HomeMy WebLinkAboutEnergy Board - Minutes - 06/08/2017Energy Board Minutes
June 8, 2017
Fort Collins Utilities Energy Board Minutes
Thursday, June 8, 2017
Energy Board Chairperson City Council Liaison
Pete O’Neill, 970-223-8703 Ross Cunniff, 970-420-7398
Energy Board Vice Chairperson Staff Liaison
Nick Michell, 970-215-9235 Tim McCollough, 970-305-1069
Roll Call
Board Present: Chairperson Pete O’Neill, Alan Braslau, Greg Behm, Margaret Moore, Bill
Becker, Amanda Shores, John Fassler
Late Arrivals: Stacey Baumgarn
Board Absent: Vice Chairperson Nick Michell
Others Present
Staff: Tim McCollough, Christie Fredrickson, Cyril Vidergar, Lance Smith, Charlotte Boney,
Christine Macrina
PRPA: Paul Davis
Members of the Public: None
Meeting Convened
Chairperson Pete O’Neill called the meeting to order at 5:30 p.m.
Announcements and Agenda Changes
Board members went around the room to introduce themselves.
Public Comment
None
Approval of May 11, 2017 Board Meeting Minutes
Amendments to the May 11, 2017 minutes were made by the Board Members and the minutes
were accepted as amended.
Staff Reports
(attachments available upon request)
Engage Volunteer Website Training
Charlotte Boney, Volunteer Program Manager
The City of Fort Collins had over 9,000 volunteers in 2016. The Engage website is a volunteer
management and registration system, and was originally developed by Natural Areas. It’s
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designed to track volunteer hours, and the City uses this information to measure the time
commitment for volunteers, rather than guessing based on meetings or events attended.
Ms. Boney displayed the website on a demo-profile, and gave the Board a brief tutorial on how
to navigate the website and where to log information such as volunteer research or meetings and
events attended. Ms. Macrina noted that she loads in the Board meetings for each board member
based on the approved minutes, so if there are no changes to the credited hours, then the Board
Members can leave the entered time as-is.
Chairperson O’Neill asked who can make assignments and who looks at user profiles. Ms.
Boney advised only Ms. Macrina can make event assignments, and that users can choose if their
profiles are visible to the public or anonymous. Mr. Baumgarn asked what the expectation of
using the website is, and Ms. Boney clarified their end goal is to accurately track volunteer
hours, so as long as the staff entry is accurate no change will be required by the Board Member.
Quarterly Financial Report
Lance Smith, Utilities Strategic Finance Director
Year over year, revenues continue to increase, but residential sales are slightly below budget
while commercial and industrial sales are slightly above budget. Year over year expenses are
down compared to previous years in system additions (where most of the Capital Work is being
completed until 2017), debt service, administrative services, energy services, and Light and
Power Operations; payment in Lieu of Taxes (PILOTs) are up because revenues are up. So far
this year, system additions and PILOT expenses are over budget, because overall sales are higher
than forecasted.
Over the past 10 years, Light and Power operating expenses have historically been above the
operating revenue. The Capital Improvement Plan addresses two additional substations planned
in 2022 and 2023. Mr. McCollough added these projections are sufficient for the short term, but
there is much work and planning to be done in the future.
The annualized trends over 10, five, and three years show a trend in total expenses above the
increase in price of wholesale electricity from Platte River. Administrative services expenses in
the general fund have increased greatly in the last three years, and it will be revisited in the next
budget cycle. Mr. Smith doesn’t anticipate positive operating income for the next few years.
Debt is a viable mechanism to pay for growth; however, Mr. Smith’s concern in the long term
financial models is maintaining a strong credit rating. Light and Power is rated AA (other
Utilities are rated AAA), and this is primarily due to a lack of debt history. The only outstanding
Light and Power debt is the Advanced Meter Fort Collins project, which will be paid off in 2020.
In the last 10 years, rate increases have primarily stemmed from purchased power, but some
years also come from the distribution system and energy services. Mr. Smith advised he is trying
to limit the rate increases to five percent annually, to help with rate fatigue.
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Mr. Smith explained there are several financial risks on the horizon, but the highest risk items
have a high likelihood and high consequence rating and he recommends mitigation planning for:
operating expense increases, asset life cycle management plans, and Platte River rate increases.
Some challenges Light and Power could face in the next 10 years include operating expenses,
Capital Improvement Plans, rate fatigue, Clean Power Plan, broadband, Climate Action Plan
initiatives, renewables technology, aging infrastructure, and others. Board members wondered
what the time is on the risk register list is and Mr. Smith clarified three to five years.
