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Public Utilities 2011/04/27CITY OF ANAHEIM PUBLIC UTILITIES BOARD MINUTES April 27, 2011 The agenda having been posted on Thursday, April 21, 2011, the Regular Meeting of the Public Utilities Board (Board) was called to order by Chairperson Lon Cahill at 5:00 p.m. on Wednesday, April 27, 2011, in the 11` Floor Large Conference Room, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: L. Cahill, J. Brandman, P. Carroll, C. Peltzer, J. Machiaverna Board Members Absent: D. Morgan, B. Hernandez Staff Present: M. Edwards, D. Calkins, M. Ward, S. Sciortino, B. Beelner, M. Lopez, A. Kott, J. Lehman, L. Quiambao, P. Oviedo, S. Welch, C. Gilbert, D. Lee, D. Shen, V. Castillo, V. Jones Guest(s) Present: David Wain, East Neighborhood Council, Norman Stout and Carol Creal, City of Irvine residents AGENDA ITEM 1. PUBLIC COMMENTS, David Wain, Vice Chairperson of the East Anaheim Neighborhood Council, thanked M. Edwards for attending the East District Council meeting held the previous week. 2. APPROVAL OF THE MINUTES OF THE REGULAR PUBLIC UTILITIES BOARD MEETING HELD ON MARCH 23,2011.* 3. APPROVAL OF REVISION TO ANAHEIM'S CALIFORNIA TRANSMISSION OWNER TARIFF.* M. Edwards indicated to the Board that when the California Independent System Operator (CAISO) was created, the intention was for that separate agency to operate the transmission grid for a variety of utilities, therefore making them the operator for Southern California Edison, Pacific Gas & Electric, and San Diego Gas and Electric, among others. The way in which the transmission network 2011 -26 ACTION TAKEN L. Cahill closed the general public comments portion of the meeting. P. Carroll moved approval of the March 23, 2011, Public Utilities Board minutes. C. Peltzer seconded the motion. MOTION CARRIED: 5 -0. ABSTAINED: 0. ABSENT- 2 (D. Morgan, B. Hernandez). P. Carroll moved to approve the Revision to Anaheim's California Transmission Owner Tariff. L. Cahill seconded the motion. MOTION CARRIED: 5 -0. ITEM NO. 03 AGENDA ITEM ACTION TAKEN is operated is that everyone puts the cost of their transmission assets ABSTAINED: 0. ABSENT: into one big pool. Then, those costs are added together and 2 (D. Morgan, B. apportioned out to the grid users based on a variety of factors. Hernandez). Those transmission costs are subject to oversight and approval by the Federal Regulatory Commission, and Council approval of any changes to be submitted to FERC is required. S. Sciortino responded to questions by the Board clarifying the varying aspects of the FERC filing. M. Edwards also answered a question from the Board asking if there is a reason why it has been so long since the last filing. She responded that historically there have not been a lot of changes or investments on the transmission grid. If it is, it's in such a small amount of money, that in order to try to get the recovery, Anaheim would spend more to change the associated tariff then they would recover in costs. However, specific upgrades were made into a portion of the transmission grid called the Southern Transmission System that delivers energy from the Intermountain Power Project. That investment created enough of a change so that adjusting the tariff became more appropriate to do and more cost effective. A Board member also asked if another revision will be necessary after Canyon Power Plant is up and running. M. Edwards responded that this specific tariff filing is specific to the cost of the physical grid itself. The additional of new generation will, however, require that other agreements with the ISO be modified. 4. APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED METERED SUBSYSTEM AGREEMENT, THE SCHEDULING COORDINATOR AGREEMENT, AND THE METER SERVICE AGREEMENT FOR SCHEDULING COORDINATORS ALL WITH THE CALIFORNIA INDEPENDENT SYSTEM OPERATOR.* The inclusion of Canyon Power Plant into the ISO grid requires J. Brandman moved the changes to subordinate agreements which are addressed in the Approval of an Amendment to proposed amendments. Council approval is required. the Amended and Restated Metered Subsystem A Board member asked if any part of the construction expense of Agreement, the Scheduling building Canyon Power Plant included in any way an upgrade to the Coordinator Agreement, and transmission grid. S. Sciortino responded that the addition of the Meter Service Agreement Canyon adds to the overall reliability to the grid; however, only for Scheduling Coordinators transmission associated with network service that everyone can use All With the California can be included. Independent System Operator. C. Peltzer seconded the motion. MOTION CARRIED: 5 -0. ABSTAINED: 0. ABSENT: 2 (D. Morgan, B. Hernandez). 