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HomeMy WebLinkAboutElectric Board - Minutes - 07/18/2001FORT COLLINS ELECTRIC BOARD REGULAR MEETING MINUTES City of Fort Collins Utilities Training Room 700 Wood Street Wednesday, July 18, 2001 Fort Collins. Colorado Council Liaison: Eric Hamrick Staff Liaison: DeEtta Carr - 221-6702 hairperson: ice Chairperson: Richard Smart Phone: Phone: 221-4474 (H) MEMBERS PRESENT: Barbara Rutstein, Guy Helme, Ginger Purvis, Richard Smart -Vice Chairperson, Alison Mason, Jeff Lebesch, Linda Stewart STAFF PRESENT: Mike Smith, Wendy Williams, Eric Dahlgren, Gary Schroeder, Bill Switzer, Allen Boushee, Ellen Switzer, Dave Agee, Kim Vondy COUNCIL REPRESENTATIVE: Eric Hamrick OBSERVER: Lu Fisk, League of Women Voters CALL TO ORDER Meeting was called to order by Vice -Chairperson Richard Smart at 5:20 p.m. with introduction of members, staff, and observer. - APPROVAL OF JUNE 14, 2001 MINUTES Barbara Rutstein made a motion to approve minutes. Guy Helme seconded motion. Passes unanimously. ENERGY SERVICES PROGRAMS - Gary Schroeder Gary Schroeder referred Board to the handout in the packet entitled 'Energy Efficiency and Renewable Energy Programs and Activities." First project Gary spoke about was the Design Assistance program, used to support new construction and assist architects and clients with early stages of design so that a building is designed correctly from the beginning. One of the big successes has been working with the Poudre School District, especially on their new elementary school. Staff got involved with this about 1 1/2 years ago. Staff provided input on energy efficient options in addition to sponsoring several workshops. Gary noted that the Utilities are not currently marketing this program as demand could easily exceed resources. Some of the results from this were great day lighting in the elementary school, which is well balanced high efficiency lighting that has an ice thermal storage unit. The predicted cost of the air-conditioned school is about 30 cents per square foot in contrast to an average or existing non - air -conditioned school, which costs 42 cents per square foot. PSD is also building a new Facilities building where they are willing to take a few risks and are going to try a ground source heat pumps, which is very efficient, as well as day lighting. They have hired architects for the new high school. ELECTRIC BOARD MINUTE MEETINGS PAGE 2 July 18, 2001 Next Gary spoke about the Hydrogen Task Force. Gary noted that there was a conference held in town in September 2000 on the "Forum for Converting to a Hydrogen Economy." A presentation was given to the Electric Board resulting in the City Manager recommending a task force be formed to evaluate hydrogen technologies. The group has met six times, will meet once or twice more and the draft report is 80% complete. They've done a lot of research and all the information was a little overwhelming. The groups feeling in general is that the demonstration phase is going to continue a few more years, with commercialization starting to merge. While technology has progressed, there isn't an infrastructure to support it, so it will probably happen in pockets. Some of the recommendations that have crystallized is the group would like to see a resolution of the city supporting hydrogen and they would encourage there be staff resource time dedicated to continued progress in this direction. Ultimately they would that this staff person could be supported by outside funding. Buses look like the best short-term tangible solution. The company Thunder Power will be demonstrating a prototype bus beginning January and they may be interested in trying it in Fort Collins for a short term. Education is real important, there are a lot of misconceptions about safety, and it would be good to explore partnerships. New Home Study in support of the building code. In 1995, there was a change in the building code towards more energy efficiency. Energy services conducted a study, which began in 1997. Some of the highlights included inspecting 20 new homes under construction, 20 builders (who were random samples) and 150 homeowners were interviewed. Of the 150 homeowners, 80 of their homes were inspected with a utility analysis. Of those 80 homes, there were 40 homes tested with floorboard testing. Several issues emerged up from the study including discomfort, and a potential for health and safety issues such as back drafting appliances. There were a number of complaints regarding homes overheating, a number of thermal defects from improperly installed insulation and a lot of over -sizing of heating and cooling equipment. Some of these things are code issues and some are work issues. The final project Gary mentioned is the non-residential building audits being conducted jointly with Platte River. They have already completed a couple of the audits and Platte River has just hired a consultant that is working part-time to help finish the audits. Guy Helmes suggested that the next meeting allot plenty of time for the New Home Study presentation and questions. BUDGET DISCUSSION - Dave Agee / Ellen Switzer Dave Agee explained that a few years back, the City established enterprises for all of its utilities. This was done as a result of the Tabor Amendment in 1992. All of the utilities have