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HomeMy WebLinkAboutEnergy Board - Minutes - 08/10/2023 ENERGY BOARD August 10, 2023 – 5:30 pm 222 Laporte Ave – Colorado Room ROLL CALL Board Members Present: Bill Althouse, Thomas Loran, Marge Moore, Bill Becker, Alan Braslau, Jeremy Giovando, Vanessa Paul, Brian Smith (remote) Board Members Absent: Steve Tenbrink OTHERS PRESENT Staff Members Present: Christie Fredrickson, John Phelan, Lance Smith, Phil Ladd, Kendall Minor, Cyril Vidergar, Javier Camacho (PRPA), Masood Ahmad (PRPA), Paul Davis (PRPA), Leigh Gibson (PRPA), Nick Combs, Chad Crager, Rhonda Gatzke, Davina Lau Members of the Public: Sue McFaddin, Chelsea Friel, Ivan Chavarria, Jenny Garside MEETING CALLED TO ORDER Vice Chairperson Paul called the meeting to order at 5:30 pm. ANNOUNCEMENTS & AGENDA CHANGES None. PUBLIC COMMENT None. APPROVAL OF MINUTES In preparation for the meeting, board members submitted amendments via email for the July 13, 2023, minutes. The minutes were approved as amended. PLATTE RIVER INTEGRATED RESOURCES PLAN Javier Camacho, Platte River Power Authority Masood Ahmad, Platte River Power Authority Paul Davis, Platte River Power Authority Mr. Phelan advised the Board to keep in mind that the Integrated Resource Plan (IRP) is a significant milestone in the planning process, but the process as a whole has become much more continuous (as opposed to periodic). Platte River’s IRP relates to a number of Fort Collins’ goals; the community carbon goal of 50% reduction by 2026, 80% by 2030, and carbon neutral by 2050. Historically the electricity portion of the community carbon inventory has been about 50%, but at the same time it is the area where we have made the most progress and the largest factor is the change in our electricity mix that has already happened to date. Platte River Power Authority is a not-for-profit, community-owned public power utility that generates and delivers safe, reliable, environmentally responsible, and financially sustainable energy and services to Estes Park, Fort Collins, Longmont and Loveland, Colorado, for delivery to their utility customers. Mr. Camacho said the relationship between the wholesale provider and the end-consumer is changing with ENERGY BOARD REGULAR MEETING the addition of renewable energy. This determines how much power to generate, control, and manage and also where Platte River’s vulnerabilities are. Platte River is committed to decarbonizing their resource portfolio without compromising their three foundation pillars: reliability, environmental responsibility, and financial sustainability. Platte River’s Resource Diversification Policy was adopted in 2018 by Platte River’s Board of Directors. The RDP provides guidance for resource planning, portfolio diversification and carbon reduction. The goal is to support owner community clean energy goals, proactively working toward a 100% noncarbon resource mix by 2030 while maintaining the foundational pillars of providing reliable, environmentally responsible, and financially sustainable energy and services. Some pieces of the RDP that Platte River is working on or aware of are: transmission and distribution infrastructure investment must be increased, transmission and distribution delivery systems must be more fully integrated, improved distributed generation resource performance, technology and capabilities of grid management systems must advance and improve, advanced capabilities and use of active end user management systems, generation, and transmission and distribution rate structures must facilitate systems integration. Mr. Camacho pointed out that the technology for long-duration battery storage has not evolved to the level necessary in order to fully rely on that resource. The 2024 IRP builds on the 2020 IRP and resource planning and modeling that occurred in 2021 and 2022. Since 2018 Platte River: added 225 MW of wind from Roundhouse, announced the decommission of its coal resources, developed a distributed energy resources strategy, filed the 2020 IRP, added 22 MW solar with 2 MWh battery at Rawhide Prairie, and will add 150 MW solar power through the Black Hollow purchase agreement, additional solar and energy storage RFPs, filed Clean Energy Plan with the state of Colorado, which requires all electric utilities to achieve 80% carbon reduction by 2030, and entered into the Southwest Power Pool Western Energy Imbalance Service market. Mr. Camacho displayed a graphic showing the growth in non-carbon resources today (33.3%) compared to 2018’s portfolio (24.8%). By 2030, Platte River expects their portfolio to be optimally composed of 88.4% non-carbon resources. Platte River is looking to conclude the IRP by Spring of 2024 and publish it that same summer. Community Engagement will take place throughout the entire process. Mr. Ahmad refreshed the Board on what an IRP is. He explained an IRP is a planning process which integrates customer demand and distributed energy resources (DERs) with utility resources to provide reliable, economical, and environmentally desirable electricity to customers. An IRP is typically developed for the next 10-20 years and updated every few years in between. It assists with preparing for industry changes including technological progress, consumer preferences, and regulatory mandates. It is also required by Western Area Power Administration (WAPA) every five years. WAPA requires a short-term action plan and an annual follow up on plan execution; the last IRP was submitted in 2020. After Platte River factors in the input assumptions (load forecast, DER potential, power price forecast, resource cost forecast, extreme weather models, renewable