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HomeMy WebLinkAboutMemo - Mail Packet - 12/1/2015 - Memorandum From Kevin R. Gertig Re: Edits To City Of Fort Collins Section: Draft Platte River Power Authority 2016-2026 Strategic PlanDRAFT OUR VISION: As a respected leader and responsible energy partner, improve the quality of life for the citizens served by our owner communities. OUR MISSION: Provide safe, reliable, environmentally responsible, and competitively-priced energy and services. STRATEGIC PLAN – 2016-2026 DRAFT DRAFT 2016-2026 Strategic Plan 2 TABLE OF CONTENTS Values ................................................................................................................................................................................... 3 Message From The General Manager ........................................................................................................................... 4 Board Of Directors ............................................................................................................................................................. 5 Senior Management Team ................................................................................................................................................ 6 Strategic Initiatives ............................................................................................................................................................. 7 Strengths, Weaknesses, Opportunities And Threats (SWOT) .................................................................................... 8 Key Operational Goals And Activities ........................................................................................................................... 9 Resource Planning ............................................................................................................................................................ 10 Risk Management ............................................................................................................................................................ 12 Financial Management ................................................................................................................................................... 13 Environmental Management .......................................................................................................................................... 14 Legislative And Regulatory Planning ........................................................................................................................... 15 Municipal Planning .......................................................................................................................................................... 16 Town Of Estes Park ..................................................................................................................................................... 16 City Of Fort Collins ..................................................................................................................................................... 16 City Of Longmont .............................................................................................................................................. 191917 City Of Loveland ............................................................................................................................................... 192018 Appendices ............................................................................................................................................................. 212120 Appendix A. Resource Planning Update ...................................................................................................... 222221 Appendix B. Risk Management Plan ............................................................................................................. 333332 Appendix C. Strategic Financial Plan ........................................................................................................... 444442 Appendix D. Environmental Regulation Issues And Positions .................................................................... 464644 Appendix E. Legislative And Regulatory Issues And Positions ................................................................. 505048 Acronyms ................................................................................................................................................................. 525250 DRAFT DRAFT 2016-2026 Strategic Plan 3 VALUES SAFETY What is non-negotiable? Working safely to protect the public, our employees, and the assets we manage. INTEGRITY What is at the core of what we do? Being ethical and holding ourselves accountable to conduct business in a fair, honest, open, compliant, and environmentally responsible manner. CUSTOMER SERVICE What creates added value and improves customer satisfaction? Providing quality service at a competitive price while being responsive to our owners’ needs. RESPECT What leads us to optimal solutions for even the most difficult challenges? Encouraging constructive dialogue that promotes a culture of inclusiveness, recognizes our differences, and accepts varying viewpoints. OPERATIONAL EXCELLENCE How do we provide reliable service while managing costs and creating a rewarding work environment? By engaging employees to strive for excellence and continuous improvement. SUSTAINABILITY How do we ensure long-term viability of the organization and the communities we serve? By maintaining financial integrity, minimizing our environmental impact, and supporting responsible economic development in our owner communities. INNOVATION How do we mitigate risk and create opportunities? By becoming an early adopter of technologies proven to improve electric efficiency, protect the environment, and create a diversified energy supply portfolio. DRAFT DRAFT 2016-2026 Strategic Plan 4 MESSAGE FROM THE GENERAL MANAGER Hello. I am pleased to share Platte River Power Authority’s 2016-2026 Strategic Plan with you. It illustrates the progress we continue to make in refining our processes and planning. In the following pages, you will get a clear picture of how we’ve organized our strategy and established the groundwork for each strategic initiative. You will see that our approach leverages new technologies, price trends and advancements over time. You will find our values, including safety, sustainability, innovation, integrity, and operational excellence, are the lens through which we focus our decision making. These are clearly interesting times for our industry. The pace and amount of change is the most I’ve seen in my 27-plus-year career. Data and artificial intelligence increases the accuracy of wind and solar generation forecasts. The Internet of Things promises to connect devices like never before. The rapid evolution of 3-D printing could mean that utilities will someday produce their own spare parts. Change is occurring so rapidly it is predicted the amount of technological advancement that occurred in the year 2000 will occur every 30 seconds in 2020. The combination of speed and scale create potentially disruptive technologies for our industry but also provide opportunities. To ensure that we continue to deliver value in this environment, our strategy must be adaptive. We would not have realized progress in our strategic planning process without our dedicated Board of Directors. They consistently provide policy-level guidance and engage in an active and collaborative fashion. This bi-directional connection increases clarity for staff in selecting the areas of focus that will best support our long-term success. I want to personally thank each director for their continued support and engagement. Of course, any strategy is only as good as its execution. Platte River succeeds because our employees transform plans into reality. Their unwavering dedication to Platte River and to our owner communities results in exceptional value being delivered day-in and day-out. I appreciate all of our employees for their commitment to service. Our strategic process is just that – a process. It does not end. Changes in the industry, both known and unknown, require an organization to be flexible and to adjust over time. Continued refinements, investments in modeling, and a thoughtful approach give us confidence that we will continue to deliver safe, reliable, environmentally responsible, and competitively-priced energy and services to our owner communities of Estes Park, Fort Collins, Longmont, and Loveland, Colorado. Sincerely, Jackie DRAFT DRAFT 2016-2026 Strategic Plan 5 BOARD OF DIRECTORS Platte River Power Authority is a joint action agency and political subdivision of the State of Colorado. It is governed by an independent eight-member board of directors that provides local decision making and control. DRAFT DRAFT 2016-2026 Strategic Plan 6 SENIOR MANAGEMENT TEAM Platte River Power Authority operates under the direction of a general manager who serves at the pleasure of the board of directors. Platte River’s senior management has extensive experience, with an average of over 25 years of service in the utility industry. DRAFT DRAFT 2016-2026 Strategic Plan 7 STRATEGIC INITIATIVES Platte River’s strategic initiatives for 2016 and beyond have been refined and clarified from the 2015- 2025 plan. These statements provide high-level direction and focus for all divisions within Platte River. SAFETY Promote a culture where no job is so important and no service so critical that employees must compromise their own safety to perform their job. COMPLIANCE Promote a culture of compliance where all employees conduct business with the highest standards of ethics and integrity. Meet or exceed all policy and regulatory requirements. FINANCIAL STABILITY Generate adequate cash flows, maintain access to low-cost capital, provide stable and competitive wholesale rates, and effectively manage financial risks, all with a focus on continually improving our financial processes. OPERATIONAL EXCELLENCE Design, construct, operate, and maintain safe, reliable, and environmentally-responsible generation and transmission assets in a cost- effective manner. EXCEPTIONAL CUSTOMER SERVICE Provide exceptional service for internal and external customers with a focus on continuous improvement through relationships, knowledge of customer needs and preferences, key performance metrics, and future program development. EMPLOYEE ENGAGEMENT Create a work environment that encourages employee engagement at all levels through a framework of effective communication. Make investments to leverage diversity, grow internal talent, develop innovative skills, and maintain high standards. RESOURCE MANAGEMENT Employ an adaptive strategy to cost-effectively maintain reliability, manage risks, and ensure regulatory compliance. COLLABORATION AND COMMUNICATION Continuously improve collaboration and communication internally and externally to enable successful projects and services, build stakeholder relationships, and articulate value. TECHNOLOGICAL INNOVATION AND SUSTAINABILITY Actively monitor and adopt new, proven technologies that cost-effectively enhance performance and promote the long-term viability of Platte River, the municipalities, and their customers. DRAFT DRAFT 2016-2026 Strategic Plan 8 STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT) To help ensure the long-term success of Platte River and its municipalities, a SWOT analysis is reviewed and updated each year. To expand employee engagement in planning efforts, all employees were invited to participate in a SWOT work session during 2015. Figure 1 reflects some of the most recent input from employees. This exercise will continue as part of the ongoing strategic planning process. As a result, the list may change over time as Platte River’s business evolves to meet new challenges and requirements. FIGURE 1. SWOT SUMMARY STRENGTHS (Internal Focus) WEAKNESSES (Internal Focus)  Financial position  Environmental compliance  Technical and operational expertise  Station generation and transmission infrastructure  Competitive wholesale rates  Industry reputation  Dedication to operational excellence  Commitment to safety  Diversity in electricity resources  Succession planning and knowledge transfer  Leadership development  Operational experience in potential structured energy markets  Alignment between culture and strategic direction  Internal communications OPPORTUNITIES (External Focus) THREATS (External Focus)  Community involvement  Optimization of physical assets and market operations  Communication and educational outreach  Collaboration with municipal owners and other regional entities  Deployment of innovative technologies  Regulatory and legislative uncertainty  Unpredictability of long-term water supply  Potential loss of tax-exempt financing  Litigation  Operational and market uncertainties  Physical and cyber security risks DRAFT DRAFT 2016-2026 Strategic Plan 9 KEY OPERATIONAL GOALS AND ACTIVITIES Key operational goals and activities for 2016 and beyond are summarized in this section. All are focused toward meeting strategic initiatives. Platte River will periodically report to the board of directors any notable progress toward these goals. RENEWABLE ENERGY SUPPLY INTEGRATION Optimize integration of the 60 MW Spring Canyon wind resource and 30 MW Rawhide Solar Flats project into Platte River's operations. NEW WATER POLICY Manage water resources through a policy that facilitates utilization and optimization. TALENT MANAGEMENT Develop programs focused on succession planning, employee development, knowledge transfer, and attracting and retaining top talent. PROJECT MANAGEMENT Focus on maturing project management processes, with special emphasis on tools and training. EPA CLEAN POWER PLAN Actively engage in Colorado’s stakeholder process to help shape the State Implementation Plan (SIP) so it aligns with Platte River’s strategic direction. DEBT FINANCING Remain focused on analyzing debt financing options for capital improvements at the Rawhide Energy Station, for the Windy Gap Firming project, and for electric facilities. FUNDING OPPORTUNITIES Develop a plan to pursue external funding opportunities that support Platte River’s strategic