2015 ANNUAL OPERATING AND FINANCIAL PLAN

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1 2015 ANNUAL OPERATING AND FINANCIAL PLAN

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3 TABLE OF CONTENTS 2015 ANNUAL OPERATING AND FINANCIAL PLAN Executive Summary... 3 Summary... 7 Revenue and Expenditure Overview Enterprise Financial Plan Enterprise Financial Plan OPERATING AND FINANCIAL PLANS BY SERVICE Electric Natural Gas Water Wastewater Enterprise Wide Capital Projects Enterprise Wide Administrative and General Division s Corporate/Chief Executive Officer Energy Services Water Services Customer and Corporate Services Environment, Health and Safety Planning and Finance Strategy and External Affairs Glossary of Terms Appendix Map of four-service territory Annual Ordinance Source Funds Ordinance Annual Operating and Financial Plan 1

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5 EXECUTIVE SUMMARY ABOUT THE ANNUAL OPERATING AND FINANCIAL PLAN The 2015 was developed to achieve the outcomes most important to customers and the Utilities Board: competitive utility rates; safe, reliable service and excellent customer service. Further, the supports the financial metrics necessary to maintain a healthy AA credit rating that helps keep customer rates competitive long term. Colorado Springs Utilities comprehensive planning and budgeting process begins with the Utilities Board Strategic Plan to achieve their strategic outcomes of rates, reliability and relationships. Within the five year plan, key themes, strategic objectives and strategic initiatives identify important areas of resource focus. The Annual Operating and Financial Plan is year one of a five-year plan. The plan is a comprehensive look at the financial resources required to meet operational needs. Colorado Springs Utilities goal is to make these operational and financial documents useful for multiple audiences; so the information is detailed in two views: 1. Service Overview: This view illustrates the expenses going into each service (electric, natural gas, water and wastewater) to determine rates. Financial statements can be linked to the total appropriation with the exception of the other category, which includes classified expense in various financial categories. All divisions contribute expense to each of the four services. 2. Division Overview: In this view, budgets are categorized by how the organization is functionally structured. Divisions include: Energy Services, Water Services, Customer and Corporate Services, Environment, Health and Safety, Planning and Finance, and Strategy and External Affairs. Financials presented include only operating expenses for the division. Note that financial data in the division view is a restatement of operating expenses in the service view. So, adding Electric budget service to Energy Division budget figures, for example, will result in counting line items twice Annual Operating and Financial Plan 3 INTRODUCTION The utility industry is changing rapidly. For Colorado Springs Utilities to continue providing safe, reliable, competitively-priced services, we need to further align the organization with increasing demands and evolving operational practices. Colorado Springs Utilities is no different than many other energy and water utilities across the nation that are experiencing relatively flat sales, additional regulatory requirements and increasing capital and infrastructure needs. To successfully meet customer expectations, now and in the future, Colorado Springs Utilities will need to continue to innovate the delivery of utility services. In 2014, Colorado Springs Utilities reduced nonlabor expenses due to reduced sales in water and electric services and significantly reduced the proposed 2015 in both Operations and Maintenance and Capital expenses. This approved 2015 reflects those reductions. All areas of the organization have contributed to the savings, which have been accomplished by evaluating service levels and prioritizing programs and projects.

6 Through the Utilities Board-directed 5-year business service plan strategic initiative, Colorado Springs Utilities is using benchmarking, best practices and other internal and external input to further optimize our organization. In the initial five year financial analysis, leadership identified that approximately $35 million in sustainable operating cost reductions are needed by 2016 to keep customer rates competitive. This will be accomplished by eliminating 100 positions over the next two years and continuing to reduce Operations and Maintenance and Capital expenses. Additional reductions are a tremendous challenge because of changes already made in how we operate in the midst of a weak economy and an essential, large capital program. However, we have a track record of finding new ways to work and do business in a thoughtful and proactive manner. Already, innovative solutions have been realized to deliver valued service at a reduced cost. KEY FINANCIAL PLANNING FACTORS Integrated strategic and financial planning are critical elements of Colorado Springs Utilities business planning process. The Kaplan-Norton Balanced Scorecard model is used as the foundation for strategic business planning. The model translates strategies into operational objectives, initiatives and performance targets to achieve desired outcomes that are measured and regularly monitored. Multiyear planning occurs in all aspects of Colorado Springs Utilities strategic plan, long-range resource plans, infrastructure plans and Operations and Maintenance plans. This planning is reflected in financial forecasts and the Annual Operating and Financial Plan. Financial key planning factors in the 2015 Annual : Relatively flat energy and water demand due to low customer growth and flat or decreasing percustomer usage is expected compared to Large capital investment is required to comply with power plant emissions regulations and natural gas safety rules. Capital expenditures for the Southern Delivery System; electric, gas and water distribution systems and wastewater collection are required to maintain reliable service. Watershed management and water asset management. Nonfuel Operations and Maintenance costs for power plant maintenance. Fuel and purchased power costs and wholesale natural gas prices for distribution to customers. TOTAL APPROPRIATIONS The 2015 is $1,082.7 million, a decrease of $70.7 million, or 6.1 percent, from City Council s Approved This decrease is primarily the result of lower capital expenditures largely driven by lower construction costs of the Southern Delivery System (SDS) water project. All increases and decreases are described in the detail that follows, and are in comparison to the 2014 Approved. Capital Improvements Total capital costs for 2015 are $329.7 million and represent approximately 30 percent of the Capital costs are the primary drivers of the 2015 electric base rate increase. Capital improvements are required to maintain and rehabilitate aging infrastructure in order to provide safe and reliable services to existing customers, to prepare for future demand, and to meet environmental and regulatory requirements Annual Operating and Financial Plan 4

7 Total 2015 capital expenditures before accounting for Allowance for Funds Utilized During Construction (AFUDC) and capitalized interest will decrease by $88.2 million, or 22.6 percent from the 2014 Approved. Water capital will decrease by $94.5 million. Phase I of the SDS project continues to represent a major portion of the water system capital investment during this planning period with the continued construction of the water treatment plant and pump stations and completion of construction of pipelines through 2016 when the pipeline is scheduled to be operational. Non- SDS capital expenditures will be limited to existing critical infrastructure needs for water mains, storage facilities, treatment plants, vehicle and equipment replacements, and Waldo Canyon fire-related restoration and recovery. Electric capital will increase by $9.7 million, primarily for funding emissions controls projects of $19.4 million, partially offset by decreased funding for plant, transmission, and distribution infrastructure, and vehicle and equipment replacements. Natural gas capital will decrease by $2.9 million, primarily due to fewer vehicle and equipment replacements compared to the 2014 Approved, completion in 2014 of gas system upgrades for U.S. Air Force Academy privatized housing (100 percent reimbursed by USAFA), and compressed natural gas infrastructure. Wastewater capital increased $3.2 million, primarily to fund the Advanced Wastewater Treat project at the Las Vegas Water Resource Recovery Facility (a $1.0 million State grant for construction is expected to partially reimburse costs for this project) and replace old and high mileage vehicles and equipment. Also included is the continued rehabilitation of local collection system and creek crossings. Common capital to support all the services decreased by $3.8 million, primarily due to fewer vehicle and equipment replacements. The majority of the remaining decrease is associated with the completion of relocating the secondary data center and back-up Supervisory Control and Data Acquisition (SCADA) control center to the East Service Center in Nonfuel Operations and Maintenance Total Nonfuel Operations and Maintenance expenditures will decrease by $4.3 million, or 1.5 percent, from the 2014 Approved primarily due to reduced maintenance for power plants. To maintain competitive compensation and attract and retain a quality workforce the labor and benefit package increased overall by $9.3 million, or 5 percent from the 2014 Approved. The overall increase in base pay is estimated at 6 percent, with approximately 3 percent allocated for merit increases based on individual performance plans, 2 percent increase in workforce needed for the Southern Delivery System, and 1 percent for normal operational base pay adjustments. Employee benefits will increase almost 4 percent from the 2014 Approved. Maintenance for major power plants will decrease by $6.0 million as planned outages on Martin Drake Units 5 and 6 and Ray Nixon Unit 1 were completed in Annual Operating and Financial Plan 5

8 Purchased water will decrease by $2.5 million from the 2014 Approved due to 2,000 acre feet delivery through the Fountain Valley Authority System compared to 10,000 acre feet in the 2014 Approved. Fuel and Purchased Power Fuel and purchased power will increase by $7.8 million, or 2.8 percent more than Natural gas for distribution will increase by $10 million over 2014 due to a strengthening natural gas market. In 2015 approximately 12 percent less MWh will be purchased off the market than in Natural gas generation at the Front Range Power Plant is available for a lower price than we can purchase from the market in Debt Service Total debt service is planned to remain relatively flat with a decrease of $0.2 million or 0.2 percent from the 2014 Approved primarily due to higher principal and interest payments associated with Water s SDS capital project, offset by higher AFUDC and Capitalized Interest overheads applied to the project. Transfers Surplus Funds to the City Total transfers surplus funds to the City are planned to increase slightly by $0.8 million or 2.5 percent from the 2014 Approved approved budget due to slightly higher electric and gas sales inside City limits. Transfers - Surplus Funds to City are in accordance with approved Resolution No dated August 10, 2010 at an electric surplus rate of $ per Kwh and a gas surplus rate per Mcf delivered at psi of $ OPERATIONAL RISKS OF BUDGET DEFERRALS AND DECREASES The 2015 is a responsible balance between investing in infrastructure to maintain safe, reliable service and keeping rates as low as possible. After an extensive prioritization process, some maintenance and rehabilitation projects have been decreased in scope or postponed to future years. Electric Service's power plant maintenance has been moved from a two- to three-year schedule. Water Services is managing risk by using cathodic protection to extend the life of the water mains. Water main replacement budgets have been reduced to moderate rate pressure while SDS is being constructed. Once the SDS project is completed, Utilities will be able to re-focus on water distribution replacements Annual Operating and Financial Plan 6

9 BUDGET SUMMARY The Colorado Springs Utilities funds the priorities outlined in the Strategic Plan. A summary of the approved uses of funds for 2015 follows: 2015 BUDGET SUMMARY COMPARED TO 2014 APPROVED BUDGET (in thousands of dollars) 2015 Approved 2014 Approved Increase / (Decrease) % Change Capitalized Projects & Interest $ 329,723 $ 410,049 $ (80,326) -19.6% Fuel Operations & Maintenance 286, ,204 7, % Non-Fuel Operations & Maintenance 283, ,112 (4,271) -1.5% Debt Service 143, ,273 (219) -0.2% Transfers - Surplus Funds to City 1 32,479 31, % Other 2 6,600 1,063 5, % TOTAL $ 1,082,682 $ 1,153,382 $ (70,699) -6.1% Note: Totals may vary due to rounding. 1 Transfers - Surplus Funds to City are in accordance with approved Resolution No dated August 10, 2010 at an electric surplus rate of $ per Kwh and a gas surplus rate per Mcf delivered at psi of $ Other includes Customer Rebates, Franchise Fees and Net Changes In Assets and Liabilities - Uses. The resulting of $1,082.7 million is needed to meet the mission of Colorado Springs Utilities to provide safe, reliable, competitively-priced electric, natural gas, water and wastewater services to its citizen owners and customers. Delivering on this mission will require a focus on meeting environmental and regulatory requirements, while maintaining critical infrastructure in Additionally, to maintain financial stability, Colorado Springs Utilities must generate sufficient revenue to meet the financial metrics of a AA credit rated utility Annual Operating and Financial Plan 7

10 2015 BUDGET SUMMARY (in thousands of dollars) 2015 Total Appropriations $1,082,682 Fuel Operations & Maintenance $286,985 27% Capitalized Projects & Interest $329,723 30% Non-Fuel Operations & Maintenance $283,841 26% Debt Service $143,054 13% Other 2 $6,600 1% Transfers -Surplus Funds to City 1 $32,479 3% 1 Transfers - Surplus Funds to City are in accordance with approved Resolution No dated August 10, 2010 at an electric surplus rate of $ per Kwh and a gas surplus rate per Mcf delivered at psi of $ Other includes Customer Rebates, Franchise Fees and Net Changes In Assets and Liabilities - Uses Annual Operating and Financial Plan 8

11 2015 Approved Electric 122,675 CAPITALIZED PROJECTS AND INTEREST (in thousands of dollars) 2014 Approved Increase / (Decrease) % Change $ $ 9, % $ 112,971 Natural Gas 14,254 17,133 (2,879) -16.8% Water 138, ,168 (94,546) -40.5% Wastewater 14,743 11,586 3, % Streetlighting 1, % Common 11,383 15,206 (3,823) -25.1% TOTAL (before AFUDC & Capitalized Interest) $ 302,788 $ 390,991 $ (88,204) -22.6% AFUDC & Capitalized Interest 26,936 19,058 7, % TOTAL $ 329,723 $ 410,049 $ (80,326) -19.6% Note: Totals may vary due to rounding. Capital improvements are required to maintain and rehabilitate aging infrastructure in order to provide safe and reliable services to present customers, to prepare for future demand, and to meet environmental and regulatory requirements. Capital expenditures are driven by $97.6 million in the Water Service for construction of the Southern Delivery System (SDS) Phase I, advancing engineering and geotechnical work for SDS Phase II, and $71.0 million in the Electric Service to install sulfur dioxide gas scrubbers at the Martin Drake and Ray Nixon power plants Annual Operating and Financial Plan 9

12 FUEL OPERATIONS AND MAINTENANCE COSTS (in thousands of dollars) 2015 Approved Purchased Power 18, Approved Increase / (Decrease) % Change $ $ (6,351) -25.2% $ 25,191 Total Fuel for Territorial Generation 116, ,335 7, % Total Natural Gas 130, ,738 9, % Wholesale Electric 10,128 10, % Natural Gas 15,415 15, % Total Wholesale 25,543 25, % Inter-Service Eliminations 1 (4,619) (1,549) (3,070) 198.2% TOTAL $ 286,985 $ 279,204 $ 7, % Note: Totals may vary due to rounding. 1 Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis. The fuel used to generate electricity for customers and the natural gas provided to customers represents a significant portion of the. As commodity prices change an electric and gas cost adjustment is used to pass these costs or savings through to customers Annual Operating and Financial Plan 10

13 NONFUEL OPERATIONS AND MAINTENANCE COSTS BY SERVICE (in thousands of dollars) 2015 Approved 2014 Approved Increase / (Decrease) % Change Electric Labor & Benefits $ 75,797 $ 72,826 $ 2, % Non-Labor 49,804 58,973 (9,169) -15.5% Total 125, ,799 (6,198) -4.7% Natural Gas Labor & Benefits 25,127 24, % Non-Labor 13,132 14,199 (1,067) -7.5% Total 38,259 38,681 (423) -1.1% Water Labor & Benefits 46,083 42,122 3, % Non-Labor 48,597 54,028 (5,430) -10.1% Total 94,680 96,150 (1,470) -1.5% Wastewater Labor & Benefits 22,019 21, % Non-Labor 13,796 14,687 (891) -6.1% Total 35,815 36,449 (634) -1.7% Streetlighting Labor & Benefits 973 1,098 (124) -11.3% Non-Labor 2,213 2,401 (187) -7.8% Total 3,187 3,498 (312) -8.9% Inter-Service Eliminations 1 (13,701) (18,465) 4, % TOTAL $ 283,841 $ 288,112 $ (4,271) -1.5% Note: Totals may vary due to rounding. 1 Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis. Colorado Springs Utilities has prioritized and streamlined operating processes that enable the safe and efficient delivery of utility services while complying with all regulations. This effort has allowed us to accommodate increased costs for plant maintenance, post-fire flood mitigation, employee benefits, and other critical operating and maintenance activities with a minimal year over year increase in expenses Annual Operating and Financial Plan 11

14 REGULAR, CAPITAL AND OTHER LABOR COSTS (in thousands of dollars) 2015 Approved 2014 Approved Increase / (Decrease) % Change Operations & Maintenance $ 172,539 $ 164,900 $ 7, % Capital 25,452 23,771 1, % Other 1,363 1,374 (11) -0.8% TOTAL $ 199,354 $ 190,045 $ 9, % LABOR COSTS BY CATEGORY (in thousands of dollars) 2015 Approved 2014 Approved Increase / (Decrease) % Change Regular Base Pay $ 148,220 $ 139,760 $ 8, % Overtime 6,194 6,913 (719) -10.4% Standby/Shift 1,396 1, % Other Compensation (35) -5.6% Total Labor 156, ,651 7, % Employee Benefits 41,646 40,069 1, % Post-Retirement Expenses 1,306 1,325 (19) -1.4% Total Benefits & Other 42,953 41,394 1, % TOTAL LABOR & BENEFITS $ 199,354 $ 190,045 $9, % Note: Totals may vary due to rounding Annual Operating and Financial Plan 12

15 2015 Approved DEBT SERVICE (in thousands of dollars) 2014 Approved Increase / (Decrease) % Change Electric Interest Payments¹ $ 42,760 $ 43,571 $ (810) -1.9% Principal Repayments 27,766 26,280 1, % AFUDC & Capitalized Interest (1,443) (639) (804) 125.8% Total 69,083 69,211 (128) -0.2% Natural Gas Interest Payments¹ 6,902 6, % Principal Repayments 4,727 4, % AFUDC & Capitalized Interest (493) (87) (406) 464.3% Total 11,135 11,154 (19) -0.2% Water Interest Payments¹ 43,939 40,231 3, % Principal Repayments 18,344 15,207 3, % AFUDC & Capitalized Interest (24,999) (18,254) (6,745) 37.0% Total 37,283 37, % Wastewater Interest Payments¹ 13,705 14,162 (457) -3.2% Principal Repayments 11,095 10, % AFUDC & Capitalized Interest - (72) % Total 24,800 24,979 (179) -0.7% Streetlighting Interest Payments¹ (14) -3.1% Principal Repayments % AFUDC & Capitalized Interest - (5) % Total % Total Interest Payments¹ 107, ,259 2, % Principal Repayments 62,257 57,073 5, % AFUDC & Capitalized Interest (26,936) (19,058) (7,878) 41.3% TOTAL $ 143,054 $ 143,273 $ (219) -0.2% Note: Totals may vary due to rounding. Bonds are typically issued for the general system and not specific to service. For forecasting purposes bonds and debt service are allocated based on capital budgets and then recorded to actuals as the expense is incurred. 1 Interest payments are net of subsidies received for Build America Bonds issued for the Southern Delivery System and Front Range Power Annual Operating and Financial Plan 13

16 Revenue 2015 Approved Electric Service 11,082 INTER-SERVICE ELIMINATIONS (in thousands of dollars) 2014 Approved Increase / (Decrease) % Change $ $ (1,296) -10.5% $ 12,378 Natural Gas Service 2,087 2, % Water Service 4,639 4,935 (296) -6.0% Wastewater Service (104) -16.9% TOTAL $ 18,320 $ 20,014 $ (1,694) -9.2% Operations & Maintenance Expense 2015 Approved Fuel 4, Approved Increase / (Decrease) % Change $ $ 3, % $ 1,549 Non-Fuel 13,701 18,465 (4,764) -25.8% TOTAL $ 18,320 $ 20,014 $ (1,694) -9.2% Note: Totals may vary due to rounding. Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis Annual Operating and Financial Plan 14

17 REVENUE AND EXPENDITURE OVERVIEW OPERATING REVENUES BY SERVICE (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual Electric $ 458,401 $ 435,685 $ 417,778 $ 22, % $ 40, % Natural Gas 221, , ,170 9, % 13, % Water 195, , ,378 (4,257) -2.1% 51, % Wastewater 66,967 70,647 65,431 (3,680) -5.2% 1, % Streetlighting 4,139 4,135 4, % (112) -2.6% Subtotal $ 946,347 $ 922,114 $ 839,008 $ 24, % $ 107, % Inter-Service Eliminations (18,320) (20,014) (15,248) 1, % (3,072) -20.1% TOTAL $ 928,027 $ 902,099 $ 823,760 $ 25, % $ 104, % Note: Totals may vary due to rounding Operating Revenues by Service Streetlighting $4,139 0% Electric $458,401 49% Wastewater $66,967 7% Water $195,165 21% Natural Gas $221,675 23% 2015 Annual Operating and Financial Plan 15

18 OPERATING REVENUE BY SERVICE AND SOURCE (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 TOTAL Actual Actual Residential $ 444,577 $ 441,396 $ 396,456 $ 3, % $ 48, % Commercial 304, , ,096 15, % 50, % Industrial 74,681 85,735 66,975 (11,054) -12.9% 7, % Military 49,860 34,596 36,243 15, % 13, % Transmission Sales 2,564 3,674 4,733 (1,110) -30.2% (2,169) -45.8% Wholesale & Other 44,606 41,458 58,999 3, % (14,393) -24.4% Irrigation 3,300 2,492 2, % 1, % Streetlighting 4,139 4,135 4, % (112) -2.6% Inter-Service Revenues¹ 18,320 20,014 15,248 (1,694) -8.5% 3, % TOTAL $ 946,347 $ 922,114 $ 839,008 $ 24, % $ 107, % ELECTRIC Residential $ 178,275 $ 171,811 $ 162,930 $ 6, % $ 15, % Commercial 152, , ,256 10, % 24, % Industrial 68,962 68,622 63, % 5, % Military 23,404 24,615 20,013 (1,211) -4.9% 3, % Transmission Sales 776 1,039 2,485 (263) -25.3% (1,708) -68.8% Wholesale & Other 23,817 15,959 32,646 7, % (8,829) -27.0% Inter-Service Revenues¹ 11,082 12,378 9,046 (1,296) -10.5% 2, % TOTAL $ 458,401 $ 435,685 $ 417,778 $ 22, % $ 40, % NATURAL GAS Residential $ 120,426 $ 120,134 $ 114,266 $ % $ 6, % Commercial 57,318 51,542 56,112 5, % 1, % Industrial 5,719 17,113 3,571 (11,395) -66.6% 2, % Military 18,146 1,702 10,237 16, % 7, % Transmission Sales 1,788 2,635 2,249 (847) -32.1% (461) -20.5% Wholesale & Other 16,192 17,014 20,143 (822) -4.8% (3,951) -19.6% Inter-Service Revenues¹ 2,087 2,085 1, % % TOTAL $ 221,675 $ 212,225 $ 208,170 $ 9, % $ 13, % WATER Residential $ 95,949 $ 96,389 $ 71,425 $ (440) -0.5% $ 24, % Commercial 79,487 80,057 55,515 (571) -0.7% 23, % Military 8,310 8,279 5, % 2, % Wholesale & Other 3,481 7,270 4,368 (3,789) -52.1% (887) -20.3% Irrigation 3,300 2,492 2, % 1, % Inter-Service Revenues¹ 4,639 4,935 4,070 (296) -6.0% % TOTAL $ 195,165 $ 199,422 $ 143,378 $ (4,257) -2.1% $ 51, % WASTEWATER Residential $ 49,927 $ 53,062 $ 47,836 $ (3,134) -5.9% $ 2, % Commercial 15,411 15,755 15,212 (343) -2.2% % Wholesale & Other 1,116 1,214 1,841 (98) -8.1% (725) -39.4% Inter-Service Revenues¹ (104) -16.9% (29) -5.4% TOTAL $ 66,967 $ 70,647 $ 65,431 $ (3,680) -5.2% $ 1, % STREETLIGHTING $ 4,139 $ 4,135 $ 4,251 $ 4 0.1% $ (112) -2.6% Note: Totals may vary due to rounding. 1 Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis Annual Operating and Financial Plan 16

19 OPERATING REVENUES BY SERVICE AND SOURCE (in thousands of dollars) 2015 Operating Revenues by Source Inter-Service Revenues 18,320 2% Streetlighting $4,139 1% Irrigation $3,300 0% Wholesale & Other $44,606 5% Transmission Sales $2,564 0% Military $49,860 5% Industrial $74,681 8% Residential $444,577 47% Commercial $304,301 32% $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 $946, Approved Comparative Totals $922, Approved $839, Actual Note: Totals may vary due to rounding Annual Operating and Financial Plan 17

20 OPERATING REVENUES BY SERVICE AND SOURCE (in thousands of dollars) ELECTRIC Residential Commercial Industrial Military Transmission Sales Wholesale & Other Inter-Service Revenues¹ Total $ $ 2015 Approved 178, ,085 68,962 23, ,817 11, ,401 Sales Sales in MWH 1,440,353 1,537,169 1,007, ,707 22,242 3, ,822 4,510,884 Total Number of Customers 187,545 31, ,044 NATURAL GAS Residential Commercial Industrial Military Transmission Sales Wholesale & Other Inter-Service Revenues¹ Total $ $ 120,426 57,318 5,719 18,146 1,788 16,192 2, ,675 Sales in mcf at psia 14,988,048 8,446, ,709 2,277,830 1,899, ,862 28,714, ,839 19, ,896 WATER Residential Commercial Military Wholesale & Other Irrigation Inter-Service Revenues¹ Total Sales in cf $ 95,949 1,464,033, ,506 79,487 1,381,858,800 13,467 8, ,762, ,481 19,492, , ,979,566-4, ,260, $ 195,165 3,533,387, ,219 WASTEWATER Residential Commercial Wholesale & Other Inter-Service Revenues¹ Total $ $ 49,927 15,411 1, ,967 Sales in cf 1,051,923, ,402,294 42,071,066 19,010,499 1,599,407, ,205 7, ,508 STREETLIGHTING $ 4,139 N/A 163 Note: Totals may vary due to rounding. 1 Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis Annual Operating and Financial Plan 18

21 OPERATING EXPENSES BY SERVICE (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual Electric $ 345,295 $ 347,612 $ 335,042 $ (2,317) -0.7% $ 10, % Natural Gas 191, , ,002 9, % 15, % Water 144, , ,338 12, % 25, % Wastewater 51,890 52,826 48,623 (936) -1.8% 3, % Streetlighting 4,571 4,849 4,511 (279) -5.8% % Subtotal $ 737,965 $ 720,101 $ 682,516 $ 17, % $ 55, % Inter-Service Eliminations (18,320) (20,014) (15,248) 1, % (3,072) -20.1% TOTAL $ 719,645 $ 700,087 $ 667,268 $ 19, % $ 52, % Note: Totals may vary due to rounding Operating Expenses by Service Streetlighting $4,571 1% Electric $345,295 47% Wastewater $51,890 7% Water $144,227 19% Natural Gas $191,982 26% Excludes Inter-Service Eliminations 2015 Annual Operating and Financial Plan 19

22 OPERATING EXPENSES BY USE AND SERVICE (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual FUEL Electric $ 145,479 $ 144,599 $ 149,880 $ % $ (4,400) -2.9% Natural Gas 146, , ,123 9, % 12, % Inter-Service Eliminations (4,619) (1,549) (4,535) (3,070) 198.2% (85) 1.9% Subtotal $ 286,985 $ 279,204 $ 279,468 $ 7, % $ 7, % NON-FUEL Electric $ 125,601 $ 131,799 $ 120,363 $ (6,198) -4.7% $ 5, % Natural Gas 38,259 38,681 34,845 (423) -1.1% 3, % Water 94,680 96,150 88,359 (1,470) -1.5% 6, % Wastewater 35,815 36,449 33,024 (634) -1.7% 2, % Streetlighting 3,187 3,498 3,204 (312) -8.9% (17) -0.5% Inter-Service Eliminations (13,701) (18,465) (10,714) 4, % (2,987) 27.9% Subtotal $ 283,841 $ 288,112 $ 269,081 $ (4,271) -1.5% $ 14, % DEPRECIATION Electric $ 73,906 $ 70,935 $ 64,510 $ 2, % $ 9, % Natural Gas 7,599 7,759 7,035 (160) -2.1% % Water 49,547 36,069 29,979 13, % 19, % Wastewater 16,075 16,377 15,599 (302) -1.8% % Streetlighting 1,384 1,351 1, % % Subtotal $ 148,511 $ 132,492 $ 118,430 $ 16, % $ 30, % OTHER Electric % % Subtotal $ 309 $ 279 $ 289 $ % $ % TOTAL $ 719,645 $ 700,087 $ 667,268 $ 19, % $ 52, % Note: Totals may vary due to rounding Non-Fuel Operating & Maintenance Expenses 2015 Fuel Operating & Maintenance Expenses Streetlighting $3,187 1% Electric $125,601 42% Wastewater $35,815 12% Water $94,680 32% Natural Gas $38,259 13% Electric $145,479 50% Natural Gas $146,125 50% Excludes Inter-Sevice Eliminations Excludes Inter-Sevice Eliminations 2015 Annual Operating and Financial Plan 20

23 2015 ENTERPRISE FINANCIAL PLAN CONDENSED FINANCIAL STATEMENTS (in thousands of dollars) 2015 Approved 2014 Approved 2013 Actual 2015 Approved Increase/(Decrease) from: STATEMENT OF NET ASSETS Actual Assets Current $ 400,359 $ 390,796 $ 427,939 $ 9,563 $ (27,580) Noncurrent - Other 294, , ,855 (271,932) (83,756) Capital Assets, Net 3,868,293 3,678,106 3,388, , ,092 Total Assets $ 4,562,751 $ 4,634,933 $ 4,193,995 $ (72,182) $ 368,756 Liabilities Current $ 182,767 $ 164,267 $ 182,657 $ 18,500 $ 110 Noncurrent 2,612,736 2,739,017 2,525,341 (126,281) 87,395 Total Liabilities $ 2,795,503 $ 2,903,283 $ 2,707,997 $ (107,780) $ 87,506 Net Assets $ 1,767,248 $ 1,731,650 $ 1,485,998 $ 35,598 $ 281,250 Total Liabilities & Net Assets $ 4,562,751 $ 4,634,933 $ 4,193,995 $ (72,182) $ 368,756 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Operating Revenues $ 928,027 $ 902,099 $ 823,760 $ 25,927 $ 104,267 Operating Expenses (719,645) (700,087) (667,268) 19,559 52,377 Operating Income $ 208,382 $ 202,013 $ 156,492 $ 6,369 $ 51,890 Non-Operating Revenues/(Expenses) - Net (70,106) (71,337) (135,679) (1,231) (65,573) Income/(Loss) Before Contributions & Transfers $ 138,276 $ 130,676 $ 20,813 $ 7,600 $ 117,463 Contributions in Aid of Construction $ 35,881 $ 37,171 $ 44,490 $ (1,290) $ (8,609) Transfers - Surplus Funds to City (32,479) (31,680) (31,844) Transfers - Other - (716) (816) (716) (816) Change in Net Assets $ 141,678 $ 135,451 $ 32,642 $ 6,227 $ 109,035 Net Assets - Beginning of year $ 1,625,570 $ 1,596,199 $ 1,454,174 $ 29,371 $ 171,396 Net Assets - End of Year $ 1,767,248 1,731,650 $ 1,485,998 35, ,250 STATEMENT OF CASH FLOWS Net Cash Provided By/(Used In): Operating Activities $ 350,602 $ 333,738 $ 252,262 $ 16,864 $ 98,340 Non-Capital Financing Activities (32,479) (31,680) (31,584) Capital & Related Financing Activities (337,792) (357,009) (211,162) (19,216) 126,630 Investing Activities 692 3,012 (46,281) (2,321) 46,973 Net Increase/(Decrease) $ (18,978) $ (51,938) $ (36,765) $ 32,961 $ 17,787 Cash and Cash Equivalents and Investments Cash & Investments, Beginning of Year $ 340,707 $ 425,848 $ 428,629 $ (85,142) $ (87,923) Cash & Investments, End of Year 321, , ,413 (52,163) (118,684) Note: Totals may vary due to rounding Annual Operating and Financial Plan 21

24 STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual OPERATING REVENUES $ 928,027 $ 902,099 $ 823,760 $ 25, % $ 104, % OPERATING EXPENSES Production & Treatment $ 160,075 $ 155,029 $ 154,221 $ 5, % $ 5, % Purchased Power, Gas & Water 173, , , % 6, % Transmission & Distribution 40,915 37,658 39,343 3, % 1, % Maintenance 56,068 61,187 63,023 (5,119) -8.4% (6,955) -11.0% Administration & General 107, ,999 93, % 14, % Customer Accounting & Collection 20,128 21,161 20,362 (1,033) -4.9% (234) -1.2% Customer Service & Information 12,802 12,548 11, % 1, % Products & Services (3) -16.0% % Franchise Fees % % Depreciation & Amortization 148, , ,430 16, % 30, % Total Operating Expenses $ 719,645 $ 700,087 $ 667,269 $ 19, % $ 52, % OPERATING INCOME $ 208,382 $ 202,013 $ 156,491 $ 6, % $ 51, % NON-OPERATING REVENUES/(EXPENSES) Investment Income $ 692 $ 3,012 $ 2,323 $ (2,321) -77.0% $ (1,631) -70.2% Other Revenue 9,320 11,040 16,680 (1,720) -15.6% (7,360) -44.1% Other Expense (1,074) (642) (73,212) (432) 67.4% 72, % Interest Expense, net of AFUDC & Bond Amortization (79,043) (84,747) (81,469) 5, % 2, % Total Non-Operating Revenues/(Expenses) $ (70,106) $ (71,337) $ (135,679) $ 1, % $ 65, % INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS $ 138,276 $ 130,676 $ 20,812 $ 7, % $ 117, % Contributions in Aid of Construction $ 35,881 $ 37,171 $ 44,490 $ (1,290) -3.5% $ (8,609) -19.4% Transfers - Surplus Funds to City (32,479) (31,680) (31,844) (799) 2.5% (635) 2.0% Transfers - Other - (716) (816) INCREASE/(DECREASE) IN NET ASSETS $ 141,678 $ 135,451 $ 32,642 $ 6, % $ 109, % Note: Totals may vary due to rounding Annual Operating and Financial Plan 22