profiles) they use the Plexos Model, an energy market simulation platform, to help develop the portfolio and do reliability testing. Platte River is a small utility so there is a need to rely on consultants and experts due to the complex nature of modeling an uncertain future. Technology will play a significant role in helping Platte River achieve its goals. Consultants will evaluate the cost curves and maturity of the technology to identify when it will be reliable without taking too much risk. ENERGY BOARD REGULAR MEETING Mr. Ahmad said the challenge with renewable resources is that we need electricity every second of every day, but a renewable resource may not always be available. There are extreme times where there is no sun and no wind, also known as “Dark Calm.” In order to provide renewable energy for all hours of the day, we need long duration energy storage. The technology is in development right now, but it is not readily available right now. Board member Braslau noted that the lack of long-term storage is a cost issue, not a technology issue. Mr. Ahmad agreed, the technology exists but it is not reliable enough or financially viable before 2030. Board member Althouse asked about methane storage at the landfill, adding a digester and converting organics. Mr. Davis said Platte River looked at that option at one point, and at the time it was enough gas to support about 3 MW of generation. Mr. Phelan said Larimer County was looking at options for digesters, but he is unsure where that stands currently. Mr. Masood added that Platte River does not store gas at the plant site. Board Braslau notes that none of this will happen unless Platte River has the political will see it through; they should be spearheading that. Mr. Masood said Platte River is looking at the least cost options, the economics have to make sense. Board member Althouse said United Power is the most progressive utility in North America and we should be looking to them as an example on how to adopt innovative technology to deliver reliable and beneficial power. Board member Loran asked how confident Platte River is that they will meet the carbon goal. Mr. Camacho said while they can’t quantify their confidence as a specific number, Platte River is very confident they will exceed the 80% state mandate. Mr. Loran feels like this is a marketing message, he is concerned because there is a 12% gap that needs to be addressed. Mr. Masood said planning and projections are one thing, but he anticipates confidence will increase as the resources are procured. Distributed Energy Resources (DERs) save energy and save money by using energy more efficiently. Electrification reduces greenhouse gases by replacing fossil fuel use with increasingly decarbonized electricity. Having flexible DERs can help form a Virtual Power Plant, or VPP. A VPP is a portfolio of flexible DERs that can provide customer and electric system benefits by responding on a scheduled basis or in near real time to manage the electric supply-demand balance. VPPs shift energy to align electric use to renewable availability and to decarbonize the electric system in a cost-effective manner. It relies on advanced information systems to enable communication, coordination and appropriate, secure data sharing among customers who have participating DERs, DER original equipment manufacturers, vendors, or aggregators, and the electric systems operated by the owner communities’ distribution utilities, Platte River, and the regional electricity market. VPPs need communication, coordination, and appropriate, secure data sharing. This includes visibility, predictability, control or dispatch (ability to achieve flexible operation through direct utility control and provide price signals to allow customer control), optimization, and program management. The DER integration timeline has some contingencies on Platte River’s DER Roadmap and the pace of system integration. Platte River is currently working on a DER forecast and potential study, conducting VPP/DERMS planning: gap assessment and roadmap, a DERMS request for proposal (Q3/4 2023). Beginning in 2024 (as well as up and through 2028) there will be a VPP/DER system implementation/integration with Fort Collins DERMS, a flexible DER pilot program planning (2023 - 2024), flexible DER pilot programs, and finally a flexible DER programs scale. Board member Loran asked where Platte River fits into the distribution networks. Mr. Davis said this is quite a challenge and they are working with the communities to put it all together. Mr. Phelan added all four communities are very different sizes and at very different states in the process. Platte River partners ENERGY BOARD REGULAR MEETING with many of the communities to provide services, such as Efficiency Works. At times the lines will be blurred between communities and acting as if we are more integrated than we have been in the past. Board member Moore wondered if the communities all being in different places will ultimately hold back the most progressive changes. Mr. Davis said he doesn’t see that as an issue currently, but it could be too early to say because we are at the point of defining our target technologies. Platte River is trying to put together a more comprehensive system that gets us all to 2030, there is time. CAPITAL IMPROVEMENT DEBT ISSUANCE Lance Smith, Director, Financial Planning & Assets, Utilities Mr. Smith explained the $66.1 million debt issuance is combined of) a $40 million appropriation request for Light & Power capital improvements and $25.5 million for the Connexion buildout. This was presented to the Council Finance Committee on July 6th and will be brought