initiatives. CLIMATE CHANGE AND RESILIENCE Assess risk and uncertainty due to climate change, and then develop plans to improve electric system infrastructure resiliency. EMPLOYEE ENGAGEMENT Ensure availability of appropriate tools, technology, training, and resources for optimal work effectiveness. RESOURCE PLANNING Develop and implement a strategy to exit ownership of Craig Unit 1, expand system-wide energy efficiency programs, implement a system- wide demand response technology pilot, and develop a distributed resource strategy. RATE PLANNING AND COORDINATION Continue collaborating with the owner municipalities, including exploring long-term rate development and potential changes to rate structure. REGIONAL WHOLESALE MARKET INITIATIVES Proactively engage in the design and development of organized markets in the Rocky Mountain region to help ensure that the market structure is workable for all participants. CYBERSECURITY Continue to enhance a robust cybersecurity DRAFT DRAFT 2016-2026 Strategic Plan 10 RESOURCE PLANNING Resource planning and management is a cross- functional activity involving many departments throughout the organization. This effort is continuous and ever-changing as market, regulatory, and other planning variables evolve. This section provides a high-level overview of resource management. Details on resource planning activities and insights appear in Appendix A. Resource Planning Update. During its August 2015 work session, the board of directors reached consensus on replacing historical resource planning guidelines with the following new statement of direction: GREATER FLEXIBILITY The new statement gives staff more flexibility to recommend resource actions going forward – relative to the detailed set of resource planning guidelines included in prior strategic plans. It also directs Platte River to position itself for compliance with the Clean Power Plan (CPP), with the potential to go beyond CPP requirements if cost-effective. Going forward, “Resource Management” has replaced “Diversified Energy Supply Portfolio” as the strategic initiative statement associated with resource planning and management. This change reflects a broader focus on all aspects of generation resource management, including portfolio diversity. FUTURE RESOURCE MANAGEMENT Platte River faces future resource management decisions from a position of strength. Generation and transmission facilities owned and operated by Platte River have performed well. Platte River has significant surplus capacity based on updated load forecasts and continues to expand energy efficiency and other demand-side programs to manage growth and provide services to customers in our owner communities. Renewable energy supply to the municipalities already exceeds the Colorado Renewable Energy Standard and 30 MW of new renewable supply will come from the Rawhide Flats facility during 2016. Finally, given its location and collaboration with owner municipalities, Platte River can select from several renewable resource options going forward. The board of directors has supported multiple activities related to resource management, including:  Continued expansion of energy efficiency programs  Integration of significant wind and solar resource additions (increased from 18 MW in 2013 to 108 MW by 2016)  Development of a strategy for exiting ownership of Craig Unit 1 DRAFT DRAFT 2016-2026 Strategic Plan 11 RESOURCE MODELING TOOLS Beginning in 2014, with board support, Platte River acquired software and put into practice new resource modeling tools that help evaluate potential future resource scenarios. We completed a screening process to identify all potential resources, prioritize them, and develop an initial range of options for the mid-term time frame. The resource analysis was recently updated to include evaluation of costs for integration of intermittent renewable resources (wind and solar). Based on overall analysis to date it appears Platte River has a solid range of practical options for meeting the CPP and future energy/capacity requirements. However, wholesale rate increases could be significant, with a range of potential impacts depending on the final implementation rules for CPP in Colorado as outlined in the Financial Management section and in Appendix A. Platte River will develop a more detailed resource analysis and communicate the results when the mechanisms for CPP implementation in Colorado become more clear. This will help us evaluate how various CPP scenarios may change the relative wholesale rate differences between Platte River and other Colorado wholesale suppliers. The analysis will also support retail/wholesale rate coordination and communications. FORMAL INTEGRATED RESOURCE PLAN Platte River is due to file its next formal Integrated Resource Plan (IRP) with Western Area Power Administration in June 2017. Management contemplated developing a resource plan earlier than this date in our 2015 Strategic Plan. However, in early 2015, the board agreed with staff’s recommendation that following the normal schedule for the next IRP was more appropriate. Reasons for this included: (1) the delay in need for new capacity resources associated with an updated load forecast and expanded Energy Efficiency (EE)/Demand Side Management (DSM), (2) uncertainties related to working with four other joint owners to develop decisions for the Craig station coal units, and (3) release of the CPP rule. Communications have been ongoing with stakeholders regarding the IRP schedule and other key resource planning considerations including the CPP and evolution of new technology options over time. DRAFT DRAFT 2016-2026 Strategic Plan 12 RISK MANAGEMENT The Risk Oversight Committee (ROC) consists of the general manager, senior management, and key staff members. It is charged with managing Platte River’s risks and the Risk Management Plan. The Risk Management Plan (see Appendix B) is a summary of Platte River’s proactive efforts to identify, evaluate, rank, and mitigate risks significant to Platte River. These are risks that could negatively impact electric supply, finances, reputation, and safety. Using a bottom-up approach, Platte River’s risk management process provides the framework to identify and assess specific risks by soliciting input directly from subject matter experts (SMEs) throughout the organization and developing mitigation strategies. This approach has increased employee engagement, resulting in more accurate risk assessment and mitigation development. For example, perspectives from SMEs resulted in expanding cybersecurity assessments. This expansion included identifying risks specific to separate facilities and areas of operation, and subsequent mitigations related to each respective area. SMEs also refined the risk assessment process for unplanned capital requirements, emphasizing project planning as well as cost projections. Proactive efforts to improve Platte River’s risk management are continuous. The 2015 Annual Budget includes funds for a third-party review of the Risk Management Plan and risk mitigation activities, which is scheduled to begin in the fourth quarter of 2015. The third-party review will include a thorough examination of Platte River’s risk ranking methodology and metrics, risk assessment development and review processes, and best practices for managing business risk. The third party will provide a detailed report summarizing the assessment, Platte River strengths and weaknesses, and recommendations. Findings from the review will be incorporated into the 2017-2027 Risk Management Plan. Platte River’s risk management approach has increased employee engagement, resulting in more accurate risk assessment and mitigation development. DRAFT DRAFT 2016-2026 Strategic Plan 13 FINANCIAL MANAGEMENT Platte River’s Strategic Financial Plan (SFP, see Appendix C) provides direction for creating long-term financial stability. The plan’s priorities include generating adequate cash flows, maintaining access to low cost capital, providing stable and competitive wholesale rates, and effectively managing financial risk. The board of directors reviews the SFP policies, goals, and financial projections at least annually. Many of the SFP goals establish targets used in setting municipal wholesale rates. The SFP is designed to maintain Platte River’s current AA senior lien debt credit rating by all three rating agencies: Fitch Ratings (AA), Moody’s Rating Service (Aa2), and Standard & Poor’s Rating Service (AA). The SFP policies and goals are interrelated. Achieving the targets for debt service, net income, and days unrestricted cash on hand should result in adequate cash flows to meet liquidity targets, exceeding the debt-to-capitalization goal, and maintaining access to low-cost capital. Maintaining the minimum unrestricted days cash-on-hand ensures a strong cash position, significantly enhancing future operating and financing flexibility. The Rate Stabilization Fund goals are met if an unforeseen event were to occur, such as an extended unplanned Rawhide outage. The remaining financial goals focus on providing competitive wholesale rates to the municipalities, prudently investing capital, and establishing appropriate and cost effective programs to manage Platte River’s risk against catastrophic losses. 10-YEAR RATE PROJECTIONS To continue meeting SFP goals, Platte River’s board of directors increases rates when necessary. Currently, wholesale rates are projected to increase between 22 percent and 70 percent from 2015 to 2025, depending on the CPP implementation and other factors. To minimize single-year rate impacts, Platte River will continue rate-smoothing strategies; currently 4.5 percent rate increases are projected in 2016 and 2017. Beyond 2017, rate projections indicate a range of 1.4 percent to 5.7 percent annual increases from 2018 to 2025. The range is due to the significant uncertainty regarding implementation of the CPP provisions – from no CPP (1.4 percent/yr) to a 50 percent reduction of carbon dioxide (CO2) emissions via carbon tax on all emissions (5.7 percent/yr). Platte River will review and revise future rate projections and smoothing strategies, at least annually, based on the financial forecasts and the latest information including the impacts and timing of the CPP. FIGURE 2. 2014 AVERAGE WHOLESALE RATES COMPARISON 53.82 71.40 75.47 104.22 0 20 40 60 80 100 120 Platte River Tri-State PSCo ARPA $/MWh 2014 Average Wholesale Rates Platte River’s customers enjoy the lowest rates among wholesale power providers in the State of Colorado. DRAFT DRAFT 2016-2026 Strategic Plan 14 ENVIRONMENTAL MANAGEMENT Platte River has a longstanding commitment to being a good steward of the environment, as demonstrated by the organization’s record of consistently meeting or exceeding regulatory requirements. By continuing to look for ways to improve plant performance and making investments in technology, Platte River is able to operate its generation and transmission systems at high levels of reliability and environmental compliance. Figures 3 and 4 show a comparison of emissions performance for Platte River’s Rawhide Generating Station relative to other US coal plants. Rawhide is a top performer among comparable coal plants. FIGURE 3. 2014 AVERAGE EMISSION RATES OF SO2 + NOX (COAL-FIRED PLANTS IN THE US) FIGURE 4. 2014 AVERAGE EMISSION RATES OF CO2 (COAL-FIRED PLANTS IN THE US) When new legislation and regulations are proposed, Platte River takes an active role in discussions. This helps shape the final outcome so that reliability, risk, and costs are fully considered. This is consistent with the organization’s strategic direction and essential to meeting its mission. Appendix D highlights the environmental-based principles that are central to the organization’s planning guidelines. It also gives context to major areas of environmental focus and consideration, including recently released CPP and Ozone regulations. 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 lb/mmBtu Source: EPA Rawhide 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 lb/MWh Source: EPA Rawhide DRAFT DRAFT 2016-2026 Strategic Plan 15 LEGISLATIVE AND REGULATORY PLANNING Platte River’s legislative and regulatory efforts at the state and federal levels support our mission to provide safe, reliable, and competitively-priced energy and services, while simultaneously recognizing and mitigating the environmental impacts of power generation. Platte River strives to maintain positive relationships with members of Colorado’s congressional delegation, the governor’s office, the Colorado General Assembly, as well as with state and federal regulators and legislators. In addition to direct issue-related communication with governmental decision makers, Platte River is an active participant in trade associations, such as the American Public Power Association (APPA), the Large Public Power Council (LPPC), and the Colorado Association of Municipal Utilities (CAMU). These associations offer a cost-effective means to participate in legislative and regulatory proceedings. Platte River management and staff actively participate with these organizations to ensure our positions are appropriately reflected by these organizations. Appendix E provides a summary of pending issues and positions such as the CPP and ozone regulations. The appendix also includes specific environmental policies and principles that provide guidance to Platte River management and staff. DRAFT DRAFT 2016-2026 Strategic Plan 16 MUNICIPAL PLANNING A summary of current planning activities within the municipalities is provided on the following pages based on input provided by representatives from each of the municipalities. TOWN OF ESTES PARK  Cost-Sensitivity. The Town of Estes Park is cost sensitive because of its larger service territory with fewer customers, which make its rates higher (relative to large municipalities). Rates are still lower than regional investor owned or rural electric utilities. Cost consciousness will impact future planning.  Environmental Advocacy. Significant environmental advocacy exists within the Town and there is interest in providing information about the cost impacts of renewable energy or other environmental initiatives.  Capital Investment. The current focus is toward capital investment. Other areas of focus include cost management, identifying risks/opportunities, and prioritization.  