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HomeMy WebLinkAboutEnergy Board - Minutes - 10/11/2018Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 Fort Collins Utilities Energy Board Minutes Thursday, October 11, 2018 Energy Board Chairperson Nick Michell, 970-215-9235 City Council Liaison Ross Cunniff, 970-420-7398 Energy Board Vice Chairperson Amanda Shores, 408-391-0062 Staff Liaison Tim McCollough, 970-305-1069 Roll Call Board Present: Chairperson Nick Michell, Vice Chairperson Amanda Shores, Alan Braslau, Stacey Baumgarn, Bill Becker, Jeremy Giovando, Greg Behm, John Fassler, Krishna Karnamadakala Late Arrivals: Board Absent: Others Present Staff: Tim McCollough, Christie Fredrickson, Lindsay Ex, John Phelan, Lance Smith Platte River Power Authority: Paul Davis, Alyssa Clemson-Roberts Members of the Public: Meeting Convened Chairperson Michell called the meeting to order at 5:30 p.m. Public Comment None Approval of September 11, 2018 Board Meeting Minutes In preparation for the meeting, board members submitted amendments via email for the September 11, 2018 minutes. The minutes were approved as amended. Announcements and Agenda Changes None Staff Reports 100RE Community Goal Resolution Update Tim McCollough, Deputy Director, Utilities Light & Power (attachments available upon request) City Council did approve the 100 Renewable Electricity Resolution with a few minor amendments, but nothing that changed the underlying goal of the resolution. Chairperson Michell said he and Board member Braslau were present and spoke at the Council meeting. Chairperson Mitchell noted that Councilperson Martinez asked many questions and for clarifications, then voted in the end to pass the resolution. “Board member Braslau found Council’s amendments to the resolution were inconsequential. Metro Districts Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 Josh Birks, Economic Health & Redevelopment Director (attachments available upon request) A metro district is a special district that utilizes public financing to provide public infrastructure or services, such as critical or lacking street infrastructure, non-potable water systems, sanitation facilities and infrastructure, parks or recreation facilities, parking structures, or operations and maintenance. Chairperson Michell asked how many of the districts are residential. Mr. Birks said there are approximately 1,600 metro districts in Colorado and most of them are residential, but up until recently the City of Fort Collins did not allow residential metro district development. In August, staff helped develop a policy to allow metro districts to apply to residential areas, and the policy is built around community objectives: Environmental Sustainability, Critical Public Infrastructure, Smart Growth Management, and Strategic Priorities. Three metro districts were recently approved by City Council: Waterfield, Montava, and Water’s Edge. Of the 500 units in Waterfield, all will be EPA certified Zero-Energy Ready with 10% committed as net zero-energy units including rooftop solar. Another 50 units are committed as affordable housing units. Montava is planning for 4,400 units certified Zero-Energy Ready, 10% of which are committed as affordable housing units. Water’s Edge made no commitments to deliver the housing to a certain standard, but there are some sustainability plans in place for the Senior-friendly community, such as electric tools for landscaping. Zero-Energy Ready homes should have the potential when rooftop solar is installed to generate as much energy as consumed and meets Certified Energy Star standards. These homes typically generate HERS ratings (Home Energy Rating System) in the low 40s. The baseline home (2015 International Energy Conservation Code) typically generates HERS ratings 58-62. This shift translates to an estimated 3 metric tons of avoided carbon dioxide, an average savings of $450 annually over the baseline home. Board member Behm asked if there are any incentives to get developers to consider an Energy District (as opposed to a few net zero-energy homes within a community). Mr. Birks said the policy right now creates a framework to allow developers to bring their own ideas, and hopefully open the door for additional dialogue. He reiterated this is very new territory for the City and with the framework in place Council can begin to set precedents. Chairperson Michell also expressed concern that the mechanism of metro districts somehow hides the real cost of purchase to buyers, who will then be stuck with significantly higher property tax burdens. Wholesale Rate Update Wade Hancock, Financial Planning Manager, Platte River Power Authority (attachments available upon request) The Platte River Power Authority Strategic Financial Plan (SFP) provides direction to create long-term financial sustainability, manage financial risk, and support Platte River’s mission, vision and values. The latest SFP was adopted in February 2018, and helps Platte River to generate adequate cash flows, maintain access to low-cost capital, provide wholesale rate stability, and maintain sufficient liquidity for operational stability. Mr. Hancock said Platte River is implementing rate-smoothing strategies; the goal is to look long term and see where their communities are headed and target that number, smoothing rates along the way to avoid any one year or multiple years with significant rate increases. Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 Platte River’s model anticipates needing additional capacity by the year 2030, so Platte River will steadily increase the rates between now and 2030. The August 2017 long-term forecast planned for 2% rate increases in 2019 through 2025, and due to building rate pressure, a 2.8% rate increase each year from 2026 through 2030; however, the Roundhouse Renewable Energy project has helped alleviate long-term rate pressure. The incoming wind energy is anticipated to displace other resources increasing surplus energy sales. Staff recommends implementing a 2% rate increase in 2019 and forecasts 2% rate increases each year from 2020 through 2030. This rate-smoothing plan helps to avoid significant single year rate hikes by smoothing rates over multiple years and provides greater rate predictability to aid municipal owners and customers with more accurate, long-term planning. Platte River’s balance sheet will remain strong by generating additional reserves, thus reducing future debt requirements. Mr. Hancock added that only the 2019 rates will be approved in October 2018. All projections beyond 2019 serve only as indications and the Board reviews the rates annually, they will not approve rates that last longer than one year. This leaves room to adjust the rates in future years up or down as needed. Mr. Hancock reviewed Platte River’s changing revenue requirements over the next 11 years, including revenue increases, portfolio diversification, and general or infrastructure. Platte River plans to exit Craig Unit1 in 2025 and for planning purposes, exit the Craig Unit 2 Yampa Project partnership at the end of 2029 (two coal fired power stations co-owned with Tri-State Generation and Transmission, Salt River Project, PacifiCorp, and Xcel Energy). Board member Braslau said exiting that partnership reduces revenue but it should also reduce cost, since those units are not particularly cost-effective. Mr. Hancock said Craig 1 and Craig 2 are still relatively competitive units compared to other coal units, but compared to Rawhide they are certainly more expensive. Mr. Hancock said there are some uncertainties within their modeling assumptions, such as commodity pricing, the timing of the decommission of Craig Unit 2, emissions expense, Integrated Resource Planning process, load forecast, regional markets (the Southwest Power Pool disbanded earlier this year), and wind additions (no additional wind energy is included beyond 2030). Chairperson Michell asked what year excess sales related to coal will continue through. Mr. Hancock said they are assuming sales out of the Craig units for as long as they are in service, essentially 2030 for Craig 2, but continuing to assume sales from Rawhide the entire time. Mr. Davis added there are many things being discussed like wind and solar opportunities and when to get out of the Craig units, but so far, the only firm decision made is to exit Craig 1 by 2025; the exit of Craig 2 is just a modeling assumption. Chairperson Michell also asked why Platte River is building up cash for future capital needs, and what are those needs. Mr. Hancock said replacing the firm resources (Craig resources) with other firm capacity along with transmissions needs; they are currently assuming a natural gas combined cycle unit. In October 2017 the Platte River Power Authority Board approved the reallocation of lower-cost wind resources to serve Tariff 7 Wind Energy subscribers, which allowed the charge of $0.025 per kilowatt hour to remain unchanged. Currently there is no service offering or rate for Community Solar, but Mr. Hancock anticipates establishing a rate and service offering once a purchased power agreement has been executed. 2019 Electric Rate Update Lance Smith, Director Financial Planning & Assets Randy Reuscher, Utility Rate Lead Analyst (attachments available upon request) Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 Mr. Smith said in 2012, utility rates were increased significantly, along with changing other billing components, such as adding a seasonal factor, etc., and the rate payers expressed that was too much at once. Since then, the Utility has tried to increase rates as gradually as possible. Mr. Smith referred to this process as bill-smoothing, so there are not a large step increases in utility bills for the rate-payers. For example, the 2019 proposed rates include a 5% Electric rate increase, a 2% Stormwater rate increase, and no increase in Water or Wastewater. The 5% proposed rate increase is necessary to replenish reserves as a means of providing financial agility and to increase revenues to allow the 10-year Capital Improvement Plan to be done within the 10 years with modest, gradual rate increases and some debt issuances over the next five years. The Strategic Financial Plan outlines a rate strategy, in which Mr. Smith has limited rate increases to no more than 5%, but he was also trying to introduce City Council to some objective financial metrics that determine when, why and how much the rate increased need to be. The 2019 proposed rate increase is composed of 1.4% wholesale increases and 3.6% increase in distribution costs. Board member Giovando asked if the limit of 5% is policy or code, or how that number was determined. Mr. Smith said that this was a number he felt was reasonable and he has not received any negative feedback from Council. Board member Giovando expressed concern that somewhere down the line, the 5% could unintentionally set a precedent; Chairperson Michell agreed and said 5% seemed arbitrary. Mr. McCollough said Council has informally expressed that 5% is their threshold for rate increases. Board member Braslau added the number is a mechanism to force a smoothing of the rates. Mr. Smith said the Cost of Service study was updated recently (scheduled to update every two years), and to the customer who receives all four utility services from the City, their average bill will only go up 2.2%, which is about the rate of inflation. Chairperson Michell asked staff to clarify the use of the term “average” in that scenario. Mr. Reuscher said it is based on each fund and actual consumption. Mr. Smith said he is looking for a motion of support from the Board; however, the Board elected to wait until Mr. McCollough’s Budgeting for Outcomes presentation later in the agenda before making a motion and taking a vote. City Code Update Russ Hovland, Chief Building Official (attachments available upon request) Mr. Hovland presented