Board of Directors Meeting. August 25, 2016

Transcription

1 Board of Directors Meeting August 25, 2016

2 July 2016 Operating Report August 25, 2016

3 July Operational Results Category July Variance 2016 Variance Municipal Demand (MW) 1.1% (2.3%) Municipal Energy (MWh) 2.3% 0.8% Baseload Generation (MWh) 2.1% (11.4%) Wind Generation (MWh) 7.5% 8.5% Surplus Sales Volume (MWh) 15.3% (35.4%) Surplus Sales Price ($/MWh) (8.6%) (16.9%) Dispatch Cost ($/MWh) 1.0% 1.6% > 2% +\- 2% of budget < -2%

4 July 2016 Financial Report August 25, 2016

5 Financial Summary Category July Variance from Budget ($ in millions) Year to Date Variance from Budget ($ in millions) Net Income $0.2 $2.6 Debt Coverage.21x.15x Revenues $0.5 $(6.4) Operating Expenses $(0.7) $8.0 Capital Additions $0.2 $9.3 > 2% Favorable 2% to -2% At or Near Budget < -2% Unfavorable

6 Board of Directors Meeting August 25, 2016

7 Wholesale Rate Projections Board of Directors Meeting August 25, 2016

8 Discussion Topics Strategic Financial Plan 2017 Tariff 1 Rate Recommendation (3.0% increase) Tariff 1 Long-Term Projections 2017 Tariff 7 Rate Recommendation (4.2% increase) Rate Comparisons Summary

9 Strategic Financial Plan

10 Strategic Financial Plan Purpose Low cost capital Manage risk Adequate cash flows and earnings Long-Term Financial Stability Stable and competitive rates

11 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

12 2017 Tariff 1 Recommendation

13 * * SFP Smoothing Recommendation 3.0% 2.5% 3.6% SFP Minimums 0.0% 2.1% 6.1% No Surplus Sales 3.4% 3.0% 2.8% 3% recommendation due to uncertainty in the surplus sales market, as well as other budget uncertainties, to generate stronger financial results to prepare for the Clean Power Plan, and to support the board s preference to smooth future rate increases *Only 2017 rates will be approved in October All projections beyond 2017 serve only as indications.

14 INCREASES Rawhide solar Expansion of energy efficiency programs Planned maintenance outages Increased pension expense Reduced surplus sales DECREASES Reduced Windy Gap expense Reduced fuel expense Savings from the 2016 debt refinancing Increased self provided reserves

15 Based on 2015 Budgeted Loads Tariff 1 Rates: Energy: $ per kwh for all energy supplied Budget 2016 Proposed 2017 % 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

16 $/kwh $/kw Energy 12 Demand Summer Winter Annual Summer Winter Annual

17 $ Millions % of CT debt recovered through summer demand charge Rawhide Transmission Combustion Turbine

18 MW MW Summer Winter Demand 27% of fixed costs Demand 44% of fixed costs Energy 73% of fixed costs Energy 56% of fixed costs Demand Energy Avg. Baseload 1 Average baseload equals average seasonal utilization of baseload units to serve municipal load

19 Tariff 1 Long-Term Projections

20 $/MWh Tariff 1: Long-Term Projections Clean Power Plan August 2015: CPP No Surplus Sales SFP Minimums Recommendation Capacity Expansion

21 Long-Term Projections Recommendation: Base Projections Average Tariff 1 Annual Rate Increase 3.0% 2.5% 3.6% Period Ending Rate ($/MWh) Period Ending Debt Outstanding ($ Millions) Period Ending Cash Position ($ Millions) Net Income ($ Millions) Debt Service Coverage Ratio SFP Minimums: Base Projections Average Tariff 1 Annual Rate Increase 0.0% 2.1% 6.1% Period Ending Rate ($/MWh) Period Ending Debt Outstanding ($ Millions) Period Ending Cash Position ($ Millions) Net Income ($ Millions) Debt Service Coverage Ratio Recommendation: 1. Rate smoothing 2. Lower rate in Builds cash resulting in less debt to fund future capacity expansion

22 Potential Changes To Projections Customized resource portfolio Energy markets Environmental regulation Strategic initiatives 2017 budget and capital plan Capacity revenue Debt issuances Energy efficiency Investment returns Municipal loads O&M escalations Outage costs Renewable energy Transmission revenue Unit performance Water lease revenue Western purchased power