Key Initiatives. The following are some key initiatives currently underway or being considered: economic development, land use, and water/energy planning – part of an overall planning process.  Renewables. The Town is cost conscious and supports renewables. Its municipal operations participate in the voluntary renewable program to achieve 100 percent power from renewable energy. CITY OF FORT COLLINS  City Plan and Transportation Master Plan. The City Plan is the comprehensive plan for the City of Fort Collins. It illustrates how the community envisions Fort Collins over the next 25 years and beyond. The Transportation Master Plan defines a bold vision for a long-term, multi-modal transportation system that supports Fort Collins well into the future.  Plan Fort Collins. The name Plan Fort Collins refers to the integrated process to prepare major updates to two key documents: City Plan and the Transportation Master Plan. City Plan is the comprehensive plan for the City of Fort Collins, and illustrates how the community envisions Fort Collins over the next 25 years and beyond. The Transportation Master Plan (TMP) serves to document a bold vision for the long-term multimodal transportation system that will support the Fort Collins community well into the future. The TMP provides policy direction for decisions regarding the implementation of the transportation system to achieve the community’s vision. The process for updating two distinct plans, City Plan and DRAFT DRAFT 2016-2026 Strategic Plan 17 sustainability, and connections. This meant the long range visions and policies for City Plan and the Transportation Master Plan would become mutually supportive and comprehensive. In 2010, the process for updating the two plans above was unified around the tenets of innovation, sustainability, and connections. This meant the long range visions and policies for City Plan and the Transportation Master Plan would become mutually supportive and comprehensive. Re-branding these two efforts as Plan Fort Collins created a simpler and more recognizable name, resulting in greater public awareness and understanding of the two projects. The 2010 update was prepared with extensive involvement from City Utilities, leading to closer integration of a variety of topics such as energy, water, and storm water. Note: The previous City Plan had incorporated those topics in a more cursory manner.  City Strategic Plan. The City of Fort Collins aspires to provide world-class services to the community while cultivating a world class organizational culture for its employees. In order to achieve this vision, both internal and external services are data-driven and implemented according to organizational values. Residents can not only expect to receive exceptional service, but also to have the opportunity to engage with decision makers, provide input regarding the way City resources are allocated, and have access to government information in a timely and transparent manner. The City of Fort Collins works to continuously improve seven key outcome areas: Community and Neighborhood Livability, Culture and Recreation, Economic Health, Environmental Health, Safety, Transportation, and High Performing Government. The City budget is divided among these seven areas, and revenue is allocated to support policies and initiatives that drive improvement in outcomes. While each outcome area has unique defining characteristics, City investment in a single objective regularly impacts more than one outcome area.  Energy Policy. The Energy Policy was updated between 2014-2015 to address the broader scope of all energy use in the community and to align with the Climate Action Plan (CAP) Framework. The City of Fort Collins’ Energy Policy reflects the community’s values of reliability, safety, affordability, greenhouse gas (GHG) emissions reduction, pollution prevention and DRAFT DRAFT 2016-2026 Strategic Plan 18 implementation plans that foster the policy outcomes for residents, businesses, and other organizations.  Climate Action Plan. During 2014-2015 Fort Collins developed a new CAP Framework document and adopted new carbon reduction goals to reduce community carbon emissions as follows: reduce by 20 percent below 2005 levels by 2020, by 80 percent below 2005 levels by 2030, and achieve carbon neutrality by 2050. The 2015 CAP Framework lays out a number of high level strategies in the areas of building, mobility, energy supply and waste reduction. Next steps for 2015 and 2016 will involve developing implementation details to prioritize actions and associated near-term budget requests needed to meet the 2020 greenhouse gas goals and longer-term targets, and continue public engagement.  Strategic Financial Plan. A Strategic Financial Plan will be published in 2016. The purpose of the Plan is to manage Utilities financial resources to achieve business objectives and maximize customer value for each utility service. The Plan will encompass the full range of Utilities finances, from setting out objectives and identifying resources, analyzing data and making financial decisions that support the City Strategic Plan. A Strategic Financial Plan will be published in 2015 for each utility service. The plan focuses on maintaining the financial resiliency of each utility for the next decade, while implementing a formal asset management program to ensure the operational reliability and integrity of the utilities.  2009 IT Strategic Road Map. The Strategic Road Map is a 10-year plan for IT development. This initiative ties to the utilities’ smart-grid efforts and other work involving information technologies. The IT Strategic Plan was recently updated to account for already accomplished work and to look forward for the next ten years.  High-Speed Broadband. As the demand for more advanced, reliable and affordable broadband service rises, the City must define its ongoing role in ensuring access is provided. "Next generation" high-speed internet services are becoming important infrastructure for communities in the 21st century. This demand for service is challenging local communities to develop effective strategies for connecting citizens, businesses and institutions. On November 3, 2015 Fort Collins voters overturned Senate DRAFT DRAFT 2016-2026 Strategic Plan 19 CITY OF LONGMONT  Focus on Longmont. This plan sets direction at a city level and is included in the city’s annual budget process. Five key categories/initiatives with general goals include: (1) healthy business climate, (2) education, (3) community identity, (4) enhance the natural environment, and (5) revitalize downtown. The city is also working on incorporating a budget prioritization model into the plan. Longmont Power & Communications (LPC) has a tie to “healthy business climate” (low rates as an economic driver), “enhance the natural environment” (energy efficiency programs, energy mix, etc.), and other areas (reliability and customer satisfaction). LPC provides related reporting statistics – definitive goals are not included as a part of this plan.  Comprehensive Plan. Longmont uses the city’s Comprehensive Plan to identify long range capacity requirements. The plan provides a model for staff to predict average loads based on specific densities and land development types. New for 2015, Envision Longmont is a community-wide planning effort by the city to update and integrate the Longmont Area Comprehensive Plan and the Longmont Multi-Modal Transportation Plan. The plans were last updated in 2003 and 2005, respectively. The updated plan will serve as a policy guide for the city over the next ten to twenty years. Envision Longmont will be a collaborative and inclusive process in which all citizens are encouraged to participate. LPC’s planning strategy includes distribution and substation needs for the complete build out of the community. As the Comprehensive Plan is modified, LPC reviews and updates planning strategies accordingly.  Sustainability Plan. The city has incorporated sustainability policies and programs across various departments throughout its history. In the latter part of 2015, the city plans to begin updating a sustainability strategy. The Sustainability Plan will incorporate LPC’s programs including: Efficiency Works, LED replacement in street lighting, electric vehicles and charging stations, renewable energy options, and others.  NextLightTM Broadband Services. LPC began offering 100 percent fiber-to-the- premise services as a pilot during 2013. A full build-out of the community began in 2014 and network infrastructure installation is expected to be complete near the end of DRAFT DRAFT 2016-2026 Strategic Plan 20  Management, Staff, and Funding. The Utility Commission provides direction to management/staff and is engaged in planning efforts. City Council conducts an annual retreat for planning purposes.  The city manager has set initiatives in the areas of improved communication/ coordination of city direction, and conducting meetings with the management team (expanding to mid-management).  In Process. Loveland is in the process of identifying all major initiatives, projects, and programs for the water, wastewater, and power utilities in 2016. Loveland currently has a general fund plan for setting financial priorities.  Comprehensive Plan. City Council is currently updating the 2005 Comprehensive Plan, which serves as a guide for aspects of Loveland’s planning. The goal is to have this completed by 2015. It provides mission/ vision statements and is mostly focused on land-use planning. From a utility perspective, it includes water conservation through land use, efficient utility service through higher density planning, coordination of the utility needs to support downtown redevelopment, and undergrounding power lines.  Economic Development Strategic Plan. Loveland adopted an Economic Development Strategic Plan and Incentive Policy in February 2012. That plan is still in place.  Key Planning. Key planning items for Loveland include cost control, demand-side management, demand response, renewable supply integration, new rate designs, economic development, energy efficiency programs, workforce planning, public outreach, operational excellence, progressive technologies, regional cooperation, customer service, broadband service, water capital program, long-range planning, and addressing aging infrastructure. DRAFT DRAFT 2016-2026 Strategic Plan 21 APPENDICES Appendix A Resource Planning Update Appendix B Risk Management Plan Appendix C Strategic Financial Plan Appendix D Environmental Regulation Issues and Positions Appendix E Legislative and Regulatory Issues and Positions DRAFT DRAFT 2016-2026 Strategic Plan 22 APPENDIX A. RESOURCE PLANNING UPDATE CURRENT RESOURCES Platte River owns and contracts for a mix of fossil-fueled and renewable generation. The existing portfolio of owned resources includes coal-fired generation located at the Rawhide and Craig stations, and natural gas-fired combustion turbines at the Rawhide site. Platte River also receives energy through Federal contracts for hydropower. Deliveries from hydropower sources depend on local and regional hydrology conditions, which vary over time. Wind energy is supplied to Platte River through contracts from the Medicine Bow and Silver Sage wind projects in southeast Wyoming, and the Spring Canyon site in northeast Colorado. This mix of resources has performed well, particularly the generation units at the Rawhide Energy Station. During the last few years, performance of the Craig units has declined from longer-term historical levels. Platte River has a diversified resource mix from a capacity (MW) perspective; however, about three-fourths of energy (MWh) delivered by Platte River to the municipalities is generated by coal plants. Platte River also has a gap in its current resource lineup—it lacks flexible, intermediate resources that can complement existing resources and help integrate more intermittent renewable sources over the long term. Platte River’s renewable resources have grown significantly over the past few years. Wind power accounts for 78 MW and about 9 percent of delivered energy (2015), while solar will account for 30 MW and roughly 1.5 percent of total delivered energy by 2017. To meet the CPP, the use of renewable generation will need to expand significantly, requiring expanded management of intermittent resources. FIGURE 5. RENEWABLE ENERGY FROM EXISTING WIND AND PROJECTED SOLAR SOURCES NOTE: actual energy production shown through 2014: forecast through 2017 - 100,000 200,000 300,000 400,000 500,000 1998 2001 2004 2007 2010 2013 2016 MWh DRAFT DRAFT 2016-2026 Strategic Plan 23 The current mix of resources has delivered roughly 3,300 GWh annually to the four municipalities that Platte River serves (last five years). Surplus energy produced by Platte River is sold to third parties, and typically averages about 750 GWh per year, primarily from Platte River’s share of the Craig units. FIGURE 6. 2014 ENERGY MIX ELECTRIC LOAD FORECAST Platte River’s system electric load forecast is one of the primary drivers in the resource planning process. Platte River’s statistical model uses multiple variables to predict demand and energy growth in the owner municipalities. These variables include population, employment, and weather. Peak load growth increased rapidly during the 1990s into the 2000s, due primarily to expanded use of air conditioning and strong economic growth. Future peak load growth is expected to be lower than growth prior to the “Great Recession”. Slower growth is due in part to the fact that most homes and businesses now have air conditioning. Additionally, lower economic growth and increased energy efficiency (EE) efforts over the last few years have reduced electric load growth in the municipalities. Platte River’s EE programs continue to evolve and are planned to expand in the future. The cumulative impact of EE is expected to reduce energy needs by approximately 788 GWh through 2035, relative to the total 2035 load projection of 3,937 GWh. FIGURE 7. PEAK ELECTRICITY DEMAND Rawhide 280 Craig 154 Gas 388 Hydro 91 Wind 78 Capacity, MW Rawhide Craig Gas Hydro Wind Energy, MWh Purchases 200 400 600 800 1,000 1995 2000 2005 2010 2015 2020 2025 2030 2035 Peak Demand (MW) 1995-2035 Actual Base Case (no efficiency) Existing Efficiency Expanded efficiency DRAFT DRAFT 2016-2026 Strategic Plan 24 FIGURE 8. ANNUAL AVERAGE ENERGY CONSUMPTION Note: The 2015 load forecast projects an annual average growth rate of 1.2 percent in energy consumption over the course of the ten-year forecasting horizon. Peak demand is forecast to grow at an average rate of 1.3 percent during the same period. CAPACITY PLANNING Platte River currently has excess capacity. Projections indicate new firm capacity is not required until about 2030 assuming expanded energy efficiency and exit from Craig Unit 1. Decisions regarding options to reduce CO2 emissions will likely be more significant than those related to needs for new firm capacity. The decision to add a new capacity resource is based on ensuring an adequate balance between loads and resources at all times. Platte River uses a combination of industry-standard and business-specific techniques to evaluate capacity needs:  Maintain a minimum planning reserve margin of 15 percent.  