CITY OF ANAHEIM PUBLIC UTILITIES BOARD MINUTES. February 22, 2017

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1 CITY OF ANAHEIM PUBLIC UTILITIES BOARD MINUTES February 22, 2017 The agenda having been posted on Thursday, February 16, 2017, the Regular Meeting of the Public Utilities Board (Board) was called to order by Chairperson J. Machiavema at 5: 00 p.m. on Wednesday, February 22, 2017, in the 11' h Floor Large Conference Room, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: Chairperson J. Machiavema, Vice Chair D. Wain, B. Hernandez, L. Cahill, A. Abdulrahman Board Members Absent: E. Medrano Staff Present: D. Lee, M. Moore, B. Beelner, J. Lonneker, G. Bowen, J. Lehman, A. Kott, A. Muniz, F. Barvarz, J. McBride, M. Seifen Guest( s) Present: Sandy Scott -Roberts, Orange County Water District AGENDA ITEM ACTION TAKEN 1. PUBLIC COMMENTS. There being no public comments, Chairperson J. Machiavema closed the public comments portion of the meeting. 2. APPROVAL OF THE MINUTES OF THE REGULAR Subject to correction of a PUBLIC UTILITES BOARD MEETING OF JANUARY 25, grammatical error, B * Hernandez moved approval of the Minutes of the Regular Public Utilities Board Meeting of January 25, A. Abdulrahman seconded the motion. MOTION CARRIED: 5-0. ABSTAINED: 0. ABSENT: 1 ( E. Medrano). 3. PRESENTATION ON THE ORANGE COUNTY WATER DISTRICT (OCWD) GROUNDWATER REPLENISHMENT SYSTEM (GWRS) EXPANSION. S. Scott -Roberts, from Orange County Water District (OCWD), gave a presentation on the Groundwater Replenishment System

2 S. Scott -Roberts indicated OCWD is starting the final expansion of the system, which includes modifications at the existing treatment plant and the Orange County Sanitation District OCSD) Treatment Plant 2 in Huntington Beach. The expansion will improve groundwater reliability with an additional 30 million gallons of water per day that is treated using advanced technologies, tested to ensure that federal and state water quality standards are met, and then eventually percolated into the groundwater basin. 4. PRESENTATION ON WATER AND ELECTRIC RATES J. McBride, Strategic Planning Manager, gave a presentation on the proposed water rate increases, electric rate revisions, and two regulatory relief initiatives that entail reducing water and electric customer service fees. J. McBride discussed the Public Utilities Department ( Department) proposed increases for two water rate components: the Water Commodity Adjustment ( WCA) and Water System Reliability Adjustment (WSRA). J. McBride explained the proposed WCA increase will recover the rising costs being billed to the Department by the wholesale water suppliers. J. McBride explained the proposed WSRA increase will provide funding for water distribution system improvements. J. McBride also discussed electric rate modifications that will reduce the electric portion of customer' s bills. The electric rate decrease will lower customers' energy charges by $ per kilowatt hour (kwh) and will save the typical residential customer approximately $2. 00 per month. J. McBride indicated the Department continues to offer customers competitive rates in comparison to surrounding utility agencies. Further, J. McBride explained that the proposed Regulatory Relief Initiatives to the Department' s service fees will provide billing credits for customers enrolled in automatic bill payment, courtesy credits for billing errors or missed appointments, and offer customers the ability to receive after hour' s service at an additional cost. The Board inquired as to how the proposed electric fee decrease will impact the Department' s revenues. B. Beelner, Assistant General Manager Finance & Administration, explained that fee revenues make up a small portion of the Department' s overall revenues and the fee reductions will not have a material impact to the Department' s financial health. D. Lee, Public Utilities General Manager, emphasized that this will benefit customers and reflects the Department' s goal to collect only what it costs to serve customers

