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Public Utilities 2019/12/18CITY OF ANAHEIM PUBLIC UTILITIES BOARD MINUTES December 18, 2019 The agenda, including the Teleconference Notice, having been posted on Thursday, December 12, 2019, the Regular Meeting of the Public Utilities Board (Board) was called to order by Vice-Chairperson J.Seymour at 5:00 p.m. on Wednesday, December 18, 2019, in the 11th Floor Large Conference Room, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: Vice-Chairperson J. Seymour, V. Baroldi, A. Abdulrahman, R. Gaona, Board Members Absent: Chairperson E. Medrano, J. Showalter, R. Bhalla City Staff Present: D.Lee, B. Beelner, G. Bowen, M. Moore, J. Lonneker, J. Lehman, A.Kott, L. Quiambao, P. Oviedo, M. Seifen, J. McBride, C. Guss, C.Parker, S. Smith, M. Gonzalez Guest(s) Present: None. AGENDA ITEM PUBLIC COMMENTS. 1.APPROVAL OF THE MINUTES OF THE PUBLIC UTILITIES BOARD REGULAR MEETING OF NOVEMBER 20,2019.* 2.BY RESOLUTION, AUTHORIZE AN ISSUANCE OF NOT TO EXCEED $250 MILLION AGGREGATE PRINCIPAL AMOUNT OF ANAHEIM HOUSING AND PUBLIC IMPROVEMENTS AUTHORITY (AHPIA) REVENUE BONDS, SERIES 2020-A (ELECTRIC UTILITY DISTRIBUTION SYSTEM IMPROVEMENTS), REVENUE REFUNDING BONDS, SERIES 2020-B (ELECTRIC UTILITY DISTRIBUTION SYSTEM REFUNDING) (TAXABLE), AND 2019 -94 ACTION TAKEN There being no public comments, Vice­ Chairperson J. Seymour closed the public comments portion of the meeting. A.Abdulrahman moved approval of the Minutes of the Public Utilities Board Regular Meeting of November 20, 2019. R. Gaona seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medr ano, J.Showalter, R. Bhalla]. V.Baroldi moved to authorize an issuance of not to exceed $250 million aggregate principal amount of Anaheim Housing and Public Improvements Authority (AHPIA) Revenue Bonds, Series 2020-A ITEM # 03 REVENUE REFUNDING BONDS, SERIES 2020-C (ELECTRIC UTILITY DISTRIBUTION SYSTEM REFUNDING) (COLLECTIVELY, THE ELECTRIC BONDS).* BY RESOLUTION, AUTHORIZE AN ISSUANCE OF NOT TO EXCEED $85 MILLION AGGREGATE PRINCIPAL AMOUNT OF AHPIA REVENUE BONDS, SERIES 2020-A (WATER SYSTEM PROJECT) AND REVENUE BONDS, SERIES 2020-B (WATER SYSTEM REFUNDING) (TAXABLE) (COLLECTIVELY, THE WATER BONDS).* Brian Beelner, Assistant General Manager-Finance and Administration, presented a verbal report on Agenda Item 2 which requested the Board to recommend, by Resolutions, to City Council that the Anaheim Public Utilities Department (APU) issue two separate types of fixed rate bonds. The first being a not to exceed $250 million fixed rate Electric Revenue Bond for three purposes: first, to fund $75 million for the construction of necessary electric distribution system investments; second, to potentially refinance up to $125 million in older more expensive debt; and third, to refinance an older variable rate bond with a fixed interest rate in order to eliminate interest rate risk in a time of increasing volatility in interest rates. The second bond issuance request is for APU to issue not to exceed $83 million in Water Revenue Bonds for two purposes: first, to fund $45 million for the construction of necessary water system improvements; and second, to refinance up to $38 million in older more expensive debt. B.Beelner discussed how bonds ensure that each generation of customer pays their equitable share of their respect use of an asset, and prevents rate spikes when large capital assets are constructed. Over time, however, APU's long run financial planning calls for increased cash funding capital as there are fewer large capital projects in its Capital Improvement Plan that typically require bond funding. In order to remain financially flexible, APU plans to cash fund its routine capital needs by the mid 2020's and become less reliant on debt. This will allow APU to become more nimble to better handle the changing nature of the utility industry. B.Beelner discussed how refunding the existing 2016 Electric and Water Bonds would generate approximately $67 million in interest savings under current interest rates. Additionally, the proposed structure of the refinancing of these bonds would shorten the respective lengths of the Water and Electric debt by 5-7 years thereby allowing APU to pay these bonds off faster than would occur otherwise. The Board discussed the importance of the long-term plan