Idaho Falls Utility Board Meetings

May 8, 2024 The Idaho Falls Power Board of the City of Idaho Falls met Wednesday, May 8, 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: Mayor Rebecca L. Noah Casper (Joined via Zoom at 7:54 a.m. and left at 9:22 a.m.) Council President Lisa Burtenshaw Board Member Michelle Ziel-Dingman Board Member Jim Francis Board Member John Radford (Arrived at 7:50 a.m.) Board Member Jim Freeman Board Member Kirk Larsen 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) Alan Cunningham, Design Services Manager Richard Malloy, Engineering and Compliance Manager Linda Lundquist, IFP Board Secretary Council President Burtenshaw called the meeting to order at 7:48 a.m. Calendar, Announcements, Events and Updates GM Prairie reviewed IFP’s items for the next Council meeting. Q2 Financial Report CFO Roos informed the Board that the utility is halfway through the year with reserves holding strong at $50 million, which he noted is slightly down from last year due to large capital investments and the recent payment for the Sugarmill to Paine project cost. GM Prairie commented that the fiber buildout will be winding down. Board Member Larsen asked about items included in the inventory and how the assets get moved once built. GM Prairie explained how the utility better represents utility assets post-2008, materials were inventoried, and balance sheets were created that tied back to work orders, inventory, etc. Board Member Freeman asked if the utility is stockpiling inventory more than ever before and AGM Boorman said yes, and explained the supply chain issues and how materials like transformers might get purchased through a capital project and then held until construction. CFO Roos reviewed IFP’s liabilities and pointed out how the project Idaho Energy Resource Authority (IERA) bond payment had been paid bi-annually this fiscal year and explained that moving forward it will be paid annually to capture interest earned dollars. Board Member Francis asked when the draft bond will be available for the peaking plant and GM Prairie said he expected to have something to review by late August or early September. CFO Roos explained how the bond rates/market work. He pointed out that income and expenses are down from last year due mostly to unseasonable, mild weather in the region. GM Prairie explained how extreme weather events can cause volatility in the market. CFO Roos explained the miscellaneous income was from selling a property this year and pointed out that revenues have increased while expenses have decreased over last year. GM Prairie noticed that the interest looked a little off and CFO Roos said that he’d recalculate and report back. He reviewed the fiber balance sheet and noted a twenty-point five percent (20.5%) increase over last year and pointed out that the operating revenue is up with 7735 customers and increasing by up to 500 new customers per month. GM Prairie pointed out that the “eligible customers” isn’t an accurate count due to various complexities in the system and said the take rate is likely close to about thirty-five percent (35%).  May 8, 2024 CFO Roos reviewed the power supply charts pointing out the projected income came in less due to mild December weather as opposed to the prior year. He noted the renewable energy credits (REC) sales appeared to be a bit off and pointed out that the revenues for the first quarter were $2.3 million and the second quarter was $2.5 million. GM Prairie said that he’d noticed how the REC sales have taken off over the last year. Board Members Freeman and Burtenshaw said they’d noticed and liked the Clean Energy ads at Club Apple. Board Member Radford asked if the load minimization seemed in line with temperatures and GM Prairie said he thought that was a great question when considered in rate setting, and cautioned he didn’t want to overestimate revenues. He noted that loads are up with weather adjusting them and AGM Boorman added that many new multi-family housing construction projects are tending to install all-electric ductless heat pump systems, which adds greatly to our winter peaks. GM Prairie reviewed the power supply graphs and pointed out that prices had dropped substantially due to gas prices tanking with a mild winter, which puts downward pressure on the electric curve. He reviewed the forecast net-power supply charts and emphasized how drought in the Northwest will drive up power supply costs this summer, which is a risk for IFP and the region as a whole. He noted that the teacups are full and reservoirs are starting to transition water down the river. Board Member Francis asked if the water calls cause the rivers to rise and GM Prairie said it depends on the timing as well as weather and temperatures and noted that right now the utility is spilling surplus water. GM Prairie explained that British Columbia is suffering one of the worst droughts in 30+ years and