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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 09/24/2013 - PLATTE RIVER POWER AUTHORITY STRATEGIC PLANNING UPDATE: September 24, 2013 STAFF: Brian Janonis Pre-taped staff presentation: none WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Platte River Power Authority Strategic Planning Update. EXECUTIVE SUMMARY Ms. Jackie Sargent, General Manager of Platte River Power Authority (Platte River) will provide an update on the work she has been doing with Platte River staff and the Board of Directors related to strategic planning. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED The work session will provide Council the opportunity to learn how Platte River’s long-term strategic planning efforts will integrate with the City’s goals. BACKGROUND / DISCUSSION General Manager Jacqueline Sargent (Jackie) became General Manager of Platte River Power Authority in August 2012. Ms. Sargent brings over twenty-five years of experience in the energy industry, including electric and gas utility operations, power generation, energy marketing, rates and regulatory affairs, strategic planning, acquisitions and mergers, and project development. Platte River Power Authority is a not-for-profit joint action agency that provides wholesale transmission and generation service to its four owner communities of Estes Park, Fort Collins, Longmont and Loveland, Colorado. Prior to joining Platte River, Ms. Sargent was the Senior Vice President of Power Supply and Market Operations for Austin Energy, located in Austin, Texas. In this position, she was responsible for the oversight of Austin Energy’s power generation facilities, management of wind, solar and biomass power purchase agreements, market operations, resource planning and engineering services. Previously, Ms. Sargent served as the Vice President of Power Supply and Renewables Integration at Black Hills Corporation. Ms. Sargent began her career as an engineering intern with Black Hills Power and Light Company, a subsidiary of Black Hills Corporation, and held various positions with increasing levels of responsibility. Ms. Sargent holds a Bachelor of Science degree in electrical engineering and a Master of Science degree in technology management, both from the South Dakota School of Mines and Technology. She is a registered professional engineer in the state of South Dakota. Ms. Sargent serves on the RMEL Board of Directors and is actively involved with the Large Public Power Council (LPPC) and the American Public Power Association (APPA). September 24, 2013 Page 2 Vision, Mission and Values (As updated and approved by Platte River Board at July 26, 2013 Board Meeting) Vision: As a respected leader and responsible energy partner, improve the quality of life for the citizens served by our owner communities. Mission: Provide safe, reliable, environmentally responsible, and competitively priced energy and services. Values: • Safety – Working safely and protecting the public, our employees, and the assets we manage is non-negotiable. • Integrity – Being ethical and holding ourselves accountable to conduct business in a fair, honest, open, compliant, and environmentally responsible manner is at the core of what we do. • Customer Service – Providing quality service at a competitive price while being responsive to our owners’ needs creates added value and improves customer satisfaction. • Respect – Encouraging constructive dialogue that promotes a culture of inclusiveness, recognizes our differences, and accepts varying viewpoints will lead us to optimal solutions for even the most difficult challenges. • Operational Excellence – Engaging employees to strive for excellence and continuous improvement ensures that we provide reliable service while managing costs and creating a rewarding work environment. • Innovation – Supporting the development of technologies to promote the efficient use of electricity, protect the environment, and create a diversified energy supply portfolio mitigates risk and creates opportunities. • Sustainability – Maintaining financial integrity, minimizing our environmental impact, and supporting responsible economic development in our owner communities ensures the long-term viability of the organization and the communities we serve. Sources of Electricity Platte River uses several sources of electricity generation capacity to meet its wholesale obligations to its four owner municipalities, including both owned resources and purchase