3 5. UPDATE ON FINANCE ISSUES. D. Lee requested that the update on finance issues be moved up in the agenda to accommodate B. Beelner having to leave the Board meeting early to make a presentation on the proposed rate modifications to a neighborhood community meeting. B. Beelner provided an update on the monthly dashboard. He indicated the year to date electric revenue through January 31, 2017 was 4. 1% higher than budget ($ 10. 8M) with costs corning in below budget by 6.3% ($ 15. 2M) causing a year to date net budget variance of $26M. B. Beelner discussed the fact that this net positive budget variance is the primary driver for the upcoming electric rate decrease. B. Beelner then mentioned that year-todate water revenue was 8. 0% ($ 3. 6M) below budget due to continued conservation coupled with the recent rainfall, however costs were 15. 4% below budget ($ 6. 2M) causing a positive net 2. 6M budget variance. 6. PRESENTATION ON LIGHT EMITTING DIODE (LED) STREET LIGHT DEPLOYMENT. F. Barvarz, Transmission and Distribution Manager, gave a presentation on the LED Street Light Deployment efforts. F. Barvarz provided the Board with background information about street lighting throughout the City of Anaheim (City). F. Barvarz mentioned the benefits of upgrading street lighting include energy efficiency, improved street visibility, and better overhead lighting coverage. In terms of deployment, F. Barvarz outlined the strategy for ( 1) transitioning to lower temperature LEDs that have a software illumination level, ( 2) roadway utilizing products that meet standards, ( 3) prioritizing areas of safety concerns expressed by residents and verified by Anaheim Police Department as well as intersections with higher accident rates, ( 4) integrating LEDs into capital and maintenance projects, and ( 5) providing optionality for customers who express that they prefer high pressure sodium lighting and do not want LEDs. The Board inquired about the efficiency comparison between LEDs and current technology. F. Barvarz indicated that LED lighting is not only 30% more energy efficient, but also cost effective because LED lights last longer than high pressure sodium fixtures. 7. APPROVAL OF ANNUAL ENERGY EFFICIENCY GOALS L. Cahill moved approval of CONSISTENT WITH ASSEMBLY BILL (AB) * Annual Energy Efficiency Goals consistent with G. Bowen, Assistant General Manager Power Supply, provided Assembly Bill (AB) the Board with an overview of AB 2021 and discussed the B. Hernandez seconded recommendation to approve an increase in the Department' s motion. Annual Energy Efficiency and Demand Reduction Goal from I% MOTION CARRIED:

4 to 1. 1%. G. Bowen explained that the Assembly Bill requires the Department to establish a rolling 10 -year energy efficiency and demand reduction goal, and provide regular reports every 4 -years to the Board, City Council, and the California Energy Commission ( CEC) regarding the progress in meeting the goal. ABSTAINED: 0. ABSENT: 1 ( E. Medrano). G. Bowen also explained that compliance with AB 2021 takes into consideration the likelihood of customers engaging in energy efficiency activities and also takes into account the cost effectiveness of the Energy Efficiency measures. To that end, there are no financial penalties if the Department is unable to meet its adopted goal. Lastly, G. Bowen made the Board aware that the Department expects that AB 2021 will at some point be superseded by Senate Bill 350 where the target will be even more aggressive over the next 13 years to For now, the Department anticipates no significant increases in expenditures as a result of the new goal in the near term. 8. APPROVAL OF A COOPERATIVE AGREEMENT WITH B. Hernandez moved THE ORANGE COUNTY SANITATION DISTRICT (OCSD) approval of a cooperative FOR CONSTRUCTION OF WATER FACILITIES IN agreement with OCSD for CONDUCTION WITH THE STATE COLLEGE construction of water BOULEVARD SEWER PROJECT. * facilities in conjunction with the State College Boulevard M. Moore, Assistant General Manager Water Services, indicated Sewer Project. L. Cahill that OCSD is replacing their trunk sewer pipeline on State College seconded motion. Boulevard starting from the 91 freeway to Orangewood Avenue. The Department has planned several pipe replacement projects over MOTION CARRIED: 5-0. ABSTAINED: 0. the next several years in the same area. This agreement will ABSENT: 1 ( E. Medrano). provide a reimbursement agreement with OCSD to design and construct the waterlines concurrent with their construction project. The waterline design and construction will be in accordance with the Department' s standards. The Department inspectors will verify the pipelines are constructed in accordance with State regulations for drinking water. Constructing the waterlines with OCSD' s project is estimated to save the City approximately 360, DISCUSSION ON SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY (SCPPA) EXPENDITURES BI- ANNUAL REPORT FISCAL YEAR G. Bowen, Assistant General Manager Power Supply, provided the Board with a semi- annual update of the Department' s expenditures through Southern California Public Power Authority SCPPA). He explained that SCPPA is a joint powers agency comprised of twelve not-for-profit public power agencies, including the City of Anaheim that serves approximately two million customers in Southern California. G. Bowen made the

