Loading...
HomeMy WebLinkAboutElectric Board - Minutes - 07/23/2008Fort Collins Utilities Electric Board Minutes Wednesday, July 23, 2008 Electric Board Chairperson City Council Liaison John Morris, 377-8221 Wade Troxell, 219-8940 Electric Board Vice Chairperson Staff Liaison Dan Bihn, 218-1962 Robin Pierce, 221-6702 Roll Call Board Present Chairperson John Morris, Vice Chairperson Dan Bihn, Tom Barnish, John Graham, John Harris, Steve Wolley Board Absent Jeff Lebesch Staff Present Brian Janonis, Patty Bigner, Steve Catanach, Tom Rock, Kraig Bader, John Phelan, Norm Weaver, Eric Dahlgren, Jenny Lopez-Filkins and Robin Pierce Guests Council Liaison Wade Troxell; John Bleem, Mike Dahl and Joe Wilson, PRPA; Tony Georgis, R. W. Beck, Inc.; Citizen Eric Sutherland Meeting Convened Chairperson John Morris called the meeting to order at 5:30 p.m. Citizen Participation Eric Sutherland recommends Fort Collins Utilities (Utilities) discontinue their subscriptions to the wind power program. Mr. Sutherland noted lack of evidence provided by Utilities to demonstrate the monetary investment by rate payers is producing results. Mr. Sutherland requested no further Renewable Energy Credits (RECs) are purchased due to lack of additionality and transparency which make them good investments. Approval of .Tune 18, 2008 Minutes Board Member Steve Wolley motioned to approve the minutes from the June 18, 2008 meeting. Board Member John Graham seconded the motion, and it passed unanimously. Climate Action Plan Tony Georgis with R. W. Beck, Inc. consulting firm presented an analysis of the Climate Task Force (CTF) Phase 2 recommendations on the City's carbon reduction goal. Utilities was asked to review the recommendations, and weigh in on the initiatives Utilities would endorse, recommend other initiatives to include and verify accuracy of the figures. Figures cited in the task force report are aggregate in nature and do not represent specific allocations to Utilities or any specific City department. The consultants focused their analysis on the 8 CTF programs with impact to Utilities: 1) Residential rate structure; 2) Smart meters and automated metering infrastructure (AMI); 3) Low cost home energy assessments; 4) Time of sale energy conservation program; 5) Renewable energy program; 6) On the ground renewable energy program; 7) Local carbon offset fund, and 8) Increase to current energy efficiency programs. Residential Rate Structure (recommended for adoption by Utilities): The residential rate structure is a declining block (tiered) structure. A higher rate applies as more energy is used. "Elasticity of demand" is the primary assumption driving a declining block structure. The task force report assumed 20% elasticity of demand. Consultants project a more conservative figure between 10-20%, translating to carbon reductions of 9,000-18,000 tons compared to the task force's projection of 18,000 tons. The cost impact for implementing a new rate structure is minimal, primarily involving operations and maintenance costs for a rate study and implementation process. Consultants are analyzing the impact of this type of rate structure on low income customers. Board Member Wolley participated with the task force and noted the task force based the information in the report on costs incurred by other cities to implement a rate structure change. Smart Meters/Automated Metering Infrastructure (AMI) (recommended for adoption by Utilities): Automated or "smart" metering refers to a solid state meter for both commercial and residential use. A smart meter provides information on energy use in predetermined increments. Other options exist with smart metering such as smart grid, integrating appliances, two-way communication between the grid, and automated programming to manage use. These options are not part of this program as represented in the report. This is strictly for meters to display energy use and communicate real-time data to the consumer. AMI technology would be implemented over 3-7 years and would not be fully implemented in time to have a positive impact on the 2012 goal. Therefore, consultants project zero tons reduction by 2012 from this program with the potential reduction of up to 19,000 tons when fully implemented. Consultants project a cost of $18- $26 million in initial capital costs based on a state-of- the-art device which eliminates the need for meter readers, compared to a lower cost of $9-12 million reflected in the task force report. The higher projection includes the cost to install water and electric meters simultaneously, resulting in faster return. Vice Chairperson Dan Bihn asked about the fairness of allocating this figure solely to carbon reduction when some of the expenditure may be part of a large investment to benefit other Utilities projects. Mr. Georgis noted when analyzing costs and benefits, the payback period is considered. The majority of the cost will be allocated to carbon reduction if it's the main driver. Board Member Wolley noted the task force did not focus on some available features and used historical costs from other cities. The cost for additional functionality is minimal if Utilities opts to install other options with