HomeMy WebLinkAboutElectric Board - Minutes - 04/06/2011Fort Collins Utilities Electric Board Minutes
Wednesday, April 6, 2011
Electric Board Chairperson City Council Liaison
Steve Wolley, 288-0317 Lisa Poppaw, 223-4136
Electric Board Vice Chairperson Staff Liaison
Edward DeCourcey, 206-9996 Brian Janonis, 221-6702
Roll Call
Board Present Chairperson Steve Wolley, Vice Chairperson Ed DeCourcey, Board
Members Peggy Plate, John Graham, John Harris, and Steve Yurash
Board Absent Board Member Tom Barnish
Staff Present Brian Janonis, Steve Catanach, Patty Bigner, Tom Rock, Bill Switzer, Jenny
Lopez-Filkins, Ellen Switzer, John Phelan, Kraig Bader, Harriet Davis, and Robin Pierce
Guests Lynn Adams, Levidy Adams Consulting; Scott Burnham, R. W. Beck Inc. (an
SAIC company); Bob Langenberger, Western Area Power Authority; Jason Frishie and
John Bleem, Platte River Power Authority; Eric Sutherland
Meeting Convened
Chairperson Wolley called the meeting to order at 5:30 p.m.
Public Comment
Eric Sutherland expressed concern that the 2011 rate increase and cost of service study
the increase was based upon used an approximate rate structure for Platte River Power
Authority (PRPA) rather than actual costs.
Approval of March 2, 2011, Minutes
Board Member Graham moved to approve the minutes of the March 2, 2011, minutes.
Board Member Yurash seconded the motion, and it passed unanimously.
Vice Chairperson DeCourcey suggested a means to track open action items to resolution.
A section will be added to the minutes to track items.
Platte River Power Authority Draft Integrated Resource Plan
(Presentation available upon request)
John Bleem, PRPA customer services division manager, presented the Draft PRPA
Integrated Resource Plan (“Plan”). The Plan was developed in coordination with its
owner munipalities (Fort Collins, Estes Park, Longmont, and Loveland). It focuses
primarily on the five-year planning period from 2012-2016 and provides information
related to resource acquisitions to meet customers’ future electrical energy needs,
including capacity and energy supply resources, renewable energy, and demand side
Electric Board Meeting Minutes
April 6, 2011
management
(DSM).
Contingencies
are
included
in
the
Plan
in
the
event
the
Rawhide
power
plant
goes down.
-
No new
firm
resources
are
needed
until
approximately
2020.
-
New
renewable
energy
resource
needs
are
anticipated
in
the
2015
time frame.
Purchases
will
depend
on
direction
from
the
cities.
All
cities
are
buying
more
renewable resources
than
they
need due
to
city
policies.
-
Final Plan
approval
Rate Design Philosophy and Principles
(Presentation available upon request)
Scott Burnham, R. W. Beck, Inc. and Lynn Adams, Levidy Adams Consulting presented
information on philosophy and principles for Utilities’ strategic financial services. Once
a group of consultants and staff began to look into the topic of rate design, it was decided
to study our rate philosophy and principles before going to Council.
Strategy: Take a long-term view to prevent making short-term decisions that conflict
with long-term goals. Rate design must reflect existing strategic direction, vision, and
values. Financial strategy ties to the economic aspect of a Triple Bottom Line approach,
and there is a significant stakeholder component.
Existing Policies:
- Section XII-6 of City Charter:
The City Charter allows the Electric Utility to recover its costs.
- City Finance Philosophy:
Sustainability and Triple Bottom Line; long-term vision; budgeting.
“Incrementally implementing projects...” is a fundamental piece to this approach.
- Climate Action Goals (also referred to Environmental Principle 11 from Plan Fort
Collins): It’s important to recognize there are two separate goals.
- Energy Policy:
Enhance local economic health
Core Principles:
1. Be founded on sound economic principles to ensure long-term financial integrity
and support the Triple Bottom Line direction; design rates that ensure an adequate
and sustainable revenue stream.
2. Demonstrate fairness and eqLntability with minimal subsidization while
considering low-income and other disadvantaged customers.