23 Rate Comparisons

24 Retail: CAMU Residential Survey BLACK HILLS ENERGY XCEL ENERGY SE COLORADO PA SAN ISABEL SAN MIGUEL PA SANGRE DE CRISTO GUNNISON COUNTY EA LA PLATA MOUNTAIN VIEW EA TRI-COUNTY HIGHLINE EA EMPIRE EA MOUNTAIN PARKS EI DELTA-MONTROSE EA HIGH WEST ENERGY GRAND VALLEY RPL INTERMOUNTAIN REA Y-W ELECTRIC ASSN UNITED POWER POUDRE VALLEY EA WHEATLAND WHITE RIVER EA HOLY CROSS EA MOON LAKE HOLLY LAS ANIMAS LAMAR SPRINGFIELD GRANADA TRINIDAD BURLINGTON LA JUNTA RATON LYONS HAXTUN DELTA FREDERICK HOLYOKE WRAY FOUNTAIN COLORADO SPRINGS YUMA ESTES PARK OAK CREEK GLENWOOD SPRINGS JULESBURG ASPEN 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

25 Retail: CAMU Large Commercial Survey BLACK HILLS ENERGY XCEL ENERGY SANGRE DE CRISTO SAN ISABEL SE COLORADO PA SAN MIGUEL PA WHITE RIVER EA POUDRE VALLEY EA TRI-COUNTY INTERMOUNTAIN REA UNITED POWER HIGH WEST ENERGY LA PLATA MOUNTAIN PARKS EI WHEATLAND Y-W ELECTRIC ASSN MOUNTAIN VIEW EA GRAND VALLEY RPL DELTA-MONTROSE EA GUNNISON COUNTY EA HIGHLINE EA HOLY CROSS EA MOON LAKE EMPIRE EA HOLLY LAS ANIMAS SPRINGFIELD TRINIDAD LA JUNTA RATON BURLINGTON LAMAR LYONS FREDERICK ASPEN WRAY HOLYOKE GLENWOOD SPRINGS FORT MORGAN DELTA FOUNTAIN OAK CREEK HAXTUN LOVELAND FORT COLLINS LONGMONT ESTES PARK COLORADO SPRINGS 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 $10,000 Investor CO-OP Municipal: Platte River Municipal

26 $/MWh 2015 Wholesale Rate Comparison $120 $100 $80 $60 $40 $20 $- $54.98 $71.33 $77.43 $ Platte River Tri-State PSCo ARPA Reported PSCo rates are derived from FERC EQR filings. Only customer transactions with a FERC Tariff Reference of Assured Power and Energy Requirements Tariff are included.

27 $/MWh Wholesale Rate Comparison Platte River Budget Platte River Actual PR 1983: CPI Electric Escalation PR 1983: CPI Escalation Tri-State

28 2017 Tariff 7 Recommendation

29 * 2019* 2020+* $/MWh Increase 4.2% 4.0% 3.8% 3.7% Future Projection Uncertainties Western Area Power Administration transmission expenses Ancillary service expenses paid to PSCo Surplus sales revenue *Only 2017 rates will be approved in October All projections beyond 2017 serve only as indications.

30 Next Steps Budget September Work Session October 1 st public hearing December 2 nd public hearing & budget adoption Sep Oct Nov Dec 2017 Formally adopt 2017 tariffs Tariff 1: 3.0% Tariff 7: 4.2% Cost of service model analysis: Seasonal rates Continue coordination meetings with municipal staffs Customized resource portfolio precedes

31 Questions/Discussion

32 Demand Side Management Energy Efficiency: An Update Board of Directors Meeting August 25, 2016

33 Introduction Demand side management ( DSM ) Programs that affect customer use of electricity Energy efficiency ( EE ) today s update Demand response ( DR ): DR pilot Distributed energy resources ( DER ): four-muni community solar EE programs Currently most cost effective form of DSM for Platte River Joint planning/implementation: Municipalities & Platte River Common / customized approach across municipalities Presentation overview Drivers for DSM EE History and projections Current programs Ongoing activities and next steps DSM EE funding policy

34 Strategic Planning Initiatives Efficiency programs provide line of sight support of multiple strategic initiatives. Operational Excellence Technological Innovation Compliance Assurance Safety Financial Stability Employee Engagement Exceptional Customer Service Resource Management Improved Collaboration & Communications 34

