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09-24-2015 HUCMMINUTES Special Meeting — Hutchinson Utilities Commission Thursday, September 24, 2015 Call to order — 8:00 a.m. President Hanson called the meeting to order. Members present: President Anthony Hanson; Vice President Donna Luhring; Secretary Mark Girard; Commissioner Monty Morrow; General Manager Jeremy Carter. Members absent: Commissioner Dwight Bordson and Attorney Marc Sebora. Others present: Jared Martig, Randy Blake, Dave Hunstad, John Webster, Dan Lang, Kim Koski, and Brenda Ewing. GM Carter distributed an updated overview of HUC's mission statement, values, strategies, and objectives based on the feedback from the first strategic planning meeting held on Tuesday, August 25, 2015. In addition, a list of tasks and metrics related to each objective was also handed out. (Handouts attached.) The following were reviewed and discussed: 1. Provide safe, reliable electric, gas, and related services to our customers - Reporting metrics and industry benchmarks are currently in place for both the electric and natural gas divisions. Dave Hunstad mentioned what sets HUC electric apart is that we are 100% underground. John Webster mentioned for natural gas, HUC is one of several municipals in the United States which transports. Discussion was held on replacement schedules of HUC's infrastructure. With the pipeline and underground being fairly new, HUC would be looking at replacement schedules of about 40 to 50 years. HUC continues to perform annual checks and budgets for replacing items, as needed. For production, Randy Blake reported Units 3 and 4 are 1968 vintage. They have been maintained beyond usable life but continue to be used regularly. Unit 8 was built in 1972 and continues to be an efficient unit. However, the boiler sections will need to be replaced in the future. Outside HUC's infrastructure, the cooling towers are in good shape. New drives on fans are being installed which will provide better electric current draw. Replacement schedules are being updated for the outbuildings. Discussion was held regarding the current base load contract with Missouri River Energy Services (MRES) and whether HUC can either reduce it from 25 to 20 megawatts or cancel the contract. HUC needs to consider renewables and how it affects the future base load. Currently, HUC gets renewables through MRES and Great River Energy (GRE). Options for renewables are wind, solar, biomass, and plasma arc. A decision needs to be made on what HUC's philosophy is on the renewable options and if the focus will be on economics or providing it directly to customers. GM Carter commented HUC needs to maintain flexibility to adapt to future changes therefore is concerned with locking into a long-term contract. If HUC does not extend the contract to 2057 or has the ability to reduce the base load, it would need to be determined if the remaining power supplied would be at the current prices. The Board requested GM Carter and staff develop a model showing options available for cost effectiveness on the wholesale side and consider splitting the portfolio and bring a recommendation back to the Board. The Board also recommended HUC start with a customer survey process to receive feedback on their interest in renewables. 2. Provide market competitive and stable pricing and excellent value for HUC's services - HUC has mechanisms in place to help mitigate price fluctuations. HUC will continue to evaluate the rate stabilization funds for adequate cash balances that aid in stabilizing customer rates. GM Carter reported HUC has a good cash flow now; however, sees a need for a cash reserve policy which would mitigate the risk of low levels of cash balances. HUC is considering alternative sources of revenue such, as the current Transalta contract to replace lost revenue due to a soft market. President Hanson mentioned he sees investments in transmission as a tremendous opportunity for HUC and suggested GM Carter and staff continue to explore those opportunities. John Webster mentioned there are two potential transmission projects for HUC to consider. One with Heartland Corn and the other is with a large customer in the New Ulm area. Neither wants to be a natural gas transmission line owner, operator or builder. The Board agreed these projects should be considered, if they are economically positive for HUC. Other alternative sources of revenue mentioned were: 1) provide insurance services for appliances or electrical services; and, 2) offer a service to maintain the homeowner's service from the lot line to their home for a monthly fee. GM Carter suggested a survey be sent to customers for this as well as a solar garden and other potential topics to get their feedback. 