the meters. Low Cost Home Energy Assessments (recommended for adoption by Utilities in combination with the Time of Sale Energy Conservation Program). Utilities would contract with a provider, subsidize a program or provide internal resources to perform low cost energy audits for residential customers. The task force projected 600 audits per year, a substantially higher number than Utilities is currently managing. Consultants project zero tons in carbon reductions, and the task force projects reduction of 15,000 tons. This program overlaps with the time of sale program, and the programs are essentially different vehicles to accomplish the same result, so consultants recommend adoption of one or the other program. Consultants also project zero tons reduction with the time of sale program, as Utilities plans to bring both programs under an existing program, Home Performance with Energy Star. Fifty audits per year is an aggressive expectation under the Energy Star program. This is due to a shortage in the number of contractors trained to perform audits in the area and lack of an implementation strategy. Utilities would subsidize the audits, and the owner would be responsible for 100% of the upgrades. Upgrades projected at $1,000 in the task force report are substantially lower than necessary to achieve significant savings. The task force estimated 500 therms per year reduction for natural gas savings. The average residential customer uses approximately 600-700 therms per year. The task force figure implies the average residential customer will save up to 90% on natural gas expenses by adding $1,000 in home upgrades. Board Member Graham noted the assumption of combining this with the time of sale program is conservative, and the projection of zero tons reduction is fairly negative and essentially rejects the task force's efforts in this area. A real estimate with a footnote stating Utilities will attempt to accomplish this in combination with another program would be a clearer way to convey this. Board Member Wolley suggested a slide to portray the result of combining these programs. Increasing Current Energy Efficiency Programs (recommended for adoption by Utilities): This program looks for opportunities to increase current energy efficiency programs, such as lighting retrofits. Consultants see the potential for more carbon reduction than identified by the task force. Chairperson Morris pointed out the presentation lacks steps for compliance and is concerned double counting may be an issue. Mr. Georgis noted double counting is accounted for in a large deduction taken in the final analysis. Time of Sale Energy Conservation (see Low Cost Home Energy Assessments section; recommended for adoption by Utilities in combination with the program.) Renewable Energy (recommended for adoption by Utilities): This program is based on growth of the existing renewable energy policy, and recommends a mix of RECs and purchases under the Purchase Power Renewable Contract. The type of RECs purchased was not analyzed. On the Ground Renewable Energy (not recommended for adoption by Utilities): This is a small program on the task force list netting a reduction of 2,000 tons. However, the consultants project zero tons reduction, because the program competes with the local carbon offset program, and Utilities would endorse one or the other. A $1.8 million surcharge across all customers would fund programs for both residential and commercial customers (photovoltaic solar projects, ground source heat pumps, etc.) with a $65,000 administrative cost to Utilities. The carbon offset program also subsidizes installations, and customers would pursue one or the other program. Local Carbon Offset (not recommended for adoption by Utilities): There was a substantial reduction with the local carbon offset program. The primary assumption is based on a 5% adoption rate at $800 per year. There are important issues to resolve with the Renewable Portfolio Standard (RPS) and carbon accounting. There is no cost impact, as it is a customer funded program. Summary of recommendations; Mr. Georgis summarized the list of potential task force programs recommended for adoption by Utilities. The list includes residential rate structure, smart meters (AMI), combination of the time of sale energy conservation and low cost residential energy assessments, increasing energy efficiency programs, and renewable energy. On the ground renewable energy and local carbon offset programs may ultimately be adopted, but Utilities does not plan to rely on them to meet the goals. The 21a` Century Utility program has other programs in mind to meet the long-term goal more effectively. Mr. Georgis presented additional programs Utilities would like to add to the action plan. Integrated Design Assistance Program: The Integrated Design Assistance Program (IDAP) is a program developed to assist with the construction of new buildings (primarily commercial) with a focus on orientation and assistance with choosing equipment, windows, insulation and construction for energy efficiency. Consultants recommend including IDAP in the action plan for the 2012 goal. Projected reduction from adoption of this program