5 Board aware that the foremost benefit of participating in SCPPA is the ability to spread projects among multiple agencies in order to achieve economies of scale to deliver lower costs to customers. G. Bowen reviewed the expenditures with the Board explaining Staff will include three - that most of the large expenditures were related to generation, years of expenditures in the next bi- annual update. transmission, natural gas, and renewable projects. He also stated that the expenditures were in line with the budgeted amounts halfway through the fiscal year. D. Lee recommended that staff include the prior three -years of expenditures so the Board would be able to see trends associated with SCPPA expenditures. 10. UPDATE ON WATER SYSTEM ISSUES. M. Moore, Assistant General Manager Water Services, indicated that all areas of California have exceeded their annual precipitation levels and more rainfall is anticipated. M. Moore mentioned the surface reservoirs throughout the State are filling up and will be reaching capacity. The local groundwater basin is still relatively Iow and increased by 5% in the past month due to substantial rainfall since it does take time for water to percolate into the groundwater basin. Lastly, M. Moore further discussed the recent news regarding the large amount of water being released by the Oroville Dam. M. Moore indicated the State identified issues with both the main spillway and emergency spillway. The water releases were within normal operating ranges, and no flooding is expected from the dam. The Board asked about local water storage and the potential for similar issues in Southern California. M. Moore explained that local dams in southern California are newer and have been renovated within the past decade. Staff will provide an update The Board requested an update on Proposition 1 funding status at a future meeting. 11. UPDATE ON ELECTRIC SYSTEM ISSUES. J. Lonneker, AGM Electric Services, provided the Board with a summary of the performance of the Department' s electric system during the February 17, 2017 storm. J. Lonneker indicated approximately twelve outages occurred over the course of the three hour storm period, affecting close to 1, 000 customers; most residents were restored quickly while approximately two hundred customers experienced a longer duration power outage and were restored within that three hour period. J. Lonneker shared that the Department began preparing for this storm days prior to the event thereby enabling Utility Operations to staff appropriately so that crews and troubleshooters were on- site and ready to respond. Additionally, testing and inspections at on Proposition 1 funding.