3. Provide excellent customer service in ways that are ethically, fiscally and environmentally responsible - This includes both external and internal customer service. The idea of a customer survey was discussed which would cover customer service satisfaction and customer preferences to identify customer's changing needs. HUC will continue to explore technology and operational methods to include payment options, bill delivery, hours of operation, customer energy management, and ease of using web based applications. Internally, HUC is currently going through a job evaluation and compensation study. After it is complete, HUC will be maintaining a company -wide succession plan by assessing the utility's employment levels, predicting future needs, planning for internal movement, assessing external hiring needs and ensuring a skilled and trained workforce. Cross -training will be implemented so that proper back-up functions are in place for core business functions. The Board requested GM Carter and staff develop a plan to identify various communication methods to solicit feedback from customers. This communication may include surveys, HUC's web site, newsletters, newspaper articles and direct customer interaction. 4. Enhance the quality of life and economic vitality in Hutchinson - GM Carter reported HUC is doing a good job with employees being involved in the community. HUC also shares some services with the City of Hutchinson and donates time and resources toward certain City projects. In customer service, there are budget plans in place for customers along with the Cold Weather Rule. HUC also maintains good communication with the financial assistance agencies to help customers in need of their services. 5. Promote the safety of our employees - HUC has a contract with Minnesota Municipal Utilities Association (MMUA) to continually maintain RUC's safety program. Formal and informal safety training is currently practiced. Brenda Ewing mentioned the number of injuries remains low. Dan Lang commented the crews' extensive experience limits potential accidents. 6. Provide competitive advantages and forward looking vision - HUC will proactively address changing customer trends, technologies, regulatory advancements and industry competition. HUC will develop new business models and continue to explore different services that may complement HUC's current core business. HUC's goal is to retain customers while keeping rates stable, competitive and reliable. GM Carter requested any further feedback from the Board be emailed to him. Items GM Carter and staff will start working on are the marketing component and customer feedback survey. There being no further business, a motion was made by Commissioner Morrow, seconded by Vice President Luhring to adjourn the meeting at 10:02 a.m. Motion was unanimously carried. / Mark Girard, Secretary ATTEST:_ Anthony Hanso , President Mission► Statement: The Hutchinson Utilities Commission will provide safe, economical, reliable electric and natural gas and related services within our service territory and the Midwest, while contributing economic vitality to the City of Hutchinson. Broad Value Statement Goals: (reliability, competitive, customer service, quality of life, safety, forward-looking) VALUES (HUC OUTCOMES Provide safe, reliable electric, gas, & related services to our customers Provide Market Competitive and Stable Pricing & excellent value for HUC's services Strategic Plan: (Review: 3-5 Years) Operating Plan: (Objectives, Budget, Long -Range Outlook, Performace measures) (Review: Annually) HUC STRATEGIES HUC Objectives Secure & deliver electric, natural gas, and related services to meet current & future customer demands in a reliable and efficient manner Provide electric, natural gas, and related services at competitive, fair and stable prices Provide excellent customer service in 1. Identify & Adapt to customer's changing demands to build & retain customer loyalty ways that are ethically, fiscally & 2. Use technology to provide convenient & efficient methods for doing business with HUC 3. Recruit & retain a qualified, productive, diverse & talented workforce responsive to our customers' needs environmentally responsible 4. HUC will strive to keep customers, city government and the community educated about their utility and ooerate with the hiahest level of leaal. ethical. financial, and environmental standards in mind. Enhance the Quality of Life & 1. Promote enhanced quality of life through community involvement & economic development initiatives Economic Vitality in Hutchinson I I 1. Promote a safe environment emphasizing the importance of accident avoidance and injury prevention, Promote the safety of our employees operate in compliance with applicable laws, rules and regulations. Provide competitive advantages & S. Proactively adress changing customer trends, technologies, regulatory advancements, and industry I--] forward looking vision competition Mission - Values/Long-term goals - Strategies - Objectives - Tasks - Metrics/Indicator - Target (Dynamic and continuous process) SWOT Analysis (Strength, Weakness, Opportunity, Threat) Situation Analysis (internal/external) PEST Analysis: (Political, Economic, Social, Technological) Communication & Translation throughout the entire organization. Maintain flexibility of supply to respond to changes in demand, market, and regulations Maintain Infrastructure to optimize asset life cycle and utilization Exceed industry standards related to reliability & quality Maintain programs to replace aging infrastructure that will improve the reliability & integrity of HUC's utility delivery system. Maintain an (IRP) that achieves appropriate supply & demand side outcomes based on changes in demand, market, and regulations 1. Mointain income levels to provide adequate cash flows for debt service