power agreements: the coal-fired Rawhide Energy Station Unit 1; five natural gas-fired combustion turbines–Units A, B, C, D and F at the Rawhide site; the Medicine Bow Wind Project and the Silver Sage Windpower Project; the coal-fired Yampa Project near Craig, Colorado, (Platte River owns 18 percent of Units 1 and 2; federal hydropower delivered via purchase from Western Area Power Administration, and purchases from the wholesale electricity market in the region. • Rawhide Unit One (coal)–280 MW (Owned) • Rawhide Units A, B, C, D, F (natural gas)–388 MW (Owned) • Yampa Project (coal)–155 MW (Platte River’s share) • Federal Hydropower–136 MW (Allocation – maximum capacity in winter) • Medicine Bow Wind Project–6 MW (Owned) September 24, 2013 Page 3 • Silver Sage Windpower Project–12 MW (Purchase Power Agreement) • New Wind Project – 30 MW (Purchase Power Agreement being finalized) • Total Capacity–977 MW (2013) Platte River also has several demand side management resources, operated in Fort Collins and all of the other municipalities. These have reduced peak demand by about 19 MW since 2002. Energy Delivered to Platte River’s Four Municipalities in 2012–Proportions by Source: • Coal 72.5% • Hydropower 19.4% • Wind Energy and Renewable Energy Certificates 3.5% • Other Purchases 3.8% • Natural Gas 0.8% History By the early 1960s, the rapid expansion of federal hydropower dams in the western United States had reached its limits. With constraints placed on future hydropower development, municipal utilities in Northern Colorado were faced with a quandary: significant growth in the local economies was anticipated and reliable and affordable electricity was necessary to support this growth. Individually the municipal utilities in Estes Park, Fort Collins, Longmont and Loveland (Municipalities) were not large enough to take advantage of the economies of scale offered through large central station generation. Faced with this dilemma, the utility managers for the Municipalities began to explore joint action as a means to secure a reliable and economic source of power. In 1965 representatives from the Municipalities formed the Platte River Municipal Power Association, Inc., a Colorado non-profit corporation. The name of the corporation was changed to Platte River Power Authority in 1973. The 1970s saw a significant expansion of generation resources in Colorado. Platte River was presented with the opportunity to participate in the Yampa Project, which consisted of two coal-fired generation units in Craig, Colorado. Confronted with the need to borrow capital funds, Platte River discovered that as a non-profit corporation it could not take advantage of tax exempt financing. An additional hurdle was the existence of a Colorado constitutional provision dating back to 1876 that prohibited municipalities from joint venturing with private corporations. This constitutional prohibition was initially intended to prevent municipal funding of railroads, but its modern application prevented Platte River from executing the Participation Agreement for the Yampa Project. Platte River’s survival was at stake. During six months of intense activity two major changes were made to Colorado law. First, the Colorado Constitution was amended through a vote of the public in November 1974. This amendment allowed municipalities to develop energy resources jointly with private entities. Second, in 1975 the General Assembly created a mechanism by which municipalities could form power authorities capable of issuing tax exempt debt. Platte River was dissolved as a corporation and reformed as a political subdivision in June 1975. In short order, Platte River issued its Series A bonds (June 1975) in an amount of $35 million. Over September 24, 2013 Page 4 the next ten years, Platte River issued debt of approximately of $600 million for participation in the Yampa Project and construction of Unit 1 at the Rawhide Energy Station. The underlying security for these debts was the existence of all-requirements power sales agreements between Platte River and the Municipalities. Thermal Resources and Environmental Controls The Rawhide Energy Station is located north of Fort Collins in Larimer County. Even in the late 1970s, the development of a coal-fired generation resource in Larimer County proved to be controversial, and was opposed by many in Fort Collins. The primary issues associated with coal- fired generation 30 years ago involved the “criteria” pollutants (those shown to impact public health) and