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HomeMy WebLinkAboutEnergy Board - Minutes - 08/10/2017Energy Board Minutes August 10, 2017 1 Energy Board Minutes August 10, 2017 Fort Collins Utilities Energy Board Minutes Thursday, August 10, 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 , Vice Chairperson Nick Michell, Alan Braslau, Greg Behm, Bill Becker, John Fassler, Stacey Baumgarn Late Arrivals: Margaret Moore Board Absent: Amanda Shores Others Present Staff: Tim McCollough, Christie Fredrickson, John Phelan, Lance Smith, Randy Reuscher, Justin Fields, Mike Beckstead, Kevin Gertig, Lisa Rosintoski PRPA: Brad Decker, Paul Davis, Mike Jones Members of the Public: Fred Kirsch, John Graham, Rick Coen Meeting Convened Chairperson Pete O’Neill called the meeting to order at 5:27 p.m. Announcements and Agenda Changes None Public Comment Fred Kirsch, Director of Fort Collins Community for Sustainable Energy, said they go door-to-door and talk to residents about energy issues. They’ve been talking to people about adding an element to the solar program in town, a Rent Your Roof program. They’ve spoken to about 1,300 people so far, and he had a meeting with Councilmember Summers this morning, who is interested. Rick Coen said the term “cross-subsidization” has come up recently, and said he believes that process is valid when we don’t have a shared community goal. He believes the City should keep tools to incentivize customers, but rather than considering it cross-subsidization, it should be considered a thank you to those members of the community who have tried to help the community reach its goals. Approval of June 8, 2017 Board Meeting Minutes Amendments to the June 8, 2017 minutes were made by the Board Members and the minutes were accepted as amended. Staff Reports (attachments available upon request) Energy Board Minutes August 10, 2017 2 Energy Board Minutes August 10, 2017 Light and Power Metrics Dashboard Tim McCollough, Light & Power Operations Manager Mr. McCollough advised the Light and Power Metrics Dashboard is his opportunity to give visibility into what’s happening within the Utility. On July 19, Fort Collins and Platte River both set new peaks (310,918 kW and 660,530 kW, respectively); Fort Collins’ peak this year was 4MW more than last year. Efficiency Program Portfolio Evaluation John Phelan, Energy Services Manager Staff is currently in the middle of the evaluation work. Interviews with participating customers will begin in mid-August, so there aren’t results to share just yet, but Mr. Phelan hopes to come back in November with a more thorough presentation of the evaluation. Mr. Phelan also provided the newly printed 2016 Energy Policy Annual Update, which will go in the City Council packet next week along with Climate Action Plan and Water Efficiency Plan updates. Broadband Mike Beckstead, Chief Financial Officer (attachments available upon request) Mr. Beckstead advised the City’s Strategic Objective as it relates to Broadband is to encourage the development of reliable, high speed internet services throughout the community. The two options the City has been focused on are a third party option and a retail option. An RFP was issued on May 30th and all responses were due by July 5th. The City is currently still exploring the third party option, and ideally looking for a partnership to share the financial risk and investment. Mr. Beckstead said he is not confident they will find that partnership, so most of the dialogue is centered on the retail option. He encouraged the Board to read the Broadband Business Plan available on the City’s website. Mr. Beckstead hopes the vote in November will not be emotional; he wants voters to be informed and feel confident in their decision. Mr. Beckstead presented a take rate survey, with a pricing strategy posted against Comcast. Price sensitivity exists in the market, 73% of consumers said they would switch to the City’s service if Comcast were priced at $110 per month and the City was priced at $70 per month. However, there are still consumers who are loyal to current internet service providers within the community—19% of current Comcast customers said they would retain their current service even if the City was offering service at $70 per month and Comcast was priced at $110 per month. There will be significant borrowing in the first year, and it will take 14-15 years to pay back the entire project. The total investment of $131 million includes $122 million in Bonds ($80 million in network construction; $29 million in equipment, facility, installation, and engineering; $13 million in bond issuance and capitalized interest) and $9 million in working capital. The current Light and Power Capital Improvement Plan and Long Term Financial Plan both indicate there is adequate debt capacity to support revenue bonds; this assumes Light and Power can support their needs without debt financing. There are strengths and risks with the retail model option. Strengths include the City Brand and customer service, control of construction, control of customer service, and strong local support. In addition to Energy Board Minutes August 10, 2017 3 Energy Board Minutes August 10, 2017 financial risks, Mr. Beckstead also pointed out several other risks, including competition, political risks (legislative changes), governance, and technology. Transparent: entire community will not be up and running within one year. One risk mitigation option is a fee or tax that generates a guaranteed revenue stream ($15-$20 per month, per account, or .35%-.40% tax). This would reduce competitive and market share risk, and could also offer service at $30-$35 per month; however it is a significant