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HomeMy WebLinkAboutElectric Board - Minutes - 10/18/1995E • Minutes to be Approved by the Board at the November 29, 1995 Meeting FORT COLLINS ELECTRIC BOARD MEETING MINUTES October 18, 1995 BOARD MEMBERS PRESENT: Bill Brayden, Jeff Eighmy, Mark Fidrych, and Richard Smart Len Loomans, Barbara Rutstein and Jim Welch STAFF PRESENT: Don Botteron, Delynn Coldiron, John DeHaes, Paul Folger, Ron King, Bob Kost, Rich Shannon, and Dennis Sumner. OTHERS PRESENT: . Council Member Apt, Bob Abiecunas, Bob Emmert and Jay Hopper BOARD LIAISONS: Council Liaison -- Alan Apt Staff Liaison -- Don Botteron 1. APPROVAL OF MINUTES: A correction was noted in the first sentence of Section 3 -- PMA stands for Power Marketing Administration. Don briefly reviewed the note that was added to the discussion on rate adjustments. A motion was made by Board Member Eighmy to approve the Minutes as amended. Board Member Smart seconded the Motion. The Motion passed unanimously and the Minutes from the September 20, 1995 meeting were approved as amended. There was some discussion on the gas unit that is being proposed at Rawhide. Jay mentioned that Platte River has 250 MW of baseload generation at the Rawhide plant, but has relied on its hydro resource to provide needed intermediate and peak capacity. Platte River needs to find additional ways to meet the demands of needed intermediate and peak capacity since they are losing the flexibility of their hydro resource. The proposed gas unit . would cut Platte River's risks, would diversify risks between two types of fuels, would change the resource mix and enable them to generate intermediate and baseload capacity, would lower operating costs, would generate cash that would be used to reduce debt, and -1- would lower reserve requirements which would effectively help solve some of the problems created by the loss of their hydro resource. In response to a question regarding citizen perception on this issue, it was mentioned that having an existing site that already has environmental approval, and having appropriate zoning in place, minimizes concerns. Platte River has collected valuable data on public concerns and issues as a result of sharing this concept with citizens during their IRP process, and as part of the work that was done with Cambridge. 2. UPDATE ON PRPA ACTIVITIES: Bob Emmert and Bob Abiecunas gave a presentation on Platte River's participation in renewable energy projects. The purpose of the presentation was to inform Board Members on current Platte River activities related to renewable energy, and to obtain input from the Board on the project concept, the level of desired participation, and the project preference. Platte River is exploring participation in renewable energy options because of the potential project opportunities that exist, because of its commitment to be environmentally sensitive, and because of the increased interest of member cities and customers in renewable energy. Platte River has been exploring a number of renewable projects over the past several years. Over the past couple of years its focus has narrowed to four regional wind projects: 1) Kenetech in Wyoming -- Phase I; 2) Kenetech in Wyoming -- Phase II; 3) Kenetech in Colorado; and 4) New World Power in Wyoming. Because the cost for the New World Power project was fairly high, and because there is a potential to obtain co - funding from the Department of Energy on the Kenetech projects, Platte River has decided to concentrate on the Kenetech projects. Kenetech Phase I and Phase II projects are located near Medicine Bow, Wyoming. Phase I is an approximate 70 megawatt project. The EIS has been completed and a decision on this is due in October. Project participants have been solidified and, at this point, Platte River is not involved; however, there is a potential that this could change. Construction is anticipated to start in October, 1995. Phase II is an extension of the initial project. This phase will add at least another 25 megawatts. The EIS would be an add -on to the existing EIS. Participation for this Phase has not been solidified, so Platte River could definitely get involved. Construction is anticipated to start sometime in 1997. The Kenetech Project in Colorado could be located in Weld County. This project will not commence until Kenetech has a commitment for at least 25 megawatts of capacity. The EIS has not started, but should be easier to obtain since the project will be constructed on private land. Participation has not been solidified. Construction could start as early as 1997, but is dependent on participation. -2- Project considerations for the Kenetech options were discussed. These included location, participation, estimated commercial operation date, and method of transmission. Estimated project costs were also discussed. The key issues that will impact project costs were identified as: The level ofNREL funding available for the Kenetech projects. It is anticipated that this will amount to approximately $500,000 per year/per every 5 MWs. The Energy Policy Act. There has been legislation introduced that would eliminate the tax credits currently available under this Act. This legislation does not address incentive payments, but because incentive payments are appropriated on a yearly basis, there is no guarantee that these will be available in the future. Financing. Platte River is considering issuing mini bonds for this project. This would give the project high exposure and would give customers an opportunity to participate by buying bonds. Preliminary estimated total cost of delivered energy (worst case) _ $59.38 mills/KWH. Estimated total cost of delivered energy (best case) _ $40.43 mills/KWH. Energy costs between existing Rawhide and Craig resources, and the proposed wind resource were compared and discussed. 