WEBVTT 00:00:00.000 --> 00:00:07.720 Okay, it's nine o'clock, so it's called to order the Monday, July 8th Public Utilities 00:00:07.720 --> 00:00:08.720 Board Meeting. 00:00:08.720 --> 00:00:14.580 I'd like to suggest that since the item that's in the closed meeting is not on the agenda 00:00:14.580 --> 00:00:20.040 later that we move that to the last item and then we can just, we can adjourn into the 00:00:20.040 --> 00:00:21.040 closed meeting. 00:00:21.040 --> 00:00:26.040 So the first item is the work session, receive a report and hold a discussion and give staff 00:00:26.040 --> 00:00:32.960 direction regarding the Denton Municipal Electric budget and capital improvements. 00:00:32.960 --> 00:00:42.480 Good morning, Madam Chair, board members, city manager Terry Nolte, assistant general 00:00:42.480 --> 00:00:43.480 manager DME. 00:00:43.480 --> 00:00:47.960 We're going to go over our budget today. 00:00:47.960 --> 00:00:52.480 I'm going to skip over a lot of the bullet points on the presentation that you've got. 00:00:52.480 --> 00:00:56.260 If you have any questions, please stop me and ask me. 00:00:56.260 --> 00:00:58.320 Just going to hit some highlights here. 00:00:58.320 --> 00:01:04.640 For accomplishments, I guess the ones that we're most proud of is our, the second bullet 00:01:04.640 --> 00:01:08.880 down, the excellence and reliability award from the APPA. 00:01:08.880 --> 00:01:15.400 Only 25% of utilities, municipal utilities in the U.S. receive this honor and it's a 00:01:15.400 --> 00:01:30.160 measure of reliability, sustainability, and customer service. 00:01:30.160 --> 00:01:36.680 We did also complete another of the largest power purchase agreements as part of the renewable 00:01:36.680 --> 00:01:47.120 Denton plan, 150 megawatt PPA, a fixed price solar energy during the year. 00:01:47.120 --> 00:01:53.640 On the street light program, we've patrolled street lights on two occasions. 00:01:53.640 --> 00:02:00.820 The first time we had about 600 lights we found out and have worked towards repairing. 00:02:00.820 --> 00:02:07.400 We just completed a second one and now we're down to 200. 00:02:07.400 --> 00:02:15.400 The Denton energy center, the last unit, completed its warranty repairs in May of this year, 00:02:15.400 --> 00:02:22.600 unit five, and so now we're into a steady state post startup operation. 00:02:22.600 --> 00:02:27.160 There are still some outstanding warranty issues on the control side that we're working 00:02:27.160 --> 00:02:37.120 on but we feel like we've turned the corner on that. 00:02:37.120 --> 00:02:41.600 For the rest of the year, we are working on our hedge plan development. 00:02:41.600 --> 00:02:46.640 This is one of the recommendations from the Deloitte study. 00:02:46.640 --> 00:02:54.360 We've passed a new risk management policy and as part of that policy, we'll be developing 00:02:54.360 --> 00:03:01.600 this hedge plan which is really the next step in the maturity of the energy management office 00:03:01.600 --> 00:03:10.200 and once implemented, it will help stabilize revenues, the ECA component of the rates, 00:03:10.200 --> 00:03:17.800 and it will help us to more effectively measure and report the risk to you and to city council. 00:03:17.800 --> 00:03:21.760 The ETRM system is the energy trading risk management system. 00:03:21.760 --> 00:03:26.320 It is another one of the recommendations that Deloitte had. 00:03:26.320 --> 00:03:29.700 We are in the selection process for this system. 00:03:29.700 --> 00:03:37.400 It's an essential component of our hedging program as we move forward. 00:03:37.400 --> 00:03:43.440 The texting capabilities, we're in the final testing of texting capabilities for customers 00:03:43.440 --> 00:03:54.080 to keep them informed of outages, time to restoration, and information that they will find valuable. 00:03:54.080 --> 00:04:01.520 For the next fiscal year, our objectives are to enhance our energy programs. 00:04:01.520 --> 00:04:17.520 We're looking to add lawn equipment incentives for electric lawn equipment, lawn service equipment. 00:04:17.520 --> 00:04:23.720 We also have -- we continue to see strong interest in the solar rooftop installation. 00:04:23.720 --> 00:04:32.040 We have over two megawatts of solar installed now throughout the city in rooftops. 00:04:32.040 --> 00:04:38.040 Gibbons Creek will be a focus of our efforts in the next fiscal year as we try to get a 00:04:38.040 --> 00:04:44.560 better handle on the costs and risks associated with the shutdown of the Gibbons Creek facility. 00:04:44.560 --> 00:04:51.240 There are a number of landfills and ash ponds that require remediation. 00:04:51.240 --> 00:04:54.760 The plant site is on the blocks to be sold. 00:04:54.760 --> 00:05:01.240 The revenues from the sale of the plant are intended to offset the decommissioning costs 00:05:01.240 --> 00:05:08.600 that we anticipate will be faced by the TMPA members. 00:05:08.600 --> 00:05:16.800 And then new LED lights will be initiating the start of our new LED street light program. 00:05:16.800 --> 00:05:22.200 Those lights will have controls that will automatically notify the control center when 00:05:22.200 --> 00:05:25.680 they're out so we can get out there and repair them very quickly. 00:05:25.680 --> 00:05:32.080 And they take about 80% less energy to fuel those. 00:05:32.080 --> 00:05:38.680 And then on the renewable energy front, we hope to ink our last deals to achieve the 00:05:38.680 --> 00:05:59.440 100% renewable program, renewable dent program, inside of this fiscal year. 00:05:59.440 --> 00:06:06.680 So this year, the new management has taken a look at the process, the budgeting process, 00:06:06.680 --> 00:06:13.680 and we decided to examine the process to ensure more accurate forecasts and methodologies. 00:06:13.680 --> 00:06:20.600 A number of changes were made to ensure that the results were objective, unbiased, and 00:06:20.600 --> 00:06:27.840 the potential outcomes were properly quantified and documented for consistency in years to 00:06:27.840 --> 00:06:28.840 come. 00:06:28.840 --> 00:06:35.080 The process identified a number of gaps associated with the DME's forward forecasting approach. 00:06:35.080 --> 00:06:43.360 We've made some changes, reviewed those changes with industry experts, got a passing grade 00:06:43.360 --> 00:06:51.960 from them, and we've attached a summary of their assessment, which supports the methodology 00:06:51.960 --> 00:06:54.240 that we used. 00:06:54.240 --> 00:06:58.720 We'll continue to improve our forecasting methodology in the coming year as we look 00:06:58.720 --> 00:07:05.600 to enhance our modeling capabilities with some stochastics and neural network models 00:07:05.600 --> 00:07:12.360 that will better predict the variability of output from our renewable energy resources 00:07:12.360 --> 00:07:15.280 and the variable demand that we have. 00:07:15.280 --> 00:07:22.400 Better modeling will result in a better sensitivity analysis as we move forward. 00:07:22.400 --> 00:07:33.440 We'll talk about some of the budget impacts. 00:07:33.440 --> 00:07:40.120 So changing markets, regulations, weather, forecasts, and that's what defines the electric 00:07:40.120 --> 00:07:46.160 utility business, and each of these factors have a significant impact on the financial 00:07:46.160 --> 00:07:48.720 performance of DME. 00:07:48.720 --> 00:07:53.960 The budget that we're proposing is based upon what staff and management consider the 00:07:53.960 --> 00:07:57.960 most probable set of inputs and likely outcomes. 00:07:57.960 --> 00:08:04.900 However, many of the variables that we have to forecast to define likely revenue streams 00:08:04.900 --> 00:08:08.080 and expenses are beyond our control. 00:08:08.080 --> 00:08:14.120 This slide provides the high-level review of some of the most important ones. 00:08:14.120 --> 00:08:18.480 Each year we present a five-year forecast with the next fiscal year having the highest 00:08:18.480 --> 00:08:21.440 confidence level. 