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HomeMy WebLinkAboutElectric Board - Minutes - 08/20/19970 • A regular meeting of the Fort Collins Electric Board was held on Wednesday, August 20, 1997, in the Light and Power Training Room, at 700 Wood Street, Ft. Collins. BOARD MEMBERS PRESENT: Jeff Eighmy, Mark Fidrych, Len Loomans, Barbara Rutstein, Richard Smart, and Jim Welch BOARD MEMBERS ABSENT: Bill Brayden STAFF PRESENT: Ellen Alward, Delynn Coldiron, Eric Dahlgren, John Duval, Suzanne Jarboe -Simpson, Bob Kost, Tim Sagen, Rich Shannon, Gwyn Strand, and Kevin Westhuis OTHERS PRESENT: John Bleem and Lar Voss AGENDA: APPROVE MINUTES A clarification was suggested in the first paragraph of page 3, second sentence. The word "financial" should be inserted before "ratios". Board Member Rutstein made a Motion to approve the Minutes as amended. Board Member Welch seconded the Motion. The Motion passed unanimously, and the Minutes from the June 11, 1997 Electric Board meeting were approved as amended. 2. ELECTION OF OFFICERS: Chairperson Fidrych opened the floor for nominations for Chair. A Motion was made by Board Member Rutstein to nominate Jeff Eighmy for Chair. Chairperson Fidrych seconded the Motion. Board Member Loomans made a Motion to nominate Jim Welch for Chair. Board Member Welch declined the nomination. There were no other nominations. The Motion to elect Board Member Eighmy as Chair passed unanimously. Newly elected Chairperson Jeff Eighmy opened nominations for Vice Chair. Board Member Loomans made a Motion to nominate Jim Welch for Vice Chair. Board Member Fidrych seconded the Motion. There were no other nominations. The Motion passed unanimously and Board Member Welch was elected for a second term as Vice Chair. 3. NATURAL GAS AGGREGATION: Rich Shannon introduced Kevin Westhuis and Lar Voss. Kevin is part of the Utility's Marketing Division and is doing a lot of the research on natural gas. Mr. Voss is a Ft. Collins area resident who does consulting work in the natural gas arena. Staff has been meeting with him over the past few months to gain understanding on natural gas issues, related terminology, rate structures, and PUC issues. Rich provided Board Members with some background information on the natural gas study. He discussed past and present arrangements that the City has made with Public Service Company -- franchise agreement and occupation tax. He also discussed lost opportunities to generate revenue by the City over the past few years due, in part, to impacts created by deregulation of the gas industry, limitations imposed by the Bruce Amendment, and the inability to track incoming transport gas in order to collect a fee. Transport gas is gas provided to our Community from suppliers other than Public Service Company. Staff estimates that the City's loss is somewhere between $250,000 to $350,000 annually. Rich mentioned that Light and Power contributes approximately $4 million dollars to the City's general fund through PILOTS and the costs associated with providing street lighting. This $4 million is a part of the $24 million that is considered as discretionary funds of the City. There is some concern that as electric retail wheeling becomes a reality, there is a chance that the City could lose more than $1 million in annual revenue. This scenario was an impetus for staffs exploration of natural gas opportunities. Rich described the "City Gate" concept, which is a natural gas project that staff is currently working on. Under this concept, the City would aggressively bid for the gas for the Community. Individual customers could opt out if they were not interested in participating. There would be several locations (City gates) in the City where the incoming natural gas would be physically metered and quantified. The aggregated gas may be sold to Public Service Company or directly to customers by the City. A portion of the price reduction realized by this gas aggregation would be passed through to customers. A small part of the reduction that is realized would be kept by the City as revenue for its role in this process. -2- Public Service could continue to be the local distributing company for the natural gas that was obtained by the City. Although there are a number of scenarios which could accomplish the Utility's goals relating to this project, having Public Service as a willing participant is most beneficial. Public Service would continue to provide the meters, billing system, etc., and the Utility would not place itself in an adversarial role with them. There was discussion on the issues that might be preventing Public Service from currently going out and getting good pricing on gas, on an aggregate basis, for retail customers. Staff mentioned that Public Service is mandated, by the PUC, to purchase gas at market rates. Public Service then passes these costs directly through to its customers. Public Service generates revenues off of its distribution system, not on the gas commodity itself, so there is no real incentive for purchasing gas at a lower price. Also, because Public Service is under the control of the PUC, they are not able to use creative methods to purchase gas (i.e., hedge gas prices, buy options, etc.) because of the risk. Mr. Voss added that as a part of deregulation, there is a chance that Public Service would be precluded from being both the distributor