to reduce reliance on debt for routine capital improvements as well as 2019 -95 (Electric Utility Distribution System Improvements), Revenue Refunding Bonds, Series 2020-B (Electric Utility Distribution System Refunding) (Taxable), and Revenue Refunding Bonds, Series 2020-C (Electric Utility Distribution System Refunding) (collectively, the Electric Bonds). R. Gaona seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medrano, J. Showalter, R. Bhalla]. A.Abdulrahman moved to authorize an issuance of not to exceed $85 million aggregate principal amount of AHPIA Revenue Bonds, Series 2020-A (Water System Project) and Revenue Bonds, Series 2020-B (Water System Refunding) (Taxable) (collectively, the Water Bonds). V. Baroldi seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medrano, J.Showalter, R. Bhalla]. the need to avoid deferred maintenance bubbles that result from under-investment in infrastructure. 3.APPROVAL OF AGREEMENT FOR COMMERCIAL CUSTOMER ENERGY ASSESSMENT PROGRAM AND RELATED SERVICES WITH RICHARD HEATH & ASSOCIATES, INC. FOR A TERM OF THREE YEARS WITH UP TO TWO ONE-YEAR EXTENSIONS IN AN ANNUAL NOT TO EXCEED AMOUNT OF $301,812.86 WITH A TWENTY PERCENT (20%) CONTINGENCY.* Graham Bowen, Assistant General Manager -Power Supply, discussed the proposed Energy and Water Efficiency Assessment Program Agreement (Agreement) with Richard Heath and Associates (RHA). APU has offered commercial customers with no cost utility assessments since 1999. The Energy and Water Assessments are comprised of a detailed review of the company's energy and water consumption, assessing major electrical and water components, and analyzing the cost associated with running the equipment. The assessment provides customized short-term and long-term options to increase water and energy efficiency for the customer. G. Bowen explained that Richard Heath & Associates ranked the highest with the current provider of the services to APU, AllianceProject, ranked second. RHA is currently providing APU with services for the Small Business Direct Installation program, and have garnered favorable feedback from Anaheim's small business customers. The Board discussed the cost difference between the top proposals, and G. Bowen explained that RHA's proposal was lower in cost than the current provider's proposal. 4.BY RESOLUTION, (1) AUTHORIZE THE CITY OF ANAHEIM TO PARTICIPATE IN THE STATEWIDE CLEAN FUEL REWARD PROGRAM FOR POINT-OF­ PURCHASE ELECTRIC VEHICLE REBATES; (2) APPROVE THE FORMS AND AUTHORIZE THE EXECUTION OF JOINDER AGREEMENT AND DEPOSIT ACCOUNT AGREEMENT; (3) APPROVE ACTIONS IN CONNECTION THEREWITH; AND (4) DETERMINE THAT SAID ACTIONS ARE EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) PURSUANT TO SECTIONS 15060(C)(3) AND 15378(B)(4) OF TITLE 14 OF THE CALIFORNIA CODE OF REGULATIONS.* G.Bowen discussed the Clean Fuels Rewards (CFR) Program Agreement (Agreement) noting that as part of the Agreement, APU would be required to sign a Joinder Agreement and assign 20% of its Low Carbon Fuel Standard (LCFS) proceeds to fund the state­ wide Electric Vehicle (EV) rebate and outreach program administered by Southern California Edison. By signing onto this 2019-96 V.Baroldi moved approval of an Agreement for Commercial Customer Energy Assessment Program and related services with Richard Heath & Associates, Inc. for a term of three years with up to two one-year extensions in an annual not to exceed amount of $301,812.86 with a twenty percent (20%) contingency. A.Abdulrahman seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medrano, J.Showalter, R. Bhalla]. R.Gaona moved to authorize the City of Anaheim to participate in the statewide Clean Fuel Reward Program for Point­ of-Purchase Electric Vehicle Rebates; (2) approve the forms and authorize the execution of Joinder Agreement and deposit account agreement; (3) approve actions in connection therewith; and ( 4)determine that said actions are exempt from the California Environmental Quality Act (CEQA) pursuant to Sections l 5060(C)(3) and Agreement, APU would have access to the remaining funds from the LCFS Program to be allocated for Anaheim-specific EV charging rebate programs, personal EV charging rebates and, income-qualified programs, and public education. The Board discussed what would happen if APU did not participate in the statewide program, and G. Bowen explained that if Anaheim elects to forego participation in the Clean Fuels Rewards Program, it would forfeit nearly all of its state funding. 