Use recognized North American Electric Reliability Corporation (NERC) conventions in capacity planning methods, including loss-of-load probability analysis.  Carry operational reserves or have access to firm capacity that is sufficient to meet load obligations whenever the Rawhide coal unit is out of service. 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1995 2000 2005 2010 2015 2020 2025 2030 2035 Annual Energy (GWh) 1995-2035 Actual Base Case (no efficiency) Existing Efficiency Expanded efficiency DRAFT DRAFT 2016-2026 Strategic Plan 25 FIGURE 9. PLATTE RIVER LOADS AND RESOURCES Platte River also evaluates renewable energy needs to support municipality compliance with state mandates. According to the Colorado Renewable Energy Standard, approximately 10 percent of energy deliveries to municipalities with over 40,000 customers must be supplied by qualified renewable resources. Deliveries from Platte River currently exceed the state requirements and we expect to deliver approximately 12 percent of total municipal energy requirements via qualified renewable sources by 2017. PORTFOLIO ANALYSIS Platte River uses the AURORAxmp Electric Market Model (“Aurora”), developed by EPIS Inc., to perform modeling related to system dispatch and production cost analysis. Aurora simulates the hourly operation of Platte River’s generation system and its management within regional energy markets. The model also captures fixed costs and capital costs which are necessary for evaluating the full cost of potential new generation alternatives. Inputs for the model are collected from a variety of resources including internal and external experts. Internal experts review data supplied by consultants to ensure it is reasonable. Since the model cannot evaluate every potential combination of portfolios, the pool of candidates is narrowed to a reasonable number of the most promising technologies. The screening process is outlined in Figure 10. 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Loads Foundation Forecast 648 659 670 681 693 705 717 729 741 754 767 780 794 807 821 835 DSM -4 -8 -13 -19 -25 -32 -39 -46 -53 -60 -68 -75 -82 -89 -97 -104 Municipal Loads (Base) 644 651 657 662 667 672 677 683 689 694 699 705 711 718 724 731 Losses 13 13 14 14 14 14 14 14 14 14 14 15 15 15 15 15 Total Loads 658 664 671 676 681 686 691 697 703 708 714 722 729 737 744 752 Planning Reserves (15%) 99 100 101 101 102 103 104 105 105 106 107 108 109 111 112 113 Load Plus Planning Reserves 756 764 771 777 783 789 795 801 808 814 821 830 838 847 855 865 Resources Rawhide 280 280 280 280 280 280 280 280 280 280 280 280 280 280 280 280 Craig 154 154 154 154 154 154 154 154 154 154 154 154 154 154 154 154 CRSP 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 60 LAP 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 Wind ELCC 10 10 10 10 10 10 10 10 10 10 10 10 10 10 9 8 Solar ELCC 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 Peaking 388 388 388 388 388 388 388 388 388 388 389 390 391 392 393 394 Total Resources 922 922 931 931 931 931 931 931 931 931 932 933 934 935 935 935 Surplus (Above Planning Reserve Requirements) 165 158 159 153 147 142 136 130 123 117 110 103 96 87 79 70 Reserve Margin 40% 39% 39% 38% 37% 36% 35% 34% 32% 31% 30% 29% 28% 27% 26% 24% DRAFT DRAFT 2016-2026 Strategic Plan 26 FIGURE 10. ILLUSTRATION OF PORTFOLIO EVALUATION PROCESS Evaluate Planning Metrics • Reliability • Rates • Environmental Impact Assess Viability • Technology Maturity • Capital Costs • Resource Constraints Screen 1 Screen 3 Screen 2 Test Performance Across Ranges • Loads • Fuel Costs • Markets Develop Full Set of Portfolios • Craig • Rawhide • Natural Gas • Renewables • Storage • Distributed Energy Resources DRAFT DRAFT 2016-2026 Strategic Plan 27 CLEAN POWER PLAN On August 3, 2015, the Environmental Protection Agency (EPA) finalized its rule to reduce CO2 emissions from electric generating units through the Clean Power Plan (CPP). The CPP establishes state-by-state targets for CO2 emissions reductions, and delegates implementation of the rule to the states. The EPA specifies reductions based on rate or mass, with the approach determined by individual states. The final version of the rule requires the State of Colorado to reduce CO2 emissions on a rate basis to 1,174 lb/MWh in 2030, a 40 percent reduction relative to 2012 levels. On a mass basis, Colorado would be required to reduce emissions from 41.8 million tons in 2012 to 29.9 million tons in 2030 (roughly 28 percent). For Platte River, the 2030 CO2 rate standard would amount to a 45 percent decrease in CO2 relative to 2012 levels; whereas, a proportionate mass decrease would require Platte River to reduce emissions from approximately 3.4 million tons in 2012 to about 2.4 million tons in 2030 (nearly 30 percent). The CPP is a complex set of regulations that will involve detailed analysis. As a result of the EPA rule, Platte River is considering compliance strategies that position it for future CO2 reduction requirements, including assessment of rate- or mass-based strategies using tax imposition, trading of allowances, or command/control implementation methods. Early planning around CO2 reduction is a critical component of Platte River’s resource planning efforts. Key uncertainties remain regarding the new rule: levels/timing of CO2 reduction required specifically for Platte River, and the implementation method that will be used in Colorado for compliance. Refer to Appendix D for more information on the CPP. DRAFT DRAFT 2016-2026 Strategic Plan 28 CRAIG UNIT 1 EXIT STRATEGY Platte River is a partial owner of Craig Units 1 and 2 (also referred to as the Yampa Project). Units 1 and 2 typically generate approximately one-fourth of all Platte River energy sales and about one-third of CO2 emissions. In 2015, Platte River studied three primary strategies, including: 1) Exiting Craig Unit 1 by 2020 and both Craig units by 2030, or 2) Exiting both units by 2020, or 3) Operating the two units at minimum contractual capacities during most of the year. Platte River’s board of directors approved staff’s recommendation to develop a strategy to exit Craig Unit 1. Rationale for the recommendation includes lower costs, potential for significant emission reductions, and need for more flexible resources to replace base load coal. DRAFT DRAFT 2016-2026 Strategic Plan 29 DEMAND SIDE MANAGEMENT Demand Side Management (DSM) refers to programs offered by utilities that influence end-use demand for electricity. DSM goals for the near-term include expanding energy efficiency programs, implementing a system-wide Demand Response (DR) pilot program, and developing a distributed resource strategy. Expanded Energy Efficiency Programs Based on studies conducted by Platte River and its consultants, we anticipate that about 788 GWh of cumulative energy efficiency savings can be achieved through 2035. FIGURE 11. CUMULATIVE ENERGY SAVINGS FROM EXPANDED ENERGY EFFICIENCY PROGRAMS Demand Response Pilot Program DR has the potential to provide net capacity for use in a variety of ways, including the ability to avoid or delay new generation capacity, to shift energy use from peak times to off-peak times, or to provide reserves (where permitted by the Balancing Authority or regional market). An emerging use of DR is to help integrate intermittent renewable generation, such as wind and solar. Platte River and its consultants estimate that 19 to 49 MW of demand response can be achieved in the municipalities at a present value cost of $13 to $26 million. The present value of the benefits is estimated at $8 to $19 million. More information on potential benefits and costs for DR will be gathered as part of the pilot program. - 200,000 400,000 600,000 800,000 2015 2020 2025 2030 Cumulative Energy Savings, MWh DRAFT DRAFT 2016-2026 Strategic Plan 30 Distributed Resource Strategy For 2016 forward, Platte River and the municipalities will work together to develop a more formal strategy for implementing and integrating distributed resources. Aspects of this strategy may include:  Maintain an up-to-date distributed generation database that includes proposed projects.  Integrate lessons learned from the system DR pilot program into overall strategy.  Work with other entities experienced in distributed resource implementation.  Enhance modeling capabilities to analyze distributed resources from wholesale, distribution and customer perspectives.  Consider a range of distributed resources including generation (such as combined heat and power (CHP)), load management (including DR) and energy storage.  Evaluate benefits in an integrated fashion, including the generation and transmission system, distribution system, and end-use customers. Solar photovoltaic (PV) and CHP are the two types of distributed generation most likely to be used in the near future.  PVs can be installed at an end-user’s facility or provided by larger-scale installations at the distribution or wholesale utility level. Platte River retained Nexant (a consultant) to evaluate the potential for roof-mounted PV in the region, based on roof orientation, capacity factors and economics. Nexant suggested that PV installations could grow to an estimated output of over 50 MW in the next 20 years (by 2035) – if utility incentives are provided to cover the majority of the cost.  Considering all PV systems already installed on homes and businesses (about 480 systems), the Loveland solar project (funded via FEMA), solar programs in Fort Collins, and a potential system-wide community solar program – total distributed PV installations could exceed 12 MW by 2017.  CHP refers to a generation system that uses a fuel—typically natural gas or biofuel—to generate electricity and incorporates a heat recovery system that captures waste thermal energy for beneficial use, making steam or hot DRAFT DRAFT 2016-2026 Strategic Plan 31 RENEWABLES INTEGRATION In the coming years, Platte River will continue to focus on integrating renewable energy resources within its resource mix. Key areas of emphasis include expanding operating expertise with wind resources (78 MW total), gaining experience with managing and integrating 30 MW of new solar, and modeling operational aspects of renewable resource integration. Platte River will also continue to monitor regional renewable resource opportunities at the wholesale level and include distributed renewable sources in system planning activities. Intermittency Preparing to manage the intermittency of renewable generation will be an important effort for Platte River in the coming years. The currently approved 108 MW of wind/solar in Platte River’s portfolio is anticipated to grow substantially to meet 2030 EPA CPP compliance requirements. Currently, Platte River lacks sufficient flexible generation resources to manage the intermittency of wind and solar generation. Platte River contracts for balancing services through PSCo (Xcel), as the regional balancing authority. Future balancing authority costs are uncertain, and total reliance on these services may create uncontrollable financial risks for large amounts of renewable resources. Integration Study To evaluate the system cost and performance impacts from higher levels of intermittent generation, Platte River engaged HDR to conduct a renewable integration study at a “sub-hourly” level (Platte River’s Aurora model analyzes generation at an hourly level). The study was designed to determine the expected incremental cost of balancing Platte River’s system at various levels of solar and wind penetration (ranging from 7.5 percent to 30 percent of Platte River’s total energy deliveries). The study concluded that at lower levels of renewable penetration, Platte River could expect additional integration costs of about $5- $7/MWh. As the penetration of renewables increases to 30 percent of total energy supply, the expected cost could rise to over $30/MWh. These preliminary cost estimates were included in Platte River’s modeling efforts to date. Further analysis is required to more accurately determine potential costs for renewable source integration. Platte River plans to continue to work closely with Xcel to better collaborate regarding large scale integration of renewable sources. Efforts will also expand with the National Renewable Energy Laboratory and other subject matter experts in this area. Platte River expects to bring expertise related to sub-hourly modeling in-house over time, similar to the approach for hourly production cost modeling using Aurora. DRAFT DRAFT 2016-2026 Strategic Plan 32 MODELING RESULTS–WHOLESALE RATE PROJECTIONS Figure 12 shows preliminary wholesale rate estimates for portfolio options considered to meet various CO2 reduction needs. Each of the three portfolio options was evaluated with and without a CO2 tax assumption. FIGURE 12. PRELIMINARY WHOLESALE RATE ESTIMATES  Path A results in the lowest rate impacts of the CO2 reduction scenarios; however, Path A’s CO2 compliance prior to 2030 is unclear due to the uncertain implementation of the EPA’s CPP rule.  Path B, where Platte River exits ownership in both Craig units by 2020, results in earlier wholesale rate increases because of the need to install lower-emissions replacement capacity by 2021. Emission reduction by 2030 is 35percent in this scenario.  