and the supplier of a commodity. The problem of collecting fees or some type of tax from suppliers who sell gas commodities directly to customers through Public Service Company's distribution system was discussed. City is working with Public Service Company through the Colorado Municipal League to address this issue and explore ways of recovering these fees. There was brief discussion on the meter fee that is charged by Public Service for any customer who is currently transporting alternate suppliers' gas through PSCO's lines (the cost is $180/month and precludes most small to mid -sized customers from obtaining gas from an alternate supplier); on Platte River's involvement in this project; on the idea that customers may feel that the Utility should pass through the entire savings realized by aggregating gas purchases; on adjusting the occupation tax rate to generate additional revenues, and on whether it would be desirable to have a franchise with Public Service Company. Staff will be focusing efforts on three areas related to this issue: 1) informing the Community about the loss of revenue to the City over the past few years; 2) exploring opportunities that are available in the natural gas arena; and 3) actively participating in natural gas activities to gain a better understanding of what will happen to the electric industry once deregulation occurs. Staff feels that the City Gate project will add value to the Ft. Collins Community and provide staff with an invaluable learning experience in a deregulated arena. It is anticipated that this project will help Ft. Collins residents save money on their gas bills, help build Light and Power's profile within the Community, and provide an additional revenue stream into the City. The issues surrounding franchise fees and occupation taxes will be addressed in addition to this project. Staff will keep Board Members apprised of any developments on this issue. -3- 4_ CITY COUNCIL 1997-1999 POLICY AGENDA: Rich reviewed the information that was provided in Board Member packets and asked for feedback. It was suggested that staying abreast of air quality issues associated with electric generation be added to Theme 1: Planning for land use, the environment and transportation; sustaining low rates be added under Theme 3: Economic vitality and sustainability; and that gas aggregation be added under Theme 4: Intergovernmental cooperation; There was some confusion as to whether question 2 was asking for a process -based answer or a context -based answer. Staff will obtain clarification from the City Manager's office and make changes, if necessary. Staff will finalize memo in accordance with Board Members' suggestions. Once Chairperson Eighmy's signature has been obtained, the memo will be forwarded to the Mayor, City Council Members and the City Manager. 5. STAFF REPORTS: Telecommunications: Rich and Eric provided an overview of staffs efforts on telecommunications. A. Preliminary system design. Staff is doing some research to determine the wants and needs of prospective customers. Decisions on system design, appropriate components, etc., will be made based on the findings of the research. B. Selection of an equipment supplier/vendor. Development of a comfortable, long- term business relationship is important here since equipment is very proprietary from one vendor to the next. Staff is exploring the options that are available. Staffs goal is to build the most advanced system possible and avoid installing technology that would be limiting in the future. C. Selection of a telecom system operator. Staff hopes to form a long-term business alliance with a company integrally involved in the telecom business. Staff is exploring available options. D. Plan pilot testing. This phase would begin once the above steps have been completed. Staff is currently targeting a pilot test group including some public, education and governmental entities. Staff has communicated with some of the potential candidates, with very favorable responses. E. Plan to provide telecommunications services to business customers. This would begin upon the successful completion of the above pilot testing. -4- Eric reviewed a list of potential vendors, services providers/users, and the work that is being done by staffin conjunction with those listed. He also reviewed an updated draft of the proposed telcom system design. Staff has been meeting with numerous telecom equipment providers, system operators, etc. Their feedback to staff has been that the Utility is on the right track, there is a role for the Utility to play in telecommunications, staff has developed a good strategy, and there is interest on their part for partnership arrangements. Staff is also finding that some of the Utility's traditional tools that have been used to enter into business arrangements in the past, may not work very well in this environment. One example, is the logistics of the public bidding process. In a competitive environment, many companies will not submit their corporate strategy, etc., into a public process. Staff is working diligently on addressing these types of issues. Board Members discussed the information that was presented. They were supportive of staffs efforts and there was general feeling that a lot of progress had been made in a short amount of time. Staff will continue to provide Board Members with updates as new information becomes available. 