payments, system growth, and asset replacement 2. Maintain adequate cash balances and reserves to provide continued operations and maintenance and stable prices 3. Maintain credit rating that provides the ability to obtain debt at competitive interest rates 4. Continue to explore and maximize opportunities to grow the business through additional revenue opportunities and/or partnerships 5. Continue to explore opportunities for investments in transmission, renewables, or other business areas 1. Regularly solicit customer feedback to improve and change as the industry and customers preferences change 2. Continue to explore technology to improve HUC's business processes and enhance the customers utility experience 3. Offer a competitive employee compensation & benefit package that will enable HUC to attract & retain a talented and diverse workforce. 4. Maintain a company -wide succession plan by assessing the utility's employment levels, predicting future needs, planning for internal movement, predicting external hiring needs and ensuring a skilled and trained workforce. S. Provide customers and community with essential information 6. Comply with applicable regulations and laws through appropriate policies, procedures, and controls 7. Achieve financial stability through the use of sound business practicies, policies, and operating procedures 1. Collaborate with community partners to promote economic development through attraction, retention, and growth of businesses and jobs in our community 2. Encourage employees to be involved in community activities 3. Promote programs that assist customers in need with their utility bills or provide incentives to make 1. Enact and maintain programs and procedures that provide safe work practicies 2. Provide a safe and healthy workplace 3. Ensure all operating areas meet or exceed all applicable local, state, and federal safety rules and regulations 4. Enusre that safetv is an integral Dart of all HUC's internal and external operations Develop new business model or strategies to take advantage of changing opportunities Continue to develop a strategic competitive advantage based on regulatory changes and technologies choices 1. HUC (VALUE/OUTCOME) Pro -fide safe, reliable electric, gas, and related services to our customers 1.1 HUC Strategy: Secure & deliver electric, natural gas, and related services to meet current & future customer demands in a reliable and efficient manner Strategic Obiective #1: 1 Maintain flexibility of supply to respond to changes in demand, market, and regulations Tasks: 1 Create a model to identify, evaluate, and analyze the appropriate portfolio diversity (type, fuel source, location, ownership) scenarios as external factors change 2 Continue to work with MIRES & other agencies on supply side alternatives & options (direct involvement, partnerships, secondary participation) 3 Continue to review and evaluate the use of internal generation fuel sources versuses market purchases & external PPA's 2 Maintain Infrastructure to optimize asset life cycle and utilization Tasks: 1 Continue to maintain and enhance the Preventative Maintenance programs of HUC's Asset's Maintain & adjust operating procedures to foster a sound Preventative Maintenance program (Electric & Gas) Properly train and educate staff on "PM" programs and procedures for various infrastructure/assets 3 Exceed industry standards related to reliability & quality Tasks: Identify, evaluate and be proactive in replacing and maintaining infrastructure Continue to address problems with infrastructure and take corrective actions before loss of service Continue to evalaute and enhance speed and efficiency of troubleshooting and repairing services 4 Maintain programs to replace aging infrastructure that will improve the reliability & integrity of HUC's utility delivery system. Tasks: 1 Maintain a sound Capital Replacement schedule to meet the needs of HUC now and into the future 2 Evaluate and put in place financial parameters to help achieve appropriate replacement schedules of critical infrastructure 5 Maintain an (IRP) that achieves appropriate supply & demand side outcomes based on changes in demand, market, and regulations Tasks: 1 Continue to review and enhance the CIP program to leverage and take advantage of opportunities on the demand side. 2 Discuss and evaluate Risk tolerance and Risk management for commodity purchases and portfolio diversification 3 Continue to discuss and evaluate opportunities in adding local or purchasing additional renewables such as (Wind, Solar, Plasma, Biomass..etc) 4 Continue to evaluate, analyze and discuss local generation options compared to contracts and market purchases as regulations, demand and market prices change. Metric/Indicator Target Electric Gas Electric Gas 75%/25% 60%/40%-70%-30% Exceed the Manufacturer's Usefule life Is there an Asset Management Program / Index? SAIDI, CADI, SAIFI, ASAI Leaks Per Mile 99% 2. HUC (VALUE/OUTCOME) Provide market competitive and stable pricing & excellent value for HUC's services 2.1 HUC Strategy: Provide electric, natural gas and related services at competitive, fair and stable prices Strategic Objective #1: 1 Maintain income levels to provide adequate cash flows for debt service payments, system growth, and asset replacement Tasks: 1 Develop