is 7,000 tons at a cost of $1.25 million. The cost includes incentivizing and subsidizing some upgrades. Vice Chairperson Bihn asked whether the opportunity exists to double the investment for greater impact. Mr. Georgis noted the issue lies with the number of larger building projects which can reasonably be accomplished each year. 21" Century Utility Project: The 21s` Century Utility project supports the Climate Task Force goals and the long-term 2020 goal. Utilities project a carbon reduction by 2012 of 117,000-146,000 tons and the task force report projects a reduction of 239,000 tons. Cost projections are similar. The project group is developing an overall sustainability strategy and action plan for Utilities. Analysis shows the opportunity to not only meet, but exceed the 2020 goals. Conclusion: Utilities supports the goal and concepts outlined in the Climate Task Force recommendations, but questions some of the assumptions, and will clarify them with Lucinda Smith and the Brendle Group who served in a consulting role with the task force. The 2012 goal is likely not feasible for Utilities to meet without purchasing RECs under all the assumptions made by the Climate Task Force. Utilities will analyze the role RECs will play in meeting the 2012 goal. The task force recommended the use of RECs at a high level. There will also be impacts from potential carbon legislation and rate increases of 8-10% with task force programs. rd The reduction programs touch on many areas in Utilities. At this time, the task force report did not attempt to equally allocate the reduction across City departments. Discussion and questions from the Board: Board Member Bamish asked if any programs were on the list primarily for the purpose of meeting the 2012 goal and is concerned with placing so much of the emphasis for meeting the 2012 goal on Utilities along with the associated cost. Decisions made in haste to implement programs for the short-term goal may not ultimately be the right solution for the 2020 goal. Mr. Georgis noted the analysis ended with the 2012 goal, although some programs recommended to meet the 2012 goal, such as smart meters, will benefit the 2020 goal. Board Member Wolley noted City Council asked the task force to define the impact of relaxing the original 2010 goal. Council Member Wade Troxell noted the intention of Council was to make investments for the short-term goal while not sacrificing the long- term, more desirable goal. Vice Chairperson Bihn asked for clarification as to how the task force arrived at the City aggregate number and whether there will be non -Utilities strategies to meet the goal. Mr. Georgis explained the formula used to arrive at Utilities' allocated portion. Utilities accounts for approximately 40% of the City's carbon footprint. Utilities' allocated portion is determined by multiplying the City aggregate by this percentage. Vice Chairperson Bihn favors a sensible approach to address the entire system. For example, it may be less expensive for Utilities to handle a higher percentage of contribution to the goal than for other groups to handle their smaller contribution. Mr. Janonis confirmed a collaborative process is underway across City departments to assess and plan for their contribution to the goal. Information from this process is not available to Utilities yet. The City will use the task force recommendations to develop a Climate Action Plan, which will be presented to Council at the August 26 work session. Natural Resources and Utilities will bring the Climate Action Plan and Electric Energy Policy to Council together for action. Council Member Troxell noted the level of contribution appears to be disproportionate among departments at the outset, but investments in infrastructure will equalize the benefit to Utilities and other departments as times goes on. This infrastructure will benefit Utilities and in turn afford the opportunity to use some of their unique levers. Council Member Troxell feels it would be beneficial to describe the FortZED/Department of Energy project. FortZED provides an opportunity to aggregate and monetize items for the first time. For example, if our system operates beyond carbon offset levels, the opportunity exists to sell RECs. Many utilities are looking at revenue programs from carbon. Light and Power Operations Manager Steve Catanach noted it's the intent of Utilities to provide expandability, flexibility and communication capability with the FortZED project. The communication realized from the FortZED project will become critical to Utilities and will provide the ability to grow the system to meet our needs by 2020. Vice Chairperson Bihn suggested a change to state the City can achieve the 2012 goal without RECs, but it's going to be cost -prohibitive and not prudent. He questions the use of the term "not feasible". Ms. Bigner stated Utilities will be challenged to ramp up programs in time to meet the goal due to a variety of factors including capacity in the community for assessments, putting programs on the ground and growing them to the extent of needed return in the necessary time frame. Board Member Wolley expressed concern with the projections represented