water usage. A number of innovative solutions were employed at Rawhide to address these issues, some of which have now become standard in the industry. For example, by the early 1970s SO2 emissions from coal plants had been linked to acid rain. At about this time the Powder River Basin in Wyoming was being developed as a source of low sulfur coal. Platte River went a step further and contracted for the lowest sulfur coal available in the Basin and has always paid a premium for such coal. In addition to obtaining a low sulfur resource, Platte River made the additional investment in active sulfur removal and was one of the first “scrubbed” units in the country. Cooling water needs were addressed in a manner intended to accommodate existing water usage on the over-appropriated Poudre River both through participation in the Windy Gap Project, a trans-basin diversion from the Colorado River, and the exchange of Windy Gap waters with Fort Collins for treated effluent. Rawhide was one of the first units to use treated wastewater effluent (from Fort Collins’ wastewater treatment facility) for cooling. The controversy associated with the construction of Rawhide led Platte River to embrace environmental responsibility as a goal on an equivalent level of importance with reliability and affordability. Rather than be satisfied with the emission controls placed on the unit in 1984, the staff at Rawhide has remained engaged as improvements in environmental controls develop. As a result, a number of innovative improvements have been implemented at Rawhide, and NOx emissions are two-thirds less than in 1984. Current unit capacity and efficiency have increased by 10 percent since 1984. Similarly, the Yampa Project has been upgraded over time. Over the past ten years Platte River has invested $24 million in SO2 and particulate emission reduction technology at the Yampa Project. New steam path technology has improved efficiency by three percent. By 2017, additional NOx reduction technology will be installed on the Yampa units. With completion of the Yampa Project and Rawhide Unit 1, the base load generation resources upon which Platte River continues to rely were in place. Initially most of the output from Rawhide was sold to Public Service Company of Colorado under a long-term contract while the Municipalities grew into the Unit 1 capacity. This strategy resulted in a period of relative rate stability from 1983 through 2003. Growth over this period differed from what was expected; growth in energy consumption was slower than anticipated but an increasing saturation of air conditioning led to higher than expected growth in peak demand. Beginning in 2000, Platte River began to add natural gas peaking units at the Rawhide Energy Station to address the growth in summer peak demand. Demand-Side Management & Renewables In addition to traditional thermal resources, Platte River has a long history of involvement in demand-side management and renewable energy generation. Beginning in 1990, a joint “Energy Efficiency Task Team” was formed to evaluate the costs and benefits of energy efficiency programs September 24, 2013 Page 5 at the wholesale, distribution and retail levels. Platte River began offering technical energy audits, distributed generation feasibility studies and other informational programs in 1991 initially to large customers. Formal evaluation of program costs and benefits for all sectors from a rate impact perspective was completed to support the first Integrated Resource Plan (IRP) in 1994. As part of the second formal IRP, the Platte River Board approved investment in energy efficiency programs funded by Platte River and implemented in all Municipalities. These incentive programs began in 2002 and have been expanded several times since then. Current funding is approximately $2 million annually. Through 2012, these programs have reduced energy usage by about 17% below the growth that would otherwise have occurred. In the early 1990s, Platte River began to investigate wind as a generation resource. Platte River was part of a statewide wind energy study, and specific studies were completed for potential sites north of Rawhide and for the Foote Creek Rim site near Arlington, WY. A plan was developed to participate in a 50 MW project at the Foote Creek site—at a level of $5 million (for 5 MW). When this effort collapsed due to technical difficulties, Platte River issued a request for proposals for wind supply and ultimately developed the Medicine Bow Wind