25 NON-OPERATING REVENUES/(EXPENSES) AND CONTRIBUTIONS IN AID (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 NON-OPERATING Actual Actual REVENUES/(EXPENSES) Investment Income Equity in Earnings - Young Gas $ 189 $ 100 $ 116 $ % $ % Interest Earnings 503 2,912 2,207 (2,410) -82.7% (1,704) -77.2% Subtotal $ 692 $ 3,012 $ 2,323 $ (2,321) -77.0% $ (1,631) -70.2% Other Non-Operating Revenues Other Miscellaneous Revenue $ 9,320 $ 11,040 $ 16,680 $ (1,720) -15.6% $ (7,360) -44.1% Non-Operating Expenses Interest on Long-Term Debt $ (87,551) $ (87,799) $ (102,284) $ % $ 14, % AFUDC & Capitalized Interest 6, ,402 5, % (11,143) -64.0% Bond Amortization Expense 2,250 2,068 3, % (1,164) -34.1% Other Miscellaneous Expense (1,074) (642) (73,212) (432) 67.4% 72, % Subtotal $ (80,117) $ (85,389) $ (154,681) $ 5, % $ 74, % Total Non-Operating Revenues/(Expenses) $ (70,106) $ (71,337) $ (135,679) $ 1, % $ 65, % CONTRIBUTIONS IN AID OF CONSTRUCTION Cash $ 7,250 $ 12,286 $ 12,356 $ (5,036) -41.0% $ (5,106) -41.3% Developer Fees 19,213 17,343 18,411 1, % % Assets 9,418 7,542 13,723 1, % (4,305) -31.4% Total Contributions in Aid of $ 35,881 $ 37,171 $ 44,490 $ (1,290) -3.5% $ (8,609) -19.4% Construction Note: Totals may vary due to rounding Annual Operating and Financial Plan 23

26 CASH BALANCE (in thousands of dollars) 2015 Approved 2014 Approved 2013 Actual 2015 Approved Increase/(Decrease) from: Actual Unrestricted Cash Balance $ 196,189 $ 171,441 $ 225,819 $ 24, % $ (29,629) -13.1% Restricted Cash Balance 125, , ,594 (76,911) -38.0% (89,054) -41.5% TOTAL $ 321,729 $ 373,892 $ 440,413 $ (52,163) -14.0% $ (118,684) -26.9% Note: Totals may vary due to rounding. Restricted Cash Balance represents cash on which constraints have been placed, principally by creditors, through bond covenants/provisions. Unrestricted Cash Balance includes all other cash. $500,000 Cash Balance $400,000 $214,594 $300,000 $125,540 $202,451 $200,000 $100,000 $196,189 $171,441 $225,819 $ Approved Restricted Cash Balance 2014 Approved 2013 Actual Unrestricted Cash Balance 2015 Annual Operating and Financial Plan 24

27 DEBT (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual Current Maturities of Revenue Bonds $ 70,742 $ 60,678 $ 55,764 $ 10, % $ 14, % Current Notes & Loans Payable 1,498 1,526 1,531 (28) -1.9% (33) -2.1% Subtotal $ 72,240 $ 62,204 $ 57,295 $ 10, % $ 14, % Revenue Bonds, Net $ 2,408,158 $ 2,410,763 $ 2,345,644 $ (2,606) -0.1% $ 62, % Notes & Loans Payable 15,321 16,818 16,636 (1,498) -8.9% (1,315) -7.9% Subtotal $ 2,423,478 $ 2,427,582 $ 2,362,280 $ (4,103) -0.2% $ 61, % Net Gain/(Loss) on Refundings $ (27,701) $ - $ (28,423) $ - $ % TOTAL $ 2,468,017 $ 2,489,786 $ 2,391,152 $ (21,769) -0.9% $ 76, % Note: Totals may vary due to rounding. $3,000,000 Debt $2,500,000 $2,468,017 $2,489,786 $2,391,152 $2,000,000 $1,500,000 $1,000,000 $500,000 $ Approved 2014 Approved 2013 Actual 2015 Annual Operating and Financial Plan 25

28 BOND ISSUES (in thousands of dollars) 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual Electric $ 28,256 $ 54,685 $ 32,606 $ (26,429) -48.3% $ (4,351) -13.3% Natural Gas 8,208 8,824 6,803 (616) -7.0% 1, % Water 68, ,669 88,075 (33,353) -32.8% (19,760) -22.4% Wastewater (76) - TOTAL $ 104,779 $ 165,178 $ 127,560 $ (60,399) -36.6% $ (22,781) -17.9% Note: Totals may vary due to rounding. Bonds are typically issued for the general system (with the exception of SDS) and not specific to service. For forecasting purposes bonds and debt service are allocated based on capital budgets and then recorded to actuals as the expense is incurred. $120,000 $100,000 Bond Issues $101,669 $88,075 $80,000 $68,315 $60,000 $54,685 $40,000 $20,000 $28,256 $32,606 $8,208 $8,824 $6,803 $ Approved 2014 Approved 2013 Actual Electric Natural Gas Water Wastewater 2015 Annual Operating and Financial Plan 26

29 DEBT SERVICE (in thousands of dollars) Approved Approved Approved 2013 Increase/(Decrease) from: Actual Actual ELECTRIC Interest Payments¹ $ 42,760 $ 43,571 $ 42,935 $ (810) -1.9% $ (175) -0.4% Principal Repayments 27,766 26,280 25,397 1, % 2, % AFUDC & Capitalized Interest (1,443) (639) (4,164) (804) 125.8% 2, % TOTAL $ 69,083 $ 69,211 $ 64,168 $ (128) -0.2% $ 4, % NATURAL GAS Interest Payments¹ $ 6,902 $ 6,854 $ 6,612 $ % $ % Principal Repayments 4,727 4,388 3, % 1, % AFUDC & Capitalized Interest (493) (87) (206) (406) 464.3% (288) 139.9% TOTAL $ 11,135 $ 11,154 $ 10,114 $ (19) -0.2% $ 1, % WATER Interest Payments¹ $ 43,939 $ 40,231 $ 37,098 $ 3, % $ 6, % Principal Repayments 18,344 15,207 13,501 3, % 4, % AFUDC & Capitalized Interest (24,999) (18,254) (12,713) (6,745) 37.0% (12,287) 96.6% TOTAL $ 37,283 $ 37,184 $ 37,886 $ % $ (603) -1.6% WASTEWATER Interest Payments¹ $ 13,705 $ 14,162 $ 14,792 $ (457) -3.2% $ (1,087) -7.4% Principal Repayments 11,095 10,890 9, % 1, % AFUDC & Capitalized Interest - (72) (285) % % TOTAL $ 24,800 $ 24,979 $ 23,944 $ (179) -0.7% $ % STREETLIGHTING Interest Payments¹ $ 427 $ 441 $ 470 $ (14) -3.1% $ (43) -9.1% Principal Repayments % % AFUDC & Capitalized Interest - (5) (35) % % TOTAL $ 753 $ 744 $ 680 $ 9 1.2% $ % TOTAL Interest Payments¹ $ 107,734 $ 105,259 $ 101,908 $ 2, % $ 5, % Principal Repayments 62,257 57,073 52,285 5, % 9, % AFUDC & Capitalized Interest (26,936) (19,058) (17,402) (7,878) 41.3% (9,534) 54.8% TOTAL $ 143,054 $ 143,273 $ 136,791 $ (219) -0.2% $ 6, % Note: Totals may vary due to rounding. Bonds are typically issued for the general system (with the exception of SDS) and not specific to service. For forecasting purposes bonds and debt service are allocated based on capital budgets and then recorded to actuals as the expense is incurred. 1 Interest payments are net of subsidies received for Build America Bonds issued for Southern Delivery System and Front Range Power. $150,000 Debt Service $140,000 $130,000 $143,054 $143,273 $136,791 $120,000 $110,000 $100, Approved 2014 Approved 2013 Actual 2015 Annual Operating and Financial Plan 27

30 SOURCES AND USES OF FUNDS (in thousands of dollars) SOURCES OF FUNDS Operating Revenues: 2015 Approved 2014 Approved 2013 Actual 2015 Approved Increase/(Decrease) from: Actual Electric $ 458,401 $ 435,685 $ 417,778 $ 22, % $ 40, % Natural Gas 221, , ,170 9, % 13, % Water 195, , ,378 (4,257) -2.1% 51, % Wastewater 66,967 70,647 65,431 (3,680) -5.2% 1, % Streetlighting 4,139 4,135 4, % (112) -2.6% Inter-Service Eliminations 1 (18,320) (20,014) (15,248) 1, % (3,072) 20.1% Subtotal $ 928,027 $ 902,099 $ 823,760 $ 25, % $ 104, % Investment Income 692 3,012 2,323 (2,321) -77.0% (1,631) -70.2% Build America Bonds Subsidy 7,935 8,115 7,871 (180) -2.2% % Contributions in Aid of Construction (Cash and Developer Fees) 26,463 29,629 30,767 (3,166) -10.7% (4,304) -14.0% Bond Proceeds 100, , ,560 (57,983) -36.6% (26,972) -21.1% Net Changes In Assets & ,107 - (19,107) % Liabilities - Sources Change In Cash On Hand 18,978 52,699 14,028 (33,721) -64.0% 4, % TOTAL SOURCES 2 $ 1,082,682 $ 1,154,125 $ 1,025,414 $ (71,443) -6.2% $ 57, % USES OF FUNDS Operating Expenses - Fuel 286, , ,468 7, % 7, % Operating Expenses - Non-Fuel 283, , ,081 (4,271) -1.5% 14, % Transfers - Surplus Funds to City & 32,788 31,959 32, % % Franchise Fees Debt Service Payments 2 : Interest Payments $ 80,798 $ 86,201 $ 84,506 $ (5,403) -6.3% $ (3,708) -4.4% Principal Repayments 62,257 57,073 52,285 5, % 9, % Total Debt Service $ 143,054 $ 143,273 $ 136,791 $ (219) -0.2% $ 6, % Capital Expenditures: Cash Funded $ 217,695 $ 251,431 $ 169,359 $ (33,735) -13.4% $ 48, % Bond Funded 112, , ,580 (46,591) -29.4% (26,552) -19.2% Total Capital $ 329,723 $ 410,049 $ 307,940 $ (80,326) -19.6% $ 21, % Net Changes In Assets & 6, , % 6,291 Liabilities - Uses Change In Cash On Hand TOTAL USES 3 $ 1,082,682 $ 1,153,382 $ 1,025,414 $ (70,699) -6.1% $ 57, % Note: Totals may vary due to rounding. Major non-cash (expense) and revenue items not reflected above that are included on the income statement: Depreciation & Amortization $ (148,511) $ (132,492) $ (118,430) $ 16, % $ (30,081) 25.4% 1 Inter-Service Eliminations are made to eliminate double counting of revenues and expenses provided from one utility service to another. Such revenues and expenses are eliminated on a consolidated enterprise basis. 2 Includes AFUDC and Capitalized Interest. 3 Total Sources approved at $1,154,125; Total Uses approved at $1,153, Annual Operating and Financial Plan 28

31 FINANCIAL MEASURES DEBT RATIO (in thousands of dollars) CALCULATION: 2015 Approved Increase/(Decrease) from: Approved Approved 2013 Actual Actual Current Maturities of Revenue Bonds $ 70,742 $ 60,678 $ 55,764 $ 10, % $ 14, % Current Notes & Loans Payable 1,498 1,526 1,531 (28) -1.9% (33) -2.1% Revenue Bonds, Net 2,408,158 2,410,763 2,345,644 (2,606) -0.1% 62, % Notes & Loans Payable 15,321 16,818 16,636 (1,498) -8.9% (1,315) -7.9% Net Gain/(Loss) on Refundings (27,701) - (28,423) (27,701) % Net Funded Debt $ 2,468,017 $ 2,489,786 $ 2,391,152 $ (21,769) -0.9% $ 76, % Current Maturities of Revenue Bonds $ 70,742 $ 60,678 $ 55,764 $ 10, % $ 14, % Current Notes & Loans Payable 1,498 1,526 1,531 (28) -1.9% (33) -2.1% Revenue Bonds, Net 2,408,158 2,410,763 2,345,644 (2,606) -0.1% 62, % Notes & Loans Payable 15,321 16,818 16,636 (1,498) -8.9% (1,315) -7.9% Net Gain/(Loss) on Refundings (27,701) - (28,423) (27,701) % Net Assets 1,767,248 1,731,650 1,485,998 35, % 281, % Total Capitalization $ 4,235,265 $ 4,221,435 $ 3,877,150 $ 13, % $ 358, % Debt Ratio 58.3% 59.0% 61.7% -0.7% -1.2% -3.4% -5.5% Notes: Totals may vary due to rounding. 70.0% Debt Ratio calculation: Net Funded Debt/Total Capitalization Debt Ratio 60.0% 50.0% 40.0% 58.3% 59.0% 61.7% 30.0% 20.0% 10.0% 0.0% 2015 Approved 2014 Approved 2013 Actual 2015 Annual Operating and Financial Plan 29

32 FINANCIAL MEASURES ADJUSTED DEBT SERVICE COVERAGE (in thousands of dollars) 2015 Approved CALCULATION: Increase/(Decrease) from: Approved Approved 2013 Actual Actual Net Revenues: Operating Revenues $ 928,027 $ 902,099 $ 823,760 $ 25, % $ 104, % Contributions in Aid of Construction 26,463 29,629 30,767 (3,166) -10.7% (4,304) -14.0% (Cash and Developer Fees) Interest Earnings w/o Bond Interest 503 2, (2,410) -82.7% (58) -10.4% Build America Bonds Subsidy 7,935 8,115 7,871 (180) -2.2% % Total Revenue $ 962,927 $ 942,755 $ 862,958 $ 20, % $ 99, % Total Operating Expenses (719,645) (700,087) (667,269) (19,559) 2.8% (52,376) 7.8% Depreciation & Amortization 148, , ,430 16, % 30, % Transfers - Surplus Funds to City (32,479) (31,680) (31,844) (799) 2.5% (635) 2.0% Net Revenues $ 359,313 $ 343,480 $ 282,275 $ 15, % $ 77, % Bond Year Debt Service $ 169,990 $ 162,331 $ 154,193 $ 7, % $ 15, % Adjusted Debt Service Coverage Ratio (0.00) -0.1% % Note: Totals may vary due to rounding. Adjusted Debt Service Coverage Ratio calculation: Net Revenues/Bond Year Debt Service Adjusted Debt Service Coverage Approved 2014 Approved 2013 Actual Executive Limitation = 2x Coverage 2015 Annual Operating and Financial Plan 30

33 FINANCIAL MEASURES DAYS OF CASH ON HAND (in thousands of dollars) CALCULATION: 2015 Approved 2014 Approved 2013 Actual 2015 Approved Increase/(Decrease) from: Actual Cash and Cash Equivalents-Unrestricted $ 196,189 $ 171,441 $ 225,819 $ 24, % $ (29,629) -13.1% Cash Expense per Day Total Operating Expenses $ 719,645 $ 700,087 $ 667,269 $ 19, % $ 52, % Less: Depreciation & Amortization 148, , ,430 16, % 30, % Net Cash Expense $ 571,134 $ 567,595 $ 548,839 $ 3, % $ 22, % Number of Days in Period % - 0.0% Net Cash Expense Per Day $ 1,565 $ 1,555 $ 1,504 $ % $ % Days of Cash on Hand % (24.8) -16.5% Note: Totals may vary due to rounding Days of Cash on Hand calculation: Cash and Cash Equivalents-Unrestricted/Net Cash Expense Per Day Days of Cash on Hand Approved 2014 Approved 2013 Actual Executive Limitation = 90 Days 2015 Annual Operating and Financial Plan 31

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35 ENTERPRISE FINANCIAL PLAN 2015 Approved STATEMENT OF NET ASSETS Assets Current 400,359 CONDENSED FINANCIAL STATEMENTS (in thousands of dollars) $ $ 431,707 $ 463,314 $ 521,658 $ 570,835 Noncurrent - Other 294, , , , ,039 Capital Assets, Net 3,868,293 3,992,351 4,097,204 4,146,132 4,178,236 Total Assets $ 4,562,751 $ 4,725,012 $ 4,852,727 $ 4,949,593 $ 5,018,111 Liabilities Current $ 182,767 $ 181,444 $ 188,979 $ 195,186 $ 203,352 Noncurrent 2,612,736 2,618,635 2,606,244 2,568,827 2,500,708 Total Liabilities $ 2,795,503 $ 2,800,079 $ 2,795,223 $ 2,764,013 $ 2,704,060 Net Assets 1,767,248 1,924,932 2,057,504 2,185,579 2,314,051 Total Liabilities & Net Assets $ 4,562,751 $ 4,725,012 $ 4,852,727 $ 4,949,593 $ 5,018,111 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Operating Revenues $ 928,027 $ 973,852 $ 999,205 $ 1,024,501 $ 1,082,935 Operating Expenses (719,645) (752,534) (785,837) (813,462) (869,153) Operating Income $ 208,382 $ 221,318 $ 213,368 $ 211,039 $ 213,781 Non-Operating Revenues/(Expenses) - Net (70,106) (72,629) (96,729) (97,333) (100,110) Income/(Loss) Before Contributions & Transfers $ 138,276 $ 148,689 $ 116,639 $ 113,705 $ 113,671 Contributions in Aid of Construction $ 35,881 $ 41,823 $ 49,004 $ 47,842 $ 48,626 Transfers - Surplus Funds to City (32,479) (32,827) (33,072) (33,472) (33,825) Transfers - Other Change in Net Assets $ 141,678 $ 157,685 $ 132,571 $ 128,076 $ 128,471 Net Assets - Beginning of year 1,625,570 1,767,248 1,924,932 2,057,504 2,185,579 Net Assets - End of Year 1,767,248 1,924,932 2,057,504 2,185,579 2,314,051 STATEMENT OF CASH FLOWS Net Cash Provided By (Used In): Operating Activities $ 350,602 $ 358,498 $ 362,002 $ 368,581 $ 371,405 Non-Capital Financing Activities (32,479) (32,827) (33,072) (33,472) (33,825) Capital and Related Financing Activities (337,792) (299,279) (317,119) (293,469) (312,538) Investing Activities Net Increase/(Decrease) $ (18,978) $ 27,137 $ 12,576 $ 42,375 $ 25,815 Cash and Cash Equivalents and Investments Cash & Investments, Beginning of Year 340, , , , ,818 Cash & Investments, End of Year 321, , , , ,632 Note: Totals may vary due to rounding Forecast 2017 Forecast 2018 Forecast 2019 Forecast 2015 Annual Operating and Financial Plan 33

36 STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast OPERATING REVENUES $ 928,027 $ 973,852 $ 999,205 $ 1,024,501 $ 1,082,935 OPERATING EXPENSES Production & Treatment $ 160,075 $ 168,385 $ 179,062 $ 186,507 $ 193,148 Purchased Power, Gas & Water 173, , , , ,034 Transmission & Distribution 40,915 43,426 44,080 44,216 44,663 Maintenance 56,068 62,184 66,395 66,023 67,146 Administration & General 107, , , , ,991 Customer Accounting & Collection 20,128 20,763 21,450 22,092 22,843 Customer Service & Information 12,802 14,599 16,694 17,603 18,642 Products & Services Franchise Taxes Depreciation & Amortization 148, , , , ,284 Total Operating Expenses $ 719,645 $ 752,534 $ 785,837 $ 813,462 $ 869,153 OPERATING INCOME $ 208,382 $ 221,318 $ 213,368 $ 211,039 $ 213,781 NON-OPERATING REVENUES/(EXPENSES) Investment Income $ 692 $ 745 $ 766 $ 735 $ 773 Other Revenue 9,320 9,370 9,407 9,532 9,474 Other Expense (1,074) (1,074) (1,174) (1,174) (1,174) Interest Expense, net of AFUDC & Bond (79,043) (81,669) (105,727) (106,426) (109,183) Amortization Total Non-Operating Revenues/(Expenses) $ (70,106) $ (72,629) $ (96,729) $ (97,333) $ (100,110) INCOME/(LOSS) BEFORE CONTRIBUTIONS AND $ 138,276 $ 148,689 $ 116,639 $ 113,705 $ 113,671 TRANSFERS Contributions in Aid of Construction $ 35,881 $ 41,823 $ 49,004 $ 47,842 $ 48,626 Transfers - Surplus Funds to City (32,479) (32,827) (33,072) (33,472) (33,825) Transfers - Other INCREASE/(DECREASE) IN NET ASSETS $ 141,678 $ 157,685 $ 132,571 $ 128,076 $ 128,471 Note: Totals may vary due to rounding Annual Operating and Financial Plan 34

37 OPERATING REVENUES BY SERVICE (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast Electric $ 458,401 $ 491,473 $ 504,012 $ 513,971 $ 522,785 Natural Gas 221, , , , ,517 Water 195, , , , ,471 Wastewater 66,967 70,892 74,597 76,826 80,316 Streetlighting 4,139 4,341 4,558 4,786 5,025 Inter-Service Eliminations (18,320) (21,573) (21,764) (21,963) (22,178) TOTAL $ 928,027 $ 973,852 $ 999,205 $ 1,024,501 $ 1,082,935 Note: Totals may vary due to rounding. $600,000 Operating Revenues by Service $500,000 $400,000 $300,000 $200,000 $100,000 $ Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Electric Natural Gas Water Wastewater Streetlighting 2015 Annual Operating and Financial Plan 35

38 OPERATING EXPENSES BY SERVICE (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast Electric $ 345,295 $ 366,347 $ 391,417 $ 403,223 $ 415,556 Natural Gas 191, , , , ,958 Water 144, , , , ,859 Wastewater 51,890 54,375 56,036 57,863 59,669 Streetlighting 4,571 4,790 4,949 5,111 5,290 Inter-Service Eliminations (18,320) (21,573) (21,764) (21,963) (22,178) TOTAL $ 719,645 $ 752,534 $ 785,837 $ 813,462 $ 869,153 Note: Totals may vary due to rounding. Operating Expenses by Service $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $ Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Electric Natural Gas Water Wastewater Streetlighting 2015 Annual Operating and Financial Plan 36

39 CAPITAL EXPENDITURES (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast Electric $ 122,675 $ 119,139 $ 140,870 $ 59,092 $ 57,992 Natural Gas 14,254 17,265 16,248 17,229 17,335 Water 138,622 69,497 51,454 76,675 69,861 Wastewater 14,743 14,824 15,892 14,732 13,074 Streetlighting 1,111 1,208 1,350 1,477 1,616 Common 11,383 14,695 15,250 20,913 19,041 Sub-Total 302, , , , ,918 AFUDC & Capitalized Interest 26,936 27,492 5,735 5,972 3,686 TOTAL $ 329,723 $ 264,121 $ 246,798 $ 196,090 $ 182,605 Note: Totals may vary due to rounding. $160,000 Capital Expenditures $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Electric Natural Gas Water Wastewater Streetlighting 2015 Annual Operating and Financial Plan 37

40 DEBT SERVICE (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast ELECTRIC Interest Payments¹ $ 42,760 $ 43,677 $ 45,835 $ 45,930 $ 45,142 Principal Repayments 27,766 31,236 33,580 35,677 37,321 AFUDC & Capitalized Interest (1,443) (2,497) (4,164) (1,587) - TOTAL $ 69,083 $ 72,416 $ 75,251 $ 80,020 $ 82,463 NATURAL GAS Interest Payments¹ $ 6,902 $ 7,234 $ 7,587 $ 7,925 $ 8,336 Principal Repayments 4,727 4,766 5,179 5,624 6,061 AFUDC & Capitalized Interest (493) (478) (454) (433) (410) TOTAL $ 11,135 $ 11,522 $ 12,312 $ 13,116 $ 13,987 WATER Interest Payments¹ $ 43,939 $ 46,843 $ 46,892 $ 47,905 $ 49,242 Principal Repayments 18,344 25,402 26,794 28,720 30,634 AFUDC & Capitalized Interest (24,999) (24,518) (1,116) (3,892) (3,276) TOTAL $ 37,283 $ 47,727 $ 72,570 $ 72,734 $ 76,600 WASTEWATER Interest Payments¹ $ 13,705 $ 13,336 $ 13,085 $ 12,779 $ 12,517 Principal Repayments 11,095 10,376 10,888 11,606 12,366 AFUDC & Capitalized Interest (61) - TOTAL $ 24,800 $ 23,712 $ 23,973 $ 24,324 $ 24,883 STREETLIGHTING Interest Payments¹ $ 427 $ 415 $ 397 $ 375 $ 351 Principal Repayments AFUDC & Capitalized Interest TOTAL $ 753 $ 875 $ 882 $ 891 $ 899 TOTAL Interest Payments¹ $ 107,734 $ 111,506 $ 113,796 $ 114,914 $ 115,589 Principal Repayments 62,257 72,240 76,926 82,143 86,931 AFUDC & Capitalized Interest (26,936) (27,492) (5,735) (5,972) (3,686) TOTAL $ 143,054 $ 156,253 $ 184,988 $ 191,085 $ 198,833 Note: Totals may vary due to rounding. Bonds are typically issued for the general system (with the exception of SDS) and not specific to service. For forecasting purposes bonds and debt service are allocated based on capital budgets. 1 Interest payments are net of subsidies received for Build America Bonds issued for Southern Delivery System and Front Range Power. $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Debt Service 2015 Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Electric Natural Gas Water Wastewater Streetlighting 2015 Annual Operating and Financial Plan 38

41 BOND ISSUES (in thousands of dollars) 2015 Approved Forecast Forecast Forecast Forecast Electric $ 28,256 $ 52,243 $ 28,512 $ 3,786 $ - Natural Gas 8,208 8,257 8,757 8,949 7,045 Water 68,315 25,327 34,954 39,406 17,476 Wastewater ,750 Streetlighting TOTAL $ 104,779 $ 85,827 $ 72,753 $ 52,515 $ 26,271 Note: Totals may vary due to rounding. Bonds are typically issued for the general system (with the exception of SDS) and not specific to service. For forecasting purposes bonds and debt service are allocated based on capital budgets. $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Bond Issues $ Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Electric Natural Gas Water Wastewater 2015 Annual Operating and Financial Plan 39

42 SOURCES OF FUNDS Operating Revenues: SOURCES and USES OF FUNDS (in thousands of dollars) Electric $ 458,401 $ 491,473 $ 504,012 $ 513,971 $ 522,785 Natural Gas 221, , , , ,517 Water 195, , , , ,471 Wastewater 66,967 70,892 74,597 76,826 80,316 Streetlighting 4,139 4,341 4,558 4,786 5,025 Inter-Service Eliminations (18,320) (21,573) (21,764) (21,963) (22,178) Subtotal $ 928,027 $ 973,852 $ 999,205 $ 1,024,501 $ 1,082,935 Investment Income Build America Bonds Subsidy 7,935 7,933 7,915 7,984 7,925 Contributions in Aid of Construction 26,463 30,766 36,906 35,394 35,836 (Cash and Developer Fees) Bond Proceeds 100,588 82,394 69,843 50,414 25,220 Net Changes In Assets & Liabilities - Sources Change In Cash On Hand 18, TOTAL SOURCES $ 1,082,682 $ 1,095,689 $ 1,114,635 $ 1,119,027 $ 1,152,689 USES OF FUNDS Operating Expenses - Fuel 286, , , , ,505 Operating Expenses - Non-Fuel 283, , , , ,982 Transfers - Surplus Funds to City 32,788 33,153 33,416 33,834 34,207 & Franchise Fees Debt Service Payments: Interest Payments $ 80,798 $ 84,013 $ 108,061 $ 108,942 $ 111,902 Principal Repayments 62,257 72,240 76,926 82,143 86,931 Total Debt Service $ 143,054 $ 156,253 $ 184,988 $ 191,085 $ 198,833 Capital Expenditures: Cash Funded $ 217,695 $ 183,017 $ 163,759 $ 132,532 $ 138,763 Bond Funded 112,028 81,104 83,039 63,558 43,842 Total Capital $ 329,723 $ 264,121 $ 246,798 $ 196,090 $ 182,605 Net Changes In Assets & 6,291 15,707 7,403 4,061 7,660 Liabilities - Uses Change In Cash On Hand - 27,360 12,574 42,460 25,896 TOTAL USES $ 1,082,682 $ 1,095,689 $ 1,114,635 $ 1,119,027 $ 1,152,689 Note: Totals may vary due to rounding Approved 2016 Forecast 2017 Forecast 2018 Forecast Major non-cash (expense) and revenue items not reflected above that are included on the income statement: 2019 Forecast Depreciation & Amortization $ (148,511) $ (153,113) $ (156,037) $ (161,604) $ (165,284) 2015 Annual Operating and Financial Plan 40

43 2015 Approved USES OF FUNDS Operations & Maintenance Fuel 286,985 USES OF FUNDS (in thousands of dollars) $ $ 290,384 $ 305,943 $ 317,393 $ 353,505 Non-Fuel 283, , , , ,982 Subtotal $ 570,826 $ 599,096 $ 629,457 $ 651,496 $ 703,487 Capital Interest & AFUDC $ 26,936 $ 27,492 $ 5,735 $ 5,972 $ 3,686 Project Capital 302, , , , ,918 Subtotal $ 329,723 $ 264,121 $ 246,798 $ 196,090 $ 182,605 Debt Service Interest Expense $ 107,734 $ 111,506 $ 113,796 $ 114,914 $ 115,589 Principal Payments 62,257 $ 72,240 $ 76,926 $ 82,143 $ 86,931 Interest & AFUDC (26,936) $ (27,492) $ (5,735) $ (5,972) $ (3,686) Subtotal $ 143,054 $ 156,253 $ 184,988 $ 191,085 $ 198,833 Transfers - Surplus Funds to City $ 32,479 $ 32,827 $ 33,072 $ 33,472 $ 33,825 Franchise Fees Other Expenditures 6,291 43,067 19,977 46,522 33,556 TOTAL $ 1,082,682 $ 1,095,689 $ 1,114,635 $ 1,119,027 $ 1,152,689 Note: Totals may vary due to rounding Forecast 2017 Forecast 2018 Forecast 2019 Forecast $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Use of Funds $ Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Fuel Capital Non-Fuel Debt Service Other Expenditures Surplus Funds to City Franchise Fees 2015 Annual Operating and Financial Plan 41

44 FINANCIAL MEASURES DEBT RATIO (in thousands of dollars) CALCULATION: 2015 Approved Forecast Forecast Forecast Forecast Current Maturities of Revenue Bonds $ 70,742 $ 75,429 $ 80,645 $ 85,433 $ 89,891 Current Notes & Loans Payable 1,498 1,498 1,498 1,498 1,498 Revenue Bonds, Net 2,408,158 2,414,057 2,401,666 2,364,249 2,296,130 Notes & Loans Payable 15,321 15,321 15,321 15,321 15,321 Net Gain/(Loss) on Refundings (27,701) (27,701) (27,701) (27,701) (27,701) Net Funded Debt $ 2,468,017 $ 2,478,603 $ 2,471,429 $ 2,438,799 $ 2,375,138 Current Maturities of Revenue Bonds $ 70,742 $ 75,429 $ 80,645 $ 85,433 $ 89,891 Current Notes & Loans Payable 1,498 1,498 1,498 1,498 1,498 Revenue Bonds, Net 2,408,158 2,414,057 2,401,666 2,364,249 2,296,130 Notes & Loans Payable 15,321 15,321 15,321 15,321 15,321 Net Gain/(Loss) on Refundings (27,701) (27,701) (27,701) (27,701) (27,701) Net Assets 1,767,248 1,924,932 2,057,504 2,185,579 2,314,051 Total Capitalization $ 4,235,265 $ 4,403,536 $ 4,528,932 $ 4,624,379 $ 4,689,189 Debt Ratio 58.3% 56.3% 54.6% 52.7% 50.7% Note: Totals may vary due to rounding. 70.0% Debt Ratio 60.0% 50.0% 58.3% 56.3% 54.6% 52.7% 50.7% 40.0% 30.0% 20.0% 10.0% 0.0% 2015 Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast 2015 Annual Operating and Financial Plan 42

45 FINANCIAL MEASURES ADJUSTED DEBT SERVICE COVERAGE (in thousands of dollars) CALCULATION: 2015 Approved Forecast Forecast Forecast Forecast Net Revenues: Operating Revenues $ 928,027 $ 973,852 $ 999,205 $ 1,024,501 $ 1,082,935 Contributions in Aid of Construction 26,463 30,766 36,906 35,394 35,836 (Cash and Developer Fees) Interest Earnings without Bond Interest Build America Bonds Subsidy 7,935 7,933 7,915 7,984 7,925 Total Revenue $ 962,927 $ 1,013,106 $ 1,044,603 $ 1,068,423 $ 1,127,279 Total Operating Expenses (719,645) (752,534) (785,837) (813,462) (869,153) Depreciation & Amortization 148, , , , ,284 Transfers - Surplus Funds to City (32,479) (32,827) (33,072) (33,472) (33,825) Net Revenues $ 359,313 $ 380,858 $ 381,731 $ 383,093 $ 389,585 Bond Year Debt Service $ 169,990 $ 183,745 $ 190,722 $ 197,057 $ 202,520 Adjusted Debt Service Coverage Ratio Note: Totals may vary due to rounding. Adjusted Debt Service Coverage Ratio calculation: Net Revenues/Bond Year Debt Service Adjusted Debt Service Coverage Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Executive Limitation = 2x Coverage 2015 Annual Operating and Financial Plan 43