in the presentation. Within a year, Utilities can be buying and installing smart meters in customer homes. On the ground renewable programs will provide $1.3 million dollars each year to invest on something of value toward the goal. Board Member Barnish expressed great confidence in staff. He would like to see some programs initialized as pilots first, such as smart metering, to allow staff the time and thought necessary to build and implement the right long-term solutions. Progress reports on effectiveness and customer satisfaction would be beneficial to the Board. Mr. Janonis and Ms. Bigner recognized the many challenges before staff in achieving the short-term and long-term goals. Program implementation timelines, staffing issues and budget cycle coordination are significant challenges. Mr. Catanach cited additional challenges and tremendous pressure on Utilities related to energy costs, carbon tax, cap in trade, pressures to implement renewables and extreme increases in the cost of materials. Board Member Harris expressed concern for the impact o rate payers as a result of these challenges. In summary, the Board recommends the following items be revised or addressed in the presentation: • Correct the tone of the presentation, including "not feasible" language, and address the passive approach reflected in the figures for anticipated targets. • Present Utilities' plan without pointing out differences or conflicts with the task force recommendations. • Describe what attempts were made to reconcile gaps with the task force recommendations, addressing the factor of two difference. • Focus on the 2020 goal and define points Utilities can exceed in working toward the goal with a checkpoint in 2012, and grade ourselves against the interim target • Highlight anticipated accomplishments by 2012 in a different way. • Add a statement that the City can achieve the 2012 goal without RECs, but it's going to be cost -prohibitive and not prudent. • Outline the cost of achieving the 2012 interim goal. • Recommend some programs be initiated as pilots. • Define a reporting mechanism/accountability from the City. • Include a detailed description of the FortZED project and impacts. • Suggestions for bullet point revisions: o First bullet point: "Analysis suggests the task force recommendations will not lead to the projected savings by 2012 without RECs and cannot envision any other measures to achieve the goal (other than the purchase of RECs.)" o Last bullet point: Add "with reduced RECs usage" to "Utility for 2V' Century Project underway includes a plan to meet 2020 goals." Mr. Janonis noted staff would like to see the Electric Board make a recommendation to Council to fully support the goal of 20% reduction by 2020, while allowing Utilities the flexibility to select the best programs for achieving the long-term goal. Motion for Recommendation: Board Member Barnish moves to support the City-wide goal of 20% reduction in greenhouse gas (GHG) emissions by 2020 with a revised, measurable Electric Utility 2012 milestone. The Board recommends the Electric Utility put forth an aggressive plan to achieve the 2020 goal. Vice Chairperson Bihn seconded the motion. There was no discussion following the motion. A vote was taken, and it passed unanimously (6 for, 0 against.) PRPA Organic Contract and Energy Supply Agreement Mr. Catanach shared an update on the status of the Organic Contract and the Energy Supply Agreement between Fort Collins Utilities (Utilities) and Platte River Power Authority (PRPA). The Organic Contract is approximately 10 years old and lays out the partnership structure between PRPA and four participant cities (Fort Collins, Loveland, Longmont and Estes Park.) The document functions as a set of by-laws and an intergovernmental agreement. The benefits favor the participant cities and include very low rates and very high reliability. Other benefits include a local generation source, a controllable fuel source, and input through Board involvement. Minor language changes have been added to update some technicalities, including the process for handling a vacancy in the PRPA General Manager position and allowing director participation by teleconference. These items go before Council at the end of August. The Energy Supply Agreement is a unique agreement between PRPA and the City of Fort Collins. It creates a symbiotic relationship by having a guaranteed customer and source, and allows PRPA to maintain a very high bond rate and much lower interest rate which is passed on to the City. In this update, language in the previous agreement regarding allowance for and management of transmission projects has been addressed. Also, the language to govern timelines has been streamlined, and the responsible party for the maintenance of our substations has been clarified. There was a previous restriction on the amount of self -generation the City could own. Joe Wilson, General Counsel with PRPA, noted this defines the difference between a scenario where a customer can net meter and when the customer would be required to sell power to PRPA under the tariffs. The deminimous language allows Utilities to develop up to 3 megawatts of renewable resources, an