HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/18/2003 - RESOLUTION 2003-038 APPROVING AND ADOPTING THE ELE AGENDA ITEM SUMMARY ITEM NUMBER: 29
FORT COLLINS CITY COUNCIL DATE: March 18, 2003
STAFF: Michael Smith
SUBJECT:
Resolution 2003-038 Approving and Adopting the Electric Energy Supply Policy.
RECOMMENDATION:
Staff, the Electric Board, Natural Resources Advisory Board and Air Quality Advisory Board
recommend adoption of the Resolution.
FINANCIAL IMPACT:
Implementation of the policy elements could result in electric rates increasing 10 to 20 percent
during the next 15 years.
7-
EXECUTIVE SUMMARY:
The purpose of this policy is to provide strategic objectives regarding system reliability, rates
and the environment to guide the electric utility into the future.
With regard to renewable energy, there are two options which were discussed by Council at its
February 25 study session. The options are adopting either a 10% renewable energy portfolio
target or a 15% renewable energy portfolio target. The proposed Policy includes the 10%
renewable energy portfolio. If the Council wishes to adopt a 15% renewable portfolio, the
proposed Policy will need to be amended at the time of adoption. The Council also discussed
increasing the renewable portfolio from the present 0.82% to 2.0% by the end of 2004. This
change has been included in the draft Policy.
BACKGROUND:
In December 2001, the City Council requested that the Electric Board and staff draft an Electric
Energy Supply Policy addressing electric rates, electric reliability, demand side management and
wind power.
DATE: ITEM NUMBER: 29
The primary objectives of the proposed Policy are:
• Maintain high system reliability
• Maintain competitive electric rates
• Reduce the environmental impact of electric generation and consumption through
energy efficiency and the increased use of renewable energy
The policy in its complete form is attached to the Resolution.
The policy includes both general objectives and specific targets or goals. The specific targets or
goals are as follows:
• Complete the electric system undergrounding program by the end of 2004.
Maintain electric rates that are regionally competitive and are below Xcel Energy.
Reduce per capita electric consumption 10%, from the baseline of 2002, by the
year 2012. (During this time period, overall electric consumption will be reduced
by nearly 1.7 billion kilowatt-hours, resulting in the avoided production of over
1.8 million tons of CO..)
• . Reduce per capita peak day electrical demand 15%, from the baseline of 2002, by
the year 2012. (This goal will reduce peak day demand by approximately 80 MW
by 2012. The projected reduction in peak day demand is about equal to the output
of one combustion turbine, which presently costs about$25 million.)
• Develop a strategic plan by July 1, 2003 outlining the strategies to reach the
consumption and demand reduction targets listed above.
Work with PRPA to increase the City's percentage of renewable energy to 2% by
the end of 2004 and to 10% by 2017.
With regard to renewable energy, there are two options which were discussed by Council at its
February 25 study session. The options are adopting either a 10% renewable energy portfolio
target or a 15% renewable energy portfolio target. The proposed Policy includes the 10%
renewable energy portfolio. If the Council wishes to adopt a 15% renewable portfolio, the
proposed Policy will need to be amended at the time of adoption. The Council also discussed
increasing the renewable portfolio from the present 0.82% to 2.0% by the end of 2004. This
change has been included in the draft Policy.
Impact on Rates
During the discussion at the study session, there were questions regarding the potential impact
on electric rates as a result of implementing the Policy. The following is a summary of those
potential impacts:
Options Impact on Electric Rates
Double existing wind generation to 2% Rates would increase less than 1% in
by the end of 2004 2004 for the additional wind energy __
10% Renewable Energy Portfolio by Rates would increase about 8-10% over
2017 the period from 2003 to 2017
15% Renewable Energy Portfolio by Rates would increase about 12-15% over
2017 the period from 2003 to 2017
DATE: Marcli 16, ZUUJ j
ITEM NUMBER: 29
Other Possible Rate Impacts
As outlined in the proposed policy, the staff will be preparing a strategic plan for reaching the
energy and demand reduction goals. Although the plan is not completed, one of the options for
reducing energy usage is through intensive conservation and incentive programs. Funding such
programs will most likely have an impact on rates, possibly in the 2-3% range. The actual
impact will not be know until the strategic plan is completed an approved by Council.