2011 -27 AGENDA ITEM 5. PRESENTATION ON LINDA VISTA WATER FACILITIES UPGRADE PROJECT. D. Shen, Water Engineering and Design Manager, gave a presentation on the proposed Linda Vista Water Facilities Upgrade Project. He provided a brief overview of the water capital program, which has a budget of approximately $60 million over the next five years. He discussed the importance of the Linda Vista facility to Anaheim by explaining that it is centrally and strategically located so it serves both the flat land and hill and canyon areas. Additionally, it has the ability to supply about one -third of the City's average day water demand. The Linda Vista Facilities consist of wells around Anaheim Lake (which is owned by Orange County Water District) that extract groundwater that is conveyed to a storage reservoir, and then pumped directly into the water distribution system. One upcoming project will be to construct a new well, Well 58, which will replace old Wells 27 and 28. The existing reservoir, which has a capacity of 4 million gallons, was built in the 1930's, and in the 1960's the wooden roof structure was added. Because the reservoir does not meet current seismic design standards, has numerous operational limitations, and rehabilitation would be extensive and cost prohibitive, staff recommends replacing it with a new storage tank. D. Shen responded to a question asked by the Board by clarifying that the existing storage reservoir will be demolished, but only after the new storage facility is built and operational. He also said the overall improvement project will be phased because of budgetary constraints. The first phase will consist of one new four million gallon storage tank, relocation of the pumps, and the associated yard piping and site improvements, and will cost approximately $7 million. The next step is to take the environmental documentation to City Council at the May 3` meeting. Staff is currently soliciting bids from construction contractors, and plans to take to City Council an award of a construction contract in June. Construction would begin October 2011, and be completed by January 2013. D. Shen responded to a number of questions pertaining to the potential bidding climate, tank size and location, and its operation and maintenance. D. Calkins added that by building the first storage tank at the south part of the property, it leaves additional space in the event that it is necessary to make the second storage tank larger, or in case new drinking water regulations are enacted that would require treatment facilities. M. Edwards mentioned that the Department will be recommending a small adjustment in water rates this year to help fund system improvements, like the Linda Vista Project. Current law for water rate adjustments requires a public hearing, and a notice to be sent to every water customer with a 45 day notice that would allow ACTION TAKEN 2011 -28 AGENDA ITEM customers to attend the hearing. The law further states that if 50 % of water customers state in writing that they do not want the rate increase, it cannot be implemented. It is the Department's intention to mail out notices to customers next week to raise water rates 3'/2 %, which equates to $1.50 per month for the typical residential customer. M. Edwards responded to questions from the Board regarding rates in other districts, and the availability of information for our customers. Also, a Board member suggested making the City of Anaheim website address more prominent on future publications. 6. PRESENTATION ON 2011112 PUBLIC UTILITIES BUDGET. M. Edwards invited the Board's attention to the binders provided. She advised the Board that E. Zacherl is currently in New York attending the pricing meeting for capital borrowing for distribution infrastructure. B. Beelner informed the Board that pricing was completed and E. Zacherl successfully obtained an interest rate of 4.95% rather than the anticipated 5.25 %. M. Edwards reminded the Board that Anaheim Public Utilities operates on a not for profit basis that is Charter and Council controlled. Anaheim is only allowed to charge for that which is necessary to maintain, operate, and rehabilitate the power system. Anaheim Public Utilities is a department of the local City government and as such its budget will be submitted along with all of the other City department budgets to the City Council in June. She also advised the Board that the overall Anaheim Public Utilities budget being presented is less than the current adopted budget. M. Edwards explained the difference between the terms "adopted," "proposed," "amended," and "projected." She also explained the term "carryover." For example, a project with a cost of $30 million is presented to the City Council; the entire $30 million is approved in the first year even if it takes the next five years to spend those funds. Therefore, if only $1 million is spent the first year, the remaining $29 million becomes the carryover amount; it is then added to the following year's adopted budget and becomes the amended budget. Knowing the terminology and its context is important when reviewing the budget, as it