data By Rate Code - Winter Commercial-Industrial Service (TEH) 22 Detail of Load Data By Rate Code - Summer Commercial-Industrial Service (IE) 23 Detail of Load Data By Rate Code - Summer Commercial-Industrial Service (TIE) 24 Detail of Load Data By Rate Code - Industrial 1 Service (IEC) 25 Detail of Load Data By Rate Code - Industrial 1 Service (TEC) 26 Detail of Load Data By Rate Code - Industrial 2 Service (TCP) 27 Detail of Load Data By Rate Code - City Use (COL) 28 Detail of Load Data By Rate Code - Commercial Vapor Lights (VLC) 29 Detail of Load Data By Rate Code - Residential Vapor Lights (VLR) Section F: Wholesale Power Costs TOC 2

26 Cost of Service Study Table of Contents Sheet(s) Description 1 Summary of Historic and Forecasted Wholesale Power Costs 2-3 Detailed Summary of Fiscal Year 2013 Power Bills from Missouri Public Utility Alliance (MPUA) 4 Detailed Summary of Fiscal Year 2014 Power Bills from Missouri Public Utility Alliance (MPUA) 5 Detailed Summary of Fiscal Year 2015 Power Bills from Missouri Public Utility Alliance (MPUA) 6 Detailed Summary of Fiscal Year 2016 Power Bills from Missouri Public Utility Alliance (MPUA) 7 Detailed Summary of Calendar Year 2016 Power Bills from Missouri Public Utility Alliance (MPUA) TOC 3

27 SECTION A: BALANCE SHEET AND CASH ANALYSIS

28 Balance Sheet Summary 12/31/16 12/31/16 Test Year Adjustments Pro Forma ASSETS Current assets: Cash and cash equivalents -$2,824,164 $0 -$2,824,164 Short-term investments $12,756,995 $0 $12,756,995 Accounts Receivable $1,613 $0 $1,613 Due from Other Funds $3,800,792 $0 $3,800,792 Total current assets $13,735,235 $0 $13,735,235 Capital Assets: Transmission Plant Assets $0 $1,213,589 $1,213,589 Distribution Plant Assets $509,559 $22,306,340 $22,815,899 General Plant Assets $607,347 $4,464,996 $5,072,343 Construction Work In Process $56,674 -$56,674 $0 Total $1,173,580 $27,928,251 $29,101,831 Less: Accumulated Depreciation -$109,832 -$14,441,084 -$14,550,915 Total capital assets $1,063,748 $13,487,167 $14,550,915 Noncurrent assets: Deferred Outflow of Resources $282,685 $0 $282,685 Other -$83,170 $0 -$83,170 Total noncurrent assets $199,515 $0 $199,515 TOTAL ASSETS $14,998,498 $13,487,167 $28,485,665 LIABILITIES: Current liabilities: Accrued liabilities $86,198 $0 $86,198 Total current liabilities $86,198 $0 $86,198 Noncurrent liabilities: Net Pension Liability $413,417 $0 $413,417 Total noncurrent liabilities $413,417 $0 $413,417 TOTAL LIABILITIES $499,615 $0 $499,615 NET POSITION Unrestrictred $14,498,883 $13,487,167 $27,986,051 TOTAL NET POSITION $14,498,883 $13,487,167 $27,986,051 Section A Sheet 1

29 Capital Improvement Plan Description Total General Distribution Projects $960,000 $960,000 $960,000 $960,000 $960,000 $4,800,000 General Transmission Projects $240,000 $240,000 $240,000 $240,000 $240,000 $1,200,000 Total Projects $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $6,000,000 Section A Sheet 2

30 Cash Flow Projection Pro Forma Years Description Operating Margin $287,188 $314,915 $341,970 $368,301 $393,854 Add: Depreciation Expense $825,163 $858,170 $892,497 $928,197 $965,325 Cash from Operations $1,112,351 $1,173,085 $1,234,467 $1,296,498 $1,359,178 Less: Capital Expenses $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 Principal Payments $0 $0 $0 $0 $0 Change in Cash Position -$87,649 -$26,915 $34,467 $96,498 $159,178 Beginning Cash and Short-Term Investments $9,932,830 $9,845,182 $9,818,267 $9,852,734 $9,949,232 Ending Cash and Short-Term Investments $9,845,182 $9,818,267 $9,852,734 $9,949,232 $10,108,410 Section A Sheet 3

31 Rate Base and Rate of Return I. Rate Base Account Amount Utility Plant in Service $29,101,831 Plus: Construction Work in Progress $0 Total $29,101,831 Less: Accumulated Depreciation $14,550,915 Net Plant $14,550,915 Cash Working Capital: 30 days of Wholesale Power 30 / 365 * $20,482,044 = $1,683, days of Other Expenses 45 / 365 * $3,400,054 = $419,185 Total Rate Base $16,653,556 II. Rate of Return Operating Rate of Year Margin Return Pro Forma Year 12/31/2017 $287, % Section A Sheet 4

