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Home My WebLink About03/09/2023 - Energy Board - Agenda - Regular Meeting ENERGY BOARD REGULAR MEETING March 9, 2023 – 5:30 pm 222 Laporte Ave – Colorado Room Zoom – See Link Below 1. [5:30] CALL MEETING TO ORDER 2. [5:30] PUBLIC COMMENT 3. [5:35] APPROVAL OF FEBRUARY 9, 2023 MINUTES 4. [5:45] CONNEXION UPDATE (Discussion, 30 Min.) Brian Hudson, Deputy Director, Broadband Chad Crager, Broadband Executive Director 5. [6:15] 2022 YEAR-END FINANCIAL RECAP (Discussion, 30 min.) Lance Smith, Director, Financial Planning & Assets, Utilities 6. [6:45] CUSTOMER INFORMATION SYSTEM (CIS) OFF CYCLE APPROPRIATION REQUEST (Decision, 15 min.) Lance Smith, Director, Financial Planning & Assets, Utilities Participation for this Energy Board Meeting will be in person in the Colorado Room at 222 Laporte Ave. You may also join online via Zoom, using this link: https://fcgov.zoom.us/j/96707441862 Online Public Participation: The meeting will be available to join beginning at 5:15 pm, March 9, 2023. Participants should try to sign in prior to the 5:30 pm meeting start time, if possible. For public comments, the Chair will ask participants to click the “Raise Hand” button to indicate you would like to speak at that time. Staff will moderate the Zoom session to ensure all participants have an opportunity to address the Board or Commission. To participate: • Use a laptop, computer, or internet-enabled smartphone. (Using earphones with a microphone will greatly improve your audio). • You need to have access to the internet. • Keep yourself on muted status. Masks Strongly Recommended in Indoor Public Spaces While there are currently no public health orders in place, Larimer County Public Health officials strongly recommend that well-fitting, high-quality masks are worn in crowded indoor spaces. For more information, please visit fcgov.com/covid ENERGY BOARD REGULAR MEETING 7. [7:00] EFFICIENCY WORKS HOMES REBATE RELAUNCH (Discussion, 30 min.) Brian Tholl, Energy Services Supervisor Glenn Pease, Mechanical Engineer II, Utilities Customer Connections 8. [7:30] OUR CLIMATE FUTURE METRICS SUMMARY (Discussion, 20 min.) John Phelan, Energy Services Manager & Energy Policy Advisor 9. [7:50] BOARD MEMBER REPORTS (5 min.) 10. [7:55] FUTURE AGENDA REVIEW (5 min.) 11. [8:00] ADJOURNMENT ENERGY BOARD February 9, 2023 – 5:30 pm 222 Laporte Ave – Colorado Room ROLL CALL Board Members Present: Bill Althouse, Marge Moore, Jeremy Giovando, Bill Becker, Vanessa Paul, Brian Smith, Thomas Loran Board Members Absent: Alan Braslau, Steve Tenbrink OTHERS PRESENT Staff Members Present: Christie Fredrickson, Phillip Amaya, Kendall Minor, Brian Tholl, Rhonda Gatzke, Cyril Vidergar Members of the Public: MEETING CALLED TO ORDER Chairperson Tenbrink called the meeting to order at 5:30 pm. ANNOUNCEMENTS & AGENDA CHANGES None. PUBLIC COMMENT Daiva Glazzard is a consultant for Polestar Village, which is a development proposal currently in front of the planning board. The vision for this community is to be inclusive of and create sacred spaces for yoga and meditation, a walkable Village Center, common areas for cooking, dining, and gathering, a large Community Garden and smaller individual gardens, play areas, open space, and natural areas, walking and biking trails, pickleball and volleyball courts, sustainably built, energy-efficient buildings, privately- owned single family dwellings, townhomes, condos, collaboratively owned apartments and rentals, live/work, micro, and age-in-place units, and to have elder housing, elder care, and preschool. Mr. Glazzard noted that the vison and values of the community support many of the goals of the Our Climate Future Plan as well as other regional goals. He hopes the Energy Board will consider supporting their development proposal. Vice Chairperson Becker thanked Mr. Glazzard for bringing this item to the Board’s attention but advised that without direction from staff or City Council, this item may be outside the Energy Board’s purview. APPROVAL OF MINUTES In preparation for the meeting, board members submitted amendments via email for the January 12, 2023, minutes. The minutes were approved as amended. STAFF REPORTS Executive Director’s Update Kendall Minor, Utilities Executive Director Mr. Minor introduced himself to the Board’s new members. Mr. Minor has been with the Utility one year this month, and he recapped a few things the Utility has accomplished with the Energy Board’s support in ENERGY BOARD REGULAR MEETING the last year, including off-cycle appropriations for the Meter Data Management System (MDMS) and more transformers. He noted that last year marked a year of transition, especially within City and Utility leadership. The Utility will need new technology upgrades, and Mr. Minor said he is challenging staff to consider how we will partner with partner organizations (Platte River, CSU, etc.) and internal work groups (Energy Services) and think about what the overall impact will be on the system from operational, optimization, and stability standpoints. Board member Loran asked Mr. Minor what