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HomeMy WebLinkAboutElectric Board - Minutes - 08/05/1996Council Liaison: Alan Apt I Staff Liaison: Delynn Coldiron Chairperson: Mark Fidrych Phone: 490-7240 (W) 223-7140 (H) Vice Chair: Jeff Eighmy Phone: 491-5784 223-9487 A regular meeting of the Fort Collins Electric Board was held on Wednesday, August 5, 1996, in the Light and Power Training Room, at 700 Wood Street, Ft. Collins. BOARD MEMBERS PRESENT: Bill Brayden, Jeff Eighmy, Mark Fidrych, Len Loomans and Jim Welch BOARD MEMBERS ABSENT: Barbara Rutstein and Richard Smart STAFF PRESENT: Ellen Alward, AI Boushee, Delynn Coldiron, Suzanne Jarboe -Simpson, Bob Kost, Tom Rock, Tim Sagen, Rich Shannon, Gwyn Strand, Dennis Sumner and Steve VanderMeer. OTHERS PRESENT: Bob Emmert, John Fischbach and Jon McHugh BOARD LIAISONS: Council Liaison -- Alan Apt Staff Liaison -- Delynn Coldiron APPROVE MINUTES: There was discussion on the Minutes from the May 15, 1996 meeting. The last sentence of the first paragraph on Page 4 was changed to read: A majority of Board Members agreed with this plan. The first paragraph on Page 5 was deleted from the Minutes. A Motion was made by Board Member Loomans to approve the Minutes as amended. Board Member Welch seconded the Motion. The Motion passed unanimously and the Minutes from the May 15, 1996 meeting were approved, as amended. A Motion was made by Board Member Eighmy to approve the June 10, 1996 Minutes as submitted. Board Member Loomans seconded the Motion. The Motion passed unanimously and the Minutes from the June 10, 1996 meeting were approved as submitted. A Motion was made by Board Member Loomans to approve the June 25, 1996 Minutes as submitted. Board Member Welch seconded the Motion. The Motion passed unanimously and the Minutes from the June 25, 1996 meeting were approved as submitted. 2. BUDGET: Ellen Alward provided Board Members with an overview of the 1997 Budget. The proposed budget for 1997 is $64,953,618. Purchase Power expenses continue to be a very large part of the budget. This expense has increased based solely on system growth. Platte River has not increased their rates and is not anticipating any rate increases for 1997. Operation and Maintenance (O&M) expenses grew somewhat from 1995 to 1996. A portion of this increase was due to the early retirement that was offered in May. This expense will be recovered over the next few years. It is anticipated that O&M expenses will increase again in 1997 due to the inclusion of the Customer Services Division in Light & Power's budget. To date, this Division has been reflected in the City's General Fund budget. Some of this expense will be recovered from other City utilities and departments. Increases due to growth and inflation are the only adjustments projected for O&M expenses after 1997, through 2001. Capital expenses are projected to increase for 1997 and 1998. The increased capital expenses proposed for 1997 include amounts budgeted for a new Customer Services utility billing system and a new SCADA system. The increased capital expenses proposed for 1998 include amounts budgeted for an anticipated substation addition. The Revenue Reserve is approximately $1 million dollars and represents 8% of the operating budget, less purchase power. The Capital Reserve is 20% of the five year capital plan. There was an increase in the Capital Reserve from 1995 to 1996 due to the increase in the average costs of the five year Capital budget. The Purchase Power Reserve is projected to decline from 1995, where the Purchase Power Reserve was approximately 27% of revenues, and on the high side of what is expected by City Council to be kept in this Reserve. The Purchase Power Reserve will be used to fund the increases in the Capital program. Based on current figures, the Utility should have positive net income through the year 2001. A 2% rate increase is being proposed for 1998, as well as a 1% rate increase in 2001 due to inflation and increased costs to operate the electric system. Staff intends to do everything possible to increase productivity and efficiency, and increase revenue sources, to avoid having to implement either of the proposed rate increases. -2- A history of electric rate adjustments shows that there was a 3% decrease in electric rates in 1990, followed by a 7.4% increase in 1993. No rate adjustments have been made since 1993. Even if the proposed 2% rate increase for 1998 is implemented, electric rates will be equivalent to what they were in 1983. Ellen summarized several 1997 budget highlights: - The Customer Services Division will be included in Light and Power's budget beginning in 1997. - Staff will be working with Platte River to obtain a wind resource and a "green pricing" option will be developed. - The Utility will be pursuing telecommunications pilot projects. - The budget meets all of the financial policies for net income and reserve levels set by City Council. It was noted that the wind project is not included in the budget as a specific dollar amount but is part of the Energy Services work plan. It is anticipated that Platte River will be paying a majority of this up