Regular Meeting Minutes of the Board of Directors
2000 East Horsetooth Road, Fort Collins, Colorado
Thursday, July 30, 2015
ATTENDANCE
Board Members
Representing Estes Park: Mayor Bill Pinkham and Reuben Bergsten
Representing Fort Collins: Mayor Wade Troxell and Mayor Pro Tem Gerry Horak
Representing Longmont: Mayor Dennis Coombs and Tom Roiniotis
Representing Loveland: Mayor Cecil Gutierrez and Steve Adams
Platte River Staff
Jackie Sargent (General Manager)
Joe Wilson (General Counsel)
Jason Frisbie (Chief Operating Officer)
Dave Smalley (Chief Financial & Risk Officer)
Deb Schaneman (Chief Compliance Officer)
Karin Hollohan (Corporate Services Director)
John Bleem (Strategic Planning & Customer Service Director)
Pete Hoelscher (Communications & Marketing Director)
Heather Banks (Fuels & Water Manager)
Wade Hancock (Financial Planning Manager)
Ryan Donovan (Associate General Counsel)
Chris Wood (Environmental Services Manager)
Brad Decker (Strategic Planning Manager)
Paul Davis (Customer Services Manager)
Debbie Seidman (Energy Technology Project Manager – Generation)
Shannon Craig (Executive Assistant)
Guests
Greg McNutt (Principal and Compensation Consultant, Milliman)
Gary Vicinus & Pat Augustine (Pace Consultants)
Rick Coen (Commercial System Designer, Namaste Solar)
CALL TO ORDER
Chairman Roiniotis called the meeting to order at 9:00 a.m. A quorum of Board Members was
present and the meeting, having been duly convened, was ready to proceed with business.
ACTION ITEMS
(1)
Approval of the Regular Meeting Minutes of May 28, 2015
Director Gutierrez moved to approve the Minutes as amended. Director Bergsten seconded, and
the motion carried 8-0.
Regular Board Meeting Minutes: July 30, 2015
(2)
Public Comment
None.
(3)
Retirement Committee Report
(presenter: Bill Pinkham)
The retirement committee met on Thursday May 28. The Plan’s investment consultant,
Innovest, presented their firm’s long term outlook for the economy and capital markets. The
firm expects modest economic growth for the US and other markets for the next several years.
They expect lower returns from equities and modest returns from fixed income securities. Based
on Innovest’s projections, the Committee agreed to maintain the Plan’s current asset allocation
mix. The Committee also agreed to have the actuary analyze the impacts of a potential
reduction in the Plan’s return assumption.
Innovest provided a report showing the performance of the Plan for the March quarter. Plan
assets increased $1.8 million from $91 million to $93 million. The increase in assets is due to net
cash outflows of about $300,000 and investment gains of $2.1 million. The return for the quarter
was 2.2%, which was slightly above the benchmark return.
Mr. Dave Smalley, chief financial officer, provided an overview of the annual Actuarial
Valuation Report prepared by Towers Watson, which contained the required funding
contribution to the Plan for 2016. The recommended contribution for 2016 is $2.9 million
compared to a contribution of $3.3 million in 2015. The Plan’s funded status as of January 1,
2015 was 109%. The ratio indicates that the Plan has assets sufficient to cover accrued benefits
Mr. Smalley also reviewed new Governmental Accounting Standards that impact reporting and
disclosure for both the pension plan and Platte River’s financial statements. Platte River’s net
pension liability per GASB is $6.7 million, which will be reflected on the balance sheet in 2015.
The Committee adopted Plan appeal hearing procedures. The procedures will be used in the
event that a participant or beneficiary requests a hearing before the Committee for review of the
Plan Administrator’s determination with respect to a claim of a denial of benefits.
The next Committee meeting is scheduled for August.
The Retirement Committee report is for informational purposes, no board action is necessary.
In response to a Director’s question at this time, 164 current employees are participating in the
Plan. Fifty-six terminated employees have not yet started to participate. The Plan was closed for
participation in 2010 and any employee hired before the 2010 closing date is 100% vested.
Employees hired after 2010 participate in the defined contribution plan.
