Idaho Falls Utility Board Meetings

March 13, 2024 The Idaho Falls Power Board of the City of Idaho Falls met Wednesday, March 13, 2024, at the Idaho Falls Power Boardroom, 140 S. Capital, Idaho Falls, Idaho at 7:45 a.m. Call to Order, Roll Call, and Announcements: There were present: Board Member Michelle Ziel-Dingman Board Member Jim Francis Board Member John Radford (Joined via Zoom) Board Member Jim Freeman Board Member Kirk Larsen There were absent: Mayor Rebecca L. Noah Casper Board Member Lisa Burtenshaw Also present: Bear Prairie, IFP General Manager (GM) Stephen Boorman, IFP Assistant General Manager (AGM) Michael Kirkham, City of Idaho Falls Attorney Josh Roos, IFP Chief Financial Officer (CFO) Richard Malloy, Engineering and Compliance Manager Jace Yancey, Operations Technology Manager Linda Lundquist, IFP Board Secretary Board Chair Michelle Ziel-Dingman called the meeting to order at 7:48 a.m. Calendar, Announcements, Events and Updates Board Chair Ziel-Dingman acknowledged that having received the Friday update ahead of the full Board packet was efficient and helpful. The new process was appreciated by other Board Members. Board Member Freeman mentioned that the recent American Public Power Association’s (APPA) Legislative Conference in Washington D.C. seemed less productive with the U.S. Congress being out of town and Board Member Radford commented that his conversation with Representative Simpson had been positive and pointed out that Rep. Simpson continues to lend his support to Idaho’s energy initiatives. GM Prairie explained the Upper Rip Rap memo that will be presented to the City Council this week in his absence. There were no questions or comments from the Board. Board Policy No. 5 (Financial Stability & Credit Worthiness) Review GM Prairie reviewed the reasons for the policy. Board Member Francis asked if IFP’s investments are separated from city investments and CFO Roos stated that the money is pooled together with the entire city. Board Member Francis asked about the status of IFP’s current credit rating and GM Prairie said the utility carries a rare AA credit rating from Fitch, which is typically reserved for utilities with 300-400 thousand plus customers. Board Member Freeman asked what the borrowing interest rate was when the loan was made, compared to now. CFO Roos said the interest rate was originally at one point eight percent (1.8%) and pointed out is now well over five percent (5%). Board Member Larsen asked if the ratings for IFP are linked to the city’s creditworthiness and GM Prairie said no and explained that the first round of bonds in 1979 were general obligation bonds (which obligated the entire city) and were later refinanced in the early 80s to revenue bonds (which obligated the utility only). AGM Boorman explained the difference between obligation and revenue bonds and the public voting requirements. GM Prairie explained how rating companies evaluate policies to make sure there is a history and clear line of practice. Board Member Larsen asked if the policy restricts the city from pulling money from the utility to cover expenses/debt and Board  March 13, 2024 Member Freeman said it would be considered a loan and City Attorney Kirkham agreed that “borrowed” is more appropriate terminology. Board Member Francis asked if the power purchase agreement (PPA) policy provisions affect the proposed geothermal PPA and GM Prairie said he felt the phrasing in the policy seemed somewhat broad when referring to seasonal operations (which are the smaller trade transactions that the GM usually manages) and pointed out that larger transactions are put before the City Council for ratification/approval. Q1 Financial/Annual Report/2023 Operations Q1 Financial - CFO Roos reviewed IFP’s balance sheet noting the cash standing and explained the winterized fund that was combined into the bottom line. He reviewed IFP’s year-over-year assets and bond payment and noted the bond doesn’t need to be paid until September 2024 and will continue to accrue interest until a payment is made. CFO Roos said IFP still owes around $16 million and has about 12 years to pay the balance but said he is in no hurry as the interest rate is so reasonable. Board Member Francis asked about the outflow resources line item and CFO Roos said it’s for funds committed to the Public Employee Retirement System of Idaho (PERSI) retirement pensions. CFO Roos reviewed IFP's income statement and pointed out that even though rates and demand are higher, the numbers are soft overall due to a mild winter. He added that additional financial statements are included in the packet. GM Prairie explained that CFO Roos reviews the utility retail numbers while he reviews the wholesale numbers and stated that overall, nothing is too abnormal. He explained that the reason the revenue was a quarter million under projection was due to a warm December compared to a very cold December 2022. GM Prairie compared Bonneville Power Administration’s (BPA) contract to market pricing and cautioned that this year is expected to be a rough water year for the Columbia River Basin (currently 82% of the average). He continued to explain that the Canadian Rockies are experiencing the worst year/s in over 50 years of snowpack in contrast to the Snake River which has rebounded to about 99% of its average. GM Prairie said the teacups (reservoir graphs) are all near full and noted that water will need to start moving down the river. He said that the El Nino weather pattern (dry and mild) seems to be transitioning to increased moisture in the north (Canada), where it’s needed. GM Prairie reviewed year-over-year peak loads that show