TENTATIVE AGENDA

GLASGOW ELECTRIC PLANT BOARD

MAY 29, 2018, 6:00 PM, Glasgow EPB Board Room

1. MINUTES OF PREVIOUS MEETING

2. ANALYTICS REPORT FOR MONTH OF APRIL

3. REPORT ON JUNE 2018 FCA

4. CUSTOMER TO ADDRESS THE BOARD

5. REPORT ON RATE DESIGN FUNDAMENTALS

6. CONSIDER TVA WHOLESALE RATE CHANGE ELECTION

7. COMPREHENSIVE CUSTOMER SERVICE REVIEW

8. NEW / OLD BUSINESS / REPORTS

A. PROGRAMMING COMMITTEE ACTIONS

B. SAFETY REPORT

9. ADJOURN

MEMORANDUM

TO: Members of Glasgow Electric Plant Board

FROM: William J. Ray, PE

DATE: 5/25/2018

SUBJECT: Board Meeting Information

Preamble

May has been another calm month, and that is totally fine with the EPB team. We’ve been working with new and reassigned employees to get them trained for new roles as we begin the process of replacing employees who will soon be retiring, and that is going quite well. 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, including the decision about the TVA rate change that is on the agenda this month. You will see rate matters on the agenda each month for the remainder of the year.

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!

June 1 FCA

📷As we continue the third year of our new retail rate designs, June 1 will bring us another small 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 June will see us getting a smaller decrease, due to the colder April and the fuel cost attendant thereto. The June 2018 FCA is going to decrease very slightly, to 1.881 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 June 1, the energy component of our retail rates will be adjusted to reflect this decrease to the wholesale cost of energy.

Rate Design Fundamentals and the TVA Wholesale Changes

We went over this a couple of months ago, as a review of our rate design work over the last several years. Since we are contemplating an adjustment to our retail rates, especially with the Customer Charge, it seems wise to get everyone on the same page.

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.

This month we will mainly be discussing the options TVA is giving all the LPCs relative to their updated wholesale rate and the new Grid Access Charge they are initiating.

As you have heard, TVA is looking to establish a new rate mechanism. In short, they want to start collecting some of their revenue through a fixed charge (they are calling it the Grid Access Charge) while reducing their kWh charges, resulting in a net zero effective rate increase. The TVA Board approved this plan at their board meeting earlier this month.

TVA is providing the LPCs a number of options for how the new wholesale billing will be implemented, and the timeline for choosing an option is very short. They would like us to make a decision by June 1.

At the meeting I will be recommending that you authorize me to notify TVA that we want to implement the change effective October 1 of this year, and that we notify them that we want to design a custom architecture for the method we must use to pass through the wholesale change to our customers.

As you know, we are already in need of an adjustment to our retail rates, especially to the Customer Charge which is not now collecting enough money to offset our fixed costs. We made that problem worse earlier this year when we agreed to a $5 reduction in the residential Customer Charge, and I explained when we took that action that it would likely need to be reviewed in the future.

At the meeting I will explain the reasons for my recommendation relative to the June 1 decision on the Grid Access Charge options. Taking the option to implement the new TVA wholesale structure early will give us more latitude to minimize any necessary change to our Customer Charge this year, and get ourselves back on a fiscally prudent annual review and adjustment to all of our retail rates. Remember, recent changes we’ve made to our retail rates have re-introduced problematic volumetric components to our rates, and I will recommend the implementation of a four-year plan to gradually remove those volumetric components while providing steadily lower kWh rates.

I look forward to discussing this at the meeting.

Comprehensive Customer Service Review Results

A few months ago, I informed you that I had asked the team to produce a comprehensive review of our customer service successes and failures, with the objective of producing a set of recommendations and guidelines to help us improve our customer relationships. We’ve been examining our failures and the criticism we’ve gotten over the last couple of years. We’ve also been studying other firms that are renowned for their customer service, like Nordstrom and Amazon, and we’ve benchmarked ourselves against them.

The gap between where we are and where we want to be is not insignificant. To build a bridge to connect us to where we want to be, we’ve drafted an outward facing document that I am attaching to this narrative. This is the document that, once we are all happy with it, we want to publish as a guarantee of what every customer can expect of us when they interact with the EPB team. We are also working on an internal policy document that provides the granularity necessary to make sure that the guarantee is honored, and hopefully surpassed.

I look forward to also discussing this with you at the meeting.

Reports

Programming Committee. The committee met this month to consider the draft agreement covering the local issues talk show proposed by Freddie Wilkerson (a copy of which is attached to the minutes of the May Programming Committee), and a couple of other issues. At the meeting we will review the recommendations of the Programming Committee so that you can consider ratification of 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.