Presentation #2 Committee of the Whole Meeting January 21, 2015

Transcription

1 Presentation #2 Committee of the Whole Meeting January 21, 2015

2 Electric Service Franchise Agreement or MEU Introduction (Staff) 1. The choices 2. Due diligence 3. Can we own an MEU? 4. Owning vs. franchising 5. Franchise issues Guest Speakers 1. Development of the Winter Park MEU Jerry Warren, Director Winter Park Electric 2. Attributes associated with MEU s vs. franchise Barry Moline, Executive Director Florida Municipal Electric Association 3. Is a Cape Coral MEU financially feasible? Doug Spencer, PE Spencer Consulting Services Bill Herrington, WHH Enterprises Benchmarking (Staff) Discussion / Considerations for future action (Staff) 2

3 What this is NOT This is not about LCEC Core Issues Core Issues & Questions 30 Year Electric Franchise Agreement expires 9/30/2016 Agreement provides the City with opportunity to purchase distribution system Core Questions What is the best option for electric service for our community? Which option provides a cost effective and transparent service that adds value for our citizens, invests in the community and improves aesthetics? The answers will have generational impact for the City of Cape Coral 3

4 The Options 1. Negotiate an extension to the franchise We should get all the attributes valuable to the City, which we would have with an MEU 2. Develop definitive plan for developing a city MEU The Grantor hereby reserves the right at and after the expiration of this grant to purchase the property of the Grantee used under this grant Ordinance Pursue both for comparison 4

5 Due Diligence Multi departmental team was assembled; met weekly Purpose Review existing franchise agreement Review 2010 Electric Municipalization Study prepared for City by Spencer Consulting Services and WHH Enterprises, Inc. Complete market analysis of pros / cons of renegotiating franchise agreement vs. creating municipal electric utility At 5/28/14 Special Council Meeting, received approval to engage Spencer Consulting Services to: Evaluate the electric transmission / distribution facilities severance and reintegration costs Evaluate municipalization revenues and operating costs Develop a pro forma for a MEU 5

6 Due Diligence Records requested on current franchise through Public Service Commission i (PSC) Site Visit to Winter Park MEU Attended Florida Municipal Electric Association (FMEA) annual conference in Naples Researched components of an MEU through discussions with representatives of other Florida MEU s Gathered data from 6 MEU s in Florida to benchmark and compare to Cape Coral MEU pro forma 6

7 Due Diligence Discussed synergistic opportunities between communications, i water and sewer utilities, i and electric services Considered opportunities for community solar and modern lower cost street lighting (MEU or franchise agreement) Legal discussion with Nabors, Giblin & Nickerson on Franchise Agreement and Purchase Rights Visited Lee County Waste to Energy Plant and discussed local opportunities for purchased power 7

8 Can We Own a Municipal Electric Utility (MEU)? Short Answer is Yes City currently operates a water and sewer utility with over 55,000 accounts Similar il reliability impact whether hth water/sewer or electric City s water and sewer system was purchased from General American Corporation (GAC) We understand and can address quality of service, billing, safety, reliability, planning and permitting issues Pro forma indicates current rates can support annual debt service for acquisition, operations, and maintenance 8

9 Owning vs. Franchising Strategic Goal: Quality of Life (service focus on Cape Coral) Opportunity to improve aesthetics Profits can be reinvested into our community Undergrounding Modernized d / lower cost street lighting i Community solar Fiber Optic Smart Grid (see Chattanooga, TN) Provide for services our residents need / desire Opportunity for economies of scale with shared resources Opportunity for community partnering (local events) Accountability/Transparency to Cape Coral residents only 9

10 Franchise Issues to Address Any Franchise Renewal Should Include Comparable Attributes Available w/meu Auditable records of franchise fee and PST determination City review of franchisee capital projects, allowing coordination Reporting of capital expenditures within Cape Coral vs. franchisee total service area assure pro rata investment Establishment of City directed Capital Improvement Fund for community projects to be funded by small % of revenues from the City accounts (e.g. undergrounding or other projects) Monthly reliability reports 10

11 Franchise Issues to Address Comparable Attributes Available w/meu (cont.) Development of community solar photovoltaic (PV) projects, modernized / lower cost street lighting Requirement for franchisee to relocate systems in the public utility easement if required for road improvements or safety at their cost Fiber optics development Allow use of franchisee smart meter path for water meter data collection Revenue diversification (the franchise fee) Reduced term 10 years Right to purchase with definitive valuation methodology 11

12 Guest Speakers 1. Development of the Winter Park MEU Jerry Warren, Director Winter Park Electric 2. Attributes associated with MEU s vs. franchise Barry Moline, Executive Director Florida Municipal Electric Association 3. Is a Cape Coral MEU financially i feasible? Doug Spencer, PE Spencer Consulting Services Bill Herrington, WHH Enterprises 12