5.APPROVAL OF SB 859 SALES AGREEMENT, IN SUBSTANTIAL FORM, WITH THE SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY FOR THE ROSEBURG BI OMASS PROJECT FOR APPROXIMATELY $157,000 ANNUALLY OVER FIVE YEARS. * G.Bowen explained that with the passing of Senate Bill 859 in 2016, all utilities including APU, serving more than 100,000 customers, are required to support the removal of High Fire Hazard forest materials through the procurement of biomass electric generation. The legislation requires APU to procure 1.3 Megawatts (MW) of biomass energy, as its proportionate share, of the statewide goal. Under the proposed agreement between Southern California Public Power Authority (SCPP A) and Anaheim related to the Roseburg Biomass Project, APU would procure 0.49 MW, which would complete APU's current compliance obligation. For this Agreement, only the capacity attributes are being acquired to meet the compliance obligations of SB 859. The Roseburg Biomass Project agreement was part of a competitive solicitation through SCPPA that began in April 2018. G.Bowen noted that APU would share the Roseburg capacity with other municipal utilities in California. SCPP A will manage the agreement and administrative activities on behalf of all SCPP A participants and that the cost of the Agreement would be $157,000 annually over five years. 6.PRESENTATION: PROPOSED ELECTRIC AND WATER RATE AND RULE MODIFICATIONS. B.Beelner presented proposed Electric and Water Rate and Rule modifications that are the subject of public hearings scheduled for January 22, 2020. The proposed rate and rule modifications modernize electric rates; ensure high-quality water service that meets State requirements; provide a discount for income-qualified customers and emergency bill assistance to those in need; and expand the billing options available to customers. B.Beelner described proposed modifications to the Electric Net Energy Metering (NEM) rate and how the proposed rate is structured to align with market price fluctuations and grid conditions. 2019 -97 15378(B)(4) of Title 14 of the California Code of Regulations. A.Abdulrahman seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medrano, J.Showalter, R. Bhalla]. A.Abdulrahman moved approval of SB 859 Sales Agreement, in substantial form, with the Southern California Public Power Authority for the Roseburg Biomass Project for approximately $157,000 annually over five years. R.Gaona seconded the motion. MOTION CARRIED: 4-0. ABSTAINED: 0. ABSENT: 3 [E. Medrano, J.Showalter, R. Bhalla]. B.Beeler described proposed modifications to the Electric Thermal Energy Storage (TES) rate that align the time-of-use (TOU) periods with grid demands in order to properly incentivize customers to use discretionary energy when energy is most abundant. The TES rate will close to new customers but existing TES customers will be grandfathered. B.Beelner discussed APU's Water rate structure and explained how changing water quality regulations regarding Perfluorooctanoic acid (PFOA) and Perfluorooctanesulfonic acid (PFOS) will result in higher water supply costs. These two organic chemicals are the most common of the thousands of synthetic organic chemicals in the Per-and polyfluoroalkyl substances (PF AS) group of compounds. Due to the presence of these PF AS compounds in the local groundwater supply, APU will temporarily cease to operate multiple groundwater wells used to serve APU customers and replace that lower-cost groundwater with higher­ cost imported water until such time that treatment options are available. B. Beelner explained that APU has both a short-term and a long-term strategy to deal with PF AS. In the short-term, APU will cease to operate groundwater wells in locations where the presence of PF AS exceeds the State's response limit. In the long-term, APU will utilize a portion of its reserve funds, identify groundwater treatment sites, evaluate treatment options, and potentially pursue litigation against responsible parties. B. Beelner explained that the Orange County Water District (OCWD) will likely reimburse APU for a portion of the capital and operating cost of new groundwater treatment