Impacts on the Environment
In the City's Local Action Plan to Reduce Greenhouse Gas Emissions, it was estimated that the
City's GHG (Greenhouse Gas) emission forecast for the year 2010 would be 3,685,184 tons of
CO2. The City's target for GHG reduction for the year 2010 is 30%, or about 1,105,555 tons. In
the year 2010, the conservation and renewable energy (10%) targets included in the proposed
Electric Energy Supply Policy will avoid 343,901 tons of COZ, or 3 1% of the City's target. If the
Council adopts a 15% renewable target instead of the 10% target, the avoided COZ increases to
386,966 tons, or 35% of the City's target.
Letters of support from the Electric Board, Natural Resources Advisory Board and Air Quality
Advisory Board are attached.
Also attached is some background information, in the form of a memo from John Bleem, about
Platte River Power Authority.
. RESOLUTION 2003-038
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROVING AND ADOPTING THE
ELECTRIC ENERGY SUPPLY POLICY
WHEREAS, in December 2001,the City Council requested that City staff draft an Electric
Energy Supply Policy addressing electric rates, electric reliability, demand side management and
wind power,to be presented to the Electric Board and then to the Council for review and approval;
and
WHEREAS, City staff has prepared the Electric Energy Supply Policy, a copy of which is
attached hereto as Exhibit"A" and incorporated herein by this reference (the "Policy"); and
WHEREAS,the primary objectives of the Policy are to: (1)maintain high system reliability;
(2)maintain competitive electric;and(3)reduce the environmental impact of electric generation and
consumption through energy efficiency and increased use of renewable energy; and
WHEREAS, on November 18, 2002, the Electric Board considered the Policy and
recommended that the City Council approve and adopt the Policy; and
WHEREAS,on November 26,2002,the Air Quality Advisory Board considered the Policy
and recommended that the City Council approve and adopt the Policy; and
WHEREAS, on January 8, 2003, the Natural Resources Advisory Board considered the
Policy and recommended that the City Council approve and adopt the Policy; and
NOW,THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS that the Electric Energy Supply Policy is hereby approved and adopted.
Passed and adopted at a regular meeting of the City Council held this 18th day of March,
A.D. 2003.
Mayor
ATTEST:
City Clerk
EXHIBIT "A"
• City of Fort Collins
Electric Energy Supply Policy
March 18, 2003
Introduction
Motivated by their concern for the welfare of the community, the citizens of Fort
Collins created the electric utility in 1935. During the years that followed, the electric
system grew both in size and sophistication. In 1973, Fort Collins joined with Estes Park,
Longmont and Loveland to create the Platte River Power Authority (PRPA), a joint action
agency charged with meeting the electric generation and transmission needs of the four
cities.
The City now has a state of the art electric system that provides citizens with
highly reliable service at an affordable and competitive price. However, getting to this
point did not happen without a lot of effort and thoughtful guidance. The future will be no
different. There will be many challenges to overcome if the city is to continue to provide
its citizens with a high level of service. The most significant of these challenges will be
addressing both important environmental issues and increasing demand, while maintaining
high system reliability and competitive pricing. The purpose of this policy is to provide
strategic objectives regarding system reliability, rates and the environment to guide the
. electric utility into the future as it continues to provide the citizens of Fort Collins with
reliable and competitively priced electric service, in partnership with PRPA.
System Reliability
System reliability is the core of providing electric service. It is critical for the
welfare of the community. It should not be compromised. The Utilities must continue to
provide businesses and residents with highly reliable electric service consistent with
established reliability goals.
Objectives for the Future
1 . Continue to design, build and maintain the electric system utilizing the high
standards that have been developed.
2. Maintain an emphasis on system safety for the benefit of employees and
citizens.
3. Complete the electric system undergrounding program by the end of 2004.
4. Reduce peak electric use in order to minimize overloading of the electric system.
5. Encourage Platte River Power Authority to design, operate and maintain their
electric transmission and generation system to minimize the risk of system
outages.
6. Encourage Platte River Power Authority to maintain a diverse source of electric
generation capacity.
• 7. Investigate the merits of distributed generation as a method of reducing system
peak demands.
Electric Rates
For many years the citizens of Fort Collins have benefited from low electric rates.
During the past 18 years, there have been two electric rate increases and two electric rate
decreases. Electric rates today are only 0.2 percent more than they were in 1983, while
the consumer price index has increased 77.8%. The City's residential electric rates are
lower than 88% of the 51 Colorado utilities surveyed by the Colorado Association of
Municipal Utilities.
In order for the City to continue being a viable provider of electric service, it will be
essential to maintain competitive rates in the future.
Objectives for the Future
1 . Continue to design and implement electric rates that allocate costs between
customer classifications in an equitable manner.
2. Design and implement electric rates that encourage conservation (e.g. market -
based incentives, block pricing) and demand side management.
