Board of Directors Meeting. October 27, 2016

Transcription

1 Board of Directors Meeting October 27, 2016

2 2017 Proposed Budget Update Platte River Board of Directors Meeting October 27, 2016

3 Agenda Budget changes Financial impact Surplus sales price forecast Financial results Budget to strategic plan Summary

4 Budget Changes Surplus Sales 8% average price decrease to $23.38 from $25.30, 13% volume decrease Fuel Decrease in generation as a result of lowering the surplus sales price, partially offset by a slight increase in natural gas usage from modeling results Hydropower WAPA LAP Rate decreased as reduced the drought adder Other Income Renewal of the water lease with a local municipality Yampa Final budget approved Other Expenses Increases: water pipe repair project, community & Loveland solar, fiber asset inventory, medical & dental, compliance project, scaffolding, dues, forecasting tool Decreases: wheeling, market purchases, salaries, gas & diesel, ancillary services, WECC expenses Capital Additions Projects new and refined

5 Financial Impacts $ in Thousands Work Session Proposed Budget Price Updates, Model Impacts Water Lease Yampa O&M Decrease WAPA - LAP Rate Decrease Other O&M Net Increase Capital Increase Favorable (Unfavorable) Changes 1st Public Hearing Proposed Budget Revenues Sales to Municipalities $ 191,957 $ (14) $ (14) $ 191,943 Sales for Resale 27,908 (4,602) (4,602) 23,306 Interest and Other Income 1,533 - $ ,706 Total Revenues $ 221,398 $ (4,616) $ 173 $ (4,443) $ 216,955 Operating Expenses Purchased Power $ 35,986 $ 102 $ 505 $ (52) $ 555 $ 35,431 Fuel 51,143 2,333 $ 10 2,343 48,800 Production 50, ,402 Transmission 15,083 5 (573) (568) 15,651 Admin and General 21,703 (333) (333) 22,036 Total Operating Expenses $ 174,040 $ 2,435 $ 619 $ 505 $ (839) $ 2,720 $ 171,320 Debt Expenses $ 27,340 $ - $ 27,340 Capital Additions Production $ 23,909 $ 697 $ 697 $ 23,212 Transmission 7,432 (2,622) (2,622) 10,054 General 11,470 (297) (297) 11,767 Total Capital Additions $ 42,811 $ (2,222) $ (2,222) $ 45,033 Total Expenditures $ 244,191 $ 2,435 $ 619 $ 505 $ (839) $ (2,222) $ 498 $ 243,693 Contingency Appropriation $ 20,000 $ - $ 20,000 Total Expenditures and Contingency $ 264,191 $ - $ 263,693 Net Income $ 14,022 $ (2,181) $ 173 $ 619 $ 505 $ (839) $ - $ (1,723) $ 12,299

6 Market Price Forecasts Market prices are a fundamental driver in planning and budgeting Like all utilities, Platte River makes operating decisions based on observed market prices

7 Influences on Platte River Market Prices Ideally, price forecasts would be obtained from a third-party Platte River s market (Ault) is unique Size and volume Location PV and Mid-C influence Platte River s local market But do not completely define the market COB NP-15 Mid-C SP-15 Mead PV Western US Power Hubs Platte River Four-Corners ERCOT

8 Price Curve Development Platte River made a basis adjustment to build an appropriate market price Palo Verde Mid-C Basis Monthly forward price inputs from Argus Overall contribution determined from statistical analysis of historical data Monthly forward price inputs from Argus Overall contribution determined from statistical analysis of historical data Determined by comparing Platte River s historical transactions to predicted values Platte River s historical transactions are used to produce an hourly shape for modeling

9 Price Curve Development Moving forward: An adjustment is required to help the drivers more closely correlate to Platte River s actual market transactions Planning will provide +/- 10% as standard cases around the adjusted base case (ABC) High Case (ABC +10%) PV / Mid-C Baseline Market Basis Adjustment Adjusted Base Case (ABC) Low Case (ABC -10%)

10 $/MWh 2016 Back-Testing $35 $30 $25 $20 $15 $10 $5 $0 -$5 -$10 Actual Platte River Transactions PV / Mid-C Baseline Average Difference ~13% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Market Price of Power Preliminary Budget $25.30 Diff from Prelim. Budget Final Budget $ % Market as of 9/1/16 (without adjustment) $ %

11 Financial Results Strategic Financial Plan Indicators Target Minimums Budget Budget Increase (Decrease) Net Income ($ millions) $ 6.0 $ 10.7 $ % Debt Service Coverage 1.50x 1.53x 1.67x 9.2% Debt to Capitalization Ratio < 50% 32% 30% (6.3%) Unrestricted Days Cash on Hand % Budget Results Budget Budget Increase (Decrease) Total Revenues ($ millions) $ $ (0.2%) Total Expenditures ($ millions) $ $ (1.5%) Board Contingency ($ millions) $ 20.0* $ % * Contingency transfer required for 2016 capital additions. Amount to be determined by December.

