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HomeMy WebLinkAboutElectric Board - Minutes - 12/17/1997A regular meeting of the Fort Collins Electric Board was held on 1 "ednesday, December 17, 1997, in the Light and Power Training Room, at 700 Wood Street, Ft. Collins. BOARD PRESENT: Bill Brayden, Jeff Eighmy, Len Loomans, Barbara Rutstein, Richard Smart and Jim Welch BOARD ABSENT: Mark Fidrych STAFF PRESENT: Ellen Alward, Delynn Coldiron, Lori Clements -Grote, Eric Dahlgren, Suzanne Jarboe -Simpson, Bob Kost, Tom Rock, Tim Sagen, Rich Shannon, Tim Sagen, Dennis Sumner and Steve VanderMeer, OTHERS PRESENT: John Bleem AGENDA: 1, APPROVE MINUTES Board Member Loomans made a motion to approve the Minutes. Board Member Welch seconded the Motion. The Motion passed unanimously, and the Minutes from the November 19, 1997 meeting were approved. 2. SURGESAFE!® PROGRAM: Lori Clements -Grote gave a presentation to Board Members on the Utility's new SurgeSafe! ® program. SurgeSafe! ® was created primarily because customers have asked Utility staff, on several occasions, for this type of service. In addition, this program fits in with the Utility's Value Proposition -- low cost, reliable service and responsiveness to customers. It also fits in well with the current Marketing Strategy since this program provides a way to generate revenue for the Utility, and contributes to customer loyalty and retention. The program is currently geared toward residential and small commercial customers who have single phase service of less than 200 amps. Eventually, staff hopes to expand this to include larger customers. Lori reviewed the equipment that is used in conjunction with this program. This equipment is intended to protect a participating customer's home, as well as large appliances inside the customer's home, from outside voltage surges from lightning, construction mishaps, etc. Equipment is also available to protect the customer's smaller electronic equipment, i.e., computers, VCR's, stereos, etc., from internal voltage surges Additionally, the equipment can be expanded to include modules to protect modem and cable TV lines. Lastly, Lori reviewed the charges associated with the program, together with warranty information. Staff responded to Board Member questions. Copies of the program brochure and warranty information were provided. WIND PROJECT UPDATE: Rich Shannon provided an update on the wind project. Delays in turbine construction continue due to contractual difficulties between NAE and Micon. Micon requested incremental payments during the construction phase of the project, but NAE does not have the necessary construction financing to make those payments. Staff has been working with Platte River Power personnel to identify some other options. Staff is recommending continuing with NAE, but substituting Vestas for Micon as the manufacturer/construction manager/operator of the wind turbines. Vestas has more flexible construction financing arrangements than Micon, and has equally proven technology that is more efficient.. The Vestas turbines are 600 kW, with a yearly output of 1.8 million (kWh), and have a 5 year warranty. Compared to the Micon turbines, there are some tradeoffs, but staff is of the opinion that the switch is beneficial. The estimated date for commercial operation if we change to Vestas is May 1, 1998. The initial price for retail wind energy would remain at a 2 cent per kWh adder. Under this option, Platte River would be required to issue a guarantee of approximately $1.5 million dollars during the construction period of the project (approximately six months) to assure payment to the turbine supplier should NAE be unable to obtain permanent financing or go bankrupt. In exchange, NAE will put up collateral in the form of wind rights, land, the substation, wind turbines, etc., with an estimated value of more than that of the Platte River guarantee. These assets would be placed in escrow. Platte River is requiring that Light and Power provide the same guarantee to them (Platte River). -2- If NAE should default, and the approximately $1.5 million dollars must be paid to the turbine supplier, Platte River would receive the collateral from NAE and then step in as the owner of the site and of the project. Light and Power would then be obligated to repay Platte River for the capital outlay, likely over a twenty year period. It is expected that NAE can obtain permanent financing, and there will be no need for Platte River to make the payment to Vestas. However, if the guarantee is exercised, Platte River would actually become the owner of the wind project. Commercial operation of the turbines could be provided by Vestas. Light and Power would either repay Platte River the amount they paid in cash, or enter into an agreement with Platte River to pay back this amount over a number of years. If Platte River becomes the owner of the project, it would be entitled to production incentive credits which are payments from the federal government to public agencies that do renewable energy. However, these credits rely on an annual appropriation. The federal government was not able to meet all of these obligations this year. If Platte River could not obtain these credits, it is anticipated that the cost for wind energy would increase by approximately 1 cent per kWh. If the risk of having Platte River own the project is unacceptable, a couple of other possibilities for wind projects include participation in Public Service Company's wind project, or in the Pacificorp wind project in Wyoming. Both of these options would include a sizable increase in the cost to provide the wind energy. Board Members discussed the pros and cons of the