46 FINANCIAL MEASURES DAYS OF CASH ON HAND (in thousands of dollars) CALCULATION: 2015 Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Cash and Cash Equivalents-Unrestricted $ 196,189 $ 221,866 $ 247,388 $ 302,661 $ 348,052 Cash Expense per Day Total Operating Expenses $ 719,645 $ 752,534 $ 785,837 $ 813,462 $ 869,153 Less: Depreciation and Amortization 148, , , , ,284 Net Cash Expense $ 571,134 $ 599,421 $ 629,800 $ 651,858 $ 703,869 Number of Days in Period Net Cash Expense per Day $ 1,565 $ 1,638 $ 1,725 $ 1,786 $ 1,928 Days of Cash on Hand Note: Totals may vary due to rounding. Days of Cash on Hand Approved 2016 Forecast 2017 Forecast 2018 Forecast 2019 Forecast Executive Limitation = 90 Days 2015 Annual Operating and Financial Plan 44

47 ELECTRIC SERVICE OVERVIEW SYSTEM HIGHLIGHTS 1 Electric Generating Station 5 Distribution Lines (12.5 kv) 2 Overhead Transmission Lines ( kv) 6 Customers 3 Transmission Substation 4 Distribution Substation STATISTICS Number of active electric meters: 217,273 Annual electric use: 4.8 billion kilowatt hours (kwh) Average service availability: percent in 2014 System Average Interruption Duration Index (SAIDI): 33 minutes (2013) Generating capability: 1,091 megawatts (MW) winter ( ); 1,026 MW summer (2014) Power Purchases: (Summer 2014) US Air Force Solar (5MW), Wind (12 MW), Western Area Power Administration (69 MW); Solar Gardens and Rooftop Solar (6 MW) Record peak demand: 908 MW (June 2012) Figures are based on the 2014 Official Statement dated September 9, 2014 unless noted with an asterisk Annual Operating and Financial Plan 45

48 2015 KEY PLANNING FACTORS Power Plant Emissions Regulation Compliance Improvements Regional Haze rules require reductions in Sulfur Dioxide (SO2) and Nitrogen Oxide (NOx) emissions. The required reduction for the next five-year period will be achieved through two steps. The first will be reduced SO2 emissions through the installation of scrubber technology at coal fired power plant generating units. The second step is reduced NOx generation in the boiler through the installation of ultra-low NOx burners and the addition of over-fire air. Fuel for Electric Generation Natural gas prices are expected to be higher in 2015, increasing the cost of purchased power and electric generation. Renewable Energy The Colorado Renewable Energy Standard requires that municipally-owned utilities provide 10 percent of their energy from qualifying renewable energy sources by In recent years, the requirement for investor-owned utilities was raised to 30 percent renewables by Colorado Springs Utilities Energy Vision contains a goal of 20 percent renewables by 2020, the same as statelegislated cooperative, or co-op, utility requirements. Utilities will complete analysis of renewable purchased power opportunities which will take advantage of investment tax credits and soon-to-expire renewable multipliers to determine if they provide the best value to customers at this time. Programs to Help Customers Reduce their Use Demand Side Management (DSM) programs and incentives to help customers reduce their electric use supports the goals of the Energy Vision. Electric Integrated Resource Plan The Electric Integrated Resource Plan (EIRP) is an integrated assessment and resource plan that considers supply and Demand Side Management options (DSM) on a consistent basis to meet electric load and reserve requirements. The goal of the EIRP is to provide low cost, highly reliable and environmentally responsible electricity to our customers. The current EIRP complies with the Colorado Renewable Energy Standard Amendment 37, which requires producing one percent of retail sales from renewable resources (wind, solar, small hydro and biomass) starting in 2008, three percent by 2011, six percent by 2015 and ten percent by The next EIRP process is scheduled to be completed by the fourth quarter of The EIRP process will take into account information from the Drake Decommissioning Study and the recommendations of the Utility Policy Advisory Committee assignment to evaluate the Energy Vision Annual Operating and Financial Plan 46

49 2015 OPERATING PLAN Electric Generation, Transmission and Distribution Systems Planning: Colorado Springs Utilities generation planning and maintenance focuses on maintaining high reliability and efficiency while remaining in compliance with all current and future environmental and other regulatory mandates. Colorado Springs Utilities continues to assess the electric transmission facilities on a 10-year planning horizon and complete various additional studies and documentation to ensure regulatory compliance with 14 NERC reliability standards. Transmission planning activities continue to increase in the region due to entities requesting interconnections, which may cause impacts to the Colorado Springs Utilities transmission system and the ever-changing NERC reliability standards. In addition, future customer requests for large loads and area utilities load forecasts are changing rapidly year by year, causing different flows through the Colorado Springs Utilities transmission system requiring more annual study work. Colorado Springs Utilities uses a Distribution Planning and Design Guide and an extensive forecasting process to determine distribution system needs. We continue to experience peak demand increases in parts of our system and the impact of aging equipment, which drives the need for capital projects to meet future growth and development in designated areas and to maintain reliable service to existing customers. Electric Master Maintenance Plans: The Electric Master Maintenance Plans serve as a roadmap for work to be performed on the electric system over the next ten years in order to meet the regulatory, reliability, and customer service goals of the organization. The plans detail the required tasks, the associated construction and operation labor hours, and the estimated program costs in five key areas of work: regulatory and reliability program compliance, corrective maintenance, system improvement/replacement, emergency response, and customer support. Initial efforts have focused on developing plans for the Downtown Network, Substations, and the Underground Distribution System to be followed by the Transmission System and the Overhead Distribution System for a comprehensive view of all electric system work. Electric Service Capital Projects 2015 Approved 1. Nixon 1 Sulfur Dioxide Reduction (191085) $34,798,764 Procure and install a flue gas sulfur dioxide gas "scrubber." The EPA Regional Haze Rule requires a SO2 scrubber be constructed on the Nixon 1 coal unit. The scrubber supplier will be selected using a competitive process. Installed scrubber will be commercially operable in Drake 6 Sulfur Dioxide Reduction (192556) $12,082,056 Procure and install a flue gas sulfur dioxide gas "scrubber." Best Available Retrofit Technology (BART) and the Regional Haze Rule requires a SO2 scrubber be constructed on the Drake 6 coal unit. Neumann Systems Group NeuStream technology is being constructed on the Drake 6 coal unit Annual Operating and Financial Plan 47

50 3. Drake 7 Sulfur Dioxide Reduction (193078) $12,082,056 Procure and install a flue gas sulfur dioxide gas "scrubber." Best Available Retrofit Technology (BART) and the Regional Haze Rule requires a SO2 scrubber be constructed on the Drake 7 coal unit. Neumann Systems Group NeuStream technology is being constructed on the Drake 7 coal unit. 4. Drake Scrubber(s) Sorbent Processing System (193234) $12,082,056 Procure and install a flue gas sulfur dioxide gas "scrubber. Best Available Retrofit Technology (BART) and the Regional Haze Rule requires a SO2 scrubber be constructed on the Drake 6 and Drake 7 coal units. The Sorbent Processing System is a shared component between the Drake 6/Drake 7 NeuStream SO2 scrubbers. The Drake 6 scrubber project is , the Drake 7 scrubber project is Front Range 1-3 Blade Row, Buckets and Nozzles Replacement (193407) $4,972,512 Replacement of the Front Range Power gas turbines. First, second and third stage bucket and nozzle replacement. 6. Underground 12.5kV Distribution to New Residential Customers (192296) $3,521,112 This is a customer growth driven program to provide service to the development community by installing new underground infrastructure to new residential customers. Also, it helps support load addition upgrades. The requesting developer pays Contribution in Aid of Construction based on existing tariffs. 7. Electric Service Vehicles and Equipment (180333) $3,462,000 Replacement of Vehicles and Equipment for the Electric service to maintain a safe, cost effective and reliable fleet. 8. Underground 12.5kV Three Phase Mainline to New Residential and Commercial Customers (192298) Customer growth driven program to install three-phase mainlines to residential and commercial customers. The requesting developer pays the Contribution in Aid of Construction based on existing tariffs. $2,197, Replace Underground Equipment (180331) $1,700,004 Replace individual capital assets on the underground distribution system which have failed either through exceeding their useful life or due to third party damage. 10. Kelker Substation Expansion (193009) $1,449,996 Expansion of the electrical equipment of Kelker substation to meet planned upgrades needed for the reliability of the Bulk Electric System (BES). 11. Underground 12.5kV Commercial Distribution (192297) $1,126,260 Install single or three phase transformers with primary conductor to meet the demands of commercial customer growth Annual Operating and Financial Plan 48

51 12. Substation Equipment Replacement (180449) $1,015,224 Capitalized switchgear, circuit breaker, and battery replacements and upgrades to transformers in substations to ensure the integrity of the electric system. 13. Replace Overhead Equipment (180286) $1,014,096 Replace individual poles or equipment on the Overhead distribution system which have failed, been damaged beyond repair, or have reached the end of their useful life from an operational, safety or reliability perspective. 14. Underground 3500 feet of 115 kva in Flying Horse (173450) $900,000 This program provides assistance for burying existing overhead lines. Utilities provides matching funds up to a 50/50 basis to bury primary voltage lines. 15. Renew End-of-Life Underground Equipment (193224) $829,920 Replace underground equipment that has exhibited signs of reaching end-of-life prior to the failure of the equipment. This includes aged equipment that can no longer be maintained due to obsolescence and system rebuilds of areas that cannot be rehabilitated or repaired due to the degradation of the infrastructure. 16. Extend Existing 600 Amp Feeders (192383) $825,000 Install electric distribution infrastructure in developed areas to meet existing customers' increasing load, as well as to address potential outage restoration issues. 17. Drake 7 Rebag Baghouse (192995) $800,004 Replace all bags in the Drake 7 fly ash removal baghouse. The existing baghouse reached its useful life and is experiencing high failure levels impacting plant operating costs. 18. INTEL Data Center Enhanced Service (193463) $800,004 Install the enhanced power feed to the Intel Data Center. Colorado Springs Utilities will charge the customer to accomplish this work. 19. Drake 5 Condenser Tube Replacement (182790) $750,000 Replacement of the Unit 5 condenser tubes. The condenser tubes have reached their useful life and are experiencing failure rates that are impacting unit reliability. 20. Replace Existing Direct Buried 750 Aluminum Conductor (193002) $750,000 This is the last of the direct buried 750AL conductor in the system which is reaching its end-of-life. This 34.5 kva line is 2.5 miles long and runs from North Plant to feed Platte Substation. Failure on this line adversely impacts distribution system reliability. 21. Southern Delivery System - Mainlines for Water Treatment Plant (192933) $564,000 Install new getaways from Claremont substation to SDS Water Treatment Plant Annual Operating and Financial Plan 49

52 22. Cable Injection Program (180457) $515,004 Inject rejuvenation fluid in underground distribution cable which is nearing the end of its useful life. 23. Nixon 1 Control System Replacement (182870) $500,004 Replace the Nixon Unit 1 computerized distributed control system. The existing system was installed in 2000 and is obsolete. 24. Nixon Impoundment Retrofit (193191) $500,004 Changes in Colorado solid waste regulations will require some existing impoundments (process water ponds) to be upgraded. 25. Electric Meters (192347) $483,996 Growth driven project to purchase electric single and three phase meters to connect residential, commercial, and industrial customers to the system. Included in this project are the funds to replace damaged and defective meters, and the deployment of remote electronic disconnect (RED) meters. This will assure accurate billing information, eliminate the potential of revenue loss and improve the safety of employees. 26. Electric Time and Material for Capital Work (192909) $424,512 Capital expenditures for Electric Third-Party Billing projects (requests by customers to move existing infrastructure) that are requested during the year. The work is required to be compliant with the Electric Line Extension Service Standards and the National Electric Safety Code. Colorado Springs Utilities will charge the customer to accomplish this work. 27. Downtown Network Upgrades (182536) $414,996 Routine maintenance to upgrade obsolete network equipment serving existing customers and new growth within the designated network boundary. 28. System Reliability Improvements (180217) $409,500 Replacement of the electric circuits with the highest outage record to improve system reliability. 29. Arc Flash Mitigation (193079) $405,996 Design and install controls and equipment to limit potential arc-flash exposure levels in substation switchgear and distribution feeder protective systems. 30. Overhead Distribution Construction (192295) $401,628 This is a customer driven program to install new overhead electric service to new customers in areas that are currently fed by overhead distribution lines or are located outside city limits Annual Operating and Financial Plan 50

53 31. Manitou Switchgear (182852) $399,996 Capital expenditure to replace Manitou hydro plant aging switchgear, feeder breakers, generator breakers and station power breakers. 32. Replace Transmission Equipment (193406) $399,996 Replace individual poles or equipment on the Transmission System which have reached the end of their useful life from an operational, safety or reliability perspective. 33. Public Improvements-Electric (180283) $375,696 Install or relocate electric facilities in conjunction with General City Public Works projects and Improvement districts. Required by the 2001 Utilities Relocation Executive Agreement. 34. Nixon Zero Discharge Controls Replacements (182684) $350,004 Replacement of obsolete programmable logic controller input and output cards and backplanes for the zero discharge plant. 35. Upgrade Overhead for Existing Customers (180218) $319,704 Rebuild overhead services to accommodate load growth of existing customers. Upgrade electric primary and secondary distribution infrastructure to continue service to existing customers. 36. System Improvement Program (170000) $300,000 This program provides assistance for burying existing overhead lines. Matching funds are provided on a 50/50 basis to bury primary voltage lines. 37. Manitou Springs Main Line Underground Improvements (180376) $300,000 Special projects required by the Franchise Agreement with Manitou Springs. 38. Nixon 1 Pulverizer Major Component Replacement (192985) $300,000 Routine maintenance to replace major components in coal pulverizers. 39. Drake 6 High Pressure Feedwater Heater #4and5 (193284) $300,000 Replace tube bundles on # 4and 5 high pressure feed water heaters. These tube bundles have reached their useful life and are experiencing failure rates impacting unit reliability. 40. INTEL Data Center Main Feeder (193462) $300,000 Install a main feeder to Intel substation for potential customer. 41. Drake Pulverizer Major Component Replacements (192956) $285,000 Drake's EL-76/EL-70 Ball Pulverizers, and our Riley Hammer Pulverizers require periodic replacement of major components such as classifiers, yokes, etc Annual Operating and Financial Plan 51

54 42. Drake 7 Boiler Casing Rework (193161) $249,996 Replace portions of the Drake 7 boiler casing to stop fugitive fly ash and flue gas from leaking into the boiler building. 43. Drake Coal Unit Train Unloading Facility Stack Out Belt Replacement (193400) $234,996 Replace 72 inch-wide Coal Unit Train Unloading Facility stack out belt. 44. Drake Station Improvements (193051) $230,004 Capital expenditure to purchase, and install replacement equipment that fails unexpectedly and meets the capital definition. 45. Relay Instrumentation Control Equipment Replacement (193225) $230,004 This program is designed to systematically replace aging electromechanical transmission protection panels with microprocessor panels in an effort to reduce Operations and Maintenance costs, improve protection system reliability, and enhance system functionality. 46. Nixon 1 Station Improvements (193013) $200,004 Capital expenditure to purchase, and install replacement equipment that fails unexpectedly and meets the capital definition. 47. Substation Communications Migration (193445) $174,996 This project is for migrating the remaining electric substations that are currently on leased communications circuits to wireless or fiber connections on the utility owned network. The scope of this project will continue the transition off of modems and onto wireless radios at the distribution substations. 48. Electric Resource Planning (192987) $150,000 Upgrade existing Electric Resource Planning software. Upgrades include software and engineering services and possible hardware additions. 49. Nixon Substation Transmission System Protection Upgrades (193073) $150,000 Replace equipment nearing end-of-life and fix non-redundancy (no back up) issues identified in the most critical substation (Nixon) which provides access to 70 percent of the generation. In the event of a protection system failure during a fault at Nixon substation, overloads on several Colorado Springs Utilities and neighboring utility facilities will require load shedding of approximately 60 MW (20,000 customers), and could impact our ability to serve all customers. 50. Drake 5 Burner Management System Upgrades (193413) $150,000 Replace the Burner Management System for the unit boiler operation, improving unit safety and reliability. 51. Manitou Generator Step-Up Transformer (182853) $125,004 Install Generator Step-Up Transformer that was procured in 2014 at the Manitou Hydroelectric plant Annual Operating and Financial Plan 52

55 52. Drake 7 Boiler Feed Pump (193289) $77,004 Replacement and repair of the zero discharge Unit 7 Boiler Feed Pump to include a rotating assembly. 53. Nixon Zero Discharge Septic System Replacement (193271) $75,000 Replace Nixon Zero Discharge septic system. 54. Nixon 1 Coal Conveyor Belt 4A Replacement (193376) $69,996 Replace conveyor belts that are worn and showing signs of failure. 55. Drake Cooling Tower Gear Boxes (193275) $68,400 Replace cooling tower gearboxes as needed to maintain unit availability. 56. Transmission System (193320) $67,500 Repair and upgrade the transmission system as needed to comply with NERC Alerts, regulatory standards, maintain and/or increase capacity, and otherwise support transmission-related projects identified in the Annual Long Range Transmission Study/Assessment Report. These projects include (but are not limited to) reconductoring, structure replacements, cross arm modifications, conductor attachment reconfigurations, etc. 57. Drake 5 Sonic Horns (193151) $59,652 Install Sonic horns in the low temperature Superheater Section of #5 Boiler to avoid unit downtime and derates associated with ash build up. 58. Nixon 1 Distributed Control System Upgrades (180359) $50,004 Upgrade of the plant Distributed Control System hardware and software. 59. Front Range Station Improvements (193372) $50,004 Capital expenditure to purchase and install replacement equipment that fails unexpectedly and meets the capital definition. 60. Drake 7 Generator Protection Relays (193427) $50,004 Replace the protection relays on the generator. 61. Front Range Combustion Turbine #2 Fire Protection Control System (193116) $39,996 Upgrade the control system in the existing CT2 CO2 Fire Protection System Panel. 62. Drake 5 Sequence of Events Recorder (193140) $39,996 Upgrade the current Sequence of Events Recorder for improved reliability and functionality of our alarm recording. 63. Front Range Combustion Turbine #2 MC VI Control Cards (193117) $38,760 Combustion Turbine #2 MC VI Control Cards replacement as they fail Annual Operating and Financial Plan 53

56 64. AMI System Foundation (796512) $36,750 The Advanced Metering Infrastructure (AMI) System represents all of the meters and AMI equipment, network and back-office systems that bring meter reads and measurement data to billing. 65. Governance, Risk and Compliance Management (796356) $33,140 Implementation of a Governance, Risk, and Compliance Solution. The software enables an organization to pursue a systematic, organized approach. 66. Drake 5 Flue Exit Gas Temperature Probes (180489) $30,000 Replace the Flue Exit Gas Temperature probes used to evaluate and improve operational performance of plant equipment. This, in turn, maintains the plant reliability, encompassing low NOX and overfire air upgrades. 67. Front Range Combustion Turbine #1 MC VI Control Cards (193112) $28,500 Replacement cards for the Combustion Turbine 1 Mark VI control system as failures occur. 68. Nixon 1 Continuous Emissions Monitoring System Upgrades (182583) $24,996 Replace Nixon Unit 1 continuous emissions monitoring system (CEMS) equipment and instrumentation due to obsolescence and to ensure agency/regulatory compliance for emissions monitoring. 69. Birdsall Station Improvements (193028) $24,996 Capital expenditure to purchase and install replacement equipment that fails unexpectedly and meets the capital definition. 70. Substation System Upgrades (193318) $24,996 Maintain and upgrade substations as needed to comply with NERC Alerts, regulatory standards, maintain and/or increase capacity, and otherwise support substation-related projects identified in the Annual Long Range Transmission Study/Assessment Report. These projects include (but are not limited to) the replacement of switches, jumpers, modifications to current transformer wiring, and reconfiguration of other components that affect the overall system rating. While some of these projects are planned enhancements, others are undefined until a NERC Alert or standard revision is issued. 71. System Protection Upgrades (193324) $24,996 Perform system protection work in existing substations as needed to comply with NERC Alerts, regulatory standards, maintain and/or increase capacity, and support projects identified in the Annual Long Range Transmission Study/Assessment Report. This includes performing system protection reviews of switch and jumpers replacements, modifications to current transformer wiring, and reconfiguration of relays and other components that affect the overall system rating. While some of these projects are planned enhancements, others are undefined until a NERC Alert or standard revision is issued Annual Operating and Financial Plan 54

57 72. Data Analytics and Reporting Development Using MDMS (793322) $24,990 The Meter Data Management System (MDMS) provides the business with data and the measurement analytics capabilities for use in many business functions including customer services, trending, forecasting, rate development, predictive studies, demand response programs and many other business opportunities. 73. AMI Equipment (793061) $22,050 Advanced Metering Infrastructure (AMI) Equipment provides annual required capital funding for equipment needs of the AMI system. Requirements include end-point metering equipment such as Net meters, Load Profile meters, MV-90 hardware, X-switches (for KV2C meters), modules and other AMI tools/equipment. 74. AMI System (793356) $19,598 Advanced Metering Infrastructure (AMI) System provides annual required capital funding for needs of the AMI system. Requirements include modifications to system interfaces for functionality of system (ex. billing upload file) and enhancements to AMI software. 75. Nixon 1 Coal Conveyor Belt 6A Replacement (193378) $18,996 Replace conveyor belts that are worn and showing signs of failure. 76. Nixon 1 Coal Conveyor Belt 8A Replacement (193384) $17,004 Replace conveyor belts that are worn and showing signs of failure. 77. Nixon 1 Coal Conveyor Belt 9A Replacement (193379) $15,000 Replace conveyor belts that are worn and showing signs of failure. 78. Streetlight Replacements (Outside City Limits) (192931) $13,692 Replace streetlight capital assets that have failed either by exceeding their useful life or due to third-party damage. This covers the streetlight system outside of the City of Colorado Springs Streetlight Enterprise to include private roads within city limits, and all public/private roads outside city limits, within the certificated area. 79. Front Range Continuous Emissions Monitor System 1 O2 Analyzer (193103) $10,500 Replace Continuous Emissions Monitor System 1 O2 Analyzer due to the age of the equipment and critical nature of its needed reliability. Subtotal Capital - Electric $108,360,112 Capital Labor & Benefits $11,798,443 Administrative & General Expense $2,516, Total Capital - Electric with Allocated Components $122,674, Annual Operating and Financial Plan 55

58 Allowance for Funds Used During Construction (AFUDC) $1,443, Grand Total Capital - Electric with Allocated Components & AFUDC $124,118, Annual Operating and Financial Plan 56

59 Streetlights Service Capital Projects 2015 Approved 1. Streetlight Replacements (Inside City Limits) (892930) $366,000 Replace capital assets for the streetlight system within the City of Colorado Springs which have failed either through exceeding their useful life or due to third party damage. 2. Streetlights - New Construction (892346) $260,292 This budget is to install streetlights in new residential subdivisions and on new arterial roadways. This project is driven by City Ordinance Street Lights (892330) $234,432 This budget is to install residential and arterial roadway streetlights in previously developed areas per Transfer Agreement to General Fund including Public Safety Lighting. Subtotal Capital - Streetlights $860,724 Capital Labor & Benefits $250,136 Administrative & General Expense $ Total Capital - Streetlights with Allocated Components $1,110,860 Allowance for Funds Used During Construction (AFUDC) $ Grand Total Capital - Streetlights with Allocated Components & AFUDC $1,110, Annual Operating and Financial Plan 57

60 ELECTRIC EXPENDITURES SUMMARY Approved Approved 2013 Actual Fuel Operations & Maintenance $ 145,479,483 $ 144,599,211 $ 148,129,921 $ 880,272 1% $ (2,650,438) -2% Non-Labor Operations & Maintenance Production and Treatment 2,283,360 3,445,392 2,385,249 (1,162,032) -34% (101,889) -4% Transmission and Distribution 5,318,552 5,788,129 5,888,742 (469,577) -8% (570,190) -10% Maintenance 18,766,483 24,887,274 24,539,760 (6,120,791) -25% (5,773,277) -24% Customer Service and Information 5,999,287 5,830,849 4,531, ,438 3% 1,467,444 32% Administrative and General 13,849,656 15,157,431 12,220,402 (1,307,775) -9% 1,629,254 13% Customer Accounting and Collections 3,524,352 3,798,483 3,458,988 (274,131) -7% 65,364 2% Total Non-Labor Operations & Maintenance $ 49,741,690 $ 58,907,558 $ 53,024,984 $ (9,165,868) -16% $ (3,283,294) -6% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Production and Treatment 8,849,750 9,138,803 7,355,894 (289,053) -3% 1,493,856 20% Transmission and Distribution 10,172,606 9,687,280 9,764, ,326 5% 407,870 4% Maintenance 15,299,110 14,452,135 16,115, ,975 6% (816,210) -5% Customer Service and Information 1,310,866 1,128,205 1,014, ,661 16% 296,630 29% Administrative and General 35,558,349 33,756,037 31,333,971 1,802,312 5% 4,224,378 13% Customer Accounting and Collections 3,794,044 3,844,920 3,896,148 (50,876) -1% (102,104) -3% Total Labor & Benefits $ 74,984,725 $ 72,007,380 $ 69,480,305 $ 2,977,345 4% $ 5,504,420 8% Total Non-Fuel Operations & Maintenance 1 $ 124,726,415 $ 130,914,938 $ 122,505,289 $ (6,188,523) -5% $ 2,221,126 2% Streetlights 3,184,265 3,495,958 3,154,510 (311,693) -9% 29,755 1% Transfers to City- Surplus 24,853,337 24,544,220 24,034, ,117 1% 818,669 3% Debt Service 2 69,836,160 69,211,293 64,847, ,867 1% 4,988,412 8% Direct Capital 2 $ 125,229,170 $ 114,542,901 $ 87,303,547 $ 10,686,269 9% $ 37,925,623 43% Allocated Capital 3 $ 4,676,194 $ 6,368,368 $ 3,409,443 $ (1,692,174) -27% $ 1,266,751 37% Total $ 497,985,024 $ 493,676,889 $ 453,385,126 $ 4,308,135 1% $ 44,599,898 10% Note: Totals may vary due to rounding. 1 Nonfuel Operations and Maintenance do not include inter-service eliminations, undistributed stores expense, or non-operating products and services. 2 Does not include inter-service eliminations. 3 Common capital allocated to electric service. Following is detailed information for each account group Annual Operating and Financial Plan 58

61 FUEL EXPENDITURES OVERVIEW Fuel costs make up over one-half of all operating and maintenance expenses for the electric service. Coal and natural gas make up the majority of the fuel supply used for generating electricity at eleven different generating units. By capacity, electric generation fuel mix is approximately 50 percent natural gas, 40 percent coal, and 10 percent hydro and renewables. This diverse fuel mix allows flexibility to adjust the generation fuel mix to take advantage of fuel market conditions. When adequate generating capacity is not available within the Colorado Springs Utilities system due to planned or unplanned generating unit outages, power is purchased from other generators. Experienced, professional staff, including an around-the-clock energy trading operation, manage multiple fuel contracts and power purchases to optimize the energy supply portfolio on behalf of customers. FUEL EXPENDITURES Account Group Note: Totals may vary due to rounding Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Fuel Operations & Maintenance $ 145,479,483 $ 144,599,211 $ 148,129,921 $ 880,272 1% $ (2,650,438) -2% Coal Costs 72,334,013 66,259,421 65,208,008 6,074,592 9% 7,126,005 11% Oil Costs 412, , ,098 (71,000) -15% 166,542 68% Gas for Electric - Steam Generation 1,654,919 2,579, ,520 (924,137) -36% 899, % Gas for Electric - Other Generation (incl Hydro) 52,237,944 48,086,345 56,989,459 4,151,599 9% (4,751,515) -8% Purchased Power 10,732,450 18,928,450 16,679,575 (8,196,000) -43% (5,947,125) -36% Other Purchased Power Costs 2,321,512 2,476,294 2,056,038 (154,782) -6% 265,474 13% Electric Capacity Payment - WAPA 5,786,005 5,786,005 6,195, % (409,218) -7% FUEL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 $6.1 million Coal Costs - In 2015 approximately 5 percent more MWh unit generation is planned compared to The remainder of this variance is due to increases in 2015 projected coal prices. $3.2 million Gas for Electric Higher natural gas prices forecasted in 2015 compared to ($8.4 million) Purchased Power In 2015 approximately 12 percent less MWh will be purchased off the market than in Natural gas generation at Front Range Power Plant is available for a lower price than we can purchase from the market in to 2015 $7.1 million Coal Cost In 2015 approximately 2.5 percent more MWh coal unit generation is planned compared to In the fall of 2013 Drake unit 7 was unavailable due to an extended major power plant outage. The remainder of this variance is due to increases in 2015 projected coal prices. ($3.9 million) Gas for Electric In 2013 off-system electric sales expenses related to gas generation sold on the market was approximately 26 percent higher than planned in ($5.7 million) Purchased Power - In 2015 approximately 15 percent less MWh will be purchased off the market than in Natural gas generation at Front Range Power Plant is available for a lower price than we can purchase from the market in Annual Operating and Financial Plan 59

62 PRODUCTION AND TREATMENT OVERVIEW Production and treatment expenses include the materials, equipment, services, and employee labor and expenses needed to effectively operate all of the electric generating plants. Efficient operations contribute to optimization of generating costs and plant reliability. Colorado Springs Utilities plant reliability measures are consistently better than industry norms. PRODUCTION AND TREATMENT EXPENDITURES Account Group Note: Totals may vary due to rounding Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Production and Treatment Non-Labor $ 2,283,360 $ 3,445,392 $ 2,385,249 $ (1,162,032) -34% $ (101,889) -4% Steam Power Generation 2,185,718 3,365,261 1,627,321 (1,179,543) -35% 558,397 34% Hydro Power Generation 3, ,024 2, % 1,456 72% Other Power Generation 94,162 79, ,905 14,561 18% (661,743) -88% Production and Treatment Labor & Benefits $ 8,849,750 $ 9,138,803 $ 7,355,894 $ (289,053) -3% $ 1,493,856 20% Steam Power Generation 7,259,001 7,281,604 6,004,847 (22,603) 0% 1,254,154 21% Hydro Power Generation 323, , ,610 (79,624) -20% (8,503) -3% Other Power Generation 1,267,642 1,454,468 1,019,436 (186,826) -13% 248,206 24% PRODUCTION AND TREATMENT SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.7 million) Plant Sorbent Injection Drake unit 5 dry sorbent injection testing for the emissions control technology was budgeted in 2014 and is not needed in ($0.1 million) Plant Outage 2014 includes maintenance for major power plant outages for Nixon unit 1 not planned for in ($0.1 million) Plant Security A reduction in armed guards planned in 2015 compared to ($0.3 million) Labor From 2014 to 2015 there is a shift in work between Production and Treatment and Transmission and Distribution to 2015 $1.3 million Labor - 11 positions to support emissions control technology in the 2015 budget that did not exist in The remaining difference is a shift in work between Production and Treatment and Fuel Annual Operating and Financial Plan 60 TRANSMISSION AND DISTRIBUTION OVERVIEW Transmission and distribution expenses provide for the labor, materials, equipment and other services to operate nearly 3,000 miles of overhead and underground electric lines, 61 electric substations, approximately 36,000 distribution transformers, and all of the other associated equipment that makes up the Colorado Springs Utilities electric transmission and distribution system. The efficient operations of the electric transmission and distribution system is integral to providing highly reliable electric service to customers. Colorado Springs Utilities electric system service reliability ranks well above industry norms.

