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Public Utilities 2017/09/2711NAPP 11110V IIF III:) CITY OF ANAHEIM PUBLIC UTILITIES BOARD MINUTES SEPTEMBER 27, 2017 The agenda having been posted on Thursday, September 21, 2017, the Regular Meeting of the Public Utilities Board (Board) was called to order by Chairperson E. Medrano at 5:01 p.m. on Wednesday, September 27, 2017, in the 11th Floor Large Conference Room, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: Chairperson E. Medrano, Vice -Chairperson J. Seymour, A. Abdulrahman, V. Baroldi, V. Ramirez, R. Nelson, J. Showalter Board Members Absent: None. Public Utilities Department Staff Present: D. Lee, L. Quiambao, M. Moore, J. Lonneker, B. Beelner, A. Kott, G. Bowen, J. Lehman, P. Oviedo, D. Albaugh, A. Kanzler, M. Seifen, A. Nguyen, Y. Gaytan, L. Laski, R. Hoang Guest(s) Present: None. AGENDA ITEM ACTION TAKEN 1. PRESENTATION RECOGNIZING THE PUBLIC UTILITIES DEPARTMENT AS THE 4TH ANNUAL BLOOD DRIVE DEPARTMENT CHALLENGE WINNER. L. Laski, Human Resources Department — Organizational Development & Training Specialist, recognized the Public Utilities Department (Department) for winning the 4th Annual Blood Drive department challenge. 2. PUBLIC COMMENTS. None. 3. APPROVE THE MINUTES OF THE REGULAR PUBLIC UTILITIES BOARD MEETING OF AUGUST 23, 2017. 2017-66 There being no public comments, Chairperson E. Medrano closed the public comments portion of the meeting. J. Seymour moved approval of the Minutes of the Regular Public Utilities Board Meeting of August 23, 2017. A. Abdulrahman seconded the motion. MOTION CARRIED: 6-0. ABSTAINED: 1. (E. Medrano) ABSENT: 0. 4. DISCUSSION ON UTILITIES SUCCESS INDICATORS. A. Nguyen, Utilities Budget Administrator, discussed the Utilities Success Indicators (USI) for the reporting period of January 1, 2017 — June 30, 2017. A. Nguyen indicated that the USI is a bi-annual report intended to provide a high-level overview of the Department's performance relative to its mission and key strategic goals. A. Nguyen mentioned the average wait times for calls placed to the Department's Call Center has been trending around the two minute mark, and efforts are being made to sustain such levels despite rising call volumes. A. Nguyen noted that staff recently accomplished their three-year preventative maintenance goal of inspecting and exercising all hydrants and valves. Lastly, A. Nguyen discussed how the Department leverages its standing as a locally owned utility through partnerships with Anaheim schools and students. D. Lee, Public Utilities General Manager, mentioned that there were a few metrics put on "Watch", an indication that a goal had not been met and that management was closely monitoring this area. G. Bowen, Assistant General Manager — Power Supply, commented that the generation availability goal had not been met due to a faulty turbine which has since been repaired; B. Beelner, Assistant General Manager Finance & Administration, explained that although the Department's score was downgraded by Standard & Poor's last year due to uncontrollable factors like the local poverty rate, management remains vigilant about its financial position and practices; and J. Lehman, Chief Risk Officer, described a safety incident in October 2016 that resulted in an injury, and how the Department has taken numerous steps to address potential safety gaps through reviewing and strengthening policies, procedures, and training. D. Lee indicated the USI report is meant to provide a full picture of the Department's performance, and including such "Watch" items helps the Board understand the Department's challenges, as well as its strategies to address those challenges. 5. PRESENTATION ON ENTERPRISE RISK MANAGEMENT. J. Lehman provided a presentation on the Department's Enterprise Risk Management Program (Program). J. Lehman indicated that the Department faces a broad, expansive, and growing list of risks and has a robust, proactive Program to help address these risks. The Program looks at all areas of operations and addresses key risks including Strategic, Operational, and 2017-67 Compliance risks. J. Lehman shared that the Program is continuously reviewed and that communication is an important element of the Program. J. Lehman mentioned that the Board receives several reports related to the Program including the Utilities Success Indicators report, the quarterly Internal Compliance report, the quarterly Energy Risk Management report, the annual Emergency Response Planning report, and monthly Budget reports. The Department's Program provides disciplined and effective means to identify and manage the actual and potential risks that might prevent the Department from achieving its core mission. Rather than being reactive to risks, it is a process to proactively predict and prevent or mitigate risks. 