(4)
Legal & Governmental Affairs Report
(presenter: Joe Wilson)
Mr. Wilson, general counsel, noted that the full report is in the Board packet and stated that
unless there were specific questions, the report is current without need of further comment.
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Regular Board Meeting Minutes: July 30, 2015
A Director requested detail regarding the prognosis on FERC’s denial decision on the approval
of the JDA. In response, Public Service Company (PSCo) submitted a petition for a re-hearing
on July 23. In addition, the parties will be making modifications to the application and plan to
submit a new application based on the FERC feedback. Presently, there is not a timeframe in
which FERC will take action. The re-filing will address the two main concerns.
Another Director requested the final Fort Collins Community Solar Garden agreement be
shared with the Board. Mr. Wilson noted that the intent of this document is that it is to be
drafted in a generalized manner for use by other communities. The memorandum of
understanding (MOU) is not an intergovernmental agreement requiring approval from this
Board. The original MOU drafts were shared with the Board, and as the Community Solar
Garden program unfolds the plan is to share any new information with the Board.
(5)
Operating Report, May and June 2015
(presenter: Jason Frisbie)
Mr. Frisbie, chief operating officer, reviewed the May and June operational budget variances
and noted the full report is in the Board packet. Platte River finished each month with zero lost
time incidents.
All base-load generation operated with high reliability for both May and June. The lower
capacity factor at Craig is a result of a continued soft surplus market and holding reserves on
both Craig units. Holding reserves at Craig reduces the capacity factor of the facility by 6.5%.
Mr. Frisbie noted a new section on wind in the operational report. With the addition of Spring
Canyon over 140,000 MWh of wind energy have been supplied to our system year to date.
Wind was 37.8% below budget in June representing about 8,000 less MWh than anticipated.
Year-to-date (YTD) wind is 11.6% below budget.
Mr. Frisbie responded to a Director’s question regarding the seasonality of wind. The Platte
River team uses forecasts based on historical data from each site for projections. June proved to
be a less windy month at all three sites. Another Director asked about other losses in relation to
wind integration that may have other impacts. Our relationship with PSCo allows Platte River
to coordinate interval schedule changes that will allow the flexibility to manage overall
regulation costs based on a Tariff.
(6)
Financial Report, May and June 2015
(presenter: Dave Smalley)
Mr. Smalley highlighted the financial budget variances for May and June. The full report is in
the Board packet.
May and June below budget revenues were partially offset by lower expenses. YTD net income
is $1.7 million below our expectation at $3.2 million. The revenue short fall is $6.8 million with
$1.1 million due to lower municipal sales and $5.7 million due to lower surplus sales revenue.
The YTD expenses are $5.4 million under budget primarily due to purchase power, fuel,
operating and maintenance (O&M) expenses and Craig operations lower than anticipated.
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Regular Board Meeting Minutes: July 30, 2015
Regarding year-end projections for Platte River, if trends continue for lower surplus sales
revenue and lower O&M expense, we estimate $8 million net income for 2015. Staff will include
year-end earnings estimates in the monthly financial reports.
Due to Platte River’s financial strength, work will continue as planned and expenses will not be
curtailed at this point. Staff does not believe it would be prudent to make short term decisions
to curtail projects that may negatively impact long term performance and reliability. Staff is
working to generate additional revenues and control expenses. One example of this is the
increased sales from the gas turbines this year; $500,000 of the surplus sales number is from
utilizing the natural gas combustion turbines. Staff understands the importance of responding
to future budgets and projections. The 2016 budget will reflect changing market conditions.
(7)
Management Report
(presenter: Jackie Sargent)
Ms. Sargent, general manager & CEO, highlighted the safety, environmental, legal, operational,
and financial updates that were covered in the Board packet. In addition, the following items
were discussed.
Platte River staff attended the recent Larimer County multi-jurisdictional hazard mitigation
planning session. Ms. Sargent thanked Director Adams for the information regarding this
session. As a result Platte River intends to actively participate in this regional collaborative
effort for emergency preparedness.
Latest intelligence suggests that the EPA final rule may issue as early as August 4th. However,
the rule may not be published in the federal register until November after the Paris Climate
Change Conference.