load-growth is outpacing customer growth due in part to the manufacturing of electric products and equipment, work trucks, vehicles, home heating, etc. He explained that artificial intelligence (AI) is causing demand for the construction of massive data centers, which carry loads upward of 500 megawatts (MW). Board Member Radford commented that evolving and more efficient technology continues to drive load. GM Prairie agreed and gave the example of LED lighting (which consumes up to 90% less energy than incandescent bulbs), and lowers power bills, but consumers tend to leave the lights on more for convenience; consumption can then remain the same. CFO Roos reviewed the hydro insurance policy and noted a $38 million increase from the previous year due to the plants’ increased value. GM Prairie said the renewal period will be in May and explained that he has been considering removing flood and earthquake coverage because the value doesn’t seem worth spending $18 – 20 thousand when the Federal Emergency Management Agency (FEMA) steps in to cover natural disaster events and added that insurers are tending to back away from covering for outlier events. AGM Boorman explained that Starr Tech has been the utility’s policyholder for many years because there aren’t many agencies who will insure hydro plants (which are rare and have relatively small policies) but are raising rates steadily year-over-year. He shared that he’d met with brokers in Texas recently and learned that as the utility increases in value (nearing $500 million) more insurance carriers are taking an interest in quoting a policy. GM Prairie said there will be more information available in May. Mr. Yancey gave a cyber security update and noted the ALBERT tool (a government-funded entity intrusion detection system) offers smaller entities 24/7/365 security for about $50 thousand per year, with small utilities in mind. He explained that they take a “snapshot” of the utility and if anything deviates from the norm then the utility gets a notification. Mr. Yancey said the new outage management system (OMS) that  March 13, 2024 is currently being implemented has a large impact on cyber security and GM Prairie added that the system is the backbone of utility. Mr. Yancey reported that the software implementation, which is expected to run through August, has been going very well. Board Member Freeman asked how the last storm affected the current OMS and wondered if it handled things better due to fiber connectivity. Mr. Yancey said that OMS has been one of the utility’s biggest struggles and explained that the recent storm was more about single- meter outages and not widespread outages. GM Prairie explained how the OMS looks for commonality in the system and reports an outage for the entire area and pointed out that better software will report more specifically what is occurring. Board Member Francis asked who is responsible if a tree rips a meter off a house and GM Prairie said if there is physical damage, the meter base is part of the home and therefore the responsibility of the owner to have it repaired and pointed out that most of the longer outages in the last storm were due in part to owners waiting for electricians. Mr. Yancey added that he is aware of some Ammon residents who had been out of power for up to four days. He explained that physical security is what occurs at the physical site like cameras on the substations and fiber huts and said that he is working with Genetec to add more cameras inside the huts this year. GM Prairie reviewed the power supply costs and pointed out that pricing has calmed down a bit and said the Snake River has improved but cautioned that the summer could be a different story. He explained that time-of-day peaks are continuing to increase and pointed out that heavy load positions have fallen off due to natural gas prices decreasing. GM Prairie commented that IFP is a unique utility because the utility has its own generation. Board Member Francis asked how much generation would be added in when the Gem State contract ends and GM Prairie said that sometime in July,18 MW would be added back into IFP’s generation and would remain forever. He explained that the general fund payment partially goes to traffic and explained that as traffic grows the city continues to invest in the traffic system, which saves millions on street improvements. Board Member Francis commented that traffic improvements have been noticeable, and GM Prairie explained how the traffic engineer watches the live feed for traffic issues/backups and abnormal patterns and will often drive to the site to see how best to correct the problem to keep traffic flowing. Board Member Francis said he likes the consistency of the six-point five percent (6.5%) payment to the general fund. GM Prairie said he’d been meeting with key account customers like Busch and Eastern Idaho Regional Medical Center (EIRMC) and has told them that he is working hard to keep rate increases at or below the rate of inflation. GM Prairie pointed out the revenue was about $3 million under projection so money was transferred from the rate stabilization fund, leaving a balance of $22 million, per policy. He added that there will likely not be a power cost adjustment (PCA) this year. He explained the customer exchange/buyout situations where the policy stipulates that IFP pays 100% of the infrastructure cost and 50% of the buyout cost and is shown on the customer’s bill as a surcharge. He added that the service address (in case the buyout customer moves) pays the balance off over time and pointed out that for most customers is a net for the customer due to IFP’s