6. PRESENTATION ON LENAIN WATER TREATMENT PLANT PROJECT. M. Moore, Assistant General Manager — Water Services, introduced R. Hoang, Principal Engineer — Water Engineering Division, who gave a presentation on the Lenain Water Treatment Plant (Plant) upgrade project. R. Hoang provided an overview of why improvements are needed at the Plant. He indicated that the Plant has not been upgraded since 1996 so the critical treatment facilities in the Plant have been failing periodically due to age, and expressed that maintaining the Plant is becoming more difficult as parts are becoming obsolete. R. Hoang explained that when any of the treatment facilities fail, the entire Plant has to be shut down, requiring the Department to purchase more expensive treated water from the Metropolitan Water District (MWD). In addition, R. Hoang mentioned that a technical study was initiated in 2016 to assess the existing condition of the Plant to identify improvements and optimize benefits. The technical study recommended improvements in (1) reliability which includes replacing outdated facility equipment, upgrading existing seismic facility structures, and installing a full -power back-up generator, (2) safety and security which includes widening of the current access road at the Plant for the chemical delivery trucks to safely enter and exit, and installing surveillance cameras to replace existing cameras that are no longer working, and (3) increasing the treatment capacity at the Plant to reduce water supply costs. Lastly, R. Hoang discussed with the Board that the Plant upgrade project is currently under design and will be completed by March 2018, followed by construction from 2019-2021, and has an overall project budget of 14 million dollars. 2017-68 The Board discussed the importance of investing in the Plant, and that the payback from operating cost savings would help recover the capital costs. 7. PRESENTATION ON FINANCING STRATEGIES. B. Beelner gave a presentation on the Department's financing strategies. B. Beelner discussed the various methods as well as the benefits and risks of those methods that utilities use to finance large capital investments. These strategies include using long term debt, using current ratepayer funds on a pay as you go basis, or a hybrid of the two. B. Beelner then discussed the impacts these various strategies have on customer rates, and how the Department's strategies have specifically benefited its customers over the past ten years. One of the ways the Department continues to offer such competitive rates is through the strategic use of the debt markets when interest rates are low. B. Beelner then discussed the current bond portfolio for both the water and electric utilities. He mentioned that the average rate of the Department's electric bonds is currently 3.14% while the average rate of the water bonds is 3.47%. In addition, B. Beelner discussed the yield curve which dictates the interest dates for the various lengths of bonds, and how the Department has taken advantage of the yield curve to extract significant savings for its customers when refunding older, more expensive bonds, while shortening the terms by keeping the debt service payments the same. The approach keeps the back end of the debt portfolio available for future capital needs or potential legislative mandates. B. Beelner finished the discussion with an overview of the past and current financing strategies along with a robust discussion with the Board about the Department's future strategies in light of future interest rate uncertainty during a time of upward pressure on customer bills. The Board asked a number of questions related to existing and future debt, credit ratings, and financial reserves. Staff indicated that the bi-annual USI report includes many of the financial metrics available to the Board for evaluating the overall health of the agency. 8. UPDATE ON ELECTRIC SYSTEM ISSUES. J. Lonneker, Assistant General Manager — Electric Services, updated the Board on current power outages in the southeast United States resulting from the flooding and recent hurricanes. J. Lonneker indicated that the Category 5 hurricane had winds up to 185 mph that left 90%, of the five million customers served by the utility with the largest customer count in the state of Florida, 2017-69 without power. As a result, questions have risen regarding utility line undergrounding and building in more grid resiliency in areas where the majority of power lines are overhead. J. Lonneker made the Board aware that the Department will provide a report and a presentation on the electric system reliability and improvements at next month's meeting. J. Lonneker updated the Board on the progress of undergrounding projects recently completed and those currently in construction. J. Lonneker discussed with the Board that they will be holding Public Hearings at the next Public Utilities Board meeting for two Underground District Formations: 1) Beach Blvd. which was added to the 5 -Year Plan to align with the planned improvements outlined in the Beach Boulevard Specific Plan and 2) the Santa Ana Canyon Road / Royal Oak Road project in which the undergrounding will mitigate the difficulty of operating and maintaining overhead lines along sloped right-of-ways. 9. UPDATE ON WATER SYSTEM ISSUES. M. Moore indicated that four Department field staff members competed in the Pipe Tapping Contest at the Orange County Water Association event on September 20, 2017. The Department's team finished third out of all of the Orange County Water agencies. M. Moore also indicated to the Board that the Lenain Water Treatment Plant was temporarily shut down for repairs due to the failure of the ozone generator. He indicated that the Department scheduled a contractor to be onsite September 28, 2017 to assess the needed repairs. Lastly, M. Moore made the Board aware that the Walnut Canyon Reservoir was used heavily for the past few days as a helicopter water refill site to fight the Canyon Fire. M. Moore mentioned up to six helicopters used long on -board hoses while hovering over the water to refill their tanks; photos and videos were posted online by local neighbors of the reservoir and were shown to the Board. 