Path C, which assumes a 50 percent CO2 reduction requirement, yields the highest long-term rate increases. This option requires additional renewable resource expenditures to maintain CO2 compliance at this higher reduction level. Currently, wholesale rates are projected to increase between 22 percent and 70 percent from 2015 to 2025, depending on the CPP implementation and other factors. To minimize single-year rate impacts, Platte River will continue rate-smoothing strategies; currently 4.5 percent rate increases are projected in 2016 and 2017. 50 70 90 110 130 150 170 2015 2020 2025 2030 2035 $/MWh Path A (tax) Path A (no tax) Path B (tax) Path B (no tax) Path C (tax) Path C (no tax) DRAFT DRAFT 2016-2026 Strategic Plan 33 APPENDIX B. RISK MANAGEMENT PLAN The Risk Management Plan summarizes Platte River’s proactive efforts to identify, evaluate, rank, and mitigate risks that could negatively impact electric supply, finances, reputation, and safety requirements. Platte River’s risk management process provides a framework to identify and assess specific risks by soliciting staff input and following an assessment and documentation process. Identified risks are evaluated through a risk assessment process coordinated by the chief financial and risk Officer, financial planning staff, and a Risk Oversight Committee (ROC) consisting of the general manager, senior management, and key staff members. The ROC identifies subject matter experts throughout Platte River to provide expertise and information regarding each identified risk and to alert the ROC of additional risks. As risks are identified, a detailed risk review process assesses risk magnitude and probably based on Platte River data, industry data, staff and management experience, and evaluation. The ROC assigns magnitude and probability ranks based on specific criteria (see Risk Definitions: Figure 13 and Figure 14). Higher rated risks are prioritized for the development and implementation of mitigation strategies when possible. Mitigation strategies include but are not limited to insurance coverage, financial and physical contracts, operational business practices, and monitoring processes. The ROC re- assesses all identified risks and the effectiveness of mitigation strategies. The Financial Planning staff maintains all assessment documentation and supporting analysis, and the ROC reviews those materials. All identified risks are listed in a risk inventory (see Figure 15). The chief financial and risk officer approves all risks included in the Risk Inventory, along with assessments, and supporting documentation. Since the first iteration of the Risk Management Plan in 2004, Platte River has assessed risks on a five-year planning horizon. Beginning in 2016, the Risk Management Plan will transition to a ten-year planning horizon. The longer planning horizon will better capture risks associated with resource planning, the impacts of proposed CO2 legislation, and will be consistent with Platte River’s strategic planning horizon. Additionally, the 2015 Annual Budget includes funds for a third-party review of the Risk Management Plan and risk mitigation activities. The review will include a thorough examination of Platte River’s risk-ranking methodology and metrics, risk assessment development and review processes, and best practices for business risk. A third party will provide a detailed report summarizing the assessment, Platte River’s strengths and weaknesses, and recommendations. DRAFT DRAFT 2016-2026 Strategic Plan 34 RISK DEFINITIONS Platte River’s identified risks are analyzed and assigned a magnitude and probability classification as defined in Figure 13 and Figure 14, respectively. FIGURE 13. RISK MAGNITUDE Magnitude Rank Electric Supply Safety Financial Reputation and Interests HIGH Loss of supply to an entire city Loss of life or serious bodily injury Significant impact >$10 million Significant long-term damage MEDIUM Loss of supply to part of a city Bodily injury Limited impact $5 - $10 million Short-term damage LOW Momentary loss to a city substation No injury Modest impact <$5 million No appreciable damage FIGURE 14. RISK PROBABILITY Probability Rank Probability Rank Definition HIGH The Identified Risk is likely to occur within five (5) years. MEDIUM The Identified Risk could occur within five (5) years and should be anticipated. LOW The Identified Risk is unlikely to occur within five (5) years. Identified Risk Risks identified as significant to Platte River that could negatively impact electric supply, finances, reputation, and safety requirements. Magnitude The impact of an identified risk occurring. Ranking classifications are detailed in Figure 13. Probability The likelihood of an identified risk occurring within a specified time period. Ranking classifications are detailed in Figure 14. Risk Oversight Committee A committee consisting of the general manager, senior management, and key staff members, charged with managing Platte River’s risks and developing the Risk Management Plan. Risk Management Plan A document included as an integral part of Platte River’s Strategic Plan summarizing Platte River’s identified risks and risk mitigation strategies. Risk Inventory A table within the Risk Management Plan summarizing the magnitudes and probabilities of identified risks. DRAFT DRAFT 2016-2026 Strategic Plan 35 RISKS & MITIGATION STRATEGIES FIGURE 15. RISK INVENTORY The number assigned to each risk does not indicate a priority or level of severity. It is designed to make it easier to find the related detail of that risk on the following pages. # Identified Risk Magnitude Probability 1 New Mandated Emission Reductions High High 2 Business Cybersecurity System Intrusions Medium Medium 3 Commodity Market Volatility Medium Medium 4 Corporate Conduct Medium Medium 5 Damage by Outside Contractor Employees Medium Medium 6 Defined Benefit Plan Investment Under-Performance Medium Medium 7 Employee Errors Resulting in Loss of Electric Service Medium Medium 8 Interest Rate Changes Medium Medium 9 Mandated Renewable Energy Standard Medium Medium 10 Physical Threats Affecting Reliability or Human Life Medium Medium 11 EPA Coal Combustion Residuals Rule Implementation Medium Medium 12 Cybersecurity: Generation Combustion Turbines High Low 13 Cybersecurity: Generation Unit 1 and Gas Yard Balance of Plant High Low 14 Cybersecurity: System Operations High Low 15 Environmental Violations High Low 16 Extended Baseload Forced Outage: Rawhide High Low 17 Interruption of Coal Supply (Fuel and Rail, Trapper Mine) High Low 18 Interruption of Water Supply for Rawhide Generation High Low 19 Unplanned Capital Requirements High Low 20 Increased Turnover of Employees (Knowledge Loss) Low High 21 Credit Risk Medium Low 22 Financial Internal Controls Medium Low 23 Interruption of Natural Gas Supply (Fuel and Pipe) Medium Low 24 Electric Facility Siting Constraints Low Medium 25 Extended Baseload Forced Outage: Craig Low Medium 26 FERC/NERC Regulatory Compliance Violation Low Medium 27 General Liability Low Medium 28 Increased Federal Oversight Low Medium 29 Changes to Tax Exempt Status of Newly Issued Power Revenue Bonds Low Low 30 Increased State Regulatory Oversight Low Low 31 Loss of Communication Systems Low Low 32 Misalignment of Capacity Resources and System Loads Low Low 33 Physical Property Loss Low Low 34 Transmission Interruption Low Low 35 Wholesale Electric Market Manipulation Low Low DRAFT DRAFT 2016-2026 Strategic Plan 36 A brief summary of each risk and its mitigation strategies follows. Each mitigation strategy requires the ROC’s attention and follow-up to evaluate alternative courses of action. 1. New Mandated Emission Reductions Platte River generation facilities consistently operate below existing emission permit limits for all regulated pollutants, and the emission levels from Rawhide and Craig are among the lowest for coal units in the United States. Evolving operational and environmental standards may require further reductions in emission levels; staff will continue monitoring regulatory developments and analyze various mitigation strategies. Emission reductions are also evaluated as part of a larger strategic planning process currently underway. 2. Business Cybersecurity System Intrusions Platte River cyber systems experience a number of intrusion attempts on a daily basis, but measures to harden and segment infrastructure along with new software tools have prevented any attempts to penetrate Platte River cyber systems to date. Platte River will continue to conduct vulnerability assessments to identify potential weaknesses and minimize exposure, while also developing standardized procedures for implementation and upgrading of business system infrastructure. 3. Commodity Market Volatility Combined coal expenses at Rawhide and Craig currently represent 26.5 percent of total expenses budgeted, with projections increasing to 28.9 percent by 2019. The recent pricing trend among coal companies reflects greater reliance upon market pricing, rather than traditional long-term pricing fixed by contract, thus reducing the accuracy of expense forecasts. Platte River will continue to monitor coal markets for future opportunities to remove price volatility and fix forward pricing. 4. Corporate Conduct Ethics violations typically receive highly negative publicity, which could damage Platte River’s reputation and result in legal action. As a result, Platte River has incorporated a “Code of Conduct” within the Employee Handbook, providing guidance and ethical principles applicable to all employee behavior. Platte River will provide workforce training on ethics guidelines and review the Employee Handbook annually. Staff will implement a compliance hotline for reporting potential violations. 5. Damage by Outside Contractor Employees The responsibility for screening contractors’ employees rests with the contractors themselves. However, Platte River personnel responsible for administering contracts must account for the risk posed by contractors. DRAFT DRAFT 2016-2026 Strategic Plan 37 and authority. These terms and conditions include, but are not limited to, contract termination, safety assessments, indemnification, or surety bond requirements. 6. Defined Benefit Plan Investment Under- performance Investment earnings on the Defined Benefit Plan are subject to volatility. Platte River closed the Defined Benefit Plan to employees hired on or after September 1, 2010, which reduced future Defined Benefit Plan funding requirements. The reinstated lump sum distribution, combined with modified plan assumptions scheduled for 2016, further reduces the risk of investment under- performance. The Retirement Committee, in conjunction with investment advisors, meets quarterly to monitor investment diversity and performance, and evaluate and update investment strategies. 7. Employee Errors Resulting in Loss of Electric Service Reliance upon human behavior introduces the unavoidable element of human error. To reduce errors and minimize their impacts, Platte River implemented job training focused on acquiring and maintaining skills. The training includes updating apprenticeship step progression requirements, regular refresher training on specialized processes or activities, and documenting processes. Time is scheduled to review job hazards before starting work, which minimizes the potential for errors and standardizes safety procedures and practices. 8. Interest Rate Changes Interest income and financing costs are divergently impacted by interest rate volatility. A laddered maturity strategy based on cash flow projections mitigates the impact of interest rate volatility on investments. Staff analyzes various debt options to help mitigate potential rising rates during times of potential debt issuance. 9. Mandated Renewable Energy Standard The Colorado Renewable Energy Standard (RES) currently does not apply to Platte River, but requires municipal utilities with more than 40,000 customers to provide 10 percent of their energy from qualified renewable resources by 2020; currently one owner municipality qualifies. Future mandates, from both federal and state governments, may require additional renewable resources in Platte River’s portfolio. Platte River will continue to proactively diversify its resource portfolio, while monitoring the regulatory landscape and analyzing potential scenarios for future compliance. 10. Physical Threats Affecting Reliability or Human Life DRAFT DRAFT 2016-2026 Strategic Plan 38 groundwater monitoring wells at Rawhide to detect problems early, establish baseline conditions, and track natural variations. Additional monitoring and assessment is planned to determine what changes may be necessary, if any, to current operations in order to show initial and ongoing compliance with the new standards Platte River will monitor initial implementation of the rule across the country, including industry best practices and enforcement actions. Participation will also continue in stakeholder meetings and public process coordinated by Colorado Department of Public Health and Environment concerning possible changes to state regulations to incorporate the new Federal standards. 12. Cybersecurity: Generation Combustion Turbines CIP reliability standards from NERC, Federal Energy Regulatory Commission (FERC), and Western Electricity Coordinating Council (WECC) require significant cyber oversight, resulting in the installation of system hardware and software to protect generation combustion turbines. The most recent audit found no potential violations, and cited no areas of concerns or recommendations. The Controls Network Administrator maintains reliability and security of the controls network and all cyber assets connected to it, including the combustion turbines. Multiple layers of cybersecurity protection exist, along with built-in redundant and independent protections. The presence of five smaller, independent, generation units better mitigates risk relative to having all peaking capacity on a single unit. 13. Cybersecurity: Generation Unit 1 and Gas Yard Balance of Plant In the event of a severe cyber breach, a loss of generation infrastructure could cause a system outage, as well as potential personnel and equipment damage until manual restoration occurred. CIP reliability standards from NERC, FERC, and WECC do not currently apply to Unit 1 and Gas Yard Balance of Plant. An initial cybersecurity assessment demonstrated areas needing improvement. Staff identified and implemented strategies to address concerns, and will continue assessing future security needs. 