tppa 2016 annual meetingtppa 2016 annual meeting pride in public power and industry trends july 26,...

TPPA 2016 Annual Meeting

Pride In Public Power and Industry Trends

July 26, 2016

HCI Products & Services

Advanced Grid

Solutions

Management Resource Consulting

HCI Benefits to Texas Public Power• Hometown’s due diligence

– Only endorse reputable providers, proven in public power – Interface/integration among technology partners

• APPA member discount– Hometown partners provide direct discount to members

• Resource/Networking– Hometown can share best practices

• working with and learning from utilities all across the country – Market intelligence on vendor community

• even if not part of Hometown network• Hometown’s Resource Management Consulting

– Strategic planning, utility assessment, market research, technology planning, workforce solutions, RP3 consulting

• Hometown and its partners have worked with 46 TPPA members to date

Talking Points• Pride in Public Power• Trending Nationally • Strategic Planning Roadmap

It’s Great to Live in aPublic Power Community!

Power to the People• Like community schools, parks and hospitals, public

power utilities are local institutions working to meet local needs.

• Public power means homes and businesses run on electricity provided by a not-for-profit, locally owned utility.

• That means the community has more control, so all the benefits produced by public power—including affordable energy costs, better service, and a focus on local goals—stay in the community.

An American Tradition That Works

Today, public power is a collection of more than 2,000 community-owned electric utilities• Serving more than 46 million people• Or about 15 percent of the nation’s

electricity consumers.

IN ALL STATES &TERRITORIES EXCEPT HAWAII

WHERE IS PUBLIC POWER?

# OF ELECTRIC UTILITIES IN AMERICA

26%

7% 6%0.3%

RURAL ELECTRIC COOPERATIVES

POWER MARKETERS

INVESTOR OWNEDUTILITIES

PUBLIC POWERUTILITIES

61%

FEDERALPOWERAGENCIES

LOCAL CONTROL LOW RATES HIGH RELIABILITY

PUBLIC POWER =

+ +

Reliability, Community Needs Come First

Public power personifies the American ideal:• Local people working together to meet local

needs• City employees joining with citizens serving in

governance roles• To provide electricity to every home and

business– In safe and responsive manner– On a not-for-profit basis

Approved by Citizens

Based on community input:• Local government and utility officials

– Set electric rates

– Invest in technology improvements

– Offer energy savings programs

– Determine staffing levels

– Maintain a service fleet able to respond quickly to outages

Neighborly Customer Service

When public power customers contact the utility service department:

• They reach a local office

• Staffed by friends and neighbors

• Dedicated to customer satisfaction.

Local repair crews:

• Are familiar with the system and neighborhoods

• Work hard to identify and correct problems quickly.

Economic Benefits Stay in CommunityRevenue to the electric department helps finance other essential city services• Helping to keep local taxes low.

Public power utility supports the local economy• By purchasing from local businesses

• Hiring local workers

• Being an attractive place to do business– Through lower electric rates– Commitment to reliability– Economic development incentives

Public power utilities employ 93,000 people

and earn $58 BILLION in revenue annually

ECONOMIC DEVELOPMENT

POWERFUL ECONOMIC ENGINES

NEW BUSINESS TO THE COMMUNITY

BUY LOCAL

Public power means:

Community Control

Community Value

Community Spirit

Today’s National Trends• Increasing regulations• Changing power supply• Aging infrastructure• New technologies• Higher customer expectations• More workforce turnover• Increasing financial pressures

1. Increasing Regulations• National

– Air Emissions – “War on Coal and Natural Gas”– Excerpt from S&P Global Market Intelligence Mark Hand’s interview with Lena

Moffitt, director, Sierra Club's Beyond Dirty Fuels campaign in 4/19/16 SNL“We are doing everything we can to bring the same expertise that we brought to taking down the coal industry and coal-fired power in this country to taking on gas in the same way. I look forward to seeing the same success brought to taking down gas plants to ensure that we're actually moving to a 100% clean energy future. That is the one Sierra Club policy that we are all working toward: getting us to 100% clean energy, which, of course, would include no new gas.”