Wholesale Renewable Premium / Tariff 7
Paul Davis, Platte River Power Authority
(attachments available upon request)
Tariff 7 is the wholesale premium for renewable energy. The program started in 1998 with
individual prices per renewable resource, and in 2006 Platte River initiated a single price for a
blended portfolio of renewables. It is an optional rate for the Platte River municipalities to
purchase wind energy, and structured as a premium price that reflects wind costs minus wind
value. The total cost is Tariff 7 added to Tariff 1 (base wholesale rate). The RECs that come with
the energy are retired on the City’s or customer’s behalf. There is currently pressure on the Tariff
7 rate due to the value of wind dropping (market pricing is dropping), the cost of wind is rising
(older PPAs and Turbines), and rate-stabilization funding will run out in 2018. This means Tariff
7 will eventually need to rise by as much as 50%, or another way to look at it is: Tariff 7 plus
Tariff 1 will rise by about 15%. The current premium is $25.00 per MH hour, or $.025 per kWh.
Chairperson O’Neill asked if the first graph is showing three times more renewable energy in
Tariff 1 than Tariff 7, and Mr. Davis confirmed that is accurate and the data is for all four cities.
Fort Collins makes up about 72% of Tariff 7.
Wind value is estimated based on the cost savings or additional revenue it can provide. Cost
savings can be attributed to avoided peaker operation, avoided market purchases, additional
surplus sales, or reduced coal generation. In 2014, Platte River switched to the Aurora model, an
hourly model designed to model what would happen every hour of the year given a series of
pricing estimates. This showed hours sold on the market and hours backing down Craig.
Board member Braslau asked if natural gas plants are a viable alternative to coal; Mr. Davis
advised that it would require more investments into natural gas plants, because the price of
running those plants all the time currently would double the energy cost. Mr. McCollough added
that it would reduce the Tariff 7 premium, but in turn it would raise the Tariff 1 wholesale rate.
There are three basic resources in the Tariff 7 Portfolio: Medicine Bow Wind Farm, Silver Sage
Wind Farm, and REC purchases. Medicine Bow was originally owned by Platte River and the
project was maintained by a Vestas five-year (extended to 10 years) warranty. Platte River sold it
in 2013 after the warranty expired, but reentered a PPA to buy it back at a later date. This
resource supplies approximately 18,000 MWh per year, and is currently about $50 per MWh, but
projected to drop to $30 per MWh. Silver Sage has been a PPA since Platte River entered it. This
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resource supplies approximately 37,000 MWh per year, and is currently about $55 per MWh,
and projected to rise up to $65 per MWh. Unbundled RECs make up about 48% of the entire
portfolio. They are keeping the premiums low on both projects and supply about 50,000 MWh
per year.
Another option is to shift Tariff 7 resources into Tariff 1 and develop a new Tariff 7 portfolio
with new wind resources. The negative of this scenario is that it shifts the cost of energy to the
cities. The City of Fort Collins currently buys 72% of the load, and Loveland purchases less than
1%. Mr. McCollough added that the City would see an overall wholesale rate decrease as well as
decrease in their renewable supply. Board members wondered if three of the four cities would
lose out on wholesale, what is the incentive? Mr. McCollough advised he would go into a few
compelling reasons in his upcoming presentation. An additional option is to let Tariff 7 phase out
by reducing as supply declines and contracts end. They would add new resources to new version
of Tariff 7, which has more customer appeal. Retail considerations include non-contract sales
(customers currently have a choice to drop out of the program at any time), so retail pricing
could reflect current renewable costs.
Renewable Energy Commitments
Tim McCollough, Light & Power Operations Manager
Largely, there are customers making new 100% renewable energy commitments. As an
electricity supplier, the Utility needs renewable energy product to be able to provide to those
customers
There are a few goals driving the Utility’s decisions in investments toward renewable energy.
The Colorado Renewable Portfolio Standard (RPS) requires 10% of electricity to be sourced
from qualifying renewables for municipals—this has been achieved through Tariff 1 at the State
level. The City’s Climate Action Plan includes goals for community inventory carbon reduction,
relative to 2005. These goals imply major changes to the electricity mix but do not specifically
include renewable electricity goals. These GHG reduction goals are: 20% by 2020, 80% by
2030, and 100% by 2050. The 2015 Energy Policy provides guidance regarding the Utility’s
future electricity resource mix of 20% renewable electricity by 2020, and 2% of that should
come from local sources, and a maximum fraction of coal electricity of 60%.
In 2016, Fort Collins Utilities electricity resources, as provided by Platte River, were 32% from
non-carbon sources, with 14% from qualifying renewable sources. Specifically, Platte River’s
generation portfolio mix in 2016 was 65% coal, 19% hydro-electric, 13% wind, 1% solar and the
remaining 2% is a combination of natural gas and market purchases.
Several large customers within the City have made renewable energy commitments, such as
Anheuser-Busch InBev, Colorado State University, Hewlett Packard Enterprise, and Walmart.
AB InBev is committed to transition global operations to 100% renewable electricity by 2025;
CSU is committed to 100% renewable electricity by 2030; HPE is committed to source 50% of
its total energy consumption from renewable resources by 2025; Walmart is committed to
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sourcing 100% of its electricity from renewable energy and aims to produce or procure 7,000
GWh of renewable energy globally by 2020. Mr. McCollough noted this is by no means an all-
inclusive list, and that many other customers have made similar commitments.
