Blog Archive

Wednesday, April 18, 2018

April 24, 2018 Board Meeting

TO:                       Members of Glasgow Electric Plant Board                 
FROM:                  William J. Ray, PE                 
DATE/Time:          4/20/2018, 6:00 PM    
SUBJECT:            Board Meeting Information                                          

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.

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.
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.