cost per account since everyone would pay for a portion for the infrastructure. Mr. Beckstead emphasized the November 7 vote only authorizes City Council to get into Broadband, but it is non-binding, and does not mandate the City to do anything. Council will have to come back to make a formal decision if they want to move forward, and if so, decide what option (retail, third party) they would like to pursue. Staff recommended Option 1 to City Council, which includes Broadband within the existing Light and Power enterprise, as opposed to creating a 5th Utility, and using L&P revenue bonds to support telecommunications. Option 2 includes all of Option 1, OR the authorization of general obligation bonds to support a 5th Utility. Vice Chairperson Michell asked what prevents a large enterprise like Comcast from undercutting the City’s Broadband program. Mr. Beckstead said there is nothing stopping a competitor from competing with the City in the marketplace, but advised the City would have to leverage other qualities to stay in the competition, like customer experience and quality of service. Vice Chairperson Michell also asked if adding debt to Light and Power is wise, and Mr. McCollough explained this would not be a debt paid back by Light and Power revenues, but rather a debt guaranteed by Light and Power revenue. Chairperson O’Neill said he did not see anything about net neutrality in the Statement of Objectives, and he believes that’s a key to the City’s differentiation of customer service. Mr. Beckstead advised net neutrality is discussed in the Broadband Business Plan. Chairperson O’Neill also said he’s concerned about the bonding capacity of Light and Power to modernize itself, and based on staff presentations to the Board, it does not appear that the Utility’s income is going to meet those needs. Mr. Beckstead said that is a potential risk until about year 6, when the Broadband business begins to support its own debt capacity needs. Board member Baumgarn mentioned the Utility fee, and he said he sees both sides of the social equity issue – if everyone is charged it could cause concern, but also providing it to everybody makes it accessible to everybody; he asked Mr. Beckstead how far off the table that option is. Mr. Beckstead said the idea came to the conversation very late, but he advised both times it was mentioned to Council, their response was, “no, we don’t really want to go down that path.” Board member Baumgarn pointed out there is a lack of specificity in what voters are voting for. Rate Design Philosophy Lance Smith, Utility Strategic Finance Director Randy Reuscher, Utility Rate Analyst Justin Fields, Utility Rate Analyst (attachments available upon request) Mr. Reuscher explained several components of Rate Philosophy. Cost-of-Service (COS) is a method to equitably allocate the revenue requirements of the Utility among the various customer classes based on the relative cost of serving each rate class (e.g. residential, commercial, industrial, etc.). Rate Design establishes a rate structure to fairly recover costs within a particular rate class by balancing the Utility’s Energy Board Minutes August 10, 2017 4 Energy Board Minutes August 10, 2017 rate objectives. Revenue Neutral is the concept that a change in rate structure is designed to generate the same revenue as the existing rate structure, all else equal. The COS model collects appropriate costs, reduces inter-class rate subsidies, provides documentation and reference for the ratemaking process, improves planning process for customers and helps avoid “rate shock,” and helps manage revenue stability for the Utility (seasonally and year to year). This model is important because some costs benefit only certain rate classes. Not all customers consume in the same pattern or require the same facilities to be served, and the COS model does help with rate shock. Rate Design has several objectives: Equity, Simplicity, Revenue Stability, Bill Stability, Customer Agility, Ease of Implementation, Conservation Incentive, and Affordability. Some examples of a rate structure include flat rate, tiered rate, coincident peak rate, and a time of use rate. Platte River implemented seasonal rates in 2012 (the City of Fort Collins implemented them for all customers at that time), because higher production costs related to summer peak demands. Roughly 70-72% of the Utility’s total electric costs are wholesale, so utilities establish retail rate structures to match wholesale costs. Mr. Smith pointed out an example; currently, fixed charges may not be adequately covering fixed costs, so it’s important to balance the objectives to make a decision about what the actual rate is, and he believes that is rate philosophy in a nutshell. Board member Moore commented about the issue of fixed charges not being recovered, and she asked if Utilities encounter that problem because the charge is too low in the beginning, or has the cost increased the and fixed charge did not follow. Mr. Smith advised he hasn’t been with the City of Fort Collins that long, but he suspects that at one time the price was adequate but there wasn’t an appetite to continue to increase as the costs were rising. Vice Chairperson Michell responded that it’s much easier to line up rate structures when costs actually match the rates, rather than backtracking. He also asked Mr. McCollough if wholesale rate structures will change at all with the possible incorporation to a regional energy market. Mr. McCollough said he wouldn’t expect them to change in the short term, but it does have the potential to change wholesale rates over the long term. Platte River Customized Resource Portfolio Brad Decker, Platte River