his vision and strategy is for managing all the distributed energy resources (DER). Mr. Minor said the Utility has a DER team, and they talk about the integration and long-term plans, but we also need to be considerate of the Utility’s aging infrastructure in these plans. This will put the Utility in a place of resilience. Mr. Loran also said Platte River is projection an electric usage growth of 1% over the next 10 years, and he thinks that is really low based on the electrification goals the City and Platte River are trying to achieve. Mr. Minor said the load growth in the City over the last 10-15 years has been flat, and even with the addition of things like heat pumps, most homes in Fort Collins are ageing and are going to have energy loss, and that is where the 1% increase is coming from. The technology is not bad, but it’s still evolving at this time. Board members wondered if 1% is too conservative with the evolution of technology, and Mr. Minor reminded the Board that it is a projection. Board member Althouse would like to see the cost for the City to exit its contract with Platte River, because they are planning to spend a million dollars of the City’s money and rate payers have little visibility in that. What is the budget and how much does the City pay for ancillary services. Mr. Vidergar advised this is all written within the Organic Contract which is drafted for several years at a time. Light & Power Operational Update Phillip Amaya, Deputy Director, Utilities Light & Power Mr. Amaya said his priority while leading the Electric Utility is that every resident has safe, affordable, and reliable power, even in the worst of circumstances. He said staff is excited to partner with the Energy Board and utilize them to help the Utility meet its goals and drive its initiatives. In technology updates, Light and Power (L&P), MDMS Upgrade just kicked off. Staff is also evaluating the Interactive Voice Response (IVR) system, due to its age. The Advanced Distribution Management System (ADMS) is also going to be upgraded; the system looks at the entire grid and monitors it for instabilities. Staff is also developing a Cable Testing System with partial discharge testing, which will make this process safe and strategic. The City is changing course on the Overland Substation Disaster Recovery Site, more to come on this project. Mr. Amaya has identified some gaps in Planning Studies, so there will be the addition of the Urban Spatial Load Growth, a DER Impact Penetration, as well as a 5, 10, 20 Year Plans for Engineering, Operations, and Financial Planning. Additionally, staff is also working on a Joint Trench Agreement, leveraging grant writers through contracted companies (StanTec and Tetra Tech), and focusing heavily on grid modernization (as Mr. Minor alluded to earlier). Operationally, L&P is looking to create and fill a dedicated Safety Position which will help ensure L&P has a robust focus on Safety. The training field (partnering with Poudre Fire) is still in design. A locates GPS System was also recently acquired, which will help to know exactly where these utilities are located underground. Additionally, the Utility is looking at adding intelligent perimeter surveillance and cameras at all Substations to enhance security. Finally, staff is working on ensuring the infrastructure maintenance ENERGY BOARD REGULAR MEETING programs are innovative and intuitive with what is really going on underground—the Engineering team has created a modification to repair old vaults with low cost replacements that we can find today (the Vault the Utility has used for decades is no longer being manufactured). Board members expressed interest in regular metric updates for Our Climate Future and Platte River carbon goals to have a solid idea of the progress being made. Staff advised that some numbers are not updated on a frequent cadence (some are annual), but numbers can certainly be highlighted when these topics are being presented. Ms. Paul requested actionable steps on how the board can support the City’s and Staff’s initiatives and goals. OUR CLIMATE FUTURE 2023/24 NEXT MOVES PLAN Brian Tholl, Energy Services Supervisor Mr. Tholl reviewed the goals of the Our Climate Future Plan (OCF), and highlighted a metric staff is now tracking, gas reduction goal (10% cumulative reduction by 2030 of community natural gas use). Board member Giovando said on one hand, we have goals for reducing usage, but on the other hand budgetary issues continue to push goals farther down the road, he noted examples within building codes and LEED certifying the Police Training Facility. He said it feels like we will never meet the goals if we continue to kick them down the road and cite budget constraints. The 2030 Pathways in OFC are nested under the plan’s Big Moves and Goals. These key pathways are categorized groups (by sector strategy) of next moves that guide the City toward quantifiable reductions in greenhouse gas and/or waste between now and 2030. The pathways also contain defined implementation mechanisms and City roles. Each emissions category (electricity, buildings, transportation, industry, waste, and land use), each have identifiable actions to reach a portion of the carbon reduction goals, which staff has forecasted up to a 71% reduction by 2030. The last 10% will require additional action from the community and its leadership. Board members expressed interest in hearing an updated presentation on carbon inventory and the process in which that data is collected and used. Board member Giovando asked if these numbers factor in budgetary restraints, are these the maximum reductions we can expect. Mr. Tholl said there are a many of assumptions, all of which are reasonable and achievable and based on next moves. For example, the forecast for efficiency over the next 9 years is flatlined; so the forecast is reasonable but not overly aspirational. Mr. Tholl reviewed an OCF Action Roadmap for City Council and highlighted the actions relating to buildings over the next several years. In 2023, staff is developing Building Performance Standards as well as home energy listing requirements. In 2024 staff plans to ask Council to adopt the Building Performance Standards as well as the home listing requirements. in 2025 staff plans to ask Council to adopt the Energy code and begin the home energy listing requirements. By 2026, staff will start building performance standards for large buildings. Board member Loran pointed out that electricity use (the move toward electrification) could be perceived to be in conflict with the plan’s reduction goals (even though that expectation is not part of the goal, it is confusing), as the City incentivizes electric utility appliances in home (heat pumps, electric water heaters, etc.). Mr. Tholl said the City is promoting dual fuel solutions to bridge that gap. ENERGY BOARD REGULAR MEETING In 2023 and into 2024, several next moves will be set into motion. Under Big Move 6 (Efficient, Emissions Free Buildings), the following projects and initiatives are underway: enhance ongoing Efficiency and Conservation programs, develop building performance standards (BPS), develop a Performance Path to Zero Carbon building code, re-launch Epic Homes with a focus on heat pumps and electrification, plan and implement mobile home efficiency demonstrations, create a sustainable business program RFP and relaunch, and obtain federal funding deployment strategies. Under Big Move 12 (100% Renewable Energy and Grid Flexibility): enhance ongoing solar, storage, grid flexibility programs, create an RFP for distributed Energy Resources Management system (DERMs), the implementation and associated program planning for IEEE 2030.5, and DER Planning and Programs with Platte River and other cities. In Big Move 13 (Electric Cars and Fleets): launch an EV demonstration with Rolling Energy Resources (RER), and further define and develop Utilities EV policies. BOARD MEMBER REPORTS Board member Moore said she heard recently that Vestas figured out a way to recycle wind turbines. Board member Althouse said he thoroughly reads a lot of grants, and there are many that are open right now that he hopes Utilities Staff will consider. FUTURE AGENDA REVIEW The February Work Session will be a meet and greet for staff and Board members. March will include a f financial update presentation, an update from Connexion, as well an update on the efficiency works homes rebate. ADJOURNMENT The Energy Board adjourned at 8:00 pm. Energy Board Update March 9, 2023 Purpose 2 1.Where are we now 2.Video Price Increases 3.New Products 4.Digital Inclusion 5.Partnership Opportunities Where are we now? 3 1.Build Out Completion 2.Key Hires 3.Resident Feedback Group 4.Over 14,000 customers 5.33% Single Family Residential Take Rate 6.Industry Trends/Challenges Business Plan vs. Current Project Estimates 4 109.0 158.0 20.5 4.5 2.1 11.6 8.5 3.6 (1.8) $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 Business Plan Mainline Build Project Mgmt. / Engineering Systems Premise Install Premise Boring Growth Facilities / Fleet Current Estimate Connexion Capital Project -$M * Does not include an additional $18 million of contingency * Capital Project Spending Update Description Business Plan and Approved Updates 11/30/2022 LTD Spent Current Project Estimate thru Dec 2024 Network (Primarily AEG)$84M $105M $110M Installation (On Trac, boring)$13M $17M $36M Equipment & All Other $12M $11M $12M Subtotal Business Plan $109M Contingency & Re-deploy –Sept. 2021 $13M L&P Reserves Appropriated –Apr. 2022 $20M Total Capital Budget/Estimate $142M $133M $158M 5 Funding Considerations 6 •$16 million additional capital project needs above the currently available budget of $142 million. •Likely path forward will be to access needed funding through the remaining $20 million of existing, resident approved bonding capacity. •L&P borrowing needs and timeframe will determine Connexion bonding timing and amounts –likely Fall 2023. •Updated Connexion financial model continues to maintain payback of L&P reserves and bond commitments through customer revenues and resulting positive operating margins. Prices and Products 7 Additional speed tiers Video Price Increase My Bundle TV 1. 