– Water Usage & Quality– RTO = rising transmission rates incents “behind the meter” generation– Grid Security (Cyber & Physical)– Tax exempt financing

• States – RPS in 30 states plus District of Columbia– Energy efficiency standards– Increasing activism from state capitols affecting public power

Cyber/Physical Security

First Year Cybersecurity Makes Top 10

Source: “2015 Risk Management Survey”, AON

2. Changing Power Supply• Natural Gas/Solar replacing Coal• Increasing renewables• Distributed generation changing utility

business model– Less growth + two-way power flow

• DSM/Energy Efficiency giving customers more control

FOR 2015 -ELECTRICITY IN THE U.S. WAS GENERATED FROM

33%

33%20%

7%

1%

COAL

NUCLEAR

NATURAL GASHYDROPOWER

RENEWABLES & OTHER SOURCESOIL

6%

U.S. Energy Information Administration – April 2016

US Solar PV Cumulative Installed Capacity and Monthly Generation

Rocky Mountain Institute – “Community Scale Solar, Insight Brief” March 2016

Solar Expansion

Courtesy of American Municipal Power

3. Aging Infrastructure

• Much of nation’s transmission and distribution infrastructure installed in the 50s and 60s– and reaching end of life around the same time

• Older equipment and design cannot accommodate modern grid technologies– Few distribution systems optimized for growing

reliance on distributed energy resources• Current transmission systems designed around

large centralized fossil fuel generation

“2016 State of the Electric Utility”: Utility Dive in association with Tendril

2016 Survey of 515 U.S. Electric Utility ExecutivesWhat are the three most pressing challenges for your utility? Choose three.

2015 Strategic Directions: U.S. Electric Industry ReportBlack & Veatch Insights Group

2015 Survey of 435 U.S. Electric Industry Participants

Rate the importance of each of the following issues to the electric industry using a 5-point scale, where a rating of 5 means “Very Important” and a rating of 1 means “Not Important At All.”

State of the Infrastructure

• American Society of Civil Engineers 2013 Report Card for U.S. Energy Infrastructure (includes electric, oil and gas):

– Significant power outages have risen from 76 in 2007 to 307 in 2011

4. New Technologies

“2016 State of the Electric Utility”: Utility Dive in association with Tendril

2016 Survey of 515 U.S. Electric Utility ExecutivesIn which technologies do you think your utility should invest more? Choose three

Traditional Utility Business Model is Changing

• Centralized to decentralized• High “demand” growth is in the past• Distributed generation

– Solar• Energy storage

– Tesla/Panasonic/Solar City • Blowing Up: Tesla's Gigafactory (NV) Is Going To

Revolutionize The Auto And Utility Industries

Future load growth will be minimal

http://www.eia.gov/forecasts/aeo/MT_electric.cfm

“2016 State of the Electric Utility”: Utility Dive in association with Tendril

EIA’s Annual Energy Growth Outlook–May ‘14 2016 Survey of 515 U.S. Electric Utility Executives

Electric Sales Fell 5 of Last 8 Years

Source: U.S. Energy Information Administration, Electric Power Monthly

Battery Storage Progressing Tesla/Panasonic• New Battery packs announced May 1, 2015• Production online in 2016

– Forecasting 50 gigawatt-hours annually by 2020• “PowerWall” for residential and commercial

– 6.4 kWh ($3K) unit configuration plus inverter and install

• “PowerPack” utility scale for the grid– 100 kWh priced at $25K

Sonnen• July 7,2016 announced a new solar energy battery storage system for

homes• “eco compact” is $5,950, which is 40% lower than other Sonnen products

– Includes inverter, battery modules with a 10,000 cycle lifetime, a smart energy manager and measurement technology (does not include installation which is estimated at $500 to $3K)

– 4-kWh is a modular design and can be expanded in 4-kWh increments up to 16 kWh

5. Higher Customer Expectations

• Customers want to be able to do business with you 24/7/365

• They want to be able to interact with their utility through multiple platforms: live voice, IVR, website, social media and still walk in your door

• Expect 21st century services from their provider• Less loyalty and less tolerance for mistakes • You are not being compared just to your

neighboring IOU, but also Amazon, Google, Zappos and dozens of other providers of service

Remember When……

• Home Depot was only construction and home supplies

• And now….– Smart thermostats– Solar – Generators

New Electric Players

The Retail Shift to RenewablesPublished July 5, 2016

6. The Silver Tsunami

Utilities Have Biggest Risk

• 78 million Baby Boomers will retire over the next 17 years, but 75% plan to continue working.