3. Maintain rates that are regionally competitive and are below Xcel Energy.
4. Maintain long-term rate stability.
5. Establish alternative cost based rate structures that reflect the community's
interest in and benefit from renewable energy (green pricing, net metering,
system benefit charges).
6. Increase productivity and efficiency throughout the Utilities.
7. Work with Platte River Power Authority to delay or mitigate the expected rate
impact associated with the construction of new base load generation facilities.
8. Work with Platte River Power Authority to develop a process whereby the
avoided generation capacity costs, associated with demand side management
(DSM) programs developed by the City, can be passed along to the City.
The Environment
Fort Collins 2000 Greenhouse Gas Audit
There is a growing awareness of 2.04 million tons CO2
and concern about global climate change Solid
Natural
and the harmful contributing effects of Gas waste
greenhouse gases. In 1999, the Fort 20% 1%
Collins City Council adopted a local Electricity
44%
action plan to reduce greenhouse gas
emissions. In the City's 2000 Climate WN
Protection Status Report, the use of Transport
electricity, generated from facilities 35%
fueled with either coal or natural gas,
was identified as the largest contributor
of carbon dioxide (CO2) to the environment. Although there are new and evolving
technologies to reduce fossil fuel pollutants such as sulfur dioxide and nitrogen oxides
(NOx) emissions, there are presently no feasible methods of reducing CO2 emissions at the
2
generating facility. However, CO2 emissions could be reduced by decreasing the
consumption of electricity generated with CO2 producing fuels and/or generating electricity
with energy sources that do not produce CO2, such as wind, solar, and water. Decreasing
consumption and using these energy sources would also reduce the negative
environmental impacts (e.g. habitat destruction, air and water pollution) associated with
fossil fuel exploration, mining and transportation.
Objectives for the Future
1 . Reduce per capita electric consumption 10%, from the baseline of 2002, by the
year 2012. The10% per capita consumption reduction target will reduce overall
electric consumption approximately 17% by 2012 (see the following graph).
During this time period (2002-2012), the overall reduction in electric
consumption amounts to approximately 1 .7 billion kilowatt-hours of electricity
and the avoided production of over 1.8 million tons of CO2.
Energy Consumption Policy Target, 10% Per Capita Reduction
13,000
m 11.000 _.- ----------- --
ggu
3 9,000 - -- -- - --- --
w 109/6 Decrease Ij
o in 2012
U 7,000
'E ...------- .-- - --- - ----
`m Historical Data Projected Data
a Or 5,000
U
-' +Base Case
� j I
Q 3,000 -41-Policy
Tar at I
1,000
W O N V tp W ppO N � f80 aD O N V
N N N N N N N N
Year
2. Reduce per capita peak day electric demand 15%, from the baseline of 2002, by
the year 2012. The 15% per capita demand reduction target will reduce the
peak demand by approximately 80 MW by 2012 (see the following graph).
This projected reduction in peak day demand is approximately equal to the
output of one combustion turbine, which presently costs about $25 million.
3
Peak Demand Policy Target, 15% Per Capita Reduction
2.5 --------
Y_
� I
W 2.0 ---
E I
1.5 ---- --- -- - --- 16%Decrease
a in 2012
CL� _ I
U ' 0 +Base Case Historical Data Prolected Data I!I
Is
a. 0.5 -*-Policy
e
Target
e
a o.o
Co O N V 0 M O N V co co O N V
W m W W W m O O O O O
O1 OI A OI W W O O O O O O O O
Year
3. Develop and implement effective demand side management (DSM) programs.
4. Develop a strategic plan by July 1, 2003 for reaching the consumption and
demand reduction targets outlined in this policy. The approaches to be
evaluated will include, without limitation, a systems benefit charge, efficiency
programs, incentive programs, educational programs, revolving loan programs
and innovative rate structures.
5. Increase community awareness and understanding of DSM and renewable
energy programs.
6. Encourage Platte River Power Authority to continue reducing emissions from
fossil fuels and to avoid the use of coal in any new generation facilities
(Rawhide Unit 2 or other potential generation facilities that PRPA may pursue).
7. Work with Platte River Power Authority to continue to diversify the portfolio of
energy sources that serve the City.
8. Work with Platte River Power Authority to increase the City's percentage of
renewable energy (in addition to the existing large hydro from WAPA) to 2% by
the end of 2004 and to 10% by the year 2017.
9. Develop and implement policies and programs that support:
• the development and use of renewable resources,
• sustainable practices,
• the City's effort to reduce global warming, and
• the design and construction of energy efficient-4k&ings
10. Develop and implement policies that require the use of energy efficient design
principles in the renovation and construction of all City facilities.