yearly budgets and forecasts that create a positive net income and positive cash flow for organizational operations 2 Continue to evaluate and control operating costs (ie ... change in operational decisions, beating the commodity market prices on a monthly basis) 3 Continue to evaluate the Rate Stabalization Funds for adequate cash balance ranges, that aid in stabilizing customer rates,, 2 Maintain adequate cash balances and reserves to provide continued operations & maintenance at stable prices Tasks: 1 Identify and implement a logical and sound cash reserve policy to mitigate the risk of low levels of cash balances 2 Follow a sound Capital Expendutre program that balances infrastructure needs against the ability to pay. 3 Identify the appropriate debt versus cash financing utilized to pay for major infrastructure and asset needs 3 Maintain a credit rating that provides the ability to obtain debt at a competitive interest rate Tasks: 1 Maintain sound financial & business policies to achieve financial stability 2 Continue to strive, maintain, and grow HUC's customer base to ensure a reliable base of revenue through customer rates 3 4 Continue to explore and maximize opportunities to grow the business through additional revenue opportunities and partnerships Tasks: 1 Continue to leverage & seek out energy contracts if appropriate to take advantage of internal generation capabilities 2 Continue to leverage & seek out capacity contracts based on unalloted MISO requirements needed for HUC's own needs 3 Discuss and explore other service related ideas or concepts that could provide a positive return on investment or revenue streams 5 Continue to explore opportunities for investments in transmission, renewables, or other business areas Tasks: 1 Seek out MRES staff and other agencies for opportunities to participate in transmission projects 2 Eventhough HUC does not currently need to meet the 25% renewable reductions by 2025, Discuss and evaluate opportunities to participate in local or non -local renewables 3 Continue to explore opportunities to expand HUC's business areas proactively and as they arise. Metric/Indicator Target Electric Gas Electric Gas Yrly Budget & 5 year forecast Rate Stab. Fund Balance Ranges Cash Reserve Policy Bond Rating Increased Renewable % 4% -5% N.I. 4%-5% N.I. Current ranges appropriate? 90 Days? 45-60 Days? Current Rating or higher? 5%? 3. HUC (VALUE/OUTCOME) Provide excellent customer service in ways that are ethically, fiscally & environmentally responsible 3.1 HUC Strategy: Identifty & adapt to customer's changing demands to build and retain customer loyalty Strategic Objective #1: 1 Regularly solicit customer feedback to improve and change as the industry and customers preferences change Tasks: 1 Provide a short survey at the annual open house each year 2 Identify & Implement various communication methods to solicit feedback (ie ... surveys, website design, direct customer interaction) 3.2 HUC Strategy: Use Technology to provide convenient & efficient methods for doing business with HUC Strategic Objective #2: 1 Continue to explore technology & operational methods to improve HUC's business processes and enhance the customers utility experience Tasks: 1 Discuss and review technological applications or internal business processes to enhance internal operations 2 Explore other payment options, bill delivery, hours of operations, ideas for customers own energy management, and additional ease of using web based applications 3 Discuss and review various software or technological applications to enhance customers experience 3.3 HUC Strategy: Recruit & retain a qualified, productive, diverse & talented workforce responsive to our customers' needs Strategic Objective #3: 1 Offer a competitive employee compensation & benefit package that will enable HUC to attract & retain a talented and diverse workforce _ Tasks: 1 Periodically evaluate and compare information to ensure HUC is maintaining a market competitive incentive package (ie .... job compensation review) 2 Set HR policies that reflect HUC's philosophy that employees are an important factor in the success of the utilities. 3 Continue to control & balance operating costs & capital expenditures to ensure greatest chance of success in providing competitive compensation 2 Maintain a company -wide succession plan by assessing the utility's employment levels, predicting future needs, planning for internal movement, assessing external hiring needs and ensuring a skilled and trained workforce Tasks: 1 Implement and annually review succession planning doc. to minimize the risk of operational gaps in HUC's yearly operations (EE creditials, experience, skill set, training) 2 Annually review the critical job functions required by HUC's core business and provide documentation on completing those tasks 3 Cross -train employees so that proper back-up functions are in place for core business functions. 4 Maintain an emphasis on developing a skilled and proficient workforce through continued education, training, personal growth. 