helps to determine how much was ultimately approved. She directed the Board's attention to the total operating budget of $424 million, given that the operating budget provides a truer focus on how the business is being run. Whereas the Capital Budget can have large variances from year to year, and is not a particularly reliable indicator of organizational health. M. Edwards reminded the Board that the Electric Utility continues to rank in the top 25 percent of utilities nationwide in the area of electric system reliability. In 2010, Anaheim had higher reliability statistics than its neighboring utilities, in addition to surpassing the ACTION TAKEN 2011 -29 AGENDA ITEM highest reliability performance level established by the California Public Utilities Commission (CPUC) for investor owned utilities. The level of reliability continues to stay high with utility personnel available and scheduled around the clock. M. Edwards also shared with the Board information regarding an agreement the Water Division had with the Community Services Department. The agreement permitted the Utility to locate wells on the Community Services park sites in exchange for providing them irrigation controllers. The program is now being expanded through a grant from the Bureau of Reclamation allowing for the replacement of 63 weather -based irrigation system controllers and over 40,000 high efficiency nozzles in the Anaheim Resort Area. The grant, along with Metropolitan Water District incentives, will save the City over $280,000 this upcoming fiscal year. M. Edwards then reviewed some of the Capital project accomplishments by Water Utility highlighting the retro -fit of Walnut Canyon, construction of the Nohl Canyon Tank and the Water Recycling Demonstration facility currently under construction, as well as the next big project, Linda Vista Reservoir. Water supply, projected water revenue and water capital projects, Hidden Canyon Pump Station Expansion, and Linda Vista Reservoir and Pump Station Replacement were also reviewed. The Power Supply budget was then discussed. M. Edwards advised the Board that Power Supply is projected to increase by $19.1 million, largely due to Canyon Power Project coming online, Intermountain Power Project (IPP) cost increases and transmission cost increases. It was noted, however, that the Canyon Power Plant also provides some expense offsets. M. Edwards then reviewed the Electric sales revenues with the Board. She also reviewed the Rate Stabilization Fund with the Board, reminding them why it was initially created; to provide rate stabilization for customers based on changes that may not be longer term. This fund was created so that the Department could mitigate potential rate increases that might otherwise have to be passed on to customers. M. Edwards also mentioned that the Department went to the market for an electric distribution system borrowing and had that issue rated by S & P, Moody's and Fitch. S & P and Fitch affirmed the Utility's AA- rating. Moody's, however, downgraded the agency and felt that Anaheim Public Utilities should raise rates to build up Iarger reserves. Ms. Edwards also reviewed next year's sales assumptions which were built on the projection of zero growth. The risk of planning for zero growth, however, is that if things turn around quickly, there are infrastructure investments that will be needed to deliver those increases in demand that have not been made because it takes years ACTION TAKEN 2011 -30 AGENDA ITEM of lead time. At the conclusion of the budget review, M. Edwards invited the Board to contact any of the Assistant General Managers with any further questions and informed the Board that the Department's budget would be presented to City Council at the June 7 "` Council meeting. 7. PRESENTATION ON CUSTOMER INFORMATION SYSTEM (CIS) REPLACEMENT. M. Lopez, Business Information Systems Manager, gave a presentation on the replacement of the Customer Information System (CIS). He began by providing some background on the CIS by sharing that it is a core business system for the Department that supports multiple work areas and functions within the Department. He also mentioned that the CIS is equally as important to other departments within the City of Anaheim including public safety, public works, and code enforcement. He mentioned that current CIS was purchased through our vendor, Sun Guard. The system was originally installed in 1995; however, the technology actually dates back to 1990. Because of this, many of the Sun Guard customers are replacing this system because the technology is so old. He shared some of the project drivers that would support the need for this upgrade. Demands from legislation, technology, and smart grid all impact the way business is conducted in the CIS. Each time a new law is passed that impacts the customer service group or demands from smart meters, changes are required to be made to the