4
. 11 . Whenever possible, integrate efforts related to energy efficiency, renewable
resources, green buildings (energy code), sustainable practices and education.
Annual Report
On an annual basis, the City Manager will provide the City Council and the Electric
Board with a status report on the objectives included in the Electric Energy Supply Policy.
•
•
5
Utilities
electric • stormwater • wastewater • water
City of Fort Collins
MEMORANDUM
Date: February 28, 2003
To: Mayor Martinez and Council Members
Thru: John F. Fischbach, City Manager
From: Michael Smith, Utilities General Manager `,�
Re: February 25, 2003 Study Session Summary - Electric Energy Supply
Policy
In December of 2001 the City Council requested that the staff and Electric Board
develop an Electric Energy Supply Policy for the Council's consideration and
adoption. At the February 25, 2003 Study Session, staff presented the Draft
Electric Energy Supply Policy for the Council's review and input.
. Key Discussion Points
1 . There seemed to be general support for the policy.
2. There was a suggestion to increase the renewable energy portfolio from
10% to 15%.
3. There was a interest expressed in increasing the City's renewable
energy portfolio from the present 0.82% to 2% by the end of 2004,
and in knowing what the rate impact would be to do so.
4. There were questions about the rate impact of implementing the
renewable portfolio (both the 10% and 15% options).
5. There was an interest in augmenting the building inspection effort as it
relates to the energy code.
6. There seemed to be the feeling that because electric rates are relatively
low, there was room to raise electric rates to fund additional wind
energy resources.
7. There was support for more conservation and demand management
programs.
8. There was support for more public outreach and education.
9. There seemed to be support for creating new rate structures that
encourage conservation.
700 Wood St. • PO. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6700 • FAX (970) 221-6619 • TDD (970) 224-6003
e-mail: utilities@fcgov.com • www.fcgov.com/utilities
10. There were questions about how the reduction in CO2 emissions —�
resulting from the energy reduction and renewable energy goals in the
policy relate to the City's overall Cities for Climate Protection goals.
Next Steps
1 . Staff will prepare the Policy for formal adoption by the Council at their
regular meeting on March 18, which will include two options for the
renewable energy portfolio, 10% and 15%.
2. Staff will provide Council with information about the rate impacts
associated with the 10% and 15% renewable energy portfolio goals.
3. Staff will provide the Council with information about the rate impact of
increasing the City's present wind energy portfolio to 2% by the end of
2004.
4. Staff will provide Council with information about how the reduction in
CO2 emissions resulting from the energy reduction and renewable energy
goals in the policy relate to the City's overall Cities for Climate Protection
goals.
5. Staff will provide Council with an overview of Platte River Power
Authority's present generation facilities and projected generation needs
for the future.
. MEMORANDUM
Date: February 12, 2003
To: Fort Collins City Council
From: Alison Mason, Electric Board Chairperson
RE: Proposed Electric Energy Supply Policy
As requested by the City Council in January 2002, the Electric Board has worked with
the staff of Fort Collins Utilities to draft a proposed Electric Energy Supply Policy. This
policy is to address, in a balanced manner, Electric Rates, Reliability, Energy Efficiency,
and Renewable Energy. The Utilities staffinembers and the Board have spent many
hours over the past 12 months discussing and debating the pros and cons of various
strategies and targets. We have looked at similar policies adopted by other cities. The
result is a policy that, if adopted by City Council, may delay the need to make a costly
investment in any large new generation facility and allow the City to take a significant
step toward a clean energy future without compromising the excellent and affordable
electricity service currently enjoyed by Fort Collins' residents.
The reasons for enthusiastically pursuing renewable energy and reducing energy
consumption are compelling. Renewable Energies cost more initially, but the fuel is free
forever. Natural gas is limited in supply and unpredictable as to future cost. Coal is
abundant and currently cheap if you discount the cost of air pollution and global warming
resulting from releases of carbon dioxide. However, the impact of future carbon
regulation on the price of coal-generated power is unknown.
In the United States, we have used two-thirds of our domestic oil and half of our natural
gas. Using the energy we do have wisely makes good sense. Reducing energy
consumption saves consumers money.
We are extremely fortunate both to have a publicly owned utility and one that has a
tradition of planning wisely for the future. Fort Collins' Energy Services Staff is widely
recognized for its cutting edge work on Energy Efficient Design, Residential Energy
Efficiency, Wind Energy, and Hydrogen Energy Storage. We recommend this proposed
policy be adopted as a binding resolution of the Fort Collins City Council.