options presented. There was some concern expressed about continuing a contractual relationship with a vendor who has not met expectations up to this point. There was some discussion about the likelihood of NAE obtaining permanent financing once the project is operational. Although there are no guarantees that this will happen, staff members have consulted with NAE's investment bankers and they have stated that NAE is a small, but good company, which they have financed before, and plan to finance again once the turbines are commercially operational and there is a purchase power contract in place. There was a good deal of discussion on the implications of Platte River assuming an ownership position. One of the biggest concerns with this scenario is keeping the price for the wind energy at the current 2 cent per kWh adder. This would be very difficult unless Platte River would be able to obtain 100% of the federal production credits. Without production credits, it is estimated that the premium cost would increase to about 3 cents per kWh. There was some discussion on the reasons why the price from NAE was so low. Staff mentioned that NAE gave us a break in price since we were their lead purchase power contract enabling NAE to develop the site. The cost savings came from the fact that NAE set the lease payments close to zero, recovery costs on the substation investment next to zero, etc. NAE simply bid the incremental pricing to construct the two turbines. -3- There was brief discussion on potential merger possibilities that NAE is considering. Other discussion included liquidated damage payments by NAE, and the potential for Platte River Solutions to own the project. There was general feeling from most Board Members that the Utility should continue with its contract with NAE, move to Vestas equipment, and make a recommendation to City Council to provide the necessary guarantee to Platte River. However, it was suggested that Platte River staff communicate to NAE the dissatisfaction with the way they have handled issues to date and ask them to communicate with us sooner, to help avoid further delays. It was also suggested that we attempt to obtain continued discounts for any future turbines that Platte River and the Utility choose to contract for. Board Member Rutstein made a motion that the Electric Board endorse the NAE project, substituting Micon with Vestas, keeping in mind all of the concerns and interests in this project, and recommending that the City Council approve the resolution to guarantee repayment to Platte River in the event of a default by the vendor. Board Member Smart seconded the motion. The motion passed unanimously. 4. LIGHT AND POWER VIDEO: Steve VanderMeer showed Board Members a video entitled "the Power is Yours". This is one tool staff will be using in an effort to increase awareness of the Utility in the community. This video will be aired regularly on Channel 27 and may be used by staff members when asked to give presentations to various groups, etc. 5. STAFF REPORTS: A. Utility Enterprise Study Session: Rich provided a recap of the study session. Staff members presented to Council an overview of the Utility's deregulation strategy. The presentation was well received by attending Council Members. Council's existing Public Access Committee was given responsibility for oversight of the Utility deregulation strategy, plus related technology issues. This Committee includes Council Members Kneeland and Smith. Council Member Mason will be replacing Mayor Azari on this Committee. Board Members briefly discussed Council Member Kneeland's ad hoc committee meetings on telecommunication issues. Chairperson Eighmy mentioned that he spoke with Council Member Mason regarding this issue. Council Member Mason was supportive of the efforts of this committee and mentioned that there is a need for additional Fublic awareness and involvement in this issue. Chairperson Eighmy reported that no other meeting have been scheduled to date. He also mentioned that he does not feel that the activities of this committee are in conflict with the activities of the Electric Board. Staff reiterated that this would be a good group to use as a sounding board on related strategies/issues. I" 7. OTHER BUSINESS: A. Retail Wheeling Bill: Rich mentioned that Public Service Company has drafted a fairly comprehensive bill on this issue and are currently looking for a sponsor. As the frenzy of activity unfolds during the legislative session where changes can be made daily, hourly, etc., staff will be using the CAMU principles that were endorsed by the Board and the City Council as a guide. City Council has a Legislative Committee that will track related activities with staff. There is a chance that staff will change from the current perspective that a study bill is needed on this issue, if the bill, and any amendments that are made, are close to what the Utility wantstneeds. In that case, the Utility would most likely en6orse the bill and not take a chance on the number of different tangents a study bill can produce. The bill is written to preserve a lot of the positions and interests of utilities, including allowing public utilities to opt out of competitive retail wheeling. Copies of the bill were provided to interested Board Members. Staff will keep Board Members abreast of developments. 8. INFORMATION REQUESTS: Board Member Welch was interested in receiving information on the President's Climate Challenge. 9. JANUARY AGENDA ITEMS: 1997 Annual Report Telecomm update Wind power update FUTURE AGENDA: PRPA IRP Plan PRPA Distributed Generation League of Women Voters Cross Current Program Adjourned: 7:20 p.m. Delyn Coldiron, Board Liaison -5-