the 2018 International Building Codes and International Residential Codes (IBC and IRC, respectively) to the Energy Board in January; at the time staff was seeking support to bypass adoption of the 2018 IBC as a measure of effectiveness, which the board was supportive of. Mr. Hovland said staff has since identified a few issues with bypassing 2018 updates: The 2015 Energy Policy commits to adopting codes within 12 months of issuance; furthermore, if the City falls more than 12 months behind the code issuance, the Insurance Services Office will downgrade the City’s rating which can affect homeowner’s insurance rates within the City. Additionally, neighboring communities such has Longmont and Loveland are planning to move ahead with the 2018 codes in January, and Fort Collins City staff do not want to fall too far behind. The Code Review Committee met several times over the last few months and proposed a few amendments to both the 2018 IBC and IRC. Mr. Hovland described the following amendments for the board and added that staff’s cost assumptions (included in attachments) were determined after reaching out to the tradespeople who would be involved with the code requirement such as electricians, plumbers, Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 mechanical contractors, and fire-suppression contractors. Construction supply houses were contacted for an estimate of off-the-shelf materials. The proposed amendments to the 2018 IBC include: In new commercial and multi-family buildings when a trash chute is provided as typical in a multi-story apartment building, a second chute for recycling must be provided. In new multi-family buildings 10% of all parking spaces must provide a conduit from the electrical room to the front of the parking space for the purpose installing electric vehicle charging equipment in the future. A new no-fee emergency repair permit provision was added to allow a permit to be issued quickly in a disaster/damage situation where a building owner can temporarily repair a building (house) to allow occupancy while more permanent repairs are forthcoming. This was recommended by the county building department who scrambled to put this in place after several recent disasters. The proposed amendments to the 2018 IRC include: New homes are to be provided with an empty ¾” conduit from the attic to the main electrical panel for ease of installing future photovoltaic (PV) system signaling wiring. New homes are also to be provided with an empty ¾” conduit from the main electrical panel board to an empty junction box in the garage for ease of installing future electrical vehicle (EV) charging outlet (the ½”conduit of the IRC is considered insufficient). Window U-value (the rate of heat transfer) for renovations will change from .32 to .30, an increase in efficiency but at an approximate cost increase of 8% for vinyl windows. Board members discussed the lack of Electric Vehicle Readiness in new commercial buildings, as outlined for the multi-family amendment. Mr. Hovland said there was an issue around who would be using those spaces (depending on the use of the building), like building employees versus customers, and because of that the review committee elected to only amend the code for multi-family buildings. Board members expressed their disappointment for daytime charging of electric vehicles is to be encouraged and said that much like solar-ready rooftops, the code does not require the installation of the panels, only the infrastructure, and they believe the same methodology should be put place for EV readiness. Mr. Hovland said if the Board is recommends including commercial EV Readiness in the amendments, he would bring that feedback to the code review committee prior to taking this item to City Council. Board member Fassler said the building code is weak, and for an organization with lofty Climate Action Plan goals we should be striving to exceed the current standards; he disagrees with the review committee’s amendment to allow existing construction to use a less efficient window U-value. Mr. Hovland said the builders were concerned with home renovations, but board members felt that the builders are not being ambitious enough because the small cost increase will be passed onto the consumer regardless. Board member Fassler moved to recommend the adoption of the 2018 International Codes and References, with any necessary local amendments, except the allowance of a .32 window U-value for existing homes. Chairperson Michell proposed a friendly amendment, to recommend the adoption of the 2018 International Codes and References, with any necessary local amendments, except the allowance of a .32 window U-value for existing homes, and include an amendment requiring commercial new-construction to install EV readiness infrastructure. Board member Becker would like to include an additional friendly amendment, the Energy Board regrets the 2018 International Codes and References are insufficiently ambitious to meet the City’s Climate Action Plan goals. The Board recommends the adoption of the Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 codes with any necessary local amendments; however, they also recommend striking the allowance of a .32 window U-value for existing homes and would like the amendments to include a provision requiring commercial new-construction to install EV readiness infrastructure. The proposed friendly amendments were accepted by the Energy Board. Board member Becker seconded the motion. Discussion: Vice Chairperson Shores asked what the harm would be to vote no, since the Board has so many stipulations. Chairperson Michell said a no-vote could be misconstrued as a vote to not update the codes at all, which is not what the Board wants either. Mr. Hovland said a very similar situation happened when they presented the codes to the Water Board, and they ultimately voted to approve the 2018 codes on the condition that staff went back to the review committee