12 2017 Operating Expenses Strategic Plan Financial Services 2% General Manager, Legal, Human Resources 3% Communications and Customer Service 5% Transmission 6% Information Technology 2% Facilities 2% Environmental and Compliance Security and Safety 1% 1% Strategic Planning 1% Generation 77% $171.3 Million

13 2017 Operating Expenses Strategic Plan Category Generation Transmission Communications and Customer Service General Manager, Legal, Human Resources Financial Services % of Total Key Activities Strategic Initiative 77% Coal, natural gas, solar, wind, purchases Operational Excellence 10-day outage (last phase of implementation of coal dust system (safety) Safety Final phase of engineering document conversion project Compliance Continued Emerson training on control system Resource Management CIP/NERC compliance Technological Innovation and CCR rule compliance for bottom ash system Sustainability Plant energy efficiency study for station service Forecasting tools for wind and city loads Joint dispatch Organized regional energy market 6% Fiber inventory of assets with GPS coordinates Organized regional energy market Vegetation management compliance (joint facilities) System electrical engineer position 5% Energy efficiency programs (expansion) Demand response pilot program Community solar (marketing) Research emerging technologies (EPRI membership) External communications and relationships Customer services engineer position 3% Leadership development Organized regional energy market EPA Clean Power Plan Legislative policy engagement Policy/procedure standardization 2% Long-term rate development Contract process improvement Debt financing preparation Accountant position Operational Excellence Resource Management Compliance Resource Management Exceptional Customer Service Collaboration and Communication Technological Innovation and Sustainability Employee Engagement Resource Management Compliance Collaboration and Communication Exceptional Customer Service Operational Excellence Financial Stability Operational Excellence

14 2017 Operating Expenses Strategic Plan Category Facilities Information Technology Environmental and Compliance Security and Safety Strategic Planning % of Total Key Activities Strategic Initiative 2% HQ campus Operational Excellence 5-year work plan and prioritization Compliance Fleet management program update Employee Engagement DOT compliance 2% Enterprise cyber security principles and initiatives Implementation of new software 1% EPA Clean Power Plan Legislative policy engagement Internal controls evaluation and risk assessment for compliance with 2018 NERC audit Environmental management system to manage compliance risk Oversee low impact physical security CIP compliance standards at Rawhide/Substations CCR rule compliance for bottom ash system Project management 1% Develop overall physical security plan Implement low impact physical security CIP compliance standards at Rawhide/Substations Focus on safety initiatives Emergency management Physical security coordinator position 1% Organized regional energy market analysis Market and emissions outlook Hourly price shaping Renewable integration Distribution/wholesale joint modeling effort Customized resource portfolio Research emerging technologies (EPRI membership) Technological Innovation and Sustainability Compliance Operational Excellence Compliance Operational Excellence Safety Compliance Operational Excellence Resource Management Collaboration and Communication Exceptional Customer Service Technological Innovation and Sustainability

15 2017 Capital Additions Strategic Plan Water Policy (Resource Management) 4% Cyber Security (Compliance) 1% Physical Security (Compliance) 6% HQ Campus (Operational Excellence, Technological Innovation & Sustainability, Safety) 8% Asset Management and Maintenance (Operational Excellence, Safety) 81% $45.0 Million

16 Summary Highlights 2016 Budget to 2017 Budget Solar generation full year DSM/EE program expansion Craig Unit 2 maintenance outage (8-week) Rawhide Unit 1 maintenance outage (10-day) New positions and benefit expenses increase Surplus sales price decrease Savings from Rawhide Unit 1 fuel price, reserves, water Tariff 1 rate increase of 3.0% Positioned to meet Platte River s strategic objectives and goals Proposed Budget

17 Questions

18 Board of Directors Meeting October 27, 2016

19 2017 Strategic Plan Update Board Meeting October 27, 2016 Pete Hoelscher

20 Today s Discussion Feedback on Version 1.0 Changes in Version 2.0 Next steps/timeline Renewable Energy Standards 20

21 2017 Strategic Plan 1.0 Feedback No reference to fiber Broader planning considerations and focus 21

22 2017 Strategic Plan Notable changes from Version 1.0 to 2.0 Version 2.0 in your packet Layout and design Some photos Placeholder for charts/graphs 22

