Committee Members Present: Don Knight, Andy Pico, and Helen Collins

Transcription

1 Minutes Finance Committee Colorado Springs Utilities Board June 24, 2015, 8:00 a.m. 12:00 p.m. Cabin Creek Conference Room 6 th Floor, Plaza of the Rockies South Tower, 121 S. Tejon Committee Members Present: Don Knight, Andy Pico, and Helen Collins Committee Member Excused: Larry Bagley Staff Members Present: Bill Cherrier, Andy Colosimo, Gary Bostrom, Eric Tharp, Tyler Allison, Leah Ash, Sonya Thieme, Scott Shewey, Tristan Gearhart, Henry Henderson, Scott Shirola, Angelia Mora, Bob Lesher, Wayne Vanderschuere, Aram Benyamin, Eileen Verosko, City Financial Audit Supervisor Jacqueline Rowland, Senior City Attorney, Colorado Springs Utilities Division David Beckett, and Ken Burgess, Chief Counsel - Rates & Regulatory The meeting convened at 8:05 a.m. Committee Chair Knight noted that Committee Members Pico and Collins participated in the Ride Your Bike to Work event today, and would be arriving later in the meeting. Review of Meeting Minutes The minutes from the Finance Committee meeting on June 15, 2015 were reviewed for posting. Fuel Rate Combination Update: Electric Cost Adjustment (ECA)/Supply and Gas Cost Adjustment (GCA)/Gas Supply Ms. Sonya Thieme, Rates Manager, presented an update on the proposed fuel rate combination for ECA and GCA. She recapped operational functions for electric and natural gas; and reviewed the components that were last brought to the Finance Committee at the April 29 meeting. She explained that her presentation today is an update on cost recovery, and how it will affect the 2016 Rate Filing. Ms. Thieme explained fuel cost recovery and the proposed combining of costs into one rate; and also how fuel cost is recovered through the base rate. Mr. Bill Cherrier, Chief Planning and Finance Officer, explained how having an ECA or GCA charge and supply charge on the customer bill can cause confusion. Ms. Thieme discussed the objective of the proposed change, and additional enhancements that were not anticipated when they started this project. The enhancements were to realign and rebalance rates, and to create cost consistency in recovery practices between services.

2 Ms. Thieme reviewed the proposed ECA combination and rate design methodology for the Time of Day (TOD) rate class and Large Power and Light rate class (ELG). She reviewed the potential impacts to TOD customers. Committee Member Pico arrived at 8:15 a.m. Ms. Thieme reviewed an overview of the proposed GCA and gas supply charge combination, stating that the change is revenue neutral for all rate classes except G1S, which represents one percent of GCA sales. Ms. Thieme explained the potential for pulling transportation and storage costs from the GCA and creating a gas capacity charge (GCC). She reviewed the end results showing the current and proposed rates. Ms. Thieme reviewed next steps required for bringing the 2016 Rate Filing before the City Auditor and the Rate Filing. She stated that ideally, they would like to deliver the Rate Filing to the City Auditor thirty days earlier that the thirty day requirement. Presentation and education discussion of the Rate Filing to the Utilities Board prior to presenting to the City Auditor Standard ECA adjustment for all rate classes o Revenue neutral for every class Alignment of supply charge required if combination is not approved o Time of Day (TOD) rate class Rebalance of supply charge Present to customers as two separate actions to avoid confusion Potential change to use terminology of fuel charge instead of ECA o Peer utilities all use cost adjustment terminology Coal component o Continue to keep separate in the two services Provide a before and after customer bill at the August Finance Committee meeting Plan of Finance Mr. Scott Shewey, Financial Services General Manager, stated that this review is a continuation of what did not get covered at the June 15 meeting. Mr. Shewey discussed liquidity for variable rate on bond issues, commercial paper, and series 2015 advance refunding bonds. Mr. Shewey presented a calendar of when proposed ordinances will be on the City Council agenda for readings and approval through October of this year. Page 2 of 8