00:08:21.440 --> 00:08:25.960 The budget you'll see identifies the need for additional revenues. 00:08:25.960 --> 00:08:31.440 It has a high reliance on the use of reserve funds in this fiscal year and next fiscal 00:08:31.440 --> 00:08:37.960 year, and with the exception of weather, the factors on this list really have a potential 00:08:37.960 --> 00:08:41.720 impact on our budgets in years two through five. 00:08:41.720 --> 00:08:46.960 So as we go through those, just to touch on a few of them, the decommissioning costs of 00:08:46.960 --> 00:08:55.440 TNPA, we have currently $22 million budgeted. 00:08:55.440 --> 00:09:00.240 We think that could come in less than or could come in higher than $22 million. 00:09:00.240 --> 00:09:06.920 The status of that is that the engineers have looked at the cost of decommissioning. 00:09:06.920 --> 00:09:15.480 Those plans have not been forwarded to the environmental people in TCEQ in Austin. 00:09:15.480 --> 00:09:25.080 Until they approve the plans, we won't know the final number. 00:09:25.080 --> 00:09:29.600 Positive cash flows from the TNPA site, to the extent we sell the site and can offset 00:09:29.600 --> 00:09:33.580 some of that $22 million, it will impact our budget. 00:09:33.580 --> 00:09:40.700 We currently have only expenses budgeted, no revenues for the sale of property. 00:09:40.700 --> 00:09:45.800 Our T cost recovery we anticipate will go down over time. 00:09:45.800 --> 00:09:49.880 Currently we're earning about 28% return on our investment. 00:09:49.880 --> 00:09:58.580 We expect that to move down to around 13% in the next three years. 00:09:58.580 --> 00:10:05.840 If that rate stays higher, for a longer period of time, it's worth about $2 million per year 00:10:05.840 --> 00:10:09.240 for each percent. 00:10:09.240 --> 00:10:16.640 Of course, summer temperatures, lower than normal summer temperatures as we've been experiencing, 00:10:16.640 --> 00:10:19.240 results in lower revenues for the deck. 00:10:19.240 --> 00:10:26.440 It also results in lower expenses on the purchase side for load. 00:10:26.440 --> 00:10:30.120 Because of our hedging program, we'd like to see higher temperatures and higher prices 00:10:30.120 --> 00:10:33.000 so that we can generate more revenues from the deck. 00:10:33.000 --> 00:10:38.920 We'll talk a little bit more about the deck forecast as we move forward. 00:10:38.920 --> 00:10:44.360 The last one on the positive is increased power price volatility and capacity. 00:10:44.360 --> 00:10:52.920 As you all have been informed, the reserve margins in the ERCOT market are very thin. 00:10:52.920 --> 00:10:57.040 To the extent that we have any major outages of generating units, we could see volatility 00:10:57.040 --> 00:10:58.540 increase. 00:10:58.540 --> 00:11:02.960 Volatility increases are good for the deck revenues as long as the units are available, 00:11:02.960 --> 00:11:08.680 which we anticipate they would be, and that would generate a lot more revenue and impact 00:11:08.680 --> 00:11:12.160 our budget positively. 00:11:12.160 --> 00:11:16.020 On the negative side, we could see higher forced outage rates. 00:11:16.020 --> 00:11:18.160 They are mechanical pieces of equipment. 00:11:18.160 --> 00:11:22.880 They are subject to breakdown, and although they're relatively new, there are unfreeze 00:11:22.880 --> 00:11:30.280 seen things that could crop up. 00:11:30.280 --> 00:11:35.040 The objectives of this presentation, I think you're going to take this one or are we going 00:11:35.040 --> 00:11:36.040 to the next one? 00:11:36.040 --> 00:11:37.040 Okay. 00:11:37.040 --> 00:11:44.120 With that, I'm going to turn it over to David. 00:11:44.120 --> 00:11:45.120 Good morning, board. 00:11:45.120 --> 00:11:46.600 My name is David Gaines. 00:11:46.600 --> 00:11:47.600 I'm the director of finance. 00:11:47.600 --> 00:11:51.520 I'm going to take over a few of these slides as we move forward talking through the financials, 00:11:51.520 --> 00:11:57.360 but definitely we have Terry and other DME staff here to answer specific questions. 00:11:57.360 --> 00:12:02.600 To start with, outline the pieces we want to hit on in this financial presentation. 00:12:02.600 --> 00:12:03.720 Talk through our assumptions. 00:12:03.720 --> 00:12:08.760 We really want to hit on a couple pieces concerning our debt service, purchase power, and how 00:12:08.760 --> 00:12:13.560 that affects our ECA rate, which really are some of the pivotal points in the budget for 00:12:13.560 --> 00:12:14.560 the next year. 00:12:14.560 --> 00:12:21.260 Then talk through the rate options, CIP, and touch on the TCOS that Terry mentioned previously. 00:12:21.260 --> 00:12:26.160 Just a step back as far as the process of how we got here, you know, obviously the budget 00:12:26.160 --> 00:12:29.800 has been delayed a couple months from what we've previously done into the other utilities 00:12:29.800 --> 00:12:33.200 that have already come to the board, and I think you saw a lot of the reasons in what 00:12:33.200 --> 00:12:37.080 Terry just presented, a lot of the variables that have been changing, and I think you'll 00:12:37.080 --> 00:12:41.000 see those in the slides to come, but it's definitely been a moving target, and it's 00:12:41.000 --> 00:12:44.040 taken a lot of work to get to this point, and I think you'll see that there's some 00:12:44.040 --> 00:12:48.560 significant decisions that we can have in the DME budget, which really are impacted 00:12:48.560 --> 00:12:52.760 by all of these. 00:12:52.760 --> 00:12:57.760 So here are the assumptions that we've included in our forecast for all of our scenarios, 00:12:57.760 --> 00:13:02.880 and what we really expect for next year in the budget, which 3% increase in projected 00:13:02.880 --> 00:13:07.620 demand, just strictly demand for next year, have a 3% increase. 00:13:07.620 --> 00:13:11.700 We are projected to continue the suspension of TCRF. 00:13:11.700 --> 00:13:16.120 We are currently planning to debt fund our entire CIP next year. 00:13:16.120 --> 00:13:22.880 This year we did have some revenue-funded CIP on the CIP side, looking to debt fund 00:13:22.880 --> 00:13:25.980 all of our CIP next year and in the out years of our forecast. 00:13:25.980 --> 00:13:30.640 We have no supplemental requests for new asks in the budget for next year, and we do have 00:13:30.640 --> 00:13:35.240 these two new solar resources with Laundry and Blue Belt II. 00:13:35.240 --> 00:13:41.460 The options for consideration, which you'll see on the slides to come, are rate stabilization. 00:13:41.460 --> 00:13:46.960 We are anticipating, if we kept everything stable, a significant rate increase on the 00:13:46.960 --> 00:13:48.040 ECA side. 00:13:48.040 --> 00:13:52.500 So we want to bring to you options on how can we keep that ECA rate stable, and then 00:13:52.500 --> 00:13:56.220 the second piece is that second bullet there, and really that comes down to how do we want 00:13:56.220 --> 00:14:01.080 to use our reserves, whether it's this year or in future years, to keep our rates stable 00:14:01.080 --> 00:14:02.080 and to plan for the future. 00:14:02.080 --> 00:14:06.320 So those are the pieces that we'll hit on in the coming slides. 00:14:06.320 --> 00:14:11.120 Here's some of those major budget variables, and I think Terry hit on a lot of these. 00:14:11.120 --> 00:14:16.200 We budget our debt revenues conservatively in the out years. 00:14:16.200 --> 00:14:20.640 We haven't got a full year of seeing how the debt runs yet, so we're still trying to understand 00:14:20.640 --> 00:14:25.400 how the debt corresponds to the market, but definitely in our future years, when you see 00:14:25.400 --> 00:14:31.720 our debt pro forma, have really stuck to conservative projections on what those revenues could be. 00:14:31.720 --> 00:14:38.360 We have a major variable as we talk through purchase powers, our renewable energy resource, 00:14:38.360 --> 00:14:43.120 the wind resources, and the faster renewable buildup, which you'll see as we get to the 00:14:43.120 --> 00:14:44.880 purchase powers slides. 