Respectfully submitted,
. Alison Mason
• MEMORANDUM
FROM THE CITY OF FORT COLLINS
NATURAL RESOURCES ADVISORY BOARD
DATE: January 21, 2003
TO: Mayor and Council Members
FROM: Nate Donovan on behalf of the Natural Resources Advisory Board
SUBJECT: Proposed Electric Energy Supply Policy
The Natural Resources Advisory Board (NRAB) recommends Council adoption of
the Proposed Electric Energy Supply Policy. The Policy is the result of an intensive
drafting process by staff and citizen advisory boards, and the NRAB particularly
commends the Utilities staff (especially General Manager Mike Smith) and the Electric
Board for their willingness to incorporate many elements and suggestions into this
policy document. The Policy illustrates the challenges of providing a high level of
service coupled with increasing demand for electricity, while recognizing the economic
and environmental costs of operating an electric utility. Several parts of the Policy
deserve special mention, and the NRAB also suggests the addition of two items:
. System Reliability: The policy recognizes that today's society depends on highly
reliable and safe electric service and that distributed generation may reduce system
peak demands. Diverse sources of generation capacity also help maintain system
reliability.
Electric Rates: Designing and implementing electric rates that encourage conservation
and demand side management make good sense, especially when compared to the
significant economic and environmental costs of new base load generation facilities
(e.g. a second unit at Rawhide Power Plant). In particular, residential air-conditioning
users should pay for their financial impact on providing summer peak demand service —
metering requirements and rate structures should be instituted to recover these higher
costs and encourage conservation.
Tools such as market-based incentives and block pricing should be implemented to
delay and mitigate the impacts of future investments in electric supply. In any event, an
extensive public process should accompany the prospect of constructing new base load
generation facilities.
The Environment: Implementation of efforts related to topics such as energy
efficiency, renewable energy, green building design, and education will help achieve the
realistic energy consumption and demand reduction goals stated in the policy. The
NRAB suggests that the Utilities Department also establish intermediate goals for
• reduction.
NRAB Memorandum: Proposed Electric Energy Supply Policy; Page 1 of 2
Suggested Additions to Policy:
Page 2, last sentence of paragraph titled "The Environment," add "energy use" in the
parentheses as follows: "(e.g. habitat destruction, air and water pollution, and energy
use)." This would acknowledge the impact of energy use associated with fossil fuel
exploration, mining, and transportation.
Page 4, add language "Work with Platte River Power Authority to mitigate the expected
environmental impacts associated with the construction of new base load generation
facilities." This is similar to language on page 2, number 7 related to objectives on
electric rates, and recognizes that such facilities (such as a second unit at Rawhide
Power Plant) have environmental impacts in addition to impacts on electric rates.
Thank you for your work on behalf of the City, and please feel free to contact me
regarding the Board's recommendations on this issue.
Yours truly,
Nate Donovan, Vice-Chair M
Natural Resources Advisory Board
tel: 472-1599
e-mail: ndonovanlaw@earthlink.net
cc: John Fischbach, City Manager
NRAB Memorandum: Proposed Electric Energy Supply Policy; Page 2 of 2
PLATTE RIVER
POWER AUTHORITY
MEMORANDUM
Date: March 7,2003
To: Mr. Michael Smith
From: John Bleem
cc: Brian H. Moeck
Subject: Background on Platte River Power Authority and Fort Collins' electric energy supply
Based on questions and discussion at the February 25 City Council meeting,I pulled together the
following background information on Platte River Power Authority(Platte River),its current electric
supply resources used to serve Fort Collins,and its resource plans for the future. It is intended to help
support discussion of Fort Collins' proposed Electric Energy Supply Policy.
Introduction-Platte River Power Authority is the sole supplier of electricity to Fort Collins and to
• three other municipalities in northern Colorado(Estes Park,Longmont and Loveland). Platte River
was established in 1973 to provide for the expanding needs of its member municipalities as electricity
loads continued to grow while federal hydropower resources were fixed or decreasing. Platte River
operates under long-term contracts with the municipalities(through 2040) as their wholesale electric
utility supplier;purchasing electricity and acquiring,constructing and operating generation and
transmission resources. Platte River also sells electricity that is surplus to the needs of its members to
other wholesale entities in the region. Revenues from these sales help offset costs to the member
municipalities. Energy sold to outside entities amounted to about 48%of the energy sold to the
municipalities in 2002. Platte River is owned by the citizens in the communities it serves,with each
municipality having equity in the company based on its contribution to revenues. Approximately
$355,000 was invested by the municipalities to start the company;the municipalities'combined equity
currently exceeds$358 million.
