Regular Meeting Minutes of the Board of Directors 2000 East Horsetooth Road, Fort Collins, Colorado Thursday, August 28, 2014

Transcription

1 Regular Meeting Minutes of the Board of Directors 2000 East Horsetooth Road, Fort Collins, Colorado Thursday, August 28, 2014 ATTENDANCE Board Members Representing Estes Park: Mayor Bill Pinkham and Reuben Bergsten Representing Fort Collins: Mayor Karen Weitkunat and Mayor Pro Tem Gerry Horak 2 Representing Longmont: Mayor Dennis Coombs 1 and Tom Roiniotis Representing Loveland: Mayor Cecil Gutierrez and Steve Adams Platte River Staff Jackie Sargent (General Manager) Joe Wilson (General Counsel) Jason Frisbie (Chief Operating Officer) Dave Smalley (Chief Financial & Risk Officer) Barb Ateshzar (Government & External Affairs Officer) John Bleem (Strategic Planning & Customer Service Director) Karin Hollohan (Corporate Services Director) Deb Schaneman (Environmental Services & Compliance Director) Heather Banks (Fuels & Water Manager) Rocky Knutson (Plant Manager) Brad Decker (Strategic Planning Manager) Mike Jones (Senior Resource Planner) Paul Davis (Customer Services Manager) Tyler Michie (Combustion Turbine Reliability Engineer) Wade Hancock (Financial Planning Manager) Brodie Griffin (Facilities, Fleet & Security Manager) Adrien Kogut (Executive Administrative Assistant) Mariah Swaffer (Executive Administrative Assistant) Guests Steve Catanach (Fort Collins Light & Power Operations Manager) Kevin Gertig (Fort Collins Utilities Executive Director) CALL TO ORDER Chairman Roiniotis called the meeting to order at 9:03 a.m. A quorum of Board Members was present and the meeting, having been duly convened, was ready to proceed with business. ACTION ITEMS (1) Approval of the Regular Meeting Minutes of July 31, 2014 Director Pinkham moved to approve the Board Meeting Minutes of July 31, 2014, as presented. 1 Arrived at 9:04 a.m. 2 Arrived at 9:07 a.m. after the minutes were approved

2 Regular Board Meeting Minutes: August 28, 2014 Page 2 of 6 Director Weitkunat seconded, and the motion carried 7-0. (2) Public Comment None. (3) Legal Counsel Report (presenter: Joe Wilson) Staff has been working on an analysis of the proposed Clean Power Plan, as well as the 1041 solar application to the county. We sold the Medicine Bow wind site, which is under review by the Committee on Foreign Investment in the U.S. (CFIUS). This review is expected to be complete in a month. Financial consolidation of Phases II and III of the Spring Canyon wind project closes next week. We are on track to start taking deliveries from Phase II by October 1 and Phase III by the beginning of next year. (4) Operating Report, July 2014 (presenter: Jason Frisbie) Platte River generation and transmission assets performed very well throughout the month of July. July is typically the highest load month and therefore the most critical month for Platte River. Municipal load and demand were again below forecast due to mild weather. As a result of below normal summer temperatures, Municipal demand and energy sales are starting to lose ground year to date. Base load resources again performed well resulting in strong surplus sales volumes. However, surplus sales pricing was below budget due to below normal regional demand as a result of the mild weather. In preparation for the Rawhide rotary car dumper outage, staff has started implementing dispatch switching to conserve coal at Rawhide by reducing generation (lowering output) and increasing utilization of the Craig facilities. A question was asked regarding the decrease in August wind generation. Wind generation is seasonal typically higher production in the shoulder months and lower production in the summer. Platte River wind resources will significantly increase when Spring Canyon comes online. Going forward staff will provide the Board with a chart showing year to date system resource utilization in addition to monthly results. (5) Financial Report, July 2014 (presenter: Dave Smalley) Mr. Smalley reviewed a financial summary for the month of July. Though we are behind on Municipal sales, surplus sales revenue partially offset lower Municipal sales revenue. Year to date total revenues are better than expected. Expenses were above budget in July, partially offsetting under budget variances earlier in the year. The year to date variance for capital spending is still significant but is expected to be approximately $8 million by year end. Although July variances are unfavorable in every category, overall we remain in a strong favorable position year to date.

