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HomeMy WebLinkAboutElectric Board - Minutes - 05/31/1995Minutes to be Approved by the Board at the June 21, 1995 Meeting. FORT COLLINS ELECTRIC BOARD MEETING MINUTES May 31, 1995, 5:00 - 7:30 p.m. BOARD MEMBERS PRESENT: Bill Brayden, Jeff Eighmy, Mark Fidrych, Barbara Rutstein, Richard Smart, and Jim Welch, BOARD MEMBERS ABSENT: John Allum STAFF PRESENT: Ellen Alward, Don Botteron, AI Boushee, Delynn Coldiron, Eric Dahlgren, John DeHaes, Paul Folger, Ron King, Bob Kost, Jon McHugh, Tim Sagen, Rich Shannon, and Bill Switzer. OTHERS PRESENT: John Wappner, Gail Doxtader, Thaine Michie BOARD LIAISONS: Council Liaison -- Alan Apt Staff Liaison -- Don Botteron 1. APPROVAL OF MINUTES: A correction was noted on page 5, next to the last paragraph, third line -- "loose" should be "lose." There were no other changes. A motion was made by Board Member Eighmy to approve the Minutes as amended. Board Member Rutstein seconded the Motion. The Motion passed unanimously and the minutes from the April 19, 1995 meeting were approved as amended. 2. PRELIMINARY 1996 BUDGET INFO: Don provided an overview of the 1996 budget. The total budget for 1996 is $55.6 million dollars. Assumptions used while preparing the budget included: A reduction of 250 new housing units from what was projected in 1995. This number is in conjunction with what is being projected by the Budget Office and Planning Department. -1- - Inflation rate of 4.4%. This number was obtained from the Budget Office and seems a little high, but was used for consistency sake. - No increase in purchase power rates through the year 2000. 1.0% increase in retail rates in 1998. The 1995 budget showed a 1. 1% increase in 1998, backed up by a 1. 1% increase in 1999. The 1999 increase has been eliminated. There is some possibility that the remaining 1% 1998 increase will also be eliminated depending on what happens in the interim. Don shared information on Light and Power budget histories. The information showed that budgeted amounts for 1992 through 1996, were cumulatively $21.8 million dollars less than growth and inflation as allowed by Amendment 1. Don reviewed the Comparative Statement of Income. Net income shows positive through the year 2000, and it is anticipated that this will not change despite not implementing a rate increase until 1998. Next Don reviewed the Comparative Statement of Changes in Financial Position. Items of note included a Council mandate that 1% of certain capital expenses be contributed to promote Art in Public Places (approximately $35,000 per year), and the fact that 1998 will be a critical decision year. This Statement shows that Purchase Power Reserves steadily decline and, in 1998, are approximately 10% of operating income. 10% is our target amount authorized by Council. During the business planning process, any additional revenues that are identified and are available, and any cost savings realized by making operating changes that reduce our cost of power, will flow into the purchase power reserve, offsetting some of the reduction. In response to a question, Don mentioned that any contractual work that we do for others, and our charges to the Water/Wastewater Department for reading meters, are examples of things that are included in the "other income" category on the Comparative Statement of Income. In response to a question on why we would incur a rate increase if net income remains positive, Don mentioned that there are two criteria that must be met based on directives from Council: 1) Maintain positive net income, and 2) Set rates at a level sufficient to create the reserve balances that have been prescribed (1/5 of the capital program for capital reserves, 10-25% of operating revenue for purchase power reserves, and 8% of operating income, less purchase power, for revenue reserves). This criteria can only be changed by Council resolution. Don also shared budget information on the Demand Side Management and Energy Services Programs. There are adequate funds to cover the programs currently underway, and those that will be implemented in 1995. Staff is estimating that 1995 expenditures for Energy Services will be approximately $891,030. Any funds appropriated, but not expensed during the year, will be appropriated the following year. For the years 1996- -2- 2000 there will be a $150,000 influx of new money, each year, coming from estimated reduction in purchase power costs influenced by DSM expenditures. This money is not repayment from CLIP loans. Potential changes that staff might be recommending during Council's final rate setting appropriation process include: Reducing demand level. Eligibility for special contracts is currently based on 10,000 kW of demand during any time of the year. Staff wants to propose lowering this to 5,000 kW of connected load. - Reducing our service charge. Board Members will be provided with more detailed information on these, and possibly other changes, as it becomes available. The current budget package must be submitted to the Budget Office by June 2nd. There will be some level of review by the City Manager's office, and they may or may not ask us to make changes. The budget package will then be submitted to City Council in the August/September timeframe and public meetings will begin. Board Members will have an opportunity to provide feedback and will be asked to endorse/not endorse the Budget during the September/October timeframe. 