00:14:44.880 --> 00:14:50.000 And then as Terry also mentioned, the decommissioning, the TNPA decommissioning, we have that. 00:14:50.000 --> 00:14:54.560 The cost associated from TNPA in our budget right now for what decommissioning would be 00:14:54.560 --> 00:14:58.600 over the next five years, they've given us dollar amounts that we've included in our 00:14:58.600 --> 00:15:01.160 budget to contribute to that decommissioning. 00:15:01.160 --> 00:15:05.040 That's definitely, as Terry mentioned, a variable that's out there that could change the budget 00:15:05.040 --> 00:15:09.400 in the out years if they sell, if they do get proceeds from a sale, it would negate 00:15:09.400 --> 00:15:13.640 some of those costs, but those costs would also fluctuate in the out years on what the 00:15:13.640 --> 00:15:18.560 actual decommissioning will be. 00:15:18.560 --> 00:15:23.840 So we want to touch first on our debt service for DME. 00:15:23.840 --> 00:15:28.240 We had a change to this '18-'19 budget for our debt service. 00:15:28.240 --> 00:15:33.640 What we anticipate to spend this year in debt service is going to be about $9 to $10 million 00:15:33.640 --> 00:15:40.240 higher than we budgeted, and that's driven entirely by our first principal debt service 00:15:40.240 --> 00:15:41.240 payment. 00:15:41.240 --> 00:15:45.160 And we've made interest payments up to this point on the deck. 00:15:45.160 --> 00:15:50.880 We have our first principal payment in December of this year, December of 2019. 00:15:50.880 --> 00:15:58.480 As with our other recent bond issuances, we had planned on making that payment in December 00:15:58.480 --> 00:16:03.160 and having that realized in the '19-'20 budget, that entire amount, which you can see there 00:16:03.160 --> 00:16:12.600 about the entire principal amount of the $6 million plus the larger interest amount. 00:16:12.600 --> 00:16:18.200 The bond language for this revenue bond is written differently than our other recent 00:16:18.200 --> 00:16:23.160 issuances, where instead of just making the payment in December in our bond confidence, 00:16:23.160 --> 00:16:28.520 it's required that we make a monthly transfer to our debt service fund in anticipation of 00:16:28.520 --> 00:16:29.920 the December payment. 00:16:29.920 --> 00:16:35.760 So what that does from a budget perspective is we get hit in '18-'19 for expenses we 00:16:35.760 --> 00:16:38.280 anticipated in '19-'20. 00:16:38.280 --> 00:16:47.200 So up until October 1st, up until September, we're now making that transfer, and the net 00:16:47.200 --> 00:16:54.480 impact of that is our '18-'19 budget is $9.8 million more in expenses transferred over 00:16:54.480 --> 00:16:56.800 to the debt service fund this fiscal year. 00:16:56.800 --> 00:17:00.720 It doesn't change, you know, when you take a big-picture view of our debt, of our debt 00:17:00.720 --> 00:17:04.480 service, what we're going to pay on the debt revenue bond, does not change our total amount 00:17:04.480 --> 00:17:08.020 that we're going to pay, but it does have an impact on this this year, and even as you 00:17:08.020 --> 00:17:13.000 look at a five-year window, it has that impact because you don't really realize that savings 00:17:13.000 --> 00:17:16.440 until the very end of the debt payoff. 00:17:16.440 --> 00:17:20.760 So that is a reality that we have to deal with this fiscal year, and I think as we talk 00:17:20.760 --> 00:17:26.960 to the ECA, that's where we have-- it really impacts the ECA rate. 00:17:26.960 --> 00:17:31.880 As far as budget appropriations, we're still within our debt-- for DME, our total debt 00:17:31.880 --> 00:17:37.400 service appropriations because we had originally-- our debt appropriations, we had originally 00:17:37.400 --> 00:17:43.520 planned to pay off the $28.6 million remaining on our TMPA scrubber debt. 00:17:43.520 --> 00:17:48.320 A few months ago, we stepped back when we were gearing up to make that the payoff of 00:17:48.320 --> 00:17:53.440 that debt, and decided to hold off on it, knowing that we had so many variables, and 00:17:53.440 --> 00:17:57.400 to take that large of a drawdown from our fund balance didn't seem appropriate, knowing 00:17:57.400 --> 00:18:01.520 that there are so many different piece-- moving targets, I think we're happy with that decision 00:18:01.520 --> 00:18:05.360 now that we've decided to hold off on that because it gives us these options that we'll 00:18:05.360 --> 00:18:09.760 talk about in the coming slides on what we can do with our reserves. 00:18:09.760 --> 00:18:13.040 We've also used this opportunity in the next couple months. 00:18:13.040 --> 00:18:18.880 We're going to be issuing debt citywide, and with interest rates being so significantly 00:18:18.880 --> 00:18:23.800 lower now than they've been in recent years, we have an opportunity to refinance that debt. 00:18:23.800 --> 00:18:29.440 So ultimately, we're going to, with the refinancing, save about $2 million on the remaining debt 00:18:29.440 --> 00:18:32.520 service for that TMPA scrubber debt as well. 00:18:32.520 --> 00:18:41.800 So that's given us that opportunity in the future to have a better impact on our forecast. 00:18:41.800 --> 00:18:47.440 The other large variable that impacts our ECA rate is purchase power. 00:18:47.440 --> 00:18:54.360 We are anticipating, in this fiscal year, in '18-'19, a $6.4 million increase in our 00:18:54.360 --> 00:18:56.960 estimated purchase power expenses. 00:18:56.960 --> 00:19:03.440 $4.2 million of that is incremental power supply costs from not operating Givens Creek 00:19:03.440 --> 00:19:05.400 in the summer of 2019. 00:19:05.400 --> 00:19:10.960 The budget, when it was developed last year, a lot of the assumptions within the budget 00:19:10.960 --> 00:19:13.120 still had that piece operating. 00:19:13.120 --> 00:19:18.080 So by not operating that, that's the increase associated that we're going to experience 00:19:18.080 --> 00:19:19.920 this summer now. 00:19:19.920 --> 00:19:25.200 And then also, we have $2.2 million in other incremental cost increase from market movement. 00:19:25.200 --> 00:19:30.360 I think this goes back to what Terry mentioned of really taking a different approach to how 00:19:30.360 --> 00:19:35.200 we budget purchase power and how we anticipate it, which we think is a better, more thorough 00:19:35.200 --> 00:19:39.080 way to look at our purchase power and meet our expectations. 00:19:39.080 --> 00:19:43.160 It has an impact on the out years as you see in '19-'20 with an increase, but it also impacts 00:19:43.160 --> 00:19:46.560 what we think we'll spend this year in '18-'19. 00:19:46.560 --> 00:19:50.680 So this $6.4 combined with that debt service increase is what you're going to see is that 00:19:50.680 --> 00:19:55.440 impact on what we have to have for an ECA rate this year and next year. 00:19:55.440 --> 00:20:02.640 In '19-'20, we again anticipate an additional $2.2 million increase in our purchase power 00:20:02.640 --> 00:20:07.880 based on our contracts, our market, and the demand associated with those. 00:20:07.880 --> 00:20:12.960 But then starting in '21-'24 of our forecast, we do see those, that purchase power amount 00:20:12.960 --> 00:20:20.840 start to decrease in the future years. 00:20:20.840 --> 00:20:26.160 So I mentioned ECA rate, the energy cost adjustment rate a lot, and I just wanted to just use 00:20:26.160 --> 00:20:30.240 this opportunity to step back and talk about what those are as we consider the alternatives 00:20:30.240 --> 00:20:31.240 moving forward. 00:20:31.240 --> 00:20:37.120 The ECA rate is really meant to, high level is meant to fluctuate with what are the actual 00:20:37.120 --> 00:20:39.000 costs to provide the energy. 