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Public Utilities 2011/01/26 CITY OF ANAHEIM PUBLIC UTILITIES BOARD NEMTES January 26,2011 The agenda having been posted on Thursday, January 20, 2011, the Regular Meeting of the Public Utilities Board (Board) was called to order by Chairperson Lon Cahill at 5:02 p.m. on Wednesday, January 26, 2011, in the I I Floor Large Conference Room, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: L. Cahill, J. rand an, B. Hernandez, J. Machiaverna, D. Morgan, C. Peltzer Board Members Absent: P. Carroll Staff Present: M. Edwards, L. Quiambao, A. Kott, S. Sciortino, D. Calkins, E. Zacherl, M. Ward, P. Oviedo, G. Bowen, K. Nguyen, M. Roleo, D. Lee, R. Shin u, J. Lehman, R. Dowell, B. Wingenroth Guest(s) Present- David Wain, East Neighborhood Council; Robert Schwenk, Member of the Public; Paul Beckman, Property Manager - Anaheim Hills Planned Community Association AGENDAITEM ACTION TAKEN 1. PUBLIC COMMENTS. Paul Beckman, Property Manager for the Anaheim Hills Planned L. Cahill closed the general Community Association, thanked E. Zacherl and staff for resolving public comments portion of the the billing cycle issue so the Association received a single bill meeting. instead of thirty-nine monthly billings. Also, he expressed his thanks for the staff s attention to their concerns and the resolution of the electrical system issue and the non-metered electrical meters for their irrigation controllers. 2. APPROVAL OF THE MINUTES OF THE REGULAR PUBLIC UTILITIES BOARD MEETING HELD ON DECEMBER 15,2010. * There was no discussion regarding this item. D. Morgan moved approval of the December 15, 2010, Public Utilities Board minutes. J. Brandman seconded the motion. MOTION CARRIED: 5-0. ABSTAINED:I (B. Hernandez). ABSENT: I (P. Carroll). 2011-1 AGENDAITEM ACTION TAKEN 3. PRESENTATION ON GOVERNOR'S BUDGET CUTS AND ITS POTENTIAL IMPACT ON ANAHEIM. M. Edwards introduced B. Wingenroth, the Director of Finance for the City of Anaheim. Wingenroth gave a presentation on the Governor's Budget Cuts and their Potential Impact on the City's budget. He indicated that the Governor is proposing a total of $26 billion in budget cuts to address a deficit that, over the next 18 months, is projected to be $25.4 billion. This amount consists of an $8.2 billion shortfall for the current fiscal year and a projected $17.2 billion shortfall for next fiscal year. The Governor's proposed solution has two major components. The Governor is proposing $12 billion in additional revenues and approximately $12.5 billion in expenditure reductions. He indicated that the majority of the revenues the Governor is proposing are dependent on voter approval of a five year extension of temporary tax increases ins es tax, vehicle license tax, and personal income tax that are currently scheduled to expire this year. The primary impact to the City's revenue is the Governor's proposal to eliminate Enterprise Zones and the associated tax credits. He indicated that the City was recently awarded Enterprise Zone status is would allow the City to provide incentives for businesses coming into the City and provide jobs. This proposal would eliminate that incentive possibility. The expenditure reductions are in a number of areas across various state programs. Wingenroth not that one area of impact to the City is the Governor's proposal to eliminate funding for Redevelopment Agencies. For Anaheim, the Redevelopment Agency represents approximately $50 million of activity. M. Edwards responded to a question by the Board if the City took special actions to help immunize itself from something oft is nature. She shared that a variety of steps were taken by the Redevelopment Agency to encumber certain projects. The Board also inquired as to the interrelationship between the Utility and the Redevelopment Agency, M. Edwards responded that the only connection the Utility has with the Redevelopment Agency is that it frequently partners with that Agency on short term projects, and s h e d oes not believe that the Department has any long term contractual obligations with the Redevelopment Agency. Wingenroth went on to add that there may be some General Fund impacts because the Redevelopment Agency does provide support tote General Fund, and that he is in the process of evaluating the extent of that support. A Board member shared his concern that there is information coming from Sacramento regarding communities going through bankruptcy and possibly defaulting on various obligations, and there was general discussion about the fallout that would stem from city bankruptcies. A question was asked about the impact of 2011-2 AGENDAITEM ACTION TAKEN bankruptcy of the state itself. Wingenroth responded that he would answer as both the Finance Director of Anaheim and as a finance professional. The bond covenants in a majority of cases are written in such a way that it may not be possible, in most cases, for a city not to pay its bond holders. Any city that would be willing to move to bankruptcy in order to resolve a short term problem, is basically taking away their future ability to use the capital market for investors to buy their bonds. It used to be a benefit to Anaheim in a bond sale, to be a part of California. Now the association is costing basis points making borrowing more expensive. The municipal bond market in general, has also been getting more expensive as a result of the anxiety investors are having from watching the news and hearing some commentators speaking about the possibility of various bankruptcies. Wingenroth indicated to the Board that he feels it is his job to talk about financial integrity. In fact, at a City Council budget workshop presentation yesterday, he felt it was important to begin by emphasizing that Anaheim is in a strong financial position. 