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HomeMy WebLinkAboutElectric Board - Minutes - 08/19/1998A regular meeting of the Fort Collins Electric Board was held at 5 p.m. on Wednesday, August 19, 1998 in the Utilities Training Room at 700 Wood Street, Fort Collins, Colorado, BOARD PRESENT: Jeff Eighmy, Mark Fidrych, Len Loomans, Barbara Rutstein and Richard Smart BOARD ABSENT: Bill Brayden and Jim Welch STAFF PRESENT: Ellen Alward, Lori Clements -Grote, Eric Dahlgren, Lisa Gardner, Bob Kost, Tom Rock, Tim Sagen, Mike Smith, Dennis Sumner, Shannon Turner, Steve VanderMeer, Kevin Westhuis and Wendy Williams GUESTS: Thaine Michie and John Bleem of Platte River Power Authority 1. APPROVAL OF MINUTES: Changes to the June 24, 1998 minutes were proposed. Chairperson Eighmy made a motion to approve the minutes as amended. Board Member Smart seconded the motion. The motion passed unanimously, and the minutes from the June 24, 1998 meeting were approved. 2. ORGANIC CONTRACT: Thaine Michie discussed the organic contract with Board Members. The organic contract was approved by all four cities on July 1. The changes extended the term of the contract from 2020 to 2040. PRPA will be discussing power supply needs with WAPA that extend into the year 2040. PRPA was formed twenty-five to thirty years ago by the four city councils. At that time, PRPA was responsible for wholesale power supply. The new organic contract enables PRPA to enter into a variety of businesses other than wholesale power supply. The new contract allows PRPA to deal on the behalf of the cities, allowing them broad powers to handle items for the cities. One city council can decide what is to be done and put together a contract, two city charters must legally allow the action, and the PRPA Board must unanimously approve the project. Because of the current power supply contract PRPA cannot serve any retail customer unless a city asks PRPA to sell to retail customers and the PRPA Board unanimously approves. If the city elects to not serve a retail customer, PRPA could legally serve that load. PRPA has broad powers due to the change of the organic contract, but they cannot exercise these powers unless the PRPA Board unanimously approves it, two city charters legally allow it and one city council approves it. By changing the organic contract the cities no longer have to form an agency to allow PRPA to engage in businesses other than wholesale power supply. Board Members requested clarification regarding the organic contract. There was some discussion of the wording (on page 20 section 7.0). Thaine Michie verified that all PRPA bonds are revenue bonds and are the responsibility of PRPA. There was some discussion of the weighted vote stipulation. PRPA is looking at possibly changing the weighted vote in the future. Thaine explained PRPA needs to be flexible when it comes to rates because they serve four different cities with four different philosophies. The change gives PRPA flexibility to negotiate rates. PRPA would like to negotiate these rates jointly with the City of Fort Collins. PRPA would like the cities to have the flexibility to pass on a negotiated PRPA rate directly to the customer. There was some discussion regarding how the extension of the organic contract may affect the City of Fort Collins. Thaine related that in order for PRPA to get involved in any business other than wholesale power supply it requires a unanimous vote of the PRPA Board. No city can get out of the contract while PRPA has any remaining debt. Termination of the contract would require a unanimous vote by all four cities and payment of all debt. There was some question as to how wise it is for the City of Fort Collins to lock itself into a contract that extends to the year 2040. Thaine explained that the City of Fort Collins in conjunction with the other three cities own PRPA and the Rawhide Power Plant. When deregulation occurs, PRPA does expect to lose some load. PRPA does understand that if they are not the low cost power supplier, they will not survive deregulation. The large industrial customers are looking at other power suppliers. The City of Fort Collins needs to make sure their rates are lower than the competitors in order to be successful in a deregulated environment. PRPA is currently reducing costs and debt, and have had a flat or declining budget for five years. PRPA costs today are still 3.4 cents. The corporate goal is to have PRPA costs in the lowest quartile in the Colorado, Wyoming, Utah and New Mexico area. If corporations pick national suppliers, PRPA will lose load even if their rates are lower. There was some discussion regarding the Sweetzer study. This study says Platte River has market power in this area since there are not a lot of incoming transmission lines. Public Service da has market power because they own 80 percent of the generation. The power system in the western grid was not built to serve the nation. Each system was built by individual power suppliers. If Public Service Company needs generation, they must buy it from PRPA because they are the only ones who can supply additional generation in this area. There was discussion regarding how deregulation could affect the City of Fort Collins. Thaine explained in order for an outside power supplier to serve our customers there must be a change in state law. Since Fort Collins is a home rule city we may not be subject to all of the state laws. Currently there is a debate whether or not the state can lawfully make the home rule cities open their borders to competition. There was a question as to whether changing the organic contract allowing PRPA to unilaterally sell retail to customers has made Fort Collins abdicate on their home rule laws and service territory. There was concern that if we allow one wholesaler to come in and sell retail it may open up our service territory to competitors. Thaine explained when deregulation occurs it will be difficult for other power suppliers to get their power to the area because of transmission difficulties. 