2. 3. 8 MyBundle TV 9 MyBundle TV 10 MyBundle TV -Results Digital Inclusion 11 Digital Inclusion Digital Inclusion 12 Digital Inclusion: Dual Approach 13 Digital Inclusion: A Community Network 14 Grants and Partnership Opportunities 15 1.Grant opportunities 2.Partnerships: •Loveland and Estes Park •Longmont •Larimer County •PSD •Others in region Summary 16 1.Transparency 2.Opportunities 3.Connexion is for ALL 4.Partnerships QUESTIONS? Epic Homes Clean Energy Transitions Glenn Pease 1 2PRPA Timeline for New Rebate 3 •$2,000 ~4x rebate for a Cold Climate Heat Pump/AC •$1,5000 ~3x rebate for an Energy Star Heat Pump/AC •$800 ~2x rebate for a Heat Pump Water Heater •$100 Additional Incentive for grid flexible heat pump water heater •40% more for Air Sealing and Insulation Overview of New Rebates 4 •Trade Incentives to sell heat pumps •No more Gas incentives •Adding funding and resources to CARE program 5 Bonus –All Electric get 3x Rebates •No gas connection by time of application (propane allowed) •Ends 9/30/2023 •If after April 1, 2023 then triple bonus layered onto new rebates More details on the changes to rebates can be found Here 6 AHRI Matches when keeping furnace Customer Education Process Challenges 7 Concerns with thermal envelope readiness Panel upgrades –do we add incentives? This Photo by Unknown Author is licensed under CC BY-SA Readiness Challenges 8 Contractor Participation Workforce development Contractor Challenges 9Partnerships Long History of working with Partners to Overcome Barriers 1 2022 Year-end Financial Update Energy Board 03/09/2023 Light & Power Annual Financial Metrics 2 Strategic Financial Plan Target 2022 2021 2020 2019 2018 Operating Margin > 2.0%2.6%5.0%2.5%-1.1%-5.3% Debt Coverage Ratio > 2.0 ----- Rate Adjustment < 5.0%2.0%3.0%5.0%5.0%1.8% The outstanding debt associated with Connexion is not considered above. Light & Power Year End 2022 Revenues 3 $ 8,690 $ 167 $ 33,147 $ 46,623 $ 61,485 $ 5,415 $ 340 $ 33,730 $ 44,100 $ 56,520 $ 0 $ 10,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000 Development Fees Green Energy Program Sales Industrial Sales Commercial Sales Residential Sales Actual vs Budget Revenues ($K) Through December 2022 Budget Actual Light & Power Year over Year Revenues 4 $ 167 $ 33,147 $ 46,623 $ 61,485 $ 151 $ 32,596 $ 44,605 $ 60,524 $ 242 $ 31,746 $ 41,396 $ 57,980 $ 0 $ 10,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000 Green Energy Program Sales Industrial Sales Commercial Sales Residential Sales Year Over Year Revenues ($K) -Through December 2020 2021 2022 Light & Power Year End 2022 Expenses 5 $ 7,190 $ 2,857 $ 5,328 $ 8,516 $ 10,092 $ 10,792 $ 7,568 $ 3,250 $ 7,474 $ 8,439 $ 9,930 $ 11,019 $ 0 $ 2,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 System Addition/Replacement Community Renewables Energy Services PILOTs Administrative Services L&P Operations Actual vs. Budget Expenses ($K) Through December 2022 Budget Actual Light & Power Year over Year Expenses 6 $ 7,190 $ 2,857 $ 5,328 $ 8,516 $ 10,092 $ 10,792 $ 6,291 $ 2,735 $ 4,847 $ 8,276 $ 8,879 $ 10,205 $ 3,788 $ 2,574 $ 4,845 $ 7,879 $ 8,938 $ 9,726 $ 0 $ 2,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 System Addition/Replacement Community Renewables Energy Services PILOTs Administrative Services L&P Operations Year Over Year Expenses ($K) Through December 2020 2021 2022 Light & Power Year over Year Purchased Power Expense 7$ 88,000 $ 90,000 $ 92,000 $ 94,000 $ 96,000 $ 98,000 2022 2021 2020 2019 2018 Year Over Year Purchased Power Expenses ($K) Through Dec Light & Power Year over Year Community Renewables Purchased Power Expense 8 $ 0 $ 500 $ 1,000 $ 1,500 $ 2,000 $ 2,500 $ 3,000 $ 3,500 2022 2021 2020 2019 2018 2017 Renewable Energy Purchased from Customers ($K) Through Dec Light & Power Year-end Financial Update Notes for 2022 9 •Operating Revenues were over budget •Operating Expenses were challenging in 2022 •Operating Income is above target •Non-operating Revenues from new development and earned interest are over budget 10 CITY OF FORT COLLINS ENERGY BOARD March 9, 2023 AGENDA ITEM SUMMARY 2022 YEAR-END FINANCIAL OVERVIEW STAFF Lance Smith, Utilities Strategic Finance Director EXECUTIVE SUMMARY Year to date financials are reported for the electric utility through December 2022 showing that operating revenues exceeded the budget for the year and operating expenses were under the adjusted 2022 budget. The operating margin decreased in 2022 primarily due to inflationary pressures and a higher than anticipated wholesale purchased power rate increase. Unfortunately, a mid-year appropriation ordinance was required in 2022 to keep operating expenses below budget for the year. ACTION REQUESTED None at this time BACKGROUND This report is intended to provide a summary of the financial performance of the Electric utility for 2022. As the table below shows, the three main financial metrics from a long-term financial planning perspective were met in 2022. The operating margin (Operating Revenues less Operating Expenses) continued to improve through 2021 driven partly by the significant recent rate