always operated as separate enterprise fiords. Even though the utilities merged, each of the funds is maintained separately and they have to maintain the fiscal integrity of each of the utilities. Ellen Switzer referred board to the handouts in their packets on the 2002-2003 Budget for the Light and Power Fund and Customer Service and Admin Fund. The Electric Board's Work Plan under fiscal considerations called for the Board to review the 2002-2003 Electric Utility Biennial Budget for ELECTRIC BOARD MINUTE MEETINGS PAGE 3 July 18, 2001 reasonableness assumptions and programs and compliance with financial policies, to evaluate prescribed reserve levels for adequacy and reasonableness; and to explore alternative rate structures. The City utilizes a biennial budget, which they moved to in 1998. They did it mainly to facilitate longer range planning and also increase staff efficiency. The 2-year budget is adopted, but each year's appropriation is made by ordinance in November prior to the budget year. Each year's appropriation is separate and can only be used in the year appropriated. The Council has several study sessions and public hearings to go through before the budget is adopted. In November 2001, City Council will adopt the 2-year budget plan for 2002 and 2003, appropriate funds for 2002 and approve rate ordinances for 2002. In November 2002, Council will appropriate funds for 2003 per the 2002-2003 budget plan. Changes will only be allowed if there are unforeseen costs that materially impact services; and if Council or City Manager directs them. They will also approve rate ordinances for 2003. The Utilities Budget is adopted by fund; there is some flexibility to move appropriations within a fund but you cannot move appropriations between funds. Each utility fund is separate and distinct from the others and there are 4 Enterprise Funds: Light and Power; Water; Wastewater; and Stormwater. In addition to the Enterprise Funds there is also an Internal Service Fund called the Utility Customer Service and Administration Fund. The functions included in this service fund are Customer Service, Billing, Meter Reading, Energy Services, Conservation and Education, Customer Connections, Employee Training. Safety and Wellness, General Manager's Office, Financial Operations, Utilities IT department. Utility Locates, and other non -departmental expenses. All of these groups are providing services to all four of the Utility Enterprise Funds. Costs of the Customer Service and Admin Fund are allocated to the 4 enterprise funds. The budget allocation is based on cost of service, Light and Power's share is approximately 52%. This was a brand new fund in 2000. The transfers will be based on the actual 2002 & 2003 expenses not budget. Chances are the actual expenses will be less than budgeted. Dave Agee explained to Richard that the four utilities were actually set up as enterprise funds before the Bruce Amendment, but voters approved a charter amendment that created the Enterprise Board which can issue bonds without going to a public vote. The Enterprise Board, which is composed of the Council, actually meets after Council and issues bonds. The idea of keeping money separate is really a State Constitution issue. The State Constitution requires that if you charge for electric service that the money needs to be spent on that particular activity. As approved by voters, excess General Fund revenue can also be kept by the City and used for specific purposes. Ellen Switzer continued by discussing the policy highlights for the Light and Power Fund. Ellen explained that there would be no electric rate increases in 2002 or 2003. There is a potential for 2% increase in 2004 and another 2% increase in 2006. It is budgeted in the 5-year plan, but past history has allowed postponement of rate increases because the Utility budgets conservatively. Rates remain competitive. Ellen displayed on overhead the Janua7 2001 Residential Electric Rate Comparison of 51 Colorado Utilities which shows Fort Collins as the 6` lowest of the Utilities. A copy of the graph was ELECTRIC BOARD MINUTE MEETINGS PAGE 4 July 18, 2001 included in packets. Excel is 16% higher than Fort Collins. A target for when developing the budget is to insure positive net income throughout the 5-year projection. The financial statements in the packets are in a slightly different format this year and net income is no longer specifically shown on the statements. Net income is calculated by taking the operating revenue from the sale of electricity and subtracting all of the operating expenses and depreciation and adding other income received, half of which is usually interest income and half miscellaneous charges. 