14. Cybersecurity: System Operations System Operations uses a SCADA system to monitor and control the Platte River Bulk Electric System (BES) assets. The technology used by the SCADA system and personnel with access may introduce vulnerabilities. A breach of the SCADA system cybersecurity could cause a loss of control or situational awareness, resulting in the loss of DRAFT DRAFT 2016-2026 Strategic Plan 39 15. Environmental Violations Operation of a BES requires compliance with numerous environmental regulations with increasing complexity. Non-compliance during the operation of generation and transmission facilities may result in financial penalties and/or mandated system upgrades. Platte River remains proactive in environmental compliance, and continually trains staff to ensure environmental compliance. Training programs are enhanced as regulations and other requirements evolve. 16. Extended Baseload Forced Outage: Rawhide Historical performance of Rawhide Unit 1, along with staff analysis defines an extended baseload outage as a two-week outage. An outage of this duration would not jeopardize Platte River’s ability to serve load because excess capacity has been constructed to meet peak summer demands and ensure electric supply during outages. The primary exposure is the cost to replace baseload generation. Replacement resources available include natural gas combustion turbines, wholesale market purchases, and a forced outage assistance agreement. Excellent maintenance practices and operating standards will continue to sustain the unit reliability. 17. Interruption of Coal Supply (Fuel and Rail, Trapper Mine) The absence of coal for baseload generation would result in replacement power purchased, or peaking generation, both potentially higher cost alternatives to Platte River’s baseload units. The proximity of mines, coal mine diversity, and adequate stockpile inventories reduce the chances of interruption. To avoid an interruption, Platte River will continue to seek long-term coal supply and rail contracts, while maintaining strong relationships with coal and rail providers. Platte River targets a minimum of 75 days of stockpile inventory at Craig and Rawhide to mitigate supply disruptions. 18. Interruption of Water Supply for Rawhide Generation Without a reliable water supply, Platte River could experience sustained curtailments of generation from the Rawhide coal unit. The Windy Gap Project is the primary source of water for Rawhide generation, and historically produces adequate water for operational needs. DRAFT DRAFT 2016-2026 Strategic Plan 40 To mitigate the risk of water shortages, Platte River is participating in the Windy Gap Firming Project to improve reliability of the Windy Gap water supply. The permitting process is underway and current projections indicate the firming project will be completed and begin filling by 2021. In the interim, Platte River will continue researching alternative water supplies for Rawhide coal unit operations. 19. Unplanned Capital Requirements Capital expenditures are planned and prioritized annually to determine capital funding requirements over the next several years. Significant variances over planned project expenses can produce financial strain and rate pressure. Platte River is implementing best practices for project management to improve cost projections. 20. Increased Turnover of Employees (Knowledge Loss) The demographics and tenure of a portion of Platte River’s workforce suggest many employees may consider retirement in the near future, resulting in a loss of significant institutional and operational knowledge. Platte River workforce development is currently focused on expanding the knowledge base within the organization. Departments with increased risk of retirements will receive additional evaluation through workplace analytics. Additional preparations include strengthening of the recruitment and selection process and expansion of workforce training. 21. Credit Risk Platte River invests in a number of Government Sponsored Enterprises (“agencies”) that present credit risk. Default of any agency debt could result in substantial loss of investment principal. Platte River diversifies its portfolio by purchasing different types of securities allowed under Colorado State Statute: agency debt, treasury notes, investment pools, bank deposits, and money market accounts. Within direct purchase agency debt, Platte River limits its exposure to each individual agency to less than 20 percent (subject to review by the chief financial and risk officer). Platte River will continue to maintain a diversified investment portfolio while monitoring the Federal Housing Finance Agency reports to ensure the counterparties remain stable. 22. Financial Internal Controls A financial loss due to fraud or embezzlement is limited by strong financial internal controls and separation of financial duties. An internal auditor is on staff, and policies and procedures exist to support internal financial controls. The Internal Audit Committee prioritizes the internal audit program, reviews audit findings, and DRAFT DRAFT 2016-2026 Strategic Plan 41 reliability of the pipeline, and Platte River maintains a consistent and reliable interconnection with Xcel Energy. In the event a natural gas disruption occurred, Platte River could sustain a loss of load depending on the timing and duration of the event. Regular inspection and maintenance of natural gas pipeline infrastructure, including the Colorado Interstate Gas interconnects, will continue to ensure reliability. Staff remains familiar with scheduling procedures on Colorado Interstate Gas’ pipeline as an alternate source, while monitoring potential alternative supply sources, including natural gas storage. 24. Electric Facility Siting Constraints Installation of new electric facilities (generation and transmission) requires extensive time for planning, design, permitting, and construction. To mitigate delays associated with siting and permitting, Platte River performs analysis using strategic planning tools that forecast the timing of a new facility, combined with proper project planning. 25. Extended Baseload Forced Outage: Craig In the event a forced outage exceeding two weeks occurred at either of the Craig units, Platte River’s ability to serve load would not be curtailed. This is due to the presence of Platte River’s natural gas peaking units, availability of other generation resources in the region, and the wholesale market. The primary exposure is the cost to replace baseload generation with a combination of natural gas fueled combustion turbines and wholesale market purchases. To represent Platte River’s interests, Platte River employees serve on the Yampa Engineering and Operating Committee and the Yampa Coordinating Committee. 26. FERC/NERC Regulatory Compliance Violation Platte River is subject to the NERC Compliance Monitoring and Enforcement program for mandatory and enforceable Reliability Standards. This requires annual self-certifications and compliance audits every three years. FERC has the authority to issue civil penalties for violations. Platte River’s Reliability Compliance Program and well-documented internal compliance program operate independently of areas responsible for reliability standards compliance. Responsibilities are assigned to relevant staff, and numerous policies, processes, procedures, and internal controls have been implemented. 27. General Liability Due to risks associated with the hazardous nature of Platte River business activities, Platte River DRAFT DRAFT 2016-2026 Strategic Plan 42 benefits, land and water development, and wildlife protection. Platte River remains active in monitoring changes to the legislative and regulatory landscape, and communicates its positions to legislators and regulators, when necessary. In addition, Platte River is an active member of coalitions that monitor and participate in the legislative and regulatory process. 29. Changes to Tax Exempt Status of Newly Issued Power Revenue Bonds Platte River’s ability to issue tax-exempt debt lowers financing costs, which benefits rate payers. Modifications to tax-exempt financing are being considered as part of federal tax reform. Platte River will continue to support APPA and LPPC in their efforts to ensure the continuance of tax-exempt financing. Staff will continue analyzing various debt options that could be used if tax exempt financing is modified. 30. Increased State Regulatory Oversight Historically, Platte River has not been subject to any significant degree of regulatory oversight by the Colorado Public Utilities Commission (CPUC) due to its status as a political subdivision and municipally-owned utility. Platte River will continue actively monitoring changes to the legislative and regulatory landscape, and communicate Platte River’s positions to legislators and regulators, when necessary. 31. Loss of Communication Systems Communication losses have been quickly repaired with minimal impact. Communication reliability is maintained through system redundancies, emergency backup systems, and continued maintenance. 32. Misalignment of Capacity Resources and System Loads Platte River has two significant risks related to capacity resources and load: (1) resources are insufficient to serve loads (short capacity), or (2) Platte River costs increase due to underutilized generation resources (long capacity). Platte River updates the load forecast annually to include recent load trends. Resource planning efforts are underway to analyze the timing of future capacity expansion. 33. Physical Property Loss Platte River has experienced few instances of property damage or loss because of its maintenance procedures, training programs, and safety standards. Platte River’s property insurance, which is reviewed annually, limits financial exposure to policy deductibles. 34. Transmission Interruption Forced outages on overhead transmission lines DRAFT DRAFT 2016-2026 Strategic Plan 43 Platte River’s redundant transmission system is continually reviewed for opportunities to decrease system constraints in the event an outage. 35. Wholesale Electric Market Manipulation The jurisdiction of the FERC was expanded to include oversight preventing market manipulation, subject to fines and penalties. Platte River policy prohibits market manipulation. We have a compliance audit program and use internal controls to minimize the likelihood of market manipulation. DRAFT DRAFT 2016-2026 Strategic Plan 44 APPENDIX C. STRATEGIC FINANCIAL PLAN Platte River’s Strategic Financial Plan (SFP, see Appendix C) provides direction to create long-term financial stability. The priorities of the SFP are to generate adequate cash flows, maintain access to low cost capital, provide stable and competitive wholesale rates, and effectively manage financial risk. The board of directors reviews the SFP policies, goals, and financial projections at least annually. RATE REQUIREMENTS Under Colorado law, Platte River’s board of directors has the exclusive authority to establish electric rates. The Power Supply Agreements (PSAs) with the municipalities require the board to review rates at least once each calendar year. The PSAs with the municipalities and the General Power Bond Resolution contain specific provisions governing Platte River’s rate setting. The PSAs require that rates be sufficient to cover all operating and maintenance expenses, purchase power costs, debt service expenses, and to provide reasonable reserves and adequate earnings margins so Platte River may obtain favorable debt financing. The General Power Bond Resolution requires that rates be sufficient to generate net revenues that cover debt service expense at a minimum 1.10 times. POLICIES AND GOALS The policies and goals listed below are described in detail on the next page.  Generate minimum debt service coverage of 1.50 times  Generate minimum net income equal to $6 million  Target minimum 200 unrestricted days cash-on-hand  Maintain $20 million in the Rate Stabilization Fund  Target debt to capitalization ratio less than 50 percent  Provide stable and competitive wholesale rates  Maintain access to low cost capital and favorable credit ratings  Maintain bond required reserves  Prudently manage and invest reserves  Variable rate debt managed in accordance with interest rate risk management policy  Manage financial risk The listed and goals are interrelated. By achieving the minimum target for debt service coverage of 1.50 times, the net income target of $6 million, and the minimum 200 days unrestricted cash-on-hand, Platte River should generate adequate cash flows to meet liquidity targets, exceed its debt-to-capitalization goal, and maintain access to low-cost capital. DRAFT DRAFT 2016-2026 Strategic Plan 45 Generate Minimum Debt Service Coverage of 1.50 Times While the legal requirement for debt service coverage is 1.10 times, coverage at this level does not generate adequate cash flows. It also increases future debt issuance and significantly impacts Platte River’s credit rating, which increases the cost of future financings. Target debt service coverage of 1.50 times provides sufficient annual cash flows to partially fund future capital additions as well as maintain favorable credit ratings. Generate Minimum Net Income of $6 Million PSAs with the municipalities require Platte River to have an adequate earnings margin to obtain revenue bond financing on favorable terms. A target minimum of $6 million net income is a sufficient earnings margin to maintain cash balances, meet liquidity requirements, and provide financial flexibility. Target Minimum 200 Days Unrestricted Cash- on-Hand A minimum 200 days unrestricted cash-on-hand target ensures that adequate cash is generated and maintained, thus ensuring Platte River’s financial flexibility, strength, and liquidity. Included in the days unrestricted cash-on-hand target is a Rate Stabilization Fund target of $20 million. The purpose of the Rate Stabilization Fund is to reduce or eliminate the rate impact due to an unforeseen event that affects Platte River’s ability to meet the minimum legal debt