4. ELECTION OF NEW PUB VICE-CHAIRPERSON.** L. Cahill indicated to the Board that as a result of K. Murray in C. Peltzer moved approval of elected as a City Council member, a vacancy became available, so the nomination of J. Brandman the Board needed to elect a new Vice-Chairperson to the Public as Vice-Chairperson to the Utilities Board. He asked if anyone would like tom e a Public Utilities Board. L, nomination. J. Brandman was nominated and accepted the Cahill seconded the motion. nomination. No other nominations were made. MOTION CARRIED: 6-0. ABSTAINED. 0. ABSENT: I (P. Carroil). 5. APPROVAL OF THE LA PAZ SOLAR TOWER PROJECT SALES AGREEMENT BETWEEN SOUTHERN CALIFORNIA PUBLIC POWER ASSOCIATION AND THE CITY OF ANAHEIM.* M. Edwards introduced G. Bowen, Principal Integrated Resources L. Cahill moved approval of Planner. She also indicated that the State has s e t a mbitious the La Paz Solar Tower Project timelines for the procurement of renewable energy, as well as Power Sales Agreement penalties for not meeting those timelines, so it is appropriate that between Southern California the Department continues to build its renewable portfolio. A Public Power Association and number of these new renewable projects fail to get funded, licensed, the City of Anaheim. B. or permitted, and as a result do not reach commercial operation. Hernandez seconded the Thus in Anaheim deals, there are substantial off ramps to protect motion. the City, but at the same time, it is good that the Department work MOTION CARRIED: 6-0. towards contractual obligation, because Anaheim needs to ABSTAINED.O. demonstrate to the regulatory agencies that it is taking the steps ABSENT: I (P. Carroll). necessary to move forward. G. Bowen began his presentation to the Board through a series of slides that outlined the history of the La Paz Solar Tower dating as far back as 1903 through obtaining patents in 1975. He shared artist's renditions of the tower that included the breakdown of size and height from the chimney to the turbines and collector zone. He noted that it works on the principal of the greenhouse effect, 2011-3 AGENDAITEM ACTION TAKEN He continued the presentation by reviewing with the Board certain characteristics of the solar tower that include performance and size comparison. He also shared with the or that the tower is made completely of concrete. The Board asked a variety of questions about the La Paz Solar Tower Project (Project) including its actual size, material, and performance. G. Bowen responded by noting typical solar projects produces energy only 25% of the time in comparison to the solar tower production of 70%. Because it is able to maintain a warmer temperature when the sun isn't shining during the evening, it actually stores the heat so the capacity factor is actually better than a typical solar cell. M. Edwards provided clarification for the Board indicating that Anaheim is buying the energy output from the Project sot e liability associated with the Project remains with the project developers, not who Anaheim is only buying the energy from the Project. The Board wass own a conceptual video that simulated the complete energy production process oft a solar tower. G. Bowen indicated tote Board that the timeline for completion oft e Project is slated f o r t he year 2014. A Board member asked if the state of Arizona was presenting any building or permitting issues. G. Bowen responded that the Developer has actually received the necessary permits from Arizona including citing approval is is a huge step. The next step is getting the Project fully subscribed. After a lengthy discussion regarding timelines, liabilities, and financing, A. Kott added that the Project Developer, not Anaheim, of be liable or responsible for construction issues or defects. M. Edwards inquired of the Board, and the Board approved, discussing Agenda Its Number 7 ahead of Agenda Its Number 6. 6. PRESENTATION FOR ELECTRIC OUTAGE MONITORING AND PERFORMANCE. M. Ward introduced the subject of electric reliability to the Board. The presentation consisted of at goes into reliability numbers, the types of outages being monitored, and ultimately how that information is used to provide reliable service to customers. M. Robledo, Electric Operations Manager, began the presentation by explaining that there are outages due to the supply of power, and outages related to the distribution of power. The focus oft e presentation was on distribution outages. Several photos of actual situations were shared with the Board illustrating these types of outages. 