32 SECTION B: RATES

33 Summary of Electric Rates Existing Rates Proposed Rates Residential Residential Service Availability $0.00 / mo. Service Availability $10.00 / mo. First 15 $ / kwh First 15 $ / kwh Next 85 $ / kwh Next 85 $ / kwh Next 150 $ / kwh Next 150 $ / kwh Next 750 $ / kwh Next 750 $ / kwh Next $ / kwh Next $ / kwh Remaining Summer $ / kwh Remaining Summer $ / kwh Remaining Winter $ / kwh Remaining Winter $ / kwh Minimum $9.25 / mo. Minimum $10.00 / mo. Commercial 1: <= 25 kw and <= 10,000 kwh /Mo. Commercial 1: <= 25 kw and <= 10,000 kwh /Mo. Service Availability $0.00 / mo. Service Availability $15.00 / mo. Summer: Summer: First 20 $ / kwh First 20 $ / kwh Next 80 $ / kwh Next 80 $ / kwh Next 150 $ / kwh Next 150 $ / kwh Remaining $ / kwh Remaining $ / kwh Minimum $11.20 / mo. Minimum $0.00 / mo. Winter: Winter: First 100 $ / kwh First 100 $ / kwh Remaining $ / kwh Remaining $ / kwh Minimum $44.40 / mo. Minimum $15.00 / mo. Commercial 2: > 25 kw and <= 150 kw Commercial 2: > 25 kw and <= 150 kw Service Availability $0.00 / mo. Service Availability $40.00 / mo. Summer: Summer: $8.72 / kw $7.30 / kw Energy: Energy: First kw x $ / kwh First kw x $ / kwh Next kw x $ / kwh Next kw x $ / kwh Remaining $ / kwh Remaining $ / kwh Winter: Winter: $6.30 / kw $7.30 / kw Energy: Energy: First kw x $ / kwh First kw x $ / kwh Next kw x $ / kwh Next kw x $ / kwh Remaining $ / kwh Remaining $ / kwh Minimum $ / mo. Minimum $ / mo. Section B Sheet 1

34 Summary of Electric Rates Existing Rates Proposed Rates Commercial Industrial: > 150 kw and <= 500 kw Commercial Industrial: > 150 kw and <= 500 kw Service Availability $0.00 / mo. Service Availability $ / mo. Summer: Summer: Demand: Demand: First 100 $10.77 / kw First 100 $7.70 / kw Next 300 $9.22 / kw Next 300 $7.70 / kw Excess $7.88 / kw Excess $7.70 / kw Energy: Energy: First kw x $ / kwh First kw x $ / kwh Remaining $ / kwh Remaining $ / kwh Winter: Winter: $6.30 / kw $7.70 / kw Energy: Energy: First kw x $ / kwh First kw x $ / kwh Remaining $ / kwh Remaining $ / kwh Minimum $1, / mo. Minimum $1, / mo. Industrial 1: > 500 kw and <= 1,500 kw Industrial 1: > 500 kw and <= 1,500 kw Service Availability $0.00 / mo. Service Availability $ / mo. Demand: Demand: First 400 $9.63 / kw First 400 $9.05 / kw Excess $7.79 / kw Excess $9.05 / kw Energy: Energy: First kw x $ / kwh First 400 $ / kwh Remaining $ / kwh Excess $ / kwh Minimum $4, / mo. Minimum $4, / mo. Industrial 2: > 1,500 kw Industrial 2: > 1,500 kw Service Availability $0.00 / mo. Service Availability $ / mo. Demand: Demand: First 400 $9.63 / kw First 400 $9.63 / kw Excess $7.79 / kw Excess $9.63 / kw Energy: Energy: First 1,400,000 $ / kwh First 1,400,000 $ / kwh Next 3,600,000 $ / kwh Next 3,600,000 $ / kwh Remaining $ / kwh Remaining $ / kwh Minimum $14, / mo. Minimum $14, / mo. Section B Sheet 2

35 City of Lebanon Lebanon, Missouri Billing Comparison Summer Rate - Residential Service Existing Proposed Rate Change kwh Rates Rates Amount Percent 0 $9.25 $10.00 $ % 15 $9.32 $11.47 $ % 100 $24.10 $ $ % 250 $39.77 $ $ % 500 $62.32 $ $ % 750 $84.87 $ $ % 1,000 $ $ $ % 1,250 $ $ $ % 1,500 $ $ $ % 2,000 $ $ $ % 3,000 $ $ $ % 4,000 $ $ $ % Existing Proposed Rate Rate Service Availability $0.00 $10.00 First 15 $ $ Next 85 $ $ Next 150 $ $ Next 750 $ $ Remaining $ $ Minimum $9.25 $10.00 Section B Sheet 3