3. Promote efficient use of resources including providing incentives for conservation
by using clear price signals.
4. Maintain the high value of utility services.
5. Institute change in rate structure through gradualism.
6. Engage stakeholders with honest transparency by being as simple and
understandable as practical in rate design and forthright in communications.
(A biannLlal customer satisfaction survey has been used; the team is considering
other mechanisms to stay current with stakeholders, such as internet
studies and other timely, user-friendly tools).
7. In alignment with Plan Fort Collins, growth pays its own way.
8. Comply with Council policy, as well as applicable laws and regulations, and
existing obligations.
Electric Board Meeting Minutes 3
April 6, 2011
Objective: Rate design that supports customer options brought about by the changing
energy industry while preserving the financial integrity of the utility.
The team will return to the May 4 meeting to review specific rate design options. The
Philosophy and Principles of Rate Design go to Council at the May 10 work session; Rate
Design Options follow on June 14.
Board discussion:
Is high reliability based on customers’ or Utilities’ definition? Utilities have internal
goals on reliability (tvpica liv very high); i’hereas customers’ expectations ina’ be loiter
and they may not want to pay/br the additional costs associated with achieving very high
reliability. The consultant verified the definition of high reliability as used in this study
is based on customers’ expectations.
How will rates account for deterioration of the system/physical plant in such a way that
cost can be anticipated over the long-term? Asset management takes into account the
life cycle and replacement costs of our facilities. The Electric Utility will be undergoing
very comprehensive studies as to fLiture costs; we do not have a good number right now.
Currently, S8 million per year is budgeted for renewal and replacements, and we
anticipate the confirmed figure will be higher. The philosophical intent is to gradually
build a reserve with rate increases rather than steep increases.
What is the ilk’ cycle projection ofour initial cable? Thirty years ago, before the
manufacturers had diagnostics that we have today, they estimated the cables would have
another 10-15 years of life, depending on conditions. However, we now know the cables
have a longer life expectancy.
Would cables be replaced proactively prior tofbiiure? The Electric Utility will begin
using diagnostics to give a clearer picture of remaining life, and conditions are also
assessed based on similar cable failures.
How much is the City paying our consultants? We appropriate for a project each year,
which can last multiple years. The proposal addresses a variety of financial strategies
(initial work and rate design for all four utilities) at $135,000.
How can a rate be expected to accomplish all of this, yet keep the Utility solvent? Some
principles are contradictory to others, which compels us to look at the rate structure.
It’s obvious to detect interesting, competing goals (reducing carbon footprint and
charging batteries/br a coal plant), resulting in a lot of competition among the guiding
principles. If a rate could be designed to encourage customers to charge electric cars at 2
a.m., it’s not perfect, but the rate design is supported by these principles. The team
envisioned developing the rate options and phasing in various rate options over time, and
noting which principles each one supports.
Board members discussed weighting the objectives.
Electric Board Meeting Minutes 4
April 6, 2011
This is based Ofl an “as is” scenario currently. As PRPA changes their rate structure,
coordination would be necessary. Mr. Janonis noted this has been discussed at the PRPA
Board meetings; there is not consistency across all four partner cities, so it is
“unhundled”. Each city translates it differently into our own rate form.
Board inenibers requested some examples of rate applications that did not work r
others in the way they were intended. (Tracked as open item for resolution).
With four rate proposals (diffrrent for commercial and residential), one risk is that we
won ‘t bring in enough i-c venue to maintain the system. Another risk is we won ‘t generate
enough revenue to meet our costs. The impact of making the wrong decision is high amid
unfavorable. A board imiember asked about the methods that the team will use to take
risks into account and compare each proposal against the risks. The team will make sure
Utilities is not in unfavorable financial shape, and end users share the risks and costs. A
quantified risk assessment of every option is beyond the scope that R. W. Beck has been
asked to do.
One core principle is gradualism, which helps mitigate the risk to both the Utility and the
customer. If the Utility was buying on the market, it would he subject to drastic
fluctuations in the market due to disasters and other market influences.
Customer and Employee Relations Manager Patty Bigner asked the Board if they favor
having a guiding rate philosophy. The Board confirmed they favor this approach.