front capital expense, and the costs will be passed on to the Utility through purchase power costs. Ellen briefly mentioned some of the additional issues that are of concern to staff during this budget process, including: Retail competition: - Federal legislation introduced by Schaefer - State legislation -- PUC study Retail rates: The Utility is conducting a cost of service study which may result in some realignment between the rate classes. - Staff will be reviewing the appropriateness of the current rate structure and looking very closely at redefining some areas to help protect us from losing at - risk customers. There was some discussion on the depth that the Utility will be exploring unbundling of services to customers. There was also some discussion on the Utility's current cost of service rate class philosophy. As part of the cost of service study that is underway, staff will look at how costs are allocated and make any necessary adjustments in order to refine rates to reflect actual costs. In response to a question about what drives the current rate structure, staff answered -3- that purchase power and customer load factors are the primary drivers. - Staff may attempt to minimize impacts on customers by ramping in rate changes over next few years. Board Members discussed the information that was presented. There was a question posed regarding the increase in the 1996 revised Energy Services budget. Part of the increase reflects additional activities in Marketing. Another part of the increase reflects expenses that were contracted for in 1995 and not paid until 1996. There was also brief discussion regarding the DSM budget. Board Members were complimentary of the 1996 Residential Rate Comparison Graph. They were interested in obtaining data from other peer cities to get an idea of where Light and Power's rates stand in relation to them. Staff is working on this now and will forward information to the Board once it is obtained. There was some discussion on the economic indicators that show the health of the utility. The fact that the Utility has no debt is one very strong indicator of our financial strength. Other factors that indicate our financial strength include our low rates, continued positive net income over and above the amount contributed to General Fund as PILOTs, and adequate reserve balances. Board Members were appreciative of staffs efforts in putting together and presenting the information related to the 1997 Budget. GOVERNANCE: Chairperson Fidrych clarified the Board's expectations related to this subject. Most Board Members agreed that the focus of discussion should be on the memo that was included in Board Member packets that summarized the duties and authorities for a future separate Electric Board that should appropriately appear in the Charter. City Manager, John Fischbach, was invited to the meeting, and asked to be an active participant in the governance discussion, in an effort to develop a proposal that the Electric Board and the City Manager could both support. Board Members discussed the duties and authorities summarized in the memo: Board Members had no changes to item 1. Item 2. Board constitution: There was discussion on the number of Board Members that should be appointed by City Council. There was some feeling that the number of Board Members should be increased from three to five to assure the preservation of Community values. It was mentioned that having the Mayor, who is an elected 13 official, and the City Manager, who is hired and reports directly to the City Council, as members on the board helps assure responsiveness to Community values. Adding two more members could potentially dilute the impact of their vote. It was also mentioned that smaller groups are typically more effective and productive in a shorter time frame than are large groups. Board Members discussed whether or not to add language that would allow the Mayor to appoint a designee. Most Board Members agreed that it is important for the Mayor to be on the board, since the Mayor is the only City Council member that is elected at large. Board Member Eighmy made a motion to amend the number of board members appointed by Council from three to five. Board Member Welch seconded the Motion. The Motion passed unanimously. With this change, the paragraph would read: 2. The Board shall consist of the Mayor, the City Manager, plus five members appointed by the City Council. Item 3. Qualifications: It was suggested that the words "and having experience and knowledge relevant to the electric business" be eliminated. There was some feeling that having members outside of the electric industry is important and valuable in that it brings some diversity of perspective to pertinent issues and helps maintain responsiveness to local Community values. It was also suggested that language be added that would prohibit employees of Platte River Power from being appointed as members on the Board. Board Members unanimously agreed with these changes. With the suggested changes, this paragraph would read: 3. Qualifications: Same as City Council. During a term of appointment, no member of the Board