Site, which was the first utility scale wind generation site serving customers in Colorado. Fort Collins was the first purchaser in 1998, and by 1999 all of the Municipalities were purchasing wind energy from this site on a voluntary basis. The Medicine Bow site was expanded three times through 2004 as demand for additional wind energy grew. Transmission availability and other factors have limited the expansion potential at Medicine Bow, and in 2008 Platte River sought other wind sources to meet growing interest from the Municipalities. In 2009, wind generation was added at the Silver Sage Wind Facility through a power purchase agreement. Output from Silver Sage is about twice the amount received from Medicine Bow. On September 12, Platte River executed a power purchase agreement for an additional 32 MW wind purchase from the Spring Canyon site in eastern Colorado. This increases the total wind supply to 48 MW providing about 6.8% of energy supply by 2015. Conclusion From a humble beginning in 1965 when the utility directors of the Municipalities faced an uncertain electric resource future, Platte River has constructed or purchased 977 MW of generation capacity with 30 megawatts under contract, and 251 miles of high-voltage transmission lines. Platte River currently employs a workforce of approximately 220 employees and continues to provide safe, reliable and competitively priced power in an environmentally responsible manner. ATTACHMENTS 1. Powerpoint presentation Strategic Planning Jackie Sargent, General Manager/CEO City of Fort Collins - Council Work Session September 24, 2013 ATTACHMENT 1 Platte River Power Authority 2 Estes Park Longmont Fort Collins Loveland Local Decision Making 3 Estes Park Fort Collins Longmont Loveland Mayor Bill Pinkham Mr. Reuben Bergsten Mayor Karen Weitkunat Mr. Gerry Horak Mayor Dennis Coombs ``` Mr. Tom Roiniotis Mayor Cecil Gutierrez Mr. Steve Adams Platte River Board of Directors Management Team 4 General Manager Jackie Sargent General Counsel Joseph Wilson Board of Directors Financial Services Dave Smalley Operations Jason Frisbie Environmental Services / Compliance Deb Schaneman Strategic Planning & Customer Service John Bleem Corporate Services Karin Hollohan Government & External Affairs Barb Ateshzar Wholesale Electric Rate Comparison 2012 Rates ($/MWh) 5 cents per kWh Energy Resource Portfolio – 2012 Based on sales to Municipalities 7 • Legislative & regulatory risks: – CO2 emissions (climate change) – SO2 , NOX , Hg, VOC, air toxics (health) – Coal ash, cooling water, etc. (environment) • Financial risks: – Greenhouse gas charges – Emission control costs – Waste / water management costs – Credit rating downgrade • Constrained resource optimization: – High base & peaking / no intermediate resource – Limited ability to integrate renewables – Less flexible resource operations • Community values: – Customer preferences vs. current resources Resource Portfolio Considerations Summary of Current Situation • Excellent operations & financial performance • Lowest cost wholesale generator in Colorado • Highly reliable system with outstanding compliance record • High CO2 emissions per unit of electric energy • Limited ability to integrate renewables • Lack of distributed resources • Limited flexibility in new market scenarios Process Timeline 9 Board Approves Wind RFP Consultants Selected Gap Analysis: • Strengths • Weaknesses • Opportunities • Threats Stakeholder Meetings & Municipal Survey Board of Directors Strategic Planning Retreat Retreat Preparation With Board and Staff Direction: • Improve collaboration among Municipalities • Reduce carbon footprint – 20% by 2020 • Diversify resource portfolio – balance supply • Expand renewable energy supply – 20% by 2020 • Maintain competitive rates –remain lowest • Seek technology & innovation opportunities Consultant Interviews Initiate Preliminary Analysis Outreach Management Team Retreat Wind RFP Issued in March Board Approves Vision, Mission & Values Review of Board Resolutions and Policies Vision and Mission Vision: As a respected leader and responsible energy partner, improve the quality of life for the citizens served by our owner communities. Mission: Provide safe, reliable, environmentally responsible, and competitively priced energy and services. Values Safety Integrity Customer Service Respect Operational Excellence Innovation Sustainability 11 Board Retreat • Engaged consultant –Beckett Advisors – Preliminary work • Conducted on‐line surveys • Conducted telephone