said the two basins have critically low snow and were at about eighty-two percent (82%) snowpack two months ago. He pointed out that coastal ranges are also very dry in Puget Sound. He said that the Snake River is one hundred and one percent (101%) of average and pointed out that it's the only major basin that is above average around the west. Board Policy No. 1 (Payment in Lieu of Taxes) CFO Roos explained how the payment in lieu of taxes (PILOT) is derived and pointed out that the policy states a six-point five percent (6.5%) payment. GM Prairie explained the traffic system is also funded through PILOT and takes pressure off the general fund because this is a general fund obligation, not IFP and pointed out a $400K+ increase over last year. He noted that the American Public Power Association’s (APPA) reference report is not out yet but will be reviewed once available per policy. There were no suggested modifications to the policy during the review. Hydro Insurance Renewal Review/Discussion CFO Roos gave an overview of the two different types of insurance and explained that Starr Tech is typically the only agency that bids on a policy for IFP and AGM Boorman explained that as our hydroelectric plants increase in value more insurance companies are willing to insure the hydro projects. GM Prairie explained that the hydro projects are small in comparison to large oil and gas projects in other regions. CFO Roos reviewed the rates and premiums and explained the common practice of dual underwriting on large policies, which also makes them more competitive. GM Prairie explained that the terrorism coverage was removed due to many exclusions, which resulted in a $40K savings (and wasn’t purchased last year either). He pointed out that since 911 there has never been an attack designated as terrorism by the federal government and said that insurance agents typically don’t recommend it in most of their policies. Mayor Casper asked why the City Council is being asked to ratify the policy as opposed to approving/signing in a Council Meeting and GM Prairie explained the need to ratify is due to the short time gap between receiving, reviewing, and signing the policy before a lapse in coverage occurs. GM Prairie stated that this is consistent with at least the past five years of practice due to normal timing. FY25 CIP / Budget Review AGM Boorman reviewed the proposed vehicle replacement in the Capital Improvement Plan (CIP) and noted the desire for an all-electric or hybrid pickup but has found nothing on the market. Council President Burtenshaw asked about year over year on the peaking plant CIP summary sheets. Board Member Francis  May 8, 2024 asked if the 9001 Bulb Turbine project includes the peaking plant and GM Prairie said “no” because that is under Capital not operation and maintenance (O&M) he continued to explain that generation will be all together and pointed out that we no longer will need to track Gem State separately from the Bulbs due to this being the last year for PacifiCorp (PAC) taking the output from the Gem State Project. AGM Boorman said that Idaho Fish and Game contributed $120K for a new boat ramp. He explained the transmission and distribution capital projects and pointed out that customer line extensions were bumped up this year and the resulting revenue combined with new subdivision construction will help offset construction costs. Council President Burtenshaw asked if the peaking plant substation will be included in the bond and GM Prairie said “no” that it will be treated as a future project. Council President Burtenshaw asked for clarification on whether the new Customer Information System (CIS) is coordinated with public works and municipal services and the work they are doing for a finance package. GM Prairie said he thought a decision was made to split the system in two [finance/billing] after the Cayenta issues. He explained that he is focusing on a CIS software package with less customization that integrates well with other systems and explained that he is budgeting for the utility’s needs which may diverge and be more urgent than public work’s needs. He confirmed that his ultimate desire is to have one city utility billing package and service but is not constraining IFP to this outcome and continues to coordinate with Director Fredericksen but the needs of IFP are such that waiting is becoming increasingly risky. GM Prairie explained that IFP was ahead of other utilities in 2012 when they deployed system-wide advanced metering infrastructure (AMI) metering but has been held back due to not finding a good CIS system to integrate with for customer-focused tools like web apps and prepay. CFO Roos said a request for proposal (RFP) for software providing a prepay option, etc. is expected to go out sometime this summer. AGM Boorman reviewed the larger CIP items that include the peaking plant construction, electric vehicle (EV) charging