Board of Directors Meeting. August 31, 2017

Transcription

1 Board of Directors Meeting August 31, 2017

2 Wholesale Rate Projections August 31, 2017

3 Discussion Topics Strategic Financial Plan 2018 Tariff 1 Rate Recommendation Tariff 1 Long-Term Projections 2018 Tariff 7 Rate Recommendation Rate Comparisons Next Steps

4 Strategic Financial Plan

5 Future SFP Revision Considerations SFP Goals Priorities Practices Long-term financial stability Financial risk management Support Mission, Vision, and Values Access to low cost capital Adequate cash flows and earnings Sufficient liquidity for operational excellence Wholesale rate stability Rate and Legal requirements Financial metrics Risk Management Internal controls Policies

6 Strategic Financial Plan Purpose Low cost capital Manage risk Adequate cash flows and earnings Long-Term Financial Stability Wholesale rate stability

7 Strategic Financial Plan Targets SFP Targets Driving Rates 1.5x debt service coverage minimum $6 million net income minimum 200 days unrestricted cash on hand target minimum Additional SFP Targets Debt to capitalization ratio less than 50% Low cost capital and favorable credit ratings Stable and competitive wholesale rates Maintain bond required reserves Prudently manage and invest reserves Variable rate debt policy Manage financial risk

8 2018 Tariff 1 Recommendation

9 Rates Framework Considerations Foundational Documents Alignment with Strategic Initiatives Rates philosophy statements Tariff structure Cost Allocation Methodologies Unbundling Time Structures: Seasonal, Time of Use, Real Time New and/or revised tariffs

10 Rate Projections* August 2016 Projections 2.5% ( ), 3.5% ( ) 2.5% 13.1% 43.6% SFP Minimum 0.0% 2.6% 37.9% Recommendation 2.0% ( ), 2.8% ( ) 2.0% 10.2% 34.2% % increase recommendation based on: Board of Directors preference to smooth increases Maintain strong balance sheet by generating additional reserves, thus reducing future debt requirements *Only 2018 rates will be approved in October All projections beyond 2018 serve only as indications.

11 Based on 2017 Budgeted Loads Tariff 1 Charges: Energy: $ per kwh for all energy supplied Budget 2017 Proposed 2018 % Change Jun Aug % Jan May, Sep Dec % Demand: $ per kw of Billing Demand Jun Aug % Jan May, Sep Dec % Average $ per MWh Estes Park % Fort Collins % Longmont % Loveland % Total % 1 Average $ per MWh = Sum of Monthly (kw Billing Demand x $ per kw + kwh Energy Supplied x $ per kwh) / Annual MWh

12 Tariff 1 Long-Term Projections

13 $/MWh Tariff 1: Long-Term Projections % average annual increase Recommendation: 2.0% ( ) 2.8% ( ) SFP Minimum August 2016: 2.5% ( ) 3.5% ( )

14 $ Millions Debt Outstanding Recommendation: 2.0% ( ) 2.8% ( ) SFP Minimum

15 $/MWh Change in Revenue Requirement REVENUE INCREASES PORTFOLIO DIVERSIFICATION GENERAL & INFRASTRUCTURE Windy Gap Sale Proceeds, Load Growth (0.2% average annual growth) Surplus Sales (price recovery) DSM Expansion Craig 1 Exit Operating Expense Decrease Reduced Surplus Sales Craig 2 Exit Operating Expense Increase Add Gas and Wind Reduced Surplus Sales Market prices, O&M and A&G escalation, Capital (excluding new resources), Emissions expense(2024) Rate Pressure ~40% Portfolio Diversification ~60% General & Infrastructure Recommendation: 2.0% ( ) 2.8% ( ) 65 SFP Minimum

16 Modeling Assumption Uncertainty CATEGORY COMMODITY PRICES CRAIG UNIT 2 CUSTOMIZED RESOURCE PLAN EMISSIONS EXPENSE LOAD FORECAST REGIONAL MARKETS WIND ADDITIONS EXPLANATION Power Supply Plans updated quarterly Decommission Craig Unit 2 timing Projections do not include portfolio customization 2024 implementation price per ton of CO 2 emitted Updated annually Projections do not include long-term costs and benefits of RTO participation Projections do not include additional wind energy prior to 2030

17 2017 Tariff 7 Recommendation

18 Tariff 7 Recommendation Tariff 7 Premium 4.0 percent increase From $0.025 to $0.026 per kilowatt-hour Increases beyond 2018 are anticipated Main factors causing Tariff 7 rate pressure: Low surplus sales offsets Increasing wind costs Reduction in quantity of low cost RECs *Only 2017 rates will be approved in October All projections beyond 2018 serve only as indications.