interviews – Retreat preparation • Attended May and July regular Board meetings • Compiled findings – Day long off‐site retreat • Facilitated planning session • Presented key decision metrics • Majority approval of directives 12 Retreat Outcome Business As Usual? New Direction Needed? Yes! Board Directives 14 • Improve collaboration among Municipalities • Diversify resource portfolio – rebalance portfolio • Reduce carbon footprint – 20% by 2020 • Expand renewable energy supply – 20% by 2020 • Maintain competitive rates • Seek technology & innovation opportunities • Identify opportunities for joint surveys Process Timeline 15 Board of Directors Strategic Planning Retreat Strategic Initiatives Goals Strategic Plan Develop Strategic Plan Received direction from Board New Integrated Resource Plan Finalize December 2014 Initiate Meetings with City Staff Increase Collaboration Finalize New Wind Purchase Execute Contract with Invenergy Present to Board in December Collaboration 16 • Fort Collins Solar Program implementation • Demand response program collaboration • Demand side management (DSM) programs & services • DSM potential studies –KEMA & Nexant • Climate Action Plan – Incorporate goals into next resource plan • Joint solar garden program evaluation • Load forecasting and DSM integration • Rates –design / updates / stakeholder communications • System reliability and cyber security • Municipal survey –several additional items • Integrated resource planning National Renewable Energy Laboratory Renewable Energy New 30 MW Spring Canyon (Colorado) Spring Canyon (N. CO) 54% Silver Sage 16% OMPA 13% EDF 10% Medicine Bow 7% Renewable Energy – 2015 Estimated on line Fall 2014 Strategic Directives, Initiatives & Goals Annual Operating Plan Strategic Climate Plan Action Plan Vision Mission Values Strategic Financial Plan Risk Management Plan Capital Plan City Plans & Energy Initiatives Legislative Policies Transmission Plan Strategic Plan Development Strategic Initiatives and Goals EXAMPLE Resource Diversification Initiative Platte River will diversify its future mix of resources –integrating both supply‐ and demand side technologies and capitalizing on regional competitive strengths (proximity to natural gas, excellent wind & solar resources, and local/regional energy technology research & development). Goals • Reduce greenhouse gas emissions to 20% below 2005 levels by 2020 • Meet 20% of retail customer energy from renewable resources by 2020 • Add natural gas combined cycle generation to support integration of additional renewable energy resources and enhance resource flexibility • Expand energy efficiency programs to reduce Municipal energy needs • Utilize distributed generation and innovative technologies where feasible • Update the Integrated Resource Plan to increase resource diversification 20 Integrated Resource Planning (1990’s +) • Maintain reliability • Energy Policy Act of 1992 • Implemented via WAPA • Load forecasting improvements • New analysis tools • “Supply” & “Demand” focus • “Integration” of resources • Energy efficiency programs • Renewable energy focus • Public input process added • “Externalities” considerations • Deregulation considerations Least Cost Planning (1980’s) • Maintain reliability • Monopoly perspective • Consumer advocate focus • Large customer influence • Lowest cost • Fewer resource options • Limited analysis capability • Initial environmental focus / integration Resource Planning Trends • Maintain reliability • Energy Policy Act of 2005 • Updated IRP rules • FERC / NERC initiatives • RTOs, ISOs, CIP, EIM, etc. • Global warming concerns • Environmental compliance –coal • Legislative / regulatory initiatives • DSM, DG, DR & renewable options • Homeland Security impacts • Hydraulic fracturing innovations • Aging infrastructure concerns • AMI, Smart Grid, innovations • Electric vehicles • Drought / water management • Stakeholder engagement • Triple bottom line perspectives • Increasing uncertainty … Evolving Planning Environment Resource Planning Phases – Platte River Summer Peak: • Five new gas CTs • Transmission • End of PSCo sale • Hydro (drought) • Craig & Rawhide operations Early 2000’s Flexibility: • Renewables • Demand response • Distributed generation • New technologies • Diverse member needs • Balancing multiple uncertainties & managing risks Next Phase Building: • Craig • Rawhide • Transmission 1970’s – 1980’s Operations: • Craig • Rawhide • Transmission • Municipal sales • PSCo CAE sale 1980’s – 1990’s 23 Questions?