00:20:39.000 --> 00:20:43.560 That number is going to fluctuate obviously year to year based on market and other contracts 00:20:43.560 --> 00:20:45.440 and different variables as we've seen. 00:20:45.440 --> 00:20:49.680 And so we look at that ECA rate as one that is meant to fluctuate with the market, whereas 00:20:49.680 --> 00:20:54.120 base rates are intended to be more stable and they have a lot of those fixed costs from 00:20:54.120 --> 00:20:59.040 personnel to O&M and all of these other costs that we've shown here that are included in 00:20:59.040 --> 00:21:02.880 the budget, whereas ECA includes purchase power. 00:21:02.880 --> 00:21:09.440 Our policy and our ECA policy, we have planned to pay for our deck operating costs, our debt 00:21:09.440 --> 00:21:16.120 service with the ECA, so those three pieces right there obviously have increased this 00:21:16.120 --> 00:21:19.140 fiscal year and are going to increase next fiscal year. 00:21:19.140 --> 00:21:25.680 So that's why we're seeing a higher ECA rate based strictly on what the costs are this 00:21:25.680 --> 00:21:31.400 year and next fiscal year. 00:21:31.400 --> 00:21:34.320 So here's our current rate recovery at a high level. 00:21:34.320 --> 00:21:35.320 We've highlighted the -- 00:21:35.320 --> 00:21:36.320 Sorry. 00:21:36.320 --> 00:21:37.320 Back up to the last slide. 00:21:37.320 --> 00:21:38.320 Yep. 00:21:38.320 --> 00:21:43.320 The ECA rate, I know what it is, it's very cost effective. 00:21:43.320 --> 00:21:44.320 Right. 00:21:44.320 --> 00:21:51.320 Why do we continue to include the debt service in the ECA? 00:21:51.320 --> 00:21:52.320 You know that's a -- 00:21:52.320 --> 00:21:53.320 Could you get closer to the microphone, Billy? 00:21:53.320 --> 00:21:54.320 Oh, sorry. 00:21:54.320 --> 00:22:01.080 Why do we continue to include the debt service in our ECA rate? 00:22:01.080 --> 00:22:07.080 You know, that's a great question and it was part of the policy that was enacted in advance 00:22:07.080 --> 00:22:12.600 of the deck was to say we want all debt costs to be part of the ECA and the theory behind 00:22:12.600 --> 00:22:18.480 that is the deck is providing energy, so any cost that we drive toward the deck would be 00:22:18.480 --> 00:22:23.120 an energy cost and also the cost that we have for the deck should lower what we have to 00:22:23.120 --> 00:22:25.400 pay on the energy side through purchase power. 00:22:25.400 --> 00:22:28.920 So it's definitely a policy discussion that we can have. 00:22:28.920 --> 00:22:33.120 If we want to, you know, we can kind of alter the way that we calculate the ECA if we want 00:22:33.120 --> 00:22:37.120 to have that discussion of taking debt service out in the future, but this is the way that 00:22:37.120 --> 00:22:39.360 we calculate it right now. 00:22:39.360 --> 00:22:40.360 Okay. 00:22:40.360 --> 00:22:41.360 Yeah. 00:22:41.360 --> 00:22:47.880 I think in the past, and it's been a few years, I was on this board a long time ago, but we 00:22:47.880 --> 00:22:55.680 didn't put those -- of course we didn't have the deck either, but it was about energy cost. 00:22:55.680 --> 00:22:56.680 Right. 00:22:56.680 --> 00:23:01.160 Debt service, I mean, is that energy cost? 00:23:01.160 --> 00:23:05.280 I think it's just how we define it because obviously the debt service is a fixed cost 00:23:05.280 --> 00:23:09.400 where it's not going to fluctuate with the energy, so that would be the argument to take 00:23:09.400 --> 00:23:13.720 it out where the argument to keep it in would be it's a cost that you have to provide the 00:23:13.720 --> 00:23:18.560 energy and I think -- I assume that was a rationale for including it in the first place. 00:23:18.560 --> 00:23:19.560 I don't know. 00:23:19.560 --> 00:23:24.680 I always thought of it as -- it was -- the ECA was the adjustment that it was predicted 00:23:24.680 --> 00:23:31.680 on the cost of energy that natural gas, fuel, whatever we were -- coal at the time. 00:23:31.680 --> 00:23:32.680 Right. 00:23:32.680 --> 00:23:33.680 You know? 00:23:33.680 --> 00:23:34.680 So okay. 00:23:34.680 --> 00:23:35.680 I think it's a good conversation to have. 00:23:35.680 --> 00:23:36.680 We don't have to have it today. 00:23:36.680 --> 00:23:37.680 Yeah. 00:23:37.680 --> 00:23:42.600 Well, I just say we've had this debate internally as well, and I think the issue is the deck 00:23:42.600 --> 00:23:45.480 is an -- it is a purchased power hedge. 00:23:45.480 --> 00:23:51.560 You wouldn't have a debt without the deck, and you can break it up. 00:23:51.560 --> 00:23:52.560 It's not going to move the needle. 00:23:52.560 --> 00:23:55.880 You're still going to end up with a rate at the end of the day on the base adjustment 00:23:55.880 --> 00:23:56.880 in the ECA. 00:23:56.880 --> 00:24:00.480 It's all going to come out through the wash the same, but you just don't have that debt 00:24:00.480 --> 00:24:06.400 service without the deck and that hedging without the debt service, so you can't untangle 00:24:06.400 --> 00:24:07.400 them. 00:24:07.400 --> 00:24:11.680 Theoretically, though, we sell the energy into the grid and not necessarily to ourselves, 00:24:11.680 --> 00:24:12.680 although we do own the deck. 00:24:12.680 --> 00:24:14.680 Don't get me wrong. 00:24:14.680 --> 00:24:20.560 The way we've been asked to present the budget with pro forma on the deck itself, I think 00:24:20.560 --> 00:24:25.000 what our concern is that everything be consistent, that it not look like we're trying to move 00:24:25.000 --> 00:24:30.040 certain costs into the base rate while cherry picking what goes in the ECA, and it's just 00:24:30.040 --> 00:24:35.320 -- again, it's going to end up at the end of the day in one rate. 00:24:35.320 --> 00:24:38.860 It may change the base versus the ECA, but the rate's going to be what the rate needs 00:24:38.860 --> 00:24:39.860 to be. 00:24:39.860 --> 00:24:40.860 I hear you. 00:24:40.860 --> 00:24:47.920 I just always thought the ECA was the over and above, and the debt that the city owes 00:24:47.920 --> 00:24:50.960 is the debt that the city owes. 00:24:50.960 --> 00:24:55.720 Granted, I'm saying now that it fluctuates, apparently, because it depends on the bond 00:24:55.720 --> 00:24:57.520 and what's going on. 00:24:57.520 --> 00:24:58.520 Okay. 00:24:58.520 --> 00:25:06.680 I'd like not to drop this -- I'll drop it today, but just continue that conversation. 00:25:06.680 --> 00:25:07.680 That's fine. 00:25:07.680 --> 00:25:08.680 Okay. 00:25:08.680 --> 00:25:16.040 So I wanted to paint a picture of what we look at, what we're looking at for this estimate 00:25:16.040 --> 00:25:18.920 and for our proposed budget in the future years. 00:25:18.920 --> 00:25:20.060 This is not our proposed budget. 00:25:20.060 --> 00:25:23.720 This is what over and under recovery would have. 00:25:23.720 --> 00:25:28.560 We kept our current rates out into the future, our current ECA rate shown there and our current 00:25:28.560 --> 00:25:30.640 base rate out into the future years. 00:25:30.640 --> 00:25:34.520 I think what you can see is, obviously, on the ECA side, we continue to under recover 00:25:34.520 --> 00:25:41.200 in the out years, and then overall, together with some over recovery to some extent, on 00:25:41.200 --> 00:25:46.600 the base rate side, you can see our total under recovery for the estimate, for our proposed 00:25:46.600 --> 00:25:52.840 2020 in the out years, if we kept rates stable for the entirety of this forecast. 00:25:52.840 --> 00:25:57.240 Really, this is just meant to paint that picture of here's what would happen if we kept rates 00:25:57.240 --> 00:26:01.560 stable, and then we'll start talking through what are our options to avoid scenarios like 00:26:01.560 --> 00:26:05.240 this. 00:26:05.240 --> 00:26:10.360 So if we just kept our status quo, these are the options that we have moving forward. 