appointed by the City Council shall be an employee of the City, an employee of Platte River Power Authority, or hold any other elected, public office except as provided in number 2 above. Board Members had no changes to items 4 and 5. Item 6. The Electric Board shall have the authority to hire and fire the Utility General Manager. There was some discussion on whether or not this should be a duty of the City Council. Doing this could set up a potential conflict between the Council and the Electric Board. There was some feeling that this should remain the duty of -5- the City Manager. However, if the Electric Board is going to be responsible for the activities of the Utility, it makes sense that they be responsible for hiring and firing the general manager. Since the City Manager will be a member of the Electric Board, he/she would still have influence over this decision. Board Members were in agreement with leaving this as is. Item 7. The Electric Board shall have the authority to adopt administrative policies... There was some concern that allowing the Electric Board to do this could result in duplicative systems within the City. It was mentioned that it is possible that the Utility could be allowed to do some things differently than other City departments within the current City organizational structure. Staff echoed the concern that it is unwise to set up a number of duplicative supportive units. However, due to the changing environment, the Utility may be forced to operate by a different set of guidelines in order to stay competitive. It is anticipated that the Utility would handle this similar to Poudre Fire Authority, wherein the City would continue to administer these policies and procedures, but under a set of guidelines different from those of the rest of the City. Board Members discussed this issue further and directed staff to work with the City Manager on compromise language that both could support. Board Members had no changes to items 8 through 14. Item 15. The Electric Board can be dissolved by an affirmative vote of six (6) members of the City Council. Board Members discussed this issue. Staff will check to see if there are any other ordinances that require a super majority vote of Council. Most Board Members agreed that items A, B, C and D could be addressed at a later date by Ordinance. Board Members agreed to support the proposed duties and authorities as amended. Staff will work with the City Manager's office to make some necessary modifications. This information will be forwarded to the City Attorney and changed into appropriate charter language. Once this has been done, this language will be forwarded to the Charter Review Committee. Board Members were in agreement with this plan. 4. ENERGY SERVICES -- GREEN RESOURCE: Dennis Sumner provided Board Members with an overview of a green resource pilot project. The proposal is to contract through Platte River Power for a new wind resource to be built. 350 subscriptions are required prior to building each wind turbine. The project has a 3 turbine maximum. Customers who subscribe will be asked to make a 3 year "soft" commitment. The price is anticipated to be an energy adder of 30% to 50% (for residential customers, this would equate to an additional $10 - $17 per month.) Work to develop a marketing plan is anticipated to be underway within the next week or so. Staff hopes to have a vehicle in place to allow customers to sign up for the project in the September/October timeframe. If there are enough interested subscribers, a commitment to the project will be made in November, and production of the first wind turbine should be complete by June, 1998. Dennis reviewed some of the risks of this project, including that this project would require a 20 year contract from the City of Fort Collins for the purchase of wind power supply; that customers may become frustrated if there are not enough subscribers to build the next turbine due to the incremental commitments that are required; and that there may be operational problems of the wind turbines that will have to be worked through. Dennis mentioned that by focusing on this project, there is the potential that we will miss other green resource opportunities. However, staff believes that this is a viable option and that now is the time to act on it. Also, current retail wheeling legislation is calling for a green resource as part of the base mix. This gives us the opportunity to comply with this. Board Members discussed the proposal. Board Member Eighmy made a motion that staff move forward with the project. Board Member Loomans seconded the motion. The motion passed unanimously. There were some concerns about the pricing and marketing strategies. Board Member Welch and Board Member Loomans volunteered to work with staff to address these issues. 5. STAFF REPORTS: None. 6. OTHER BUSINESS: None. AGENDA: Election of Officers ESCO/Light & Power Roles Front Range Library Design Example Budget Rates Wind -7- FUTURE ISSUES: Cost of Service Study Comparative data from other cities Distributed generation Adjournment: The meeting adjourned at 8:35 p.m. DelymOColdiron, Board Secretary in