19 Rate Comparisons

20 Retail: CAMU Residential Survey BLACK HILLS ENERGY XCEL ENERGY SAN LUIS VALLEY REA SAN ISABEL SE COLORADO PA SANGRE DE CRISTO GUNNISON COUNTY EA SAN MIGUEL PA MOUNTAIN VIEW EA LA PLATA EMPIRE EA MORGAN COUNTY REA MOUNTAIN PARKS EI HIGH WEST ENERGY TRI-COUNTY DELTA-MONTROSE EA GRAND VALLEY RPL WHEATLAND K C ELECTRIC ASSN Y-W ELECTRIC ASSN INTERMOUNTAIN REA UNITED POWER WHITE RIVER EA HOLY CROSS EA MOON LAKE HOLLY LAMAR LAS ANIMAS SPRINGFIELD TRINIDAD BURLINGTON LA JUNTA RATON LYONS ESTES PARK DELTA FREDERICK COLORADO SPRINGS WRAY OAK CREEK ASPEN JULESBURG FOUNTAIN GLENWOOD SPRINGS FORT COLLINS LOVELAND GUNNISON LONGMONT FORT MORGAN January Cost of 700 kwh $- $20 $40 $60 $80 $100 $120 $140 Investor CO-OP Municipal: Platte River Municipal

21 Retail: CAMU Large Commercial Survey BLACK HILLS ENERGY XCEL ENERGY SANGRE DE CRISTO SAN ISABEL SE COLORADO PA SAN MIGUEL PA SAN LUIS VALLEY REA WHITE RIVER EA HIGH WEST ENERGY MORGAN COUNTY REA EMPIRE EA INTERMOUNTAIN REA UNITED POWER WHEATLAND MOUNTAIN PARKS EI MOUNTAIN VIEW EA GRAND VALLEY RPL LA PLATA Y-W ELECTRIC ASSN GUNNISON COUNTY EA DELTA-MONTROSE EA TRI-COUNTY HOLY CROSS EA MOON LAKE LAMAR LAS ANIMAS SPRINGFIELD TRINIDAD LA JUNTA RATON HOLLY BURLINGTON ASPEN LYONS FREDERICK WRAY GLENWOOD SPRINGS FORT MORGAN DELTA COLORADO SPRINGS ESTES PARK OAK CREEK LOVELAND FORT COLLINS FOUNTAIN LONGMONT GUNNISON January Cost of 45,000 kwh kw $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 Investor CO-OP Municipal: Platte River Municipal

22 2016 Wholesale Rate Comparison ARPA $ PSCo $72.97 Tri-State $72.07 Platte River $57.58 $/MWh Reported PSCo rates are derived from FERC EQR filings. Only customer capacity and energy transactions with a FERC Tariff Reference of Assured Power and Energy Requirements Tariff are included. Holy Cross excluded pending verification from PSCo.

23 $/MWh Wholesale Rate Comparison Platte River Budget Platte River Actual PR 1983: CPI Electric Escalation PR 1983: CPI Escalation Tri-State

24 Next Steps Budget September Work Session October Public hearing and budget revisions December Budget adoption Sep Oct Nov Dec 2018 Formally adopt 2018 tariffs Tariff 1: 2.0% Tariff 7: 4.0% Rates framework development Foundational documents Cost of service methodology

25 Questions/Discussion

26 Board of Directors Meeting August 31, 2017

27 Cyber Security August 31, 2017

28 Norse Live Attack Map What you are looking at is a real-time map off attacks being generated from around the world The attackers are signified by red dots and the targets are in white.