00:26:10.360 --> 00:26:14.120 The first one really isn't an option, more just to paint the picture again of where we 00:26:14.120 --> 00:26:17.600 sit and what choices we have in front of us. 00:26:17.600 --> 00:26:20.920 If we kept everything stable when we said, oh, the base rates are going to stay where 00:26:20.920 --> 00:26:27.760 they are, the ECA rates are going to fluctuate as needed to cover this, the '18-'19 increase 00:26:27.760 --> 00:26:34.600 and the '19-'20 increase, we would see a 25% increase to the total residential rate. 00:26:34.600 --> 00:26:38.720 Obviously, as we talk through, we have significant reserves right now. 00:26:38.720 --> 00:26:41.120 We don't see this as a viable option. 00:26:41.120 --> 00:26:44.160 This is more just to say here's a status quo if we did nothing. 00:26:44.160 --> 00:26:50.560 So here's our plans and what we want to present to the board and to council for options moving 00:26:50.560 --> 00:26:53.560 forward to not have that large increase. 00:26:53.560 --> 00:26:58.160 One is what we're calling a phased approach, which would be to utilize 44.2 million of 00:26:58.160 --> 00:27:05.260 our total reserves and essentially just shift those over to help us negate the large increase 00:27:05.260 --> 00:27:09.400 in ECA in '18-'19 and '19-'20. 00:27:09.400 --> 00:27:17.300 We would ask for a proposed 1.5% increase in the ECA next fiscal year to cover some 00:27:17.300 --> 00:27:23.640 of that increase and not cover it all by moving the reserves over two years and then move 00:27:23.640 --> 00:27:24.640 forward. 00:27:24.640 --> 00:27:28.420 That's why we're calling this one the phased approach, whereas the no increase approach 00:27:28.420 --> 00:27:33.760 would say we're going to keep both our base rate and ECA rate stable next year. 00:27:33.760 --> 00:27:39.640 We have a total rate that's the same as '18-'19 and just utilize reserves over these two years 00:27:39.640 --> 00:27:43.280 entirely to keep that rate stable. 00:27:43.280 --> 00:27:49.280 But know that in 2021 we'll need a 3% rate increase, whereas in our phased approach we 00:27:49.280 --> 00:27:55.880 think we can do a 1.5% increase in '19-'20 and then a 1.5% increase in 2021. 00:27:55.880 --> 00:28:00.920 And the excess reserves coming from us not paying off that bond in part? 00:28:00.920 --> 00:28:01.920 Correct. 00:28:01.920 --> 00:28:05.760 So as we head into the '18-'19 budget, we knew that -- and you'll see our reserves 00:28:05.760 --> 00:28:06.760 are significant. 00:28:06.760 --> 00:28:09.760 We knew we had this large amount of reserves and we were trying to -- we definitely didn't 00:28:09.760 --> 00:28:12.800 want to just sit on our reserves and one of the options was we pay off the debt. 00:28:12.800 --> 00:28:17.380 By not paying off the debt, we've kept this reserve and now it gives us these options 00:28:17.380 --> 00:28:25.600 to deal with the ECA balance over '18-'19 and '19-'20. 00:28:25.600 --> 00:28:28.800 So here are the options just in numbers. 00:28:28.800 --> 00:28:33.200 You can see our projected fund balance at the end of '18-'19, $55 million. 00:28:33.200 --> 00:28:38.200 If we just kept the status quo, we would end up with about a $90 million fund balance because 00:28:38.200 --> 00:28:44.200 the ECA would cover itself and then the base rates would continue to contribute to that 00:28:44.200 --> 00:28:45.240 fund balance. 00:28:45.240 --> 00:28:49.520 So we do not want to do the status quo, want to emphasize that. 00:28:49.520 --> 00:28:51.280 So we've, you know, Xed out that status quo. 00:28:51.280 --> 00:28:56.400 That is not our recommendation moving forward, but you can see on this phased approach and 00:28:56.400 --> 00:29:01.360 the no increase approach that increase in the total rate, that 1.5% increase in the 00:29:01.360 --> 00:29:05.720 total rate between the no increase and phased approach next fiscal year and then you can 00:29:05.720 --> 00:29:11.040 see that our fund balance is utilized slightly more in the no increase approach, but we are 00:29:11.040 --> 00:29:16.920 still in both scenarios by -- despite drawing down that significant amount of reserves over 00:29:16.920 --> 00:29:22.280 to the ECA, we have a fund balance that's still, you know, well above our minimum reserve 00:29:22.280 --> 00:29:27.320 or our minimum reserve kind of fluctuates around $40 million, and these scenarios we 00:29:27.320 --> 00:29:30.320 still anticipate being around $50 million in our reserve. 00:29:30.320 --> 00:29:34.880 So it's not a situation where we're drawing our reserves down so much that we're under 00:29:34.880 --> 00:29:36.520 our minimum reserve balance. 00:29:36.520 --> 00:29:39.960 I just want to make sure I understand the no increase approach. 00:29:39.960 --> 00:29:45.040 So we wouldn't have an increase this year, but we'd have to have a much larger increase 00:29:45.040 --> 00:29:46.040 in subsequent years. 00:29:46.040 --> 00:29:52.720 So in our current forecast in 2021, we would need a 3% increase in 2021. 00:29:52.720 --> 00:29:58.000 I think our recommendation would be for the phased approach where we just do one and a 00:29:58.000 --> 00:30:02.920 half this year, one and a half the following year, and I think what that also does is as 00:30:02.920 --> 00:30:08.680 we -- there's so many variables out there from the decommissioning cost to TCOS to all 00:30:08.680 --> 00:30:11.520 the other variables we've talked through. 00:30:11.520 --> 00:30:16.720 So by doing the -- we can do the no increase approach, but it does put us behind the -- say 00:30:16.720 --> 00:30:20.920 one of those variables goes poorly and we have to make it up even more, maybe that 3% 00:30:20.920 --> 00:30:23.160 becomes higher to 5% or so. 00:30:23.160 --> 00:30:27.520 So by doing the one and a half now puts us in a better spot to deal with any variables 00:30:27.520 --> 00:30:28.520 in 2021. 00:30:28.520 --> 00:30:33.160 I always prefer smaller, little than a -- 00:30:33.160 --> 00:30:34.160 Yeah. 00:30:34.160 --> 00:30:35.160 Right. 00:30:35.160 --> 00:30:36.160 Right. 00:30:36.160 --> 00:30:42.840 One and a half percent, one time you mentioned a total rate increase or is it an ECA rate? 00:30:42.840 --> 00:30:47.040 It's an ECA -- just on the ECA rate, it just -- the impact would be, you know, on the total 00:30:47.040 --> 00:30:54.640 rate, but it would just be on the ECA specifically, no change to the base rates next year. 00:30:54.640 --> 00:30:58.960 So as we go forward, the phased approach is our recommendation, and as we show the rest 00:30:58.960 --> 00:31:03.640 of these numbers, really focused on the phased approach, but want to show you what the no 00:31:03.640 --> 00:31:08.060 increase approach would be. 00:31:08.060 --> 00:31:11.640 Here's just average monthly bill, what that would look like with that phased approach 00:31:11.640 --> 00:31:13.000 of the one and a half percent. 00:31:13.000 --> 00:31:19.160 So you can see, you know, going up slightly in '19-'20 and then again in 2021 where the 00:31:19.160 --> 00:31:24.680 no increase approach, you just get that same hit in 2021, you end up in the same place, 00:31:24.680 --> 00:31:30.840 just not phased to get there. 00:31:30.840 --> 00:31:36.120 And here you can see just the distribution on our out years of our rate between our base 00:31:36.120 --> 00:31:38.360 rate and our ECA. 00:31:38.360 --> 00:31:43.440 One thing that you'll see in 2022, we actually are projecting right now in our forecast a 00:31:43.440 --> 00:31:46.080 decrease in the base rate. 00:31:46.080 --> 00:31:53.160 As the ECA rate, you know, grows over these years, our fund balance continue and the base 00:31:53.160 --> 00:31:59.700 rates continue to over recover, we start building up that fund balance to a large number again. 00:31:59.700 --> 00:32:04.460 So for this forecast, we've said, we think in 2022, we can at least project for this 00:32:04.460 --> 00:32:09.720 forecast a base rate decline so that we're not continuing to just increase our reserves 00:32:09.720 --> 00:32:11.560 for the out years. 00:32:11.560 --> 00:32:18.920 This is a chart that we show every budget year just to say here's where we are versus 00:32:18.920 --> 00:32:22.680 other providers. 