3. ENERGY SERVICES UPDATE: Rich mentioned that we are ready to start disbursing some of the funds allocated for DSM. He and Jon McHugh provided an overview of the preliminary DSM budgets for 1995. Things highlighted included: - C/I Lighting for New Construction: Non -Residential Energy Code: Although dollar amounts are not significant for this program, any code changes we are able to agree upon and get approved by Council will be as significant as anything else we will do in conjunction with DSM. The City will incur some additional expenses that are not readily apparent in the budget. There is the potential that additional enforcement personnel will be needed to enforce the proposed code changes, especially during the first year that the changes are implemented. Also, it will take additional time to train personnel on the changes, etc. Lighting Design Review: After evaluating standard practice and market conditions, staff decided to focus efforts on design. Staff worked with Walrus Ice Cream on their project. After recommending some changes to their design, the actual cost of the system decreased, their energy usage will decrease, and they have a better lighting system overall. -3- - C/I Lighting for Existing Construction: The City Facilities Green Lights Program: With this program, Light & Power would provide energy audits for other City Departments and make necessary improvement recommendations. Light & Power would then provide up -front funding for the recommended changes, but would require each Department to sign CLIP loan documents for the amount provided for those changes. This program requires the support of Department Heads and Council in order to be successful. There was some discussion on things that have changed since implementation of the various DSM programs. A lot has been learned from the pilot process and staff has modified various programs accordingly. The DSM programs will continue on a pilot basis, but on a larger scale. The programs will be evaluated after a year to assure that they remain cost effective, that energy improvements are being realized, etc. There was also discussion on Platte River's increased DSM activity; this is good. Staff mentioned that Platte River also has a DSM budget and there is nothing that precludes us from making submittals to Platte River on those items that might be appropriate for them to be involved in. Board Members asked that they be kept informed on the effectiveness of current DSM efforts, benchmarks, the numbers of customers we are reaching, new program development, and whether we could or should be doing more. There was also a request for information on how we are doing compared to numbers shown in the IRP. There was some feeling that this information would be helpful in determining necessary funding levels. Support from the Board encouraging Council to promote energy conservation efforts will be imperative, especially for those items that require funding from the General Fund, such as implementation of the energy code. In the near future, staff plans to work with Board to develop a plan for notifying Council of these issues. 4. OVERVIEW OF LIGHT AND POWER'S STRATEGIC PLANNING EFFORTS: Dennis provided an overview of current strategic planning efforts. Light and Power's Strategic Planning Organization includes: - Rich Shannon, Project Executive and Advisor - John Wappner, Project Consultant/Process Facilitator - Dennis Sumner, Project Leader - Paul Folger, Co -Project Leader - Eric Dahlgren, Project Administrator and Coordinator - Ellen Alward, Strategy Team Member - Don Botteron, Strategy Team Member - Al Boushee, Strategy Team Member 13 Ron King, Strategy Team Member Bob Kost, Strategy Team Member Tom Rock, Strategy Team Member Tim Sagen, Strategy Team Member Gwyn Strand, Strategy Team Member The goals of Light and Power's strategic planning efforts are to: - Identify strategic initiatives over a 5-10 year horizon - Establish a dynamic strategic planning process Objectives include to: - Think and plan as team for Light and Power - Define and chart future business objectives - Assess competitive issues and industry trends - Define opportunities for a 5-10 year horizon - ID and prioritize strategic initiatives - Document a strategic plan with defined activities and schedules Major steps in this strategic planning effort include: - Project initiation: Scheduled for completion on April 28, 1995 - Conduct situational. analysis: Scheduled for completion on July 12, 1995 - Compile