Board of Directors Meeting - prpa.org · 04.04.2018 · • Does it make sense to join the CAISO...

Board of Directors MeetingApril 26, 2018

MWTG and SPP: What’s Next?

What happened?April 20, 2018, Xcel Energy issued a press release announcing that it was terminating efforts to form an RTO in the Rocky Mountain West. As grounds, Xcel cited:

• Limited opportunities for westward expansion• Increased costs of expansion • Recent regulatory developments with RTOs

Though the other MWTG participants have not announced that they are terminating efforts to join SPP, integration with SPP probably does not make sense without Xcel.

Where does this leave us?If the MWTG/SPP integration is truly dead, it will mean business as usual for Platte River and the other MWTG participants for now.

• All of our existing transmission contracts will remain in place

• We will remain in the Xcel balancing authority• We will continue operation under the Joint Dispatch

Agreement• We will continue with existing wind power purchase

agreements and evaluation of options for solar and storage

Short term considerations• We will need to decide on a reliability coordinator

• The notice of termination to Peak Reliability could be revoked

• CAISO is planning to offer reliability coordination services by early 2019

• Other options may be considered

• We will need to make decisions about the integration of additional renewable resources

• The current Roundhouse contract has an option for an additional 75 MW of wind power

Longer term considerations• Can the Joint Dispatch Agreement be expanded beyond

the current intra-hour operations?• Does it make sense to join the CAISO energy imbalance

market (EIM)?• Are there other viable options for a regional transmission

organization in the West?• MISO?• PJM/Peak?• CAISO?• Formation of a new market?

Questions?

Strategic Plan Board of Directors Meeting

April 26, 2018

Purpose

• High level 3 year guiding plan• Alignment with mission, vision and values

Focus• Enhanced customer experience

• Collaborative communications and community outreach

• Resource diversification and alignment

• Infrastructure Advancement

Enhanced customer experienceCommitted to providing our owner communities and their customers with solutions, programs and choices to help achieve their varied goals.

• Rates - comprehensive review of rate making practices

• Efficiency Works – continue to work with communities to deliver efficiency programs that add value

• Distributed energy resources - Energy future; developing service offerings for our customers

• Electric vehicles – study benefits/costs to our system

Communications and community outreachInternal and external communications are key to an organizations success

• Participation – reach out to stakeholder and civic groups

• Media outreach – strategically proactive and responsive

• Technology – social media and microsites to educate and engage

Resource diversification and alignmentTransformation of how energy is made and delivered to our communities and their customers

• Integrated Resource Plan – starting the process early with high levels of public engagement

• MWTG – participation in broader, organized energy market will provide access to more energy resources and more efficient transmission systems.

Infrastructure and technology advancementContinued investment in infrastructure and technology to provide secure, safe and reliable service• Transmission substation security – intrusion detection

and building access control• Cyber security – disaster recovery response plan,

training, system testing and refinement• Interactive energy management tools – platforms and

programs that enable choices and communications• Fiber optic strategic initiatives –broadband delivery

services, leasing options, transfer of excess capacity

• Water resources – the Windy Gap Firming Project = firm water supply for electric generation operations

• New headquarters project – manage next gen technologies, increase work effectiveness, community access

Infrastructure and technology advancement

Questions/Comments

Safety Program OverviewJason Maldonado, CSP, SMS

The Platte River Safety StoryStriving for Safety Excellence

No job is so important and no service so urgent that an employee must violate a safety rule or risk injury/illness over taking the time to perform their work safely. • Assess risk • Educate and equip• Eliminate and manage hazards

Injury Analysis 2015-2017

*Analysis based on 28 first aid, 13 recordable, and 3 lost time injuries.

• 63% soft tissue injuries• 49% related to human factors

(Body position, ergonomics, strength, etc.)

22

HAZARD ASSESSMENT TOOLSConduct a risk analysis to help prioritize jobs

R = P x S

Risk is a function of probability, and severity

• What is the probability? How likely will a worker be injured or become ill as a result of an accident or exposure? (unlikely, likely, very likely)

• What is the severity? How serious will the injury or illness be as a result of an accident or exposure? (minor, serious, death)

Planning for Zero

Assess Risk

Correct Hazards

Compensate For

Remaining Risk

Conduct Work

Accomplish The Mission

Education & Prevention Above Policy Through practical, targeted emphasis on hazards, safety provides resources and recommendations geared toward eliminating the potential for employee injury. This method helps build trust in the safety process, creates a partnership with other work groups and is accomplished through:

• “Why” focused training• Flexibility to address urgent safety needs as they arise• Evaluation of work area health risks (IH Analysis)

combined with annual health testing• Collaborative input on complex, high hazard tasks

• Not regulation-based roadblocks

Lifecycle of a HazardHey, using that board

doesn’t look safe!!!