29 Cyber Security Life Cycle Step 5 Test and communicate remediation solutions Step 6 Implement remediation solutions 5 Step 4 Research and identify remediation solutions Step 1 Annual External Security Audit 3 2 Step 2 Continuous vulnerability scanning and monitoring Step 3 Risk-based prioritization of remediation tasks

30 The BitSight rating scale is similar to a credit rating and ranges from 250 to 900. The blue band indicates the rating range for all utilities. The rating indicates an organization s relative security effectiveness based on externally observable data from numerous security events.

31 Key Drivers for Improved Performance Identifying and removing or re-installing infected computers Implementing changes to secure our domain name service (DNS) environment Deploying encryption on more of our external facing websites Regularly and consistently deploying patches throughout the environment

32 Electricity Subsector Cybersecurity Capability Maturity Model (C2M2) Threat and Vulnerability Management Domain Key Areas Identify & Respond to Threats Reduce Cybersecurity Vulnerabilities Perform related management activities Aggregate Rating as of 2015 Not Implemented Partially Implemented Largely Implemented Fully Implemented

33 Electricity Subsector Cybersecurity Capability Maturity Model (C2M2) Key Drivers for Improved Performance Formalized our processes for gathering and interpreting threat data Greatly improved our patching methods, responsiveness and frequency Improved standards & procedures for the communication of threats, organizational impact analysis and vulnerability management activities Aggregate Rating as of 2016 Not Implemented Partially Implemented Largely Implemented Fully Implemented

34 Electricity Subsector Cybersecurity Capability Maturity Model (C2M2) Information Sharing and Communications Domain Key Areas Establish & maintain relationships with various information sources Share cyber security information internally and externally Perform related management activities Aggregate Rating as of 2015 Not Implemented Partially Implemented Largely Implemented Fully Implemented

35 Electricity Subsector Cybersecurity Capability Maturity Model (C2M2) Key Drivers for Improved Performance Formalized information gathering and sharing with organizations like MS-ISAC, E-ISAC, US-CERT, APPA, CMAP and others. Improved policies and procedures regarding the ethical use and sharing of sensitive, protected and classified information. Aggregate Rating as of 2016 Not Implemented Partially Implemented Largely Implemented Fully Implemented

36 Key Conclusions Systematic attention to established cyber security principles and identified work plan goals has resulted in continuing and sustained improvement in business enterprise cyber security. Next steps will include an update to work plan goals resulting from the recently completed cyber risk assessment along with periodic updates to the Board of Directors on this key issue.

37 Next Steps National Renewable Energy Lab (NREL) presentation on distributed energy resource security October 31, 2017 from 1 p.m. 4 p.m. hosted by Platte River Dr. Erfan Ibrahim, Ph.D., Director, Cyber-Physical Systems Security & Resilience Center Estes Park, Fort Collins, Longmont and Loveland have committed to participating Supports Platte River s Innovation and Operational Excellence values

38 Questions?

39 Board of Directors Meeting August 31, 2017

40 HQ Campus Project August 31, 2017

41 Introduction Owner Representatives William T. Welch - Wm T. Welch Company Stuart Lumsden - Gleeds

42 Current Review Process Cost Estimation / Validation Value Assessment Schedule Review

43 Cost Estimation Validation Two (2) Separate Processes: a) Facility Development Capital Project Budget: Validate that the Schematic Design documents conform to the project program plus discretionary changes directed by Sr. Leadership. Incorporates reasonable quantities, cost factors, target costs, and allowances. Is comprehensive based on team expertise and benchmarking against other similar projects. b) Platte River Equipment & Furnishings Budget: Validate that budgets for specialty equipment and furnishings are based on documented systems and products with verifiable and reproducible cost factors.

44

45 Value Assessment Evaluate the project program and design against other similar projects including whole life facility factors, life cycle cost assessments including materials and assembly selections, construction processes, local materials and suppliers, targeted quality specifications and project phasing. Value assessment also incorporates construction period and facility operations risk assessments.