A board mneniber expressed concern that we ‘re spending money to create the philosophy.
The rate structure analysis is needed.
Chairperson Wolley sitggested adding a “risk aversion” category, similar to the other
princ-iples — an option to address this i’ithout going into a full risk assessment. Ms.
Bigner noted we could clarify the intent to insure sufficient revenue to support the Utility
extends well past our tenure. Utilities Rates Analyst Bill Switzer also noted many
options exist to buffer risk.
The board would like an intelligent discussion ofwhy each was chosen over the others
(refrrring to rate options). (Tracked as open item resolution).
Automated Metering Infrastructure (AM!) provides the ability to do timne-of-use rates.
Several members of Council pushed fur a rate structure change hefure AM! isfitlly
installed. Would we consider going ii’ith a rate structure c/mange befure AM!, and will we
get a clear picture of the cost (to the Utility) if we think another one is coining in a year
or two? if we go to time-of -use rate, ((in we collect information or would load profiles be
sufficient to figure it out? We do not have this data on the residential side, so we will
have to gather a year’s worth of data in order to design time-of-use rates around our
customer load.
Risk should also consider reliability thresholds.
A board member expressed support fur the investment of time and funds to develop the
guiding prim ip/es and phi/osoph’.
Electric Board Meeting MinLites 5
April 6,2011
Ms. Bigner noted that strategic alignment is part of the reason for the front end of this
document. Utilities’ world is complex and has many inputs and expectations to bring
everything into alignment. Mr. Janonis noted that originally, Council wanted to go to
tiered rates, and Utilities took a step back to look at the spectrum of options. Some
elements are specific to the Electric Utility and have been brought to this Board. The
Water Board will hear both the common elements and those specific to Water,
Wastewater and Stormwater utilities.
Motion: Board Member Graham moved that the Electric Board recommend that
the City Council consider approval of the proposed Financial Strategy and Rate
Design Philosophy, consistent with staff’s recommendation. Vice Chairperson
DeCourcey seconded the motion.
There was no further discussion on the motion.
Vote on the motion: It passed unanimously.
Wholesale Rate Structure
Mr. B]eem presented a summary of the PRPA Wholesale Rate Study. Rate structure
issues are more important at the retail level. PRPA has been underway with this study for
about 15 months and have used the services of a rates consultant (Mark Beauchamp with
Utility Financial Solutions) who is also familiar with Loveland’s and Longmont’s rate
structures. PRPA paid about $20,000 for the consultant work. It was noted this figure
does not correlate directly to the cost of Fort Collins Utilities’ paid consultant work;
staffs are structured very differently. The PRPA Board approved to move the structure
forward at the February meeting for seasonal pricing in the summer.
Why did PRPA consider a rate change now? Rate and cost alignment, and an update to
cost allocations were the primary drivers. It was discussed last at the end of regulation.
This time, PRPA felt the need to look at cost of service studies. They also have some
cost components that vary with time to consider and wanted to reduce some cost-shifting.
PRPA has considered designing the structure around the municipal loads and how the
cities use power.
Our last winter peak was in 1996, and the trend has changed to summer peaking now,
likely due to the addition of many more air-conditioned homes and a decrease in electric
heating. PRPA expects the high summer peak (annual) to increase 2 percent each year
based on an econometric model (population, weather, building permits, with population
most significant). Electric vehicles and low-cost storage would have a significant impact.
Board discussion:
How does this afJct Estes Park who doesn ‘t peak in the summer? They generally pay
less per unit of energy. Estes Park increases the most with a structure change; Fort
Collins remains essentially the same (0.1 percent increase). Loveland and Longmont
would decrease slightly.
Electric Board Meeting Minutes 6
April 6, 2011
The rate proposal will go to the PRPA Board in May. Mr. Catanach and Mr. Switzer
were both on the proposal team, along with representatives from all the cities.
What is “load Jbllowing”? The portion is selected by an average of load at all times, and
then the rest follows the load.
This is a rate-recovery view to think of in terms of dollars... recovery of fixed costs that
must be paid. Fixed costs are charged 75 to 25 percent based on base-load and load
following portion model.