63 TRANSMISSION AND DISTRIBUTION EXPENDITURES Account Group Note: Totals may vary due to rounding Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Transmission and Distribution Non-Labor $ 5,318,552 $ 5,788,129 $ 5,888,742 $ (469,577) -8% $ (570,190) -10% Electric Transmission 1,155,726 1,667, ,639 (511,436) -31% 217,087 23% Electric Distribution 4,162,826 4,120,967 4,950,103 41,859 1% (787,277) -16% Transmission and Distribution Labor & Benefits $ 10,172,606 $ 9,687,280 $ 9,764,736 $ 485,326 5% $ 407,870 4% Electric Transmission 2,932,760 2,722,409 2,360, ,351 8% 572,031 24% Electric Distribution 7,239,846 6,964,871 7,404, ,975 4% (164,161) -2% TRANSMISSION AND DISTRIBUTION SIGNIFICANT FINANACIAL CHANGES 2014 to 2015 ($0.3 million) Outside Professional Services 2014 includes compliance standards procedure writing not planned in ($0.2 million) Compliance/Regulatory Resources A reduction in expenses required for NERC compliance. $0.3 million Labor From 2014 to 2015 there is a shift in work between Transmission and Distribution and Production and Treatment. The remaining difference represents actual pay changes from 2014 which are budgeted in a pool in Human Resources to 2015 ($0.7 million) Drake Study A Drake Decommissioning Study was conducted in 2013 to review retirement of the Drake Power Plant. MAINTENANCE EXPENDITURES OVERVIEW Maintenance funding covers the maintenance of the full production and delivery of electric energy to customers, and provides for the materials, equipment, contract services, and labor needed to maintain the entire electric system, including generation, transmission and distribution systems. Examples of maintenance activities include site maintenance, power plant planned and emergency outage repairs, electric transmission and distribution system outage repairs, line patrol, tree trimming, and underground cable repairs. Maintenance activities are integral to providing highly reliable electric service to customers, and the Colorado Springs Utilities electric system reliability ranks well above industry norms Annual Operating and Financial Plan 61

64 MAINTENANCE EXPENDITURES Account Group Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Maintenance Non-Labor $ 18,766,483 $ 24,887,274 $ 24,539,760 $ (6,120,791) -25% $ (5,773,277) -24% Steam Power Generation Maintenance 10,292,577 16,394,723 14,457,568 (6,102,146) -37% (4,164,991) -29% Hydro Power Generation Maintenance 208, , ,705 10,981 6% (89,853) -30% Other Power Generation Maintenance 3,533,737 2,719,542 1,099, ,195 30% 2,434, % Electric Transmission Maintenance 929,687 1,054, ,205 (125,100) -12% 119,482 15% Electric Distribution Maintenance 3,801,630 4,520,352 7,873,932 (718,722) -16% (4,072,302) -52% Maintenance Labor & Benefits $ 15,299,110 $ 14,452,135 $ 16,115,320 $ 846,975 6% $ (816,210) -5% Steam Power Generation Maintenance 8,846,448 7,825,063 8,502,446 1,021,385 13% 344,002 4% Hydro Power Generation Maintenance 123, , ,783 (40,299) -25% (25,303) -17% Other Power Generation Maintenance 712, , ,859 8,668 1% (119,156) -14% Electric Transmission Maintenance 965, ,369 1,184, ,025 17% (219,324) -19% Electric Distribution Maintenance 4,651,085 4,930,890 5,447,513 (279,805) -6% (796,428) -15% Note: Totals may vary due to rounding. MAINTENANCE SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($6.0 million) Plant Outage 2014 includes maintenance for major power plant outages for Drake unit 6, and Nixon unit 1 not planned in $0.7 million Plant Outage A major outage is planned at the Front Range Power Plant to include blade row replacements and combustion turbines 1 and 2 compressor repairs. ($0.3 million) Line Clearing A reduction in line clearing moving from a three to four-year tree trim cycle in ($0.3 million) Electric Planning 2015 planned reductions in transmission studies. $0.8 million Labor Actual pay changes from 2014 which are budgeted in a pool in Human Resources to 2015 ($3.1 million) Plant Outage included maintenance for a major power plant outage for Drake unit 7. ($0.9 million) Emissions Control Technology Emissions control technology Operations and Maintenance expenses not required in $1.5 million Plant Outage A major outage is planned at the Front Range Power Plant to include blade row replacements and combustion turbines 1 and 2 compressor repairs. $0.9 million Energy Costs The Front Range Power Plant is expected to sell less off-system electric sales in 2015 than Lower off-system sales means the plant is off-line more often resulting in higher utility expenses to operate equipment required even when the plant is off-line. ($3.7 million) Air Force Academy Maintenance In 2013 Colorado Springs Utilities performed maintenance work at the request of the United States Air Force Academy (USAFA). The work was reimbursed in full by the USAFA but still appears in 2013 actuals. ($0.8 million) Labor From 2013 to 2015 there is a shift in work between Maintenance and Capital and Transmission and Distribution Annual Operating and Financial Plan 62

65 ADMINISTRATIVE AND GENERAL EXPENDITURES OVERVIEW Administrative and general expenses are critical to the delivery of Colorado Springs Utilities four services. These expenses are for numerous functional areas that efficiently provide critical support for multiple services while directly delivering essential services to our customers and community. Some of the expenses are directly attributable to one service, while others provide benefit to all four services and are allocated to those services using statistical basis that are widely accepted throughout the utility industry. Non-Labor Administrative and General Note: Totals may vary due to rounding Approved Approved 2013 ADMINISTRATIVE AND GENERAL EXPENDITURES Actual Customer Service and Information 5,999,287 5,830,849 4,531, ,438 3% 1,467,444 32% Administrative and General 13,849,656 15,157,431 12,220,402 (1,307,775) -9% 1,629,254 13% Customer Accounting and Collections 3,524,352 3,798,483 3,458,988 (274,131) -7% 65,364 2% Total Non-Labor Administrative and General $ 23,373,295 $ 24,786,764 $ 20,211,233 $ (1,413,469) -6% $ 3,162,062 16% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Customer Service and Information 1,310,866 1,128,205 1,014, ,661 16% 296,630 29% Administrative and General 35,558,349 33,756,037 31,333,971 1,802,312 5% 4,224,378 13% Customer Accounting and Collections 3,794,044 3,844,920 3,896,148 (50,876) -1% (102,104) -3% Total Labor & Benefits $ 40,663,259 $ 38,729,161 $ 36,244,355 $ 1,934,098 5% $ 4,418,904 12% Total Administrative and General $ 64,036,554 $ 63,515,925 $ 56,455,588 $ 520,629 1% $ 7,580,966 13% 2015 Annual Operating and Financial Plan 63 ADMINISTRATIVE AND GENERAL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.4 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. ($0.4 million) Legal Fees Estimates for these costs from the City Attorney s office are lower in 2015 than in 2014, due to intentional expenditure reductions. ($0.3 million) Property Insurance Estimates for excess liability premium are expected to be lower in ($0.2 million) Bad Debts Lower bad debt as a percentage of revenue included in 2015 budget is based on historical write-off as a percentage of revenue. $0.2 million Labor From 2014 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. $0.4 million Pay Adjustment Pool The 2015 base pay budget proposes a 4 percent increase to account for the below market compensation of our employee population as part of a multiyear effort as recommended by an external consultant. The 2014 budget included a 4 percent increase. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool.

66 $0.5 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here. $0.2 million Employee Leave Payout Sick leave conversion, retiree sick leave, and separating employee vacation expense. $0.7 million Pay Changes Actual pay changes from 2014 and 2015 are budgeted in a base pay adjustment pool in Human Resources, however, once pay changes, it is accounted for in the area in which the employee works to 2015 $0.6 million Electric DSM and Renewable Energy Program Planned 2015 increases in Business Lighting Rebates $0.4 million, Business CFL Promotional Program $0.1 million, and Business Peak Demand Rebates $0.1 million to meet the energy vision. $0.4 million DSM Potential Study The 2015 study will focus on capacity reduction potential. No similar study in $0.3 million DSM Tracking Software Database to manage and report all DSM program information. $0.6 million Legal Fees Estimates for these costs from the City Attorney s office are higher in 2015 than in $0.5 million Facilities Expense Recognition Expenses for corrective maintenance and emergency projects are budgeted based on historical spend in administrative and general accounts, but actually expensed to the appropriate service account. The expenses from 2013 will be in the service where they occurred, while budget for 2015 is in administrative and general. ($0.5 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. $0.4 million IT Lifecycle Upgrades increased software license costs and additional Operations and Maintenance for completed IT projects. $0.4 million Property Insurance During 2012, the management of insurance for Colorado Springs Utilities moved into the Planning and Finance Division from the City. After detailed evaluation of insurance policies it was determined that they were deficient in insuring the property value and risk associated with Colorado Springs Utilities assets. Additional coverage was added in 2013 and is now reflected in the 2015 budget. $0.3 million Labor From 2013 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. $3.0 million Pay Adjustment Pool The 2015 base pay budget proposes 4 percent increase. In 2013 pay adjustments were embedded in labor throughout the organization. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool. $0.8 million Pay Changes Actual pay changes from the 2014 Approved are budgeted in a base pay adjustment pool in Human Resources, however, once pay changes; it is accounted for in the area in which the employee works. $0.6 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here Annual Operating and Financial Plan 64

67 NATURAL GAS SERVICE OVERVIEW SERVICE HIGHLIGHTS 1 Gathering System 3 City Gate Stations 5 Delivery Services for Customers 2 Underground Storage 4 Distribution System Number of active gas meters: 192,872 Total Net Throughput Volume: 23,816,453 MCF at psia Peak demand: million cubic feet Feb.1, 2011* Miles of main: 2,432 STATISTICS Figures are based on the 2014 Official Statement dated September 9, 2014 unless noted with an asterisk KEY PLANNING FACTORS Gas Supply Prices Although supplies remain plentiful, natural gas prices are expected to be higher in 2015 which will continue to put upward pressure on the Gas Cost Adjustment. Meter Replacement and Repair Continuing the program to service 15,000+ corroded/tilted meters identified in the Atmospheric/Corrosion project. These gas meters will be serviced due to Department of Transportation (DOT) mandates and safety considerations. Natural Gas Distribution Master Plan: Colorado Springs Utilities maintains and continually updates a master plan for the natural gas distribution system. The plan looks at needed expenditures and details specific projects for the upcoming three years. A capacity analysis is completed twice each year on the system to verify adequate capacity for peak hour deliveries based on actual growth Annual Operating and Financial Plan 65

68 2015 OPERATING PLAN Natural Gas Master Maintenance Plans: The Gas Master Maintenance Plan (GMMP) is a comprehensive plan containing system and program information that includes, but is not limited to, gas main renewals, service line renewals, emergency leaks, damage prevention, system evaluation and gas facilities operations. The plan provides a comprehensive overview of each program that will be executed along with other mandatory Department of Transportation (DOT) program maintenance requirements. Many of these programs are designed to meet the Distribution Integrity Management Plan (DIMP) requirements of mitigating threats to Colorado Springs Utilities gas distribution system. The objective of the GMMP is to ensure public safety, improve system reliability, and reduce customer costs to meet federal and state regulatory requirements. Natural Gas Supply: The Natural Gas Supply Plan meets forecasted growth demand requirements of natural gas customers during a peak day with an average temperature of minus 13 degrees Fahrenheit. This is met through a combination of natural gas supply delivered on Colorado Interstate Gas Company (CIG) firm transportation contracts, natural gas delivered from CIG and Young storage, interruption of non-firm natural gas customers, and the natural gas substitute produced by the propane air plant. Colorado Springs Utilities plans to meet future demand increases by contracting for additional transportation capacity from CIG and expanding the capabilities of the propane air plant. In 2011, we experienced winter temperatures and peak demands on the gas system that required a re-evaluation of the Natural Gas Supply Plan and completion of a new Gas Integrated Resource Plan, which outlines system infrastructure and supply needs to ensure long term, reliable gas supply. The results of the new Gas Integrated Resource Plan are being implemented through planned capital and Operations and Maintenance projects and programs as budget priorities allow. Safety: Colorado Springs Utilities, in accordance with federal regulations, is required to periodically communicate with customers, constituents, government leaders and public safety personnel about its system s purpose, reliability, associated hazards, and damage prevention, as well as emergency preparedness measures. Colorado Springs Utilities educates natural gas customers, residents and contractors about the importance of complying with the national Call Before You Dig requirements. When citizens or contractors are planning to move earth, they must call the Utility Notification Center of Colorado (UNCC) at at least three days prior to their excavation to have all buried utility lines located on their property to prevent a potentially hazardous condition. In addition, Colorado Springs Utilities education efforts include leak detection and response. Gas Service Capital Projects 2015 Approved 1. Gas Meters and Regulators (293043) $1,928,004 Growth driven project to purchase gas meters and regulators to connect residential, commercial, and industrial customers to Colorado Springs Utilities system. Included are the funds to replace damaged and defective meters, and support the Gas Measurement Accuracy Control (GMAC) Program. This will assure accurate billing information, and eliminate the potential of revenue loss. 2. Main Renewals and Relocates - DIMP (280015) $1,006,692 Renew gas mains which pose a risk to the integrity of the system either due to the presence of active leaks, the age and condition of the pipe and/or fittings, or substandard material performance Annual Operating and Financial Plan 66

69 3. New Construction Billable (293041) $990,828 Customer growth driven project to install new mains, service stubs, steel to new gas customers and the extensions of the 150 pound per square inch trunk distribution system to previously undeveloped areas. Advance payments are required from developers for actual construction costs. 4. Gas Service and Stub Renewals - DIMP (280014) $939,672 Renew individual service lines in the gas distribution system, which pose a risk to the integrity of the system either due to the presence of active leaks or substandard materials. 5. New Construction Non Billable (293042) $453,168 Customer growth driven extension of gas mains to new customers which sometimes requires extension of mainline not covered by developer advance payments such as gas main over sizing for future developments. This budget funds those additions and is required to meet new customer growth indentified through the gas modeling software. In addition, it funds the costs for new services and installing scattered service stubs. Costs include material, labor and restoration. 6. Gas Service Vehicles and Equipment (280021) $420,000 Replacement of Vehicles and Equipment for the Gas service to maintain a safe, cost effective and reliable fleet. 7. Public Improvements - Gas (280024) $304,872 Install or relocate gas facilities in conjunction with General City Public Works projects and Improvement districts. Required by the 2001 Utilities Relocation Executive Agreement. 8. Casing Upgrade and Cathodic Protection - DIMP (280017) $260,304 Project regulated by the Department of Transportation to upgrade gas casings and provide cathodic protection of gas mains and gas services to enhance the life of the gas pipes in the distribution system. 9. Gas Propane Vaporizer Replacement (293137) $249,996 Increase the vaporization capacity of the propane plant by replacing vaporizer 1 through 4 at a rate of one vaporizer per year. 10. Gas Time and Material for Capital Work (293122) $205,056 Capital expenditures for Gas Third-Party Billing projects (requests by customers to move existing infrastructure). The work is required to be compliant with the Gas Line Extension Service Standards and the PUC 192 Code. Utilities will charge the customer Third-Party Billing Annual Operating and Financial Plan 67

70 11. Gas Distribution System Improvements (293044) $155,004 This project is designed for system improvements that provide added benefit to our natural gas system. These improvements are for system performance including available capacity to new customers and improved reliability to existing customers. Improvement projects can include installation of larger piping, new district regulator stations to the existing gas system, or increased system capacity in the form of an uprate. Additionally, the project budgets dollars for unforeseen capital contingencies that may occur during the year. 12. District Regulator Station Replacement - DIMP (280011) $57,000 This task consists of replacing district regulator stations that are in poor condition. Each regulator station has two regulators, one is for normal control of the flow of gas and the other provides over pressure protection in the event the control regulator fails. Some of the regulators to be replaced are custom fabricated or the manufacturers have discontinued the regulator model and no longer supply replacement parts. GDO determines which regulators to replace based on type of equipment (obsolete). 13. Emergency Valve Replacement - DIMP (280005) $39,996 Perform annual inspection, maintenance, and operation of all designated Gas Emergency Valves per Department of Transportation requirements. Emergency Valves are designed to stop the flow of gas in specific situations such as creek crossings (an Emergency Valve will be located on each side of the streambed above the high water mark). 14. Gas Distribution System Improvements - DIMP (280034) $30,000 This project is designed for system improvements that are driven by Regulatory Compliance (PHMSA Part 192). Improvement projects can include installation of metering and regulating equipment, emergency valves, telemetry monitor points, as well as other facilities to the natural gas distribution system. Other methods can also be used to achieve regulatory compliance such as system uprates, pressure tests, inspections, etc. 15. AMI System Foundation (796512) $22,500 The Advanced Metering Infrastructure (AMI) System represents all of the meters and AMI equipment, network and back-office systems that bring meter reads and measurement data to billing. This foundation program provides the advancements needed to respond to the enterprise s business demands for AMI. 16. Data Analytics and Reporting Development Using MDMS (793322) $15,300 Our Meter Data Management System (MDMS) provides the business with data and the measurement analytics capabilities for use in many business functions including customer services, trending, forecasting, rate development, predictive studies, demand response programs and many other business opportunities Annual Operating and Financial Plan 68

71 17. AMI Equipment (793061) $13,500 Advanced Metering Infrastructure (AMI) Equipment provides annual required capital funding for equipment needs of the AMI system. Requirements include end-point metering equipment such as Net meters, Load Profile meters, MV-90 hardware, X-switches (for KV2C meters), modules and other AMI tools/equipment. 18. AMI System (793356) $11,999 Advanced Metering Infrastructure (AMI) System provides annual required capital funding for needs of the AMI system. Requirements include modifications to system interfaces for functionality of system (ex. billing upload file) and enhancements to AMI software. Subtotal Capital - Gas $7,103,891 Capital Labor & Benefits $5,807,836 Administrative & General Expense $1,342, Total Capital - Gas with Allocated Components $14,253,798 Allowance for Funds Used During Construction (AFUDC) $493, Grand Total Capital - Gas with Allocated Components & AFUDC $14,747, Annual Operating and Financial Plan 69

72 Approved Approved 2013 Actual EXPENDITURES SUMMARY Fuel Operations & Maintenance $ 146,124,608 $ 136,153,916 $ 134,107,178 $ 9,970,692 7% $ 12,017,430 9% Non-Labor Operations & Maintenance Transmission and Distribution 2,983,155 3,196,077 2,307,609 (212,922) -7% 675,546 29% Maintenance 1,317,108 1,357,543 1,363,779 (40,435) -3% (46,671) -3% Customer Service and Information 1,972,099 2,067,567 1,573,741 (95,468) -5% 398,358 25% Administrative and General 4,364,875 4,805,376 3,750,864 (440,501) -9% 614,011 16% Customer Accounting and Collections 2,480,789 2,758,335 2,403,654 (277,546) -10% 77,135 3% Total Non-Labor Operations & Maintenance $ 13,118,026 $ 14,184,898 $ 11,399,647 $ (1,066,872) -8% $ 1,718,379 15% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Transmission and Distribution 7,565,487 7,189,453 7,534, ,034 5% 30,959 0% Maintenance 1,967,690 1,836,862 2,076, ,828 7% (108,668) -5% Customer Service and Information 703, , , ,209 30% 228,992 48% Administrative and General 11,309,575 11,302,991 10,459,497 6,584 0% 850,078 8% Customer Accounting and Collections 3,441,888 3,469,858 3,517,570 (27,970) -1% (75,682) -2% Total Labor & Benefits $ 24,987,645 $ 24,341,960 $ 24,061,966 $ 645,685 3% $ 925,679 4% Total Non-Fuel Operations & Maintenance 1 $ 38,105,671 $ 38,526,858 $ 35,461,613 $ (421,187) -1% $ 2,644,058 7% Transfers to City- Surplus 7,625,711 7,135,859 7,809, ,852 7% (184,043) -2% Debt Service 2 11,135,096 11,154,284 10,113,618 (19,188) 0% 1,021,478 10% Direct Capital 2 $ 14,747,063 $ 17,220,169 $ 11,727,343 $ (2,473,106) -14% $ 3,019,720 26% Allocated Capital 3 $ 718,276 $ 985,364 $ 527,536 $ (267,088) -27% $ 190,740 36% Total $ 218,456,425 $ 211,176,450 $ 199,747,042 $ 7,279,975 3% $ 18,709,383 9% 1 Nonfuel Operations and Maintenance does not include inter-service eliminations, undistributed stores expense, or non-operating products and services. 2 Does not include inter-service eliminations. 3 Common capital allocated to natural gas service. Note: Totals may vary due to rounding. Following is detailed information for each account group. FUEL EXPENDITURES OVERVIEW Fuel costs are the majority of the expenses required to deliver reliable natural gas services to customers. Colorado Springs Utilities has an extensive Gas Supply Management Program to control these expenses. The program has multiple components, including ensuring supply reliability as well as cost management. This includes many programs, including gas supply contracting through a full time energy trading group, implementation of tools such as a prepaid gas transaction resulting in $5.0 million in annual savings, and pipeline and storage asset optimization. Colorado Springs Utilities also participates in rate proceedings affecting wholesale transportation rates. A hedging program is a means to provide increased stability of gas prices. The hedging program is currently suspended in an environment of relatively stable gas prices Annual Operating and Financial Plan 70

73 Account Group Approved Approved 2013 Actual FUEL EXPENDITURES Increase/ (Decrease) from: Actual Fuel Operations & Maintenance $ 146,124,609 $ 136,153,915 $ 134,107,179 $ 9,970,694 7% $ 12,017,430 9% Gas Purchases - Input 120,328, ,104, ,979,988 15,224,185 14% 19,348,301 19% Gas Purchases -Other 25,796,320 26,049,811 24,059,786 (253,491) -1% 1,736,534 7% Gas Hedge Settlements 0 5,000,000 9,067,405 (5,000,000) -100% (9,067,405) -100% Note: Totals may vary due to rounding. FUEL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 $15.2 million Natural Gas Commodity Prices Projected natural gas prices have strengthened resulting in an increased budget for natural gas in ($5.0 million ) Gas Hedge Settlement Costs The last year of the gas hedging program was in $5.0 million budgeted in 2014 for the purchase of hedge option tools should market conditions warrant a resumption of the hedging program to 2015 $19.3 million Natural Gas Commodity Prices Projected natural gas prices have strengthened resulting in an increased budget for natural gas in $1.7 million Gas Transportation and Storage 2015 is expected to fall below the revenue band agreement with CIG requiring an additional gas transportation payment. ($9.1 million ) Gas Hedge Settlement Costs The last year of the gas hedging program was Annual Operating and Financial Plan 71

74 TRANSMISSION AND DISTRIBUTION OVERVIEW Transmission and distribution expenses cover all of the materials, equipment, services, labor and benefits to efficiently operate five gate stations, over 2400 miles of pipe, and all of the other associated equipment that makes up the gas distribution system, enabling reliable and safe gas services to customers. Account Group Note: Totals may vary due to rounding TRANSMISSION AND DISTRIBUTION EXPENDITURES Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Transmission and Distribution Non-Labor $ 2,983,155 $ 3,196,077 $ 2,307,609 $ (212,922) -7% $ 675,546 29% Gas Transmission 94, ,219 54,617 (23,420) -20% 40,182 74% Gas Distribution 2,888,356 3,077,858 2,252,992 (189,502) -6% 635,364 28% Transmission and Distribution Labor & Benefits $ 7,565,487 $ 7,189,453 $ 7,534,528 $ 376,034 5% $ 30,959 0% Gas Transmission 1,033, , ,774 85,711 9% 256,045 33% Gas Distribution 6,531,668 6,241,345 6,756, ,323 5% (225,086) -3% TRANSMISSION AND DISTRIBUTION SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.2 million) Training, Travel, and Seminars/Conferences Planned 2015 reductions to non-critical/nonrequired licenses and certifications. $0.4 million Pay Changes Actual pay changes from 2014 are budgeted in a base pay adjustment pool in Human Resources, however once pay changes, it is accounted for in the area the employee works to 2015 $0.2 million Gas Main and Line Renewal Program Increase for Operations and Maintenance improvements on the gas distribution system. $0.2 million Vehicle Maintenance Increased vehicle expenses due to aging fleet. $0.1 million Materials and Supplies Rising material costs associated with the gas distribution system. MAINTENANCE EXPENDITURES OVERVIEW Maintenance expenses include the costs of all materials, equipment, services, and labor and provide maintenance for the gas system, including the Propane Air Plant, the gas distribution system, and all other associated equipment needed to ensure reliable gas services to customers. Examples of maintenance activities include plant equipment repairs, gas pipe and valve repairs, leak and corrosion surveys, and site maintenance Annual Operating and Financial Plan 72

75 MAINTENANCE EXPENDITURES Account Group Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Maintenance Non-Labor $ 1,317,108 $ 1,357,543 $ 1,363,779 $ (40,435) -3% $ (46,671) -3% Gas Raw Materials Maintenance 109,984 90,709 83,574 19,275 21% 26,410 32% Gas Distribution Maintenance 1,207,124 1,266,834 1,280,205 (59,710) -5% (73,081) -6% Maintenance Labor & Benefits $ 1,967,690 $ 1,836,863 $ 2,076,358 $ 130,827 7% $ (108,668) -5% Gas Raw Materials Maintenance 102,146 80, ,012 21,990 27% (13,866) -12% Gas Distribution Maintenance 1,865,544 1,756,707 1,960, ,837 6% (94,802) -5% Note: Totals may vary due to rounding. MAINTENANCE SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 $0.1 million Pay Changes Actual pay changes from 2014 are budgeted in a base pay adjustment pool in Human Resources, however once pay changes, it is accounted for in the area the employee works to 2015 ($0.1 million) Overtime Labor Planned 2015 reduction in overtime labor for gas distribution maintenance work Annual Operating and Financial Plan 73 ADMINISTRATIVE AND GENERAL EXPENDITURES OVERVIEW Administrative and general expenses are critical to the delivery of Colorado Springs Utilities four services. These expenses are for numerous functional areas that efficiently provide critical support for multiple services while directly delivering essential services to our customers and community. Some of the expenses are directly attributable to one service, while others provide benefit to all four services and are allocated to those services using statistical basis that are widely accepted throughout the utility industry. Non-Labor Administrative and General Note: Totals may vary due to rounding ADMINISTRATIVE AND GENERAL EXPENDITURES Approved Approved 2013 Actual Customer Service and Information 1,972,099 2,067,567 1,573,741 (95,468) -5% 398,358 25% Administrative and General 4,364,875 4,805,376 3,750,864 (440,501) -9% 614,011 16% Customer Accounting and Collections 2,480,789 2,758,335 2,403,654 (277,546) -10% 77,135 3% Total Non-Labor Administrative and General $ 8,817,763 $ 9,631,278 $ 7,728,259 $ (813,515) -8% $ 1,089,504 14% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Customer Service and Information 703, , , ,209 30% 228,992 48% Administrative and General 11,309,575 11,302,991 10,459,497 6,584 0% 850,078 8% Customer Accounting and Collections 3,441,888 3,469,858 3,517,570 (27,970) -1% (75,682) -2% Total Labor & Benefits $ 15,454,468 $ 15,315,645 $ 14,451,080 $ 138,823 1% $ 1,003,388 7% Total Administrative and General $ 24,272,231 $ 24,946,923 $ 22,179,339 $ (674,692) -3% $ 2,092,892 9%

76 ADMINISTRATIVE AND GENERAL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.1 million) Customer and Business Solutions Allocated 2015 reduced spending for surveys (i.e. Community Partner, Customer Experience). ($0.2 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. ($0.1 million) Legal Fees Estimates for these costs from the City Attorney s office are lower in 2015 than in 2014, due to intentional expenditure reductions. ($0.2 million) Bad Debts Lower bad debt as a percentage of revenue included in budget is based on historical write-off as a percentage of revenue. $0.2 million Labor From 2014 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. The remaining difference represents actual pay changes from 2013 and to 2015 $0.3 million Gas DSM and Renewable Energy Program Increases in Residential and Business Window Rebates and Residential Water Sense Showerhead Program compared to $0.3 million Facilities Expense Recognition Expenses for corrective maintenance and emergency projects are budgeted based on historical spend in administrative and general accounts, but actually expensed to the appropriate service account. The expenses from 2013 will be in the service where they occurred, while budget for 2015 is in administrative and general. $0.2 million Legal Fees Estimates for these costs from the City Attorney s office are higher in 2015 than in $0.1 million IT Lifecycle Upgrades increased software license costs and additional Operations and Maintenance for completed IT projects. $0.2 million Labor From 2013 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. The remaining difference represents actual pay changes from 2013 and 2014 which are budgeted in a pool in Human Resources. $0.9 million Pay Adjustment Pool The 2015 base pay budget proposes 4 percent. In 2013 pay adjustments were embedded in labor throughout the organization. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool Annual Operating and Financial Plan 74

77 WATER SERVICE OVERVIEW SERVICE HIGHLIGHTS 1 Mountain Water Collection System 4 Local Water Collection System 7 Distribution Storage and Pump Stations 2 Raw Water Pump Station 5 Water Treatment Plant 8 Customers 3 Terminal Storage 6 Ground Water System 9 Water Exchanges 10 Nonpotable Water Distribution Estimated population served: 458,716 people through 137,619 active water meters Annual potable water system deliveries (2013): 66,413 acre-feet (21.6 billion gallons of water) Total Non-potable output (2013, all sources): 9,000 acre feet* (AF) Total Arkansas River and Local Exchange (2013): 35,000 AF* Treatment capacity: 234 mgd (peak), 217 mgd (sustained) 1 Record peak demand: 182 mgd (2001 max. day) 1 STATISTICS Figures are based on the 2014 Official Statement dated September 9, 2014 unless noted with an asterisk, which are 2013 figures Finished Water Master Plan, Black & Veatch, January Annual Operating and Financial Plan KEY PLANNING FACTORS Southern Delivery System (SDS) SDS continues to represent a major portion of the water system capital investment during this planning period with the continuation of significant construction of the water treatment plant and three pump stations as part of ongoing Phase 1 construction through early 2016.