before City Council (and the Electric Telecommunications Enterprise Board) on August 15th. The issuance has a fixed interest rate with 21- year repayment, Light & Power will make even debt payments until 2044 and Connexion will pay interest only for 19 years (to maintain a levelized debt service payments) issuance and pay off the balance in 2044. At the January 10, 2023, City Council Work Session meeting the need was identified for additional funding to complete the network buildout and customer ramp-up. The outlook still remains the same: Approximately $20 million of additional funded is needed, $16 million for capital buildout and $4 million for near-term operations through 2024. December 2024 is expected to be the point of maximum need with 2025 projected as breakeven (revenues covering capital, operating expenses, and debts service costs). Connexion has invested the $20 million appropriation from Light and Power reserves. In March 2023, City Council authorized Connexion to use bond proceeds to reimburse expenditures related to construction. In October 2022, as the budget was being finalized, inflation made it necessary to update the 10-year forecasts before presenting them again to this Board (5%). There has been a near-term need for some debt financing of L&P capital investments planned for previously. Proceeds from this issuance will be appropriated through off-cycle appropriations and the 2025-26 Budgeting For Outcomes for Light & Power. Ahead of the 2025-26 Budgeting For Outcomes process, the long-term financial plan will be updated for Light & Power. Part of this update involves revisiting the 10-year Capital Improvement Plan. Preliminary updates indicate there will be near-term capital needs: $57 million for new development including $23 million for a new substation, $28 million for renewal or replacement of existing assets, $7 million for Annexations that have already occurred, $7 million for Our Climate Future investments through Energy Services, $20 million for transformers to serve new customers as well as new load growth from beneficial electrification by existing customers. Board member Loran asked how exposed Light & Power is if Connexion doesn’t make their revenue targets. Mr. Smith said Connexion’s debt service is $10 million, if they were unable to pay any of that there would need to be a rate adjustment (up to 7%) to compensate for that. Board member Becker said he is struggling with how intertwined these two pieces are. Capital improvement is business as usual and not changing how the utility is run, but he feels he and the Board are being asked to approve things that go beyond what he has knowledge of. Board member Braslau said it seems as though the ratepayer is subsidizing things that they shouldn’t be, these costs should be paid for through development fees. Mr. Smith advised this is the way the City chose to finance it. Mr. Braslau said the electric fund has no control over the governance mistakes that have been made and Light & ENERGY BOARD REGULAR MEETING Power is paying the price. Board member Althouse agreed with the discussion, the pace of technology improvements in the energy sector is rapid. Rates should be going down with the deployment of innovation. He does not feel comfortable supporting these numbers without signaling the deployment of additional innovation. Mr. Smith clarified that he is not asking for the Board to support a rate increase at this time. Board member Giovando asked if the Connexion debt issuance was anticipated or if this newly needed funding. Mr. Crager said voters originally approved $150 million, and initially Connexion utilized $130 million of that $150 million threshold. After some unexpected issues arose, they borrowed $20 million in early 2022 from Light & Power reserves. Then, in summer 2022 the demand for Connexion surged concurrently with a huge labor shortage; installation lead times were 8-10 weeks. Connexion has since caught up and installations are now on a two-week waiting list. They also have many bulk installations, such as apartment complexes with Connexion exclusively, coming down the pipeline. Mr. Crager said he mentioned all this to instill confidence, it has been frustrating to get to this point, but their financial modeling shows this should be the last time they will be asking for additional funding. Vice Chairperson Paul asked when the taxpayers can expect a return on the investment. Mr. Crager said he expects Connexion to be in the black by 2026. Ms. Paul asked if there will be a rate decrease in 2026. Mr. Crager said no, bonds will not be paid back until 2042. Ms. Paul commented that the marketing around the pricing structure feels like a betrayal to the consumer (after the rate increase earlier this Spring). Mr. Crager clarified that it was never promised that there would never be a rate increase, there are many factors that influence monthly cost for the end consumer. He said it is their goal to always be transparent and thoughtful before increasing the price. Board member Braslau agreed with Ms. Paul and said the community was promised that there wouldn’t be marketing games, it was touted as a benefit of choosing Connexion over a competitor. Mr. Braslau also believes that the ratepayers are subsidizing this, and by borrowing from the reserves it is in essence cheating the voters. The debt issuance was to build out, there are legitimate reasons to be concerned and criticize this. Board members asked for additional clarification on how much money Connexion has requested to date. Mr. Smith said there was a debt issuance of $130 million, then Light & Power lent $20 million from reserves, and now a $20 million