Smart Meter Fort Collins Vendor Selections
Mr. Catanach reported that Siemens/E-Meter was chosen as the vendor for the Meter
Data Management System and Elster for the Automated Metering Infrastructure system.
Business process mapping began today to identify those impacted by the new metering
system. At this time, the project is on schedule and on budget.
Routine Updates
PRPA (Board Member Yurash): Nothing to report.
Capitol News (Vice Chairperson DeCourcey): Vice Chairperson DeCourcey will assume
this reporting starting with the next meeting.
Green Building Prograin (Board Member Graham): It passed on second reading on
March 22 and is in the next stage of implementation planning. Code development is
being transitioned to the Development Review office. There will be no further reporting
on this program to this Board.
Staff Reports
Utilities Financial Operations Manager Ellen Switzer provided a monthly Financial
Report was included in the packet. Ms. Switzer noted purchase power went up and
kilowatt hour sales decreased; she is working to understand this change.
Other Business
None
Future Agenda Items
None
Open Items Tracking
Open Item Related to Agenda Responsible Party to Date Resolved
Description Item/Date Report Back
Request for unsuccessful April 6, 201 I-Rate Patty Bigner/Beck Team
rate applications that did Design Philosophy
not work as intended and Principles
Discussion on why each same same
rate option was chosen is
desired
Electric Board Meeting Minutes 7
April 6, 2011
Adjournment
The meeting was adjourned at 7:49 p.m.
Submitted by Robin Pierce, Utilities Administrative Services Supervisor
Fort Collins Utilities
Approved by the Board on
77)’244
, 2011
Signed
5/
/1
/
Board Secretary Date
Electric Board Meeting Minutes 8
April 6, 2011
and
submittal
is
expected
in
May
2011.
Plan
recommendations
include:
-
Continue
demand
side
management
programs.
-
Implement
the
Renewable
Energy Supply
Policy.
-
Update
planning
criteria
for
adding
new
firm
system
resources.
-
Monitor/study
regional
developments.
-
Continue
contingency
planning.
Board
discussion:
Sonic
/iarties
are
buying
their
own
photoi’o/taic
resources.
Can
these
resources
be
included
in
our
portfiIio?
The
associates Renewable
Energy Credits
(RECs)
have been
purchased
and
accounted
for;
they have not
been
included
in
the
PRPA
count.
City
solar
provides about
I
,000
megawatt
hours.
There
are
about
fifty DSM
programs.
Some
programs
are
common
to
and
offered
in
all
four
partner
cities.
PRPA
and the
partner
cities
each
pay
a
portion
now
of
“common”
programs. Energy
efficiency
programs
are
funded
to
$7
million
in
2011.
Are
other
transmission
resources
planned?
PRPA
will
complete
a
10-year
transmission
plan
in
about
18
months. More
transmission
may
be
needed
depending
on
developments
at
the
Rawhide power
plant.
What
is
the
cost
or
va/tie
o/pushing
the
next
resource
to
2020?
It
is
relatively
small,
as
the
next
resource
is
likely
to
be
a
peaking
unit
which costs
very
little
to
run.
Wind
power
is
being
managed
by
Xcel
Energy.
PRPA
is
in
two
balancing
authorities;
Western
Area
Power
Authority (WAPA) (current
wind;
does
our
balancing)
and
Xcel
Energy.
Is
there
any
advantage
to
PRPA
doing
the
balancing?
It’s
a
balancing authority
function,
and
PRPA
is
not
a
balancing
authority.
Those
are
separated services
now,
so
rates
apply
to
ancillary
services.
The price
to
pay
the
balancing
authority
to
perform
this
function
is
much more
affordable
than
PRPA taking
over
this
role.
It
would
be
expensive
to
bring
that
capability
into
the
system.
Board
members
may
submit
written
feedback
to
Mr.
Bleem
at
PRPA,
or
to
Fort
Collins
Utilities through Utilities
Executive
Director
Brian,
Janonis
or
Light
and
Power
Manager
Steve
Catanach.
Feedback
will
be
shared
with
the
PRPA Board.
Electric
Board
Meeting
Minutes
2
April
6,
2011