system. Unfortunately, the system is hard coded, very rigid and not configurable to update. As a result, it is necessary to do a majority of the work on a paper -based system because the system cannot support the work done by the Department. Paper based manual systems tend to be error prone. M. Lopez continued by discussing benefits to the customer of replacing the CIS. Service levels will be improved by providing online access to tools, information, and services. This will include on -line chatting, availability to make a payment by cell phone, access account information and the ability to request City services. This will also allow social networking that will enhance a customer's ability to communicate. It is the intent to be more efficient in business operations. This new system will minimize the need for Customer Service Representatives to navigate through several screens to just a few. As a result, this will also allow better utilization of staff and allow Customer Service representatives and Field Utility Service Representatives time to assist in other areas and become consultants to the customer. ACTION TAKEN 2011 ,. 31 AGENDA ITEM M. Lopez continued by sharing that anytime a large system is replaced there are risks. Two main risks were identified, the first being technology obsolescence, which would mean purchasing a new system and having it become obsolete due to updates in a short amount of time. To prevent this, the Vendors who are responding to the Request for Proposal (RFP) have been asked to include hosted solution. In addition, Anaheim has contracted consultant AAC Utility Partners, to help with the selection process. The second risk faced is the limited staff resources and expertise. In order to manage this risk, Project Management services, Project Quality Control, and Technical Support services will be contracted. In response to a question asked by a Board member at a past meeting of what other municipalities are doing in this area, M. Lopez provided a survey of some neighboring California utilities. Riverside, Pasadena, and Burbank Utilities are all replacing their CIS and in fact, these Utilities currently have systems that are actually newer than Anaheim's system. He shared with the Board that Anaheim just completed the reviewing and scoring of 12 proposals. The next step is to short list the vendors, do onsite demonstrations, conduct site visits, obtain the approval of the Board, then present it to City Council for approval. The project would then begin in January 2012 and would be an 18 to 24 month project, and would go live sometime between July and December 2013. M. Edwards clarified that the project cost is in the range of $9 - $14 million and was included in the recent borrowing.. The CIS will be funded through a funding stream in the bonds that is separate and distinct than what is to be used for general distribution purposes. That stream dedicated to CIS will be repaid by 2021 with an interest rate of approximately 3.5 %. A Board member asked if other departments are contributing to the cost for their use of the system. B. Beelner responded that there is a rental rate charged by Utilities to these other departments for their usage. 8. DISCUSSION ON POTENTIAL FORMATION OF WORKING GROUP TO REVIEW AND PROVIDE GUIDANCE ON LEGISLATIVE GUIDING PRINCIPLES." M. Edwards shared with the Board that in order to best respond to the rapidly changing legislative and regulatory environment, that an internal working group of no more than three Board members be established that meets solely to focus on legislative and regulatory issues. The Board was then asked to review a set of draft Guiding Principles with respect to legislation and regulation. M. Edwards asked the Board to return their comments to one of the members of this internal legislative working group; L. Cahill, J. Machiaverna and J. Brandman. At a later point, these guiding ACTION TAKEN 2011 -32 AGENDA ITEM principles would be presented to City Council on an informational basis. 9. UPDATE ON WATER SYSTEM ISSUES. Orange County Water Summit D. Calkins invited the Board's attention to the flyer provided on the Orange County Water Summit on May 20 and extended an invitation to the Board to attend. The invitation will also be sent to the Board by email. Monthly Water Supply Conditions Update This year's water supply outlook is strong. Last week, the Department of Water Resources increased the allocation on the State Water Project, which will provide more imported water for the Metropolitan Water District (MWD). As a result, MWD's total supplies this year will exceed demand by about 800,000 acre feet. It is not surprising, therefore, that the Governor has declared the drought over, and that MWD recently lifted their rationing of imported supplies. Expansion of the Groundwater Replenishment System D. Calkins referred to the informational memo provided to the Board on the decision by the Orange County Water