issuance (which will meet the $150 million bonding capacity approved by the voters). Board member Braslau said that is $20 million over what the voters approved. Mr. Smith said yes, though the language was around debt issuance. Mr. Phelan said the loan from Light & Power reserves is more or less considered independent of the bonding capacity. Mr. Minor said the Board is making valid points, the current staff inherited Connexion as it is. At the end of the day staff understands and is not trying to dispute anything that’s been discussed; however, this is the current situation that we are in, and it is essential to make sure Connexion succeeds. Going forward he hopes to see honesty and transparency. Vice Chairperson Paul said tonight’s presentation does not address how things will change; the multiple requests for funding do not instill confidence that there won’t be another request in another year or two. Connexion had previously come before the board to give a operational update without mentioning any price increase, only to announce an increase to its customers the two business days later. Mr. Crager said the new financial model is much more conservative, but also some of this information is competitive so the details can’t be shared publicly. Again, he said staff anticipates Connexion to be cash flow positive by 2026. While they do support the appropriation request for Light and Power, Board members spent time ENERGY BOARD REGULAR MEETING discussing their hesitance to support an additional funding request for Connexion. The mistakes of the governance should not be the ratepayer’s responsibility. They elected to draft a memo to send to Mayor Arndt to express their concerns. Board member Becker moved the Energy Board support the issuance of $40 million in revenue bonds from the Electric and Telecommunications Enterprise Fund to support Light & Power capital improvement needs, which supports existing and new customers, but the Board does not feel they have enough information or have the purview to support the funding for the completion of the Connexion build out. Vice Chairperson Paul seconded the motion. Discussion: None. Vote on the motion: It passed 7-1, with 1 absent. OUR CLIMATE FUTURE METRICS DASHBOARD UPDATE John Phelan, Energy Services Manager & Energy Policy Advisor Mr. Phelan hopes to revisit the framework that Board member Loran created and get the Board’s thoughts on what metrics they would like to see consistently reported on and what cadence those are available. Most metrics are reported out annually and the updates come through mid-year. Mr. Phelan advised that we only have influence in a few places. Ms. Fredrickson reminded the Board that though staff, Council, and the Board may have limited capacity to influence these things, it is still impactful to study and identify any gaps gaps and then bring attention to those issues because it will ensure that everyone is doing everything within their ability to enact change. Board members are not only community members but also experts in their fields. Board member Althouse wondered how electrification became the only word and perceived only method to reduce oil and gas usage. There are many other ways to cut out oil and gas. Board members agreed to spend more time discussing these metrics at their work session in two weeks. BOARD MEMBER REPORTS Board member Moore went to the Confluence: Colorado water summit and & Net Zero cities. She said it was really interesting discussion around the upper basin of the Colorado River. FUTURE AGENDA REVIEW The Board’s September meeting will have a presentation to introduce a community wide solar visualization tool, as well as a stakeholder update on Building Performance Standards. ADJOURNMENT The Energy Board adjourned at 8:53 pm. Utilities – Energy Board 700 Wood St. PO Box 580 Fort Collins, CO 80522 970.221.6702 970.416.2208 - fax fcgov.com M E M O R A N D U M DATE: August 14, 2023 TO: Mayor Arndt and City Councilmembers FROM: Vanessa Paul, Energy Board Vice Chairperson RE: Electric and Telecommunications Enterprise Fund 2023 Revenue Bond Issuance The Energy Board would like to have a chance to communicate their thoughts on the request for a $66.1 million combined debt issuance for Light & Power and Connexion. Connexion and Utilities Finance staff presented the request at the August 10, 2023, Energy Board meeting. The Board voted 7-1 (with one absence) to support the issuance of $40 million supporting Light & Power’s capital improvement needs, but the Board does not feel they have enough information or have the purview to support the funding for the completion of the Connexion build out. While the Energy Board is grateful to remain involved and informed on this issue, the Board feels there has been a historical lack of transparency about the usage of Connexion bond funding now and in the future. The Board also questions if the request to weigh in on Connexion financing is within their purview, because in the past they were explicitly told Connexion related items are not within their codified duties as an Energy Board. The Board would also like to reiterate that they are supportive of Connexion as a whole and want the service to succeed, but they hope there will be more transparency and guidance going forward. Thank you for the opportunity to review and comment. Respectfully submitted on behalf of the Energy Board, __________________________ Vanessa Paul, Vice Chairperson Energy Board cc: Steve Tenbrink, Energy Board Chairperson Phillip Amaya, Director of Operations & Technology Lance Smith, Director, Financial Planning & Assets, Utilities DocuSign Envelope ID: 44D6EAD4-A9FE-4A35-9AD9-55EF08729D5F