00:32:22.680 --> 00:32:28.400 So you can see here's our 2019 rate, here's what that no increase approach rate would 00:32:28.400 --> 00:32:32.160 be obviously the same and then our phased approach where we're still, you know, right 00:32:32.160 --> 00:32:39.640 in the middle or slightly to the top or the upper end of these comparison cities or entities 00:32:39.640 --> 00:32:43.080 and then if we kept that status quo, we just let the ECA rate go and we have that large 00:32:43.080 --> 00:32:51.600 increase, we would be down here at the bottom on that comparison. 00:32:51.600 --> 00:32:57.060 So a lot of numbers here, just our pro forma on that phased rate, a couple that we want 00:32:57.060 --> 00:33:02.880 to point out, you can see our fund balance in the ending next year at $50 million and 00:33:02.880 --> 00:33:08.600 then starting to go up over the next couple of years, 54, around $54 million and then 00:33:08.600 --> 00:33:15.120 after we have that base rate decline, it drops but it also drops because as we'll talk about 00:33:15.120 --> 00:33:19.640 later on our T cost and as Terry mentioned earlier, right now we're getting a large return 00:33:19.640 --> 00:33:24.900 on all of our T cost out of transmission assets whereas we are anticipating at some point 00:33:24.900 --> 00:33:28.960 over the next couple of years that will be reevaluated and that, you know, 28% will come 00:33:28.960 --> 00:33:34.400 down to-- right now for this model, we have in those out years, it dropping to 13% just 00:33:34.400 --> 00:33:38.440 as kind of a guess of where it might end up but that does have an impact on these out 00:33:38.440 --> 00:33:43.720 years in the model of that less revenue. 00:33:43.720 --> 00:33:48.320 You can also see the revenue funded capital where we're not-- we had, you know, focused 00:33:48.320 --> 00:33:53.760 on some revenue funded capital CIP projects this fiscal year, our plan in the future years 00:33:53.760 --> 00:33:56.840 is to debt fund those capital projects. 00:33:56.840 --> 00:34:05.520 So here's-- I wanna put this in here as just a breakdown of our total purchase power and 00:34:05.520 --> 00:34:11.640 this is before that debt revenue that we get to-- that offsets our purchase power just what 00:34:11.640 --> 00:34:17.240 that total purchase power looks like and I wanna point out, you can see here our TMPA 00:34:17.240 --> 00:34:22.040 amount that's included in purchase power, the $4.3 million, $2.8 million of that is 00:34:22.040 --> 00:34:26.880 for decommissioning cost, that's again part of that-- the schedule that TMPA has given 00:34:26.880 --> 00:34:32.480 us of 20, $22 million over the next five years that we'll be paying toward decommissioning 00:34:32.480 --> 00:34:33.480 cost. 00:34:33.480 --> 00:34:37.320 That number is gonna-- it varies through the year so it fluctuates from 2 million and then 00:34:37.320 --> 00:34:41.000 in a year or two, it's 8 million so it just kind of-- it goes up and down with the years, 00:34:41.000 --> 00:34:45.360 those are shown in our forecast but the first cost that we'll have next fiscal year is at 00:34:45.360 --> 00:34:57.480 $2.8 million and here's again on those ECA expenses as we talk through, here's our energy 00:34:57.480 --> 00:35:03.640 cost that are in the ECA that have always been the ECA that 44.96 and then you can see 00:35:03.640 --> 00:35:08.640 those deck expenses and the deck fuel that makes up the rest of our ECA that we have 00:35:08.640 --> 00:35:14.440 to recover with that rate. 00:35:14.440 --> 00:35:18.760 Just some dollars ago in this-- obviously I'll tidy the budget book that was presented 00:35:18.760 --> 00:35:24.640 to the board where you can see the base rates continuing to increase until we have that 00:35:24.640 --> 00:35:31.480 rate reduction with demand and then our ECA rates following accordingly to the plan that 00:35:31.480 --> 00:35:37.800 we laid out and we have a deck forecast later but you can see that we really have budget 00:35:37.800 --> 00:35:43.840 conservatively on the usage of the deck, that is definitely one that will continue to change 00:35:43.840 --> 00:35:48.740 in the next couple of years as we get more information on the deck but we want to stay 00:35:48.740 --> 00:35:52.720 as conservative as possible with those estimates. 00:35:52.720 --> 00:35:57.680 You can also see if you see that dip in the other revenue from 52 million to 34 million 00:35:57.680 --> 00:36:05.000 that has a few different impacts but obviously a large one is that TCOS, that TCOS piece. 00:36:05.000 --> 00:36:10.640 On the expense side, you know, everything is essentially in line on the admin and the 00:36:10.640 --> 00:36:15.920 power supply side and then the energy center will show later in a different breakout but 00:36:15.920 --> 00:36:23.800 you can see those expenses in the out years as well. 00:36:23.800 --> 00:36:29.200 So here's a breakdown at a high level of RCIP and definitely if you have any questions on 00:36:29.200 --> 00:36:31.160 anything in specific, we can get into those. 00:36:31.160 --> 00:36:32.940 We've just shown this at a high level here. 00:36:32.940 --> 00:36:36.960 We have all of the details as well if you have any questions. 00:36:36.960 --> 00:36:41.720 You can see we have increased the RCIP for distribution next year. 00:36:41.720 --> 00:36:46.560 This was another piece of that step, trying to take a step back and look at why we budgeted, 00:36:46.560 --> 00:36:51.600 what we budgeted last year, what was the methodology and a piece that came from that was that we 00:36:51.600 --> 00:36:57.640 really needed more dollars in RCIP devoted to distribution and so you can see that reflected 00:36:57.640 --> 00:37:05.080 here and in the out years and then on transmission as well obviously these assets in these next 00:37:05.080 --> 00:37:09.480 year and the following year are going to have that high rate of return with the transmission 00:37:09.480 --> 00:37:17.800 on the TCOS and in the out years it will be a little bit different. 00:37:17.800 --> 00:37:18.800 There's a lot to this slide. 00:37:18.800 --> 00:37:23.520 I think the easiest way to look at it is just what-- with each of-- on this-- when we look 00:37:23.520 --> 00:37:29.160 at our CIP for transmission, what essentially is our return on investment for what we paid 00:37:29.160 --> 00:37:33.500 towards transmission, all the debt cost that goes with those-- with that transmission. 00:37:33.500 --> 00:37:39.440 So over the life of each asset that we buy, what is our total expense over 30 years and 00:37:39.440 --> 00:37:45.920 then what is our total revenue as you can see in 2019, total expense on this 7.5 million 00:37:45.920 --> 00:37:54.080 in transmission CIP is 12.76 but because of our large rate of return right now, we anticipate 00:37:54.080 --> 00:37:57.240 to get 19.16 in TCOS revenue. 00:37:57.240 --> 00:38:03.560 So over 30 years with that rate of return, we end up in the positive of 6.39. 00:38:03.560 --> 00:38:09.200 That continues obviously throughout the-- throughout the forecast, we are getting a return on all 00:38:09.200 --> 00:38:13.080 of those transmission asset investments but it does change in the out years with a different 00:38:13.080 --> 00:38:22.400 rate of return used. 00:38:22.400 --> 00:38:28.560 For the position summary, we're not-- not anticipating too much new in the DME budget 00:38:28.560 --> 00:38:30.320 from a position perspective. 00:38:30.320 --> 00:38:37.040 We are increasing the proposed budget by two FTEs and these are really two plan operators 00:38:37.040 --> 00:38:39.320 that will work out at the deck. 00:38:39.320 --> 00:38:43.640 The deck, if you look at this current budget, we are having significant amount of overtime 00:38:43.640 --> 00:38:47.880 just to meet all of the hours that need-- that are needed for the deck to operate. 