36 City of Lebanon Lebanon, Missouri Billing Comparison Winter Rate - Residential Service Existing Proposed Rate Change kwh Rates Rates Amount Percent 0 $9.25 $10.00 $ % 15 $9.32 $11.47 $ % 100 $24.10 $ $ % 250 $39.77 $ $ % 500 $62.32 $ $ % 750 $84.87 $ $ % 1,000 $ $ $ % 1,250 $ $ $ % 1,500 $ $ $ % 2,000 $ $ $ % 3,000 $ $ $ % 4,000 $ $ $ % Existing Proposed Rate Rate Service Availability $0.00 $10.00 First 15 $ $ Next 85 $ $ Next 150 $ $ Next 750 $ $ Next 1,000 $ $ Remaining $ $ Minimum $9.25 $10.00 Section B Sheet 4

37 City of Lebanon Lebanon, Missouri Billing Comparison Summer Rate - Commercial 1 Service Existing Proposed Rate Change kwh Rates Rates Amount Percent 0 $11.20 $15.00 $ % 20 $12.43 $16.96 $ % 100 $26.33 $ $ % 250 $42.01 $ $ % 500 $65.93 $ $ % 750 $89.86 $ $ % 1,000 $ $ $ % 1,250 $ $ $ % 1,500 $ $ $ % 2,000 $ $ $ % 3,000 $ $ $ % 4,000 $ $ $ % Existing Proposed Rate Rate Service Availability $0.00 $15.00 First 20 $ $ Next 80 $ $ Next 150 $ $ Remaining $ $ Minimum $11.20 $15.00 Section B Sheet 5

38 City of Lebanon Lebanon, Missouri Billing Comparison Winter Rate - Commercial 1 Service Existing Proposed Rate Change kwh Rates Rates Amount Percent 0 $44.40 $ $ % 100 $49.72 $ $ % 250 $62.10 $ $ % 500 $82.72 $ $ % 750 $ $ $ % 1,000 $ $ $ % 1,250 $ $ $ % 1,500 $ $ $ % 2,000 $ $ $ % 3,000 $ $ $ % 4,000 $ $ $ % Existing Proposed Rate Rate Service Availability $0.00 $15.00 First 100 $ $ Remaining $ $ Minimum $44.40 $15.00 Section B Sheet 6

39 City of Lebanon Lebanon, Missouri Billing Comparison Summer Rate - Commercial 2 Service kw Existing Proposed Rate Change Demand kwh Rates Rates Amount Percent 50 kw 30% Load Fac 10,950 $1, $ 1, $ % 50% Load Fac 18,250 $1, $ 1, $ % 75 kw 30% Load Fac 16,425 $1, $ 1, $ % 50% Load Fac 27,375 $2, $ 2, $ % 100 kw 30% Load Fac 21,900 $2, $ 2, $ % 50% Load Fac 36,500 $3, $ 3, $ % Existing Proposed Rate Rate Service Availability $0.00 $40.00 kw $8.72 $7.30 First kw x $ $ Next kw x $ $ Remaining $ $ Minimum $ $ Section B Sheet 7

40 City of Lebanon Lebanon, Missouri Billing Comparison Winter Rate - Commercial 2 Service kw Existing Proposed Rate Change Demand kwh Rates Rates Amount Percent 50 kw 30% Load Fac 10,950 $1, $ 1, $ % 50% Load Fac 18,250 $1, $ 1, $ % 75 kw 30% Load Fac 16,425 $1, $ 1, $ % 50% Load Fac 27,375 $2, $ 2, $ % 100 kw 30% Load Fac 21,900 $2, $ 2, $ % 50% Load Fac 36,500 $3, $ 3, $ % Existing Proposed Rate Rate Service Availability $0.00 $40.00 kw $6.30 $7.30 First kw x $ $ Next kw x $ $ Remaining $ $ Minimum $ $ Section B Sheet 8

41 City of Lebanon Lebanon, Missouri Billing Comparison Summer Rate - Commercial-Industrial Service kw Existing Proposed Rate Change Demand kwh Rates Rates Amount Percent 200 kw 30% Load Fac 43,800 $5, $4, $ % 50% Load Fac 73,000 $7, $6, $ % 300 kw 30% Load Fac 65,700 $7, $7, $ % 50% Load Fac 109,500 $10, $10, $ % 400 kw 30% Load Fac 87,600 $10, $9, $ % 50% Load Fac 146,000 $14, $13, $ % Existing Proposed Rate Rate Service Availability $0.00 $ First 100 $10.77 $7.70 Next 300 $9.22 $7.70 Excess $7.88 $7.70 First kw x $ $ Remaining $ $ Minimum $1, $1, Section B Sheet 9