08-29-2019 HUCM Special MeetingMINUTES
Strategic Planning Meeting — Hutchinson Utilities Commission
Held at Southwest Initiative Foundation
Thursday, August 29, 2019
Commenced — 9:00 a.m.
Members present: President Don Martinez; Vice President Matt Cheney; Secretary Robert Wendorff;
Commissioner Monty Morrow; Commissioner Anthony Hanson; GM Jeremy Carter;
Others present: Randy Blake, Dave Hunstad, Dan Lang, Jared Martig, John Webster and Angie Radke.
Preserving/Attracting/Developing a skilled workforce
• The GM & Managers have identified critical positions in their respective areas through the
succession planning workbooks which are reviewed, discussed, and amended annually if
needed.
• Where applicable internal employees are identified for potential movement up within the
organization and in other areas external candidates may need to be considered.
• Continued training, conferences, and education continues to be a part of the organizations focus
to ensure a skilled and educated workforce at HUC. Management will continually evaluate
personnel and recommend adjustments and organizational change where appropriate based on
industry trends, the needs of HUC's current operations, and as opportunities present
themselves.
• HUC will continue to cross -train, provide back up, and have an action plan in place for critical
areas so that daily operations are minimally affected by personnel changes, retirements... etc.
• Management continues to evaluate daily operations and streamline functions where
appropriate and eliminate non -value added functions or tasks. Management recognizes the
continual need in the future for more technical skill sets as technology continues to advance at a
rapid pace.
• There was discussion on if all operational areas where appropriately staffed. Some areas are
doing more inspections and not as much maintenance and replacement as needed while other
areas may be keeping up with maintenance and smaller new construction projects. However,
major new developments could cause a problem in the future. In another area maintenance has
been lagging because of the addition of new generating units and the salvaging of an older unit.
Managing HUC's Future Finances/Business
• Board and staff discussed the frequency of Cost of Service (COS) studies and Wage
Compensation studies. It is general practice to have a consulting firm do a comprehensive COS
study every 3-5 years or sooner if something could dramatically change Utilities business
operations or financial outlook. The last COS study started in 2017 and was completed in 2018
using 2016 audited financial statements, 5 year forecasted CIP, and 2017 & 2018 operating
budget numbers. The next COS study should be considered and budgeted sometime in
2021/2022 or sooner depending on local changes in customer base. The last compensation
study started in the fall of 2015 and was completed in 2016 using current wage rate
comparisons. The board and staff also discussed the frequency of formally doing an extensive
compensation study every 5 years while obtaining wage data annually internally to ensure
HUC's wages stay competitive to market. There was discussion about doing an external Wage
Compensation the beginning of 2021 so that the latest market data could be used to evaluate
competitive pay for union and non -union employees.
• The board and staff discussed designating HUC's full 5 — Year CIP plan on an annually basis
versus 5 years of project maintenance expenses and fleet. Also, there was discussion on HUC's
outstanding debt. The Natural Gas outstanding debt is roughly $12.5M in principal after 2019
with the bonds fully paid off in December of 2026. Annually the P&I payments are roughly $2M.
The Electric Debt is $16.675M in principal balance paid off in 2037. This debt will essentially be
paid by the revenue generated in the capacity contracts with another municipal agency starting
in 2020. First principal payments starts in 2019.
• Discussed regulatory changes that could directly or indirectly impact HUC. Some of those
changes are the Affordable Clean Energy (ACE) plan which replaced the Clean Power Plan (CPP),
Deregulation of the industry, and customers putting in Distributed Energy Resources within
HUC's service territory. Also discussed potential changes at FERC with regards to incentives for
transmission investments and allowing public/coop utilities to have the same opportunities as
Investor Owned Utilities relative to making transmission investments.
• The Board and Staff also discussed Time of Use Rates, Peak versus Off -Peak rates, and Inclining
Block Rate structures. Discussions centered on why utilities may institute these types of rate
structures and if/when HUC should consider changing rate structures from what are typical rate
structures being used by HUC today.
• Discussions occurred on additional ways to control personnel costs. Topics discussed were: 1)
where opportunities arise to make organizational changes those opportunities are explored. 2)
HUC staff is looking into a national health care program being spearheaded by the American
Public Power Association (APPA) in addition to annually shopping out health and dental
insurance along with the ancillary benefits like LTD, and life insurance.
Resource Planning/Programs
• Discussed whether or not a Community Solar Garden should be considered within HUC's service
territory. Three business model scenarios where discussed. Discussed some constraints and
whether or not customers would be interested in subscribing to solar energy via purchasing
panels. At this point, HUC has never done a community survey to gauge the interest in the
community. The first step would be to solicit feedback in the community on whether community
solar garden is of interest to HUC's customers.
Discussed industry trends and whether or not HUC should get involved in adding Electric Vehicle
(EV) charging stations in town in destination areas. There was also discussion on offering an in
home program using Conservation Improvement Program (CIP) dollars to help defray some of
the customers cost of the larger service that would need to be installed to accommodate an
electric vehicle. This is a small program that could be instituted particularly in the residential
class to assist customers who want to purchase electric vehicles. There was also some discussion
on how much penetration/involvement HUC should have on this current topic.
• MRES is rolling out a program called "Bright Energy Choices". Each member utility can
determine the type of program they want to offer or if they want to offer a program at all. MRES
will buy Renewable power for member utility customers who want more of their power coming
from renewable sources like wind and solar. Renewable Energy Certificates will authenticate the
power purchased for costumers is renewable. MRES will charge HUC a %: cent for every kwhr
purchased on behalf of HUC's customers. HUC would then need to consider passing on the cost
to the customers or subsidizing some of the cost.
• Battery Storage technology was discussed. Part of the discussion centered on how different
battery storage applications in the industry are working. Staff continues to monitor battery
storage technology and if there are any applications worthwhile in the future to investigate HUC
staff may bring it forward to the commission for consideration.
• Discussed expanding into creating a store to sell products and enhance technology on mobile
devices to provide a great amount of information at a customer's fingertips. These areas didn't
really fit the core business at this time so these topics should not be pursued at this time.
However, offering a maintenance program for a small monthly fee to cover the costs of repairs
that are the customer's obligations seemed to fit into some of the core business model of HUC
and could provide an extension to what is currently being done.
• Discussed Natural Gas Transmission rates. Based on the COS study yielding roughly a 5% Rate of
return (ROR) it showed a minimum charge based on a historical cost structure at 10 cents per
DTH per day. Industry averages for ROR are usually in the 13% range. Based on the current asset
value, the age of the infrastructure/transmission line, and ensuring adequate cash to continue
maintaining and reinvesting in the transmission line 13% is not out of line for a ROR transmission
rate. Staff will be bringing additional information forward to the board for consideration. This
topic is important to discuss as more customers are looking for transportation arrangements.
Inflation in transportation contracts should also be considered as the cost of constructions,
materials, and labor continual increase. There was also some discussion on a rate range to take
into account customer's risk profiles, length of contracts... etc.
Adjourned at 2:00 p.m.
Robert Wendorff, SecrerarT
ATTESV.
Don Martinez, resident