Blog Archive

Friday, October 18, 2019

October 22, 2019, EPB Regular Meeting

OCTOBER 22, 2019, 6:00 PM

TO: Members of Glasgow Electric Plant Board
FROM: William J. Ray, PE
DATE: 10/18/2019
SUBJECT: Board Meeting Information
October Main Topics
Ø Annual Audit Report
Ø Consideration of Labor Bids for Transmission Line Refurbishment
Ø Discussion of TVA Long Term Offer
Ø Programming Committee Recommendation
Ø Reports
📷November 1 FCA
Ø The November 2019 TVA FCA will increase to 1.758 cents per kWh. This is the second monthly increase to the FCA in the last few months. TVA’s explanation is that September sales were much higher than had been forecast, and the extremely hot weather, combined with a forced nuclear outage and low hydro resources, resulted in increased fuel costs. These increases came from purchasing more coal and from buying more power from neighbors.
Ø On November 1, the energy component of our retail rates will adjust to reflect this anticipated increase to the wholesale cost of energy.
Action Items
Approval of Agenda and any New Items Desired by Board
Ø The present proposed agenda is attached to this narrative, but, as always, any board member can ask for additional items to be added, or placed in a different order.
Review and Approve Minutes of September 24, 2019 Meeting
Ø This is the customary review and consideration of formally adopting the proposed minutes for the last meeting.
Audit Report from Carr, Riggs, & Ingram
Ø Lanny White, from Carr, Riggs & Ingram, will deliver the annual report on findings by the team of auditors who examined all EPB finances and methods of operating the business, for Fiscal 2019.
Ø Copies of the report will be shared with the City of Glasgow, and I will appear before City Council in November, or December (whenever I can get on the agenda) to discuss the audit and other 2019 activities of Glasgow EPB.
Mayor Armstrong Remarks
Ø The Mayor has requested time on the agenda to make some remarks. Nothing further is known about this item.
Bids for Transmission Line Refurbishment Labor
Ø A couple of months ago we awarded bids to various vendors for hardware and materials needed for this project.
Ø On October 18 we opened bids for the labor necessary to install the hardware previously ordered to complete the transmission line work. At the meeting I will review the bids, and our budget for the work, and make a recommendation to the Board for approval of the best labor vendor for the project.
Consideration of TVA Long Term Offer
Ø This matter was discussed at the last meeting, but there was no resolution to the matter. Since then, considerable discussion on the issue has taken place in the community.
Ø TVA’s new CEO has proposed a novel approach to the problem of declining energy sales and TVA’s need to modernize its generation fleet. That proposal is outlined in a document attached to this narrative, entitled “Long-Term Agreement.”
Ø This is a very complicated matter, but the simple elements are: TVA is willing to give LPCs a 3.1% credit to their power bills (for Glasgow, that means about $500,000 per year), and they also want LPCs to alter their power contract to make the term a rolling 20-year agreement instead of the rolling 5-year term.
Ø Some local opponents to the offer seem to base their opinions on a recently published article by Daniel Tait – representing the Energy and Policy Institute. Since this is such a critical decision for the Board, I’ve written a response to that article, so that the Board will have access to a better-rounded set of facts than the opinions presented in the Energy and Policy Institute article. My response is as follows:
o In a September 22, 2019 article, authored by Daniel Tait, and published by Energy and Policy Institute, TVA is condemned for offering a modified power contract which includes an extended term, in return for certain concessions. These concessions are not minor. A 3.1% credit on their wholesale power billing to local power companies (LPCs), coupled with TVA’s first offer to allow LPCs to make some of their own power, is a very big deal for TVA and the LPCs. Over 85% of the 154 TVA LPCs have already taken the offer. In examining this article, it is first important to know who Daniel Tait and the Energy and Policy Institute appear to represent. They represent the loose association of those renewable energy industries that want to replace the big power companies, like TVA, with the technologies that they find most profitable. In fact, they really want retail power costs to steadily increase, such that their replacement technologies are more economically attractive when compared to utilities. One cannot blame them for trying to be more profitable, but also the buyer should beware of whom they are accepting opinions from, when articles like this one are published.
o It is notable that the author didn’t contact TVA for their input to the story, and much of the information which is available regarding TVA’s renewable energy portfolio, was ignored and omitted. Further, after speaking with BGMU representatives, I determined the author did not speak with them either, and likely didn’t contact other LPCs that they described in the article. No link to the CFC analysis is provided, so the reader is left wondering just what assumptions were used, when this study supposedly revealed the wide disparity between TVA wholesale rates and those of Kentucky Utilities, Duke, or MISO. Was this a cobbled together, apples vs. oranges analysis? It seems more likely than not.