00:38:47.880 --> 00:38:53.040 So these two FTEs really make a lot of sense to bring in to help offset that overtime and 00:38:53.040 --> 00:38:58.080 operate the deck effectively and we're also transferring a position from our email group 00:38:58.080 --> 00:39:03.280 over to the deck for engineering needs associated with the deck. 00:39:03.280 --> 00:39:11.560 Here's our deck pro forma and I'll just touch on this high level and then I'll hand back 00:39:11.560 --> 00:39:16.240 over to Terry to talk through the deck and any more specifics but you can see as we're 00:39:16.240 --> 00:39:23.040 estimating this year, we are estimating a, you know, a net income loss essentially is 00:39:23.040 --> 00:39:24.040 one way to look at it. 00:39:24.040 --> 00:39:26.880 I think there's a lot of different caveats to look when we can talk through the deck 00:39:26.880 --> 00:39:30.720 and that Terry can touch on but as far as just what is the revenue we're estimating 00:39:30.720 --> 00:39:35.320 for the deck and what are the-- all expenses including the deck and this deck debt service 00:39:35.320 --> 00:39:41.700 is now included in the estimate anticipating a 2.4 million dollar expenditures over revenue 00:39:41.700 --> 00:39:46.200 and then each of those out years you can see with the conservative essence we have now 00:39:46.200 --> 00:39:52.560 how that-- how that comes out with that really increasing that-- that income loss increasing 00:39:52.560 --> 00:39:56.880 each year 8.9, 10.1, 12 and through the out years. 00:39:56.880 --> 00:40:05.680 I'm gonna hand it over to Terry now to talk a little bit more about the deck. 00:40:05.680 --> 00:40:12.600 Thank you, David. Okay, I mean obviously you can see here that the deck net incomes are 00:40:12.600 --> 00:40:18.960 decreasing over time. This is a reflection of the current forward curve. When we value 00:40:18.960 --> 00:40:25.120 the deck, we basically look at what the future value of energy is that can be produced from 00:40:25.120 --> 00:40:36.600 the deck during these out years and if I can just-- let's see, where are those other slides? 00:40:36.600 --> 00:40:49.960 Yeah, I need to get to the other slide. Oh, it's on the other presentation. No, this one 00:40:49.960 --> 00:40:54.480 right here. Yeah, that one right here. Yep. Thank you. 00:40:54.480 --> 00:41:00.560 So this is the forward curve and again you can see the shape of the forward curves here 00:41:00.560 --> 00:41:10.160 for power. This is the power forward curve and you can see it's decreasing over time. 00:41:10.160 --> 00:41:17.640 What we represent here is the on-peak price which is the Monday through Friday, 7 in the 00:41:17.640 --> 00:41:23.560 morning to 10 o'clock at night, 11 o'clock at night and obviously all the value is on 00:41:23.560 --> 00:41:29.840 these peaks in the summer, July and August is where all the value is. 90% of the deck 00:41:29.840 --> 00:41:37.280 revenue is achieved during July, August and September. So as these peaks go down, that 00:41:37.280 --> 00:41:45.320 represents less revenue option-- opportunity for the deck and that's why that net income 00:41:45.320 --> 00:41:53.720 number continues to look bad. The gas curve on the other hand does have a slight decrease 00:41:53.720 --> 00:42:00.300 through 2022 and then it starts to increase and this is problematic for the deck because 00:42:00.300 --> 00:42:06.640 as gas prices go up and power prices go down, we're effectively squeezing the margin, the 00:42:06.640 --> 00:42:13.560 gross margin that can be achieved by the deck. Now, the one thing that you'll hear me say, 00:42:13.560 --> 00:42:18.560 these two graphs in front of you are wrong. They are forward curves just like anybody's 00:42:18.560 --> 00:42:25.280 projection of the stock market, they're a guess. They are the best current estimate 00:42:25.280 --> 00:42:30.880 of what buyers and sellers would be willing to transact there. The other point I'll make 00:42:30.880 --> 00:42:38.440 is that since we only have, you know, very limited amount of data on operating the deck 00:42:38.440 --> 00:42:48.320 during the summers, there's significant available margins inside of the day. So each day as 00:42:48.320 --> 00:42:54.360 we offer the deck into the marketplace, it's based upon the price for the next day. Inside 00:42:54.360 --> 00:43:01.720 of the day, because market prices vary every five minutes, we could see spikes and we saw 00:43:01.720 --> 00:43:08.800 a couple this weekend, a couple $300 prices this weekend. We ran the deck yesterday most 00:43:08.800 --> 00:43:15.800 of the day because of the hot weather. That was not projected in these curves. So once 00:43:15.800 --> 00:43:22.040 we get through this summer and we see how it performs, we will hopefully be able to 00:43:22.040 --> 00:43:29.960 add some more value into our forecast for the deck. This summer may not be the best 00:43:29.960 --> 00:43:36.840 litmus test because it's been relatively mild. We've had a lot of rain, mild temperatures, 00:43:36.840 --> 00:43:42.720 healthy grid, healthy generation stack, and so we haven't seen much stress on the grid. 00:43:42.720 --> 00:43:51.140 So you know, the deck as a resource, we're going to see some low price years, low performance 00:43:51.140 --> 00:43:56.440 years, and then we're going to see some really good performing years as well. And it's there 00:43:56.440 --> 00:44:04.040 as insurance, again, to protect the load against those high prices. So I think that's the extent 00:44:04.040 --> 00:44:11.880 of our presentation. I'd be glad to answer any questions that you might have. 00:44:11.880 --> 00:44:14.400 All right. Questions? 00:44:14.400 --> 00:44:20.320 We must have done a great job. 00:44:20.320 --> 00:44:21.320 Or we're confused. 00:44:21.320 --> 00:44:22.320 We're still-- 00:44:22.320 --> 00:44:23.320 Totally confused. 00:44:23.320 --> 00:44:33.600 It's a lot to process. Yes, it is. But I do prefer that phased in. I've always preferred 00:44:33.600 --> 00:44:47.960 that. All right. Thank you. Next. Oh, you got more? Okay. 00:44:47.960 --> 00:44:51.360 I know there's a lot of information there, so we can definitely bring the presentation 00:44:51.360 --> 00:44:54.960 back at the next PEB meeting, if you'd like, just to have any additional questions. And 00:44:54.960 --> 00:44:58.560 obviously, we'll be coming back soon with rate ordinances and things like that that 00:44:58.560 --> 00:45:01.520 will be associated with the budget. So it won't be the last time that you see the budget. 00:45:01.520 --> 00:45:05.560 But if you'd like, we could just at least have it on the agenda for next time to answer 00:45:05.560 --> 00:45:06.560 any questions. 00:45:06.560 --> 00:45:09.760 I think I would like that. It's a lot to digest. 00:45:09.760 --> 00:45:15.440 Perfect. And then there was a closed session item associated with the budget presentation. 00:45:15.440 --> 00:45:19.800 That was really just in case you wanted to get into the PPA discussions as an offshoot 00:45:19.800 --> 00:45:22.440 of the presentation. But if not, then I don't think the closed session will be in this... 00:45:22.440 --> 00:45:30.360 Actually, I would like that. Okay. Great. Perfect. All right. Thank you. 00:45:30.360 --> 00:45:39.800 Thank you. All right. Consent agenda. Does any board member wish to pull an item from 00:45:39.800 --> 00:45:53.120 the consent agenda? All right. Then, do I have a motion to approve items A through G? 00:45:53.120 --> 00:45:54.520 Second. 00:45:54.520 --> 00:45:58.320 All in favor, say aye. 00:45:58.320 --> 00:45:59.320 Aye. 00:45:59.320 --> 00:46:06.920 Motion carries. Items for individual consideration. The Public Utility Board's minutes of June 00:46:06.920 --> 00:46:16.560 24th, 2019. Were there any changes or corrections? Hearing none, they'll be approved. What's 00:46:16.560 --> 00:46:37.800 the right wording? ACM update. 