Power Authority Mike Jones, Platte River Power Authority (attachments available upon request) The Customized Resource Plan (CRP) Process is taking place concurrently with other major efforts that can reshape Platte River’s future resources. There are many things impacting the way Platte River is planning to do business in the future, such as the Clean Power Plan, a 2017 Wind RFP (50-75 MW, 10 total respondents to the RFP), Municipal Goals, and the Governor’s order. This order reduces carbon by 35% by 2030, which is similar to the Clean Power Plan. All four municipalities also expressed interest in a Net Carbon-Free Scenario. This is a portfolio with a high penetration of renewables, full allocations of hydro resources, full coal retirements, and inclusion of natural gas peaking for reserve and balancing needs. Any carbon produced for balancing and reserves would be offset by excess output from renewables marketed as surplus sales. Renewables costs are very low for the energy component so they think they have some viable options. Energy Board Minutes August 10, 2017 5 Energy Board Minutes August 10, 2017 The CRP is made up of two phases over a two year effort. Phase 1 was initial modeling and analysis, and Phase 2 is developing specific next steps and programs. Currently Platte River is in between the two phases, refining risk and benefit modeling and refining cost impacts. Next, the development of a carbon- free scenario will take place in quarter three of 2017, and input from the four municipalities will be provided. By quarter four, revisions and additional modeling will be made where requested, and then program development is slated for 2018. There are two paths for generation portfolios; a Customized Resource Plan and a Consolidated Resource Plan. The potential for pursuing joint goals was discussed at the July 10 CRP meeting, and all four Utility Directors opted to pursue a carbon free scenario. Platte River believes the four cities are potentially better off staying together, on a single path. It’s an approach that will benefit everyone. The Carbon Free scenario was discussed at the July 14 Utility Directors Meeting with Platte River. The model will be constructed at the system level with all four cities participating. The analysis will use a carbon netting methodology, using several assumptions: coal generation is retired and replaced with renewable generation by 2030, natural gas resources are held for reserve capacity, and hydro resources will help produce a low-carbon footprint. Pace Global will be engaged to provide communications and modeling support, and project results are expected on October 31. Vice Chairperson Michell asked if there is any control over the hydro resources, is Platte River able to dispatch it? Mr. Decker said it is technically dispatchable, but it’s not a pump storage facility—there is some degree of flexibility though. Mr. McCollough added there are seasonal capacity limitations as well. Chairperson O’Neill added this program is very exciting and encouraging to see the acceptance among all four municipalities. He asked if it is possible to optimize wind and solar power to play together better to fill in the load curves. Mr. Jones advised they will try to optimize the mix to economic benefit, but it may not always perfectly match up with the load curve. Board member Braslau asked if they can accurately predict how the market will respond. Mr. Decker said if everyone decided to overextend themselves with renewables, there will be too much power and that is a risk, but in the next 5-8 years, he doesn’t see everyone having the same goals that Fort Collins has right now. Over the long term it could be an issue, but at that time Platte River would make new resource decisions, he believes there is room to grow into these things over time. Platte River has delivered preliminary packets of system-level CRP options to the owner-municipalities, concluding CRP Phase 1 objectives. Ongoing discussions will be held with the four cities to determine if any individual options will be pursued. If the cities make individual elections, Platte River will prepare a joint system model which will include those elections in order to begin to determine system cost impacts. Draft 2018 Work Plan The Energy Board Work Plan lists the Board’s goals and objectives for the year. It can also address issues and opportunities since the previous year’s plan. Board members reviewed the draft of the 2018 Work Plan, put together by Chairperson O’Neill. Several board members suggested changes, updates, and additions to the Work Plan. The finalized 2018 Work Plan will be approved at the September 14, 2017 Energy Board Meeting. Board Member Reports Energy Board Minutes August 10, 2017 6 Energy Board Minutes August 10, 2017 Vice Chairperson Michell advised that Grid Alternatives and Poudre Valley REA are building a community solar array near the Larimer County landfill, they are accepting volunteers. Board member Moore judged the pitches for at the in the Innovate Fort Collins finalists. Chairperson O’Neill collected three years of his home utilities data (HUDA) from City Staff so he could evaluate how Time of Use rates might affect him. Future Agenda Review There is a work session on August 24; the Loveland Utilities Commission will be joining the Energy Board to hear a presentation by Platte River regarding Energy Markets. Staff may bring Small Cell Attachments and Climate Economy to the Board as discussion topics in the near future. Adjournment The meeting adjourned at 8:23 p.m. Approved by the Energy Board on September 14, 2017 ________________________________ ______________ Board Secretary, Christie Fredrickson Date 9/19/2017