option previously prohibited by the all requirements feature. There is essentially no limitation on customers developing generation sources for their own use, unless generation reaches a level over 1 megawatt. A contract with the customer would be needed if generation reaches over 1 megawatt. Limitations and requirements are spelled out in the City's interconnection standards, and electric rules and regulations. For example, if a customer generated more power than it used, the excess power would be sold to PRPA rather than to Fort Collins Utilities. Mr. Catanach noted the opportunity in the agreement for the City to work independently and negotiate specific deals with PRPA. Council Member Troxell asked about purchasing wind power from an entity other than PRPA. Mr. Wilson said if the other entity is developed by an owner, and the wind is transferred between owners, it constitutes customer generation via a third party power provider and violates the all requirements 7 nature of this agreement. Vice Chairperson Bihn asked whether the PRPA Board can execute decisions on projects or exceptions to the agreement. Mr. Wilson responded the Board can executive some decisions on a case by case basis, but bond holders would be addressed for certain types of third party provider opportunities. The 3 megawatt limit was developed to address a pattern of requests for small projects. PRPA has issued a letter stating these projects are deminimous and present no issues for bond holders. PRPA consulted with Sherman and Howard, bond counsel, to determine a sensible level that would not be actionable on the part of those who have already purchased bonds based on all agreements rights. The current power supply agreement runs through 2040; this will extend the agreement by 10 years to 2050. Electric Code Change Light and Power Operations Manager Steve Catanach introduced a proposed change to the electric code as defined in Sections 26-391 and 26-441 through 26-444 of the Municipal Code. The Code contains sole provider language necessary to clarify the City's position on obtaining and providing electricity within City limits. Fort Collins Utilities entered into a sole provider agreement with Platte River Power Authority (PRPA). However, the City also needs the option to accommodate distributed generation projects. An example of such a project is a parking structure planned by Colorado State University (CSU). CSU will potentially add solar panels to the structure in the future, qualifying the structure as a distributed generation project. According to the way current ordinances are written, due to the location of the parking structure and its relationship to right-of-way, CSU would have to simply be a metered customer of the City. The proposed language is designed to provide a new level of flexibility and allow parties to petition Council for a permit to cross over right-of-way and interconnect with their system, so long as the structure meets the "qualifying facility" criteria. It also recognizes if a party is not entering right-of-way for distributed generation. It does, however, still limit third party sales of electricity through appropriate restrictions in the Code. This Code change will go before Council at the August 19 meeting and therefore requires action by the Board. Board members discussed various scenarios for applying this change. • An owner of a solar panel cannot run a wire from their panel to a neighbor and charge for the electricity. • A distributed generation project that crosses ownership lines on the same premise would be allowed if the party is the owner of the project under the interconnection agreement. However, a third party financing and owning the project facilities would not be allowed to sell only the kilowatt hours according to the Code. • This practice is prevalent in some states as a very effective way for financing solar projects. However, rates are much higher in those states, because these practices are allowed. Board Member Barnish noted our community has been successful in maintaining lower rates, because this type of practice is not allowed. Mr. Wilson noted the case of a third party solar developer in another city that wanted to install panels and sell electricity directly to a building on the same property. Typically under Colorado law, this would not be allowed. A customer can generate electricity for their own use, but service territory protection protects utilities from third party retailing. This guideline has eroded somewhat in light of solar development. As a solution, PRPA offered to enter into a simultaneous buy -sell transaction where PRPA purchased the solar -generated power at the price the customer was willing to pay and sold it at that price to the city utility, so the utility could sell it for the same price to the customer. This was a transparent transaction to the customer and would not go against contractual protections or cause the utility to waive its territorial protections. Board Member Harris added the importance of advancing solar projects while protecting the interests of Utilities. Board Member Wolley added issues could arise if Utilities anticipates cases where a party objects to