On Monday, June 29, the Supreme Court held that EPA violated the Clean Air Act when it
determined that regulation of mercury and other hazardous air pollutants from certain power
plants was “appropriate and necessary” without consideration of costs. A summary on the
Mercury and Air Toxics (MATS) Ruling has been prepared by PACE and distributed to the
Board as a handout to provide information on this ruling and the potential implications for the
proposed Clean Power Plan. The Supreme Court’s rejection of the MATS rule is not expected to
delay or have direct impacts regarding the progress of the Clean Power Plan. The MATS rule
and CPP are two different rules with different compliance requirements and legal grounding.
Ms. Sargent noted the issue of the upcoming revised ozone rule as discussed in the Board
packet. She noted a correction on page 68 of the Management Report concerning the issue of
costs of emission controls at Rawhide in the context of new ozone standards: strike out ~$100M
and replace this with ‘which will require detailed engineering to accurately estimate costs’. In
2008 Black & Veatch prepared a preliminary high level estimate to add additional equipment,
but additional study is required to gain a more accurate estimate of costs.
Additionally, permitting of a new facility in a nonattainment area will require offsets to be
obtained from existing sources thus potentially limiting our expansion capabilities at Rawhide.
A Director had asked what the rate impact would look like for a capital project of this size. Mr.
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Regular Board Meeting Minutes: July 30, 2015
Smalley responded with roughly a 4% rate increase assuming an estimated $100 million of
financed expense.
Deb Schaneman, chief compliance officer, prepared a memo for the Board addressing some
potential questions about the Proposed Ozone Standard. The final standard is expected to issue
in October 2015, the Board will be updated as information becomes available.
On the compliance front, compliance staff and multiple Platte River subject matter experts met
with representatives from the municipalities to discuss NERC compliance and challenges the
cities may be facing with regards to compliance activities.
Platte River is currently working on developing a community Solar Pilot Program with
municipal staff as well as working on a combined Heat and Power Study with Colorado State
University and the City of Fort Collins. Staff believes that information from these studies may
help guide future planning for distributed resources.
Platte River plans to provide a draft of the 2016-2026 Strategic Plan to the Board in October, and
will request approval of the plan at the December Board meeting.
In regards to an update on the Rawhide Flats Solar project, Platte River and juwi, inc. executed
the final PPA; the final project size will be 30 MW on an estimated 200 acres with the new
location and layout as described in the July management report.
A Director had a question about the Windy Gap Firming Project update and the preliminary
findings that indicate a potential increase of 30% over the 2011 estimate for the construction
phase of the project. At this time, Heather Banks, fuels & water manager, estimates this to be
roughly a $10M increase for Platte River. The original estimate was based on a preliminary
engineering estimate and for preliminary design, whereas the updated cost estimate is based on
a more thorough construction budget approach and a more robust market for construction
services.
a.
Fort Lupton Water Lease Extension
(presenter: Heather Banks)
Fort Lupton is requesting that the Board approve an extension of the current lease for
one year for 10 Windy Gap units between Platte River and the City of Fort Lupton. Staff
supports the extension.
A Director asked the question if the second use of the water units could be oil and gas
and could Platte River potentially be losing out on possible revenue by extending this
lease. Mr. Wilson stated that Fort Lupton runs the water through their system as firstuse. The second-use could then be used for oil and gas. Platte River dedicates its Windy
Gap water to the re-use plan. Mr. Frisbie added that financially there is minimal risk to
Platte River by extending this lease for one year. Staff will research and report back to a
question asked by a Director on whether the first use of these 10 units must be municipal
use.
Director Adams moved to approve the Fort Lupton Water Lease Extension - Resolution
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Regular Board Meeting Minutes: July 30, 2015
08-15 as presented. Director Bergsten seconded, and the motion carried 7-1. Director
Horak opposed.
b. Resource Planning Update
(presenter: John Bleem)
John Bleem, strategic planning & customer service director, updated the Board on
resource planning and recommendation to move forward with a strategy to exit Platte
River’s ownership in Craig Unit 1. The recommendation is based on months of modeling
and study related to meeting the resource planning guidelines set by the Board.
A director questioned staff on what would happen to the other Craig units should an
exit strategy be executed. Ms. Sargent explained that there are many possible scenarios,
depending on details of the Clean Power Plan and interests of the other four owners of
Craig. The Board discussed how this strategy will help Platte River and the State of
Colorado meet the Clean Power Plan. A possible resolution seeking a Board decision on
this may come during the summer of 2016.