District to expand the Groundwater Replenishment System project. The plant will be expanded from 70 million gallons per day to 100 million gallons per day of recycled water. Overall, this expansion will increase the amount of available groundwater and reduce our overall water supply costs by approximately $1 million per year. 10. UPDATE ON ELECTRIC SYSTEM ISSUES. M. Ward informed the Board that staff has put a lot of work into the streetlight repair over the last several months. At one point and time it was up to a 4 day turnaround, however it is now down to a 2 day average turnaround. Canyon Power Plant The Canyon substation has been energized and the current schedule is to fire the first unit during the week of May lb`'' to begin testing and commissioning. The first unit is expected to be commercial in July. Mira Loma is still in the process of finishing up construction in the street with the last of the recycled water pipelines being put into place this month. Repaving has begun at Miller and Mira Loma streets. The project is in the clean up stage, and streets are expected to be cleaned up and repaved by mid June. A Board member asked about the entry point located in the alley way, and shared that it looks to be somewhat vulnerable to vandalism. M. Ward responded that there is security lighting but that he would look further into the issue. ACTION TAKEN 2011 -33 AGENDA ITEM 11. UPDATE ON FINANCE ISSUES. Electric Utility /Water Revenue and Expense Summary B. Beelner, Financial Planning Manager, provided the Board with the update on Finance Issues. He directed the Board's attention to the March Financial Dashboard provided in the packets. He did mention that March electric revenue was $3 million or 10% above budget. Retail revenue was 7 %, $1.7 million above budget and wholesale revenue was $1.3 million above budget. Water was up 1%, $55,000 in revenue for the month of March. 12. UPDATE ON JOINT SERVICES ISSUES. S. Sciortino directed the Boards attention to the staff report provided in their packets regarding Water Awareness month. He informed the Board that a Proclamation would be presented by City Council at the May 3` Council meeting at which time D. Calkins would be accepting on behalf of the Department. He also shared some dates of interest with the Board including the solar boat races and annual Water Poster contest. The ceremony awarding the winners of the Water Poster contest is scheduled to coincide with the next regular scheduled Public Utilities Board meeting May 25 There was discussion of moving the next meeting to the alternate date, however it was determined that as a result of some early departures from the meeting, a quorum was not present and therefore the date of the next Public Utilities Board meeting could not be moved at this time. Monthly Resource Adequacy Plan Currently, the Intermountain Power Project (IPP) is still out for the month of April. Since there is a lot of water available up north, the associated the hydro - electricity is driving prices in the market down to a point that the Magnolia Power Plant unit is not being turned on. 13. UPDATE ON ENERGY RISK & LEGISLATIVE/REGULATORY AFFAIRS ISSUES. J. Lehman shared with the Board the report provided on the internal compliance plan that covers all areas. It includes all regulations and requirements that Anaheim must meet. She mentioned that unfortunately, although it is rare that this happens, it did need to be reported that a very minor violation occurred with the bottled water program. J. Lehman also provided to the Board an update on the 33% renewable portfolio standard law recently passed, SBXI 2, and shared that yesterday another bill, SB 23, was amended to be the vehicle for clean -up language needed to effectively implement SB X 1 2. J. Lehman also reported that all the water quality standards were met. 2011 , 34 AGENDA ITEM ACTION TAKEN 14. AGENDA ITEM(S) FOR THE NEXT PUBLIC UTILITIES BOARD MEETING ON MAY 25, 2011. • Presentation on Hidden Canyon Pump Station Expansion • Underground Conversion Presentation • Urban Water Management Plan Public Hearing • 2011112 Budget Recommendation 15. ITEM(S) BY SECRETARY. None 16. ITEM(S) BY THE BOARD. J. Brandman offered his compliments on the presentations. He also felt that it was a very good meeting. L. Cahill also Felt that it was a very good meeting with a lot of important issues discussed. 17. ADJOURNMENT: (TO THE REGULAR MEETING ON MAY 25, 2011, AT 5:00 P.M., IN THE 11 FLOOR LARGE CONFERENCE ROOM, ANAHEIM WEST TOWER, 201 S. ANAHEIM BOULEVARD, ANAHEIM, CALIFORNIA). There being no quorum, the Regular Meeting was adjourned at 7:24 p.m. to the Board's next Regular Meeting date of May 25, 2011 at 5:00. Pespectp'w,ilky subnijfted., I �IN� ... . ......... — " Marcie L. Edwards Secretary, Public Utilities Board Indicates item(s) that will be ,r o .a Indicates itern(s) that will be ded to City Clerk and City Council for informational purposes.