46 Budget Messages Items still under consideration include interior fit and finishes, site layout logistics, building exterior finishes, and other similar key components. Project costs are controllable We are working to scale back in a reasonable manner Balance between achieving cost target with best long term decisions Remain both cost-competitive and flexible Budget Goal Benchmark range = $321/sq ft to $444/sq ft Target cost is approximately $375/sq ft Specialized building requirements Total target cost range = $40 million to $45 million

47 CONCEPTUAL PROJECT SCHEDULE PLATTE RIVER POWER AUTHORITY HQ CAMPUS PROJECT Aug 17 - Oct 17 Aug 17 Apr 18 Sept 17 Nov 17 December 7, 2017 Dec 17 Apr 18 Apr 18 June 18 April 18 April 18 - Feb 20 Feb 20 March 20 DD Phase Design Process and Budget Reconciliation Entitlement Negotiation FCI Construction Cost, Scope of Work, & Schedule Update Platte River Board Meeting: FCI GMP Approval Construction Documents Design Phase Building Permit Process HQ Building Site Development Plan (SDP) Approval/DCP Permit Project Construction Substantial Completion Final Completion

48 Next Steps Sept. BOD Meeting Oct. BOD Meeting Design Update Firm Cost Estimate as part of the budget Dec. BOD Meeting Budget Approval

49 Questions?

50 Board of Directors Meeting August 31, 2017

51 Strategic Plan Update August 31, 2017

52 Recap Gathering Input for Next Plan Senior Manager Input Review of Peer Plans Suggested Changes Board Review (July) Calls with Consultants

53 Suggestions for Next Plan 2017 Plan Changes Vision Multi-year vs. annual Mission Annual goals budget SFP Less operational detail IRP (more strategic focus) CAP Update Values and Strategic Initiatives Risk Mgmt. Integrate recent priorities Policies. Separate key documents Reorganize format Enhance communications New Plan

54 Updates VALUES Added an introduction: o Definition o Why important Removed question-based format Updated some of the value statement language Same seven items as 2017: Safety Sustainability Integrity Respect Service Innovation Operational Excellence INITIATIVES Added an introduction Removed redundancy Written with 3 to 5 year view Integrated Board work session direction & recent discussions Five key areas: o Customer Solutions o Resource Diversification o Organized Markets o Infrastructure Advancement o Community Outreach

55 Board Input Draft versions included in Board memo attachment Suggestions on Values? Suggestions on Initiatives?

56 Next Steps Integrate Board input from today Refine key goals for 2018 Budget document Annual items moved to budget (from SP) Restructure document content & format Follow suggestions outlined in July Consider additional enhancements Gather additional Board input as the plan evolves September review draft sections of new plan October present draft document for Board consideration December anticipate seeking final Board approval

57 QUESTIONS / DISCUSSION

58 Board of Directors Meeting August 31, 2017

59 2017 Wind RFP Progress Update and Next Steps August 31, 2017

60 Wind RFP Summary Through the 2017 Wind RFP, Platte River received 17 Notices of Intent to Bid from potential counterparties Platte River received 10 wind and 2 solar proposals on August 4 Platte River will focus on wind offerings during this RFP Potential wind projects are clustered in four main regional areas The responses will be narrowed to a short list of 4 participants based upon: Prices Transmission constraints/costs Vendors financial health System diversification

61 Respondent List Enbridge Avangrid Enyo NextEra EDF Invenergy LS Power EDP Tradewind Leeward

62 Proposed Wind Project Locations Offers received in capacities ranging from 50 to 150 MW

63 Wind PPA Prices - 20 Year Term $/MWh $80 $70 $60 $50 $40 $30 Price range of 2017 RFP responses $20 Approximate price trend from historical Platte River contracts Recent Quotes Impact of PTC Expiration $ Prices include levelized costs of transmission and integration

64 PPA Cost /MWh, including transmission Price-Quantity Relationship PPA Cost includes cost of transmission and integration Cost declines with higher levels of contract capacity $80 $70 $60 $50 $40 $30 $20 $10 $ Contract Capacity, MW

65 $2020/MWh Summary of Proposed Pricing Multiple offers at Rawhide that require construction of transmission All other offerings require point-to-point transmission Delivered cost includes transmission and integration $80 $70 $60 Price Range - Existing Platte River Wind PPAs $50 $40 $30 $20 $10 $0 Platte River Currently pays ~$1.25 M in annual balancing charges to PSCo, excluding Schedule 4.