78 Reservoir and Dam Improvements Improving Tesla, Montgomery, Crystal, and Rampart dams will satisfy regulatory requirements and Colorado Springs Utilities operational requirements. Water Mains Replacements Program The program identifies, assesses and prioritizes the replacement and upgrade of failing or inadequate water distribution pipelines. Waldo Canyon Fire Restoration and Recovery Program The program will be used to restore creek channels, construct sedimentation ponds and replace infrastructure to mitigate sedimentation, erosion and flooding risk caused by the Waldo Canyon Fire. Integrated Water Resource Plan (IWRP) The IWRP was initiated in the third quarter of Work on the IWRP was slowed significantly in response to organizational revenue and budget reductions resulting from the 2013 drought response and mandatory outdoor water use restrictions. Preliminary work resumed in the fourth quarter of 2013 and has continued through the first half of This is a significant effort, which is a holistic approach to water resources planning and management that incorporates water supply with elements of water demand management and conservation, hydrology, water quality, climate variability, environmental protection, energy use, regulatory requirements and public participation. Related disciplines of wastewater, stormwater, power and other factors are included in the IWRP to the extent that they affect water supply risk and reliability. The IWRP involves collaboration with many groups within Colorado Springs Utilities and a comprehensive public process. A plan is expected to be presented to Utilities Board by mid Annual Operating and Financial Plan OPERATING PLAN Water Infrastructure Planning Mid-range and long-range planning studies are prepared for the infrastructure in the water collection, treatment, distribution, and non-potable systems. Ongoing and anticipated plan updates include: Raw Water Infrastructure Improvement Project Updates (ongoing) and Homestake System Assessment Updates (ongoing). Mesa Water Treatment Plant Master Plan An update of this plan was initiated in 2014 with projected completion mid The objective is to refine the path forward for the rehabilitation of the Mesa Water Treatment Plant in light of optimizing local water supplies, refining the fluoride management approach, and providing treatment provisions to address water quality challenges. The plan will consider overall water system impacts including distribution improvements for inter-pressure zone transfers and SDS WTP integration and operations. The plan update will establish a long-term capital investment plan for implementation of identified improvements as well as the corresponding Operations and Maintenance expenses. Water Main Replacement Program (WMRP) This program is complimentary to the Finished Water Master Plan and was initiated in 2005 as an ongoing program that assesses, prioritizes, and plans replacement of pipes and appurtenances in the finished water distribution system, including failing water mains and those with inadequate fire flows. WMRP replaces approximately six to eight miles of distribution water main per year out of a total system of approximately 1985 miles. The goals of the WMRP include establishing a long-range plan for the systematic replacement of aging and deteriorated water distribution system infrastructure, managing emergency maintenance activities and ensuring safe and reliable water service. The Water Use Efficiency and Management Plan (WUEMP) : The WUEMP update was initiated third quarter 2013 and will replace the current Water Conservation Plan (WCP) It will identify a portfolio of cost-effective measures and strategies that will be implemented to meet a specific water savings goal. The

79 ultimate product will be a high-level strategic plan that establishes a foundation for making decisions related to water use efficiency and management through The WUEMP will consider historical demand and savings, forecasted demand, water use and customer trends, operational issues, savings benefits and costs, the regulatory and political environment, industry best practices, local markets, public input, and other internal and external water plans. Finally, the WUEMP will provide a vision for the future regarding market opportunities for water efficiency as well as water savings potential. According to Colorado s Water Conservation Act of 2004, all covered entities retail water providers who sell 2,000 acre feet or more of water annually must have a water efficiency plan on file with the state that has been approved by the Colorado Water Conservation Board (CWCB). The WUEMP complements, and will be integrated into, the IWRP Annual Operating and Financial Plan 77

80 Water Service Capital Projects 2015 Approved 1. Southern Delivery System (394242) $95,079,600 The Southern Delivery System is a major regional water delivery project that will bring water from the Arkansas River to Colorado Springs, Fountain, Security, and Pueblo West. The initial phase of the Southern Delivery System is scheduled to be in service by 2016 and will include three raw water pump stations, approximately 50 miles of underground pipeline, and a water treatment plant initially capable of treating up to 50 mgd. 2. Water Mains Replacement Program (394304) $7,000,000 The Water Mains Replacement Program (WMRP) was established in 2005 to identify, assess, prioritize and construct the renewal of failing and inadequate water distribution pipelines and appurtenances throughout the Colorado Springs Utilities' service area. In 2015, 30 projects are scheduled that will replace/renew failing water mains for a total length of approximately 7.5 miles out of the 1985 miles of pipe that make up the water distribution system. 3. Water Service Vehicles and Equipment (380109) $3,539,004 Replace vehicles/equipment to maintain a safe and cost-effective fleet. 4. Tesla Reservoir Liner Rehabilitation (394454) $3,300,000 Rehabilitation of the geomembrane liner at Tesla Regulating Reservoir. The reservoir has a capacity of about 144 million gallons, and regulates flow between the Tesla Hydroelectric Facility and the Pine Valley/McCullough Water Treatment Complex. The reservoir was constructed in 1996, and the liner is at the end of its design life and is damaged due to wind and sun. 5. Highline Transmission Main - Platte, Marksheffel to Academy (394537) $3,110,400 Includes design and construction of 4.5 miles of new water transmission/distribution main from the new SDS Water Treatment Plant to a connection at Academy Blvd. The pipeline will range in size from 24-inch diameter to 48-inch diameter with a total of five connection points to the existing distribution system within the Highline Pressure zone. 6. Upper Williams Creek Reservoir - Phase II (394592) $2,500,000 Upper Williams Creek Reservoir is the terminal storage reservoir for Phase II of the Southern Delivery System (SDS). This budget is for SDS Phase II activities, which include cultural resource survey and treatment, subsurface geotechnical site characterization, and initial (30 percent) engineering design for the reservoir. 7. Purchase and Install New Energy Dissipation Structure (EDS) Valve (394509) $2,319,996 Replace valves inside the Tesla EDS, including the sleeve valves and the isolation valves. Phase 1 includes replacing the sleeve valves and associated pipeline on the two existing trains. Phase 2 work includes replacing the isolation valves on the two existing trains and adding a complete third train Annual Operating and Financial Plan 78

81 8. Interim Emergency Operations Templeton Zone Distribution System Improvements (394622) This project provides interim capabilities to supply water from the SDS treatment plant into the Templeton and Briargate zones under emergency conditions (significantly reduced or completely eliminated Pine Valley McCullough complex supply to these zones). Funding in 2015 provides for construction of engineering analysis identified interim improvements quickly (within 12 hours) to establish the necessary supply transfer from the Northfield zone to meet indoor water demands in these zones. $2,000, Templeton/Briargate Zone Distribution System Improvements (394577) $1,940,004 This project provides a second phase of finished water improvements to move more production from the SDS water treatment plant into the upper pressure zones (Templeton and Briargate) to provide for long-term growth and system reliability. The funding provides for land acquisition along the Marksheffel corridor needed for the large transmission pipelines and pump station and tank site. 10. Water Meters (394204) $1,616,004 Growth driven project to purchase water meters to connect residential, commercial and industrial customers to the system. Included in this project are the funds to replace damaged and defective meters, support the Water Measurement Accuracy Control (WMAC) Program and the Wide Flow Range Commercial and Industrial Water Meter Project. This will assure accurate billing information and eliminate the potential of revenue loss. 11. Mesa Water Treatment Plant Upgrades Program (394536) $1,250,004 This program provides for the improvements needed to address aging infrastructure replacements, increased local water use, and extend the service life of the Mesa Water Treatment Plant (WTP). Funding in 2015 provides for the highest priority components to maintain capacity and reliably treat increased levels of local supplies. Design of key components will begin in Public Improvement Colorado Projects - Water (380083) $1,149,996 This budget pays for Colorado Springs Utilities' share of water utility relocations, betterments and improvements as a result of Pikes Peak Rural Transportation Authority (PPRTA), City Capital Improvements Projects, El Paso County and Colorado Department of Transportation (CDOT) public improvement projects. 13. Waldo Canyon Fire Restoration and Recovery Program (394572) $999,996 The Waldo Canyon Fire Restoration and Recovery Program will be used to restore creek channels, construct sedimentation ponds and replace infrastructure to mitigate sedimentation, erosion and flooding risk caused by the Waldo Canyon Fire Annual Operating and Financial Plan 79

82 14. Finished Water Master Plan Improvements (394573) $858,852 This program encompasses distribution projects that are not related to the construction of the SDS system. The timing of these projects is based on forecasted growth and needed redundancy within the Colorado Springs Utilities' water distribution system. The growth related projects will be partially funded by developers through Contribution in Aid of Construction. 15. Woodmen Road Phase 2 - Water (Alternative 3) (394553) $500,004 This project provides for the relocation of two vaults associated with the operation and maintenance of the 42-inch Pine Valley Water Transmission Pipeline, installed in The pipeline and vaults, which serve potable water to approximately one-third of the citizens of Colorado Springs, are located at the intersection of Woodmen Road and Union Boulevard, one the most heavily trafficked intersections in Colorado Springs. The project is subject to the March 2001 Utilities Relocation Executive Agreement between the City of Colorado Springs and Colorado Springs Utilities. 16. Potable Water Tank Rehabilitation/Replacement Program - Capital (394575) $500,004 Annual Replacement of Potable Water Distribution Tank components due to aging infrastructure. Work has been assessed and prioritized through the ongoing Potable Water Tank Assessment program. Through this program, tank repairs and replacements will be prioritized, and budget and alternative analysis will be utilized to determine the best solutions. 17. Water System Infrastructure Continuity (380096) $500,000 The Water System Infrastructure Continuity Program is an activity that adds and replaces water system infrastructure when project costs are over the $5,000 Operations and Maintenance threshold and when the project is not covered by the Water Main Replacement Program. Examples are smaller footage jobs that are not engineered, large valve replacement, pipe replacement work and rehabilitation done for Water System Continuity. This program is budgeted annually and accounts for necessary infrastructure needs that are not funded under other programs. 18. Twin Rock Pump Station - Variable Speed Drive Life Cycle Replacement (394584) This multiyear project replaces variable frequency drives that are beyond their useful life. Individual component replacement in most cases exceeds the cost of a new drive. The drives will be replaced with newer, energy efficient technology. One drive will be replaced each year, beginning in 2015, until all five drives have been upgraded. $332, Annual Operating and Financial Plan 80

83 19. Water Infrastructure Corrosion Program (394602) $332,376 The intent of a comprehensive Water Infrastructure Corrosion Program (WICP) is to identify, evaluate, monitor, prioritize and construct the repair/replacement of failing cathodic protection systems to ensure safe and reliable water services. Project Engineering and Management is currently performing an assessment of the existing cathodic protection systems for the water systems. This evaluation includes the cataloging and condition assessment of several asset groups based on criticality. 20. New Water Storage (394419) $249,996 Development of new water storage to increase water system yield, manage risk and hydrologic variability, and increase service reliability. 21. Montgomery Reservoir Relining (394595) $249,996 Rehabilitate the upstream face of Montgomery Dam. The current asphalt face was constructed in 1956 with a design life of about 40 years. It has experienced significant cracking, oxidation, and deterioration, particularly on the upper portion of the slope. An interim repair project of crack repair and surface sealing was completed in The anticipated life of these repairs is about five to seven years, and more substantial rehabilitation is needed to extend the life of the upstream face. 22. Bear Creek Watershed Restoration (100 percent grant funded) (394621) $249,996 The goals of the project are to protect the federally-threatened greenback cutthroat trout from sedimentation caused by an adjacent trail system to ensure compliance with the Endangered Species Act, while providing appropriate recreational opportunities. The project is 100 percent grant funded. 23. Homestake Microwave and Radio Infrastructure Improvements (394488) $240,000 Installation, upgrade and improvement of the Very High Frequency (VHF) Voice and Ultra High Frequency (UHF) Data Communication Systems used in support of Supervisory Control and Data Acquisition (SCADA) operations supporting the Upper and Mid Homestake Watershed. The upgrades and improvements will be performed via a partnership between Colorado Springs Utilities, Aurora Water, various state and federal governmental agencies and private communications carriers to share and leverage the resources needed to establish a robust, fully redundant, SCADA and voice communications relay and back haul network. 24. Cache La Poudre Street Bridge Nonpotable Water Main Replacement (394604) Replace the existing 8-inch steel nonpotable water main hanging from the Cache La Poudre Street Bridge with a 12 inch steel nonpotable water main. The existing 8-inch nonpotable water line that crosses Monument Creek under the Cache La Poudre Street Bridge is reaching the end of its service life. $240, Annual Operating and Financial Plan 81

84 25. Homestake Suction Pipeline Replacement (394477) $207,000 During the 2008 Homestake Assessment Project, a total of 47 longitudinal cracks and one circumferential crack were observed in the 66-inch Otero Intake (suction) pipeline. Most of the longitudinal cracks were sizable in width and length which potentially poses a significant risk to the service life of the pipeline that is nearly 50 years old. The majority of Colorado Springs Utilities' and Aurora Water's raw water is transported through this crucial pipeline. This project provides for additional assessment, engineering, and replacement of a damaged section of the Homestake suction pipeline. 26. FONT01 Water Operations Remodel (394576) $200,004 Construct additional offices at 456 Fontanero to support Water Services Operations and begin planning to support the expanding space needs of Water Services Operations - Relocate the majority of the Water Division Planning Engineering Resource Management Department. 27. Fire Hydrant Installation (380099) $200,000 This program is used to replace hydrants that are nonoperational or that are obsolete because replacement parts are no longer manufactured. These hydrants are identified through the Operations and Maintenance Preventive Maintenance Program and notification by internal and external sources. 28. Wolf Ranch Pump Station (394318) $180,000 This budget item covers the cost for completing design and project management of a pump station at the Wolf Ranch Reservoir site at the northwestern boundary of the Wolf Ranch Development to directly pump domestic water and fire protection water to the Wolf Ranch Upper Zone. Construction costs for this pump station are not budgeted and will be paid for by the developer. Currently the project is projected to be on-line by March 2015 but could be delayed at the developer's request. 29. Crystal Dam Refacing (394590) $165,000 This project will rehabilitate the steel upstream face of Crystal Creek Dam to significantly extend the service life of the facing. This includes cleaning, removal of corrosion scale, repair/replacement of the facing, rehabilitating cathodic protection, applying an enhanced multipart epoxy coating, and removal/ rehabilitation of damaged concrete cutoff wall at abutment facing connection. 30. Homestake Dam Improvements (394457) $150,000 Complete repairs to the asphalt face; applying mastic to the asphalt face above elevation 10,153 feet; improvements to the dam crest and site restoration in Las Vegas - East Nonpotable Reservoir Floor (394498) $150,000 Las Vegas nonpotable floor basin is experiencing significant spalling/cracking of the concrete surface. There are large areas of exposed aggregate. The project will resurface the entire basin with asphalt to prevent further degradation of the concrete and avoid the massive cost of reconstructing basin Annual Operating and Financial Plan 82

85 32. Rampart Dam Seepage Evaluation, Design, and Construction (394579) $150,000 Evaluate seepage and internal drainage conditions on the lower portion of the downstream slope of Rampart Dam, design appropriate corrective measures, and perform rehabilitation construction. The project will reduce the risk of internal erosion and piping that could result in a dam safety emergency or catastrophic failure of the dam. 33. Water Tools and Equipment (380101) $140,004 For the purchase of large tools and equipment for the Distribution, Collection and Treatment Department, Construction/Maintenance Section. 34. Homestake Vehicles and Equipment (380124) $125,004 Replacement vehicles and equipment for the Homestake project to maintain a safe, cost effective, and reliable fleet. 35. Developer Initiated Projects - Water (394114) $123,996 Provides for participation or reimbursement for pipelines larger than 12 inches in diameter and above the capacity required to serve the proposed development, for pipelines in designated enclaves, and for required pumping facilities. It also reimburses the developers for pressure relief valves that benefit others outside the development. It includes projects for the University of Colorado Colorado Springs North Campus Master Plan as part of an economic development participation agreement. In accordance with Utilities Rules and Regulations - Water, paragraph 42 A. and C., effective December 31, Northfield Dam (394611) $99,996 Rehabilitate Northfield Dam to satisfy regulatory requirements of the Colorado State Engineer Office (SEO), general dam safety requirements, and Colorado Springs Utilities operational requirements. Project includes spillway reconstruction and outlet modification at the dam, and will demolish and remove the abandoned Northfield Water Treatment Plant. 37. Distribution System Instrumentation and Control Improvement Program (394613) Optimizing the water distribution system through implementation of better designed instrumentation and control strategies will reduce operational costs. This can be achieved by ongoing modeling of the water distribution system to see where improvements can be made. Implementation of modeling recommendations will add about 10 new pressure monitoring sites, and will automate at least 10 existing valve sites per year. $99, Eagle River Project (396081) $99,996 Joint project with the City of Aurora and West Slope entities to develop a comprehensive water project to deliver 10,000 acre feet of water per year to Colorado Springs. Work in 2015 will be to develop a feasible project configuration including further technical work on reservoir sites and engineering for development of a wetland banking concept Annual Operating and Financial Plan 83

86 39. Homestake Pipeline Pressure Pits (394446) $81,504 Installation of new vaults and pressure monitoring equipment to increase Homestake's capability quickly to locate pipeline leaks and failures. 40. East Nonpotable Reservoir Gate Replacement (394497) $75,000 This project will replace the drain gate valve currently leaking and irreparable. The valve will be replaced with a tower type structure similar to other valve structures in the east and west nonpotable reservoirs. 41. Potable Pumping Station Replacement Program (394587) $75,000 Systematic replacement of pump stations as they have reached their useful life and are no longer cost effective. Identification is based on the Finish Water Pump Station Assessment completed in Lab Capital Equipment - Water (380082) $72,000 The Colorado Springs Utilities laboratory maintains over 30 distinct analytical instruments and ancillary pieces of equipment vital to the function of the laboratory. These instruments and equipment require periodic replacement as they reach the end of their life-span, or as technological advances and improved analytical methods drive the need for new instrumentation. This project encompasses those instruments and equipment necessary for continued Safe Drinking Water Act compliance. 43. Potable Pump Station Equipment Replacement Program (394585) $69,996 Based on a System Wide Pump Station Assessment completed in 2009, improvements will be made to capital potable pump station equipment necessary to maintain operational capabilities to an expected facility life of 30 to 50 years. 44. Nichols Dam and Spillway Modifications (394612) $50,004 The project will rehabilitate Nichols Dam to satisfy regulatory requirements of the Colorado State Engineer Office (SEO), general dam safety requirements, and Colorado Springs Utilities operational requirements. Project includes spillway reconstruction, outlet modification, and miscellaneous improvements. 45. Homestake Structure Improvements (380094) $38,004 This project is a multiyear project ( ) for construction of an equipment storage building to prolong the useful life and protect vehicles and equipment that are exposed to harsh, high altitude environment. 46. Governance, Risk and Compliance Management (796356) $34,492 Implementation of a Governance, Risk, and Compliance Solution. The software enables an organization to pursue a systematic, organized approach. 47. Jones Park Land Exchange (394596) $30,000 Analyze, prioritize, initiate, facilitate and complete a land exchange between land owned by the City of Colorado Springs, primarily Utilities controlled lands, and federal agencies, primarily U.S. Forest Service lands Annual Operating and Financial Plan 84

87 48. Xeriscape Plant Database (394601) $30,000 The purpose of the project Xeriscape Plant Database Solution is to develop a replacement plant database for the existing Colorado Springs Utilities SharePoint Internet site, creating pages that allow customers to research and find plants suitable for planting a water-conserving landscape. The solution will include two other functions. First, customers will be able to create a personalized "favorites" list of plants. Second, customers will be able to view photos of local water-conserving landscapes, and then click on plants in the photos to find out the plant's name, its benefits, and growing requirements. 49. Water Tap Install - New Customer (380108) $24,996 This project is for the inspection and installation of water taps for new residential and commercial customers. 50. AMI System Foundation (796512) $15,750 The Advanced Metering Infrastructure (AMI) System represents all of the meters and AMI equipment, network and back-office systems that bring meter reads and measurement data to billing. 51. Water System Design Review, Inspection and Acceptance (394132) $12,000 Water system extension design review, inspection, and documentation for developers/contractors to ensure compliance with City Code and current Line Extension and Service Standards, and to protect system integrity. 52. Data Analytics and Reporting Development Using MDMS (793322) $10,710 The Meter Data Management System (MDMS) provides the business with data and the measurement analytics capabilities for use in many business functions including customer services, trending, forecasting, rate development, predictive studies, demand response programs and many other business opportunities. 53. AMI Equipment (793061) $9,450 Advanced Metering Infrastructure (AMI) Equipment provides annual required capital funding for equipment needs of the AMI system. Requirements include end-point metering equipment such as Net meters, Load Profile meters, MV-90 hardware, X-switches (for KV2C meters), modules and other AMI tools/equipment. 54. AMI System (793356) $8,399 Advanced Metering Infrastructure (AMI) System provides annual required capital funding for needs of the AMI system. Requirements include modifications to system interfaces for functionality of system (ex. billing upload file) and enhancements to AMI software. Subtotal Capital - Water $132,787,353 Capital Labor and Benefits $4,660, Annual Operating and Financial Plan 85

88 Administrative & General Expense $1,174, Total Capital - Water with Allocated Components $138,621,827 Allowance for Funds Used During Construction (AFUDC) $4,321,995 Capitalized Interest $20,717, Grand Total Capital - Water with Allocated Components & AFUDC $163,661, Annual Operating and Financial Plan 86

89 Non-Labor Operations & Maintenance WATER EXPENDITURES 1 Operations and Maintenance does not include inter-service eliminations, undistributed stores expense, or nonoperating products and services. 2 Does not include inter-service eliminations. 3 Common capital allocated to Water Service. FY15 FY14 Approved Approved FY13 Actual $ % $ % Production and Treatment 19,099,860 21,006,839 17,657,109 (1,906,979) -9% 1,442,751 8% Purchased Water 8,875,300 11,372,300 9,166,504 (2,497,000) -22% (291,204) -3% Transmission and Distribution 1,835,667 1,748,866 1,435,549 86,801 5% 400,118 28% Maintenance 7,425,577 7,625,994 7,284,877 (200,417) -3% 140,700 2% Customer Service and Information 1,664,370 1,996,365 2,662,413 (331,995) -17% (998,043) -37% Administrative and General 7,948,347 8,368,102 6,496,897 (419,755) -5% 1,451,450 22% Customer Accounting and Collections 1,734,486 1,895,602 1,683,954 (161,116) -8% 50,532 3% Total Non-Labor Operations & Maintenance $ 48,583,607 $ 54,014,068 $ 46,387,303 $ (5,430,461) -10% $ 2,196,304 5% Labor & Benefits Account Group Increase/ (Decrease) from: FY14 FY13 Actual Production and Treatment 12,140,343 10,600,711 10,057,954 1,539,632 15% 2,082,389 21% Transmission and Distribution 5,133,166 4,864,207 4,962, ,959 6% 170,201 3% Maintenance 5,178,539 4,859,175 5,320, ,364 7% (142,060) -3% Customer Service and Information 503, , , ,766 30% 157,665 46% Administrative and General 20,508,046 18,759,813 17,468,961 1,748,233 9% 3,039,085 17% Customer Accounting and Collections 2,456,328 2,485,689 2,519,088 (29,361) -1% (62,760) -2% Total Labor & Benefits $ 45,920,019 $ 41,958,426 $ 40,675,499 $ 3,961,593 9% $ 5,244,520 13% Total Operations & Maintenance 1 $ 94,503,626 $ 95,972,494 $ 87,062,802 $ (1,468,868) -2% $ 7,440,824 9% Debt Service 2 37,283,431 37,184,000 37,886,233 99,431 0% (602,802) -2% Direct Capital 2 $ 142,943,822 $ 233,347,873 $ 161,749,115 $ (90,404,051) -39% $ (18,805,293) -12% Allocated Capital 3 $ 4,160,537 $ 5,311,535 $ 2,843,645 $ (1,150,998) -22% $ 1,316,892 46% Capitalized Interest $ 20,717,586 $ 18,073,862 $ 10,900,350 $ 2,643,724 15% $ 9,817,236 90% Total $ 299,609,002 $ 389,889,764 $ 300,442,145 $ (90,280,762) -23% $ (833,143) 0% Note: Totals may vary due to rounding. Following is detailed information for each account group. PRODUCTION AND TREATMENT OVERVIEW Production and Treatment expenditures include raw water collection and transmission operations covering 11 counties and using three delivery systems, five water treatment operations and the non-potable water system operation Annual Operating and Financial Plan 87

90 Account Group Approved Approved 2013 PRODUCTION AND TREATMENT EXPENDITURES Actual Increase/ (Decrease) from: Actual Production and Treatment Non-Labor $ 19,099,861 $ 21,006,839 $ 17,657,109 $ (1,906,978) -9% $ 1,442,752 8% Water Source of Supply 11,899,910 12,978,530 11,389,649 (1,078,620) -8% 510,261 4% Water Power for Pumping 4,801,579 5,548,990 4,443,276 (747,411) -13% 358,303 8% Water Purification 1,903,268 1,945,655 1,442,641 (42,387) -2% 460,627 32% Water Tertiary Treatment 106, ,798 59,841 (2,751) -3% 46,206 77% Water Non-Potable System 389, , ,702 (35,809) -8% 67,355 21% Production and Treatment Labor & Benefits $ 12,140,344 $ 10,600,711 $ 10,057,954 $ 1,539,633 15% $ 2,082,390 21% Water Source of Supply 8,224,179 6,941,949 6,225,586 1,282,230 18% 1,998,593 32% Water Power for Pumping 94,562 21, ,654 72, % (105,092) -53% Water Purification 3,598,838 3,421,716 3,425, ,122 5% 173,061 5% Water Tertiary Treatment 153, , ,032 1,640 1% (375) 0% Water Non-Potable System 69,108 63,206 52,905 5,902 9% 16,203 31% Account Group Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Purchased Water Non-Labor $ 8,875,300 $ 11,372,300 $ 9,166,504 $ (2,497,000) -22% $ (291,204) -3% Note: Totals may vary due to rounding. PRODUCTION AND TREATMENT SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($1.2 million) Water Resource Planning 2015 planned reductions (due to budget constraints) in engineering and consulting services to protect our water resources and infrastructure. This includes programs; Arkansas Valley Leasing, Storage Development, and Integrated Water Resource Plan (IWRP). $1.1 million Payments to Pueblo County This increase is for Southern Delivery System mitigation, engineering and design expenditures specific to the monetary mitigation requirements of the Pueblo County 1041 permit, certain National Environmental Policy Act (NEPA) mitigations as required by the Bureau of Reclamation (BOR), and Fremont County mitigation. ($0.6 million) Southern Delivery System From 2014 to 2015 outside professional services for Southern Delivery System MWH program manager is shifting from Operations and Maintenance to Capital, as SDS is at the height of capital construction with the water treatment plant and three pump stations. ($0.2 million) Watershed Planning Reduce agency labor and no participation in Fountain Creek Healthy Waterways Program in ($0.2 million) Water Conservation Program Parks watering program planned completion in ($0.8 million) Power for Pumping This decrease is due to 49,000 acre feet of delivery through Twin Rocks and Otero forecasted in 2015 compared to 64,800 acre feet delivery budgeted in ($2.5 million) Purchased Water This decrease ($2.3 million) is due to 2,000 acre feet delivery through the Fountain Valley Authority System forecasted in 2015 compared to 10,000 acre feet delivery budgeted in The remaining ($0.2 million) is due to Arkansas Valley leasing program not budgeted in 2015 due to budget constraints. $1.3 million Labor - 14 positions to operate the water treatment plant and pump stations for the Southern Delivery System is included in the 2015 budget that's not in Annual Operating and Financial Plan 88

91 2013 to 2015 $1.7 million Payments to Pueblo County This increase is for Southern Delivery System mitigation, engineering and design expenditures specific to the monetary mitigation requirements of the Pueblo County 1041 permit, certain NEPA mitigations as required by the BOR, and Fremont County mitigation. ($1.3 million) Southern Delivery System From 2013 to 2015 outside professional services for Southern Delivery System MWH program manager is shifting from Operations and Maintenance to Capital, as SDS is at the height of capital construction with the water treatment plant and three pump stations. $0.2 million Water Resource Planning 2015 increase over 2013 for Water Supply Planning, Modeling and Analysis. This includes Post IWRP Project and Process Implementation, Mid Range Planning Studies, Blue River Conditional Water Rights Assessment, and Arkansas Valley Risk Assessment. $0.1 million Power for Pumping Pumped less water in 2013 due to water restrictions. $0.1 million Vehicle Maintenance Increased vehicle expenses due to aging of the fleet. $0.4 million Chemicals Treated less water in 2013 due to water restrictions. $2.0 million Labor - 14 positions to operate the water treatment plant and pump stations for the Southern Delivery System included in the 2015 budget that did not exist in TRANSMISSION DISTRIBUTION AND OVERVIEW Transmission and Distribution expenditures include the operations of 2,385 miles of pipeline, 33 tanks, 29 pump stations, 250 pressure reducing stations and thousands of valves across the entire distribution systems. Account Group Note: Totals may vary due to rounding TRANSMISSION AND DISTRIBUTION EXPENDITURES Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Transmission and Distribution Non-Labor $ 1,835,667 $ 1,748,866 $ 1,435,549 $ 86,801 5% $ 400,118 28% Transmission and Distribution Labor & Benefits $ 5,133,166 $ 4,864,207 $ 4,962,965 $ 268,959 6% $ 170,201 3% TRANSMISSION AND DISTRIBUTION SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 $0.1 million Office Alterations Construct additional offices at 456 Fontanero to support the expanding space needs of Water Services Operations - Relocate the majority of the Water Division Planning Engineering Resource Management Department. This is the Operations and Maintenance portion of capital activity $0.2 million Labor From 2014 to 2015 there is a shift in work between Transmission and Distribution and Capital to 2015 $0.4 million Water Planning and Design This increase is for Mesa Water Treatment Plant system-wide Impact Study and Raw Water System Master Planning Program Annual Operating and Financial Plan 89

92 MAINTENANCE EXPENDITURES OVERVIEW Funding in the maintenance area follows the cycle of service for water beginning with Source of Supply in the watersheds. Maintenance includes road access and reservoir maintenance items. Water is transferred via pump stations which have exceptional equipment maintenance needs. Raw water is treated at water treatment plants for the distribution system where maintenance items include plant equipment, utilities, engineering and site work. If the raw water is not treated for the distribution system, it is used in the non-potable system which includes tertiary treatment equipment and plant maintenance (equipment and facility) as well as nonpotable pumps and nonpotable distribution system of pipes and valves. Account Group Note: Totals may vary due to rounding Approved Approved 2013 Actual MAINTENANCE EXPENDITURES Increase/ (Decrease) from: Actual Maintenance Non-Labor $ 7,425,576 $ 7,625,994 $ 7,284,877 $ (200,418) -3% $ 140,699 2% Source of Supply Maintenance 2,245,443 2,135,095 1,693, ,348 5% 552,433 33% Pumping Maintenance 346, , ,218 (10,108) -3% 177, % Water Purification Maintenance 766,085 1,254,325 1,947,317 (488,240) -39% (1,181,232) -61% Water Transmission and Distribution Maintenance 3,856,580 3,711,976 3,275, ,604 4% 580,740 18% Water Tertiary Treatment Maintenance 86,869 87,641 56,353 (772) -1% 30,516 54% Water Non-potable System Maintenance 124,000 80, ,139 43,750 55% (19,139) -13% Maintenance Labor & Benefits $ 5,178,540 $ 4,859,174 $ 5,320,599 $ 319,366 7% $ (142,059) -3% Source of Supply Maintenance 575, , , ,257 22% (71,411) -11% Pumping Maintenance 363, , , ,436 56% (27,428) -7% Water Purification Maintenance 642, , ,937 (179,512) -22% (20,870) -3% Water Transmission and Distribution Maintenance 3,593,577 3,296,758 3,562, ,819 9% 30,827 1% Water Tertiary Treatment Maintenance 1,213 33,192 31,973 (31,979) -96% (30,760) -96% Water Non-potable System Maintenance 2,122 3,777 24,539 (1,655) -44% (22,417) -91% MAINTENANCE SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 $0.2 million Labor From 2014 to 2015 there is a shift in work between Maintenance and Capital. The remaining difference represents actual pay changes from 2014 which are budgeted in a pool in Human Resources to 2015 No Significant Changes 2015 Annual Operating and Financial Plan 90

93 ADMINISTRATIVE AND GENERAL EXPENDITURE OVERVIEW Administrative and general expenses are critical to the delivery of Colorado Springs Utilities four services. These expenses are for numerous functional areas that efficiently provide critical support for multiple services while directly delivering essential services to our customers and community. While some of these expenses are directly attributable to one service, the majority of them provide benefit to all four services and are allocated to those services using statistical basis that are widely accepted throughout the utility industry. Non-Labor Administrative and General ADMINISTRATIVE AND GENERAL EXPENDITURES Account groups are allocated to every service. The detail for these expenses appears in the division sections. Note: Totals may vary due to rounding Approved Approved 2013 Actual Customer Service and Information 1,664,370 1,996,365 2,662,413 (331,995) -17% (998,043) -37% Administrative and General 7,948,347 8,368,102 6,496,897 (419,755) -5% 1,451,450 22% Customer Accounting and Collections 1,734,486 1,895,602 1,683,954 (161,116) -8% 50,532 3% Total Non-Labor Administrative and General $ 11,347,203 $ 12,260,069 $ 10,843,264 $ (912,866) -7% $ 503,939 5% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Customer Service and Information 503, , , ,766 30% 157,665 46% Administrative and General 20,508,046 18,759,813 17,468,961 1,748,233 9% 3,039,085 17% Customer Accounting and Collections 2,456,328 2,485,689 2,519,088 (29,361) -1% (62,760) -2% Total Labor & Benefits $ 23,467,971 $ 21,634,333 $ 20,333,981 $ 1,833,638 8% $ 3,133,990 15% Total Administrative and General $ 34,815,174 $ 33,894,402 $ 31,177,245 $ 920,772 3% $ 3,637,929 12% ADMINISTRATIVE AND GENERAL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.2 million) Rebates Planned 2015 decreases in residential and business toilet rebates. ($0.1 million) Customer Information Planned 2015 decrease in Customer Information. ($0.2 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. ($0.2 million) Legal Fees Estimates for these costs from the City Attorney s office are lower in 2015 than in 2014, due to intentional expenditure reductions. ($0.1 million) Bad Debts Lower bad debt as a percentage of revenue included in budget is based on historical write-off as a percentage of revenue. $0.1 million Labor From 2014 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. $0.7 million Pay Changes Actual pay changes from 2014 are budgeted in a base pay adjustment pool in Human Resources, however once pay changes, it is accounted for in the area in which the employee works Annual Operating and Financial Plan 91

94 $0.6 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here. $0.3 million Pay Adjustment Pool Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool to 2015 ($0.8 million) Customer Information Customer Information higher in 2013 due to water restrictions. $0.4 million Property Insurance During 2012 the management of insurance for Colorado Springs Utilities moved into the Planning and Finance Division from the City. After detailed evaluation of insurance policies it was determined that they were deficient in insuring the property value and risk associated with Colorado Springs Utilities assets. Additional coverage was added in 2013 and is now reflected in the 2015 budget. $0.3 million IT Lifecycle Upgrades Increased software license costs and additional Operations and Maintenance for completed IT projects $0.3 million Facilities Expense Recognition Expenses for corrective maintenance and emergency projects are budgeted based on historical spend in administrative and general accounts, but actually expensed to the appropriate service account. The expenses from 2013 will be in the service where they occurred, while budget for 2015 is in administrative and general. $0.3 million Legal Fees Estimates for these costs from the City Attorney s office are higher in 2015 than in $0.2 million Injury and Damages Lower liability claims in ($0.2 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. $0.1 million Labor From 2013 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. $1.7 million Pay Adjustment Pool The 2015 base pay budget proposes 4 percent. In 2013 pay adjustments were embedded in labor throughout the organization. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool. $0.7 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here. $0.7 million Pay Changes Actual pay changes from 2013 are budgeted in a base pay adjustment pool in Human Resources, however once pay changes, it is accounted for in the area in which the employee works Annual Operating and Financial Plan 92

95 WASTEWATER EWATER SERVICE OVERVIEW SERVICE HIGHLIGHTS Wastewater Services graph legend: 1 Customers 2 Lift Station 3 Water Resource Recovery Facility 4 Discharge to Stream 5 Reclaimed Water 6 Non-potable potable System 7 Biosolids Treatment 8 Biosolids Land Application STATISTICS Number of active accounts: 134, 134,007 Wastewater treated: average of 38 million gpd Combined permitted capacity: 85 million gpd Miles of sewer main pipe: more than 1,600 miles Number of water resource recovery facilities: 2 Solids Handling Facility: 1 Number of lift stations: 19* Figures based on the 2014 Official Statement dated September 9, 2014 unless noted with an asterisk. asterisk 2015 KEY PLANNING FACTORS FA Biological Nutrient Removal Improvements at the Las Vegas Wastewater Treatment Plant This project is required by State regulations that address nutrients (nitrogen and phosphorous) in receiving streams. The biological removal of nitrogen and phosphorous process will occur in the existing aeration basins and include installation of new baffle walls, internal mixed liquor recycle (IMLR) pumps and n nitrate itrate probes, and process controls for the dissolved oxygen system. Design is underway and construc construction tion is expected to be complete by Local Collectors Evaluation and Rehabilitation Program (LCERP) LCERP was initiated in 2004 to significantly improve rove the collection system and reduce Sanitary Sewer Overflows. Sanitary Sewer Creek Crossings (SSCC) The project evaluates and rehabilitates/repairs sanitary sewer pipelines that cross major and minor drainages in Colorado Springs Utilities service area area Annual Operating and Financial Plan 93