consolidated preliminary conclusions: Scheduled for July 13, 1995 - Present preliminary conclusions to management and utility personnel: Scheduled for July 31, 1995; Presentation to Electric Board scheduled for August 16, 1995 - Conduct strategic planning workshop sessions: Scheduled for completion on October 9, 1995 - Prepare strategic plan document: Scheduled for October 9, 1995 - Present strategic plan to management and personnel: Scheduled for October 30, 1995; Presentation to Electric Board scheduled for the November or December meeting. - Submit Light and Power strategic plan: Scheduled for November 3, 1995 Scheduled dates are changing on a weekly basis. Staffs objective is to keep on track, but not be obsessed with given dates or timeliness so that adequate time is taken to ensure a quality product. Issues and trends being explored have been split into three groups: - Category Group I -- Competition; customer service; and diversification -- Research on these issues has been completed. - Category Group II -- Environmental concerns, marketing, technology, and energy resources -- Currently researching these issues. -5- - Category Group III -- Organization/Human Resources, finance, legal/regulatory and social/political. Research is scheduled to start on these issues in July, 1995. Immediate action issues include: Exploring brokering of natural gas on a limited basis. This will be done in conjunction with PRPA and might be as simple as determining the kind of arrangements that can be made to get a package deal on gas for City facilities in the four cities. This is an opportunity for Platte River and the Utility to gain some experience in brokering and to get a feel for the natural gas market. It also gives us a potential opportunity to expand services to customers and provide cost savings to the four cities. Exploring the installation of spare conduits during normal construction. Since this is a necessary part of our construction, additional conduit could be placed during construction that could later be utilized by communication, cable, and possibly other companies. Exploring telecommunications. Platte River is considering participating in a study to quantify telecommunication service opportunities. Light and Power is planning to join this effort. Some related services which might be explored range from supplying right of way or trenching services for companies doing telecommunications, to installing a complete system and leasing it to others, to partnering with telecommunications companies and having them create products and services for us that we can offer to our customers. Our ability to offer customers choices is critical if we are to be successful in the future. Staff believes that telecommunications will have to be utilized somewhat just to stay in business. Gaining a better understanding of the telecommunications industry, will enable Light and Power and this Board to assist City Council in drafting future policy on this issue. This would also enable the Utility to take a lead role if, in the future, City Council determines that the City should be an aggressive player in the telecommunications business. Rich mentioned that Columbine Cable, and the Loveland and Longmont cable systems are for sale. TCI, a major telecommunications company, is interested in purchasing these cable systems. Staff intends to talk with TCI to see if partnering makes sense. TCI is very familiar with partnerships; they have entered approximately 600 partnerships in the past 10 years. Other telecommunication companies which staff might contact include Teleport and Metro Fiber Services. Exploring power quality issues: Staff feels there is a need, interest and value in this for our large customers. Staff will be meeting with large use customers to find out more about their needs relating to this. 0 Issues and trends associated with competition, customer service and diversification were briefly discussed. Under the competition category, 35 competitive initiatives were identified through a brainstorming process. These initiatives were categorized by significance based on impact, time frame and urgency. The 17 most urgent issues were examined in greater detail. Some of those issues that were highlighted included: Direct Customer Contacts: Customer retention of our large customers will be a primary focus. One of the major tools that will be used in direct customer contacts is DSM. Privatization Initiatives: Includes changes that would radically alter our way of doing business. One example is the deregulation initiatives being seen throughout the industry that have been set up by PURPA and the Energy Policy Act. Other examples are state wide initiatives that would mandate that any government business that had an equivalent in the private market would have to go out of business. - Environmental concerns (cost impact): This issue was addressed in conjunction with Low Cost Commodity. Staff looked at the impact of what our clean air