Governance-Platte River is locally governed by an eight-member Board of Directors (two from each
member municipality),including the mayor(or designee of the mayor) and a member appointed by
City Council (typically the director of the municipality's electric utility). Rates to the municipalities,
annual budgets and other policy directives for Platte River's operations are determined by its Board of
Directors. The Board typically meets ten times each year. Platte River is not under the jurisdiction of
the Colorado Public Utilities Commission or the Federal Energy Regulatory Commission. It is a
political subdivision and public corporation of the State of Colorado,is not-for-profit,has access to tax-
exempt financing,and is exempt from most other taxation. Platte River has approximately 190
employees;divisions of the company include corporate services,financial services,customer services&
environmental programs,electric operations and power production.
Memorandum
Mr. Michael Smith
March 12,2003
Page Two
Existing Sources of Electricity—Platte River owns and operates the Rawhide Energy Station,
located 26 miles north of Fort Collins,which includes a 270 MW coal-fired generator (Unit 1),
the lowest emission coal plant in the state of Colorado. This unit runs at full load nearly all the
time. Units A, B and C,all 65 MW natural gas-fired generators (summer rating),are also
located at the Rawhide site. They are used very seldom(less than 10% of the time),to provide
for the municipalities'electrical demand on peak days,to backup other units if they are off line
for maintenance and to bolster surplus sales. Platte River also owns an 18%(154 MW) interest
in the Yampa Project,consisting of Craig Station Units 1 and 2,coal-fired generators located in
northwestern Colorado. The Craig units also operate at full load most of the time. Renewable
energy comes from the Medicine Bow Wind Project(6 MW rating)located near Medicine Bow,
Wyoming,which is owned and operated by Platte River,and from hydropower. Platte River
purchases about 80-100 MW of hydropower(depending on season) from Western Area Power
Administration,the marketing agent for federal hydropower in this region. Existing renewable
energy sources (wind and hydropower) provide over 20%of the electric energy serving Fort
Collins and the other municipalities. A summary of maximum output rating and energy
production for all current resources is provided in Figure 1 (see appendix for figures). Emission
trends from this mix of resources are shown in Figure 2. Reductions in emissions over time are
due to continued investments in enhanced emission control by Platte River. Variability from
year to year is also due to variation in maintenance schedules (downtime).
Reliability—The resources just described allow Platte River to provide both capacity and
energy to meet the needs of the municipalities. "Capacity"is the capability to serve load at any
time,and is needed to ensure reliability of service. The units at Rawhide and Craig and the
hydropower resources have provided high levels of reliability over their lifetime,and continue
to be available for full-power operation over 95%of the time. These resources rarely require
"backup"power. Wind resources,however,are highly intermittent,and are only available
about one-third of the time(on average) through the year. Also,in this region,wind speeds are
relatively low during the summer,when Platte River's members'electrical loads are highest(the
"peak"period). Given these characteristics,confirmed from five years of actual operating
history,wind generation does not reduce the need to build new resources as peak loads grow.
Wind does provide energy,however,and when the wind is blowing,output from other
resources on the electrical grid can be reduced,allowing decreased consumption of fossil fuels
and reduced emissions. Reliability of all existing resources is summarized in Figure 3. Figure 4
shows the significant variability of wind generation over time and Figure 5 illustrates the lack of
wind generation availability during summer peak periods.
Rates—Platte River's wholesale electric rates to the municipalities are within the lowest quartile
of rates for suppliers in the Rocky Mountain region(CO,WY,UT,AZ& NM). Platte River's
wholesale rates amount to about 70%of the municipalities' retail rates(on average),so low
wholesale prices help the municipalities keep their rates low. Figure 6 shows the actual rates
(na inflation adjustment) that Platte River has charged to member municipalities over the last 20
years. Note that rates are lower now than they were in 1983. The primary drivers for
maintaining low rates during this extended period include strong surplus sales (at prices higher
than rates charged to the municipalities),reductions in debt service payments (due to reduced
Memorandum
Mr. Michael Smith
• March 12,2003
Page Three
interest rates and refinancing),reductions in staffing during the 1990's,and high reliability of
Platte River's existing resources,allowing mitigation of price risk in the wholesale electric
markets. Rates are expected to increase in the near future,from 5-10%in the 2004-2005 time
frame. Primary drivers for future increases include declining surplus sales,increased costs for
reliability assurance,and increased operating costs(primarily fuel,purchased hydropower,
demand side management programs and regional system operating expenses).