96 2015 OPERATING PLAN Wastewater Treatment and Capacity Planning: The Wastewater Integrated Master Plan is updated every three to five years and provides a comprehensive look at collection and treatment facilities infrastructure investment needs driven by growth demands, changes in wastewater characteristics, regulatory requirements, aging infrastructure, and advances in technology. An update of this plan is scheduled in the next one to two years and will include a focus on long-term regulatory nutrient compliance. Wastewater Collection System Infrastructure Programs: The comprehensive Wastewater System Improvement Program is a companion set of programs to the Wastewater Integrated Master Plan and includes the Collection System Rehabilitation and Replacement Project the Local Collectors Evaluation and Rehabilitation Project (LCERP), the Sanitary Sewer Creek Crossing (SSCC) Project, the Manhole Evaluation and Rehabilitation Project (MHERP) and the Lift Station and Force Main Evaluation and Rehabilitation Program (LSFMERP). These programs systematically assess and plan for rehabilitation and replacement of the wastewater collection system infrastructure mainly driven by the need to continuously address aging infrastructure to reduce the risk of sanitary sewer overflows. Wastewater Service Projects 2015 Approved 1. Local Collectors Evaluation and Rehabilitation Program (LCERP) (495121) $3,200,004 This project was initiated in 2004 to significantly improve the collection system and reduce Sanitary Sewer Overflows (SSOs). It addresses sanitary sewer pipes that are less than 10 inches in diameter totaling approximately 83 percent (1,150 miles) of the wastewater collection system. This program assesses the condition of all sanitary sewer pipe segments less than 10 inches in diameter and ranks them based on a priority schedule to be re-inspected, rehabilitated, repaired or replaced. 2. SSCC Collection System Rehabilitation/Replacement (495253) $2,990,004 This project follows the completion of the Sanitary Sewer Creek Crossing (SSCC) program and performs ongoing work to maintain the collection system in accordance with the Utilities-adopted management of assets. SSCC Collection System Rehabilitation/Replacement is a Capital Project to evaluate and rehabilitate sanitary sewer pipelines that cross drainages in our service area. There are an estimated 1469 sanitary sewer pipelines in or near creeks, 369 of those pipelines have been identified to be evaluated and repaired under the amended Compliance Order schedule. 3. Wastewater Service Vehicles and Equipment (480017) $2,256,996 Replacement of vehicles and equipment for the Wastewater service to maintain a safe, cost effective and reliable fleet 2015 Annual Operating and Financial Plan 94

97 4. Las Vegas Street Water Resource Recovery Facility Biological Nutrient Removal Improvements (495135) Install improvements at the Las Vegas Street Water Resource Recovery Facility (LVSWRRF) to implement biological removal of nitrogen and phosphorous. This project is required by State regulations that address nutrients (nitrogen and phosphorous) in receiving streams. The process improvements will occur in the existing aeration basins and include installation of new baffle walls, internal mixed liquor recycle (IMLR) pumps and nitrate probes, and process controls for the dissolved oxygen system. Design is currently underway and construction is expected to be complete by $1,200, Collection System Rehabilitation/Replacement (495236) $975,000 Collection System Rehabilitation/Replacement Project provides for long-term capitalized rehabilitation/replacement of the collection system for pipes 10 inch in diameter and greater identified to require improvements from re-inspection of sewer pipes installed before January 1, 1994 (sewer pipes that were included in the SSERP), and first inspection and re-inspection of sewer pipes constructed after January 1, This project succeeds the SSERP and performs the ongoing rehabilitation and replacement work to facilitate operations and upgrade the sanitary sewer collection system condition. 6. Las Vegas Treatment Plant Freeze Protected Storage Building (495288) $804,900 Multiyear freeze protected 9,000 sf storage building for equipment located at Las Vegas Treatment Plant. 7. Developer Initiated Projects - Wastewater (495296) $502,500 Provides for participation or reimbursement of wastewater mains, manholes or infrastructure upgrades when required for development and other customer projects. It includes projects for the University of Colorado Colorado Springs North Campus Master Plan as part of an economic development participation agreement. In accordance with Utilities Rules and Regulations - Wastewater, paragraph 35.A., effective December 31, Lift Station and Force Main Evaluation and Rehabilitation Program (495281) $500,004 The Lift Station and Force Main Evaluation and Rehabilitation Program (LSFMERP) is a program to systematically assess the condition of critical wastewater pump stations and force mains to avoid sanitary sewer overflows (SSOs). Capital funds cover needed improvements for the lift stations to maintain reliability. 9. Public Improvement Projects - Wastewater (480015) $350,004 This budget pays for our share of wastewater relocations, betterments and improvements as a result of Pikes Peak Rural Transportation Authority (PPRTA), City Capital Improvements Projects, El Paso County and Colorado Department of Transportation (CDOT) public improvement projects Annual Operating and Financial Plan 95

98 10. Manhole Evaluation and Rehabilitation Program (495252) $200,004 The purpose of this program is to inspect, assess, repair, rehabilitate and/or replace the estimated 35,000 manholes in the wastewater collection system. To date, manholes have been addressed within the Collection System Rehabilitation and Replacement and Sanitary Sewer Creek Crossing programs as well as the LCERP. This program is an integral part of hardening our wastewater infrastructure to reduce the risk of sanitary sewer overflows and to reduce infiltration. 11. Solids Handling Disposal Facility Digester Feed Pump Replacement (495289) $180,000 Replace the obsolete digester feed pumps, grinders, Variable Frequency Drives, and related piping for Digesters #1 and #2. This project will enhance the reliability, efficiency and provide for flexibility of the treatment process. 12. Las Vegas Water Resource Recovery Facility - Headworks Odor Control Media Replacement (495310) The odor control vessels at the Las Vegas Street Water Resource Recovery Facility contain a media which removes the sulfur and nitrogen based odors that are removed from the headworks facility, namely the step screen channels and screenings building and the grit chambers. These areas generate unpleasant nuisance odors and hazardous gases which need to be removed in order to maintain a safe working environment. The spent media must be replaced periodically (approximate media life is about five years) in order to mitigate odor emissions from the plant. $99, Closed Circuit Television Equipment (CCTV) (480004) $87,996 This project provides for replacement or upgrades of CCTV Cameras and Equipment used by collection system staff to evaluate the condition of sanitary sewer pipe. 14. Lab Equipment Capital - Wastewater (480003) $54,996 The Colorado Springs Utilities laboratory maintains over 30 distinct analytical instruments and ancillary pieces of equipment vital to the function of the laboratory. These instruments and equipment require periodic replacement as they reach the end of their life-span, or as technological advances and improved analytical methods drive the need for new instrumentation. This project encompasses those instruments and equipment needed for continued Clean Water Act compliance. 15. Wastewater Infrastructure Corrosion Program (495322) $52,068 The intent of a comprehensive Wastewater Infrastructure Corrosion Program (WICP) is to identify, evaluate, monitor, prioritize and construct the repair/replacement of failing cathodic protection systems to insure safe and reliable wastewater services to our customers. We are currently performing an assessment of the existing cathodic protection systems for the wastewater systems. This evaluation includes the cataloging and condition assessment of several asset groups based on criticality Annual Operating and Financial Plan 96

99 16. J.D. Phillips - Install Ladders into the Aeration Basins (495313) $30,000 This project will install permanent ladders into the basins and eliminate a significant safety risk. 17. Solids Handling Disposal Facility Air Handling Unit/Control System Replacement (495306) Replace the air handling unit and associated control system at the Clear Spring Ranch Solids Handling and Disposal Facility for improved reliability and control of the system. $15, Wastewater System Design Review, Inspection and Acceptance (495062) $12,000 Wastewater pipeline design review, inspection, and documentation for developers and contractors to ensure compliance with City Code and Colorado Springs Utilities' current Line Extension and Service Standards, and to protect system integrity. Subtotal Capital - Wastewater $13,511,472 Capital Labor & Benefits $1,007,897 Administrative & General Expense $223, Total Capital - Wastewater with Allocated Components $14,743,048 Allowance for Funds Used During Construction (AFUDC) $ Grand Total Capital - Wastewater with Allocated Components & AFUDC $14,743, Annual Operating and Financial Plan 97

100 Non-Labor Operations & Maintenance WASTEWATER EXPENDITURES 1 Operations and Maintenance does not include inter-service eliminations, undistributed stores expense, or nonoperating products and services. 2 Does not include inter-service eliminations. 3 Common capital allocated to Wastewater Service. Note: Totals may vary due to rounding Approved Approved 2013 Actual Production and Treatment 3,614,280 3,765,633 3,197,316 (151,353) -4% 416,964 13% Transmission and Distribution 1,984,996 2,108,067 1,693,969 (123,071) -6% 291,027 17% Maintenance 3,233,597 3,164,978 2,974,166 68,619 2% 259,431 9% Customer Service and Information 157, ,682 94,485 (56,443) -26% 62,754 66% Administrative and General 4,047,691 4,584,693 3,478,218 (537,002) -12% 569,473 16% Customer Accounting and Collections 740, , ,649 (91,683) -11% (16,061) -2% Total Non-Labor Operations & Maintenance $ 13,778,391 $ 14,669,324 $ 12,194,803 $ (890,933) -6% $ 1,583,588 13% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Production and Treatment 2,658,023 2,557,053 2,525, ,970 4% 132,281 5% Transmission and Distribution 4,854,567 4,649,896 4,602, ,671 4% 251,996 5% Maintenance 2,444,767 2,384,354 2,824,024 60,413 3% (379,257) -13% Customer Service and Information 491, , , ,999 30% 161,116 49% Administrative and General 9,368,450 9,467,129 8,760,000 (98,679) -1% 608,450 7% Customer Accounting and Collections 1,955,271 2,075,580 2,126,058 (120,309) -6% (170,787) -8% Total Labor & Benefits $ 21,772,537 $ 21,513,472 $ 21,168,738 $ 259,065 1% $ 603,799 3% Total Operations & Maintenance 1 $ 35,550,928 $ 36,182,796 $ 33,363,541 $ (631,868) -2% $ 2,187,387 7% Debt Service 2 24,799,653 24,979,103 23,943,791 (179,450) -1% 855,862 4% Direct Capital 2 $ 14,743,048 $ 11,658,451 $ 10,611,950 $ 3,084,597 26% $ 4,131,098 39% Allocated Capital 3 $ 1,828,132 $ 2,540,961 $ 1,360,358 $ (712,829) -28% $ 467,774 34% Total $ 76,921,761 $ 75,361,311 $ 69,279,640 $ 1,560,450 2% $ 7,642,121 11% Following is detailed information for each account group. PRODUCTION AND TREATMENT OVERVIEW ed items include operational and general plant activities to include treatment process monitoring, utilities, engineering, training and labor Annual Operating and Financial Plan 98

101 Account Group Note: Totals may vary due to rounding Approved Approved 2013 PRODUCTION AND TREATMENT EXPENDITURES Actual Increase/ (Decrease) from: Actual Production and Treatment Non-Labor $ 3,614,281 $ 3,765,633 $ 3,197,316 $ (151,352) -4% $ 416,965 13% Wastewater Laboratory 228, , ,253 (42,163) -16% (24,198) -10% Wastewater Trickling Filter 38, , ,635 (154,569) -80% (142,782) -79% Wastewater Primary Treatment 419, , ,142 2,724 1% 43,053 11% Wastewater Preliminary Treatment 9,697 50,186 6,902 (40,489) -81% 2,795 40% Wastewater Active Sludge 2,594,099 2,407,905 2,027, ,194 8% 566,639 28% Wastewater Tertiary Treatment ,023 (50) -100% (46,023) -100% Wastewater Recovery Operations 324, , ,901 (102,999) -24% 17,481 6% Production and Treatment Labor & Benefits $ 2,658,023 $ 2,557,053 $ 2,525,743 $ 100,970 4% $ 132,280 5% Wastewater Laboratory 959, , ,738 87,627 10% 11,127 1% Wastewater Trickling Filter 53,677 94,392 37,650 (40,715) -43% 16,027 43% Wastewater Primary Treatment 155, , ,484 (7,618) -5% (2,430) -2% Wastewater Preliminary Treatment 156, , ,538 6,281 4% (4,886) -3% Wastewater Active Sludge 925, , ,715 8,204 1% 67,547 8% Wastewater Recovery Operations 407, , ,618 47,191 13% 44,895 12% 2014 to 2015 No Significant Changes PRODUCTION AND TREATMENT SIGNIFICANT FINANCIAL CHANGES 2013 to 2015 $0.4 million Energy Costs This increase is due to higher energy costs at the Las Vegas Wastewater Treatment Plant and J.D. Phillips Water Resource Recovery Facility. $0.1 million Labor From 2013 to 2015 there is a shift in work between production and treatment and maintenance. TRANSMISSION AND DISTRIBUTION EXPENDITURES OVERVIEW Funding provides for regular maintenance and inspection of the wastewater collection system, 1,643 miles of pipe and 19 lift stations. These services include regular preventative cleaning of mains, CCTV (closed circuit television) inspections to ensure integrity of the system and preventive maintenance of lift stations. Continuous operation of lift stations requires inspection and service at prescribed intervals throughout the year to avoid failure. Other preventative measures utilized are grease release treatment to reduce balls of grease accumulating in the system and root control treatment to the main lines to reduce cleaning frequency Annual Operating and Financial Plan 99

102 Account Group Note: Totals may vary due to rounding TRANSMISSION AND DISTRIBUTION EXPENDITURES Approved Approved 2013 Actual Increase/ (Decrease) from: Actual Transmission and Distribution Non-Labor $ 1,984,996 $ 2,108,067 $ 1,693,969 $ (123,071) -6% $ 291,027 17% Wastewater City Collection System 1,949,996 2,034,073 1,646,112 (84,077) -4% 303,884 18% Wastewater Independent Waste 35,000 73,994 47,857 (38,994) -53% (12,857) -27% Transmission and Distribution Labor & Benefits $ 4,854,567 $ 4,649,896 $ 4,602,571 $ 204,671 4% $ 251,996 5% Wastewater City Collection System 4,417,250 4,241,534 4,187, ,716 4% 230,170 5% Wastewater Independent Waste 412, , ,299 4,297 1% 23,360 6% Wastewater Non-potable System 24, ,192 24,658 0% (1,534) -6% TRANSMISSION AND DISTRIBUTION SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.1 million) Plant Security A reduction in armed guards planned in 2015 compared to to 2015 $0.2 million Vehicle Maintenance Increased vehicle expenses due to aging fleet. $0.1 million Wastewater Planning and Design This increase is for Odowatch Maintenance Agreement for the Las Vegas Wastewater Resource Recovery Facility and Recalibration of BioWin Model. $0.2 million Labor In 2014, there is a shift in work between transmission and distribution and maintenance. MAINTENANCE EXPENDITURES OVERVIEW This category of expenditures includes maintenance to existing critical wastewater infrastructure including but not limited to pumps, valves and controls in lift stations, sediment basins, clarifiers, blowers and UV disinfection in the treatment plant processes, filters and chemical feeds in the tertiary treatment process, digesters and injectors in the solids handling process, pipes and manholes in the collection system Annual Operating and Financial Plan 100

103 Account Group Approved Approved 2013 Actual MAINTENANCE EXPENDITURES Increase/ (Decrease) from: Actual Maintenance Non-Labor $ 3,233,596 $ 3,164,978 $ 2,974,166 $ 68,618 2% $ 259,430 9% Wastewater City Collection System Maintenance 1,346,152 1,370,808 1,128,159 (24,656) -2% 217,993 19% Wastewater Preliminary Treatment Maintenance 68,500 66,438 83,685 2,062 3% (15,185) -18% Wastewater Primary Treatment Maintenance 108,799 97,700 96,323 11,099 11% 12,476 13% Wastewater Trickling Filter Maintenance 47,056 48,575 2,103 (1,519) -3% 44, % Wastewater Active Sludge Maintenance 877, , ,416 8,400 1% (5,308) -1% Wastewater Tertiary Treatment Maintenance , % (30,951) -100% Wastewater Recource Recovery Maintenance 785, , ,529 73,232 10% 35,452 5% Maintenance Labor & Benefits $ 2,444,766 $ 2,384,354 $ 2,824,024 $ 60,412 3% $ (379,258) -13% Wastewater City Collection System Maintenance 1,620,942 1,562,562 1,919,657 58,380 4% (298,715) -16% Wastewater Preliminary Treatment Maintenance 57,552 56,728 86, % (28,873) -33% Wastewater Primary Treatment Maintenance 214, , ,407 2,257 1% 19,537 10% Wastewater Trickling Filter Maintenance % (572) -100% Wastewater Active Sludge Maintenance 227, , ,424 (23,259) -9% (80,128) -26% Wastewater Tertiary Treatment Maintenance % (820) -100% Wastewater Recource Recovery Maintenance 324, , ,719 22,210 7% 10,313 3% Note: Totals may vary due to rounding to 2015 No Significant Changes MAINTENANCE SIGNIFICANT FINANCIAL CHANGES 2013 to 2015 $0.2 million Lift Station Maintenance This increase is due to rising maintenance costs. ($0.4 million ) Labor In 2015, there is a shift in work between maintenance and production and treatment and transmission and distribution. ADMINISTRATIVE AND GENERAL EXPENSES OVERVIEW Administrative and general expenses are critical to the delivery of Colorado Springs Utilities four services. These expenses are for numerous functional areas that efficiently provide critical support for multiple services while directly delivering essential services to our customers and community. While some of these expenses are directly attributable to one service, the majority of them provide benefit to all four services and are allocated to those services using statistical basis that are widely accepted throughout the utility industry Annual Operating and Financial Plan 101

104 Non-Labor Administrative and General ADMINISTRATIVE AND GENERAL EXPENDITURES Approved Approved 2013 Actual Customer Service and Information 157, ,682 94,485 (56,443) -26% 62,754 66% Administrative and General 4,047,691 4,584,693 3,478,218 (537,002) -12% 569,473 16% Customer Accounting and Collections 740, , ,649 (91,683) -11% (16,061) -2% Total Non-Labor Administrative and General $ 4,945,518 $ 5,630,646 $ 4,329,352 $ (685,128) -12% $ 616,166 14% Labor & Benefits Account Group Increase/ (Decrease) from: Actual Customer Service and Information 491, , , ,999 30% 161,116 49% Administrative and General 9,368,450 9,467,129 8,760,000 (98,679) -1% 608,450 7% Customer Accounting and Collections 1,955,271 2,075,580 2,126,058 (120,309) -6% (170,787) -8% Total Labor & Benefits $ 11,815,180 $ 11,922,169 $ 11,216,401 $ (106,989) -1% $ 598,779 5% Total Administrative and General $ 16,760,698 $ 17,552,815 $ 15,545,753 $ (792,117) -5% $ 1,214,945 8% Note: Totals may vary due to rounding. ADMINISTRATIVE AND GENERAL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($0.1 million) Customer and Business Solutions Allocated 2015 reduced spending for surveys. ($0.2 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. ($0.1 million) Legal Fees Estimates for these costs from the City Attorney s office are lower in 2015 than in 2014, due to intentional expenditure reductions. ($0.1 million) Injuries and Damages Lower liability claim estimates based on historical trend. ($0.1 million) Bad Debts Lower bad debt as a percentage of revenue included in budget is based on historical write-off as a percentage of revenue to 2015 $0.1 million Customer Information Increased allocation to wastewater for Customer Information. $0.2 million Facilities Expense Recognition Expenses for corrective maintenance and emergency projects are budgeted based on historical spend in administrative and general accounts, but actually expensed to the appropriate service account. The expenses from 2013 will be in the service where they occurred, while budget for 2015 is in administrative and general. $0.2 million Property Insurance During 2012 the management of insurance for Colorado Springs Utilities moved into the Planning and Finance Division from the City. After detailed evaluation of insurance policies it was determined that they were deficient in insuring the property value and risk associated with Colorado Springs Utilities assets. Additional coverage was added in 2013 and is now reflected in the 2015 budget. $0.1 million Legal Fees Estimates from the City Attorney s office are higher in 2015 than in $0.8 million Pay Adjustment Pool The 2015 base pay budget proposes 4 percent. In 2013 pay adjustments were embedded in labor throughout the organization. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool. ($0.1 million) Employee Leave Payout Sick leave conversion, retiree sick leave, and separating employee vacation expense. ($0.1 million) Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here Annual Operating and Financial Plan 102

105 Enterprise Wide Capital Projects 2015 Approved 1. Pikes Peak Regional Communications Network (PPRCN)/Colorado Springs Utilities Infrastructure Program of Work (596377) Colorado Springs Utilities partners with El Paso County and City of Colorado Springs in the Pikes Peak Regional Communication Network (PPRCN). The PPRCN provides trunked radio communication for utilities and emergency response teams (police, fire, sheriff, etc.). Colorado Springs Utilities is responsible for 20 percent of the infrastructure costs of the PPRCN network. This project funds CSU's 2015 portion of a PPRCN infrastructure upgrade, which is needed to improve system reliability and security, as well as maintain compatibility with current and future trunked radio technology. $859, BRDS02 Halon Replacement (586280) $849,996 Upgrade to the chemical fire suppression system at the System Energy Control Center Building (BRDS02). This system serves critical electrical systems, information technology infrastructure, and technical and system control areas. It is essential in complying with U.S. Department of Transportation requirements and ensures a reliable fire safety function. In addition, it satisfies the City Auditor's 2012 Data Center Audit recommendations. Data Center size will be reduced as part of this project. 3. Pikes Peak Regional Communications Network/Colorado Springs Utilities Dispatch Console Program of Work (596386) Colorado Springs Utilities partners with El Paso County and City of Colorado Springs in the Pikes Peak Regional Communication Network (PPRCN). The PPRCN provides trunked radio communication for utilities and emergency response teams (police, fire, sheriff, etc.). This project will upgrade Colorado Springs Utilities' existing radio dispatch consoles with new consoles and add new consoles at the East Service Center. The existing consoles are 13 years old, and will no longer be supported by Motorola in The new consoles include significant new security and functionality improvements. $800, Microsoft Office Upgrade from 2007 to 2013 (596442) $731,004 Upgrade all Common Operating Environment (COE) computers (approximately 2,300) from Office 2007 to Office Customer Information System (CIS) Upgrades (596434) $650,004 Upgrade of the Customer Care and Billing Customer Information System. The existing version of the software (2.3.1) was last upgraded over 4 years ago. The system must be upgraded to maintain standard support from the vendor and continue to meet ongoing business needs Annual Operating and Financial Plan 103

106 6. Common Service Vehicles and Equipment (580175) $579,000 Replacement of vehicles and equipment for the Common service to maintain a safe, cost effective and reliable fleet. 7. MAXIMO 7.Next (596244) $519,996 Implement Maximo Work Asset Management software version 7.5.x to improve operational effectiveness, quality of information and system performance. Maximo 7.5 includes significant improvements in supply chain functionality and enables new features that benefit asset management. Additional benefits include an integrated scheduling solution. 8. Network Communications Upgrade (580164) $489,000 Colorado Springs Utilities maintains more than 500 enterprise networking devices. These devices run all voice and data computer systems and applications. They provide network connectivity, which enables all forms of communications such as telephone calls, , security systems, control networks, etc. The typical life cycle for network devices is approximately four to five years due to warranty, performance, capacity, maintenance, and compatibility requirements. This capital project provides funding for the upgrade/replacement of network devices that no longer meet those requirements. 9. ESSC01 Major HVAC and Energy Efficiency Upgrades (596325) $399,996 Continuation of the phased-in upgrades to the building envelope and HVAC equipment at the East Side Service Center (ESSC01). This project addresses energy reduction goals for energy efficiency and long-term reliability. 10. Enterprise Analytics (596464) $399,996 This effort is to fulfill the organization's business requirements for a scalable solution that provides the accurate information needed to drive critical business decisions through descriptive reporting, and predictive and prescriptive analytics for enterprise and operational systems. 11. Storage Area Network (SAN) Switch Lifecycle Upgrade 2015 (596468) $350,004 Replace the 4 aging Storage Area Network (SAN) switches with new products and acquire a SAN management tool. 12. Upgrades for UNIX/Windows Servers (596383) $335,496 Colorado Springs Utilities maintains more than 330 enterprise servers running UNIX and Windows operating systems. These servers run all of Colorado Springs Utilities computer applications, including billing, financial, asset management and system control applications. The typical life cycle for servers is approximately 4-5 years due to warranty, performance, capacity, maintenance and compatibility requirements. This capital project provides funding for the upgrade of larger capacity servers that no longer meet those requirements Annual Operating and Financial Plan 104

107 13. Enterprise Records Management (eb Upgrade) (596462) $300,000 This project will implement a centralized electronic records management solution, upgrading or replacing the Bentley (eb) Records Management Server, which is overdue for upgrade or replacement and at risk of failure resulting in loss of access to critical business data. Key components include regulatory compliance support, consistent application of retention schedules, improved document link support with Maximo and Facilities Information Management System (FIMS), and record declaration from within SharePoint. 14. MESA01 Roof Upgrade and Replacement (596443) $275,004 Life cycle replacement and upgrades to the Mesa Conservation and Environmental Center roof. This project will mitigate roof leaks and repair damaged and patched decking. This project should substantially reduce reactive maintenance needs as well as improve energy efficiency resulting from insulation upgrades. 15. CIS Technology Foundation Initiatives (586266) $249,996 Implement urgent initiatives that involve purchases of new software, hardware, and/or services for implementation or integration with existing Customer Information Systems based on revised strategic direction. Examples from 2013/14 include Remittance Processing failover systems, MV-90 data extraction tool for My Usage, Business Process Automation script development, customer self service maintenance/enhancements and SharePoint Website development. Potential initiatives in 2015 include: Oracle service center review, data archiving/purging, configuration mgmt tool, and Web logic server upgrade. 16. Customer Self Service (596389) $200,004 This project focuses on providing customers with new solutions, enabling them to conduct self-service business on an around-the-clock basis. 17. Security Operations Center (SOC) (596506) $159,996 Implement an Intrusion Prevention System (IPS) tool designed to identify possible threats which may have gotten past the firewalls rudimentary inspection. The IPS is designed to do a deeper level of inspection of traffic on the network and provide alerts to the security staff of any anomalous traffic which is either unusual or typical of a hacker. This solution includes the build out of a location for the security team to centralize the security operations of Cyber Security and continuously monitor unusual network traffic in near real time. 18. SharePoint System Upgrades (596445) $155,004 The scope of this project includes two key areas,1) Upgrade SharePoint from 2010 to 2013 and 2) Design and build a SharePoint Disaster Recovery/High Availability system to maintain operability in the event that one of the data centers is out of service. 19. URL Filtering (596466) $155,004 This tool protects staff using the Internet, protects the data allowed out of our network and monitors what comes into our network, ensuring it s not malicious Annual Operating and Financial Plan 105

108 20. Data Center/Communications Room Upgrades (580160) $125,004 Colorado Springs Utilities maintains 157 telecommunication facilities and data centers as part of its regional communications infrastructure. This infrastructure is required for system monitoring of all four utility services. Much of the support equipment, including Uninterrupted Power Supplies (UPS) and Air Conditioning (AC), must be replaced when a failure occurs. This project provides funding for this replacement. The amount of funding allocated annually is based on historical experience with this equipment. 21. AMR Network-USAFA and New Growth Expansion (596463) $125,004 This multiyear ( ) project provides the funding for purchase of additional Automated Meter Reading (AMR) concentrators that are needed to accommodate growth and maintain system reliability within our service territory. The AMR concentrators are required to gather readings from the meters and send those reads to the billing system. As part of its tariff agreements, Colorado Springs Utilities has an obligation to serve any new construction in our service territory, which requires metering infrastructure, including concentrators. 22. Lawson S3-10 Upgrade (596407) $107,604 Upgrade Lawson HR/Financial System to version S3-10. The system must be upgraded to maintain standard support from the vendor and continue to meet Enterprise business requirements. 23. Enterprise Access Management (EAM) (596507) $95,004 Colorado Springs Utilities has a proliferation of privileged accounts (administrator accounts) which are required to do the work being performed at Utilities, however, these accounts are not being monitored or managed to reduce the risk of someone exploiting one of these accounts and gaining access to customer data. This tool is designed to be both a method of protection for these types of privileged accounts and a way to monitor the usage (when used and for what purpose) of these accounts. 24. SONET Communications Network Program of Work (596396) $83,004 Utilities has a fiber optic data network across its service territory to enable communications between central control rooms and monitoring equipment at remote sites, such as electric substations. These systems are critical to monitoring and controlling utilities services. This project funds the upgrade of seven critical components of the network that are no longer supported by the vendor, meaning that software, hardware and security updates are no longer available. 25. Identity and Access Management (IAM) (596508) $81,996 Utilities has tools for creating accounts for users and services. However, there are no enterprise class tools to audit against the groups created and the spanning account permissions created over time as a person moves from one position within Utilities to another. This IAM will provide insight into each account, groups they belong to, and the permissions granted to the user of specific accounts Annual Operating and Financial Plan 106

109 26. Clear Spring Ranch Miscellaneous Improvements (596365) $24,996 Ongoing upgrades and additions to Clear Spring Ranch, including those portions of the ranch used for utility operations and irrigation and share cropping operations. 27. Supervisory Control and Data Acquisition (SCADA) (580216) $9,996 The SCADA system has various hardware replacements and software purchases occur throughout the year. 28. Large Print Devices (Plotters) (580223) $8,148 Upgrade/replacement of large print devices (plotters, wide formatters, and multifunctions) supporting the Colorado Springs Utilities business. There are a total of 15 wide-format devices to upgraded / replaced over 2-3 years as part of the lifecycle management program. Subtotal Capital - Common $9,119,988 Capital Labor & Benefits $1,927,634 Administrative & General Expense $335, Total Capital - Common with Allocated Components $11,383,139 Allowance for Funds Used During Construction (AFUDC) $ Grand Total Capital - Common with Allocated Components $11,383, Annual Operating and Financial Plan 107

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111 Account Group Non-Labor Administrative and General Service FY15 ENTERPRISE WIDE ADMINISTRATIVE AND GENERAL FY14 Approved Approved FY13 Increase/ (Decrease) from: FY14 FY13 Actual Actual $ % $ % Customer Service and Information Electric Service 5,999,287 5,830,849 4,531, ,438 3% 1,467,444 32% Gas Service 1,972,099 2,067,567 1,573,741 (95,468) -5% 398,358 25% Water Service 1,664,370 1,996,365 2,662,413 (331,995) -17% (998,043) -37% Wastewater Service 157, ,682 94,485 (56,443) -26% 62,754 66% Total $ 9,792,995 $ 10,108,463 $ 8,862,482 $ (315,468) -3% $ 930,513 10% Administrative and General Electric Service 13,849,656 15,157,431 12,220,402 (1,307,775) -9% 1,629,254 13% Gas Service 4,364,875 4,805,376 3,750,864 (440,501) -9% 614,011 16% Water Service 7,948,347 8,368,102 6,496,897 (419,755) -5% 1,451,450 22% Wastewater Service 4,047,691 4,584,693 3,478,218 (537,002) -12% 569,473 16% Street Light Service 164, , ,013 (34,794) -17% 3,656 2% Total $ 30,375,238 $ 33,115,065 $ 26,107,394 $ (2,739,827) -8% $ 4,267,844 16% Customer Accounting and Collections Electric Service 3,524,352 3,798,483 3,458,988 (274,131) -7% 65,364 2% Gas Service 2,480,789 2,758,335 2,403,654 (277,546) -10% 77,135 3% Water Service 1,734,486 1,895,602 1,683,954 (161,116) -8% 50,532 3% Wastewater Service 740, , ,649 (91,683) -11% (16,061) -2% Total $ 8,480,215 $ 9,284,691 $ 8,303,245 $ (804,476) -9% $ 176,970 2% Products and Services Electric Service 7,134 9,836 10,668 (2,702) -27% (3,534) -33% Gas Service 3,994 4,281 1,344 (287) -7% 2, % Water Service 2,568 2, % 2,568 0% Wastewater Service 1,226 1, % 1,226 0% Street Light Service % 78 0% Total $ 15,000 $ 17,859 $ 12,012 $ (2,859) -16% $ 2,988 25% Total Non-Labor Administrative and General $ 48,663,448 $ 52,526,078 $ 43,285,133 $ (3,862,630) -7% $ 5,378,315 12% Labor & Benefits Customer Service and Information Electric Service 1,310,866 1,128,205 1,014, ,661 16% 296,630 29% Gas Service 703, , , ,209 30% 228,992 48% Water Service 503, , , ,766 30% 157,665 46% Wastewater Service 491, , , ,999 30% 161,116 49% Total $ 3,008,927 $ 2,439,292 $ 2,164,524 $ 569,635 23% $ 844,403 39% Administrative and General Electric Service 35,558,349 33,756,037 31,333,971 1,802,312 5% 4,224,378 13% Gas Service 11,309,575 11,302,991 10,459,497 6,584 0% 850,078 8% Water Service 20,508,046 18,759,813 17,468,961 1,748,233 9% 3,039,085 17% Wastewater Service 9,368,450 9,467,129 8,760,000 (98,679) -1% 608,450 7% Street Light Service 519, , ,694 (6,489) -1% 33,354 7% Total $ 77,263,468 $ 73,811,507 $ 68,508,123 $ 3,451,961 5% $ 8,755,345 13% Customer Accounting and Collections Electric Service 3,794,044 3,844,920 3,896,148 (50,876) -1% (102,104) -3% Gas Service 3,441,888 3,469,858 3,517,570 (27,970) -1% (75,682) -2% Water Service 2,456,328 2,485,689 2,519,088 (29,361) -1% (62,760) -2% Wastewater Service 1,955,271 2,075,580 2,126,058 (120,309) -6% (170,787) -8% Total $ 11,647,531 $ 11,876,047 $ 12,058,864 $ (228,516) -2% $ (411,333) -3% Total Labor & Benefits $ 91,919,926 $ 88,126,846 $ 82,731,511 $ 3,793,080 4% $ 9,188,415 11% Total Administrative and General $ 140,583,374 $ 140,652,924 $ 126,016,644 (69,550) 0% $ 14,566,730 12% Note: Totals may vary due to rounding Annual Operating and Financial Plan 109