low utility rates. GM Prairie said the utility industry is booming as companies are electrifying so many things, which leaves the industry short as utilities find ways to build out infrastructure. He talked about hiring trends and commented that retirement benefits like PERSI are not as big of a recruiting tool as they once were with younger people. He commented that hiring challenges continue to be single-employee risk positions and competition for skilled employees and key positions. He keeps the organizational chart fluid to meet utility needs. GM Prairie said that inflation and supply chain issues, employee morale, software systems, power supply, unprecedented market volatility, the BPA contract, and the construction of the peaking plant continue to be his areas of focus. Mr. Malloy gave an overview of the Federal Energy Regulatory Commission (FERC) relicensing project and said the next step in the process was for stakeholders to file the development of study plans with FERC by May 2023. He explained that the review of the plans will take up to two years to complete, and information from the studies will determine actions related to resource conservation, recreation, land uses, etc. Mr. Malloy said that the final applications will be reviewed in 2026 and by 2029, IFP should expect to be under a new 40-year contract. Board Member Ziel-Dingman asked what kind of responses IFP gets from  March 13, 2024 the stakeholder outreach and Mr. Malloy said that the Bureau of Land Management (BLM) is questioning downstream sedimentation and how to pass more dirt and trees downstream, etc. and GM Prairie said that state parks and recreation has deferred to the city parks and recreation since most of the parks are in the city. Board Member Freeman asked when/how Gem State was determined a high hazard project and Mr. Malloy said he was not sure when Gem State was designated high hazard. He explained that any house downstream of a hydro project that might take in two feet of inundation water at ground floor (An inundation study determines that the headwater that is largely contained in the banks of the river – 14ft head.) is designated high hazard. He said that hazard status can change as neighboring communities get developed like the newer house built near the Upper Dam. Board Member Freeman asked if rip rap is part of high status, Mr. Malloy said rip rap is a standard maintenance procedure to address erosion. GM Prairie reviewed the safety statistics that illustrate how the utility has improved in attitude and safety culture in the past four years. He reviewed the fiber statistics and pointed out the take rate is likely close to 31% and said the utility needs to continue marketing and providing excellent customer service. Mr. Yancey estimated that there are around 500 customers to get passed by the end of May with the remaining 1500 to be completed sometime in 2024. He explained that many of the last areas of town are tough areas with bad underground situations. He said that 650 miles of pass-by cable with 140,000 feet of underground infrastructure was put in last year and noted that will be a lot to maintain. Mr. Roos pointed out that the fiber balance sheet reflects a revenue of just under $89 thousand and said as soon as the revenue exceeds expenditures (just under $1 million) fiber will begin to pay back its loan to power. Board Member Larsen asked if fiber is considered when looking at power for a credit rating and GM Prairie said that Fitch was very interested in what fiber’s dark network cashflow was but now that the lit network is built out and the utility keeps driving the numbers. GM Prairie reviewed the geographic information system (GIS) links for fiber and said that the Board will be set up with logins and explained how the take rate isn’t perfect because of multiple meter ownership situations. IBEW Negotiation Update GM Prairie said that bargaining negotiations will begin on March 18, 2024, and conclude with a new contract before the April Board meeting for approval by the Board. The existing contract expires early May 2024. PILOT Time-of-Day Net-Metering Rate Discussion GM Prairie reviewed Wasatch Group’s fourplex project, (focused on automation) and gave their proposed development overview to help manage their demand, which includes using software and batteries to help reduce their demand to zero through time-of-day net-metering rates and put their energy surplus back into IFP’s grid through demand charging. GM Prairie said the pilot project may be a first-of-kind in the industry. He explained that Wasatch’s goal is to get low rates and stay out of IFP’s peak and pointed out that is good because growing peaks require additional expensive infrastructure to be built. Board Members Francis and Larsen suggested the memo should come before the City Council on the regular agenda so the benefits to the community can be explained in detail. IFP Strategic Planning Board Member Francis asked if there are too many bullet points to manage and GM Prairie said not necessarily and said that he views them as a roadmap to reaching the goal. The Board completed revisions to the last section entitled Our Aspirations for 2028. Utility Reports Grant Update – CFO Roos said an agreement for the electric vehicle (EV) Grant came back and will be reviewed by the city legal department and subsequently brought to the City Council for approval and pointed out that no work can be started until the grant is approved.  March 13, 2024 There being no further business, the meeting adjourned at 11:35 a.m. s/ Linda Lundquist s/ Rebecca L. Noah Casper Linda Lundquist, BOARD SECRETARY Rebecca L. Noah Casper, MAYOR