increases as well as limited growth in operating expenses. This trend continued into 2022, however, the rate increase in 2022 was 2.0% (compared to 3.0% in 2021) and purchased power expenses exceeded budget by mid- year which resulted in a need to appropriate an additional $2M for those expenses. Operating revenues were also above budget at that time so the net impact to this financial target was lessened but there was a decline in the operating margin from 2021. Strategic Financial Plan Target 2022 2021 2020 2019 2018 Operating Margin > 2.0%2.6% 5.0% 2.5% -1.1% -5.3% Debt Coverage Ratio > 2.0 - - - - - Rate Adjustment < 5.0%2.0% 3.0% 5.0% 5.0% 1.8% There have been a few operating expense variances year to date. These include inflationary pressures on labor and materials that continued into 2022 at a rate well above the historical average rate of inflation, but the most significant variance has been with the largest operating expense, purchased power costs. In 2022, purchased power expenses have been higher than expected despite community energy use remaining flat year over year. The reason that purchased power expenses exceeded the budget and required a mid-year appropriation of $2.0M is that the projected wholesale rate increase was understated in 2022. The wholesale rate increase presented to the Platte River Board of Directors showed the anticipated rate increase for Fort Collins to be 2.8% over the 2021 wholesale rate based on projected loads and peak demands. Through December the realized wholesale rate increase was 5.2% over 2021. This in turn has caused the operating margin to be below budget at this time. Revenues Operating revenues exceeded the budget by $7.3M in 2022 primarily driven by continued growth in residential energy use. This was consistent with what was seen since the COVID pandemic began in March of 2020. Commercial and industrial revenues were closer to the budgeted amounts than in 2021 with commercial revenues being 5% over budget in 2022. Non-operating revenues from development fees have remained very strong and were adequate to fully cover the system additions and replacements, including an additional mid-year appropriation of $2.5M for system additions. $ 8,690 $ 167 $ 33,147 $ 46,623 $ 61,485 $ 5,415 $ 340 $ 33,730 $ 44,100 $ 56,520 $ 0 $ 10,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000 Development Fees Green Energy Program Sales Industrial Sales Commercial Sales Residential Sales Actual vs Budget Revenues ($K) Through December 2022 Budget Actual Expenses Operating expenses were below budget in 2022 by $1.1M primarily due to Energy Services being significantly under budget for the year. Aside from this, the graph below shows that operations and administrative expenses were very close to budget. PILOTs refers to the 6% transfer to the General Fund for payment in lieu of taxes and exceeded budget because it is based on realized operating revenues which themselves were higher than budgeted. $ 167 $ 33,147 $ 46,623 $ 61,485 $ 151 $ 32,596 $ 44,605 $ 60,524 $ 242 $ 31,746 $ 41,396 $ 57,980 $ 0 $ 10,000 $ 20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000 Green Energy Program Sales Industrial Sales Commercial Sales Residential Sales Year Over Year Revenues ($K) -Through December 2020 2021 2022 $ 7,190 $ 2,857 $ 5,328 $ 8,516 $ 10,092 $ 10,792 $ 7,568 $ 3,250 $ 7,474 $ 8,439 $ 9,930 $ 11,019 $ 0 $ 2,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 System Addition/Replacement Community Renewables Energy Services PILOTs Administrative Services L&P Operations Actual vs. Budget Expenses ($K) Through December 2022 Budget Actual As discussed above, purchased power costs have increased more than expected in 2022. This is shown in the graph below relative to prior year purchased power costs. STAFF RECOMMENDATION $ 7,190 $ 2,857 $ 5,328 $ 8,516 $ 10,092 $ 10,792 $ 6,291 $ 2,735 $ 4,847 $ 8,276 $ 8,879 $ 10,205 $ 3,788 $ 2,574 $ 4,845 $ 7,879 $ 8,938 $ 9,726 $ 0 $ 2,000 $ 4,000 $ 6,000 $ 8,000 $ 10,000 $ 12,000 System Addition/Replacement Community Renewables Energy Services PILOTs Administrative Services L&P Operations Year Over Year Expenses ($K) Through December 2020 2021 2022 $ 88,000 $ 90,000 $ 92,000 $ 94,000 $ 96,000 $ 98,000 2022 2021 2020 2019 2018 Year Over Year Purchased Power Expenses ($K) Through Dec Staff recommends continued discussions around the wholesale purchased power rate projections and long-term financial modeling. ATTACHMENTS: Attachment 1 – PowerPoint presentation CITY OF FORT COLLINS ENERGY BOARD March 9, 2023 AGENDA ITEM SUMMARY Appropriation Need for a New Utility Customer Information System and Customer Portal STAFF Lance Smith, Senior Director of Finance EXECUTIVE SUMMARY An appropriation ordinance is being brought for your consideration from the Light & Power as well as Water, Wastewater and Stormwater enterprise funds’ to be taken from available reserves. The use of these reserves is necessary to implement a modern Utility Customer Information System – Customer Self Service Portal (CIS-CX) Solution. These funds are being requested just as the City completes the selection of a