35 DSM EE Direction Growing EE programs Strategic Plan and Integrated Resources Plan Energy savings: double by 2018, nearly triple by 2022 (from 2014 levels) Budget: increase from $3.3M in 2016 to $5.2M in 2017 (not including municipality funding) Program growth exceeding expectations Achieving growth nearly one year ahead of schedule Assumed growth would be harder to achieve than it has been Took a conservative approach to budgeting to reduce possibility of unused budget Commercial rebates re-structured and simplified was more effective than expected Lower cost per unit energy saved Higher participation & higher rebate expenditure Worked with muni staff to find additional funding and/or control rate of commercial rebate commitments (including termination of rebates in Loveland) Municipalities support for efficiency continues Municipality staff are an integral part of program planning and development Municipalities funding has grown supplemental and directive Energy efficiency is 48% of Fort Collins initial CAP goal much of their savings comes through PRPA/Common Programs (with added FCU funding) Longmont draft sustainability plan calls for 1% annual efficiency savings by 2020

36 Energy Efficiency History & Growth Cumulative Savings Results ( ): Energy: 136 GWh/yr (4.2% of load) Demand: 23 MW peak (3.5% of demand, contributes to 2 year delay for new peak generation)

37 Energy Efficiency History and Growth Cumulative Results ( ): Utility investment: $28M ($19M from Platte River, $8.4M from Munis) Customer perspective: Cumulative: invested >$30M, saving $9.5M on electric bill

38 Common Energy Efficiency Programs Efficiency Works for Home Home efficiency audits & rebates Neighborhoods (Fort Collins pilot/funding) Energy efficient lighting and products Northern Colorado ENERGY STAR Homes Efficiency Works for Business Efficiency assessments/technical support Energy and water audits Building Tune-Ups (BTU) Rebates for efficient equipment

39 Savings and Spending by Program ( ) Does not include municipalities programs (e.g., Home Energy Reports, appliance rebates, etc.).

40 Pilot Program: Midstream Cooling Incentive Program Support for high-efficiency commercial packaged cooling equip Identified through program review & gap analysis Rebates directed at HVAC distributors ( midstream ) Benefits Distributors control equipment stocking Distributors influence contractors purchasing decisions Fewer market actors simplifies program communications Distributors are most familiar with equipment Lower per unit rebates & yet higher participation Program implementer: Energy Solutions Also implements program for Xcel Energy Run through end of year and consider next steps Upstream Midstream Downstream ~9 manuf Distributors 100s of HVAC Contractors 10,000s of Commercial Customers

41 Commercial Rebates: Survey Sample Results

42 Commercial Rebates: Survey Sample Results 85% of business participants stated that rebates were important in their decision to do an EE project

43 Ongoing Activities and Next Steps Continue commercial rebate evaluation and gap analysis Goal: increased energy savings at minimum cost RFP issued for consulting, advising, and commercial assessment services Continue DSM software implementation Investigating new residential program concepts Efficiency Works Neighborhoods pilot Consumer products expand mid/up-stream incentives & partner with other utilities Low-income (Larimer County Conservation Corps, Colorado Energy Office) EE Financing Fort Collins RFP and other opportunities being monitored Considering third-party program evaluation (2017)

44 Efficiency Program Funding Policy Situation Investment in programs has grown and is expected to continue to increase as part of Platte River s resource management strategy. Objective Scope Develop a policy for the board to consider and adopt that outlines and describes key program governance items such as how funding decisions are made and financial controls. EE programs most significant, regular, ongoing funding Not DR and DER (solar, storage, etc.) still in pilot-program stage; not subject to regular funding Draft outline Total EE program funding How we determine annual savings goals and spending levels Allocation among municipalities (based on equity shares) Program-level EE funding How we determine allocation of funding by customer class, program type, and technology Quality and financial controls

45 Questions / Discussion

46 Laporte Project 230kV Expansion and Autotransformer T2 Addition

47 Laporte Project Expansion & T2 Addition Project Scope of the Project Benefits of the Project Details of the Project Involved Parties

48 BEFORE AFTER

49 Project Scope Re-route Transmission Lines Expand 230kV Yard Add 230/115kV Autotransformer Reconfigure & Update 115kV Yard

50 Benefits of the Project Increased power transmission capabilities from Rawhide Energy Station Rawhide Generation Limit increased by 41% Higher transmission capacity from Rawhide Energy Station to our municipalities especially during contingency situations Meets Strategic Initiative of Resource Management by maintaining reliability and managing risks.