Director Bergsten made a motion that the General Manager enter into negotiations to
determine an exit strategy for Platte River’s ownership in Craig Unit 1, to advise the
Board of progress and to prepare the Board to take any necessary action. Director
Gutierrez seconded, and the motion carried 8-0.
The Board reconvened from the 10-minute break with a presentation from Pace, the
consulting firm facilitating the August Board work session on resource planning.
There was discussion from the Board and staff relating to reconsideration of resource
planning guidelines for the Platte River system as a whole. It was noted the
municipalities will have different interests due to the demographics of the individual
communities, but the communities are more alike than they are different. Additional
discussion of resource planning guidelines and other considerations will take place at
the August work session.
(8)
Review Compensation Study Results
(presenter: Greg McNutt)
Ms. Sargent introduced Greg McNutt, a principal & compensation consultant, from Milliman
and explained that the results of the compensation study are within the Board Packet.
Mr. McNutt introduced the scope of work and methodology then reviewed the highlights of the
compensation study report. He explained the data collected, the findings, and then the
recommendations based on the represented market participant group. Mr. McNutt stated that
the peer group equals a representative sample to provide a solid compensation and talent
reference. Of the twenty-two organizations deemed comparable by the consultant that had
received the initial questionnaire, eight organizations responded. Three primary components of
total compensation were evaluated as part of the study: base salary, paid incentives and
supplemental benefits. The consultant concluded his presentation with a summary of the
market results.
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Regular Board Meeting Minutes: July 30, 2015
(9)
Executive Session
Director Pinkham made the motion to go into Executive Session for the purposes of considering
personnel matters related to compensation of the General Manager and the General Counsel.
The General Counsel has advised that an Executive Session is authorized in this instance
pursuant to Colorado Revised Statutes, Section 24-6-402, subsection (4)(f); provided that, no
formal action will be taken during the Executive Session. Director Coombs seconded, and the
motion carried 8-0.
(10)
Reconvene Regular Session
Chairman reconvened the Regular Board Meeting at 12:37 p.m.
The Chairman spoke of the positive organizational change that is attributed to the General
Manager as well as stating that the Board is pleased with the performance of the General
Manager and looks forward to continuing to work with both the General Manager and General
Counsel.
The Board agreed to adopt the consultant’s recommendation to implement a salary range for
both positions that begins at 80% of the survey’s 50th percentile and ends at 120% of the survey’s
50th percentile.
Director Coombs motioned to raise the General Manager’s salary to 5% above the 50th percentile
as reported by Milliman, retroactive to the first of the year. Director Reuben seconded, and the
motion carried 8-0.
Chairman Roiniotis encouraged staff to propose additional comparison organizations for the
Board to consider during future surveys. In addition, as part of the discussions on the pending
compensation policy, the Board requested information on the market pricing methodology used
to establish pay at Platte River for positions other than the General Manager and General
Counsel, with a specific focus on the General Manager’s direct reports.
Ms. Sargent shared that Platte River has engaged a third-party external consulting firm to
complete an audit of the compensation methodology. At this time, the study is in process with
results expected in September to allow for the annual market pricing review of positions in the
fall. Information will not be available to share with the Board until October 2015. Historically
and by existing policy, compensation has been delegated to the General Manger with overall
approval of the total salary and position budget by the Board of Directors through the budget
process.
The Board of Directors requested a briefing from staff on the methodology and process for
establishing compensation levels within Platte River, with specific focus on senior level
management positions. Staff agreed to coordinate this briefing with their review of the current
Board policies in the October time frame.
ADJOURNMENT
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Regular Board Meeting Minutes: July 30, 2015
With no further business, the meeting adjourned at 12:44 p.m. The next regular Board meeting
is scheduled for Thursday, August 27, 2015, at 9:00 a.m. in the Platte River Power Authority
Board Room, 2000 East Horsetooth Road, Fort Collins, Colorado.
AS WITNESS, I have executed my name as Assistant Secretary and have affixed the corporate
seal of the Platte River Power Authority this
day of
, 2015.
Assistant Secretary
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