solution partner to maintain project momentum before professional services are contracted. This appropriation Ordinance will allow the City to secure CIS-CX project management and solution quality assurance services through go-live, provide legal review of professional services contracts, and provide funding for hiring contractual staff throughout the implementation. The total amount being requested for appropriation from all 4 utilities including Light & Power is: Implementation Project Management and Quality Assurance $1,500,000 Contract Review and Counsel $100,000 Contractual Implementation Staffing $2,650,000 Total $4,250,000 Once the full solution scope with our preferred vendor is negotiated, another appropriation will be requested for the direct solution costs including licensing and hardware. ACTION REQUESTED Does the Energy Board support the appropriation of these funds from Light & Power’s reserves to support the next phase of the modernization of the Utilities Customer Information System? BACKGROUND Fort Collins Utilities is currently conducting 5 weeks of onsite product demonstrations as the final review of proposals received for a modern Utility Customer Information System – Customer Self Service Portal (CIS-CX) Solution. The proposals were received after a deliberate 12-month process focused on identifying solution requirements, scrutinizing and rating every proposal received, performing reference checks of each solution provider with other utilities that have implemented the proposed solutions, planning the solution implementation schedule, staffing needs and quality assurance milestones, and having employees involved in the solution selection throughout the process and asking questions of the solution providers. As this Board is aware, a previous effort to upgrade this system was unsuccessful. (That effort is still in litigation with a trial anticipated later in 2023.) This appropriation is driven by many of the lessons learned from the previous effort including the need for more thorough due diligence before entering any software services contracts. As described below, the funds being requested here will ensure a successful implementation and that the selected solution partner and their CIS-CX will serve our community well as our community moves toward Our Climate Future and evolving how we serve our ratepayers and enhancing their customer experience with their municipal utilities. Over the next few months, a solution partner will be selected and then a second appropriation will be presented to this Commission before the 24-month solution implementation can begin. It is anticipated that the City will successfully implement the new CIS-CX within 24 months, at which point the existing solution will be retired. The Capital Improvement Plans presented to the Council Finance Committee ahead of the 2023-24 Budgeting For Outcomes included up to $15M for this capital investment including the implementation, change management, and the software licensing and hosting services. This appropriation is being brought forward at this time to maintain the continuity of the implementation schedule and to ensure that the pricing reflected in the proposals are current and complete. Momentum for this implementation is building as staff are getting opportunities to see the benefits of modernizing and enhancing our customer’s experience as well as focusing on simplifying the architecture and processes behind the customer interface to provide a stable, upgradable platform. There are three categories of funding in this next phase of the CIS-CX modernization. Professional Quality Assurance and Project Management Services While many existing City employees have worked for decades with the current customer information and billing system, operating such a system requires a different skill set than upgrading or implementing an existing system into a new system. The new system may be hosted in the cloud or a more traditional in-house physical solution with different hardware requirements and interfaces. It may include different modules for a customer portal, social media, bill printing, etc. To effectively implement these new features and ensure that the City is receiving the functionality it is expecting, professional software implementation project management and quality assurance is required. A scope of work has been developed for these services with a maximum fee through the implementation and go-live of the new solution. Because most of this work will be done remotely, travel expenses have been excluded from the not to exceed price for these services. Estimating some travel will be necessary, raises the amount being requested for these services including travel to $1,500,000. Contract Review and Counsel Prior to the City entering into a binding services agreement with the solution provider outside legal counsel may be sought as needed to ensure the final agreement is in the best interest of the City and ratepayers. It is requested that an amount of up to $100,000 be appropriated for this purpose. Contractual Staffing Many of the City’s employees who