112 ADMINISTRATIVE AND GENERAL SIGNIFICANT FINANCIAL CHANGES 2014 to 2015 ($1.0 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. ($0.9 million) Legal Fees Estimates for these costs from the City Attorney s office are lower in 2015 than in 2014, due to intentional expenditure reductions. ($0.3 million) Injuries and Damages Lower liability claim estimates based on historical trend. ($0.2 million) Property Insurance Estimates for excess liability premium are expected to be lower in the Electric service $0.3 offset by an increase in water and wastewater premiums $0.1 million. ($0.5 million) Bad Debts Lower bad debt as a percentage of revenue included in budget is based on historical write-off as a percentage of revenue. ($0.2 million) Vehicle Maintenance Shift from Administrative and General to Production and Treatment, Transmission and Distribution, and Maintenance. $0.4 million Labor From 2014 to 2015 there is a shift in work between Customer Service and Information and Customer Accounting and Collections. The remaining difference represents actual pay changes from 2013 and $1.1 million Pay Changes Actual pay changes from 2013 and 2014 are budgeted in a base pay adjustment pool in Human Resources, however, once pay changes, it is accounted for in the area in which the employee works. $0.9 million Pay Adjustment Pool Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool. $0.9 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here. $0.5 million Employee Leave Payout Sick leave conversion, retiree sick leave, and separating employee vacation expense to 2015 $0.6 million Electric Demand Side Management (DSM) and Renewable Energy Program Planned 2015 increases in Business Lighting Rebates $0.4 million, Business CFL Promotional Program $0.1 million, and Business Peak Demand Rebates $0.1 million to meet the energy vision. $0.4 million DSM Potential Study The 2015 study will focus on capacity reduction potential. No similar study in $0.3 million DSM Tracking Software Database to manage and report all DSM program information. ($0.6 million) Customer Information Customer information higher in 2013 due to water restrictions ($0.8 million) offset by an increase in other services (primarily electric for DSM) $0.2 million. $0.3 million Gas DSM and Renewable Energy Program Increases in Residential and Business Window Rebates and Residential Water Sense Showerhead Program compared to $1.4 million Facilities Expense Recognition Expenses for corrective maintenance and emergency projects are budgeted based on historical spend in administrative and general accounts, but actually expensed to the appropriate service account. The expenses from 2013 will be in the service where they occurred, while budget for 2015 is in administrative and general. $1.2 million Legal Fees Estimates for these costs from the City Attorney s office are higher in 2015 than in Annual Operating and Financial Plan 110

113 $1.1 million Property Insurance During 2012 the management of insurance for Colorado Springs Utilities moved into the Planning and Finance Division from the City. After detailed evaluation of insurance policies it was determined that they were deficient in insuring the property value and risk associated with Colorado Springs Utilities assets. Additional coverage was added in 2013 and is now reflected in the 2015 budget. $0.2 million Injury and Damages Lower liability claims in ($1.0 million) Banking and Financial Services Fees The decrease is due to managed reductions in fees for carrying lines of credit, financial advisors, rating agency fees, and debt issuance fees. $0.8 million IT Lifecycle Upgrades increased software license costs and additional Operations and Maintenance for completed IT projects. $0.5 million Labor From 2013 to 2015 there is a shift in work between Customer Accounting and Collections and Customer Service and Information. The remaining difference represents actual pay changes from 2013 and $6.5 million Pay Adjustment Pool The 2015 base pay budget proposes 4 percent. In 2013 pay adjustments were embedded in labor throughout the organization. Due to the timing of budgeting, 2014 adjustments for the second half of the year are compounded into the 2015 adjustment pool. $1.5 million Pay Changes Actual pay changes from 2013 and 2014 are budgeted in a base pay adjustment pool in Human Resources, however once pay changes, it is accounted for in the area in which the employee works. $1.1 million Benefits The Operations and Maintenance allocation of benefits is increasing due to rising health care cost trends, regulatory compliance requirements and high dollar claims. A portion of benefits is allocated to capital and not included here. ($0.4 million) Employee Leave Payout Sick leave conversion, retiree sick leave, and separating employee vacation expense Annual Operating and Financial Plan 111

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115 CORPORATE/CHIEF EXECUTIVE OFFICER BUDGET 2015 COLORADO SPRINGS UTILITIES MISSION To provide safe, reliable, competitively-priced electric, gas, water, and wastewater services to the citizen owners and customers of Colorado Springs Utilities. ORGANIZATIONAL CHART Colorado Springs Citizen Owners Colorado Springs City Council / Utilities Board Colorado Springs Utilities Chief Executive Officer Jerry Forte 1 Energy Services Division Eric Tharp 1 Water Services Division Gary Bostrom 1 Customer and Corporate Services Division Carl Cruz 1 Environment, Health and Safety Division Dave Padgett 1 Planning and Finance Division Bill Cherrier 1 Strategy and External Affairs Division Sherri Newell Wilkinson 1 Energy Supply Water System Operations Customer Revenue andservices Environmental Services Financial Services Government and Corporate Affairs Energy Construction, Operations and Maintenance 334 Energy Acquisition, Engineering and Planning 68 Distribution Collection and Treatment 181 Southern Delivery System 24 Customer Field and Measurement Services 161 Information Technology 153 Human Resources Facilities Management and Security Operations 51 Safety and Health 13 Rates 10 Office of Economic Development 10 Community Relations and Information Management 7 Strategic Planning and Governance 4 Regulatory and Compliance 5 System Extensions University of Springs Utilities Enterprise Risk Management 7 Planning, Engineering 27 and Resource Management 77 Compliance and Risk Mitigation 13 Customer and Workforce Communications 8 1,874 regular positions as of 2015 Approved *100 positions will be cut from the above number over the next two years Annual Operating and Financial Plan 113

116 DIVISION RESPONSIBILITIES Pursuant to the City Charter, the CEO of Colorado Springs Utilities is chosen by and accountable to the City Council, acting in their role as the Utilities Board of Directors. The CEO is responsible for the operations of Colorado Springs Utilities. Corporate expenditures support Colorado Springs Utilities overall operations and are expenses that are managed at an enterprise level. Expenses budgeted in this area include: CEO salary and expenses A portion of Colorado Springs Utilities payments to the City for shared services Amortization expense for SDS and for Demand Side Management rebates from prior years that were treated as a regulatory asset Annual payments to electric and gas regulating commissions Corporate & Other DIVISION EXPENDITURES 1 Operating expense excludes fuel, inter-service eliminations, undistributed stores expense, and non-operating products and services; 2014 adjusted to exclude fuel. FY15 Approved 2 Operating labor expenses exclude capital and undistributed stores expense. 3 Portion of administrative and general overhead allocated to capital. FY14 Approved Increase/ (Decrease) from: 2014 Corporate Non-Labor 1 $ 6,455,060 $ 5,273,208 1,181,852 $ 22% $ 16% $ -8% Corporate Labor 2 $ 363,084 $ 311,750 51,334 Administrative and General Overhead 3 $ (5,591,961) $ (6,047,565) 455,604 FERC account detail can be found at Annual Operating and Financial Plan 114

117 ENERGY SERVICES DIVISION BUDGET DIVISION MISSION To provide safe, reliable, competitively-priced electric and natural gas services to the citizen owners and customers of Colorado Springs Utilities. Energy Services Division Eric Tharp 1 DIVISION ORGANIZATIONAL CHART Energy Supply Interim Dan Higgins 253 Energy Construction, Operations and Maintenance Mason Parsaye 334 Energy Acquisition, Engineering and Planning John Romero 68 Regulatory and Compliance Kenneth Burgess 5 661regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Energy Supply The Energy Supply Department consists of eight departmental work groups that provide electric and natural gas supply services for Colorado Springs Utilities customers. The eight groups are: Front Range; Drake; Remote Energy and Nixon Power Plants; Fuel and Materials Management; Portfolio Technical Services; Portfolio Support Services; and Portfolio Management. Energy Supply is responsible for procurement and production of electric and gas energy, and electric generation fuel (coal, gas and oil) procurement and transportation services. Energy Supply establishes regional competitiveness by managing its portfolio to provide electric and natural gas supplies to industrial, commercial and residential customers at prices that are competitive across the region. Energy Supply manages reliability through planning that includes acquiring and managing resources to ensure system reliability meets or exceeds established standards and customer expectations. Energy Construction, Operations, and Maintenance Energy Construction, Operations, and Maintenance (ECOM) consists of six departmental work groups designed to provide construction, operations, and maintenance services for Colorado Springs Utilities electric and gas customers. The six work groups include: Energy Operations; North and South Construction Work Centers; Energy 2015 Annual Operating and Financial Plan 115

118 Support Services; Energy Business Performance; and Energy Technical Services. ECOM is responsible for the construction and maintenance of the electric and gas system wires and pipes. ECOM also monitors the gas and electric systems to ensure the availability of reliable and safe energy, and provides 24-hour emergency response for gas and electric infrastructure. Numerous performance metrics are employed in ECOM to maintain high service levels, including outage frequency and duration, as well as outage response times. ECOM is responsible for ensuring the electric transmission and distribution systems comply with all applicable regulatory and safety requirements, including the North American Electric Reliability Corporation (NERC) and the National Electric Safety Code (NESC). ECOM also ensures that the gas distribution system complies with all pipeline safety requirements regulated by the Department of Transportation (DOT). Energy Acquisition Engineering and Planning Energy Acquisition Engineering and Planning consists of nine departmental work groups that plan, acquire, design and engineer the long-term gas and electric resources and infrastructure requirements for Colorado Springs Utilities customers. The nine sections consist of: Substation and Transmission Engineering; Engineering Standards; Field Engineering (North and South); Energy Resource Planning; Electric Planning; Gas Planning and Design; AEP Project Management; and Demand Side Management and Renewable Energy Solutions. Regulatory and Compliance The Regulatory and Compliance Department sets the direction for all energy regulatory and compliance activities, and develops internal compliance programs that align work activities with the strategic outcomes and initiatives, including North American Electric Reliability Corporation (NERC) standards. Comprehensive NERC program audits are completed by the Western Electricity Coordinating Council under authority granted to it by the NERC every three years. The next major program audit is scheduled in Annual Operating and Financial Plan 116

119 Energy Services Division Approved Approved DIVISION EXPENDITURES Increase/ (Decrease) from: 2014 Division Total $ 370,992,991 $ 370,356,528 $ 636,463 0% Energy Services Administration Labor 589, , ,261 50% Outside Professional Services. 1,080 1,459 (379) -26% Office Expenses, Materials & Supplies 2, , % Travel, Education & Employee Expenses 8,851 20,251 (11,400) -56% Conserv, Safety, Customer Assist & Finacial Info 68, ,364 0% Professional/Industry Memberships & Publications 0 2,050 (2,050) -100% Sub-Total $ 670,144 $ 415,748 $ 254,396 61% Energy Acquisition, Engineering & Planning Labor 4,417,170 3,993, ,260 11% Outside Professional Services. 2,336,573 2,555,999 (219,426) -9% Equipment lease & Maintenance 179, , % Office Expenses, Materials & Supplies 217,599 84, , % Travel, Education & Employee Expenses 47, ,777 (241,826) -83% Conserv, Safety, Customer Assist & Finacial Info 3,682,635 4,345,978 (663,343) -15% Professional/Industry Memberships & Publications 67,939 45,901 22,038 48% Sub-Total $ 10,949,839 $ 11,496,193 $ (546,354) -5% Construction & Maintenance Labor 16,611,024 16,649,155 (38,131) 0% Outside Professional Services. 4,359,375 5,075,250 (715,875) -14% Equipment lease & Maintenance 6,762,736 6,699,067 63,669 1% Buildings & Utilities 103, ,600 (3,895) -4% Office Expenses, Materials & Supplies 4,168,254 4,107,755 60,499 1% Travel, Education & Employee Expenses 459, ,059 (272,597) -37% Professional/Industry Memberships & Publications 891, , ,109 37% Sub-Total $ 33,355,618 $ 34,022,839 $ (667,221) -2% Note: Totals may vary due to rounding Annual Operating and Financial Plan 117

120 Energy Supply Energy Services Division Approved Approved Increase/ (Decrease) from: 2014 Labor 21,548,859 21,116, ,182 2% Outside Professional Services. 11,078,844 17,081,475 (6,002,631) -35% Equipment lease & Maintenance 2,053,050 2,290,663 (237,613) -10% Buildings & Utilities 6,675,917 5,964, ,831 12% Office Expenses, Materials & Supplies 283,110, ,394,919 6,715,196 2% Travel, Education & Employee Expenses 434, ,741 (115,132) -21% Professional/Industry Memberships & Publications 320, ,608 25,998 9% Sub-Total $ 325,222,000 $ 323,692,169 $ 1,529,831 0% Regulatory & Compliance Labor 662, , ,811 42% Outside Professional Services. 52, ,000 (108,000) -68% Equipment lease & Maintenance 0 23,000 (23,000) -100% Office Expenses, Materials & Supplies 17,500 17, % Travel, Education & Employee Expenses 61,870 61, % Professional/Industry Memberships & Publications 1,500 1, % Sub-Total $ 795,390 $ 729,579 $ 65,811 9% 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and non-operating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. Note: Totals may vary due to rounding. Descriptions of significant financial changes in the Electric and Natural Gas budgets can be found in their respective service sections of this document. FERC account detail can be found at Annual Operating and Financial Plan 118

121 WATER SERVICES DIVISION BUDGET DIVISION MISSION To provide safe, reliable, competitively-priced water and wastewater services to the citizen owners and customers of Colorado Springs Utilities. DIVISION ORGANIZATIONAL CHART Water Services Division Gary Bostrom 1 Water System Operations Distribution Collection and Treatment Southern Delivery System System Extensions Planning, Engineering and Resource Management Tyler Allison 119 Leah Ash 181 John Fredell 24 Brent Schubloom 37 Wayne Vanderschuere regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Water System Operations The Water System Operations Department performs raw water collections; storage and delivery, manages the Operations and Maintenance (365 days a year) of six ground and surface water treatment facilities, operates and controls 2,010 miles of distribution mainlines; and is the managing partner for the Homestake Project and the Fountain Valley Authority. Field and treatment personnel are required to maintain state certifications. Distribution, Collection and Treatment The water and wastewater services provided by the Distribution, Collection and Treatment Department represent the full cycle of service from finished water distribution to clean water release to the creeks (including wastewater solids disposal at Clear Spring Ranch). Specifically, the Distribution, Collection and Treatment Department performs water distribution system maintenance and rehabilitation, wastewater system maintenance and rehabilitation programs; manages system rehabilitation contracts, provides construction support and equipment services for energy, water and wastewater services and operates the wastewater treatment facilities. Colorado Springs Utilities field and treatment personnel are required to maintain state certifications Annual Operating and Financial Plan 119

122 Southern Delivery System The Southern Delivery System (SDS) Department is responsible for a regional project to bring water from the Arkansas River to Colorado Springs, the City of Fountain, the Security Water District, and the Pueblo West Metropolitan District. Once operational in 2016, SDS will diversify water infrastructure and supply to help ensure we can continue reliably delivering water to all our customers even when existing pipelines are out of service for extended repairs. Additionally, the project will help protect Colorado Springs from water supply uncertainties related to climate variability, drought and shortages on the Colorado River. About 45 of the 50 miles of pipeline have been installed. The new connection to Pueblo Dam and power lines to two of the rawwater pump stations have been completed. In 2013, construction began on the SDS water treatment plant and the three raw-water pump stations. All the land parcels needed for Phase I construction have been acquired. The project is on schedule for completion in 2016 and we are currently forecasting completion at $147 million below budget. Staff is responsible for managing all project related permits including the Bureau of Reclamation s Record of Decision and the Pueblo County 1041 permit. System Extensions The System Extensions Department provides a variety of services and manages programs that are essential to the development community and to customers that request extension of utility infrastructure to serve new landdevelopment projects and connect new residential and commercial buildings to Colorado Springs Utilities systems. These programs include development reviews for electric, gas, water and wastewater systems; design approval and oversight of the construction, inspection, and acceptance of all water and wastewater systems (including non-potable water mains) and public improvement projects; new service applications, permit approvals and development fee collection; line extension, telecommunication and recovery contract administration; development project management, coordination of public improvement projects and other infrastructure initiatives. Planning, Engineering and Resource Management The Planning, Engineering and Resource Management Department performs long/short range water supply planning, water rights development and protection, water accounting, regional water relationship management, watershed management, water conservation, water/wastewater infrastructure planning, design and standards services, water/wastewater project management and energy/water and wastewater asset management services. They interface with local, state, and federal agencies and stakeholders on a wide range of issues involving water in Colorado and nationally. They manage education and outreach programs that are key components to ensuring a safe and reliable water supply for the community, as well as manage efforts focused on factors that affect our water supply such as forest health, land use, stormwater management and recreation or municipal watershed lands Annual Operating and Financial Plan 120

123 DIVISION EXPENDITURES Water Services Division Approved Approved Increase/ (Decrease) from: 2014 Division Total $ 69,075,542 $ 72,102,430 $ (3,026,888) -4% Water Services Administration Labor 222, ,301 5,435 3% Outside Professional Services. 0 2,400 (2,400) -100% Office Expenses, Materials & Supplies % Travel, Education & Employee Expenses 8,651 8,857 (206) -2% Conserv, Safety, Customer Assist & Finacial Info % Professional/Industry Memberships & Publications 102,192 89,850 12,342 14% Sub-Total $ 333,733 $ 318,454 $ 15,279 5% Planning, Engineering & Resources Management Labor 6,344,051 5,643, ,873 12% Outside Professional Services. 3,788,311 5,277,054 (1,488,743) -28% Equipment lease & Maintenance 311, ,024 10,296 3% Buildings & Utilities 1,011,200 1,348,332 (337,132) -25% Office Expenses, Materials & Supplies 11,100,914 13,512,288 (2,411,374) -18% Travel, Education & Employee Expenses 115, ,252 (90,327) -44% Conserv, Safety, Customer Assist & Finacial Info 402, ,820 (208,120) -34% Professional/Industry Memberships & Publications 34,930 29,315 5,615 19% Sub-Total $ 23,109,351 $ 26,928,263 $ (3,818,912) -14% Water System Operations Labor 7,725,959 6,957, ,370 11% Outside Professional Services. 2,920,602 3,411,930 (491,328) -14% Equipment lease & Maintenance 215, ,402 20,285 10% Buildings & Utilities 4,625,341 5,111,194 (485,853) -10% Office Expenses, Materials & Supplies 2,718,290 2,371, ,159 15% Travel, Education & Employee Expenses 85, ,548 (85,217) -50% Conserv, Safety, Customer Assist & Finacial Info % Professional/Industry Memberships & Publications 5,465 2,830 2,635 93% Misc. Accounting General. 22,500 30,800 (8,300) -27% Sub-Total $ 18,319,300 $ 18,251,549 $ 67,751 0% Note: Totals may vary due to rounding Annual Operating and Financial Plan 121

124 Water Services Division Distribution, Collection & Treatment Approved Approved Increase/ (Decrease) from: 2014 Labor 9,843,503 9,308, ,888 6% Outside Professional Services. 3,417,119 3,473,536 (56,417) -2% Equipment lease & Maintenance 49,399 47,974 1,425 3% Buildings & Utilities 3,360,809 3,353,869 6,940 0% Office Expenses, Materials & Supplies 3,239,106 3,233,226 5,880 0% Travel, Education & Employee Expenses 170, ,368 1,985 1% Conserv, Safety, Customer Assist & Finacial Info 8,500 2,496 6, % Professional/Industry Memberships & Publications 6,858 5,172 1,686 33% Sub-Total $ 20,095,647 $ 19,593,256 $ 502,391 3% Southern Delivery System Labor 2,212,321 1,903, ,445 16% Outside Professional Services. 2,339,069 2,898,284 (559,215) -19% Equipment lease & Maintenance 42,900 42, % Buildings & Utilities 4,320 4, % Office Expenses, Materials & Supplies 77,916 77, % Travel, Education & Employee Expenses 70,444 70, % Conserv, Safety, Customer Assist & Finacial Info 10,800 10, % Professional/Industry Memberships & Publications 6,000 6, % Sub-Total $ 4,763,770 $ 5,014,540 $ (250,770) -5% System Extensions Labor 2,115,657 1,919, ,503 10% Outside Professional Services. 294,500 1, , % Office Expenses, Materials & Supplies 27,929 53,058 (25,129) -47% Travel, Education & Employee Expenses 13,450 21,171 (7,721) -36% Professional/Industry Memberships & Publications 2,205 1, % Sub-Total $ 2,453,741 $ 1,996,368 $ 457,373 23% 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and nonoperating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. Note: Totals may vary due to rounding. Descriptions of significant financial changes in the Water and Wastewater budgets can be found in their respective service sections of this document. FERC account detail can be found at Annual Operating and Financial Plan 122

125 CUSTOMER AND CORPORATE SERVICES DIVISION BUDGET DIVISION MISSION The mission of the Customer and Corporate Services Division is to enable and promote the provision of safe, reliable electric, competitively priced gas, water, and wastewater services to the citizen owners of Colorado Springs Utilities. The Division functions as the primary contact point for customers and provides key services to the organization in the areas of Human Resources, Training, Technology, Communications and Compliance. DIVISION ORGANIZATIONAL CHART Customer and Corporate Services Division Carl Cruz 1 Customer Revenue and Services Kathleen Solano 150 Customer Field and Measurement Services Pat Moyer 161 Information Technology Situ Ramaswamy 153 Human Resources Melissa Kellione 30 University of Springs Utilities Lisa Brady 27 Compliance and Risk Mitigation Charise Swanson 13 Customer and Workforce Communications Mark Murphy 8 543regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Customer Revenue and Services (CSD) is responsible for critical customer cycle of service operations, typically occurring in the office. The responsibilities of the CSD include: full-cycle customer account set-up and management, customer billing, customer payments, office collections, customer assistance programs, one-stop shopping for all customer inquiries and services, the successful resolution of customer escalations and the development and management of customer solutions. This is accomplished through multiple customer service channels including face to face, telephone, and written correspondence, as well as automated services through the web, an Interactive Voice Response (IVR) system, and the development of future automated services including mobile-friendly solutions. The CSD is also responsible for specialized services for business customers. Customer Field and Measurement Services (CFM) is responsible for a diverse array of customer facing field, engineering and measurement technology functions and services. Key functions include meter equipment investigations, installation, exchange and disconnect/reconnect services, field collections, emergency response (e.g. gas leaks, carbon monoxide, frozen pipes), dispatch, underground line locating and damage prevention, equipment testing and programming and Advanced Metering Infrastructure (AMI) and Smart Grid Annual Operating and Financial Plan 123

126 Information Technology (IT) is responsible for providing the Application Systems and related hardware, infrastructure and CyberSecurity solutions. Information Technology solutions are a critical enabler of many aspects of Colorado Springs Utilities business and operational functions and processes. IT applications development and maintenance teams provide new application capabilities to meet changing business needs, and also support and upgrade the portfolio of about 400 applications. The IT infrastructure team provides a wide-range of technology solutions including end-user devices such as desktops, laptops, tablets, cell phones and smart phones, voice and data communication systems and networks, data centers housing and operating servers, storage, and databases. The CyberSecurity team is responsible for providing security solutions that help ensure appropriate access to systems, data and technologies in line with security policies and regulatory compliance requirements. Human Resources (HR) is responsible for ensuring we have the workforce needed to deliver safe, reliable, competitively priced electric, natural gas, water and wastewater service to our citizen owners. The HR department responsibilities include: benefits, compensation, human resources information systems, recruitment and selection, NERC compliance, organizational development, employee relations, leadership support and oversight of equal employment opportunity programs. University of Springs Utilities (USU) supports the organization s mission by developing a skilled workforce and ensuring we maintain regulatory compliance with the following regulatory bodies: Department of Transportation, Public Utilities Commission, Environmental Protection Agency, North American Electric Reliability Corporation, and the Federal Emergency Management Agency. For the safety of our employees, citizen owners and customers, we also voluntarily maintain training standards that are in compliance with the Occupational Safety and Health Administration. Compliance and Risk Mitigation (CRM) is responsible for the organization s information protection and privacy programs, along with risk mitigation functions related to information systems controls, compliance program development and management, operational risk identification, and policy development. Customer and Workforce Communications (CWC) serves all four service lines and is responsible for managing communications between the organization and our customers. Our key focus areas include customer and employee safety, customer assistance and service options, Demand Side Management, construction projects, environmental responsibility, workforce readiness, business information and regulatory compliance, such as annual water quality reporting and electric reliability and security education. Additional responsibilities include management of web and social media platforms, media relations, and 24/7 response to service outages and utility emergencies. CWC also supports joint communication efforts during community crisis events, such fires or floods. Effective communication helps reduce operating costs and build trust and transparency with customers Annual Operating and Financial Plan 124

127 Customer & Corporate Services Division 2015 Annual Operating and Financial Plan Approved Approved DIVISION EXPENDITURES Division Total $ 106,000,289 $ 103,949,652 $ 2,050,637 2% Customer Revenue & Services Labor 8,624,808 8,727,009 (102,201) -1% Outside Professional Services. 908,141 1,192,174 (284,033) -24% Equipment lease & Maintenance 52,850 20,325 32, % Office Expenses, Materials & Supplies 1,386,880 1,428,700 (41,820) -3% Travel, Education & Employee Expenses 64, ,940 (55,637) -46% Conserv, Safety, Customer Assist & Finacial Info ,400 (36,800) -98% Professional/Industry Memberships & Publications 73,400 78,515 (5,115) -7% Misc. Accounting General. 3,583,169 4,129,891 (546,722) -13% Sub-Total $ 14,694,152 $ 15,733,954 $ (1,039,802) -7% Customer Field & Measurement Services Labor 9,913,472 9,325, ,429 6% Outside Professional Services. 2,319,972 2,427,506 (107,534) -4% Equipment lease & Maintenance 275, ,298 4,038 1% Buildings & Utilities 63,057 80,794 (17,737) -22% Office Expenses, Materials & Supplies 484, ,254 (107,442) -18% Travel, Education & Employee Expenses 103, ,438 (66,927) -39% Conserv, Safety, Customer Assist & Finacial Info % Professional/Industry Memberships & Publications 3,154 5,149 (1,995) -39% Sub-Total $ 13,163,859 $ 12,873,012 $ 290,847 2% Compliance & Risk Mitigation Services Labor 1,252,414 1,189,952 62,462 5% Equipment lease & Maintenance % Office Expenses, Materials & Supplies 10,305 12,792 (2,487) -19% Travel, Education & Employee Expenses 11,769 54,697 (42,928) -78% Professional/Industry Memberships & Publications 1,975 4,265 (2,290) -54% Sub-Total $ 1,277,157 $ 1,261,706 $ 15,451 1% Information Technology Services Increase/ (Decrease) from: 2014 Labor 12,877,327 12,513, ,756 3% Outside Professional Services. 845, ,196 (4,196) 0% Equipment lease & Maintenance 8,631,953 8,029, ,676 8% Buildings & Utilities 1,388,400 1,645,624 (257,224) -16% Office Expenses, Materials & Supplies 131, ,738 (28,323) -18% Travel, Education & Employee Expenses 373, ,455 (80,545) -18% Professional/Industry Memberships & Publications 10,887 10, % Sub-Total $ 24,258,892 $ 23,662,540 $ 596,352 3%

128 Customer & Corporate Services Division Human Resources Approved Approved Increase/ (Decrease) from: 2014 Labor 2,490,008 2,446,840 43,168 2% Outside Professional Services. 399, ,880 70,657 21% Equipment lease & Maintenance 59,950 61,750 (1,800) -3% Office Expenses, Materials & Supplies 26,201 53,325 (27,124) -51% Travel, Education & Employee Expenses 284, ,525 (156,500) -36% Conserv, Safety, Customer Assist & Finacial Info 160, ,847 (6,000) -4% Professional/Industry Memberships & Publications 46,174 43,060 3,114 7% Sub-Total $ 3,466,742 $ 3,541,227 $ (74,485) -2% University of Springs Utilities Labor 2,214,503 2,148,209 66,294 3% Outside Professional Services. 44,455 37,307 7,148 19% Equipment lease & Maintenance 145, ,094 (24,981) -15% Office Expenses, Materials & Supplies 84,876 74,292 10,584 14% Travel, Education & Employee Expenses 173, ,280 (46,745) -21% Professional/Industry Memberships & Publications 7,072 8,275 (1,203) -15% Sub-Total $ 2,669,554 $ 2,658,457 $ 11,097 0% Customer & Workforce Communication Labor 732, ,428 52,028 8% Outside Professional Services. 84,000 78,000 6,000 8% Office Expenses, Materials & Supplies 0 2,000 (2,000) -100% Travel, Education & Employee Expenses 16,806 16, % Conserv, Safety, Customer Assist & Finacial Info 2,054,162 2,123,742 (69,580) -3% Professional/Industry Memberships & Publications 4,084 3, % Sub-Total $ 2,891,508 $ 2,904,560 $ (13,052) 0% Human Resources Corporate $ 8,248,303 $ 6,902,197 $ 1,346,106 20% Benefits $ 35,330,122 $ 34,411,999 $ 918,123 3% 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and non-operating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. 3 Does not include portion of benefits allocated to capital. Note: Totals may vary due to rounding. FERC account detail can be found at Annual Operating and Financial Plan 126

129 ENVIRONMENT, HEALTH AND SAFETY DIVISION BUDGET DIVISION MISSION The mission of the Environment, Health and Safety Division is to enable and promote the provision of safe, reliable, competitively-priced electric, gas, water, and wastewater services to the citizen owners and customers of Colorado Springs Utilities by building environmental, health and safety stewardship and protection into the business practices of Colorado Springs Utilities and providing cost-effective facilities management and physical security services for safe, healthy, functional, comfortable and secure environments for employees, customers and the general public. DIVISION ORGANIZATIONAL CHART Environment, Health and Safety Division Dave Padgett 1 Environmental Services Dave Padgett 58 Facilities Management and Security Operations Thane LeBarre 51 Safety and Health Dominic Romano regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Environmental Services Environmental Services is responsible for developing, implementing and managing programs and policies for Colorado Springs Utilities. The department performs a wide variety of environmental services such as securing environmental permits and approvals, emissions and discharge reporting, drinking water quality monitoring, effluent monitoring, water distribution system flushing and rechlorination, environmental engineering and remediations, compliance auditing, regulatory inspection coordination, and industrial pretreatment and crossconnection oversight Annual Operating and Financial Plan 127

130 Environmental Services supports compliance with federal, state and local environmental laws and regulations. There are also a number of federal and State regulatory agencies with authority to enforce these laws and regulations including the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act for the electric generation facilities, treatment plants, and collection/distribution systems. Other significant laws impacting construction and operations include the National Environmental Policy Act, Endangered Species Act, Migratory Bird Treaty Act, Resource Conservation and Recovery Act, Solid Waste Disposal Act, Toxic Substances Control Act, and the Comprehensive Environmental Response Compensation and Liability Act. Facilities and Security Management Facilities and Security Management (FSM) provides facilities management and physical security support for all Colorado Springs Utilities owned or leased facilities and operations. Physical security administration and leased space management are also provided to the Municipal Government through annual service level agreements and memorandums of understanding. Services performed include architectural/engineering planning, design and project/contract management, organizational and site strategic/space planning, building and security operations including system maintenance, ergonomic workstation design and construction, new construction and renovations/remodels, real estate support, and physical security of facilities, personnel, and infrastructure. FSM also supports organizational compliance with North American Electric Reliability Corporation Critical Infrastructure Protection Regulations, Physical and Cyber Security Standards, and the Environmental Protection Agency s Chemical Facility Anti-Terrorism Standards. Safety and Health Safety and Health is responsible for developing, implementing and managing programs and policies for Colorado Springs Utilities to help ensure the health and safety of our employees and the public, and in support of the corporate safety value and an incident and injury-free culture. The department provides a wide-range of professional and medical safety and services, including employee monitoring, evaluation and treatment, workplace exposure monitoring, safety engineering and office/industrial ergonomics, and accident investigation. Department services support organizational compliance with the Occupational Health and Safety Act Annual Operating and Financial Plan 128