3. WIND POWER PROGRAM: John Bleem presented Board Members with a summary of the wind project. PRPA originally had an outputs contract also known as a purchase power contract for the output of the two Vestas turbines. Since NAE did not fulfill the contract, the City of Fort Collins owns the two wind turbines. The wind turbines have a monitor of how much energy each unit produces. The estimate of energy production given by NAE has changed slightly, given the losses of power occurring in the transmission system from the generator to the customer. There are various meters located along the transmission lines that measure the power losses. There is a transformer that has some losses at the unit. There are five miles of transmission line that come to the Medicine Bow Substation, and there are some losses at the substation. The power is then moved through the WAPA system, delivered to PRPA, Fort Collins and ultimately to the Fort Collins customers. Between the generator and the Medicine Bow Substation there is a 2 percent loss. WAPA issued PRPA a contract for a 6.8 percent loss from going through their system. PRPA system losses are 1.2 percent and there is a 2.3 percent loss for Fort Collins. Total losses for the transmission for wind power from the turbines is 12.3 percent. This loss projection is an average of real numbers over a period of time. Total losses were originally expected to be 6 percent. There was some discussion regarding the average wind speeds at the Medicine Bow site. John presented a slide which showed the average wind speed. John explained during the summer months it is common to have very low output. Energy output is cubed as a function of wind speed. At the generator for a given wind Vestas guarantees a given output of energy. Performance is figured by monitoring the energy output and the wind speed. If the turbines do not produce according to specifications Vestas will reimburse us for lack of performance. The wind speed and power output are both monitored, and PRPA is planning to upgrade the wind monitoring system. The turbines have been performing within 10 percent of where they should be. The turbines first 500 hours are not included in the estimates of performance, and we have just recently reached the 500 hours. After the initial 500 hours the five year warranty goes into effect. -3- John presented Board Memb, with a project cost summary. The cos .mmary includes financing, warranty operations and maintenance, property tax, land lease, insurance and utilities. There will need to be a security system in place. The legal and management fees will be covered by PRPA. Fort Collins will pay all of the other costs for the two units. There will be possible credits from The Renewable Energy Production Incentive (KEPI) that are annually appropriated. If the City of Fort Collins is awarded these REPI credits on a yearly basis, the average yearly credit is $57,000. There was some question as to whether Fort Collins is better off because we own the turbines. John stated that if the units run without failure and we get the REPI credits every year, Fort Collins is better off. Fort Collins gets all the output from the two units because we own them. The expenses have been estimated at $36,000 per year. We may receive REPI credits annually at the estimated $57,000 for 10 years. PRPA has completed all the paperwork for the City to be eligible for REPI credits. Since we own the turbines, the wind power is scheduled into the City of Fort Collins but is subtracted off of the monthly bill. Board Members asked what happens with coincident load. John explained it is a non -firm purchase from WAPA. There is no capacity as WAPA is putting the coincident generation into a deviation account, they will give this back to us as energy. There was some discussing regarding carbon credits and assets. Any future carbon credits will be passed on to the City. The assets at the site, including the roads, infrastructure, control building, substation and Nortank Turbine were purchased by PRPA for $200,000. The Nortank turbine is producing 10 percent of one of the Vestas units. The City has requested all the energy from the Nortank turbine. The City will receive the output from this unit for the next 20 years. The maintenance fees for the Nortank Turbine are still being discussed. Thaine Michie would like to move the turbine to Rawhide. The site in Medicine Bow has capability for more turbines. The project could expand in terms of units, but the challenge is transmission. Transmission is limited at this time and will be a concern if more turbines are erected at this site in the future. There are other entities such as Aspen, Tri-State and Colorado Springs interested in a small project for their wind programs. There is room at the site to add two or three turbines. PRPA could build more turbines and sell to others with Board approval. Chairperson Eighmy stated that he would like PRPA to be aggressive in involving the other cities in wind power projects. 4. ELECTION OF OFFICERS: Board Member Eighmy nominated Jim Welch as Vice Chairperson. Board Member Rutstein nominated Len Loomans for the position of Chairperson. Board Member Fidrych seconded the nomination. The motion passed unanimously, and the election of officers was approved. -4- 5. STAFF REPORTS: SURGESAFE!® Lori Clements -Grote presented the Board with a report on the SurgeSafe!® program. There have been over 700 inquiries from customers about the SurgeSafe!