to discuss the Board’s amendments. Mr. Hovland said he would do the same for the Energy Board. Vote on the Motion: It passed, 7-2 Vice Chairperson Shores said the codes are not ambitious enough. Board member Becker agreed, a yes vote with all the conditional reasoning is not enough. He added that he had voted no after Mr. Hovland’s last presentation in January. Budgeting for Outcomes Tim McCollough, Deputy Director Utilities Light & Power (attachments available upon request) Council has had three budget work sessions and two public hearings, and there is an additional work session scheduled for next week. As Mr. Smith noted in his earlier presentation, there is a recommended 5% rate increase to support the City Manager’s Recommended Budget. Mr. McCollough said Council does support many of the programs within the Climate Action Plan optional budget package that was discussed at last month’s Energy Board Meeting, but they have asked staff if there is a way to continue those programs within the already proposed 5% rate increase. Mr. McCollough said that would mean adjusting other offers already on the table, such as reducing some of Light & Power’s capital needs, or finding additional revenue sources. Staff doesn’t have additional details at this time, but Mr. McCollough wanted the board to be informed about the request from Council. Vice Chairperson Shores asked why Council does not want to exceed a 5% rate increase, because an additional 0.63% would likely be a fraction of a dollar on an average household utility bill. Mr. McCollough said this meeting didn’t provide an opportunity for staff to discuss with City Council, but rather for City Council to provide feedback on the information they were presented and request a follow up from staff. Board member Braslau said he believes it would be a mistake to make budget choices that allows the City to miss its 2020 CAP goal; he also said the City Manager’s recommended budget seems inconsistent with the recent Council decision to commit to 100% Renewable Electricity. Vice Chairperson Shores said relaying information in percentages is ineffective, because at the end of the day most people only care about the cost of their monthly bill, and perhaps it would be more effective to explain how much 0.63% translates to monetarily and what services that rate increase would be providing to the community. Chairperson Michell said in the past there have been several great efficiency programs that were marketed, just like some of the CAP programs that are currently on the chopping block, but by February Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 all the funding had run out with the expectation that customers would come back the following year. He believes Council should either fund or not fund efficiency programs such as these so there isn’t such a drastic swing between funding cycles. Mr. Davis said the Platte River Power Authority efficiency budget grew by 20% this year, and though it is somewhat complicated, he does not believe some of the larger efficiency programs, such as Efficiency Works Business, are in any danger of running out of funding. Mr. Smith said it’s important to add context: In the 2019/2020 budget, staff is proposing $18.3 million in renewable energy and green initiatives, and the question now is do we rather invest $19.6 million in those initiatives. He wanted the board to remember it’s not as if the City isn’t doing anything, and Platte River is also contributing an additional $4 million. It’s Mr. Smith’s opinion the City will not even be able to use all $18 million currently allotted, because in recent history there have always been funds left over in that budget line. Mr. Smith believes it would be wiser to invest more money into capital. Mr. McCollough reiterates support for Mr. Smith’s statements and added that deferring capital investments comes with its own set of concerning problems. Chairperson Michell moved that the Energy Board support a 5% rate increase, as proposed by staff, plus an additional 0.63% to support the enhancement CAP offer package, allowing the City to meet its 2020 CAP goals. Furthermore, the Energy Board does not support cutting funding for capital infrastructure to support the optional CAP offer package. Board member Behm seconded the motion. Discussion: Board members asked Mr. Smith what the overall financial impact would be to an average residential bill with a 5.63% rate increase and the assumed Time of Day usage reductions. Mr. Smith estimated it would be approximately $3.38 more per month. Chairperson Mitchell noted that an average 2% reduction in energy consumption due to effects of our efficiency programs is reported annually, so bills should not see as great of an increase as the rate hike might suggest. Board member Baumgarn asked if voting on this motion is as impactful as the Board hopes, since they voted on a very similar motion at last month’s meeting. He wondered if the Board should consider another avenue of communication such as a memo. Vote on the Motion: It passed unanimously, 9-0. Board members discussed attending the October 16 City Council meeting, so they can ensure their opinions are heard in addition to their motions and votes. Board Member Reports Board member Braslau asked what information is available on the Income Qualified Assistance Program, he asked for staff to report back to the Energy Board at a future meeting. Future Agenda Review Board members received conflicting information about what time Platte River’s IRP meeting begins, and Mr. Davis confirmed the correct time. November is a heavy agenda with a few timely items, so it may be rearranged to accommodate better discussions. Adjournment The Energy Board meeting adjourned at 8:57 p.m. Energy Board Minutes October 11, 2018 Energy Board Minutes October 11, 2018 Approved by the Energy Board on November 8, 2018 ________________________________ ______________ Board Secretary, Christie Fredrickson Date 11/08/2018