initiatives and investments are -- Rawhide and our undergrounding program were included in this. Next, John Wappner, Project Consultant, gave an overview of the strategic planning model that is being used in this process. He mentioned that the final product of this process is a documented Strategic Plan that identifies the mission of the Utility, the major objectives that will be accomplished, and will include an action plan for implementation. This Strategic Plan will be updated at least annually to address changing environments, environmental impacts, changing markets, changes in competition, etc. Board discussed the issues that were presented. In response to a question on the Utility's future relationship with Platte River, Dennis mentioned that this business alliance is expected to continue for a minimum of five years. Platte River and the cities are currently competitive, prices are good, Platte River remains in a fairly strong financial position and our expectation is that they will remain in this position by continuing to relieve debt. There was a question on the types of constraints the Utility is facing since it is governed by a City Council. Rich responded that the Strategy Team is working on the basis that there are no constraints. This may cause some problems in the future and, if so, the support of the Electric Board will be an integral part in resolving these problems. So far, City Council has been receptive to this process. The Utility's toughest battles are being fought with other City Departments who want status quo. There was some concern about citizens' reactions to the Utility forcing a value system on them. Staff feels the answer to this is offering customers choices. The Utility will be offering as many options, as all inclusive options, and as quick of options as are possible. -7- There was some discussion on whether or not the City can control who comes into the City limits and offers power. Right now the City Charter prohibits companies from doing this. However, there is a reasonable possibility that something will change in the legal arena that will allow this. Today other companies are contacting our customers for the purpose of establishing a business relationship with them so that the minute the laws change, they have made the necessary contacts and are in a position to take over that customer's account. Staff feels it is imperative that the Board be thoroughly informed and closely involved in this strategic planning process and other aspects of electric industry change. Staff will provide updates on the strategic planning process during regular Board Meetings and will continue to send minutes from the teams that are working on the various issues, and other information pertinent to change, competition, etc. 5. UPDATE ON PLATTE RIVER BUSINESS PLAN: Rich provided an update on the R.W. Beck study that was done. The study shows that Platte River will 'continue to be competitive over the next 10-20 years as long as debt is paid off aggressively; that there is no reason to sell the generating plants since it would be hard to replace power in the long term with a cheaper source; that there might be some merit in Platte River getting larger -- should continue to study this (think this study can by done by Platte River staff for now; will bring in outside help, if needed); and that research should continue on Platte River becoming an Energy Services company (no decision has been made on whether Platte River will do this in-house or hire a consultant). Platte River and the four cities becoming one entity is also still on the table. Eight business objectives resulted from Platte River's strategic planning process. These objectives were adopted by the Platte River Board. Thaine mentioned that these objectives are subject to future change, but Platte River staff wanted to get these objectives adopted so work can begin on these issues. Board Members discussed whether or not it was appropriate to provide feedback on these objectives. Chairperson Smart reminded Board Members that the role of the Board is to monitor what is going on and then advise and make recommendations to Council. The Board could forward suggestions to the Council person who sits on the Platte River Board and ask that they forward these suggestions to that Board. Board Members do have some comments. They will take the next month to review the Platte River objectives in greater detail and will spend adequate time during next month's meeting to develop a recommendation to Council that includes their suggested changes to those objectives. 6. STAFF REPORTS: None -8- 7. INFORMATIONAL REQUESTS: None 8. OTHER BUSINESS: There was some discussion about Platte River's involvement in the Ft. Collins Chamber of Commerce. Platte River has opted not to renew their membership with the Chamber of Commerce for next year. 9. AGENDA: Platte River Business Objectives ADJOURN: The meeting adjourned at 7:30 p.m. Delynii Coldiron, Board Secretary 91