work in and with the current customer information system will be involved in the implementation of the new solution. This is a best practice to ensure that the proposed solution is consistent with customer expectations and operational requirements. To have these employees available to focus on the implementation, staff will be augmented by contractual staff throughout the implementation, and post go-live quality assurance and testing. Based on the staffing plan developed for the solution implementation, the following contractual positions are needed before implementation: 4 Customer Service Providers $288,000 / yr 1 Customer Experience Provider $64,000 / yr 1 Billing & Accounts Receivable Specialist $80,000 / yr 1 Field Service Lead $100,000 / yr 5 Information Technology Solution Providers $575,000 / yr $1,047,000 / yr Because having these additional staff will be advantageous throughout the 24-month implementation with some needed beforehand and some afterward, in total for almost 2.5 years of augmentation it is estimated that contractual staff may require: Contractual Staffing Appropriation = $2,650,000 In addition to the contractual staff discussed above who will backfill employees focused on the implementation, there will be a need for additional staffing for the duration of the project who will focus on leading testing of the solutions, developing training and training employees, implementing organizational change management, reviewing existing business processes, and developing business analytics for the future solution. As these additional staff are not needed initially, this staffing need will be a part of the implementation appropriation once the solution partner is selected. Appropriation by Enterprise Fund As the customer information and billing system is needed by each utility to generate monthly operating revenues, each utility requires such a system and therefore should contribute to the upgrade or replacement of such a system. While some rates are more complicated than others and some require meter consumption data to assess, billing for each utility requires much of the same information as any other utility. Because electric monthly charges are more complicated than flat stormwater rates and unmetered wastewater use, there are additional billing components for billing electric customers. Hence, it is appropriate to attribute more of the shared costs to Light & Power. A similar argument applies to Water billing. The annual subscription costs for this system are divided between the four utilities as follows: Light & Power 50.0% Water 25.0% Wastewater 12.5% Stormwater 12.5% This same cost sharing ratio is proposed for the implementation costs. Light & Power $2,125,000 Water $1,062,500 Wastewater $531,250 Stormwater $531,250 $4,250,000 Enterprise Fund Reserve Balances The funds being requested herein would come from available reserves of each utility. These funds are above and beyond funds set aside within the reserves to meet minimum fund balance requirements and any previous appropriations made but not yet spent. As the table below shows, each enterprise fund has sufficient available reserves for both anticipated appropriations related to modernizing the CIS-CX solution. STAFF RECOMMENDATION Staff recommends supporting this appropriation. ATTACHMENTS: Attachment 1 – PowerPoint presentation Light & Power Water Wastewater Stormwater Available Reserves EOY 2021 $41.4 $41.3 $19.1 $14.5 Mid-year 2022 Appropriations ($26.1)$0.0 $0.0 $0.0 2023-24 BFO Use ($1.0)($29.3)($7.7)($2.3) 2022 Revenues Above Budget $11.2 $3.5 $1.2 $0.2 2022 Expenses Below Budget $1.9 $7.4 $1.8 $2.2 Estimated Available Reserves $27.4 $22.9 $14.4 $14.6 Amount Being Requested ($2.1)($1.1)($0.5)($0.5) Remaining Available Reserves ($M)$25.3 $21.8 $13.9 $14.1 Utilities Billing System Appropriation 03/09/2023 Lance Smith Senior Director of Finance for Utilities 2Project Overview What? •Billing system •Customer Portal •Customer Information System Why? •Existing system is 22 years old •Highly customized •Customer expectations •Security Where? •Hosted in the cloud •On premise servers When? 3The Journey to here 2018 CIS Project 2021 Lawsuits 2022 Requirements Developed 4Solution Analysis and Provider Selection Timeline 5Implementation Project Management, Quality Assurance and Contract Review Project Management •Managing project scope, installation plans, schedule and budget •Minimizing project risks by proactively addressing issues as they arise •Addressing staffing challenges for the Solution Provider and City Quality Assurance •Product testing and process validation •Establishing clear service level expectations •Ensuring project requirements are met within the initial project scope Contract Review •Outside Counsel will ensure that the City’s and its ratepayers interests are front and center in the solutions agreements 6Contractual Staffing for Implementation Contractual Staffing •Allow existing staff to focus on how the new solution will function after deployment •Ensure operational requirements are ready before go-live •Allow training of some staff as the