Environmental Stewardship—Platte River uses state-of-the-art air quality control systems at its
power generation stations and meets or exceeds all applicable environmental laws and
regulations. As new legislation and regulations are proposed,Platte River participates in public
processes and supports additional control requirements where costs are commensurate with
measurable environmental benefits. In addition,as technology improves and opportunities
arise,Platte River is proactive in evaluating and implementing improvements in its power
operations that balance environmental and other socio-economic concerns. One recent example
of this policy is the Voluntary Emissions Reduction Agreement implemented with the state of
Colorado. Platte River is voluntarily reducing sulfur dioxide(S02) emissions in 2003 at the
Rawhide plant by 9% relative to historical actual levels (31%below 2001 permit levels) and
reducing nitrogen oxide (NOX) emissions by 35%in 2005. Many other environmental programs
have also been implemented over the last few years,as listed below. They are also voluntary,
. beyond any existing environmental legislation or regulation.
• Continued evaluation of emission reduction options at generation facilities
• Equipment efficiency upgrades at Platte River facilities(power plants,office buildings,etc.)
• New demand-side management programs(provided to all four municipalities' customers)
• Ownership, operation and development of the Medicine Bow Wind Project
• Photovoltaic (PV) solar system at Platte River office site / upgraded in 2001
• Emission free electric vehicles (charged by the PV solar system)
• Natural gas and hybrid fleet vehicles&Clean Cities partnership support
• Co-funding of a prototype biomass energy generating facility
• Small hydro project evaluation and implementation
• Renewable energy technology testing support at the Rawhide site
• Energy efficiency,distributed generation and renewables services to large customers
• Climate Wise and EPA 1605 CO2 emissions reduction& accounting programs
• Recycling and waste reduction programs
• Tree planting programs in each of the owner cities
• Public education and participation programs on multiple environmental issues
• Many other activities related to clean air,water,soils,grasslands and wetlands
Resource Planning—Platte River's fundamental resource planning goal is providing reliable,
cost-effective, environmentally sensitive resources to meet the member municipalities'
wholesale electric requirements. Platte River reviews the municipalities'loads and considers
• resource requirements on an annual basis, typically focusing on a ten-year planning horizon. A
longer term planning horizon is also considered,given the contracts between Platte River and
its member municipalities,which remain in effect until December 31,2040. Formal resource
Memorandum
Mr. Michael Smith
March 12,2003
Page Four
planning evaluations were made in 1996, 1999 and 2001,as part of Platte River's Integrated
Resource Planning(IRP) process. The 1996 and 1999 evaluations resulted in the Platte River
Board's decision to purchase three gas-fired combustion turbine units,which were installed at
the Rawhide site in 2002(Units A,B and C described above). In 2001,Platte River's resource
planning philosophy was updated,to clarify that Platte River will carry reserves or have access
to firm capacity resources sufficient to meet load obligations whenever the largest resource
(Rawhide) is out of service,with new resources to be brought on line when the forecast deficit
between peak load and existing resources exceeds 65 MW. This update was driven by two
factors: (1)existing regional transmission constraints,and (2) significantly increased market
price risks in the wholesale electricity market. New demand side management(DSM)programs
were also approved by the Board in 2001. These programs were initiated in 2002,with the goal
of reducing growth of peak demand by 5%over the five-year period 2002-2007. DSM program
results were 108%of goal through December 2002.
New Resources Planned-Utilizing the resource planning philosophy described above and
considering the current forecast for growth of municipal loads,new "peaking' resources
(approximately 65 MW)could be needed in 2006 and again in 2010-2011. These would likely be
natural gas-fired units,similar to the Units A,B and C that exist at the Rawhide site,designed to
run less than 10%of the time(to serve peak loads,to backup other units if they are off line for
maintenance,and to bolster surplus sales),_ No new"baseload" resources are needed in the
current 10-year planning period (baseload resources in this region typically use coal as fuel and
run the majority of the time, similar to the current operation of the Rawhide and Craig units).
Regional Electric Market Issues-Though Platte River does not need a new baseload resource
during the next 10 years (given current assumptions on growth,etc.),other electricity suppliers
in the region may decide to build such a unit and seek joint ownership. Platte River and its
members could realize significant advantages to being"partners" in a new baseload unit. These
advantages may include: (1) economies of scale,as larger units typically produce electricity for
less than small ones, (2) opportunities to share risk,and therefore reduce risk relative to Platte
River owning and operating the plant on its own,(3) opportunities to match the level of
resource needed with the portion of ownership,allowing smaller resource acquisition
increments,and(4) opportunities for increased surplus sales,to help minimize rate impacts to
the member municipalities. Also,large baseload resources take several years to design,permit
and build,and once such a unit is built,it may be many years before another joint opportunity
arises. Platte River continues to work with regional entities and to consider joint opportunities.
