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HomeMy WebLinkAboutElectric Board - Minutes - 08/20/2007Fort Collins Utilities Electric Board Minutes Monday, August 20, 2007 Electric Board Chair John Morris, 377-8221 Electric Board Vice Chair Dan Bihn, 218-1962 City Council Liaison Wade Troxell Staff Liaison DeEtta Carr, 221-6702 Roll Call: Board Present Chairperson John Morris, Tom Bamish, Dan Bihn, John Harris, Jeff Lebesch and Steve Wolley Absent John Graham City Council Liaison Wade Troxell Visitors Eric Sutherland Staff Present: Kraig Bader, Bill Bray, Terri Bryant, DeEtta Carr, Eric Dahlgren, Joyce Grenz, Brian Janonis, Bob Micek, John Phelan, Tom Rock, Ellen Switzer, Dennis Sumner and Norm Weaver Meetin¢ Convened Chairperson John Morris called the meeting to order at 5:40 p.m. Citizen Participation Regarding The Rocky Mountain Sustainable Living Fair, Eric Sutherland said: 1. He was expressing concerns about the view expressed by vendors at the Sustainable Living Fair; 2. He feels adoption of biofuels should not be promoted at Sustainable Living Fair; 3. He feels City sponsorship endorses these views; and 4. Thanked City Staff for correcting information on the Web site. Minutes of April 18, 2007 Board Member Tom Bamish made a motion, which was seconded, to approve the minutes of the June 20, 2007, meeting. The motion passed unanimously. Electric Board Meeting Minutes Monday, August 20, 2007 Page 2 2008-2009 Budget Presented to the Electric Board Utilities Finance and Budget Manager Terri Bryant introduced Ellen Switzer, Utilities Financial Operations Manager, and stated that Ms. Switzer would be giving the presentation for the 2008- 2009 Budget to the Electric Board. Ms. Bryant said Ms. Switzer is the primary accountant for the Light and Power Fund. Ms. Bryant said the one big unknown Ms. Switzer will address through her presentation is where Platte River Power Authority (PRPA) will be going with rates in the future. Utilities made some projections based on the preliminary information they have from PRPA. Ms. Bryant wanted to caution the Electric Board the information is preliminary and has not been finalized. Ms. Switzer stated that this was her 34s' Light and Power Budget. Ms. Switzer said the City used Budgeting for Outcomes process for the 2008-2009 Budget which focuses on results and emphasizes accountability. The process determines how much revenue will be available and the results that matter most to citizens. Those results are: economic health, environmental health, neighborhood quality, safe community, cultural and recreational opportunities, transportation and high performing government. The budgeting process allocated revenue to achieve each result and decides how to best deliver the results citizens expect. The City Manager issues the recommended budget on September 4, 2007. City Council will review and make changes in the budget at the series of study sessions and public hearings, and then Council will make final appropriations in November. 2009-2009 Budget Assumptions and Highlights • The budget was developed using the following assumptions: o Growth projected at 1 percent per year; o Inflation estimated at 3 percent per year; o Purchase power rates are projected to increase 3 percent in 2008, 3.7 percent in 2009 and 3 percent per year through 2012; o Retail electric rates are projected to increase an average of 2.3 percent in 2008 and 2.7 percent in 2009; o Development charges are projected to increase based on costs of labor and materials; and o Salaries estimated to increase 3 to 4 percent per year. • Retail Rates — As shown above, retail electric rates are projected to increase an average of 2.3 percent in 2008 and 2.7 percent in 2009. The purchase power increases will be passed through to the energy and demand components of each rate class. The fixed charges and facilities demand charges will not change. As a result, the rate increase will vary for each rate class going up slightly more in the commercial and industrial classes than in the residential. Based on Platte River Power Authority's wholesale rate projections, retail rates are projected to increase 2.3 percent each year from 2010-2012. • The proposed 2008 budget is 17.9 percent (or $15.3 million) greater than the adopted 2007 budget. The increase is primarily due to an ambitious capital program (+$11.5 million) and the increased purchase power (+2.4 million). The payment to the Customer Services and Administration (CS&A) fund is also projected to increase about $1 million. -2- Electric Board Meeting Minutes Monday, August 20, 2007 Page 3 • Operations and maintenance budgets are stable. Three landscape maintenance employees will be transferred to the CS&A Fund in 2008 offsetting inflationary and salary increases resulting in zero percent increase in the O&M budget for 2008. • Energy Services continues funding to meet energy supply policy goals, other ongoing conservation and community service programs and 68 percent of City's Climate Wise program. • Purchase Power includes funding for renewables to meet the goals of the Energy Supply Policy. • Payments in Lieu of Taxes (PILOTs) continue to be budgeted at 6 percent of revenues. • Light and Power's portion of Utilities CS&A increased approximately $1 million in 2008. These are estimates; 2008-2009 transfers to CS&A will be based on actual expenses which are typically less than budget. The 2008 increases include the following: o New positions: Executive Director and Project Manager — Assets; o Transfer of Regulatory and Governmental Affairs Division (5 positions) and landscape maintenance crew; o Increased IT costs for