facilities. As a not-for-profit agency, APU must recover the higher cost of procuring water on behalf of APU cu stomers through a Water Commodity Adjustment (WCA) increase in the meantime. B.Beelner also provided an overview of APU's Water System Reliability Adjustment (WSRA) that recovers capital-related costs, including debt service on bonds issued to pay for infrastructure improvements. B. Beelner illustrated that APU's water distribution system is aging and requires ongoing investment to maintain reliability. B. Beelner explained that the proposed WSRA adjustment will help reduce reliance on debt by directly funding a portion of necessary capital investment. B.Beelner described multiple alternative options to the proposed rate changes, highlighting the pros and cons for each alternative and explaining why the proposed strategy is being recommended. Board members discussed the importance of maintaining a reliable water distribution system and ensuring water quality and acknowledged how the proposed strategy contributes to those objectives. Board members additionally stated how important it is to explain the situation to customers and reviewed a Frequently Asked Questions (FAQ) handout. Staff indicated that the FAQs 2019 -98 will be made available at the public hearing and online, and other methods of communications including Anaheim Magazine and the utility bill insert would also be used. B.Beelner described a proposed new water rule that establishes a water bill discount for income-qualified seniors, long-term disabled, and military veterans and also offers emergency assistance to customers, similar to the current electric bill discount and emergency assistance programs. B. Beelner described additional rule modifications that provide customers more billing options to help them pay their utility bills including a level pay program that offers a recurring monthly bill amount based on prior bill history, with a periodic true-up and modifications that provide customers more time to evaluate and formally dispute a utility bill. 7.PRESENTATION: TRANSPORTATION ELECTRIFICATION UPDATE. Charles Guss, Principal Integrated Resource Planner, provided the Board with an update on APU's Transportation Electrification initiative. This initiative is aimed at supporting customers who are interested in moving from high carbon fuels to low carbon electricity as a transportation fuel. C. Guss reviewed the Transportation Electrification initiative highlights for 2019 and provided a look at some programs that APU is developing in 2020. 8.UPDATE ON ELECTRIC SYSTEM ISSUES. Janet Lonneker, Assistant General Manager-Electric Services, made the Board aware of a power outage that initiated on Friday, December 6, 2019 at 5 p.m. due to a vehicle colliding into an above ground switch enclosure located at the intersection ofNohl Ranch Road and Scout Trail Road. Initially, the power outage affected 1,480 customers, however operators and field crews were able to restore power to approximately 80% of these customers within 1 hour, and 90% within another 2 ½ hours. The remaining 128 customers were without power for an extended period while crews replaced the damaged switch and made additional repairs after ascertaining the damage to the electric cables and connections. Costs for the damages will be billed to the vehicle owner and their insurance company. J.Lonneker shared with the Board the finished and framed picture and hand-prints of the Roosevelt Elementary School students that participated at the Harbor Substation dedication in November 2019. 9.UPDATE ON WATER SYSTEM ISSUES. Michael Moore, Assistant General Manager -Water Services, provided an update on the water supply. So far this season, there is 2019 -99 normal precipitation in California. The local groundwater basin has nearly recovered from the drought four years ago. The State Water Project reservoirs were drawn down significantly this summer. The State has issued the initial water allocation of 10% for water agencies, which means MWD will start this calendar with the guarantee of receiving only 10% of their State Water Project allocation. This number will likely go up over the winter as more precipitation is expected. Most of MWD's reservoirs are full and ready should another drought occur. 