Maybe we should do something different.

Fix the Hazard

The manager then engages to fix the

problem

Whatever man! I’m fine.

Ok, you’re probably right.

Ok, sorry.

Supervisor, lead or other manager with authority to

correct the problem.

Successful Injury Prevention Current Initiatives

Active Release Techniques®ART is a soft tissue injury treatment and prevention protocol that was initially developed to help elite athletes perform at their peak and recover from injuries as fast as possible.

• Voluntary program aimed toward preventing through direct treatment and education

• Allows employees to utilize ART treatments in order to improve their overall quality of life, and with it their productivity at work.

• Provides valuable leading indicators that help identify areas/employees at high risk of injury

ART Treatment BreakdownIn less than one year, the ART process has yielded some valuable data that is helping to direct injury prevention efforts. Using this data we are able to target programs such as RSI Guard and our upcoming job specific body positioning initiative to the areas where employees experience the most discomfort, and potentially the most risk of injury.

• 136 individual cases• 382 ART sessions• 88% improvement reported (closed)• Average 3.68 sessions per closed case

*Data is based on all treatments from July 2017 to March 2018

CollaborationRather than dictate how others perform work, the primary method for development of new procedures and programs has been to partner with groups who will use the new processes.

• Lockout/Tagout (LO/TO) – Operations, Engineering, Maintenance

• Electrical Safety – I&E, Facilities, Operations, Substations

• Hazard Communications (HAZCOM) – Environmental, Maintenance, Facilities

• Respiratory Protection – Maintenance, Operations

Electrical Safety Program

Program OverviewThe Electrical Safety Program is based on the most current industry standards for electrical safety in the workplace. It provides criteria for qualifying, training and assessing the skills of employees who are exposed to electrical hazards.

• Training of qualified, non-qualified, and general employees

• Process designed around PRPA equipment• Criteria for selection of protective gear• Provisions for conducting authorized energized work

Control of Hazardous EnergyJointly owned by Safety and Plant Operations, this procedure assures the personal protection of every employee who performs maintenance on plant systems. Among other things, the items below detail enhancements made to the existing process.

• Focus on personal protection• Adoption of group

Lockout/Tagout (LO/TO) boxes in combination with personal locks

• Inclusion of contract personnel

Program OverviewControl of Hazardous Energy provides a consistent approach for protecting employees during the service and maintenance of machines and equipment when the unexpected energization, startup, or release of stored energy could cause harm.

• Personal Protection (Locks)• Focus on hazards• Verification of Zero Energy • Integration with plant Lockout/Tagout (LO/TO) software

Emergency Management Through TechnologyPlatte River has a history of preparedness and quick response. Safety is leading the effort to update the company’s emergency management protocols through the use of technology and routine reinforcement.

• Program migration to a cloud-based system (Crisis Commander)

• Employee training • Plant tours for emergency

planners / first responders• Quarterly drills

Employee Engagement Without the willingness and dedication of Platte River staff, no safety program would be successful. Below are just two examples of the many ways employees actively participate in keeping everyone at Platte River Safe.

RA Fan brake device Rawhide Emergency Response Team (ERT)

Brake Clamp

Attachment point

Moving Forward

• Standardization of incident investigation techniques and problem solving

• Cause mapping and root cause analysis

• Industry leading functional movement assessment• Emergency management tabletops and exercises in

coordination with Security and local agencies

Questions?

Debt Financing UpdateBoard of Directors Meeting

April 26, 2018

Financing Plan• Issue next series of bonds in late 2018 / early 2019• Fund a portion of the Headquarters Campus and Windy

Gap Firming projects• Reimbursement Resolution

Why Issue Bonds?Platte River’s five-year capital plan totals $281 million. A portion of the Headquarters Campus and Windy Gap Firming projects will be funded by a $100 million bond issue.

• SFP days cash on hand target 200 days, without the financing 181 days in 2019

($ in thousands) 2018 2019 2020 2021 2022 5yr Total

Power Production $41,992 $10,130 $6,468 $18,048 $16,628 $93,266

Power Delivery 8,547 2,035 5,828 11,387 2,636 30,433

General 2,117 2,025 3,361 594 383 8,480

HQ Campus 16,428 23,713 4,359 - - 44,500

Windy Gap Firming Project 3,623 20,327 29,667 25,196 25,437 104,250

Total Capital Expenditures $72,707 $58,230 $49,683 $55,225 $45,084 $280,929

Debt Financings (new money) $100,000 $0 $0 $0 $0 $0

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

1 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year 15 Year 20 Year 25 Year 30 Year

MMD Range Current MMD Average MMD

Tax-Exempt Interest Rates

Although rates are at levels higher than the all-time lows reached in the last five years, interest rates remain below their long-term averages, particularly on the longer end of the yield curve.