23 2017 Strategic Plan Notable changes from Version 2.0 to 3.0 Key Operational Goals and Activities Purpose Identify major priorities Help align strategy and tactics May extend beyond the following calendar year Review Process Engaged broader management team in review and discussion Senior management team reached consensus 23

24 2017 Strategic Plan Notable changes from Version Key Operational Goals and Activities Climate Change and Resilience Cyber Security Debt Financing Employee Engagement EPA Clean Power Plan Funding Opportunities Headquarters Campus Design and Engineering Legislative Policy Engagement New Water Policy Project Management Rate Planning and Coordination Regional Wholesale Market Initiatives Renewable Energy Supply Integration Resource Planning Talent Management 24

25 2017 Strategic Plan Notable changes for Version Key Operational Goals and Activities Removed Climate Change and Resilience Cyber /Security Debt Financing Employee Engagement EPA Clean Power Plan Funding Opportunities Headquarters Campus Design and Engineering Legislative Policy Engagement Evaluate to determine feasibility Combined with Talent Management New Water Policy Project Management Rate Planning and Coordination Regional Wholesale Market Initiatives Part of Resource Planning Renewable Energy Supply Integration Resource Planning Talent Management Reached level of maturity 25

26 2017 Strategic Plan Notable changes for Version Key Operational Goals and Activities New and Revised Cyber Security Debt Financing Emergency Management EPA Clean Power Plan Headquarters Campus Design and Engineering Legislative Policy Engagement Water New Water Management Policy Physical Security Policy Governance and Board Procedures Rate Planning and Coordination Regional Wholesale Market Initiatives Renewable Energy Supply Integration Resource Planning Talent Management System Assets 26

27 2017 Strategic Plan Next Steps Version 3.0 Feedback from BOD Revised Key Operational Goals All charts/graphs/photos GM letter All changes highlighted in document 27

28 2017 Strategic Plan Timeline Deadline for feedback on Version 2.0 Nov. 10 Pete will contact each board member Edits and revisions Nov Final version complete Nov. 29 Materials to BOD Dec. 1 BOD meeting Dec. 8 Published to website Dec. 9 Assuming board approval Hard copies printed and distributed Dec. 15

29 Renewable Energy Standards Historical context 2004 Colorado establishes Renewable Energy Standard Different targets by utility type IOU 30% Co-op 20% Munis serving more than 40,000 customers 10% Munis serving less than 40,000 customers no requirement Targets to be met by PRPA establishes renewable energy supply policy; focus on meeting state standard via purchases 2012 Removal of renewable energy forecast from PRPA policy 2014 Elimination of PRPA renewable energy policy due to wind purchases

30 Platte River Renewable Energy Supply MWh 500, , , , level assuming all Municipalities met the full 10% RES level Colorado Renewable Energy Standard (RES) 100, Current RES requirement (2015) 30

31 Renewable Energy Standards Platte River s strategic view Locally owned and controlled utilities are best suited to determine the proper mix of renewable resources for generation and delivery Policy goal prevent increase in muni targets Potential change Colorado Communities for Climate Action Nine communities focused on climate change at state and federal levels; Fort Collins a member Engaged with Fort Collins staff Legislative and policy platform includes changes to RES Draft language - CC4CA supports giving consideration to incrementally increasing the standard for all three types of utilities.

32 Renewable Energy Standards Legislative Risk 40,000 threshold may change or be eliminated Target percentages may change Compliance deadline acceleration

33 Questions

34 Board of Directors Meeting October 27, 2016

35 Water Resources Policy Review Board of Directors Meeting October 27, 2016

36 Agenda 1. Water Policy Background and Purpose 2. Overview of Water Policy Components Maintain adequate water supplies for operations (current and projected future) Manage water as an asset 3. Policy Administration 4. Next Steps December Board Meeting Policy approval (Resolution)

37 Platte River s Water Resource Policy Background o Water is of critical importance to Platte River for generation purposes. o No prior formal water policy - previous board guidance has been through direction on topical issues, and adoption of multiple resolutions regarding leasing water and participation in the Windy Gap Firming Project. Purpose of Policy o Serve as a comprehensive guide for the management and execution of water related decisions. Will provide parameters to operate within, while allowing for the efficient and effective management of water.