network buildout [National Electric Vehicle Infrastructure (NEVI) grant was received, with revenue that will offset costs], fiber buildout, downtown alley project (delayed to next year due to the delay in the federal grant contracting process) and pointed out that the Advanced Distribution Management System (ADMS) onboarding will extend into fiscal 2025. Board Member Francis acknowledged that improvements tend to cost more at the onset but are worth it in the long run as opposed to a quick and cheap fix. GM Prairie mentioned that underground easements have been easier to obtain but cost much more to construct. Board Member Larsen asked about the life expectancy of overground versus underground and AGM Boorman said that power poles last anywhere from 30 to 50 years, while the underground conductor is substantially better at around 70 years, not to mention the nature of undergrounding precludes weather and animal-related outages. CFO Roos explained the payroll/benefits portions of the budget, reviewed the proposed new positions, and clarified the O&M items. He noted a forty-five percent 45% increase for Idaho County's Risk Management Program (ICRMP) insurance and said he is researching the increase as there have been no claims he’s aware of. GM Prairie reviewed the projected power supply costs and pointed out that Gem State is coming back with generation, but that IFP will lose its revenue from PAC. CFO Roos reviewed the inter-fund transfers (supplied by municipal services) and pointed out that some city services have increased over three hundred percent (300%) this year from just the prior year. GM Prairie said that IFP’s allocation factors should be set on the use of service and costs to provide the service. City Attorney Kirkham said the closest you can come to actuals, the better the practice and it needs to be reasonable. Board Member Francis said that he’d thought that other city departments weren’t supposed to be soaking the enterprise fund departments because they have revenue. There was a discussion on how centralized service costs (municipal services, finance, legal, parks) get allocated. Council President Burtenshaw asked what the next steps were and emphasized that the situation has to be right-sized across the entire city. CFO Roos said municipal services is reviewing the transfers and Board Member Ziel-Dingman said she was frustrated that the Board/utility has spent many years fixing this situation and find that we’re right back here again after fixing it a few years ago. GM Prairie said he is hoping it’s an education issue with maybe some new staff, etc., and will circle back once the situation is hopefully resolved. CFO Roos concluded that the O&M increase is driven mostly by inter- fund transfers, PILOT, payroll, and benefits costs. Council President Burtenshaw asked if there is a  May 8, 2024 correlation between the two percent (2%) operating and payroll and CFO Roos said the majority of labor is going towards capital projects. GM Prairie pointed out the new positions are also included in the budget along with projected step and wage adjustments for 2025 in compliance with anticipated market wages. He explained that payroll accounts for only about seventeen to eighteen percent (17-18%) of the total budget so there is some wiggle room as opposed to other departments where payroll can be around eighty percent (80%) of their total department budget. CFO Roos reviewed the draft cash flow statement and reiterated that IFP won’t be receiving revenue for Gem State generation. Council President Burtenshaw commented that she appreciates the way Mr. Roos reports the finances. COSA and Projected Rate Review GM Prairie gave an overview of the cost-of-service analysis (COSA) which is figured on a cash basis and explained that expenses get allocated into rate classifications and said he prefers to adjust customer charges over energy charges, so as not to socialize increasing utility costs unfairly. Board Member Larsen asked how demand is figured in and GM Prairie explained that you take the highest usage in a month and go to demand rate setting to true up the difference. AGM Boorman explained that a church has high energy usage generally once per week, but the transformer and wires still carry a light load the rest of the week (which generally gets socialized in the current rate structure) that someone pays for. Board Member Francis asked if the utility pays for Parks’ lighting and GM Prairie clarified that Parks pays a fixed fee of $20 per month for any non-metered security lights, the same as any other customer with no associated energy cost. He continued to explain general lighting in parks should be metered and that maintaining the infrastructure is the Park’s responsibility and that Director Holms has been good at understanding that IFP is not responsible for park lighting but we do support him where we can. GM Prairie continued with