66 Share of Carbon-Free Resources Platte River s share of carbon-free resources is approximately 30% Relative to municipal deliveries 50 MW wind additions add about 5% 150 MW wind additions add about 15% Share of carbon-free resources 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% ~30% 2021 Wind additions Plus 50 MW ~45% ~35% Plus 150 MW

67 Operational Risk Management Determine Platte River s capability to accommodate renewables in increments ranging between 50 MW to 150 MW Platte River will focus on four areas of optimization and risk management: Supply Management Negotiate flexibility needed from vendor to facilitate handling of surplus energy Generation Management Determine methods to manage Platte River s existing resources to accommodate surplus energy Market Operations Look for market opportunities to manage Platte River s long positions Transmission Perform transmission studies to evaluate interconnection needs and future congestion risk

68 Next Steps Narrow RFP candidates to a short list of 3-4 vendors Hold preliminary individual discussions with short-listed vendors to assess project viability (binding offers due September 30) Develop draft term sheet(s) Conduct in-depth evaluation of bid structures: Transmission Counterparty financial health Operational impacts Continue congestion risk analysis (Quanta) Finalize term sheet with preferred vendor Make regular progress updates to the Board Final recommendation to the Board in December Negotiate a final PPA with the preferred bidder

69 Board of Directors Meeting August 31, 2017

70 July Operational Results Category July Variance YTD Variance Municipal Demand 1.7% (0.1%) Municipal Energy 2.6% (0.6%) Baseload Generation (3.8%) (3.2%) Wind Generation (9.2%) (3.3%) Solar Generation (7.4%) (9.9%) Surplus Sales Volume 8.3% 6.0% Surplus Sales Price 13.3% (6.7%) Dispatch Cost 8.4% (0.2%) Variance Key: Favorable: >2% Near budget: +/- 2% Unfavorable: <-2%

71 6:17 AM 6:32 AM 6:47 AM 7:02 AM 7:17 AM 7:32 AM 7:47 AM 8:02 AM 8:17 AM 8:32 AM 8:47 AM 9:02 AM 9:17 AM 9:32 AM 9:47 AM 10:02 AM 10:17 AM 10:32 AM 10:47 AM 11:02 AM 11:17 AM 11:32 AM 11:47 AM 12:02 PM 12:17 PM 12:32 PM 12:47 PM 1:02 PM 1:17 PM 1:32 PM 1:47 PM 2:02 PM 2:17 PM 2:32 PM 2:47 PM 3:02 PM 3:17 PM 3:32 PM 3:47 PM 4:02 PM 4:17 PM 4:32 PM 4:47 PM 5:02 PM 5:17 PM 5:32 PM 5:47 PM 6:02 PM 6:17 PM 6:32 PM 6:47 PM 7:02 PM 7:17 PM 7:32 PM 7:47 PM Solar Generation During the Eclipse MW 30 Rawhide Flats Maximum Eclipse

72 6:17 AM 6:33 AM 6:49 AM 7:05 AM 7:21 AM 7:37 AM 7:53 AM 8:09 AM 8:25 AM 8:41 AM 8:57 AM 9:13 AM 9:29 AM 9:45 AM 10:01 AM 10:17 AM 10:33 AM 10:49 AM 11:05 AM 11:21 AM 11:37 AM 11:53 AM 12:09 PM 12:25 PM 12:41 PM 12:57 PM 1:13 PM 1:29 PM 1:45 PM 2:01 PM 2:17 PM 2:33 PM 2:49 PM 3:05 PM 3:21 PM 3:37 PM 3:53 PM 4:09 PM 4:25 PM 4:41 PM 4:57 PM 5:13 PM 5:29 PM 5:45 PM 6:01 PM 6:17 PM 6:33 PM 6:49 PM 7:05 PM 7:21 PM 7:37 PM PRPA Load During the Eclipse MW Maximum Eclipse

73 Board of Directors Meeting August 31, 2017

74 Financial Summary Category July Variance from Budget ($ in millions) Year to Date Variance from Budget ($ in millions) Net Income $(0.1) $4.6 Debt Coverage (.13x).25x Revenues $0.9 $(0.4) Operating Expenses $(1.4) $4.3 Capital Additions $1.9 $13.3 > 2% Favorable 2% to -2% At or Near Budget < -2% Unfavorable

75 Board of Directors Meeting August 31, 2017