3 Refunding bonds o Norm is to wait until there is three percent net value savings before executing the refund Colorado Springs Utilities waits until it is five percent No new money bonds this year Liquidity for variable rate bond issues o Balanced so there are just a few expiring each year Signing of bonds o One of three officers, with CEO as secondary o Mr. Cherrier will probably be the primary o The key is availability due to critical time frames o The charter change removed the requirement of the Mayor s signature on Colorado Springs Utilities contracts, but it did not specify who will have authority to sign o Seeking direction from Bond Counsel Present the impact factor at the July Finance Committee meeting for liquidity, refunding, and commercial paper Provide a write-up of the bond signing process at the July Finance Committee meeting with the recommendation of who the Bond Counsel is looking for as a signer 2015 Forecast Due to time constraints for the meeting, the forecast was not reviewed. Mr. Shewey asked the committee members if they had any questions or concerns. He discussed the affect of the current weather conditions, and stated that they will have a better update in the next forecast. Mr. Cherrier explained that a scenario was run looking at a wet summer, as the regular forecast is based on normal weather. Weather normalized forecast Committee Member Collins arrived at 9:00 a.m By-Service Budget Water Mr. Gary Bostrom, Chief Water Services Officer provided an overview of the 2016 Budget for Water and Wastewater Services. Mr. Wayne Vanderschuere, Planning, Engineering and Resource Management General Manger; Mr. Tyler Allison, Interim Chief Page 3 of 8

4 Water Services Officer; and Ms. Leah Ash, Distribution, Collection and Treatment General Manger, were present as well to answer questions during the presentation. Mr. Bostrom reviewed the Water Services key initiatives which are water supply and water delivery issues and constraints; legal and regulatory compliance; aging infrastructure; the Southern Delivery System (SDS) integration plan; water rates strategy and revenue stabilization; and aging workforce. He stated that all of these are from the Five-Year Business Plan. He stated the Back Flow Prevention program needs to be delivered at a greater level because of new regulation. He explained that a significant amount of Operations and Maintenance (O&M) in SDS is ramping down as operations are ramping up. He explained that they need to get to a sustainable place where they are not cutting infrastructure maintenance. Mr. Bostrom reviewed key Water capital projects which are SDS Phase 1, water main rehabilitation and replacement programs, wastewater collection system improvement programs, and water treatment plant improvements. Mr. Bostrom explained the Water Services expenditures in O&M, SDS Capital, and non- SDS Capital; and presented the 2016 proposed budget in comparison with actuals from 2013 and 2014 and the approved 2015 budget amount. Ms. Angelia Mora, Principal Operations Analyst, presented the financial changes for Water Services. Fillmore hill o Coordinating with City Public Works to get the pipeline completed before they do an overlay Water main replacement is a capital expense if it goes over $5,000 Water infrastructure continuity Water O&M reductions Debt service increasing $8 million due to additional borrowing to fund the water capital program o Paying on borrowed money is similar to a mortgage payment o Capitalized interest Information Technology (IT) cuts o Computer replacement program Raising and leveling manholes when streets are paved o Coordination meetings with City Public Works o Adding more money for infrastructure Non-potable water rate adjustment o Rate has been held flat since prior to SDS o Prior to SDS it was at fifty percent of total water revenues and is now down to sixteen percent Page 4 of 8

5 o Staff recommends a phased-in non-potable rate increase o Will require a separate discussion before the 2016 Rate Filing o Increasing non-potable water rate o Drake represents fifty percent of all non-potable usage Ms. Ash will follow up on the Fillmore hill issue with Committee Chair Knight Mr. Bob Lesher, Treasury and Finance Manager, will provide detail on what is being funded in water to drive the debt up Wastewater Mr. Bostrom reviewed Wastewater Service key initiatives including legal and regulatory compliance, aging infrastructure, and aging workforce. He stated that several key employees in Water Services are retiring this year, including himself; and this will put a strain on the department to get new knowledgeable and skilled employees in place. Mr. Bostrom discussed Wastewater Service expenditures in O&M and Capital; and presented the proposed 2016 budget in comparison with actuals from 2013 and 2014 and the approved 2015 budget amount. Mr. Bostrom explained that in the Five-Year Business Plan they are working to have a process in place that has more planning and assessment so they are spending the money in the right place. He stated that they need to get O&M in a better place. The last Wastewater rate increase Required rate increase of five percent to close the gap in water operations o Driven by revenue shortfall o Infrastructure is feeling the brunt of it o Preventative maintenance is usually cut first o Impact on the customer bill o Challenge of educating customers on the drivers Water Revenue forecast o Challenges in building cash Initial intent coming off of SDS was that water rates would stay stable for several years o Pressure on revenues to maintain financial metrics o Lack of revenue last three years o Need an increased coverage ratio o Moody s rating o Seeing improvement in debt ratio What is being done in O&M to reduce over the long-term o This is the first year that there is nothing left to give Page 5 of 8