service coverage requirement. Target Debt to Capitalization Less Than 50 Percent A debt-to-capitalization ratio less than 50 percent provides Platte River with a strong balance sheet. It also reduces the risk of becoming over leveraged in the debt market. Maintain Access to Low Cost Capital and Favorable Credit Ratings Interest rates between various credit ratings can fluctuate significantly depending on market conditions. Maintaining a strong credit rating provides access to low-cost capital and favorable financing terms, resulting in lower overall debt service expense. Provide Stable and Competitive Wholesale Rates The board develops and reviews rate projections at least annually. To provide more stable rates from year to year, Platte River may smooth the projected rate modifications over several years to meet SFP criteria. Platte River uses rate comparisons with other utilities in the region to measure the competitiveness of wholesale rates charged to the municipalities. DRAFT DRAFT 2016-2026 Strategic Plan 46 APPENDIX D. ENVIRONMENTAL REGULATION ISSUES AND POSITIONS 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 will be proactive in evaluating and implementing improvements in its power operations that balance environmental and other socio-economic concerns. PRINCIPLES The following principles are used to guide Platte River’s decision making and operations:  Consider environmental factors in planning, design, construction, and operations decisions  Ensure compliance with applicable laws, rules, regulations, and permits  Conserve natural resources  Reduce environmental risks  Encourage pollution prevention  Communicate environmental values  Encourage public participation  Support cost-effective programs to conserve energy  Coordinate generation and transmission planning with neighboring utilities  Consider environmental progressive technologies to meet future generation needs CLEAN POWER PLAN On August 3, 2015, the EPA issued a set of rules regulating the emission of CO2from new, modified and reconstructed, and existing fossil fuel-fired electric generating units (EGUs) under section 111 of the Clean Air Act (CAA). Nationwide, EPA projects that the set of rules will reduce emissions from the power sector by 32 percent (from 2005 levels), by the year 2030. Set of Rules 1) A final rule under section 111(b) of the CAA setting emission standards for new EGUs, based on the “partial” application of carbon capture and sequestration for coal-fired EGUs 2) In the same rule, emission standards for modified and reconstructed EGUs, which are not based on carbon capture and sequestration for coal-fired EGUs 3) The final “Clean Power Plan (CPP),” a rule under section 111(d) of the CAA that establishes state-by- state CO2 emission reduction “goals” starting in 2022. It directs each state to submit for EPA approval a plan demonstrating how the state’s affected EGUs will meet its reduction goals. In addition, EPA released a proposed federal plan that would establish unit-by-unit emission reduction obligations for affected EGUs in states that did not submit an approvable state plan. The proposed federal plan also includes presumably approvable model trading frameworks for states submitting their own plans. DRAFT DRAFT 2016-2026 Strategic Plan 47 State Responsibilities As with many other CAA regulatory programs, section 111(d) gives states the primary responsibility to meet their reduction obligation by adopting state plans that limit emissions at regulated facilities. The CPP sets state-specific CO2 emission goals to reduce statewide emission from the power sector. These goals consist of an Interim Goal, which must be met on average during the years of 2022-2029, and a Final Goal for 2030 and beyond. However, the EPA proposes to allow states to determine when and how quickly individual EGUs in the state must reduce their emissions. The EPA allows states to demonstrate progress either through multi-year “step down” goals or through a state-determined “glide-path” approach. Three Forms of Goals EPA specifically set state goals in three forms, which it deems equivalent: 1) a rate-based goal measured in pounds of CO2 per megawatt hour (lb CO2 /MWh) of generation by the electric power sector 2) a mass-based goal covering the mass emission of only existing affected EGUs within the state, measured in tons of CO2 3) a mass-based with new source complement, measured in tons of CO2, which includes emissions from both existing and new affected EGUs. States choose the goal they want to use when designing and submitting their plans. The CPP requires states to submit their initial plans by September 6, 2016. Note: The EPA may grant a state an extension for as many as two years, provided its initial submission meets certain specified criteria for progress and consultation. States must submit their final plans by September 2018. EPA Changes Reacting to significant public comment, EPA has adopted a number of changes to address reliability concerns. These changes include:  A requirement that each state plan demonstrate that is has considered reliability  A way for a state to revise its plan in the face of unanticipated reliability challenges  A temporary “safety-valve” for individual EGUs when CPP requirements conflict with reliability obligations  An agreement between EPA, the Department of Energy, and the Federal Regulatory Commission to coordinate and monitor implementation of the rule in order to ensure reliability. Staff are preparing for these new requirements and coordinating with peer utilities, trade DRAFT DRAFT 2016-2026 Strategic Plan 48 1. More difficult and complicated permitting requirements. With the current 75 ppb standard the North Front Range ozone non-attainment area does not quite reach Rawhide. However, this new standard increases the likelihood that the Rawhide site will be included in the future. 2. Further State-level rulemaking for additional reductions. If the State is unable to show that sufficient emissions reductions can be achieved to meet this standard through existing programs or other less expensive alternatives, we could see new reduction mandates for existing units through additional rulemaking. Depending on the magnitude, impacts at Rawhide could range from a simple air permit change to expensive new controls including installation of Selective Catalytic Reduction (SCR). Potential Nonattainment Boundaries At present, the Rawhide Energy Station is in an area that attains the 75 ppb standard. Based on 2011-2013 monitoring data, EPA indicates that at 70 ppb, 358 counties nationwide would violate the standard. Extension of the nonattainment area depends on the 2014-2016 monitoring data and modeling results. At 70 ppb, if ozone monitoring data shows favorable results, the North Front Range nonattainment area may not be extended. The EPA will make attainment boundary recommendations in October 2016, and designation of nonattainment areas are expected in October 2017. Permitting for new resources located in a nonattainment area is considerably more difficult and complicated. NOx emission offsets must be obtained from existing sources within the nonattainment area for any new emissions. New units must also be constructed with lowest achievable emission reduction controls and limits. Any additional NOX produced from new generation units at the Rawhide site may involve committing to lower emissions from Rawhide coal. Depending on the designation of nonattainment areas and the ability of the State to show that sufficient reductions are possible with existing programs, the Rawhide coal unit may be required through future rulemaking processes to make additional emissions reductions. The cost of additional NOx controls, in the form of SCR or Selective non-catalytic reduction (SNCR), would be significant. DISPOSAL OF COMBUSTION RESIDUALS FROM ELECTRIC UTILITIES RULE (CCR RULE) On April 17, 2015 the EPA posted to the Federal Register a final rule including new regulations affecting Coal Combustion Residuals (CCR). The regulations come into effect October 17, 2015. The CCR Rule includes comprehensive requirements for design, monitoring, and reporting; with requirements for new and existing CCR disposal facilities. Platte River operates two bottom ash transfer ponds and an ash monofill that are subject to the rule, all located at Rawhide. There is still considerable uncertainty as to exactly how the new standards will be enforced, what the state’s role will be, and how some important details will be interpreted. In the face of such uncertainty, below is a list of actions Platte River expects to be required to take during the initial 42- month implementation period:  Expand the existing groundwater monitoring plan.  Demonstrate that all existing operations meet the new standards, and make contingency plans in case they do not.  Comply with expanded inspection requirements (weekly, monthly, and annually). DRAFT DRAFT 2016-2026 Strategic Plan 49  Comply with expanded recordkeeping requirements.  Comply with a new requirement to post compliance information to a public website. Staff are preparing for these new requirements and coordinating with peer utilities, trade groups, and consultants to determine possible effects to Rawhide operations, and to determine best practices for compliance going forward. In response to the CCR Rule, the Colorado Department of Public Health and Environment is planning to update their solid waste regulations and incorporate the new EPA requirements. Staff is planning to participate in any related rulemaking stakeholder processes to communicate the need for achievable standards with clear expectations and include flexibility for operations. Craig is not subject to the CCR rule as it is primarily managed as backfill material at Trapper Mine. This type of CCR management is specifically exempt from the current rule, however similar standards are expected in the future through the Office of Surface Mining. MERCURY (STATE AND FEDERAL REGULATIONS) On June 29, 2015 the Supreme Court held that EPA violated the CAA when it determined that regulation of mercury and other hazardous air pollutants from certain power plants was “appropriate and necessary” without considering costs. The decision overturned a contrary decision from the D.C. Circuit and raises questions about the fate of the Federal Mercury and Air Toxics (MATS) Rule for power plants. However, the MATS Rule is still in effect, and will continue be in effect until the D.C. Circuit acts. Although federal efforts to regulate mercury have been temporarily blocked, Colorado adopted rules to implement mercury reductions in early 2007. These regulations, also known as the Colorado Utilities Mercury Reduction Program, are still in effect as state-only requirements. Platte River installed mercury monitoring equipment at Rawhide in 2008 and it was certified for operation to meet the state regulatory deadline of January 1, 2009. The equipment was placed in service in November 2010. A mercury emission limit of 0.0174 lb/GWh was required under the state program at Rawhide by 2012. Platte River is in compliance with the 2012 requirements and will meet the 2018 emission reduction requirements. Due to the type of coal burned, boiler chemistry, and other factors, mercury emissions from the Craig Station are low and no emission control equipment is currently required for that facility. DRAFT DRAFT 2016-2026 Strategic Plan 50 APPENDIX E. LEGISLATIVE AND REGULATORY ISSUES AND POSITIONS CLEAN POWER PLAN REGULATIONS The CPP regulations focus the electric industry’s attention on the issue of carbon emissions in a new and dramatic fashion. The regulations pose a number of unique challenges, many of which will be addressed through the creation of a State Plan for Colorado. Platte River will work with industry participants, stakeholders, legislators, and regulators in a positive manner with the goal of crafting an implementation plan that meets compliance goals in the most reasonable, equitable and cost effective manner. OZONE REGULATION The new ozone standards may expand the nonattainment areas within Colorado. In turn, this may create operational issues for existing sources of NOx emissions as well as for new sources, including resources that may be necessary meet regional load growth and compliance with the CPP. Revisions to the boundaries of the nonattainment areas may take a number of years identify. Platte River will actively monitor this process and participate as necessary. DODD-FRANK REFORM The Dodd-Frank legislation and subsequent rulemakings affect a number of Platte River business practices. Platte River has complied with new Dodd-Frank protocols for natural gas hedging. Platte River supports on-going legislative and statutory efforts to limit the application of Dodd-Frank requirements to public power business transactions unrelated to the types of transactions that led to the 2008 financial crisis. TAX-FREE STATUS OF MUNICIPAL BONDS Federal budget concerns have put the tax-free status of municipal bonds at risk. The unique tax-exempt status of public financings dates back to the inception of the income tax, and recognizes the public nature of the capital projects funded by municipal bonds. Platte River has issued $2.4 billion in debt during its history. The issuance of this debt has been critical for developing the infrastructure necessary to meet the needs of the growing populations in our owner municipalities. The reduced interest costs associated with tax-exempt financings are passed directly to electric utility customers in these communities. Platte River strongly opposes repealing or altering the current tax-exempt status of municipal bonds. TRANSMISSION ACCESS AND PLANNING REFORM FERC requires jurisdictional utilities to operate their transmission systems as common carriers. DRAFT DRAFT 2016-2026 Strategic Plan 51 the proper mix of renewable resources for power generation and delivery. Platte River supports the continuation of federal financial incentives to encourage the development of renewable energy. Renewable energy incentives should continue, be expanded, and be made available on an equal basis to municipal power systems, rural electric cooperatives, and investor-owned utilities. FUEL AND RESOURCE DIVERSITY Platte River supports policies that promote improved technology for all