® program since its inception. To date the utility bill inserts have generated 638 inquiries. We have received 100 phone calls at the service center, and this number does not include the calls to the Utility Billing Office. There have also been six inquiries via e-mail. The Utility plans to follow up with these customers. The Utility has sold 27 meter based units, 14 six -outlet surge protectors, eight cable TV modules and four phone modem modules. We conducted a brief survey in March/April and found customers might be interested in a smaller unit with two outlets versus the six outlet model. We are investigating other products to fit these customer needs. A number of utilities across the country have inquired about our program. We have had inquiries from Fort Pierce Utilities, Loveland, Longmont, Maui Power and Light, Omaha Public Power District and APPA's Home Town Connections. Home Town Connections is looking at a surge protection service they could offer to all the public power utilities. If Home Town Connections would act as an aggregator for all the public power utilities, they may be able to purchase equipment at a better price. There was some discussion regarding pricing of the surge protection units. Fort Collins provides the meter based units on a lease basis. This is typical for utilities. The in-house equipment is provided on a purchase basis to customers subscribing to the program. Much of what the customer is paying for is the warranty. We are looking at a five year payback for our investment in the program. We will continue to monitor customer input regarding price. There was some discussion regarding formal customer complaints of power surges and exposure to lightening. Prior to the SurgeSafe!® program we received approximately nine power surge claims annually. This does not include informal calls to the electric meter section. On the Utility's system we have switching surges and some lightning exposure. If lightening does hit the house, the equipment will not necessarily help. If the lightening does not hit the house directly, the equipment should work as specified by the manufacturer and the warranty. Surge damage problems are typically cumulative. The stress of power surges can damage equipment over time. 16f:[.1901efA.11ul Steve VanderMeer provided Board Members with an update on the gas program. In the last year several cities in the metro Denver area have become interested in natural gas. Staff has been trying to determine whether there is a role for municipalities in the deregulated gas environment. The Utility is working in conjunction with Arvada, Commerce City and Lakewood and has -5- formed a consortium and hired a consultant. This consortium has attracted the attention of Colorado Municipal League. Legislation would be required before municipalities could participate in gas aggregation. There is a business plan that is exploring alternatives to gas aggregation. The Utility hopes to present the information to City Council. Steve VanderMeer and Kevin Westhuis offered to come back to give the Board an update at a future meeting. There was discussion regarding the various roles the Utility could play in the natural gas business. There has been legislation proposed at the state level, and there may be choices for small commercial and residential customers in the future. We want to find out if there is a role for municipalities. We want to look out for the needs of our citizens in our community. Staff anticipates completing the project in the fall of this year, but it may take years to implement. Board Members requested an update in the fall. STRATEGIC PLAN Mike Smith presented Board Members with an update on the Request For Proposal. The RFP is out, and the Utility has received five proposals. Board Member Smart is reviewing the proposals. Candidates for interviews will be selected by the end by August 28. Interviews will take place on September 25. The Utility received proposals from Black and Veach, Warner Group, Ernst Young and Woodward Clyde. A Water Board member has also reviewed the proposals. Both Boards will be active in working with the consultant. 6. OTHER BUSINESS: Board Member Eighmy has a conflict with the next three meetings and will not be able to attended the meetings until 7 p.m. Board Members agreed to change the September 16 meeting to 7 - 9 p.m. Changes to October and November meetings will be discussed and set based on Board Member schedules. There was some discussion of the Agenda Item Summary passed out at the meeting. Council approved a resolution for an intergovernmental agreement between the City of Fort Collins and Longmont to have PRPA implement the new CIS system. Once Longmont's City Council approves the project, PRPA will begin to contract with the software vendors and purchase hardware. Board Members reviewed the memorandum from the Natural Resources Department. Natural Resources has invited an Electric Board Member to participate on the Cities for Climate Protection Citizen Advisory Committee. The Citizen Advisory Committee will meet monthly between August and December. Board Member Loomans volunteered to participate on the Advisory Committee. Board Member Eighmy would also like to participate. A question was asked about a telephone survey of wind power customers. Steve VanderMeer explained that grant money the Utility received from OEC is being used to fund the market research. The Utility has lost five wind power customers after they received their first utility bill. Most of the wind power turnover is due to customers moving out of town. 0 Board Member Smart informed the Board that he and Board Member Loomans had been invited by John Allum of PRPA to attend a meeting with Berthoud City Council regarding their attempts to form a municipal electric utility. Board Member Smart discussed with Berthoud City Council how our Electric Board was formed and the function and activities of the Board. The meetings were heavily attended by Public Service Company employees and by many municipal utility board members. Public Service Company attended the meeting to try to persuade the City of Berthoud not to form a municipal electric utility. The citizens of Berthoud formed a citizens group. The council got 300 votes, while Public Service Company got 600 votes. Berthoud plans on forming a utility board to negotiate the new contract with Public Service Company. There was some discussion regarding the Utility advertisements in the Coloradoan. The advertisements focused on Fort Collins Utility electric rates. We will put future advertisements in the paper that compare Utility rates with Public Service Company's rates. Adjourned: 7:15 p.m. Shannon L. Turner, Board Liaison -7-