51 Benefits of the Project Addition of 230/115kV Autotransformer T2 Redundancy of substation design for increased reliability Maintenance of autotransformers becomes much easier, less outages are required, less system exposure Meets Strategic Initiative of Operational Excellence by developing and maintaining assets in a cost-effective manner

52 Benefits of the Project Equipment Upgrades All oil breakers and aging equipment have been replaced New controls and protection installed for increased protection accuracy and reliability Meets Strategic Initiative of Operational Excellence by designing, constructing, operating, and maintaining safe, reliable, and environmentally-responsible transmission assets.

53 BEFORE Project Details: Foundations Installed: 200+ AFTE

54 BEFORE Project Details: Control Cable Installed: 18+ miles AFTE

55 BEFORE Project Details: New 230/115kV Autotransformer: $1.2 million AFTE

56 BEFORE Project Details: New Controls and Protection Installed AFTE

57 Involved Parties External Black & Veatch Transmission Line Design ESC Engineering Relay Settings Smith Geotechnical Foundation Design EP2 Control Panel Manufacturer Waukesha Transformer Manufacturer Mitsubishi Circuit Breaker Manufacturer Addison Construction Substation Construction Contractor Brink Constructors Transmission Construction Contractor Xcel Energy Design and Outage Coordination Meets Key Operational Goals of using Project Management to communicate between external and internal parties

58 Involved Parties Internal Accounting Contracts & Legal Compliance Dispatch Engineering Maintenance Procurement SCADA Engineering System Planning Telecommunications Total of 9,600+ PRPA Hours Required Project Initialization to Completion Time = 22+ months

59 Questions?

60 Mountain West Transmission Group Regional Joint Tariff Update

61 MWTG Footprint for the Regional Joint Tariff Transmission Owners Basin Electric Black Hills (BHP,CLFP,BHCE) Colorado Springs Platte River PSCo Tri-State WAPA (LAP and CRSP)

62 How Transmission Tariffs Work Today Each Transmission Owner has its own tariff for its system Network service for serving load Point-to-Point service for moving power through a system at specific points of receipt and delivery Transmission customers pay a tariff for each transmission system used to deliver power. (Pancaked Rates) Pancaked Rates Add to cost of serving load and selling surplus power Hinder access to remote generation Could incentivize construction of duplicate bypass transmission PRPA pays a Pancaked Rate to WAPA for delivery of 72 MW of wind to our load 62

63 How a Regional Tariff Would Work An Independent Transmission Service Provider manages a tariff for the MWTG Footprint. Benefits to PRPA and Owner Municipalities: Stop paying WAPA s pancaked rate to deliver 72 MW of wind to our load Reduce ancillary service fees PRPA and Colorado Springs could exchange power without additional transmission cost PRPA could exchange power to Utilities in parts of Wyoming, South Dakota, and all of Colorado without additional transmission cost PRPA could build or contract for new generation anywhere in the footprint and bring it home under one tariff Common Tariff creates a foundation for organized energy markets 63

64 What is an Organized Energy Market? RTO/ISO? RTO Regional transmission organization ISO Independent system operator Both types of entities are functionally the same they operate and manage the interstate electricity grid over a large region, dispatch the system by means of auction/bid-based energy markets, and provide market monitoring oversight. A key characteristic of both ISOs and RTOs is that, in contrast with grid operators in utility operated systems, they are not affiliated with any market participant and thus provide the fair access to grid services needed for a level playing field. RTOs and ISOs dispatch the system by means of competitive auction/bid-based energy markets, in contrast to the purely bilateral markets in single utility operated systems. 64

65 Organized Energy Markets, PJM Example (Day 2 Market)

66 RTO/ISO Map

67 Possible Areas of Value 1. Reduced cost of third-party transmission 2. Operating reserves and services managed on a larger footprint with market based tools 3. Transparent and open markets creating more efficient day-ahead and hourly dispatch and marketing 4. Ability to interconnect new generation resources anywhere in MWTG footprint 5. Reduced system-wide planning reserves 6. Improved reliability

68 Next Steps and Target Dates Action MWTG will need to find agreement on a method to share future regional transmission costs Agree if an Energy Market will be included Select a Tariff/Market Operator Begin stakeholder processes Date Oct-2016 Oct-2016 Oct-2016 After Oct-2016 Begin Tariff/Market operation Q

69 Questions?

70 Board of Directors Meeting August 25, 2016