00:46:37.800 --> 00:47:00.560 Good morning, board members. On the ACM update items, you have a few items in there. Quarterly 00:47:00.560 --> 00:47:06.160 financial report ending March 31. That's just more of a four-year information. If there's 00:47:06.160 --> 00:47:09.760 any information that you would like after reviewing that, we'd be more than happy to 00:47:09.760 --> 00:47:29.360 get that for you. I was looking at that same report this morning. Ethan Cox, Director of 00:47:29.360 --> 00:47:33.320 Public Works. I need to go back and double check those tonnages to make sure we're not 00:47:33.320 --> 00:47:38.280 reporting net versus gross, and that's maybe some of the imbalance there. Typically look 00:47:38.280 --> 00:47:43.200 at those reports from our processor on a monthly basis. I did see a couple months ago that 00:47:43.200 --> 00:47:47.640 our gross tonnages were going down, but what that is is our contamination rates dropping. 00:47:47.640 --> 00:47:50.720 I need to go back and double check and make sure that we're not reporting two different 00:47:50.720 --> 00:47:52.080 data sets on that table. 00:47:52.080 --> 00:47:54.760 A drop in contamination rate is good, though. 00:47:54.760 --> 00:48:00.800 It is a very good thing. We're from 35% down to 25% the last month I checked. Let me double 00:48:00.800 --> 00:48:05.760 check on that and I'll circle back on a future ACM update with any changes. 00:48:05.760 --> 00:48:17.000 I was wondering what the source of revenue was for recycling. Is that just part of the 00:48:17.000 --> 00:48:18.320 solid waste fee? 00:48:18.320 --> 00:48:22.760 No, we actually have revenues that we get for the sale of commodities through the market, 00:48:22.760 --> 00:48:28.160 so if it's something that we sell directly through a scrap metal outfit, some of that 00:48:28.160 --> 00:48:33.560 comes directly in. The others is basically just a profit or revenue sharing through our 00:48:33.560 --> 00:48:36.080 agreement with Pratt Industries. 00:48:36.080 --> 00:48:39.320 It's also a portion of the fee, though. 00:48:39.320 --> 00:48:43.960 Really what the fee is designed to do is the collection of recyclables, so running the 00:48:43.960 --> 00:48:47.680 trucks up and down the street. There is some revenue coming in, but we don't count that 00:48:47.680 --> 00:48:54.840 as recycling revenue, per se. The recycling revenue itself comes from the commodity sales. 00:48:54.840 --> 00:49:00.960 So obviously if our recycling tonnage is down, we might want to get out some education, maybe 00:49:00.960 --> 00:49:01.960 increase that. 00:49:01.960 --> 00:49:06.480 Yeah, those percentages are a big shift, and so I need to go back and double check that 00:49:06.480 --> 00:49:08.680 and I'll bring that back to the board for you. 00:49:08.680 --> 00:49:09.680 All right, great. Thank you. 00:49:09.680 --> 00:49:17.080 I have a question. We stopped getting recyclables from other municipalities, though, right? 00:49:17.080 --> 00:49:23.960 Didn't we do that? Weren't we getting recyclables and charging a scale fee for those things? 00:49:23.960 --> 00:49:27.280 Or were those calculated? 00:49:27.280 --> 00:49:31.320 According to our recycling contract with Pratt Industries, we can accept or they can accept 00:49:31.320 --> 00:49:36.400 recyclables from other communities. We've never counted that in terms of our tonnages. 00:49:36.400 --> 00:49:41.560 However, we do get a $5 per ton fee for anything that they collect from other communities. 00:49:41.560 --> 00:49:45.800 They've scaled that back greatly. Number one, they're having a hard time moving stuff in 00:49:45.800 --> 00:49:50.760 the market, and other communities have contamination issues just like us, some much, much worse 00:49:50.760 --> 00:49:55.440 than us, and so Pratt's been very selective in who they partner with. They want to make 00:49:55.440 --> 00:49:58.840 sure they're getting clean materials and that they can move it in the market. 00:49:58.840 --> 00:50:02.040 But that wouldn't have been attributed to the decline that she's talking about. 00:50:02.040 --> 00:50:05.200 Not that I'm aware of. Like I said, I'll take a look at the data and make sure that's not 00:50:05.200 --> 00:50:06.200 the case. 00:50:06.200 --> 00:50:10.520 And if I remember, you had the question on the Valet pilot project? 00:50:10.520 --> 00:50:11.520 Me? 00:50:11.520 --> 00:50:23.120 No questions. Yes, that information has been provided to you. And if any additional questions 00:50:23.120 --> 00:50:32.240 that you might have, we'd be glad to address those. The only other two items are the future 00:50:32.240 --> 00:50:41.280 agenda items. I've got a list there for you. The report on the solid waste Valet collection 00:50:41.280 --> 00:50:49.280 was obviously provided today. The report on the DEC is actually a part of the presentation 00:50:49.280 --> 00:50:53.800 that was given today. It's a part of exhibit five for the DEC dashboard. So if you do have 00:50:53.800 --> 00:50:58.280 any questions on that, I'd be glad to get answers for you. 00:50:58.280 --> 00:51:05.600 And then we have a pending item on recycling. And we also have an item pending, item one 00:51:05.600 --> 00:51:12.280 reviewing the changing the time for the PUB meeting to 9 a.m. for both meetings instead 00:51:12.280 --> 00:51:19.200 of a 9 a.m. and a 6 p.m. So we'll work on getting that scheduled going on to the future 00:51:19.200 --> 00:51:26.400 agenda items. We did review the electric budget today. So that one's been taken care of. We've 00:51:26.400 --> 00:51:33.020 got two upcoming sessions that are going to be heavily focused on the budgets and rates. 00:51:33.020 --> 00:51:41.080 So the July 22nd, we'll be looking at the rate ordinances, which will basically be your 00:51:41.080 --> 00:51:46.600 first opportunity to see the rate schedules and kind of what those are looking like based 00:51:46.600 --> 00:51:53.520 on discussions that we've had with the budget. And then on August 12th, we will actually 00:51:53.520 --> 00:51:59.440 be, if all goes as planned, we'll be bringing forward the utility rate ordinances for water, 00:51:59.440 --> 00:52:04.480 wastewater, customer service and solid waste for a recommendation for the board. And that 00:52:04.480 --> 00:52:11.160 is all I have. Okay. Concluding items, then any board member 00:52:11.160 --> 00:52:16.760 wishes to have something brought put on the agenda in the future? 00:52:16.760 --> 00:52:22.200 I don't want to put anything on the agenda, but I just wanted to make an announcement. 00:52:22.200 --> 00:52:27.320 I've had a really good time working with all you guys, but immediately following the closed 00:52:27.320 --> 00:52:32.440 item that we're having, this will be my last meeting. But I have had a great time. It's 00:52:32.440 --> 00:52:36.720 been almost four years. Worked with some of y'all a short period of time, some of y'all 00:52:36.720 --> 00:52:40.680 longer, but got some other things that I want to experiment with and I don't feel like I'll 00:52:40.680 --> 00:52:46.000 be able to meet the attendance requirements. And so this will be my last meeting. 00:52:46.000 --> 00:52:47.000 All right. I'll miss you. 00:52:47.000 --> 00:52:50.040 So thanks a lot. Thanks y'all for working with me, teaching me all kinds of stuff about 00:52:50.040 --> 00:53:02.880 electricity. I appreciate it. You can take my share. But thank you very much. 00:53:02.880 --> 00:53:09.400 And I'm always not sure how I do this, Larry. So do we adjourn and then go into closed session? 00:53:09.400 --> 00:53:12.080 Okay. So do we have a motion to adjourn to go into- 00:53:12.080 --> 00:53:17.560 I'll make sure we adjourn one last time. All right. Do we have a second? 00:53:17.560 --> 00:53:19.760 I'll second. All in favor, aye. 00:53:19.760 --> 00:53:26.160 Aye. Now I do have to read what the closed meeting is about, correct? Okay. Deliberations 00:53:26.160 --> 00:53:32.500 regarding certain public power utilities competitive matters under Texas governmental code section 00:53:32.500 --> 00:53:41.080 551.086 to deliberate and discuss competitive information regarding the public power operational 00:53:41.080 --> 00:53:46.960 and financial matters pertaining to the purchases and risks of wholesale energy supply and pertaining 00:53:46.960 --> 00:53:48.500 to the proposed electric budget.