131 Environment, Health and Safety Division Approved Approved DIVISION EXPENDITURES Increase/ (Decrease) from: 2014 Division Total $ 16,760,970 $ 17,523,848 $ (762,878) -4% Labor $ 8,472,305 $ 8,269,217 $ 203,088 2% Outside Professional Services. 713, ,594 (84,789) -11% Equipment lease & Maintenance 79,092 81,040 (1,948) -2% Buildings & Utilities 6,706,255 7,629,223 (922,968) -12% Office Expenses, Materials & Supplies 563, ,847 (83,061) -13% Travel, Education & Employee Expenses 181, ,691 (13,535) -7% Conserv, Safety, Customer Assist & Finacial Info 8,000 17,400 (9,400) -54% Professional/Industry Memberships & Publications 32,055 31,038 1,017 3% Misc. Accounting General. 4,516 (144,202) 148, % 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and non-operating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. Note: Totals may vary due to rounding. FERC account detail can be found at Annual Operating and Financial Plan 129

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133 PLANNING AND FINANCE DIVISION BUDGET DIVISION MISSION The mission of the Planning and Finance Division is to promote and enable the provision of safe, reliable, competitively-priced electric, gas, water, and wastewater services to the citizen owners and customers of Colorado Springs Utilities by driving sound financial and business practices critical to enterprise success. DIVISION ORGANIZATIONAL CHART Planning and Finance Division Bill Cherrier 1 Financial Services Rates Office of Economic Development Enterprise Risk Management Vacant 61 Sonya Thieme 10 Cindy Newsome 10 David Maier 7 89regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Financial Services The Financial Services Department includes Accounting, Procurement and Contracting Services, Treasury and Finance, and Financial Planning and Analysis. Accounting Services Services provided include general, fixed asset, energy settlements accounting, accounts payable, and payroll. The accounting team is responsible for organizational compliance with Generally Accepted Accounting Principles (GAAP) and other accounting rules and regulations specific to utilities. Procurement and Contract Services Ensures effective management of and compliance with procurement regulations, policies, contract standards, and processes in the acquisition of goods and services. Promote local spending and provide reports in accordance with Executive Limitation requirements. Identify cost-saving opportunities and collaborate with project management to maximize those savings. Treasury and Finance Provides efficient and cost effective management of short-term and long-term debt in support of Colorado Springs Utilities capital structure through the analysis and application of the debt management plans, issuance of debt obligations, and strategies in accordance with the Long-term Financing Plan and Financial Risk Management Policy. Manages enterprise liquidity through cash and investment activities in accordance with the Cash Management Plan, cash flow requirements, financial obligations, liquidity metrics targets, and regulatory requirements; optimize investing in accordance with the Investment Policy Annual Operating and Financial Plan 131

134 Financial Planning and Analysis Partners with all areas of finance and operations to provide information that allows the organization to operate efficiently while maintaining financial strength. This is accomplished through development of the annual budget and support of the organization s monthly forecasting and reporting to provide timely results to leadership to guide operational decisions. Financial analysis supports operational spending decisions, and enterprise-level investing and financing decisions. Rates The Rates Department designs base rates by customer class based on the cost to serve those classes for all services, designs rate options to meet internal and external customer needs, develops pricing on selected projects and initiatives, and manages the electric and gas cost adjustments. Office of Economic Development The Office of Economic Development (OED) provides the organization with process analysis and project management expertise, develops comprehensive forecasts for sound planning, and leverages resources to drive economic development success with our partners and community. OED consists of three sections: Economic Development, Sales and Load Forecasting, and Enterprise Project Office. Economic Development The team provides utility solutions to stimulate economic development and prosperity in the Pikes Peak Region. They partner with the community to achieve economic development goals and profitably, reduce barriers to entry, resulting in a net bottom line benefit to our customer base. Sales and Load Forecasting The Sales and Load Forecasting team develops and provides comprehensive and accurate customer, sales, demand, and revenue forecasting information for planning purposes. They monitor economic conditions and key indicators impacting the forecast, provide monthly analysis on sales and revenue variances, analyze and develop customer profiles that will maximize system utilization, lead load research initiatives and conduct economic development analysis for new prospects and existing customer expansion. Enterprise Project Office Provides the organization with process analysis and project management expertise to drive continuous improvement and sound project planning and execution. The Enterprise Project Office manages the Project Portfolio Tracking System (PPTS), Colorado Springs Utilities project portfolio management tool, performs portfolio review, reporting, assessment, and monitoring, provides direct project management to select service projects, and assists in process development and analysis. Enterprise Risk Management The Enterprise Risk Management (ERM) Department provides leadership in risk management to the enterprise through efforts to identify, prioritize, and report risks so that appropriate mitigation plans are developed and implemented, to protect and enhance the business performance of Colorado Springs Utilities. Additionally, ERM manages the property/casualty and liability insurance programs and carriers, supports financial risk management programs, provides derivative valuation for external financial reporting, and manages the internal review function to ensure compliance with internal and external policies and practices. Specific ERM activities include providing policy guidance and analytical support for Colorado Springs Utilities financial risk management programs involving natural gas and interest rate exposures to ensure derivative valuations associated with these programs meet all financial reporting guidelines for public utilities. Overall grant activity is coordinated within Colorado Springs Utilities to communicate the process for access to federal, state, and local grant funds, and ensuring compliance with all grant requirements and report status of existing grants. ERM conducts internal reviews of ongoing practices and activities against established policies and procedures to assess and ensure compliance Annual Operating and Financial Plan 132

135 Approved Approved DIVISION RESPONSIBILITIES Division Total $ 21,048,429 $ 23,413,820 $ (2,365,391) -10% Financial Services Labor 4,356,485 4,178, ,815 4% Outside Professional Services. 659, , , % Equipment lease & Maintenance % Office Expenses, Materials & Supplies 26,724 30,816 (4,092) -13% Travel, Education & Employee Expenses 33,060 75,350 (42,290) -56% Conserv, Safety, Customer Assist & Finacial Info 2,930 2, % Misc. Accounting General. 4,150,424 5,541,149 (1,390,725) -25% Sub-Total $ 9,229,853 $ 10,061,105 $ (831,252) -8% Rates Planning & Finance Division Labor 911,667 1,068,384 (156,717) -15% Outside Professional Services. 0 20,000 (20,000) -100% Equipment lease & Maintenance 0 50,500 (50,500) -100% Office Expenses, Materials & Supplies 20,500 17,500 3,000 17% Travel, Education & Employee Expenses 10,080 21,480 (11,400) -53% Professional/Industry Memberships & Publications 0 3,100 (3,100) -100% Sub-Total $ 942,247 $ 1,180,964 $ (238,717) -20% Planning & Finance Administration Labor 532, ,682 65,659 14% Outside Professional Services. 2,531,550 3,444,000 (912,450) -26% Office Expenses, Materials & Supplies 10,500 15,726 (5,226) -33% Travel, Education & Employee Expenses 12,980 12, % Professional/Industry Memberships & Publications 84, ,422 (46,422) -36% Sub-Total $ 3,171,371 $ 4,069,360 $ (897,989) -22% Office of Economic Development Labor 849, , ,181 17% Equipment lease & Maintenance 7, ,000 0% Office Expenses, Materials & Supplies 5,150 4, % Travel, Education & Employee Expenses 18,795 27,165 (8,370) -31% Sub-Total $ 880,487 $ 758,976 $ 121,511 16% Risk Management Services Increase/ (Decrease) from: 2014 Labor 677, ,683 (16,905) -2% Outside Professional Services. 1,188,740 1,242,933 (54,193) -4% Office Expenses, Materials & Supplies 1,360 2,050 (690) -34% Travel, Education & Employee Expenses 19,661 18,099 1,562 9% Misc. Accounting General. 4,936,932 5,385,650 (448,718) -8% Sub-Total $ 6,824,471 $ 7,343,415 $ (518,944) -7% 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and non-operating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. Note: Totals may vary due to rounding. FERC account detail can be found at Annual Operating and Financial Plan 133

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137 STRATEGY AND EXTERNAL AFFAIRS DIVISION BUDGET DIVISION MISSION The mission of the Strategy and External Affairs Division is to promote and enable the provision of safe, reliable, competitively-priced electric, gas, water, and wastewater services to the citizen owners and customers of Colorado Springs Utilities by proactively engaging our community and our local, regional, state and federal stakeholders to satisfy customer expectations and promote achievement of organizational results. Strategy and External Affairs Division Sherri Newell Wilkinson 1 DIVISION ORGANIZATIONAL CHART Government and Corporate Affairs Andrew Colosimo 6 Community Relations and Information Management Susan Presti 7 Strategic Planning and Governance Sherri Newell Wilkinson 4 18 regular positions as of 2015 Approved DIVISION RESPONSIBILITIES Government and Corporate Affairs Government and Corporate Affairs manages and coordinates regional, state and federal legislative policy issues. The department proactively participates in the legislative process by working extensively with elected officials and their staffs, industry trade associations, and external professionals to support or mitigate impacts on our business objectives while reducing the financial burden on our customers. The department also is responsible for Utilities Board communications to citizen owners, media and stakeholders regarding Utilities Board and Board Committee discussions, decisions and policies. Other key responsibilities include Board and CEO media relations, corporate and executive communication on budget and rates, strategic planning and annual reports and strategic stakeholder outreach and engagement Annual Operating and Financial Plan 135

138 Community Relations and Information Management The department provides community outreach programs and information management oversight for the enterprise. This includes sustainable funding and administrative coordination for the Project COPE (Citizens Option to Provide Energy) Program to provide utility bill assistance to customers of Colorado Springs Utilities. It also coordinates community outreach by managing employee volunteerism programs, coordinating educational tours, providing information booths at community events and scheduling subject matter experts for speaking engagements. Electric and natural gas safety education programs are delivered to targeted audiences including students, adults, contractors and first responders in support of enterprise risk management and for compliance with federal regulatory requirements. The Records and Information Management group provides enterprise-wide process documentation control systems; coordinates the Colorado Open Records Act (CORA) requests process; sets enterprise records retention schedules and manages records storage. It oversees records and information protection policies and supports legal documents preservation. Strategic Planning and Governance The department leads Colorado Springs Utilities strategic planning process by coordinating direction from the Utilities Board Strategic Planning Committee and the Utilities Board, with staff input in a collaborative process. Using Strategic Plan indicators and targets, the CEO Performance Plan and enterprise balanced scorecard are developed for transparent Board monitoring of organizational performance which is critical to achieving the Utilities Board strategic outcomes of rates, reliability and relationships. The governance function supports the Utilities Board s annual program of work; coordinates, plans and executes compliance and reporting for the Board s performance monitoring of established policies; communication to the Board; and coordination of Utility related legislative responsibilities in its role as City Council. The department also assists the Board with the creation and establishment of new operational and public policies. This includes governance process policy modifications; providing policy background, research and analysis; and facilitation of proposed Board policy discussions. The department is the liaison to all Utilities Board committees including the Finance Committee, Personnel Committee, Strategic Planning Committee and the Utilities Policy Advisory Committee (UPAC). The department supports the work of committees and assists UPAC in completing their Utilities Board assignments by coordinating input from subject matter experts and the public; research and report development Annual Operating and Financial Plan 136

139 Strategy and External Affairs Division Approved Approved DIVISION EXPENDITURES Increase/ (Decrease) from: 2014 Division Total $ 2,570,588 $ 2,679,169 $ (108,581) -4% Strategy & External Affairs Administration Labor 239, ,284 5,548 2% Outside Professional Services. 11, ,500 (99,475) -90% Office Expenses, Materials & Supplies 18,565 17,347 1,218 7% Travel, Education & Employee Expenses 35,233 33,932 1,301 4% Professional/Industry Memberships & Publications 1,342 1, % Sub-Total $ 305,997 $ 397,341 $ (91,344) -23% Government & Corporate Affairs Labor 590, ,597 42,773 8% Outside Professional Services. 163, ,000 (11,428) -7% Travel, Education & Employee Expenses 76,080 75, % Professional/Industry Memberships & Publications 358, ,045 (9,000) -2% Sub-Total $ 1,188,067 $ 1,164,726 $ 23,341 2% Community Relations & Information Management Labor 537, ,279 17,573 3% Outside Professional Services. 53,000 89,000 (36,000) -40% Office Expenses, Materials & Supplies 800 2,450 (1,650) -67% Travel, Education & Employee Expenses 10,650 14,000 (3,350) -24% Conserv, Safety, Customer Assist & Financial Info 180, ,400 (29,300) -14% Professional/Industry Memberships & Publications 32,500 51,745 (19,245) -37% Sub-Total $ 814,902 $ 886,874 $ (71,972) -8% Strategic Planning & Governance Labor 253, ,228 23,294 10% Office Expenses, Materials & Supplies 1, ,000 0% Travel, Education & Employee Expenses 7, ,100 0% Sub-Total $ 261,622 $ 230,228 $ 31,394 14% 1 Operating expenses exclude inter-service eliminations, undistributed stores expense, and non-operating products and services. 2 Operating labor expenses exclude capital and undistributed stores expense. Note: Totals may vary due to rounding. FERC account detail can be found at Annual Operating and Financial Plan 137

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141 GLOSSARY OF TERMS Acre-feet (AF) The volume (as of irrigation water) that will cover one acre to a depth of one foot. Allowance for Funds Used During Construction (AFUDC) Capitalized cost related to borrowed and/or equity funds used for construction purposes during the accounting period. AFUDC is applied to multi-year major projects based on life-to-date project cost. Annual Operating and Financial Plan (AOFP) The annual plan that financially moves Colorado Springs Utilities toward achieving our strategic destination. The AOFP provides financial data based on analysis of the current budget and a forecasted five-year financial plan. Appropriation The amount of cash funds that Colorado Springs Utilities is authorized to spend by City Council in a given year. Authorities A legal entity of two or more participants organized to accomplish a mutually advantageous goal. Colorado Springs Utilities currently participates in several Authorities created for the acquisition, collection, and/or storage of water. Authority debt service Off balance sheet principal and interest obligations related to the Authorities Colorado Springs Utilities currently participates in, such as the Fountain Valley Authority. Automated Meter Reading (AMR) Using wireless radio transmitters, AMR remotely reads customer meters and then transfers the data into the billing system. Colorado Springs Utilities utilizes AMR for meter reads for all services. Balanced scorecard A measurement-based strategic management system and tool that translates an organization s mission and strategy into a comprehensive set of performance measures. The balanced scorecard provides a method of aligning business activities to strategy and monitoring performance of strategic goals over time. Colorado Springs Utilities follows the Kaplan-Norton Balanced Scorecard methodology. Bond amortization expenses The recognition of bond expenses over the life of the issue. Bond interest Interest on bonds issued. Bond proceeds Monies that Colorado Springs Utilities receives when it sells bonds in order to fund major capital projects. The proceeds are normally net of bond issuance expenses. Bond proceeds applied Funds that are spent in an accounting period, such as a budget year, that are obtained through bond financing. Bond ratings A measure of the quality and safety of a bond, based on the issuer's financial condition; more specifically, an evaluation from a rating agency indicating the likelihood that a debt issuer will be able to meet scheduled interest and principal repayments. Typically, AAA is highest (best), and D is lowest (worst). Colorado Springs Utilities maintains a Aa2 as rated by Moody's, a AA as rated by Standard & Poor s, and a AA as rated by Fitch Ratings. Capital expenditures Capital expenditures are those investments in property, plant, and equipment that have a useful life that is greater than one year (depreciable assets). They can be comprised of either constructed or purchased assets, and are distinguished from Operation and Maintenance (OPERATIONS AND MAINTENANCE) expense. Capital outlay Capital outlay is the amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment Annual Operating and Financial Plan 139

142 Capitalized interest Interest payments on bonds that are capitalized over the life of a project rather than expensed in the current year. This applies primarily to the Southern Delivery System. CCF / ccf 100 cubic feet CF / cf Cubic feet Change in cash on hand A change in total cash position during a specific reporting period. As used in the sources and uses statement, this will define cash used as a source of funds or cash additions as a use of sources. City City of Colorado Springs City Charter The City of Colorado Springs is a Colorado home rule municipality operating under its City Charter. The Charter defines the basic legal requirements and process for approval of the budget, along with the annual appropriation ordinance, annual sources ordinance an any supplemental appropriations. City Code The Colorado Springs City Code encompasses any regulation or provision required and/or enforced within the City of Colorado Springs (coloradosprings.gov). City gate Point at which a local utility distribution system connects to the interstate pipeline. This facility reduces the pressure of the natural gas from its transmission rate (from 200 to 1,500 pounds per square inch) down to a rate more appropriate to consumer usage (as low as 3 psi). The city gate also adds sour-smelling Mercaptan to the naturally odorless gas to make it easier to quickly sniff out a natural gas leak. Colorado Renewable Energy Standard Colorado legislation signed on March 22, 2010, by Governor Bill Ritter (HB 1001) requiring that 30 percent of Colorado s electricity come from renewable energy sources by (c2es.org) Common bond reserve fund Classified as a restricted investment, this fund is derived from a mixture of bond proceeds and customer revenues. This fund was established for the benefit of bondholders to prevent deficiencies in the payment of principal and interest on outstanding Senior Lien debt. Deposits are not required as long as the fund is not less than a minimum reserve as prescribed by the Bond Ordinance. Any excess may be transferred to the unrestricted fund (Income Fund). Construction funds applied These are unspent construction funds borrowed in previous time periods or use of fund balance (reserve to meet contingencies and unforeseen events). Funds applied are carried forward into the new budget year. Contribution in Aid of Construction (CIAC) These are tariff based fees, fees that offset construction costs and developer contributed plant. These can also be cash and non-cash contributions from developers for specific projects. A primary example is the development charge on new water and wastewater connections to Colorado Springs Utilities' system. A development charge is assessed for connection to the water and wastewater systems to compensate existing customers for the costs of developing the current system and to help pay for the growth of the system caused by new customers. Critical Infrastructure Protection (CIP) Coordinated efforts to improve and sustain physical and cyber security especially with regard to the bulk power system of North America and reliability; i.e. standards development, compliance enforcement, assessments of risk and preparedness, disseminating critical information via alerts to industry, and raising awareness of key issues. (nerc.com) Customer Care and Billing (CC&B) System to receive and rate call data records and generate customers. Customer rebates Colorado Springs Utilities offers several rebates for energy and water efficiency updates to customers to help them conserve resources and save money, including but not limited to windows, furnace, and irrigation controllers Annual Operating and Financial Plan 140

143 Days of cash on hand This metric is an indication of Colorado Springs Utilities ability to fund Operations and Maintenance expenditures at any given time. It is calculated as follows: Unrestricted cash and cash equivalents/ (Average Annual Net Cash Expense / # of days in the year). Days of working capital This metric is an indication of Colorado Springs Utilities ability to fund Operations and Maintenance expenditures at any given time. It is calculated as follows: Working Capital/ (Average Annual Operations and Maintenance Expense / # of days in the year). Debt To raise cash for a portion of capital improvements, Colorado Springs Utilities sells bonds to investors. The timing and the size of the bond issue is determined by the amount of capital spending identified in financial forecasts, for the following budget year. Debt service includes both the principal and interest payments to the investors. Debt service coverage ratio Debt service coverage is a measure of an organization s ability to pay its debt service obligations. Debt Service Coverage Ratio is calculated as follows: (Net revenues/ Debt Service). Colorado Springs Utilities reduces net revenues by surplus funds transferred to the City in this calculation. Depreciation Depreciation represents the use of capital assets over their useful life. Eventually all physical assets wear out or become obsolete. Depreciation recognizes this fact but does not represent either an actual cash outflow or cash inflow. Derivatives Contracts which derive their value from underlying assets, such as commodities and bonds. Buyers and sellers often hedge against uncertainty about future price by making a contract for future trading at a specified price. The contract is a financial instrument called a derivative. An interest rate swap contract is a current example of a Colorado Springs Utilities derivative instrument. Electric Cost Adjustment (ECA) Mechanism that tracks and passes through to customers the actual cost of purchased fuel or purchased electricity. Adjustments can be decreases or increases. Ends A part of the Colorado Springs Utilities governance model which defines the purpose for the organization's existence. The Ends express the Utilities Board s expectations for CEO performance, provide a process of accountability, and direct quality services to best benefit customers. Ends are outwardly focused. Executive Limitation (EL) Boundaries established by the Utilities Board within which the CEO must operate to lead the organization, respond to issues and implement the Utilities Board s directives. The Utilities Board receives consistent, scheduled updates in the form of EL reports on each limitation that has been identified for the organization s performance. Federal Energy Regulatory Commission (FERC) An independent agency which regulates the interstate transmission of electricity, natural gas, and oil. (ferc.gov) Financial metrics Colorado Springs Utilities sets financial targets to measure performance in specific areas which enable the organization to financially sustain a AA bond rating. Fixed cost coverage ratio Total fixed costs coverage is the ratio of net pledged revenues to debt service on long-term debt including fixed Operations and Maintenance contracts and fixed capacity payments. Fixed cost coverage ratio is calculated as follows: (Net pledged revenues available for Debt Service + Authority Debt Service + Electric Capacity Payment)/ (Colorado Springs Utilities Debt Service + Authority Debt Service + Electric Capacity Payments). Franchise fees (taxes) Colorado Springs Utilities pays a franchise fee to other cities in order to provide electric and natural gas service within their municipal boundaries. Full Time Equivalent (FTE) An employee working 2,080 hours in a year. Gallons per day (Gpd) Measurement of fluids Annual Operating and Financial Plan 141

144 Gas Cost Adjustment (GCA) Mechanism that tracks and passes through to customers the actual cost of the purchased natural gas. Adjustments can be decreases or increases. Green Mountain Falls A community located west of Colorado Springs. Heating degree days The number of days times the number of degrees that the average temperature is below 65 degrees Fahrenheit. Hedging (or price hedging) Method to reduce the risk of loss caused by price fluctuation. It consists of the purchase or sale of equal quantities of the same or very similar commodities in two different markets at approximately the same time, with the expectation that a future change in price in one market will be offset by an opposite change in the other market. Inter-service eliminations Deduction of revenue and operating expense generated internally and between services. These amounts are reflected when each service is reported, but eliminated when consolidated results are reported to prevent double counting of internal revenues and their corresponding operating and maintenance expense. Integrated resource plan A long-term strategic plan that combines technical analysis and public participation for business development in the various services. Interest expense Interest expense is the cost of borrowing funds. It is shown as a financial expense item within the income statement. Interest income Colorado Springs Utilities invests certain cash assets in order to receive interest earnings until that cash is needed. All interest earned is recorded as interest income. Joint venture A contractual agreement that joins together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise. Kaplan Norton Balanced Scorecard An approach to strategic management developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School) and David Norton. They named this system the balanced scorecard. (See Balanced Scorecard definition above.) Kilovolt (kv / KV) A unit of potential equal to 1,000 volts. Kilowatt (KW) A unit of potential equal to 1,000 watts. Kilowatt hour (kwh) The work performed by one kilowatt of electric power in one hour. A kwh is the unit on which the price of electrical energy is based. Example: a 1000 watt light bulb operating for one hour will use one kwh. Liquidity Liquidity refers to how quickly an asset can be turned into cash, used up, or expires; used in reference to assets, which are listed on the balance sheet in the order of their liquidity. MCF 1,000 cubic feet. This is a measure of natural gas usage. Manitou Springs A community located four miles west of Colorado Springs. Mark-to-Market valuations An accounting procedure by which assets are "marked," or recorded, at their current market value, which may be higher or lower than their purchase price or book value. Measure Statement of how success in achieving an objective will be measured and tracked. Measures are written statements of what we will track and trend over time, not the actual targets such as direction and speed. Megawatt (MW) 1,000 watts. Megawatt hour (MWh) A unit of energy, especially electrical energy, equal to the work done by one watt acting for one hour and equivalent to 3,600 joules Annual Operating and Financial Plan 142

145 MGD Millions of gallons per day. Mission A statement that defines the reason an organization exists. Colorado Springs Utilities mission is to provide safe, reliable, competitively priced electric, natural gas, water, and wastewater services to our citizenowners and customers. Nonfuel, Nonlabor Operations and Maintenance See Operations and Maintenance expense. Nonpotable Water not suited for drinking. North American Electric Reliability Corporation (NERC) The electric reliability organization (ERO) certified by the Federal Energy Regulatory Commission to establish and enforce reliability standards for the bulk power system. (nerc.com) Novation The substitution of a new legal obligation for an old one. Off-system sales Electric sales outside of the system. Operating cash Operating cash, classified as unrestricted cash, is derived from customer revenues and excess earnings from restricted funds. These funds are used to pay for operating and maintenance expenses and the portion of capital activities not covered by bond proceeds. The major accounts included are the operating checking, savings, petty cash, and excess cash in deposit accounts linked to an investment safekeeping institution. Operating income Operating revenues less operating expense. Operations and Maintenance (Operations and Maintenance) expense Day-to-day expenses that Colorado Springs Utilities incurs to produce and deliver electricity, natural gas, water, and wastewater treatment. The major categories of Operations and Maintenance expenses are (1) labor, (2) purchased fuel, power and gas, and (3) operating and maintenance expense (all other nonfuel and nonfuel expenses). Operating revenue Revenue which Colorado Springs Utilities receives from customers for the sale of electricity, natural gas, water, wastewater, and streetlight use. Miscellaneous revenues are also included in this category. Other reserve funds Typically classified as restricted cash and investments, these funds are derived from bond proceeds. They are also established for the benefit of bondholders to prevent deficiencies in the payment of principal and interest on outstanding debt, but are established for Subordinate Lien Bondholders when a Surety Bond has not been purchased for the same purpose. Overhead (OH) Electric distribution lines located above ground. Policy governance Colorado Springs Utilities utilizes the Carver Policy Governance model principles under which the Utilities Board provides direction to the organization through Ends Policy Measures and Executive Limitations. Ends Policy Measures are defined as statements of the desired organizational outcomes. Executive Limitations are defined as boundaries of acceptability within which the CEO can operate. The CEO is accountable for organizational performance within the limits set by Utilities Board policy. Principal and interest funds Principal and interest funds, classified as restricted investment, are derived from operating or income funds and are used to pay debt service. PSIA Pounds per square inch (absolute pressure) Purchased fuel, power, and gas Colorado Springs Utilities purchases coal, natural gas, and other fuels for electric generation, natural gas for gas system distribution, and electricity from other suppliers. These expenses comprise purchased fuel, power, and natural gas Annual Operating and Financial Plan 143

146 Public Utilities Commission (PUC) Operated in each state, the Colorado PUC is a Colorado entity which has full economic and quality of service regulatory authority over intrastate telecommunication services, and investorowned electric, natural gas and water utilities, as well as partial regulatory control over municipal utilities and electric associations. Purchased Power Electricity purchased by Colorado Springs Utilities from other suppliers; a component of purchased fuel, power and natural gas. Rebate funds Typically classified as restricted investments, these funds are derived from customer revenues and excess earnings from restricted funds. They are subject to First Lien Bond provisions and may be required to be remitted to the U.S. Treasury as a result of arbitrage calculations. Regional Haze Rules In 1999, the U.S. Environmental Protection Agency finalized the Regional Haze Rule which calls for state, tribal and federal agencies to work together to improve visibility in 156 national parks and wilderness areas; including the 21 Class I Wilderness areas managed by the U.S. Fish and Wildlife Service. (Class I Area: as defined in the Clean Air Act, the following areas that were in existence as of August 7, 1977: national parks over 6,000 acres, national wilderness areas and national memorial parks over 5,000 acres, and international parks.) Remarketing, liquidity, and other financing fees Various fees including those paid to a Remarketing Agent for computing rates applicable to variable rate bonds, and for arranging the remarketing (re-selling) of any variable rate bonds tendered for purchase by the bond owners and fees paid to a Liquidity Provider (usually a bank) for agreeing to purchase any variable rate bonds tendered. It also includes the costs for the line of credit, rating agency annual review costs, arbitrage expenses, the cost of swap valuations, disclosure expenses, and miscellaneous financing costs. Restricted cash and investments A distinction is made between restricted and unrestricted funds when managing cash and investments. Restricted cash and investments consist of acquisition funds, principal and interest funds, common bond reserve funds, other reserve funds, and rebate funds. Sedimentation The process of depositing sediment (matter that settles to the bottom of a liquid); settling. Single Family Equivalent (SFE) Single family household. Sources of funds The origination of cash received by Colorado Springs Utilities to pay for various activities of the organization. There are three major categories of cash sources: operations, financing and investments/other. The primary source of cash is from operations; customers paying for the utility services provided to them. The second largest source is from financing. As needed, Colorado Springs Utilities generates cash from selling bonds to investors in order to pay for capital improvements of the system. The remaining cash receipts include cash from interest on investments, contributions-in-aid and customer deposits. Southern Delivery System (SDS) A critical, multi-year water delivery project intended to increase raw water supply for meeting future demand. Estimated project completion of Phase 1 is Strategic outcomes The overarching goals of the organization over the next three to five years. Strategic initiatives Key action programs developed to achieve objectives or close the gap between measures performance and targets. Initiatives are often known as projects, actions, activities. They differ from objectives in that they are more specific, have stated boundaries (beginning and end), have a person/team assigned to accomplish them, and have a budget. Several initiatives taken together may support a specific objective or theme. Strategic objective Concise action phrases articulating a specific component of what the strategy must achieve and what is critical to the organization s success Annual Operating and Financial Plan 144

147 Strategic perspective Specific view(s) determined by an organization's business model (comprised of mission, vision, and strategy) which delineate activities that guide the organization s success. Strategic plan When taken together, all of the balanced scorecard components represent a strategic plan. This form of strategic plan ensures the linkage between an organization s strategy and its activities. It also ensures consistency across the organization from a framework and definitional standpoint. Strategic themes Descriptive statements that summarize the focus of the strategy at the highest level. Strategy Description of what the organization is attempting to accomplish over the next three to five years. Strategy map A visual representation of an organization s strategy that identifies what must be accomplished to achieve the Boards Strategic Outcomes. It illustrates the interrelation between the strategic themes, perspectives and strategic objectives that when viewed together, tell the story of the strategy in a clearly understandable framework. Supervisory Control and Data Acquisition (SCADA) A process control system that is used in myriad applications, including manufacturing, communications, distribution (water, gas, power) and heating, cooling and security in buildings. A SCADA system collects data from sensors in local and remote locations and sends them to central computers to control local machinery. Target The level of performance or rate of improvement required for a particular measure. Territorial generation Electric generation within Colorado Springs Utilities certificated service territory. Third-Party Billing A form of billing where an intermediary handles the invoicing and payment between a purchaser and a vendor. Time and materials Time and materials accounts include revenues and expenses applicable to operations which are non-utility in character but nevertheless constitute a distinct operating activity. Specifically, damages to utility equipment by third parties and Colorado Springs Utilities subsequent billing to those third parties for reimbursement of repair work are recorded to time and materials accounts. Transfer Surplus funds to City Colorado Springs Utilities pays the City of Colorado Springs a fee in-lieu of taxes. These payments are to replace the franchise, property, and sales tax revenues the City will collect if electric and natural gas services were to be provided by an investor owned (for profit) utility. Underground (UG) Electric transmission, distribution lines located below/under the ground. Use of funds Colorado Springs Utilities budgeted expenditure for cash received. The use of cash is reported using the same major categories: operations, financing and investments/other. The largest use of cash is for operational expenses; labor, fuel, and other expenses related to the day-to-day operation and maintenance of Colorado Springs Utilities systems. The amount of operating cash used to pay for capital projects is also identified. Financing costs represent the principal and interest payments for the outstanding bond issues. Investments/other include purchase of investments, payments for joint ventures, and other cash expenses. Value Principle or quality held to be intrinsically valuable or desirable. Vision Descriptive, compelling image of the organization s world when it has achieved an ideal picture of success. Watershed A region or area bounded peripherally by a divide, and draining ultimately to a particular watercourse or body of water. Watt The absolute meter-kilogram-second unit of power equal to the work done at the rate of one joule per second or to the power produced by a current of one ampere across a potential difference of one volt : horsepower Annual Operating and Financial Plan 145

148 Western Area Power Administration (WAPA) One of four power marketing administrations within the U.S. Department of Energy whose role is to market and transmit electricity from multi-use water projects. WAPA's mission is to market and deliver reliable, renewable, cost-based hydroelectric power and related services within a 15-state region of the central and western United States. Western Cyber Exchange (WCX) A consortium of concerned businesses, IT security professionals, and federal, state and local government representatives committed to sharing information, training, services and products in cyber security. (wcyberx.org) Wheeling Refers to the ability of an energy consumer to select their own energy supplier, or "wheel in" energy from one of two or more different suppliers. Colorado Springs Utilities primarily wheels electricity from WAPA to local military bases and charges for the use of the transmission system. Working capital Current assets minus inventories minus prepaids minus current liabilities Annual Operating and Financial Plan 146

149 APPENDIX ELECTRIC, GAS, WATER AND WASTEWATER SERVICE TERRITORY MAP 2015 Annual Operating and Financial Plan 147

150 2015 Annual Operating and Financial Plan 148

151 2015 Annual Operating and Financial Plan ANNUAL BUDGET ORDINANCE

152 2015 Annual Operating and Financial Plan 150

153 2015 Annual Operating and Financial Plan SOURCE FUNDS ORDINANCE

154 2015 Annual Operating and Financial Plan 152