0 Platte River staffs recommendations included: - that participation in the Kenetech projects could be on a member -by -member basis - that wind project costs should be kept separate from existing resources and should be paid for by the participants - that all costs should be recovered over the life of the project - that a renewable pass -through energy charge should be used to recover costs Adding 5 MWs of wind power to Ft. Collins' 1994 power costs would have increased the wholesale rate by approximately 1.26% (best case) or 2.17% (worst case). Retail rates would have increased .81% (best case) or 1.40% (worst case). Board Members discussed the information that was presented. There was some confusion over why each of the Cities are paying different rates. It was mentioned that each City pays the same amount for demand and that differences occur due to varying load factors. There was some concern over the numbers shown in the comparison of energy costs between the various resources. Other sources of data have shown wind power to be only a penny or so more than other kinds of power. This was not reflected by the numbers shown in Platte River's information. Reasons for this difference were discussed, including the fact that none of the costs associated with wind power were assigned to the cost of . capacity, as is done by some other utilities. There was also some discussion on the affect the proposed gas unit would have on these numbers. Concerns about the credits given by -3- Platte River for wind power compared to the credits given by other utilities, and the lack of credits given for environmental externalities were voiced. At this point, none of the other member cities are interested in participating in this project. Ft. Collins needs to decide whether or not it is willing to spend the necessary $4 to $5 million dollars, over the next 20 years, to be involved in this wind power project. There was discussion on the value of wind power. An example was given that if Ft. Collins elected to participate at the lowest possible level, i.e., $100,00 per year, it would take approximately 4,000 subscribers to pay an extra $2.00 a month to cover the Utility's cost for providing "green" power. In this scenario, customers interested in obtaining green power as a portion of their electric energy supply could subscribe to this service and, for a small price, would be provided green power. This would provide a value-added service to the Utility since customers would have a variety of rates, power, etc, to choose from. 10% of our customers that were surveyed by Cambridge said they would pay extra for green power, so there appears to be a potential market for this on a small-scale basis. There was also brief discussion on exploring the option of rolling the cost of wind power into rates rather than isolating this cost and offering it as a choice. Another suggested option was that Platte River could initially buy blocks of wind energy, instead of investing in the wind equipment. This equipment could be purchased at a later date when there was enough customer interest to justify the expense. Board Members were in agreement that this issue merits additional study, but felt that there was no sense of urgency to get involved in Phase I of the Kenetech project. It might take a few months to discuss the issues related to this project, and this delay will provide an opportunity to monitor Phase I activities. There was some feeling that this project does not make good business sense at this point -- wind power is base load capacity and Platte River has no need for additional base load capacity. Wind power is also a fairly high cost resource and, in light of deregulation, the Utility should be doing everything it can to reduce costs. Platte River will report back to the Electric Board within the next month or two. At that time they will provide Board Members with an update on the wind power project, and will open discussion on issues such as the Wyoming site vs. the Colorado site, etc. 3. CAMU PRINCIPLES OF RETAIL WHEELING: Paul provided Board Members with an update on this issue. Representatives from CAMU met with Paul Shauer to discuss the issues and complications presented by the bill he has initiated. They shared CAMU's Principles with him. He thanked the Representatives for their insight and stated that he intends to move forward with the bill as drafted. CAMU restated their position that they are not opposed to retail wheeling pgr 5g , but are opposed to this version of Shauer's bill. 10 CAMU hopes to develop a community by community stance on this issue through educating the various Boards and Councils. Paul reviewed CAMU's principles with the Board. He mentioned that there are three major issues addressed by these principles: 1) Assuring a level playing field for all competitors; 2) Self determination and local prerogatives; and 3) Costs associated with freedom of choice. Principles 1, 11, 13, 14 are all related to leveling the playing field for all competitors: - Principle 1 states that the creation of retail competition in Colorado must not occur until similar competitive retail markets are created in adjacent states. - Principle 11 states that industry participants must be prohibited from engaging in unfair competitive practices such as predatory pricing. - Principle 13 states that all industry sectors must be subject to identical requirements concerning open records. - Principle 14 requires that there be equal access to all transmission and generation markets. Principles 2, 5, 6, 10, 12 are all related to self determination: - Principle 2 states that in order to preserve local control, retail wheeling would not be a state mandate. Municipal utilities must be given a local control choice option to determine the extent to which retail wheeling should be implemented and the rules governing such implementation. - Principle 5 states that the constitutional and statutory right of consumer -owned utilities to establish their own rates must be preserved. - Principle 6 states that rates, terms and conditions for retail wheeling service offered by municipally owned utilities must be established by the local governing body. - Principle 10 states that any retail competition legislation must prohibit the unnecessary and economically wasteful duplication of distribution facilities. - Principle 12 provides for the distribution utility to retain the right to meter and bill its retail wheeling