6 the electric substations and in the field were performed prior to the event. The pre -storm preparation enabled fast outage response and relatively few customers affected as compared to surrounding cities. 12. UPDATE ON POWER SUPPLY ISSUES, G. Bowen, provided the Board with an update on the Solar for Schools Program ( Program) stating that five of the seven school districts have expressed interest in participating in the Program and that two school districts, Anahiem Union High School District and Orange Unified School District, have declined to participate at this time. G. Bowen indicated that school board approvals are expected to be completed in March with award recommendations coming to the Board in August. Furthermore, G. Bowen made the Board aware that Orange County Department of Eductation and the Department sponsored a home energy and water survey event as part of Public Power Week last October which ran until January Students and teachers were encouraged to participate in the event and were entered into a raffle to win an ipad. G. Bowen indicated there were a total of 1, 657 surveys received and the raffle winner was student M. Baran from Ponderosa Elementary School and the winning teacher was Ms. Knopes from Loara Elementary School. G. Bowen explained that the surveys were useful tools which provided information about efficency of homes in the City and allowed the Department to identify households that were interested in a free home utility check- up. Lastly, G. Bowen discussed the planned Magnolia Power Plant outage and showed pictures of the power plant gas turbine being disassembled. G. Bowen explained the outage was routine in nature and so far there were no major issues for a unit that had been in operation for nearly 9 -years since its commissioning. G. Bowen indicated the plant will be back in service towards the end of March. 13. UPDATE ON ENTERPRISE RISK, COMPLIANCE, AND LEGISLATIVE & REGULATORY AFFAIRS ISSUES. J. Lehman, Chief Risk Officer, made the Board aware that the PUB Legislative Working Group ( Group) reviewed and recommended the 2017 Legislative Guiding Principles Principles). These Principles are used to evaluate legislation and establish the Department' s legislative positions. She also indicated that the Principles will be included in the City' s Legislative Platforms for City Council consideration in March. J. Lehman then shared with the Board that the Group also reviewed bills with the potential to impact the Department. J

7 Lehman indicated that Friday, February 17 was the last day to formally introduce new State bills, and that over 2, 000 were introduced. Of these, there were several bills to note, including one that would establish a 100% Renewable Portfolio Standard RPS) by 2045 which would likely increase costs if not developed and regulated in a thoughtful manner, as well as several apparent place holders for a potential water use surcharge to support State determined activities. 14. AGENDA ITEM(S) FOR THE PUBLIC UTILITIES BOARD MEETING ON MARCH 22, D. Lee stated the following items are planned for the following Board meeting: Public Hearings Water and Electric Electric Infrastructure Inspection Update Valve Maintenance Update Utilities Success Indicators 15. ITEMS(S) BY SECRETARY. D. Lee informed the Board that City Council will transition towards district -based appointments, with the remaining seats appointed by a majority of the full City Council members. The ordinance will likely be introduced in March, with an effective date 30 days subsequent to the second reading of the ordinance. D. Lee encouraged current Board members to re -submit their applications for consideration. D. Lee informed the Board that a shade tree planting ceremony in recognition of Earth Day is being scheduled for April, and the Board would be provided further information prior to the event. D. Lee provided an update that the Los Angeles Candidate City for the Olympic Games in 2024 ( LA2024) committee is preparing technical information to be submitted for consideration that will include the Honda Center, which may host indoor volleyball. 16. ITEM(S) BY BOARD MEMBERS; A. Abdulrahman said the LED lighting presentation was very informative, and he thanked staff for the meeting. L. Cahill thanked staff for the meeting. He appreciated the presentation regarding the water rate increase and electric rate and rule modifications and commended staff for putting the customers first. B. Hernandez thanked staff for keeping the Board informed and was pleased with the presentations and the information that was

8 provided. D. Wain thanked staff for the meeting and highlighted their hard work and efforts of field crews during the storm. J. Machiaverna thanked staff for keeping the Board informed of important issues and events. 17. ADJOURNMENT TO THE (PUBLIC HEARINGS/REGULAR MEETING ON MARCH 22, 2017, AT 5: 00 P.M., IN THE GORDON HOYT CONFERENCE CENTER, 2' FLOOR, ANAHEIM WEST TOWER, 201 S. ANAHEIM BOULEVARD, ANAHEIM, CALIFORNIA). B. Hernandez moved approval to adjourn the Regular Meeting at 7: 41 p.m., to the Board' s Public Hearings/ Regular Meeting date of March 22, 2017 at 5: 00 p.m. A. Abdulrahman seconded motion. MOTION CARRIED: 5-0. ABSTAINED: 0. ABSENT: 1 ( E. Medrano). tf mitted, U Dukku Lee Public Utilities General Manager Indicates item( s) that will be forwarded to City Council for action upon recommendation by the Board. Indicates item( s) that will be forwarded to City Clerk and City Council for informational purposes