10.UPDATE ON FINANCE ISSUES. B.Beelner discussed the monthly dashboard with the Board. The year to date electric revenue through November 30, 2019 was 3.9% below budget ($7.9M) due primarily to a temperate summer causing low retail demand coupled with lower than expected wholesale revenue driven by lower than expected wholesale prices. Electric costs for the fiscal year fell below budget by 7. 7% ($14.8M), also due to lower than expected demand and lower than expected wholesale power prices causing a positive net budget variance of $6.9M. Year to date water revenue was 5.2% ($2.lM) below budget due to weaker than anticipated customer demand as a result of the temperate summer. Water costs were below budget as well by 4.3% (I.SM) causing a negative net budget variance of $0.6M. 11.UPDATE ON POWER SUPPLY ISSUES. G.Bowen provided the Board with a summary of APU's Power Supply Portfolio for November. APU provided the Southern California Air Management District with notification of cessation of operations for the Kraemer Power Plant as of December 18, 2019. Wholesale sales has been much higher than expected as a result of the California Independent System Operator (CAISO) dispatching APU's coal fired power plant, IPP, in the off-peak hours. This was due to gas prices exceeding the price of coal in November. 12.UPDATE ON ENTERPRISE RISK AND COMPLIANCE. Janis Lehman, Chief Risk Officer, provided two updates to the Board. The first was on the Wholesale Energy Risk Management (ERM) Program's Quarterly Compliance report. During this period there were two minor violations of the California Independent System Operator (CAISO) tariff related to resource adequacy submittals. Appropriate corrective actions have been taken and staff training was conducted to ensure that they do not occur again, as well as modifications to the ERM Program will specify that CAISO tariff requirements must be met. 2019 -100 J.Lehman shared that the annual audit of the ERM Program was completed for the period covering calendar year 2018. The audit determined that APU was in compliance with the ERM Program's transaction control and risk management protocols. While there were no findings or recommendations for 2018, the improvements to address the CAISO tariff violations will be included in the next revision of the ERM. A brief overview was provided of the upcoming legislative year, and some of the issues that are likely to be addressed, including additional wildfire related bills, resource procurement mandates, water quality standard setting processes, and a potential ban on metallic balloons. The next meeting of the Legislative Working Group will be scheduled in February 2020. 13.ITEM(S) BY SECRET ARY. D.Lee shared with the Board the items scheduled for the following Board meeting include: •Water and Electric Rate and Rule Public Hearings •Recognition of the MWD Poster Contest Winner •Electric Reliability Presentation •Consulting Agreement with Orange County Water District related to PF AS Treatment Testing D.Lee shared photos from Board Member Showalter regarding her family at the Packing House and her daughters in front of their new home in Anaheim. He showed photos of a tour provided to students from Westmont Elementary School. They visited the Water Recycling Demonstration Facility and the Electric Operations Control Room. He informed the Board that Mayor Pro Tern Kring recognized students from the Harbor Substation dedication event at City Council. He described that a customer with a water issue over the Thanksgiving holiday was assisted by Water Maintenance Pipefitters. Lastly, D. Lee requested that the meeting be adjourned in the name of William Blake, Electric Systems Operator, who passed away. 14.ITEM(S) BY BOARD MEMBERS. Board members wished everyone Happy Holidays. 2019 -101 15.ADJOURNMENT: (NEXT REGULAR MEETING ON JANUARY 22, 2020, AT 5:00 P.M., IN THE 2ND FLOOR GORDON HOYT CONFERENCE CENTER, ANAHEIM WEST TOWER, 201 S. ANAHEIM BOULEVARD, ANAHEIM, CALIFORNIA). DukkuLee Public Utilities General Manager Vice-Chairperson J. Seymour moved to adjourn the Regular Meeting in Memory of William Blake at 7:01 p.m., to the Board's Regular Meeting date of January 22, 2020 at 5:00 p.m. in the 2nd Floor Gordon Hoyt Conference Center of Anaheim West Tower. R. Bhalla seconded the motion. *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. 2019 -102