selling through PRPA and wants to sell straight to the customer. Board Member Barnish asked whether PRPA would be left to hold a long term contract if a current customer willing to pay the higher cost leaves and a new customer comes in that does not want to pay the higher costs. Mr. Wilson clarified the customer chose to bear the risk under any number of unforeseen possibilities that could develop, such as the solar developer going out of business. PRPA would want protection in that case, since they are still obligated to purchase the power. Board Member Graham asked whether this Code change does well by our customers. Staff responded that the proposed language is favorable in allowing the Utility to offer customers more flexible options. Board Member Graham moved that the Board accept the Code change language as written. Board Member Barnish seconded the motion. It passed unanimously (5 for, 0 against. Note: Chairperson Morris was not presentfor this vote.) Electric Energy Policy Customer and Employee Relations Manager Patty Bigner reviewed the last steps taken with the Board on the Electric Energy Policy draft. Feedback gathered from the Board previously has been incorporated. The Policy goes before Council in October, and staff is following a specific timeline to share the policy with other boards (Air Quality Board and Natural Resources Board.) Public outreach will also occur. Energy Services Engineer John Phelan requested feedback on some new minor language changes in the policy. No formal action is required from the Board at this time. 2050 Vision Statement: The policy contains a mid-century vision and three goals. The policy goal reflects the City's goal of 20% carbon reduction below 2005 levels by 2020 and 80% reduction below 2005 levels by 2050. Board Member Barnish noted carbon neutral as referred to in the vision means balance rather than zero carbon. Mr. Phelan notes future discussion needs to occur on the vision and how it relates to specific goals. The term "responsible management" appeared through the policy and has been added to the draft vision statement. Goal #1 — Provide highly reliable electric service. The year, 2005, was added as a reference related to load management targets, replacing a percentage of load which varies annually. Board Member Graham requested a wording change from reliability "statistics" to reliability "performance." Discussion took place about the critical importance of attracting and retaining skilled electric workers. Salaries, succession planning and maintaining credentials are part of workforce management. A metric will be added 0 regarding recruitment and retention of skilled electric workers as referred to in the summary. Goal #2 — Support the community's carbon emissions goal of reducing the City's carbon footprint 20% below 2005 levels by 2020 and 80% by 2050. A change was made to reflect the goal as the community's goal rather than Utilities' goal. Mr. Phelan expects changing the philosophy from 15% by 2017 to be the biggest topic of discussion in light of the new minimum requirement from the State of 10% reduction by 2020. After all of the voluntary programs and initiatives are implemented, renewable energy credits will likely still be purchased to meet the goal. Board Member Barnish requests wording to establish a cap on intermittent renewables on the system and allow only a certain level of renewables on the system before a dispatching system is required. Intermittent renewables of 20-30% are designed to work on system reliability. The point on renewables in the summary document will be modified to read "renewables to reach carbon goal without compromising reliability." A point will be added under bullet #3 to state "include dispatchable renewables as part of the portfolio to maintain system stability and reliability." This will reduce the need for future base load generation. Goal #3 — Enhance local economic vitality. Points were added under bullet #1 to define financial health metrics. For bullet #2, Board Member Barnish suggested emphasis on comparison toward "like systems" (i.e., municipal utilities). A metric will be developed in the future to reflect the affordability of electric bills for Fort Collins Utilities customers. The Board gave permission to share the policy with the Air Quality Board and Natural Resources Board next month with the proposed changes. The Climate Action Plan will be discussed at the August 26 Council work session, and Mr. Phelan anticipates discussion of the Electric Energy Policy to occur at the same meeting. Timeline: An energy efficiency briefing will be given to Council to follow up on previous questions at the September 9 work session. Staff will bring this back to the Electric Board at their August 20 and September 17 meetings. The policy will be discussed at the September 23 Council work session and will go before Council with the Climate Action Plan at the October 21 regular meeting. Adiournment The meeting was adjourned at 9:26 p.m. following a motion to adjourn by Board Member Graham. Submitted by Robin Pierce, Executive Administrative Assistant Fort Collins Utilities Approved by the Board on 2008 Signed h Robin Pierce fwrlwa DaTtc 10