2011 -4 AGENDAITEM ACTION TAKEN Informational graphs were shown that identified 27 outage parameters that are tracked and evaluated. Typical causes of outages include weather, tree contact, vehicle accidents, and metallic balloons. M. Robledo then went through a series of slides that described Anaheim's performance metrics for the reliability categories of momentary outages, sustained outages, outage duration, and restoration time. Anaheim's mitigation methods include implementing measures such as automated field switching, branch line fusing, cable and transformer replacement, tree trimming, and utilizing an Outage Management System. Additionally, response time improvements have been made, such as enabling troubleshooters to perform vault switching, using auto transformers, and enhancing call out and standby procedures in an effort to minimize the impact of outages to customers. M. Robledo concluded the presentation by showing a comparison of reliability metrics between Anaheim and other utilities. Anaheim's reliability statistics compare very favorably with other utilities in California. 7. DISCUSSION OF THE STATUS OF THE TERMINATION AGREEMENT BETWEEN THE CITY OF ANAHEIM AND SHOSHONE PRESTON LLC FOR THE 32 MW GEOTHERMAL PROJECT. M. Edwards reminded the Board that some time ago, the Board authorized a geothermalp ject commitment with the Shoshone Indian Tribe. Since that time, the Shoshones experienced some financial challenges, so the parties mutually agreed to terminate the project agreement. M. Edwards indicated tote Board that there were time constraints to terminate the agreement, so she authorized staff to take the Termination Agreement to City Council. She indicated tote Board that this item was simply to make the Board aware that the Termination Agreement did go to City Council with a recommendation that City Council mutually agree to terminate the agreement. 8. UPDATE ON WATER SYSTEM ISSUES. Monthlv Water SuioDiv Conditions UiDdate D. Calkins shared with the Board the monthly Water Supply Conditions Update. He indicated to the Board that December was the wettest month in Southern California since 1889. Anaheim received ten inches of rain for December, but it has been a dry January. The National Weather Service outlook for the next three months shows dryer than normal conditions for both Southern California and Colorado River Basin. 2011 -5 AGENDAITEM ACTION TAKEN He reminded the Board that this type of unpredictable weather pattern in California is the reason it is so important to have adequate water storage, Because of the wet weather lasts rin early this winter, the Department of Water Resources recently increased the water supply allocation f o r t he State Water Project from 50% to 60%. This means the Metropolitan Water District will get another 200,000 acre feet of water. For the coming year, Metropolitan Water District is now estimating available supplies will exceed demand by about 300,000 acre feet, which will help replenish storage. Quarterly Water Quali!y_Update D. Calkins invited the Board's attention to the Quarterly Water Quality Update. The memorandum covers compliance efforts that include over 10,000 tests to make sure Anaheim's water meets all drinking water standards, information on customer inquiries and complaints, and other important issues that have been highlighted in the media lately. He also reminded the Board that there is a significant amount of water quality information on Anaheim's website, which is available to customers. The Board asked a number of clarifying questions about fluoridation practices, the condition of the groundwater basin, and the expected groundwater pumping level for next year. Metro olitan Water District Poster Calendar D. Calkins concluded his update by inviting the Board's attention to the water conservation calendar provided byte Metropolitan Water District, which includes student artwork on water conservation. The months of June and September feature artwork by students from Anaheim schools. 9. UPDATE ON ELECTRIC SYSTEM ISSUES. Ca von Power Plant M. Ward shared with the Board an update on the construction oft e Canyon Power Plant. There was a slight delay due to the recent rain, however the overall schedule was not impacted. Commissioning and testing is scheduled to begin in May 2011. Underground Conversion Districts M. Ward advised the Board that next on two new underground districts are being formed. The districts are located on Brookhurst Street, between all Road and Katella Avenue, and West Street, between La Palma Avenue and Lincoln Avenue. He concluded by congratulating D, Lee for completing the 100"' circuit mile in the Underground Conversion Program. 10. UPDATE ON FINANCE ISSUES. Electric Utilitv[Water Revenue and ExRgnnsag-LSumrnnary E. Zacherl presented the Board with the December financial results. 