operations and capital replacement; and o Capital replacement of the Customer Service Division phone system and additional capital funding for automated meter reading. • There are large capital projects and system additions planned in the next two years: o Capital Projects: ✓ Electric Substation (Trilby) — $5.2 million (2008); ✓ Replace Building C — $4.4 million (2008); ✓ Southwest Annexation — $0.8 million per year (2008 and 2009); and ✓ Wi Fi Pilot Project. o System Addition: ✓ Major Ductbanks and Circuits — $1.2 million per year (2008 and 2009); ✓ Replacement of UG Cable —$1.0 million per year (2008 and 2009); ✓ UG Equipment Upgrades —$1.4 million per year (2008 and 2009); and ✓ Transformer Purchases — $1.6 million per year (2008 and 2009). Reserves — Based on the aggressive capital program, reserves are projected to decrease from $56.5 million at year end 2008, to $39.5 million at year end 2009. Projected 2009 reserves will meet all of Light and Power's reserve policy requirements. No other significant shifts in priorities or resources are planned. Budget Summary • Total Light and Power Budget o 2008 is $100.8 million and 2009 is $95.4 million • Retail Rate Increases o 2008 is 2.3 percent and 2009 is 2.7 percent (Pass through PRPA increases) • 2 percent of revenues targeted for Energy Supply Policy o 1 percent Renewables; and o 1 percent DSM and energy conservation. • Reduced growth projections —1 percent • Use of reserves to meet capital needs: o Trilby Substation; -3- Electric Board Meeting Minutes Monday, August 20, 2007 Page 4 o Replace aging UG infrastructure; o Duct Banks; and o New facility for crews and equipment. Financial Policies • Increase Net Assets (Income After Contributions and Transfers) o 2008-$3,352,712 and 2009-$3,168,332 • Reserves o Operating Reserve — 8 percent of operating budget less purchase power. ✓ Fully funded at about $1.6 million in 2008-2009 o Art in Public Places - 1 percent of specified capital appropriations. o Capital Reserve — 20 percent of cost of 5 year capital improvements. ✓ Fully funded at $16.5 million in 2008-2009 o Purchase Power Reserve — targeted at up to 25% of annual operation revenue. ✓ PP Reserve was 34 percent of revenue year end 2006 (about $27 million); ✓ PP Reserve is projected to decrease over the next two years to the 25 percent level; and ✓ Since the reserve is projected to return to the established target in 2009, staff recommends that Council take no action to reduce the Purchase Power Reserve at this time. o Reserves will be drawn down and used to fund portions of the capital and system additions projects. ✓ $12.3 million in 2008; and ✓ $ 3.5 million in 2009. Board Member Tom Barnish asked in Budgeting for Outcomes, is there a group that goes through Customer Service and Administration Fund (CS&A) in the same way so there is some logic as to where the fund is spent. The process for doing the budget for CS&A is slightly different. Managers write the offers as in Budgeting for Outcomes and prepare their budget. The offers are reviewed by the Executive Director. The cost of CS&A is included in each one of the funds. Payments and Transfer Offers are reviewed a second time by the Results teams. The costs can go up and down each year for each fund depending on capital expenses. Transfers are based on actual expenses. It was asked whether CSU's electrical account is considered residential or industrial. Ms. Switzer said CSU's electrical account is considered industrial. Ms. Switzer then asked if there was a motion recommending that City Council adopt the proposed 2008-2009 Budget and Rate Increases. Board Member Dan Bihn motioned to adopt the 2008-2009 Budget and Rate Increases with John Harris seconding the motion. The motion passed unanimously. Electric Energy Supply Policy Review of Goals Chairperson John Morris summarized the original goals of the Electric Energy Supply Policy which were to reduce the per capita consumption by 10 percent by 2012. Since the time of the policy, the consumption has been brought down by 2.8 percent and it seems to be staying pretty ME Electric Board Meeting Minutes Monday, August 20, 2007 Page 5 steady. The Electric Energy Supply Policy may be running behind on reducing the per capita consumption. Another goal was to reduce the per capita demand by 15 percent by 2012. In 2007, we are up 1 percent. It has come down a little from the 2006 levels, but per capita demand is up from 2005. We are not on track to meet the demand goal. Renewable energy needs to increase to 15 percent by 2017, and we are now at 3.6 percent. That means we have 10 years to increase by 2 '/z times. Board Member Tom Barnish asked if the 15 percent renewable energy target was applied to both the per capita energy usage target, as well as the actual per capita energy usage. Do we have that number? We have a certain amount of renewable energy that we're buying based on the per capita energy usage target. Are we on track to meet that target, because if we're exceeding the per capita usage target, on that basis that can be interpreted as not meeting the renewable target. The issue was that when you reported 3.2 percent renewables, he was concerned because that may be way behind the renewable target, but if it is a higher percent of our target per capita energy use instead of actual, then the 15 percent renewable goal by 2017 is not too far off. The focus would then be on meeting the failing measure, or per capita energy usage in this case. Chairperson John Morris said what was talked about was developing aggressive, strategic plans to reach these goals. If we are running behind in those, Mr. Morris said he