10. UPDATE ON FINANCE ISSUES. B. Beelner discussed the monthly dashboard with the Board indicating that the electric revenue for the year-to-date August 31, 2017 was 9.7% higher than budget ($7.7M) with costs coming in below budget by 1.6% ($1.1M). He then mentioned that the year- to-date August 31, 2017 water revenue was 2.7% ($0.4M) below budget; however costs for the year were 7.5% below budget ($0.8M) causing a positive net $0.4M budget variance. 2017-70 I 1. UPDATE ON POWER SUPPLY ISSUES. G. Bowen presented an update to the Board on the effects of the solar eclipse that occurred in August on the State's electric grid. He indicated that despite only having obscuration levels in the 60 percent range, the eclipse did have a major impact on solar generation, at one point reducing solar generation by as much as a third of the overall 10,000 megawatts generating at the time. However, there was sufficient generation to supply customer loads during the eclipse. G. Bowen also discussed with the Board that the 2016 Power Content Label was being mailed to Anaheim customers over the next 60 -days. Lastly, G. Bowen provided the Board with an update on the Department's Power Supply Portfolio for the month of August, indicating that the portfolio was at 98% availability for the month with only a few minor outages. 12. UPDATE ON ENTERPRISE RISK MANAGEMENT. J. Lehman invited the Board's attention to the Wholesale Energy Risk Management (ERM) Program's Quarterly Compliance Report that was in their Board packet. She reported that for the first time since March 2015, there were violations of the ERM. J. Lehman indicated that the four violations were related to four unnecessary transmission purchases. She shared the fiscal impact related to these actions and the mitigation actions that were instituted to help prevent a reoccurrence. With the exception of the four transmission transactions described, all other transactions were in compliance with the ERM Program. J. Lehman shared that on August 301', as part of the Department's Emergency Response Plan, the annual Department -wide emergency response drill was conducted. She also indicated that the Department executed its emergency response, as Department staff manned the City Emergency Operations Center on Monday and Tuesday in response to the Canyon Fire. J. Lehman then shared that the Board's Legislative Working Group had met just prior to the PUB meeting and reviewed key bills with the potential to impact the Department's operations. J. Lehman thanked the PUB Legislative Working Group members for their time and dedication on these matters. 13. ITEM(S) BY SECRETARY: M. Seifen, Communications Supervisor, gave an overview of the Department's website and how to access the Boards and Commissions pages that contain Board member background information and photos. 2017-71 D. Lee informed the Board of upcoming events and requested that members contact P. Oviedo with any interest. He also informed the Board the International Brotherhood of Electrical Workers (IBEW) Memorandum of Understanding (MOU) was recently approved by City Council. The IBEW represents all the field staff in the Department, and a new unit representing some management staff has been formed. D. Lee requested that the Board meeting be closed in the memory of Joe Stafford, a former Senior Utilities Engineering Aide, who retired in 2014 and passed away on July 1St after a year-long battle with cancer. 14. ITEM(S) BY BOARD MEMBERS: A. Abdulrahman indicated the meeting was informative and appreciated the Financing Strategy presentation. R. Nelson thanked D. Lee for the updates in regards to the Canyon Fire. E. Medrano mentioned he attended the groundbreaking ceremony for the Anaheim Convention Center. 15. ADJOURNMENT IN MEMORY OF MR. JOE STAFFORD, TO THE (PUBLIC HEARING/REGULAR MEETING ON OCTOBER 25, 2017, AT 5:00 P.M., IN THE GORDON HOYT CONFERENCE CENTER, 2ND FLOOR, ANAHEIM WEST TOWER, 201 S. ANAHEIM BOULEVARD, ANAHEIM, CALIFORNIA). 1 ectfull submitted, Dukku Lee Public Utilities General Manager J. Seymour moved approval to adjourn the Regular Meeting at 6:58 p.m., to the Board's Public Hearings/Regular Meeting date of October 25, 2017 at 5:00 p.m. A. Abdulrahman seconded motion. MOTION CARRIED: 7-0. ABSTAINED: 0. ABSENT: 0. * Indicates item(s) that will be forwarded to City Council for action upon recommendation by the Board. * * Indicates item(s) that will be forwarded to City Clerk and City Council for informational purposes. 2017-72