2011-6 AGENDAITEM ACTION TAKEN He invited their attention to the area of the electric schedule, which shows revenues under budget for the month. Retail sales were above budget with favorable variances in residential/commercial revenue of approximately $1.2 million, offsetting an unfavorable variance of about $700,000 in industrial sales. Year to date electric retail revenues were $155 million, about $11.5 million or 7% under budget. Non-retail revenues sales of surplus energy and gas transmission were under budget forte month in the amount of about $2.2 million or under about 21 %. The primary unfavorable variance is attributable to wholesale energy, is is under budget by approximately $1.6 million. Year to date non-retail revenue of $27 million, which is approximately $2.5 million over budget. Total electric revenue year to date is $182 million, which is under budget by approximately $9 million or 5%. Expenses in electric were under budget for the month. or was down $163,000 with supply services and equipment down $3.9 million or 54%. A significant portion of this variance is due to the timing of expenses related to the Smart Grid project. The carryover from the prior year's budget was put into the of of December. He continued by sharing that our power supply was up about $800,000 or 4%. Year to date expenses in electric were about $170 million and are under budget by approximately $8.5 million or 5%. E. Zacherl continued by presenting the water revenues, which continue to be less than budget. Residential single family sales were down over $325,000 or 19%. Commercial industrial revenues were down $173,000 or 11 %, sot a result was total sales were down $839,000 or 17% for the month. Year to date water revenues are approximately $30 million, down a little over $5 million or 15% under budget. Expenses in water supplies, services and equipment were under budget by $318,000 due mostly to timing of expenses and a portion due to the holiday closure. Water supply was up $40,000 or approximately 2% over budget. Total expenses for the of are approximately $4 million and are under budget $452,000 or 10%. Year to date expenses in water are $20.7 million and are under budget approximately $2.5 million or 10%. 11. UPDATE ON JOINT SERVICES ISSUES. Brea Landfill Groundbreaking Ceremony S, Sciortino began by thanking the Board members for their attendance tote Brea Landfill Groundbreaking ceremony. He added that he appreciated everyone taking time from their personal schedules to attend. Resource Adequacy Plan He continued by reviewing the resource adequacy handout provided to the Board for the month of February. He indicated that the Intermountain Power Project came back on service in January, but the were some extended outages with the Magnolia Power Plant, sow olesale energy sales reflect that. However, because Anaheim pre-purchased a lot of the gas for the facility, there will be some 2011-7 AGENDAITEM ACTION TAKEN partial offsets with surplus gas sales. The increase in rainfall experienced in the area last month carried across the region and efitted the Hoover Dam project of which Anaheim is a participant. The levels of Lake Powell and Lake Mead have been chronically low for the last several years. With the rainfall received in December, it actually raised some of those levels, so Anaheim is actually seeing a little bit more energy allocation from these facilities, which is a good sign. A Board member asked for clarification about Magnolia Power Plant's of status. G. Bowen responded that the issue concerns a bearing on the main rotor of the gas turbine; however, General Electric is working to get it back together and in the process has found some other high temperature related issues. The Magnolia Power Plant is expected to be back online by the end of January. 12. AGENDA I FOR THE NEXT PUBLIC UTILITIES BOARD MEETING ON FEBRUARY 23,2011. None. 13. ITEM(S) BY SECRETARY. M. Edwards reminded the Board that there had been some discussion at an earlier meeting about the City of Anaheim's ticket policy. She clarified that this matter is different than the For 700, which are State regulations on gifts. Anaheim's process was brought about by the State's efforts to correct problems caused by other agencies ticket policies. M. Edwards provided the Board with a handout that explained Anaheim's ticket policy and reminded the Board members that they are able to request tickets through her. She concluded with a discussion about the Form 802 which is completed by the City and posted online. 14. ITEM(S) BY THE BOARD. J. Machiaverna welcomed B. Hernandez to the Public Utilities Board. C. Peltzer also extended a warm welcome to B. Hernandez, J. Brandman thanked M. Edwards and staff for giving him the opportunity to attend the State of the City with his colleagues. He mentioned that hew also able to attend the Brea Landfill Ground Breaking ceremony. He felt that the Brea Landfill, Canyon Power Plant, the La Paz Solar Tower and Anaheim's under grounding programs over the last twenty years have put Anaheim consistently ahead of the curve. He congratulated everyone and expressed how very proud he is of Anaheim. He too welcomed B. Hernandez. B. Hernandez expressed his pleasure in being at the meeting and expressed similar feelings as J. Brand man regarding Anaheim and 2011-8 AGENDAITEM ACTION TAKEN the Utilities Department. He mentioned that this Utility is entirely not only evident in the Utilities but by staff City-wide. He shared Anaheim. 61M 15. ADJOURNMENT: (TO THE REGULAR MEETING ON FEBRUARY 23, 2011, AT 5:00 P.M., IN THE 11TH FLOOR LARGE CONFERENCE ROOM, ANAHEIM WEST TOWER, 201 S. ANAHEIM BOULEVARD, ANAHEIM, CALIFORNIA)• D. Morgan moved to adjourn the Regular Meeting at 7:03 p.m. to the Board's next Regular Meeting date of February 23, 2011 at 5:00 p.m. L. Cahill seconded the motion. MOTION CARRIED: 6-0. ABSTAINED: 0. ABSENT: 1 (P. Carroll). Indicates item(s) that will be forwarded to City Council for action upon recommendation by the Boarl Indicates item(s) that will be forwarded to City Clerk and City Council for informational purposes. E