6. OTHER BUSINESS: A. LIGHT AND POWER'S ROLE IN BUILDING A GREAT COMMUNITY: Rich mentioned that he is finding the need to talk more about the fact that one of Light and Power's historic roles has been to make money for the City. Rich shared a short presentation on this topic and asked Board Members to critique it. Rich stated that the Utility's goal is to help build a great community. Light & Power's role in this is: to provide reliable/responsive electric service; to keep rates low (Light & Power currently saves the Community $6 million dollars a year compared to what it would cost if Public Service Company were the local electric provider); to provide a dividend to the City's General Fund. (Light & Power currently contributes $3.7 million annually to the City's General Fund). On a historic note, Rich mentioned that Light and Power was purchased by the City to assure that electricity was available throughout into the Community, and to make money for the City. The Utility has met these original goals, and contributions to the General Fund have continually increased. -5- Rich gave several examples of what the current $3.7 million annual contribution to the General Fund might buy: - maintenance of 1,230 acres of active park, or - 50 police patrol officers, or 100% of library, museum and forestry budgets, or - Four new 10-acre neighborhood parks every year, or - 74 miles of repaved local streets Although another electric company would be making some type of contribution to the City if they were the local provider, it is estimated that Light and Power pays twice what a normal franchise fee would be, in addition to maintaining low rates for our customers. Good service, low rates and providing a dividend to the Community need to continue for Light and Power to help build a great Community. In order to assure this continues despite the challenges associated with deregulation, Light and Power must explore ways to: - be successful in the competitive arena so that we can retain customers; - identify a role in natural gas where the Utility can add value to the Community and make money for the City; - identify a role in telecommunications where the Utility can add value to the Community and make money for the City; - become a "marketing channel" for household services. Rich will be sharing this information with the Executive Lead team later on in the week. He anticipates sharing it with others in the future. Board Members shared their feedback and offered some suggested changes. There was general agreement that the information was good and described Light and Power's role in a positive way. LIONEL I� Board Member Rutstein asked if anyone else had received the Colorado Health Effects Communicator from the Department of Energy regarding EMF. She also wanted to know if the issue of ENE had settled somewhat. Staff replied that Congress is attempting to get additional funding for more studies. Board Member Rutstein mentioned that the Communicator included a web site address and an 800 number that can be accessed to obtain to obtain up to date information. She will provide this information to staff. C. APPA MEETING IN TORONTO: Board Member Rutstein provided a brief overview from the APPA meeting. She stated that meeting participants were talking about the same issues the Utility is dealing with: gas aggregation, telecommunications, fiberoptics, telephone, and billing. She also mentioned that one of the speakers stated that utilities are not in the utility business 29 anymore; they are in the information business. The utilities that will be most successful are the ones that will have the most information available to their customers. Board Member Rutstein mentioned that representatives from Enron and Utilicorp were campaigning for partnerships with local utilities. Because of the good rapport that local utilities have already developed with their customers, they are finding that customers are not readily switching to new service providers. Enron and Utilicorp want new customers and are willing to enter into partnerships to get them. Board Member Rutstein emphasized that the Utility's customer base is a big asset. Board Member Rutstein mentioned that petro companies have quit doing a lot of marketing because they are finding that people are going to the vendor who is providing the cheapest resource, and are not following brands, etc. Board Member Rutstein noted that she did not hear any industry "hold outs" who felt that things were going to stay as they have been in the industry for the last fifty years. Everyone has seemed to embrace the fact that change is inevitable. D. WIND POWER: Some Board Members were interested in taking a tour to the Utility's wind power site. There was also some interest in touring the coal mine that is used for Platte River's Rawhide Plant. Staff may be able to assist in scheduling a group tour if Board Members are interested, or Board Member are welcome to call the sites directly and arrange an individual tour at a time that is convenient. SEPTEMBER AGENDA ITEMS: Light & Power Energy Services Update Platte River Solutions Update PRPA energy services update Motion related to 1998-1999 Budget FUTURE AGENDA: PRPA IRP Plan PRPA Distributed Generation League of Women Voters Cross Current Program Adjourned: 7:35 p.m. Delyng Coldiron, Board Liaison -7-