5 Periodically review the succession planning process for appointed board members to ensure time commitments, skill -set and diversity exists Metric/Indicator Target Electric Gas Electric Gas Customer satisfaction % Metric/Indicator Electric Gas Metric/Indicator Electric Gas Competitive with Defined Market 95% Satisfaction Target Electric Gas Target Electric Gas (+/-) 5%-10% of mid -point cross -training in core areas, or documentation 3.4 HUCStrategy: HUC will strive to keep customers, city government, & the community educated about their utility and operate with the highest level of legal, ethical, financial, and environmental standards in mind Strategic Objective #4: 1 Provide customers and community with essential information Tasks: 1 Identify & continue to provide stakeholders important summary information through various communication channels (ie ... newsletter, website, media, commission board meetings, city council) 2 Continue to educate customers on the advantages of local public power and the positive partnerships HUC has with other local government agencies and HUC customers 3 Identify frequency of key informational topics (reliability, financial, project areas, renewables, key business descisions, new technologies being explored, CIP) 2 Comply with applicable regulations & laws through appropriate policies, procedures and controls Tasks: 1 Stay involved and continue necessary training to ensure continuous compliance with regulations & laws affecting HUC 2 Continue to maintain strong relationships with other agencies to ensure timely information is not missed 3 Achieve financial stability through the use of sound business practices, policies, and operating procedures Tasks: 1 Continue to move towards meeting net operating income %'s to ensure sustainability of HUC's operations 2 Continue to move towards appropriate cash balance reserves and continue to maintain adequate debt reserves 3 Continue to evaluate, implement, and follow a capital expenditure program,ensuring proper levels of insurance coverage to mitigate significant cash reserve losses Metric/Indicator Target Electric Gas Electric Gas non-compliance with audits "0" non-compliance audits 4. HUC (VALUE/OUTCOME) Enhance the quality of life & economic vitality in Hutchinson 4.1 HUC Strategy: Promote enhanced quality of life through community involvement and economic development initiatives Strategic Objective #1: 1 Collaborate with community partners to promote economic development through attraction, retention, and growth of businesses and jobs in our community Tasks: 1 Continue to be a part of the City's "one-stop" shop for new development in the community 2 Discuss other various options to help foster additional economic development (ie ... not directly charging for infrastructure at the time of development)? 2 Encourage employees to be involved in community activities Tasks: 1 Continue to promote active engagement in community events (ie...open houses, Big Toys Events, School functions that encompass HUC's core business topics) 2 foster a flexible work environment to allow community particpation and active engagement in the community by HUC employees 3 Promote programs that assist customers in need with their utility bills or provides incentives to make good energy consumption choices Tasks: 1 Continue to maintain, evaluate, and enhance HUC's "Budget Plan" so customers have an additional option to help pay their bills. 2 Continue to stay in communication with financial assistance agencies for additional programs that can be offered 3 Discuss and evaluate the "CIP" program to take advantage of additional opportunities to have customers make smart equipment purchases and energy consumption decisions Metric/Indicator Electric Gas Target Electric Gas S. HUC (VALUE/OUTCOME) Promote the safety of our employees 5.1 HUC Strategy: Promote a safe work environment emphasizing the importance of accident avoidance and injury prevention while operating in compliance with applicable laws, rules and regulations Strategic Obiective #1: 1 Enact and maintain programs & procedures that provide safe work practices Tasks: 1 Secure effective and efficient safety consultation services (ie..MMUA..etc) 2 3 2 Provide a safe and healthy workplace Tasks: 1 Promote employee wellness initiatives 2 3 3 Ensure all operating areas meet all applicable local, state, and federal safety rules and regulations Tasks: 1 Annually review and evaluate all operating areas are in compliance with all applicable rules and regulatiosn (ie..OSHA, MNOPS.... etc) 2 3 4 Ensure that safety is an integral part of all HUC's internal and external operations Tasks: 1 Complete Job Hazard Analyses (JHA) for all tasks with identified hazards 2 3 Metric/Indicator Target Electric Gas Electric Gas Lost time hours Recordable Injuries "0" lost time hours "0" recordable Injuries 6. HUC (VALUE/OUTCOME) Provide competitive advantages and forward-looking vision 6.1 HUC Strategy: Proactively address changing customer trends, technologies, regulatory advancements, and industry competition Strategic Obiective #1: 1 Develop new business models or strategies to take advantage of changing opportunities Tasks: 1 Discuss and explore community based projects or strategic partnerships with existing customers on future enegry projects/needs 2 Continue to develop a strategic competitive advantage based on regulatory changes and technologies Tasks: 1 Explore different services that may complement HUC's current core business Metric/Indicator Target Electric Gas Electric Gas