o Though the article does a fair job of identifying the underlying fiscal elements of the offer relative to power cost, and the decisions required by the LPCs thereupon, the author totally misses many other factors which will impact these decisions. The article curiously laments the wisdom of signing a contract with a twenty-year notice provision, while suggesting that many LPCs might be able to build new transmission facilities that could pay for themselves over a twenty-year, or less, period. In Glasgow’s case, such new facilities could easily cost over $100 million. Thus, they are suggesting that a twenty-year agreement with TVA is constraining, while a twenty-year bond issue to finance the duplication of transmission facilities that already exist, is somehow liberating.
o The LPC-TVA relationship is more complex than the simple determination of who might provide the cheapest flow of electrons in the future, and over 85% of the LPCs have already processed the information and chosen to sign the new agreement. In doing so, it must be presumed that those LPCs value the 3.1% wholesale bill credit (which is worth about $500,000 per year to Glasgow’s customers), as well as TVA’s diverse portfolio of generation assets. TVA’s diverse portfolio of generation provides the comfort of knowing that, whatever the future holds with respect to one method of generating power, TVA has several other options at their disposal. They value TVA’s 86- year history of improving the environment of the seven states they serve, and TVA’s record of providing 99.999% reliability is a huge accomplishment. Glasgow and the other LPCs cherish the partnership with TVA that allows very small LPCs access to TVA’s expertise when certain technical facets of our distribution system present problems which challenge us. TVA provides its LPCs with backup mobile substations, which keep our customers in service, even after a catastrophic failure of a major substation component. TVA is also still close to its original mission of inventing ways to improve the operation of the grid, and the LPCs enjoy being a part of the research and development efforts which TVA undertakes, completes, and makes available to their LPCs.
o While it is understandable that Energy and Policy Institute wants to make its funders happy by promoting more use of solar, and other renewable generation options, it isn’t okay to do that by attacking TVA. While it is true that TVA could do better, especially in the field of promoting renewable resources and allowing its LPCs to provide same to their respective communities, this agreement opens the door to doing just that.
o At the meeting, Ernie Peterson will be present to answer any questions about the proposed agreement that come up. Like I said, this is a complicated matter which deserves ample consideration. But, as depicted by the average bill impacts presented last month, the agreement gives the Board an opportunity to reduce power bills for everyone.
Consideration of Programming Committee Recommendations
Ø The Committee considered programming service renewal proposals from Fox-owned networks – FX, FXX, FXM, NatGeo, and NatGeo Wild.
Ø The renewal proposals cover only 2020 and 2021, and, if accepted, will add 14 cents per subscriber in programming cost for 2020, to the Essential Tier.
Ø The programming cost would increase 3 cents per subscriber to the Premier Tier for 2020.
Ø The Programming Committee met and considered the cost and benefits of accepting the renewal proposals and unanimously voted to recommend we accept the offer.
Ø SEPTEMBER METRICS. Superintendent will do a brief review of the performance of the Glasgow EPB metrics for September.
Ø NOVEMBER FCA. The Superintendent will go over the upcoming change to the Fuel Cost Adjustment for November, as dictated by TVA.
Ø CPD LEDGER. Since we altered our Variable Rate, at the request of an Advisory Council of our customers, to limit our peak predictions to four days per month, we have financial exposure when we miss the correct actual peak hour. To compensate for that exposure, we added a small amount to the wholesale cost of a peak kW, to collect funds to pay for missed predictions. The Superintendent will report on the status of that fund thus far in the fiscal year.
Ø WINDSTREAM BANKRUPTCY. Windstream Holdings (parent company of Windstream Company in Glasgow) filed Chapter 11 bankruptcy early this year. There is a large outstanding debt which is owed to EPB (about $40,000 now). To protect our interests and work to secure payment, as well as a suitable new relationship with Windstream going forward, I have engaged Scott Bachert, with the firm Kerrick Bachert PSC, to represent us in this matter. There will be a report on the progress at the meeting.
Please let me know if you have any questions before the meeting.