his goal to hold rate increases at or below the rate of inflation which is currently averaged at three point five percent (3.5%), depending on what metric you use, and proposes a net-collective rate increase of two point eighty-eight percent (2.88%) to grow and maintain reliability and doesn’t see a power cost adjustment (PCA) for this year due to power supply cost expenses continuing to be high. He explained that some capital projects were pushed out a couple of years to achieve this rate goal and explained that in the next couple of months, things could get tweaked but feels that overall, the COSA is in a good spot. GM Prairie said he’d report back in a City Council work session if needed and doesn’t see the need for a special Board meeting at this time. The Board Members supported the proposed increase. Council President Burtenshaw said she’d be comfortable with up to a three percent (3%) increase. Board Member Radford said the cost of growing and maintaining reliability justifies a two-point eight percent (2.88%) increase. It was the Board’s consensus to move forward with the proposed increase of two point eighty-eight percent (2.88%). Board Policy No. 2 ( City Council Acting as IFP Board) GM Prairie reviewed the draft policy and explained that he strives to clarify policy language and noted he worked with Board Member Francis to tighten up the special and public meeting language. Mr. Kirkham clarified that the City Council has wide discretion to govern as long as what the Council is doing is properly noticed. Board Member Francis asked about the front door that is locked until 8:00 a.m. and if it has been an issue for the public that wants to join the meetings. Mr. Kirkham advised that staff is advised to let the public in and bring them upstairs and GM Prairie said that staff watches the front door and know we have a public meeting and to assist with getting people upstairs as needed. There was discussion on the consequences of restricting decisions to Board meetings. Mr. Kirkham reiterated that the Council has the right to govern the city whenever convened as long as the meetings are properly noticed and noted that a policy is a guideline. AGM Boorman suggested that ordinances regulate the public and resolutions regulate the city and Mr. Kirkham said he agreed. It was moved by Board Member Francis and seconded by Council President Burtenshaw to approve the proposed policy changes. The motion passed unanimously.  May 8, 2024 Utility Reports Safety Update –– GM Prairie updated the Board on a recent minor vehicle accident where a bin door on the utility bed of a service truck opened up as they were leaving the garage and it was damaged, which counts towards our vehicle accident metric. Lower Plant – GM Prairie said the utility is getting ready to begin construction to improve the security and aesthetics (landscaping) at the Rack substation and the Lower plant. He pulled up the map and illustrated what 8-foot concrete walls could look like (similar to the ones on Sunnyside) and wanted to let the Board know that it’s likely people won’t be able to view the river in the same manner as today with the chain link when driving by the plant on Sunnyside Road. Board Member Larsen asked what the motivation is for constructing a wall around the substation and plant and GM Prairie said that Board members in the past few years felt the facilities can appear unsightly but implored that the walls could be considered a security improvement also. Council President Burtenshaw asked if the wall would follow the footpath. The answer was that the wall is just to replace the existing chain link fence locations. AGM Boorman said the new path will connect back to the path at the Rocky Mountain Power Substation and noted Rocky Mountain Power wouldn’t give an easement and work with the City to route the path to the north of their substation in keep it off Sunnyside road. GM Prairie offered that the construction could come in two phases, where the landscaping and access improvements could go in phase 1, and the cement wall could be phase 2 but re- evaluated first before beginning phase 2 if still needed/desired. Council President Burtenshaw said she supports the two-phase approach. Board Member Freeman prefers to have everything done in one phase and Board Members Francis, Larsen, and Radford agree that security is also important, but would be good to proceed in two phases. GM Prairie said he would begin with phase 1 and the Board could then reevaluate how things look once the landscaping was in and then decide on whether to proceed with phase 2. Peaking Plant – GM Prairie showed the rendering and timeline of the new plant and said that color swatches will be available at the next Board meeting. There being no further business, the meeting adjourned at 11:55 a.m. s/ Linda Lundquist s/ Rebecca L. Noah Casper Linda Lundquist, BOARD SECRETARY Rebecca L. Noah Casper, MAYOR