2002 net income is estimated at about $300,000 and 2003 is projected at $400,000. Throughout the 5-year plan the reserves are projected to decline but remain within policy. The Operating Reserve and the Capital Reserve are both going to be fully funded. The Operating Reserve is calculated at 8% of the operating budget less Purchase Power expense. The purpose of the operating reserve is if something were to happen that we were somehow unable to collect revenues for a month, we would still have resources adequate to pay the bills for that period (with the exception of purchase power bills). The Capital Reserve is 20% of the 5-year capital plan, which is equal to 1/5 of the 5-year plan. Historically our capital expenses have been high one year, low the next, so this reserve sort of evens out the funds required for capital expansion without the need for changing rates every year. The Purchase Power Reserve is essentially whatever is left over in reserves. The official policy states that it is not to exceed 25% of operating revenue. We historically try to target it at 10%, but rates are not usually raised to meet that percent. Year-end 2000 we were actually at 24%, but in 2006 the graph shows the Purchase Power Reserve down to almost nothing as based on budget projections because we are projecting to spend more than revenues over the five years. This would be the worse case based on the conservative approach to budgeting. - — Ellen displayed a graph comparing the actual 2002 & 2003 budget pointing out the 2002 Light and Power proposed budget is projected at $80.2 million. For 2003, due to reduced capital system additions, it is projected at $78.9 million. Ellen continued with Light & Power Fund Budget highlights stating that no purchase power rate increases are projected for 2002-2003, in fact we are not projecting any increases in a 5-year plan. Purchase power growth is projected to increase at 4.3% per year, however, purchase power for 2001 will be about $45.7 million, almost $3 million more than originally budgeted so there is a big jump in the 2002 budget. For operations there are no significant changes. There are 2 new positions being proposed one for substation maintenance and the other is landscape maintenance. Budget projections ng are based on t an estimated 2.8% inflation and customer growth at 2.5%. Transfers include payment in lieu of taxes projected at $4 million per year (plus street lights at $900,000 per year). the Transfer to the General Fund for Administrative Services at $950,000 per year and the Transfer to the Customer Service and Admin Fund projected at $6 million per year. Under System Additions (Capital) we are assuming 1200 new housing units per year. Subdivision construction is projected at $2.2 million per year and major circuits and ductbanks is projected at $1 million per year. $3.2 million is budgeted for a Service Center addition in 2002 and undergrounding is projected at $2.3 million per year through 2004. Light and Power operating revenues are projected at almost $69 million in 2002 and continue to provide the majority of the Utility's resources. Other resources include investment income ($800,000), miscellaneous income ($1.8 million) and development fees ($2.2 million). Of the operating revenues, ELECTRIC BOARD MINUTE MEETINGS PAGE 5 July 18, 2001 approximately 38% is from residential customers, 38% from commercial customers and 24% from industrial customers. The Customer Service and Admin Fund includes Customer Service, Billing, Meter Reading, Energy Services, Conservation and Education, Customer Connections, Employee Training, Safety and Wellness. It also includes the General Manager's Office, Financial Operations, IT, Utility Locates, and other non -departmental. This fund was initiated in 2000 to account for services provided to all utility customers and enterprise funds. Customer Service and Admin is funded by transfers from the four enterprise fiends. The transfer amounts are determined on an estimated cost -of -service basis. Transfers will be based on actual 2002 and 2003 expenditures not budget. Customer Service and Admin fund will begin to pay General Fund Admin transfer $180,000 per year. All communications costs are consolidated in the IT budget. New positions are Energy Services Engineer in 2002, three Customer Service positions in 2002, one new Customer Service position in 2003. In addition, two Water employees are being transferred to the Customer Service and Admin Fund. MOTION Ginger Purvis made a motion to approve the 2002 budget as proposed. Linda Stewart seconded the motion. VOTE Approved Unanimously. RATES OVERVIEW -Bill Switzer Bill Switzer gave a rate presentation on the issues and dynamics of electric rates. Starting with a pie graph showing the portions of the electric budget, he explained which parts are fixed and not sensitive energy use and which are variable and change with the level of energy use. There was some discussion concerning how unresponsive the fixed portion of the Platte River costs were in light of the potential ability of PRPA to sell unused power. Further discussions of this would require the presence of an appropriate PRPA representative. Bill also presented several examples of electric load patterns for various types of commercial customers to explain why some customers are more efficient users of electricity than others. He also displayed load profiles of residential air conditioning customers to show the diversity of such loads. The issue of properly metering and charging for residential air conditioning took most of the remainder of the presentation. One issue is how to weigh the additional costs of metering and the problems of identifying customers with air conditioners against more accurate bills for residential air conditioning customers. The board indicated that further discussion with both Bill and a representative from the Energy Services staff was desired. ADJOURNMENT Meeting was adjourned at 8:30 p.m.