38 Platte River s Water Resource Policy Overview of Policy 1. Maintain adequate water supplies for all existing and projected future operations. o Participation in the Windy Gap Firming Project (target 16,000AF) o Lease water as needed for operations o Integration with resource planning efforts o Research alternative water supply opportunities o Manage agreements

39 Platte River s Water Resource Policy Overview of Policy, cont. 2. Manage Water as an Asset o Lease water to others Effluent Windy Gap units Up to 60 units (maintain control of a minimum of 100 units) o Sell Windy Gap units Up to 60 units (maintain control of a minimum of 100 units) o Sell/lease Carter Lake Outlet Capacity Maintain ownership of a minimum of five cfs for potential future use

40 Carter Lake Outlet Capacity

41 Platte River s Water Resource Policy Policy Administration o Approved through board resolution (will supersede prior water related resolutions). o The General Manager/CEO will have primary responsibility for policy implementation. o The Water Resources Reference Document will serve as an associated reference for this policy (will be updated annually). o Policy will be reviewed annually by Platte River.

42 Questions/Discussion?

43 Board of Directors Meeting October 27, 2016

44 Platte River Power Authority Board Meeting 27 October 2016 New Headquarters Campus

45 genda Design Principles & Goals Progress to Date Cost Summary Next Steps Platte River Power Authority Board Meeting 27 October 2016 New Headquarters Campus

46 uiding Principles - Incorporate collaborative spaces that help bridge departments and work teams to promote knowledge transfer. - Provide attractive, flexible space with planned expansion for long term growth. - Maximize campus for employee wellness. (trails, flexible work space, etc) - Provide opportunities for public interaction, and education on core business. - Create a headquarters building that showcases the state-of-the-art Platte River infrastructure. - Honor the Platte River Power Authority history.

47 roject Goals - Be good stewards of the environment - Improved ingress/egress through the campus - Separation between secure and non-secure environments - Substation and fleet traffic isolated from other traffic and pedestrians - Improved redundancy for critical infrastructure - Evaluate tech thru lifecycle costing, implement where it fits best

48 rogramming Progress - Program questionnaires received prior to Workshop #1 from 19 user groups Questionnaires speak to department size, staffing, projected growth, potential operational changes, and functional adjacency - Workshop #1 October 3rd 5th Met with executive team visioning session Met with each user group program discussion Sustainability overview presentation - Workshop #2 October 18th 19th Met with executive team - cost model developed Met with project team stakeholders confirmed program Sustainability visioning session

49 urrent Program Model Existing (GSF) Cost/SF Cost Needs Based Program (GSF) HQ GSF 23,646 $ 366 $ 9,920,796 48,044 E+O 17,717 $ 329 $ 5,828,893 17,310 Facilities Office GSF 3,460 (included above) Maintenance Facilities 16,516 $ 210 $ 3,468,360 27,729 Total 61,339 $ 291 $ 19,218,049 93,083 Occupants Space types are standardized and made consistent in program model Functional areas presently missing have been added to program model (conference rooms, shared amenities, etc.) 35% projected growth included as an average across all departments growth varies by department

50 otes on Program & Replacement Cost Existing (GSF) Cons. Cost/SF Cons. Cost Needs Based Program (GSF) Cons. Cost/SF Cons. Cost HQ GSF 27,106 $ $ 9,097,213 48,044 $ $ 16,124,494 E+O 17,717 $ $ 6,776,650 17,310 $ $ 6,620,793 Maintenance Facilities 16,516 $ $ 3,683,497 27,729 $ $ 6,184,379 Site Cost $ 1,200,000 $ 1,200,000 GSF Total 61,339 $ 20,757,360 93,083 $ 30,129,666 Soft Costs $ 11,177,040 $ 14,412,434 Cost Total $ 31,934,400 $ 44,542,100 Occupants Space types are standardized and made consistent in program model Functional areas presently missing have been added to program model (conference rooms, shared amenities, etc.) 35% projected growth included as an average across all departments growth varies by department Numbers based on a preliminary cost model assessment Additional site planning and program needs are yet to be defined

51 otential Project Cost Range of Cost based on Program Options $32,000,000 - $44,500,000 Numbers based on a preliminary cost model assessment Additional site planning and program needs are yet to be defined

52 pcoming Milestones 11/1 & 11/2: Programming Workshop III Site Schemes Preferred Program 11/15: Programming Workshop IV Final Program & Cost Model Update Preferred Site Option 12/8: Present to Platte River Board of Directors

53 ext Steps

54 Platte River Power Authority Workshop #2 17 October 2016 New Headquarters Campus

55 Board of Directors Meeting October 27, 2016

56 September Operational Results

57 Board of Directors Meeting October 27, 2016

58 Financial Summary Category September Variance from Budget ($ in millions) Year to Date Variance from Budget ($ in millions) Net Income $1.0 $6.2 Debt Coverage.30x.29x Revenues $(1.1) $(8.2) Operating Expenses $1.6 $12.6 Capital Additions $3.1 $13.5 > 2% Favorable 2% to -2% u At or Near Budget < -2% Unfavorable

59 Board of Directors Meeting October 27, 2016