3 Regular Board Meeting Minutes: August 28, 2014 Page 3 of 6 (6) Wholesale Rate Forecast (presenter: Dave Smalley) The Strategic Financial Plan (SFP) is now included in the organization s Strategic Plan (SP). Mr. Smalley reviewed SFP targets with the Board, which may be adjusted upon review of the SP and IRP. Last year, Platte River adopted a 2% wholesale rate increase. This year, a 2.5% increase in 2015 is recommended, followed by estimated 2% in both 2016 and While the revenue requirement model shows small rate pressure in 2015 due to new wind energy purchases, the increases recommended are higher than the model to support rate smoothing, the potential impacts of prospective projects, and anticipated adjustments to Municipal load forecasts. The 2.5% rate increase will be implemented with a 3.6% increase in the energy rate, while the demand rate will be held flat. Actual proposed Tariff 1 rates were shown in the board materials. Mr. Smalley explained the various components affecting rate pressure: O&M, purchased power, fuel, A&G, surplus sales, debt services, and Municipal load growth. Three year financial projections with the proposed rate adjustments were reviewed. All SFP targets will be met, with the exception of the days cash on hand target in Platte River has in place a reimbursement resolution to replenish the cash shortfall as part of the next debt issuance, currently planned for early Mr. Smalley covered several variables that can impact future rate forecasts. He also reviewed rate comparisons showing that Platte River s wholesale rate and the cities retail rates are still well positioned among the other utilities in the region. Staff will ask the Board to formally adopt rates in October. Ten-year projections will be presented with the IRP and other planning efforts. Mr. Smalley explained how Tariff 1 is calculated and how load factor affects rates. There was further discussion about net income and rate stabilization fund targets. Rating agencies look favorably on organizations with a rate stabilization fund that is used for unforeseen events and unfavorably on the use of rate stabilization funds for needed rate increases. In addition, Moody s is putting more emphasis in their ratings towards having utilities carry a bond reserve fund, which Platte River eliminated several years ago. Platte River has been working with a consultant to review the SFP, including the net income target, which may require changes in the future to address decisions made regarding future resource plans. Mr. Smalley will provide additional materials to the Board on Platte River reserve policy. (7) Integrated Resource Plan (IRP) Update (presenter: Brad Decker) Staff now has a fully capable production cost model, producing 40-year forecast runs for the Platte River system. A reference scenario (RS) and first alternative scenario (AS-1) were introduced. The RS meets reliability criteria, but does not meet CO 2 and renewables study guidelines. AS-1 can meet all study goals, but is not considered an optimal scenario for Platte River s future resource needs. Over time additional generating capacity will be needed as Municipal loads grow (in both scenarios). The retirement date for the Craig Units is estimated at 2042 based on a life of plant study. The Craig 62 year expected life was used as a proxy to establish a retirement date of 2046 for Rawhide Unit 1 for study purposes.