30 Year AAA MMD Rate Position(April 9, 1988 to April 6, 2018)

Summary of April 6, 2018 vs. 30 Year Historical MMD RatesStatistic 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year 15 Year 20 Year 25 Year 30 Year4/6/2018 1.61% 1.71% 1.84% 1.96% 2.08% 2.25% 2.43% 2.68% 2.84% 2.91% 2.96%Average 2.36% 2.65% 2.85% 3.04% 3.21% 3.54% 3.92% 4.37% 4.64% 4.78% 4.82%Spread to Avg. -0.75% -0.94% -1.01% -1.08% -1.13% -1.29% -1.49% -1.69% -1.80% -1.87% -1.86%Minimum 0.11% 0.25% 0.36% 0.44% 0.62% 0.89% 1.29% 1.57% 1.80% 1.88% 1.93%Spread to Min. 1.50% 1.46% 1.48% 1.52% 1.46% 1.36% 1.14% 1.11% 1.04% 1.03% 1.03%Maximum 6.80% 6.80% 6.85% 6.85% 6.90% 7.00% 7.10% 7.40% 7.70% 7.80% 7.80%Spread to Max. -5.19% -5.09% -5.01% -4.89% -4.82% -4.75% -4.67% -4.72% -4.86% -4.89% -4.84%

Interest Rate Forecasts• On March 21, 2018 the FOMC established a new target range for the

fund funds rate of 1.50% to 1.75%.• The FOMC increased the fed funds rate six times since 2015. The total

rate movement was 1.50% from a low range of 0.0% - 0.25% where it remained from 2009 through 2015.

• Amidst the uncertainty regarding how high and how fast long-term interest rates will go, the consensus amongst economists is that short-term rates will increase more and faster than long-term rates.

The Street's Interest Rate Forecast(As of April 12, 2018)

Average Forecasts Current Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19

30-Year UST 3.03% 3.21% 3.33% 3.46% 3.55% 3.67% 3.83%

10-Year UST 2.82% 2.93% 3.05% 3.16% 3.26% 3.36% 3.48%

2-Year UST 2.34% 2.41% 2.56% 2.70% 2.85% 2.98% 3.11%

3M LIBOR 2.34% 2.27% 2.43% 2.59% 2.75% 2.92% 3.04%

Fed Funds Target Rate (Upper) 1.75% 1.95% 2.15% 2.40% 2.60% 2.75% 2.95%

Fed Funds Target Rate (Lower) 1.50% 1.72% 1.92% 2.13% 2.33% 2.52% 2.69%

Bond Sale Process

• Select the team• Determine project cost and timing• Identify source of repayment• Size and structure the bonds• Determine method of sale

Plan of Finance

• Adopt Authorizing Resolution• Tax analysis & due diligence• Prepare disclosure document (official

statement)

Legal Framework

• Obtain ratings• Underwriter & investor out reach• Sell & price the bonds

Marketing

• Closing/money transfer• Invest bond proceeds• Begin project & track progress• Make principal & interest payments• Monitor for refinancing opportunities• Comply with Arbitrage Rebate

Regulations (IRS/Tax Code)• On-going disclosure by complying with

SEC Rule 15( c)2-12

Administration

Structure of the New Bonds

• Tax exempt• Long-term bonds (final maturities greater than 10 years)• Fixed rate, current interest, serial bonds• Optional redemption: par call bonds within 10 years

$0

$5

$10

$15

$20

$25

$30

$35

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

Millions

Series JJ

Series II

Series HH

Series GG

Current Debt Service

Substantial decline in DS post 2018 | Excess debt capacity

As of: Debt Outstanding

12/31/2017 $194.3M

06/01/2018 $179.8M

$0

$5

$10

$15

$20

$25

$30

$35

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043

MillionsNew Debt

Series JJ

Series II

Series HH

Series GG

Projected Debt Service

New debt: represents $100 million issuance, assumes level debt service payments

Issuance ConsiderationsWindy Gap Firming Project• IRS private letter ruling – confirm the tax status of the bonds• Potential timing delays due to pending litigation• Preliminary cost estimates, subject to change• Determination of pooled financing vs. individual financing

• Provide support for lower/unrated participants• Subordinate loan (30yr, 3.1%)• Bond reserve and liquidity fund• Step-up provisions

Step-Up ProvisionsIf a pooled participant defaults on debt service payment other participants “step-up” and make the payment.• Firming project participants drafted step-up provisions for

upcoming pooled financing• If defaulting participant does not cure then they lose a portion

of storage, no longer make debt service payments and as long as O&M payments made, continue to participate in project

• Platte River’s proposal• If defaulting participant does not cure, forfeits all storage and

is out of the storage project• Protects non-defaulting parties• Provides strong incentive to not default• Similar to other step-up provisions for pooled financings

Reimbursement ResolutionTo be reviewed and approved at the May Board meeting.