implementation proceeds •Informal trainers ready before go-live Contractual employees will be trained to backfill the positions of staff working on the implementation to maintain current levels of customer service and operations 7Appropriation Requested Implementation Project Management and Quality Assurance $1,500,000 Contract Review and Counsel $100,000 Contractual Implementation Staffing $2,650,000 $4,250,000 Light & Power 50.0%$2,125,000 Water 25.0%$1,062,500 Wastewater 12.5%$531,250 Stormwater 12.5%$531,250 8Available Reserves Light & Power Water Wastewater Stormwater Available Reserves EOY 2021 $41.4 $41.3 $19.1 $14.5 Mid-year 2022 Appropriations ($26.1)$0.0 $0.0 $0.0 2023-24 BFO Use ($1.0)($29.3)($7.7)($2.3) 2022 Revenues Above Budget $11.2 $3.5 $1.2 $0.2 2022 Expenses Below Budget $1.9 $7.4 $1.8 $2.2 Estimated Available Reserves $27.4 $22.9 $14.4 $14.6 Amount Being Requested ($2.1)($1.1)($0.5)($0.5) Remaining Available Reserves ($M)$25.3 $21.8 $13.9 $14.1 9Suggested Motion Language I move that the Energy Board supports the appropriation of these funds from the respective utility’s reserves to support the next phase of the modernization of the Utilities Customer Information System. Our Climate Future Primary Metrics Summary 03-09-2023John Phelan, Energy Services Manager 2 Agenda Our Climate Future Goals Reporting methods and timelines Examples Typical Energy Board reporting Looking ahead 3 Our Climate Future Goals •Primary -Carbon: Reductions of 50% by 2026, 80% by 2030 (2005 baseline) -100% renewable electricity by 2030 (5% from local sources) -Achieve zero waste, or 100% landfill diversion, by 2030 •Additional -Achieve a 20% reduction in forecast electricity (2021 to 2030) -Annual reliability metrics of: –Customer Average Interruption Duration Index (CAIDI) less than 45 minutes –System Average Interruption Duration Index (SAIDI) less than 30 minutes –System Average Interruption Frequency Index (SAIFI) is less than 0.66 annually -Achieve a 10% reduction in forecast natural gas use (2021 to 2030) -Adopt and enforce updated energy codes on a three-year cycle -Achieve bidirectional demand flexibility capacity of 5% of peak loads by 2030 Learn more at ourcity.fcgov.com/ourclimatefuture 4 Reporting Methods and Timeline •Public Dashboards -CAP Dashboard (complete community inventory with two-year lag) -Community Dashboard (electricity use updated quarterly) •Publications -Energy results infographic (mid-year for prior year) -Carbon results infographic (two -year lag) -Waste results infographic (one year lag) •Internal Dashboards -Electricity resource mix (annual) -Efficiency portfolio results (annual) -Grid flexibility results (annual) -Community carbon (preliminary results by Q2 for prior year) 5 CAP Dashboard https://ftcollinscap.clearpointstrategy.com/ 6 Community Dashboard https://fortcollins.clearpointstrategy.com/environmental-health-2/community-electricity-use-per-capita// 7 Publications 8 Publications 9 Internal Dashboards –Community Renewables 10 Internal Dashboards –Energy Program Portfolio Savings 11 Internal Dashboards –Local Solar 12 Internal Dashboards –SAIDI 13 Emissions MTCO2e Percent Change vs 2005 vs Previous 2005 Baseline 2,327,026 2020 Inventory 1,769,493 -23.9%-18.5% 2021 Inventory 1,743,933 -25.1%-1.4% IPPU 7%+4.5%-0.8% Water <1%+0.1%+0.1% Waste 2.5%-9.7%-0.4% Petroleum 25.5%+0.2%+2.7% Natural Gas 24.5%+1.8%+0.3% Electricity 40%-22%-3.3% Energy Board Reporting June 2022 Community Carbon Emissions by Inventory Resource Energy in 2021 accounted for 90% of the overall inventory emissions Emissions MTCO2e 2005 Baseline 14 Emissions MTCO2e Percent Change vs 2005 vs Previous 2005 Baseline 2,327,026 2020 Inventory 1,769,493 -23.9%-18.5% 2021 Inventory 1,743,933 -25.1%-1.4% 2030 Inventory*1,144,000 -51% IPPU <1%-0.9% Water <1%-0.1% Waste 5%-9% Petroleum 45%+3% Natural Gas 40%+3% Electricity 9.5%-47% Energy Board Reporting June 2022 Community Carbon Emissions Forecast by Resource Natural Gas & Petroleum estimated as 85% of 2030 Inventory Emissions MTCO2e 2005 Baseline *reference scenario with forecasted consumption, factors, & planned utility-scale renewables 15 Energy Board Reporting June 2022 Community Electricity Resource Mix Forecasting 90% energy from non-carbon sources in 2030 Resource Mix Percent of Generation by Resource Inventory Year Carbon Non-Carbon Hydro Wind Solar 2005 76%22%2%0% 2020 54%19%23%4% 2021 48%18%29%5% 2030*9%17%44%30% *reference scenario with planned utility-scale renewables from Local Renewables Percent of Generation 16 Energy Board Reporting June 2022 2021 Portfolio Results Electricity Savings by Program 17 Energy Board Reporting June 2022 2021 Portfolio Results Local Renewables Renewable Capacity Local kW Operational Capacity kW 2010 2015 2020 2021 Local Renewables 740 7,451 19,456 24,698 Commercial Solar 542 1,078 2,500 3,730 Residential Solar 199 2,093 11,677 15,478 Community Solar 0 621 621 621 SP3 0 3,660 4,659 4,869 18 Looking Ahead Upcoming •2022 annual reporting scheduled with Board for May meeting •Anticipating staff and community team to develop recommendations for more integrated OCF reporting