4 Regular Board Meeting Minutes: August 28, 2014 Page 4 of 6 Mr. Decker described how various portfolio mixes could potentially satisfy Platte River s reserve capacity, renewable integration, and CO 2 emission objectives. A key effort for the next few months is integrating production and capital cost estimates from the Aurora model with finance models to estimate overall wholesale rate impacts. Staff hopes to provide estimates of rate impact differences between cases and AS-1 by the October Board meeting. There was discussion about the economic impacts of the EPA Clean Power Plan in relation to Board guidelines, as well as the interpretation of the proposed EPA rules on CO 2 mitigation. It was pointed out that conflict exists between the three primary study goals (reserve margin, CO 2 mitigation, and increased utilization of renewables). In particular, the guideline for the share of renewables in Platte River s resource mix can conflict with the objective of keeping costs down. It is likely that compromises will be needed to balance the various study goals in future alternative scenarios to produce a viable resource planning scenario for Platte River. There was additional discussion about the Municipal load forecast and a question was raised about the inclusion of impacts from the price elasticity of demand for electricity within Platte River s current planning models. The potential effects of demand elasticity are an area that can be addressed with additional analysis. A question was also asked about the use of nuclear power to reduce emissions. Mr. Decker indicated that there are many uncertainties regarding nuclear technology, but this resource will be considered as an option for Platte River s longterm analyses (2030 and later). Staff is working with Fort Collins as they define their modeling needs to support climate action plan study goals. (8) Management Report (presenter: Jackie Sargent) Since the Management Report was distributed, there have been two recordable injuries but neither resulted in a lost time accident. Platte River has now reached an agreement with Fort Collins regarding the property involved in the widening of the intersection at Horsetooth and Timberline. Staff will bring this agreement back to the Board for approval in September. There was some discussion about Platte River comments on the proposed EPA Clean Power Plan. Staff will bring a position paper to the next Utility Director and Board meetings. We received feedback that Congressman Jared Polis enjoyed his recent tour of the Rawhide plant. Ms. Sargent touched on other safety, environmental, legal, operational, and financial updates that were covered in the Board packet. There was some discussion about the Trapper Mine extension timeline. Ms. Sargent described her recent presentation to the Colorado Public Utilities Commission regarding the EPA s proposed Clean Power Plan and the positive feedback received from Commissioner Patton. a. Water Resources Reference Document (presenter: Heather Banks) As of today Lake Granby is one-tenth of an inch away from spilling. Fossil Creek spilled, so we are pumping effluent as provided from Fort Collins and utilizing the Colorado-Big Thompson (C-BT) in lieu system. Ms. Banks reviewed the background of the reference document, highlights of recent meetings with the Municipalities, and feedback that will be included in the document. A timeline for the Water Policy was reviewed. Ms. Banks noted that we want to take time to gather input. The dates are flexible and can be extended as

5 Regular Board Meeting Minutes: August 28, 2014 Page 5 of 6 needed. b. Rotary Car Dumper Dust Collection System Upgrade (presenter: Tyler Michie) Mr. Michie gave an overview of the Rotary Car Dumper (RCD) Dust Collection System Upgrade. Safety was the driver of this project, but efficiency and effectiveness will be improved as well. There was discussion about how dust is moved back to the coal silos. Mr. Michie pointed out that it takes half a megawatt to complete the unloading process. A timeline of the project was reviewed. The duration of the outage was reduced by four days and dispatch switching will be utilized to increase the Rawhide fuel inventory by one week. The control system upgrade will occur simultaneously. Mr. Michie noted the challenges with regard to budgeting based on the variances in bids from contractors. Completion of this project will help reduce the capital spending variance for EXECUTIVE SESSION Director Pinkham moved that the Board of Directors go into Executive Session for the purposes of discussing personnel matters, in particular the manner in which compensation shall be established for the General Manager and the General Counsel pursuant to the compensation policy approved by the Board. The General Counsel has advised that an Executive Session is authorized in this instance pursuant to Colorado Revised Statutes, Section , subsection (4)(f); provided that, no formal action will be taken during the Executive Session. Director Coombs seconded. There was further discussion. Mr. Wilson clarified that discussions on compensation can be considered a personnel matter exception. Salary negotiations will not be broached during the session. The motion carried 6-2, Directors Adams and Gutierrez dissenting. Chairman Roiniotis reconvened the Regular Meeting at 1:00 p.m. Director Horak moved that the Board Subcommittee hold another meeting to select a consultant to conduct a third party review of salaries for the General Manager and General Counsel, and to begin discussion on performance review options for both positions. Director Weitkunat seconded, and the motion carried 7-1 with Director Gutierrez dissenting. Director Gutierrez suggested the Board discuss this matter in more detail at a future date in order to achieve consensus on the interpretation of language contained in the Compensation Policy. (9) Roundtable Board Members shared the latest news from the Municipalities.

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