• Reimburse Platte River for HQ campus expenses that are incurred before the bond issue with future bond proceeds

• Expenses incurred 60 days prior to Resolution’s effective date can be reimbursed, does not apply to preliminary costs

• Reimbursement bond should be issued within 18 months of initial expenditure or date project is placed in service (must be issued within 3 years)

• Issued similar resolutions for prior bond issues (Series HH, II, JJ)

• Does not approve issuance of new debt• Board will be asked to approve new debt in the future

Questions / Discussion

Policy Repository and Resolution Rescission

Joe Wilson, General Counsel

Policy Quality ManagementIn late 2015 a committee of stakeholders from across the organization was established to evaluate policies at Platte River. The team included stakeholders from the following internal functions: ComplianceAuditingHuman ResourcesLegalRisk Critical Infrastructure Protection and Records

The project scope included:• Create an accepted definition for the term “policy,”• Audit existing policies,• Create user-friendly templates for policies and related

documents,• Create a repository for policies and related documents,• Migrate current policies and related documents to the

repository,• Rescind outdated and obsolete policies, and• Revise and restate policies that need to be amended.

Project progress to date:• The term policy has been defined. In addition, the team

defined the following other methods for quality management:

Procedure, Process, Plan, Program, Guideline, and Standard

• Documents with the word “policy” in the title or in the document content were reviewed

• Templates created and a classification process formulated

• Policies migrated to the new format. Migration is almost complete

• Policies maintained in the HP document management system, which provides the ability to create a “next review date”

• Policies and other methods can be accessed through the Platte River SharePoint intranet

Benefits – Process and Business Continuity• Uniformity for writing, approving, and revising guidance

documents• Monitor guidance documents to keep current• Centralize access to guidance documents• Use of SharePoint platform

Board Action in May:Rescind outdated resolutions, including • Resolution No. 2-74 - Amended and Restated Fiscal Policy• Resolution No. 42-81 - Off-Site Use of Rawhide Ambulance• Resolution No. 58-81 - Conflicts of Interest• Resolution No. 64-82 - General Wage Policy• Resolution No. 13-84 - Deposit and Investment of Funds• Resolution No. 37-91 - Endorsement of Transmission Access Principles• Resolution No. 23-95 - Power Marketing Administration Sale• Resolution No. 6-04 - Gas Hedging Policy• Resolution No. 16-04 - Energy Risk Management Policy• Resolution No. 8-05 - Interest Rate Derivatives• Resolution No. 16-05 - SO2 Emission Allowances

Board Action in May:Amend and restate policy resolutions:• Board resolution 30-97 –Electronic Mail Policy• Board resolution 19-09 – Expense Recognition Accounting for

Pension Funding; renamed Additional Pension Funding Accounting Policy

• Board resolution 28-12 – Accounting for Debt Issuance Cost Policy; renamed Debt Issuance Expense Recognition Policy

• Board resolution 05-13 - Market Manipulation Prohibition Policy

Questions?

March Operational Results

Variance Key: Favorable: >2% | Near budget: +/- 2% | Unfavorable: <-2%

Category March Variance YTD Variance

Municipal Demand (0.8%) (0.1%)

Municipal Energy (1.8%) (0.8%)

Baseload Generation (5.2%) (6.8%)

Wind Generation 11.8% (2.6%)

Solar Generation 3.8% (2.9%)

Surplus Sales Volume 8.6% (3.0%)

Surplus Sales Price (5.2%) (6.2%)

Dispatch Cost (2.0%) (2.0%)

CategoryMarch

Variance from Budget($ in millions)

Year to DateVariance from Budget

($ in millions)

Net Income $0.8 $1.6

Debt Coverage .36x .31x

Revenues $ - ($0.7)

Operating Expenses $0.7 $2.7

Capital Additions $3.5 $5.8

Financial Summary

> 2% Favorable | 2% to -2% At or Near Budget | < -2% Unfavorable

Board of Directors Meeting - prpa.org · 04.04.2018 · • Does it make sense to join the CAISO...

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