For example,during 2001,Platte River was involved in the study of a large,jointly owned coal-
fired unit in southeast Colorado. It currently appears that transmission constraints,relatively
high cost of the plant,and uncertainty in the market for surplus sales make this project
unattractive at this time. However,we will continue to monitor this project and any others in
the region that may develop as options for Platte River and its municipalities.
Summary-Platte River's mission is to provide reliable,low cost,environmentally sensitive
electricity to meet the needs of Fort Collins and the other the municipalities that it serves. Each
of these "mission critical"attributes(reliability,cost,and environmental stewardship)are
Memorandum
Mr. Michael Smith
March 12,2003
Page Five
incorporated into Platte River's current operations and are integral to its planning efforts for
new resources. Platte River is the sole supplier to its owner municipalities and must provide for
their electric loads,whatever they may be. If Fort Collins implements new demand side
management programs that reduce energy usage and peak demand,Platte River will adjust its
municipal load forecasts and surplus sales accordingly. As demand side management
programs are implemented in Fort Collins,Platte River can provide estimates of how these
programs may impact CO2 emissions in the region,and how the programs may affect future
requirements for new electric supply resources.
Platte River will also continue to meet Fort Collins'requirements for renewable energy,where
possible,with Fort Collins paying acquisition costs. Existing renewables (wind and
hydropower) account for about 20%of the energy currently provided to Fort Collins.
Hydropower is highly valuable, since it provides firm,reliable capacity,as well as energy,at a
competitive price. Platte River will continue its efforts to ensure that federal hydropower
allocations are not reduced (by proposed legislation or regulation). Five years of experience
with wind generation has shown that it can provide energy, to displace fossil fuel consumption
and associated emissions when the wind blows,and this helps meet Fort Collins' goal of
reducing CO2 emissions. However, wind is highly intermittent, is not reliable for meeting peak
demands,and therefore does not reduce the need to add new resources on Platte River's
system. Each new unit of wind generation must be "backed up"by a unit of generation from a
reliable resource. Cost estimates for providing various levels of wind energy to Fort Collins will
be provided in a separate memo, along with an evaluation of transmission constraints and other
potential limitations on new wind energy supply.
We look forward to continued work with you and your staff as the Fort Collins Electric Energy
Supply Policy is developed. Please let me know if you would like additional information.
Memorandum
Mr. Michael Smith
March 12, 2003
Page Six
APPENDIX
Figure 1.—Existing Electric Supply Resources
MAXIMUM OUTPUT ENERGY PRODUCTION
Purchases - Purchases
Hydropower 4% Hydropower 0.3%
15% 20.1%
Rawhide 1 Rawhide ABC
35% 3.4%
Wind Rawhide 1
0 / 45.6%
Rawhide ABC
25%
Craig 1&2
0
Wind Craig 1&2 30.2% -
1% 20%
Figure 2.—Emissions (vs.2002) For Current Supply Plan
120%
100%
d `
b 80%
P] `
_ S02
e 60%
m NOX
6 40% ---- - --- -
--- ---------------------
w
20% -- ---- — ---— --- —
0%
Base 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Memorandum
Mr. Michael Smith
March 12,2003
Page Seven
APPENDIX (continued)
Figure 3.-Reliability (Average Availability) of Existing Resources
100%
90% -_-_. -.-- ----- _.
00
C 80% - -- -
70% - - --
X
50%
w
c 40%
0
30% - - — -
w 20% - -
10% --- -
0°
Rawhide 1 Rawhide ABC Purchase Hydro Wind
Figure 4.-Typical Variability of Wind Generation
100%
90%
on
80%
70%
60%
X
ZM 50%
w
G 40%
O
u 30%
m
Y
u 20%
10%
0%
Month of July 2002
Memorandum
Mr. Michael Smith
March 12,2003
Page Eight
APPENDIX (continued)
Figure 5.-Wind Generation at Time of System Peak
100%
90%
ec
a 80%
m
E 70%
a
60%
x
50% 45.6%
w
O
K 40%
0
w 30% 22%
w
20%
10% 7.3%
1.3% 0.2%
0% I 1 0
1998 1999 2000 2001 2002
Figure 6.-Platte River Wholesale Rates to Fort Collins
40
35
�c 30
25
d
a 20
w
d 15
0
s
3 10
5
0
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02