customers. Principles 3, 4, 7, 8, 9 are all related to the costs associated with freedom of choice: - Principle 3 addresses rate protection for residential, commercial, small industrial, • and any other customers that may be unable to take equal advantage of retail wheeling opportunities. -5- Principle 4 allows for full recovery of the costs associated with ownership of the distribution system. These costs include operation and maintenance, depreciation, system upgrades, administrative costs, franchise fees, PILOTS, return on investment, etc. Some of these costs reflect local community values, i.e., costs associated with the undergrounding program and clean air technology in power generation. Principle 7 addresses clarifying the responsibilities of the retail wheeling customer for securing back-up power to ensure the integrity of the system and to protect other customers receiving service over the distribution system. Principle 8 addresses the need for providing a method to recover stranded investment costs. Principle 9 addresses the need to define the distribution utility's obligation to provide sales service to former retail wheeling customers, if they request to resume service with the utility. These fourteen principles emphasize serious issues that need to be resolved before any benefits from retail wheeling can be realized by Ft. Collins' consumers or the Utility. It is imperative that affected parties study the benefits, risks, implications, and impacts of retail wheeling on our customers. CAMU is suggesting that their principles be used as a guideline for this type of study. Board Members discussed these principles and agreed with CAMU's recommendation. Board Member Smart made a motion to adopt the Colorado Association of Municipal Utilities Retail Wheeling Principles, Board Member Eighmy seconded the Motion. The Motion passed unanimously. Staff will draft a Council recommendation. 4. 1996 WORK PLAN A. Work Plan: Don mentioned that the Board's 1996 Work Plan must be submitted to the City Clerk's office by November 30. Board Members identified several key issues they were interested in pursuing in 1996. Those issues included: - Fiscal Considerations -- review budget and make recommendations on rates and policies. - Charter Review/Governance Issues -- work with the newly established Charter Review Committee to consider governance options and develop recommendations relating to Charter changes. - Demand Side Management/Environmental Activities -- monitor, advise, promote, explore new opportunities - PRPA Relationship -- cooperation/guidance - Strategic Plan -- advisory to staff/council (includes deregulation issues) 10 0 Don will prepare a draft 1996 Work Plan for the Board's review at the November meeting. B. Governance: Don mentioned that a lot of energy was expended by the Board brainstorming governance issues. The Strategy Planning Team has identified governance issues as a major topic of action. This team, plus a couple of ad hoc members are going to be spending a full day brainstorming governance issues and developing a list of pros, cons, gets, keeps, avoids, aids and barriers, etc., related to these issues. This group will prioritize this list and identify the major governance issues that merit further study. This list will be presented to the Electric Board for additional input. Don asked if there were any Board Members interested in participating in this effort. Board Members Smart, Fidrych and Eighmy expressed interest. Staff will notify Board Members once a meeting date has been established. 5. STAFF REPORTS: Don mentioned that there is a vacancy on the APPA Policy Advisory Board. There is a minimum commitment of two days per year, plus travel time. The Utility would pay for • associated expenses. If Board Members have any questions or are interested in applying for this position, they should call Don or Jeff Tarbert from APPA. • 6. INFORMATIONAL REQUESTS: None. OTHER BUSINESS: 1. September Snow Storm: Board Members liked the thank -you letter to our customers that was sent out by Light and Power employees after the storm. It was suggested that we send some information to our customers regarding the underground electric system and how this improved our ability to survive the storm. Other facts including the percentage of the City that is currently underground, the amount of money spent to accomplish this, the amount of money yet to be spent to complete this project, reliability factors, and the aesthetic benefits to the Community might also be included in this information. Staff mentioned that we were able to provide our customers with some of this information in a Channel 9 news interview done with John DeHaes a couple days after the storm. -7- Staff reported that in a survey done in 1994 of public power agencies that have underground electric systems, only one of the agencies that responded had a greater percentage of their system underground than we do. Most of the agencies that responded had 80% or more of their system still overhead. 2. Meeting Dates Chairperson Fidrych thanked Board Members for their flexibility in changing this month's meeting. November's meeting date was also discussed. It was decided that the next Electric Board meeting will be held on November 29, 1995, and will be a combined November/December meeting. 3. E-mail: Board Members were interested in using the Internet to send staff E-mail messages. Delynn collected E-mail addresses from the Board Members present at the meeting. Delynn will collect remaining E-mail addresses from absent Board Members, if any, and will update the Board Member list to include this information. Delynn will also work to get an Internet mailbox set up for this purpose and will forward the appropriate address to Board Members once it is obtained. 4. Rawhide Tours: Rich mentioned that there are Rawhide Tours available for those who are interested. Anyone who is interested should contact staff. 8. Agenda PRPA Updates - Wind Power Issues 1996 Work Plan Discussion/Approval Update on Governance Brainstorming Session, General Discussion Strategic Planning Team Report ADJOURNMENT: The meeting adjourned at 8:07 p.m. Del oldiron 12