Wednesday, April 18, 2018
April 24, 2018 Board Meeting
3:07 PM | 
Posted by
Billy Ray |
MEMORANDUM
TO: Members of Glasgow
Electric Plant Board
FROM: William J. Ray, PE
DATE/Time: 4/20/2018, 6:00 PM
SUBJECT: Board Meeting Information
Preamble
April has been another blissfully calm
month, and that is totally fine with the EPB team. We’ve enjoyed sharing the
news about our PEER certification and we’re still making strides toward the reorganization
moves that are required to address the large number of retirements coming up in
the next several months. I’ve presented our lessons learned relative to
non-volumetric rate design to a couple of seminars, and there is great interest
in the LPC community. We’ve also started work on the electric retail rate
change that will be necessary for the fall. TVA is moving along on its plans
for wholesale rate changes, and some decisions on our reaction to that change
will likely be on the agenda for May. The other issue is what the legislature
does with the pension reform bill.
The main event for this month will be the
cable television rate change that we discussed in December and January. This is
required due to the increased cost of programming, especially from the
broadcast stations in Bowling Green. This is another situation wherein we are
between a rock and a hard spot. Cable rate increases are unpopular, but they
are a fiscal necessity.
The meeting might be a bit long, so try
to grab a snack before you arrive. Now, let’s move on to this month’s agenda!
May 1 FCA
As we continue the third year of our new retail rate designs, May 1
will bring us a decrease in overall power cost due to a decrease in the FCA.
The FCA calculation always trails actual TVA fuel expenditures by a couple of
months, so May will see us getting a smaller decrease than expected, due to the
colder March and the fuel cost attendant thereto. The May 2018 FCA is going to decrease
very slightly, to 1.921 cents per kWh, and that decrease, when blended with our
other wholesale costs, will bring about a roughly .5% decrease in overall
energy costs to us and our customers. As usual, I am attaching the narrative on
the FCA from the TVA portal. On May 1, the energy component of our retail rates
will be adjusted to reflect this decrease to the wholesale cost of energy.
Rate Design
Fundamentals
While I will not go over all of the rate design slides,
unless you want me to do so, we will spend some time discussing the variables
that are being solved relative to the equation for our needed retail rate
change for later this year. The elements of the rate change we will recommend
to you later in the year include:
·
Increased fixed costs due to three-year lapse since last design of retail rates.
·
CERS increased cost, which, will not be as large as we feared thanks to the
Kentucky Legislature overriding Gov. Bevin’s veto of a bill which allows the
CERS agencies to limit their annual contribution increases to a much smaller
amount.
·
TVA wholesale rate
change, for which we will have
options whether to accept their planned fixed cost charge this year, with a
corresponding reduction in kWh charges, or delay until 2019 to implement.
·
Implementation of
gradualism, in
our process of removing delivery charge markup to kWh and moving the remaining
fixed cost revenue collection to the Customer Charge, as we initially
envisioned.
·
Additional personnel
cost, as
we have discussed, to recognize the cost of hiring and training new personnel
to replace numerous upcoming retirements.
·
Capital projects, and the Board’s
vision of how aggressively EPB needs to move in upgrading the resiliency of the
EPB grid.
Cable
Television Rate Adjustment and Other Recommendations
During late 2017 and January of this
year, we talked at length about our negotiations with programming providers and
broadcast stations and how decisions about which broadcast stations to drop and
which ones to keep, would drive the size of the 2018 cable rate increase. After
a lot of work by everyone, especially our Cable Television Programming
Committee, we settled on dropping the Louisville and Nashville stations to
produce the smallest possible rate increase. Now is the time to implement the
$3.00 per month increase that we settled on in January.
At the meeting I will recommend the
details on how this $3 monthly increase should be implemented. Since the cost
of broadcast programming went down as a result of our dropping the Nashville
and Louisville stations, we will recommend a reduction in the retail charge for
the broadcast channels of $1.60. Of course, we still have to pay for the
increases in programming cost from all of the other providers. The cost of this
year’s round of previously agreed increases to the other programming is $4.60.
So, broadcast needs to be reduced by $1.60 and the Essential Tier needs to go
up by $4.60. Combine those two adjustments and you get the net $3.00 per month
increase that we talked about in December and January.
May 2018
Meeting Date
The TVPPA Annual Conference is May 20-23, and at least two board members,
maybe three, are planning to attend. That would make it very difficult for the
board meeting to occur on its normal 4th Tuesday date in May. I will
suggest that the May meeting be rescheduled. I hope you will all find a
workable date outside of the May 20-23 range.
Reports
Programming Committee. Most of this report will likely be given during
the discussion of the cable rate increase earlier in the meeting. However,
there were a couple of additional items as you can see from a review of the
minutes of the April meeting. You will need to consider ratifying their
recommendations.
Safety Report. I will review our latest Workers Comp modifications at the
meeting. We were really doing well and our W/C cost was decreasing each year,
but the last fiscal year included a couple of expensive accidents that will
cost us. I’ll have more detail at the meeting.
EPB Version 4.0. Inspired by the process of PEER certification, I’ve
challenged the team to make steady progress toward the 4th iteration
of Glasgow EPB. The first version of our utility encompassed the totally analog
format that existed from 1962 until 1988, when we became an electric power and
cable television utility. Version 2 (electric/cable television) lasted until
1996 when we added internet to our offerings and began to transform the
broadband network to support a wide variety of services as well as all electric
power telemetry. We entered Version 3 when we implemented cost-based electric
rates that are designed to make the local grid sustainable.
Looking forward to Version 4.0, we will be using everything we learned
and implemented since 1962 to transform the resiliency and reliability of our
services. We can now support truly rare and advanced technology that will begin
to make our grid smart and self-healing. We are ready to begin the process of
installing technology that will recognize fault conditions on our grid, and
isolate those faults to a small area, while redirecting power to the un-faulted
line sections so as to maintain service to more customers, during and after
grid damaging events. This new version of EPB will not arrive quickly. Rather,
it is a direction that might well take the next decade to fully implement, but
I am excited about sharing these new concepts and potential direction with you
at the meeting.
Conclusion
Well, that ought to be
more than enough to set your head to spinning for this month. Let me know if
you have any questions before the meeting.
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