6 Now it is down to just not doing something, and is a risk they are not comfortable with o Fire and floods have added more work without asking for more money o Fire hydrant maintenance program Expanded from a three to five year program o Valves program As the City Publics Work improves roads, mains and valves can get covered o Absorbing increased costs with a fixed cost operation Additional funding for the water main replacement program o There are a few other areas that need to be addressed first, such as the valve management maintenance program The overall impact to budget if they do a four percent increase Timing of the budget and rate case Wastewater has not had rate increase for many years o From financial view it is very healthy o Be cautious about increasing wastewater rate o Contributes to the Enterprise level Preventative Maintenance Inspections (PMI) If $2 million were to be added to budget should it go to Water or Wastewater? o Water is more critical, but there are areas in Wastewater that could use it Performance metrics that can be reduced Review timing of the budget and rate case Provide how much was saved by not repairing the Little Mesa tank and what it is costing to replace it Break 9:57 a.m. 10:10 a.m. Energy Mr. Eric Tharp, Chief Energy Services Officer reviewed the Electric Services key initiatives which are the Electric Integrated Resource Plan (EIRP), emissions compliance (SO2), addition of renewable electric supplies, North American Electric Reliability (NERC)/Western Electric Coordinating Council compliance, and safety. Mr. Tharp reviewed the budget numbers for the Demand Side Management (DSM)/Renewables incentives program. Mr. Tharp discussed Energy Services key capital projects of emissions control of Drake Units 6 & 7 and Nixon; electric distribution to new residential and commercial Page 6 of 8

7 customers; Front Range major maintenance, and natural gas renewals and improvements. Mr. Tharp reviewed Electric expenditures in Fuel O&M, Capital, and Non-fuel O&M with actuals from 2013 and 2014 and the approved 2015 budget amount. He stated that the fuel budget is lower than it s been in several years. DSM and rebates o Modified customer behaviors o Custom rebate programs o Rebates keeping loads flatter Bulk of Capital Projects are emissions control for Nixon o A couple million dollars has been included in the 2016 budget for Drake Unit 5 depending on outcome of the EIRP Mr. Mason Parsaye, General Manager for Energy Construction, Operations and Maintenance and his team are working to put together a master maintenance inspection program Only seeing the cost of DSM, not benefit because of deferment Provide safety statistics on days lost, incidents, accidents Natural Gas Mr. Tharp reviewed the Natural Gas Service key initiatives which are Colorado Interstate Gas (CIG) rate case, compressed natural gas fuel station, Distribution Integrity Management Program (DIMP), and safety. Mr. Tharp reviewed the natural gas expenditures in Fuel O&M, Capital and Non-fuel O&M with actuals from 2013 and 2014 and the approved 2015 budget amount. CIG Rate Case o Last rate case Colorado Springs Utilities was able to drive down costs o New case will be a big deal, and Colorado Springs Utilities engage in the filing Two fueling stations should be ready in 2016 Key capital projects o Gas renewals and improvements Gas and electric are maintaining status quo What is being done to bring down long standing fixed costs o Deployment of smart meters to run the system better o Using technology o Cuts were made to get to this point Page 7 of 8

8 Areas of technology that would save money, but upfront costs prevent putting it in place o Deploy a smart grid pilot If $2 million were added to the budget o Needed more in Water, but Electric could find a place to spend it Provide a list of the top ten natural gas and energy capital projects Planning and Finance Due to time restraints, this will be reviewed at the July 29 meeting. Future Agenda and Follow-up Items Mr. Cherrier reviewed the agenda items for the July 29 meeting. Plan of Finance was listed under Items by Exception, and Mr. Cherrier was asked to move it up as a regular agenda item. Other items added to the ones listed in the Finance Committee Work Plan were: Signature authority review O&M Capital Water Adjustment Messaging Little Mesa tank costs Safety Safety o Auto accidents, slips, falls, strains o Do a root cause analysis Budget Work Session o No need, as it can be done in a regular meeting Risk Management Committee Report Review No discussion. Economic Development Briefing No discussion. Adjournment The meeting adjourned at 12:00 p.m. Next Meeting Wednesday, July 29, 2015, 8:00 a.m. 12:00 a.m. Page 8 of 8