feels it is worthwhile for the Electric Board to re -talk. Mr. Morris said he believes that Board Member Tom Barnish had suggested either adjusting the goals to what is more realistic, or getting more aggressive. Mr. Morris said this was just a quick summary of the key highlights of the Electric Energy Supply Policy and that we are falling behind. Mr. Morris feels the other areas in the Electric Energy Supply Policy are either being met or are exceeding the expectations. He wants to make sure the Electric Board has time to discuss these issues. Update of Staff Review of Energy Policy Strategic Policy Customer and Employee Relations Manager Patty Bigner wanted to talk about the REC issue first. Platte River Power Authority (PRPA) is in the process of bringing a renewable policy to their board for adoption and is very close to adoption which would change the resource mix from currently 83 percent RECs and 17 percent energy. This would change closer to 40-50 percent RECs and energy. PRPA is interested in balancing that. When the current strategy was adopted, it was after many discussions at the Energy Board meetings to decide what was going to be the best way to move closer to our renewable energy policy. This was based primarily on the effectiveness of RECs, if they were purchased in a responsible manner and the cost. The cost was a big driver and it has allowed them to get to where they are now. A couple of changes that have taken place since they received the policy are the addition of Green-e Certification which really provides some quality assurance to their program. There have been a lot of changes in the market and the market environment prompting them to look at changing the resource mix. Ms. Bigner said they think that RECs are still going to be a valuable resource for them in the next few years, but they have no idea what the REC market will be like after 2010. The City of Fort Collins and Platte River Power Authority share the concern for RECs and are moving to make a course correction. -5- Electric Board Meeting Minutes Monday, August 20, 2007 Page 6 Ms. Bigner said they have heard there are a number of questions, both in the community and by City Council members, about the Renewable Energy Policy goal as to whether it is at the right level. Fort Collins Utilities is prepared to implement the policy as it is now. Utilities next big purchase will be in 2011, and the next one prior to the goal. They are not sure what the market will look like in 2011, so they don't know if a rate increase will be needed. Ms. Bigner said that's where they are now. The City does not actually purchase RECs, but purchases renewable energy. How renewable energy is provided to the City of Fort Collins is determined in collaboration with Platte River Power Authority. Ms. Bigner said the Electric Board will make a decision to make a suggestion on direction to PRPA. Ms. Bigner said they feel comfortable in the direction they are going in now. Ms. Bigner said what they are really focused on now is an update to their strategic plan. They have had preliminary discussions about what their progress had been with their current programs. For the last few years, they have been in the process of ramping up those programs, developing and refining them. What they want to do now is to really focus on increasing participation. Fort Collins Utilities still firmly believes energy efficiency is the way to solve this particular problem and they want to put their efforts toward that. Ms. Bigner said what their plan will be is to get together internally, unless the Electric Board has other ideas, to start to look at where they are, what they feel needs to happen and come up with some proposals. They will bring their proposals to the Electric Board for consideration or discussion. Ms. Bigner said they are in the process of completing a project to look at a green building program. They are finalizing the roadmap and expect to be implementing something in the next few months, or early next year at the latest. There are a lot of incentives to have high performance buildings. This is a complicated process and may have to start with the building permit. It was suggested that a building permit spokesperson could come to the Electric Board meeting to discuss changes that have taken place recently to encourage energy conservation. Another suggestion is that members of the Electric Board could be invited to staff meetings for a continuation of the discussions on energy conservation. The general consensus from the discussion is that we should be in on the design phase of building to promote energy conservation. Chairperson John Morris asked, due to the time, the underground information be presented at the next meeting. Routine Updates PRPA — Dan Bihn The last meeting of PRPA was exactly three minutes long as they did not get a quorum until the very last. Climate Task Force —JeffLebesch The members are expressing several ideas as to what the City could do for greenhouse gas emissions and voted on those items. The Brendle group is evaluating the top 25 ideas to eliminate greenhouse gas emissions and costs. Three things that are likely to be recommended to the task force that affect Fort Collins Utilities would be rate structure, increasing the rate base charges to fund more conservation and DSM programs and upping the Energy Supply Policy renewable allowables. Capitol News — Steve Wooley No change from last meeting. 10 Electric Board Meeting Minutes Monday, August 20, 2007 Page 7 Other Business No other business. Adiournment The meeting was adjourned at 7:50 p.m. " 7 Joyce Gr z, Electric Boar Secretary -7-