Fort Collins Utilities has invested in a Platte River Tariff that provides a total of 76,000 MWh
per year towards renewable energy in our community. This tariff has been predominately
managed with our Green Energy Program with the customer paying an additional cost to
participate. Utilities Customer Accounts team has met with business customers to gauge interest
in pledging renewable. Currently, 38 businesses purchase 100% renewable energy through
Utilities, with another 18 that purchase blocks of renewable energy; and 47 businesses have solar
systems installed on-site to offset energy usage. Utilities is also aware of approximately 10
business customers who have officially pledged to reach 100% renewables and about 20 who
have expressed interest out of 6,000 business customers.
Currently, the Utility does not have enough renewable energy product if some of the key, large
customers decided to move to 100% renewable energy today. Alternative pathways include:
Virtual PPAs and Direct Retail PPAs (multi-state companies). Virtual PPAs are only possible in
regions with organized energy markets; they are transacted directly between the generating
facility and the corporate off-taker, but the crucial difference is that no renewable power is
physically delivered. The generation facility sells their renewable power directly to the grid and
receives the open market price and the project developer pays the difference to the off-taker
when the agreed-upon PPA price (or strike price) is below the market price; and vice versa. A
Direct PPA is an agreement made between a renewable energy generator and an end user in
which power produced by a wind or solar facility is physically delivered to power the corporate
buyer’s operations. Because the corporate off-taker actually takes title to the energy produced in
this type of deal, the final price for delivered power is a function of the contracted PPA price
plus transmission-related expenses. For a direct PPA to be possible, in general, the generating
facility and the company’s operations must be located within the same grid region and only
companies with operations in deregulated retail states can engage in this deal structure.
Many customers, both commercial and residential, have been using 100% renewable energy for
several years, sometimes over 10 years, under Tariff 7. However a number of industrial
customers dropped out of the Green Energy program after 2009. Because the Utility subscribes
to the level of energy needed at the time of sign up, for the most part they are locked into those
purchases for the remainder of the program contract. Some options the Utility is considering are:
allocating Tariff 7 based on a customer’s 12-month usage history, reselling locally purchased
solar, or change REC purchases for customers to allow them to retain those instead of selling
them back to the Utility. Board member Braslau commented renewable energy would have to be
increased significantly to meet the goals of the Climate Action Plan. Mr. McCollough agreed,
and noted this is a very small drop in the bucket at this time; Tariff 7 only accounts for 5% of
total energy, and other renewables make up the other 10%.
In the future, the Utility plans to continue conversations with customers to understand their goals
and how they intend to meet them. Additionally, continuing to partner with Platte River on
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customized resourced planning, new wind opportunities, joint community solar, and Tariff 7
adjustments. Board member Shores asked if utility customers are interested in locally sourced
renewables. Mr. McCollough explained the Utility has some data collected through Platte
River’s community solar project survey, and many of the customers responded that of all the
qualifiers, locally sourced was the least important – price was the most important.
Board member Moore asked if personal wind turbines on residential properties are allowed in the
City; Mr. McCollough advised most customers will run into zoning issues so they will typically
not be permitted.
Subcommittee Appointments
Pete O’Neill, Energy Board Chairperson
Chairperson O’Neill announced that he received new information from the City Attorney’s and
City Clerk’s Offices clarifying that subcommittee meetings do not need to be public, but he
reminded the board that they can only provide input to the full board, no independent decisions
can be made. Subcommittees should also report their progress each meeting as a standing agenda
item.
Chairperson O’Neill made the following Subcommittee Appointments:
Future State of the Electric System Design: Vice Chairperson Nick Michell (interim
subcommittee Chair), Amanda Shores, Greg Behm
Electric Rate Philosophy: Alan Braslau (interim subcommittee Chair), Chairperson Pete O’Neill,
John Fassler.
Board Member Reports
Board member Moore mentioned that the Homebuilders Association held a meeting with
developers, builders, State legislation representatives, about water. There are significant gaps in
the water needs and how to encourage reduced water usage.
Board Member Braslau said the Climate Action Plan Team launched a survey that board
members should have received; he believes the survey came off very bias for the branding of
Fortify Fort Collins. He thinks the statistical value is questionable because it’s self-selected
sample audience. He also attended a meeting with sustainability and there is a movement to get
Platte River to 100% renewable through the four cities.
Sunday service on certain transit lines has been approved. Board member Baumgarn encouraged
the Board members to ride the bus to promote Sunday service and ridership.
Future Agenda Review
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The Executive Director’s update is only thing scheduled for July right now, but staff is actively
seeking more agenda items. Board Member Moore asked about Broadband; Mr. McCollough
said Broadband is still a potential topic but it’s currently in limbo for the time being because of
the state of the project. Council is considering adding ballot language on the November ballot,
but it may not be presented to any Boards or Commissions before that happens.
Adjournment
The meeting adjourned at 8:37 p.m.
Approved by the Energy Board on July 13, 2017
________________________________ ______________
Board Secretary, Christie Fredrickson Date
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8/18/2017