electricity generation sources including coal, natural gas, hydro, nuclear, wind, solar, geothermal, and biomass as vital components of the country’s energy portfolio. Efforts at the federal level to encourage diversity should provide clean coal technology funding, increased research and development funds addressing the integration of renewable resources, and innovative distributed generation, particularly as these issues and technologies apply to smaller utilities. PREVENTING MARKET ABUSES The Energy Policy Act of 2005 (EPAct 2005) grants FERC expanded jurisdiction to address market manipulation, including authority over public power systems. In 2006, Platte River adopted a policy prohibiting market manipulation and implemented training and audit programs in pursuit of this policy. Platte River conducts bi-annual market manipulation audits, and none of the audits have revealed any market manipulation by Platte River employees. Platte River encourages continued FERC oversight of market abuses, and recognizes that this will become an increasingly important issue as organized markets evolve in the West. SYSTEM RELIABILITY In 2007, FERC adopted electric reliability standards with the force and effect of law. Platte River is registered to perform ten functions under the reliability protocols adopted by FERC, and the municipalities are registered as distribution providers. Platte River has a well established Reliability Compliance Program and promotes a culture of compliance. Platte River continues to assist the municipalities with reliability compliance. PHYSICAL AND CYBERSECURITY There is an increasing recognition of the importance of physical and cybersecurity for the interconnected bulk power system. Platte River is engaged in national discussions of these issues before the relevant legislative and regulatory bodies as this issue matures. FEDERAL HYDROPOWER Federal hydropower comprises a significant portion of the electricity delivered to the DRAFT DRAFT 2016-2026 Strategic Plan 52 ACRONYMS Term Definition APPA American Public Power Association ARPA Arkansas River Power Authority CAA Clean Air Act CAMU Colorado Association of Municipal Utilities CAP Climate Action Plan CCR Coal Combustion Residuals CHP Combined Heat and Power CIP Critical Infrastructure Protection CO2 Carbon Dioxide CPP Clean Power Plan CPUC Colorado Public Utilities Commission DR Demand Response DSM Demand Side Management EE Energy Efficiency EGU Electric Generating Unit EPA Environmental Protection Agency EPAct 2005 The Energy Policy Act of 2005 FERC Federal Energy Regulatory Commission GHG Greenhouse Gases GWh Gigawatt-hour IRP Integrated Resource Plan IT Information Technology LPC Longmont Power & Communications LPPC Large Public Power Council MATS Mercury and Air Toxics Standard MW Megawatt MWh Megawatt Hour NERC North American Electric Reliability Corporation NOx Nitrogen Oxides PMA Power Marketing Administrations ppb Part Per Billion PSA Power Service Agreement PSCo Public Service Company of Colorado PV Photovoltaic RES Renewable Energy Standard ROC Risk Oversight Committee SCADA Supervisory Control and Data Acquisition SCR Selective Catalytic Reduction SFP Strategic Financial Plan SIP State Implementation Plan SNCR Selective Non-Catalytic Reduction SO2 Sulfur Dioxide SWOT Strengths, Weaknesses, Opportunities, and Threats TRI-STATE Tri-State Generation and Transmission Association, Inc. VOC Volatile Organic Compound WECC Western Electricity Coordinating Council DRAFT DRAFT 2016-2026 Strategic Plan 53 municipalities. Platte River supports continued federal ownership and management of hydropower resources through regional Power Marketing Administrations (PMAs). Platte River supports the continued operation of the PMAs within the constraints set forth by Congress through authorizing legislation, including the rate-setting guidance contained therein. Platte River recognizes that hydropower dams create unique environmental challenges and supports a reasonable balance between species recovery and operational flexibility. MUNICIPAL ANNEXATION AND UTILITY SERVICE TERRITORY Colorado’s Constitution and the existing state statutes regarding electric service provision in newly annexed areas are equitable to all parties. Any proposed changes will be closely scrutinized to ensure that equity is maintained. Platte River is non-jurisdictional, but voluntarily adopted an open access transmission tariff. The Platte River open access tariff is modeled after the FERC pro forma tariff with rates consistent with the FERC rate setting formula. FERC also requires jurisdictional utilities to engage in regional transmission planning. Platte River is a member of WestConnect, a regional transmission planning organization. Platte River is presently involved in efforts associated with regional joint dispatch and transmission tariff reform. Platte River is a member of the Colorado Coordinated Planning Group and the Foothills Planning Group, and has established a transmission planning process as part of its open access transmission tariff. Platte River supports regional transmission planning as a means to assist in the development and integration of renewable resources and enhance grid resilience. RENEWABLE ENERGY STANDARD AND INCENTIVES Platte River believes locally owned and controlled utilities are best suited to determine groups, and consultants to determine possible effects on Rawhide operations and determine best practices for compliance going forward. OZONE STANDARDS On November 25, 2014 the EPA issued a proposed rule under the National Ambient Air Quality Standards program to tighten the primary and secondary standards for ground level ozone. NOx emissions from combustion sources and volatile organic compounds (VOCs) are the major contributors to ozone. Major NOX sources include vehicles, commercial/industrial activities, and electric generation. The main contributors to VOC emissions are oil and gas operations. On October 1, 2015, the EPA announced revisions for ground-level ozone. The standard has been changed from 75 part per billion (ppb) to 70 ppb, which is at the top of the 60 ppb to 70 ppb range that was proposed. The change has no immediate effect on Platte River operations but may have some future implications: Maintain Bond Required Reserves The General Power Bond Resolution requires Platte River to maintain a Reserve and Contingency Fund at a minimum of 2 percent of net plant. Bond service and bond reserve funds are maintained as required. Prudently Manage and Invest Reserves Platte River’s investments will be managed according to Platte River’s Investment Policy. The primary objectives of the investment activities are safety, liquidity, and yield, while achieving market returns comparable to benchmark performance. Variable Rate Debt Managed In Accordance With Interest Rate Risk Management Policy The board-approved Interest Rate Risk Management Policy has established guidelines that govern variable rate debt. Manage Financial Risk Platte River’s financial risks are managed according to, but not limited to, the following board-approved documents: Energy Risk Management Policy, General Power Bond Resolution, Interest Rate Risk Management Policy, and PSAs. The Energy Risk Management Committee and the ROC are charged with managing Platte River’s business risks. are typically of short duration. Inventories of temporary transmission equipment exist to quickly recover from a forced outage. purchases various insurance products to mitigate financial risk. With the assistance of insurance brokers, appropriate insurance policies are maintained. Platte River promotes a culture of high safety standards, starting with the general manager, with a focus on continuously improving business policies and procedures. 28. Increased Federal Oversight As a political subdivision of Colorado, many federal legislative and regulatory reforms that apply to private businesses do not apply to Platte River. Increasingly Platte River is subject to federal oversight in areas such as employment, finance, business transactions, employment recommends action items. Additionally, Platte River will implement a confidential hotline, operated by external auditors, for employees to report suspicious activity. Platte River also maintains insurance policies to mitigate financial loss. 23. Interruption of Natural Gas Supply (Fuel and Pipe) Natural gas is currently used only on an intermittent basis. Regular inspections ensure load to one or more of the owner municipalities. Platte River will address threats and regulatory requirements specific to SCADA systems through internal controls improvement, capital investment, employee training, and proper staffing to adapt to evolving technology. Generation and transmission facilities include high-value assets in multiple locations serving the owner municipalities. This exposes Platte River to increasing physical security threats. Platte River implements the NERC Critical Infrastructure Protection (CIP) reliability standards as required, and uses them as a roadmap for physical security practices in other areas. Platte River also established a committee to develop a comprehensive security policy. 11. EPA Coal Combustion Residuals Rule Implementation In April 2015, the EPA finalized new rules resulting in increased regulation of coal combustion residuals (CCR). The new rules include standards for new and existing facilities, applicable to operations at Rawhide. Proactively, Platte River established The contractor screening, selection, and bidding process helps mitigate the risk. Contract terms and conditions further mitigate risks and reinforce administrative personnel’s responsibility water. Nexant evaluated the potential for several CHP technology applications and concluded that cost effective potential for CHP was fairly low – less than 5 MW of system wide capacity. This preliminary assessment did not include detailed evaluation of specific larger projects at individual customer facilities such as Colorado State University, breweries, and regional hospitals. These larger, case-by-case projects will be evaluated in more detail going forward. 2016. LPC currently provides a 10-gigabit wide-area network to the St. Vrain Valley School District, internet speeds up to a symmetrical Gig for residents, and both standard and custom speeds for commercial customers. Digital voice service is offered as well. Customer demand is high, significantly exceeding study projections. Network and customer installations are taking place in phases throughout the city. CITY OF LOVELAND Bill 152, SB-152, removing legal barriers to the City’s involvement in providing residents telecommunication services. With the vote, the City will continue researching practices in other communities and the feasibility of a range of business models for telecommunications. Staff plans to work with the public throughout 2016 to gauge what role the City should play in broadband services if any. In 2015, the city began to study the best approach for implementing high-speed broadband in the community. A strategic examination of potential models, a feasibility and business case review of the most likely structures, and development of an action plan to move forward will be presented for voter consideration in November 2015.  Other Plans. Other plans include a Roadmap for Green Building and Road to Zero Waste Plan. Formatted: Font: Tw Cen MT, 11 pt Formatted: Font: Tw Cen MT Formatted: Font: Tw Cen MT, 11 pt energy independence with the vision of “Fort Collins is a leader in the transition to sustainable and resilient local energy systems to serve the community’s 2050 carbon neutral future.” The policy provides goals for the prioritization of decision making, programs and services related to the quantity of use and the sources of energy for electricity, thermal end-uses and transportation. The Energy Policy uses a systems approach to energy production and consumption, as well as triple bottom line metrics (economy, society and environment), to guide City government in the development of plans promoting policy outcomes for residents, businesses and other organizations. The policy supports Fort Collins leadership in solutions at a community scale. The Energy Policy was updated in 2015 to address the broader scope of all energy use in the community and to align with the 2015 Climate Action Plan (CAP) Framework. The policy provides objectives for the sources and uses of energy to generate electricity, meet thermal needs, and power transportation. It also supports reductions of the community’s Greenhouse Gas (GHG) emissions from energy use in accordance with the CAP. The Energy Policy uses a systems approach to the production and consumption of energy, along with triple bottom line metrics of economy, society, and environment. The policy supports Fort Collins leadership in solutions at a community scale. It also guides Fort Collins city government in developing strategic and tactical Formatted: Font: Bold Formatted: Font: Tw Cen MT, 11 pt Formatted: Font: Tw Cen MT, 11 pt Formatted: Font: Tw Cen MT, 11 pt Formatted: Font: Not Bold Formatted: Font: Tw Cen MT, 11 pt the Transportation Master Plan, was unified around the tenets of innovation,  Development of a Demand Response pilot program  Several collaborative efforts related to distributed resources These activities will be a focus during 2016 and over the short-term planning horizon, through 2020. Fortunately, Platte River does not need to make short-term decisions regarding new resources to meet peak capacity needs. We can plan capacity additions as part of a broader long-term resource strategy that integrates positioning for CPP compliance. “Platte River Power Authority employs an adaptive strategy to cost-effectively maintain reliability, manage risks, and ensure regulatory compliance.” program. HEADQUARTERS CAMPUS DESIGN AND ENGINEERING Select a cost effective and viable headquarters campus space alternative that will meet projected space needs for staff, technology, and equipment for the next 30 years, incorporate energy efficiency principles; and initiate permitting, design, engineering, and construction. LEGISLATIVE POLICY ENGAGEMENT Establish core messaging and an engagement plan at both the state and federal levels to encourage a favorable political climate for our continued operations.