13 Benchmarking Get to know the MEU s in Florida Compare these MEUs business metrics to potential il MEU in Cape Coral Gainesville e 92,907 meters Jacksonville 423,309 meters Kissimmee 69,263 meters Lakeland 121,963 meters Ocala 48,582 meters Ol Orlando 183,372 meters Tallahassee 118,314 meters 13

14 Benchmarking ALL MEU RESPONDENTS BENCHMARKING METROPOLITAN ELECTRIC UTILITIES MAX MIN AVERAGE RATES RESIDENTIAL 1,000kWh / month Cape Coral MEU Pro Forma Basis, FY2022 Customer Charge $10.17 $5.50 $8.08 $15.00 Base rate incl. customer charge $ $59.31 $81.69 $96.20 Fuel or cost adjustment $49.00 $26.22 $ $30.38 $16.65 Total $ $ $ $ COMMERCIAL 40kw 10,000kWh / month Base rate incl. customer charge $1, $ $ $ OPERATIONS METRICS Fuel or cost adjustment $ $ $ $ Total $1, $ $1, $1, Based on 2014 LC CEC rates, timeframe ~ ben nchmark responden nts Residential meters 89% 83% 86% 90,823 92% Commercial & Industrial meters 17% 11% 14% 8,038 8% Total customer meters 100% 100% 100% 98, % Residential kwh sold 53% 33% 43% 1,285,500, % Commercial / Industrial kwh sold 67% 47% 57% 460,462,776 26% Total kwh sold 100% 100% 100% 1,745,963, % Total kwh purchased and / or generated 1,817,985,692 mwh sales growth over previous year (%) 1% 2% 0% 1% Demand peak (MW) past 12 months Approximate Load Factor 78% 41% 58% 51% System Average Interruption Duration Index (SAIDI) (Minutes) SAIDI FL MEU's AVG Transmission (69kV & above) pole miles (if any) Distribution (below 69kV) pole miles ,532 Meters / distribution pole mile Service Area (sq.miles) Perimeter (miles) Perimeter to Area ratio

15 Benchmarking ALL MEU RESPONDENTS BENCHMARKING METROPOLITAN ELECTRIC UTILITIES MAX MIN AVERAGE STAFFING (Including contract employees if any) Transmission / distribution O&M direct labor # of employees 45% 24% 35% Power generation O&M direct labor # of employees (if applicable) 34% 0% 18% Customer service & billing # of employees 32% 12% 23% Administrative / overhead # of employees 38% 12% 24% Total # of Electric Utility Employees 100% 100% 100% FINANCIALS Cape Coral MEU Pro Forma Basis, FY2022 # of employees $ Amount Gross revenues, excluding pole attachment fees, pass thru franchise fees, govt fees / taxes 100% 94% 98% $247,654,026 94% Revenues from pole attachment fees 1% 0% 0% 0% Pass thru municipality franchise & other fees 4% 0% 1% $15,849,858 6% Revenues from pass thru other govt fees / taxes 3% 0% 1% 0% CASH INFLOWS 100% 100% 100% $263,503, % Purchased power including transmission delivery charges $141,235,485 Power generation fuel, operations & maintenance $0 Bulk power cost 69% 41% 56% $141,235,485 56% Distribution operations & maintenance 6% 2% 4% $18,096,736 7% Customer service & billing 4% 2% 3% Administrative i ti / other overhead costs 11% 4% 8% $30,625,246, 12% Capital spending 16% 3% 11% $15,744,446 6% Debt service 15% 1% 10% $29,242,291 12% Other MEU expenses not noted elsewhere 1% 0% 0% 0% Pass thru municipality franchise & other fees 4% 0% 1% $15,849,858 6% Pass thru other govt fees / taxes 2% 0% 1% $0 0% General fund transfer 9% 0% 6% 0% CASH OUTFLOWS 100% 100% 100% $250,794, % GENERAL FUND TRANSFER + MUNICIPALITY FEES AS % OF GROSS REVENUE 9% 4% 7% 6% Average cost of bulk power ($/mwh) $92.98 $46.60 $66.61 $

16 Benchmarking All MEU s we asked participated All MEU s shared information i and assistance freely Most have rates that are very competitive, some lower than those in Cape Coral MEU s with substantial generation capability provided the most competitive rates All MEU s provide significant revenues for investment in their cities An average of 6% of total cash outflows to General Fund, plus cash accumulated and/or other fees paid 16

17 Discussion / Considerations for Future Action Core Issues 30 Year Electric Franchise Agreement expires 9/30/2016 Agreement provides the City with opportunity to purchase distribution system Core Questions What is the best option for electric service for our community? Which option provides a cost effective and transparent service that adds value, invests in the community and improves aesthetics? Future meetings? Future workshops? This is not a decision made simply on the information provided in this workshop 17

18 Questions/Comments 18