• Only 50 million Generation X exist and they are in short supply.

• 76 million Generation Y are entering the workforce.

Source: Congressional Research Service, “Retiring Baby-Boomers = A Labor Shortage?” Jan. 2008

Workforce Changes• Increasing retirements

– Poor economy stalled retirements in last 10 years• Smaller employment pool

– 50M Gen X compared to 78M Boomers and 76M Gen Y • Changing “employee” characteristics

– Boomers lived to work while Gen Y works to live– Employer and employee loyalty is in the past– Gen Y looking for “hip and cool” place to work

• Needs to be fun, rewarding and flexible• Needs technology (don’t want to work for a dinosaur)

• Competitive compensation package– Employer Benefits are not as lucrative as once was

• Most employers only offer “Defined Contribution” plans– Typically in 3rd place when it comes to compensation

Is Public Power a “feeder” program for the IOUs and Coops?

7. Increasing Financial Pressures

Financial StabilityC

ash

Res

erve

s

“2016 State of the Electric Utility”: Utility Dive in association with Tendril

2016 Survey of 515 U.S. Electric Utility ExecutivesWhat is the best way for utilities to deal with decreases in utility revenue as a result of load defection (customers decreasing their demand by generating their own electricity or purchasing it from a third party)?

In response to the growth in distributedenergy resources, how should your utility change its residential rate design? Choose all that apply.

Trends in Rate Making

• Increasing demand/fixed charges to recover distribution costs

• Volatility in power supply markets resulting in more utilities using power cost adjustments and or rate stabilization funds

• Time of use rates becoming more widespread

• More frequent, smaller rate increases

How to Impact Change

• Formulate strategic planning and policy development that focuses on key utility priorities

• Understand where your utility can thrive in this rapidly changing landscape

Strategic Roadmap to Success

Communicate& Educate

StrategicDialogue

Alignment & Focus

UtilityValue • Financial

• Local control• Reliability• Customer Service

…Know Your Utility’s Value

• Staff, Policy Makers, Community Alignment

• Strategic Areas of Focus/Goals

…Core Areas of Focus

• Staff & Policy Makers• Community Values• Customer Needs

…Values and Vision

• Value Messaging and Communications• Customer Education & Engagement

…If You Are Not Telling Your Story, Someone Else Will

Capturing Utility Value• Do you know the value of your utility?

– Utility contributions to City and to the community• Direct payment (PILOT or transfer) to General Fund• Administrative chargebacks • Community sponsorships• In-kind services (hanging banners/holiday lights, street light maintenance)• Subsidizing water and/or wastewater rates

– Compare to what an IOU/Coop pays in franchise tax/fee– Utility rates differential

• Another way to look at it: Would anything be lost if the utility weren’t owned by the city?– Local control including: rates, reliability, customer service, keeping

margins in the community, economic development, employment– Local attendance/voice at utility board meetings

• What’s the value of your distribution system?– Worth of the system (depreciated value)– Capital planning/investments for renewal

Discovery

Mission

Vision

Values

Focus

Development

Prioritize

Alignment

Have a Strategic Dialoguebetween Staff, Policymakers, Community

SWOT

Internal

External

Critical Issues

Needs

Customers

Stakeholders

Are you having a Strategic Dialogue today?

– First step in the process for ANY size utility

– Where does your utility want/need to be in 10 years?

Why Strategic Planning?– Capturing a clear vision of the

future– Aligning values with utility

staff, governing bodies and community stakeholders

– Creating the roadmap for the utility and the community

– Helping with succession planning of staff and boards

Alignment and Focus• Focus/alignment on strategic areas of focus• Seek continuous improvement• Consider consolidation/sharing of resources

– Regionalization of skill sets and services• Joint action• Other utilities in geographic area

– Examples in public power• Joint line crews in OK and NC• Joint utility management/operations in MN

Communicate and Educate• Communicate the utility value to your community

– Customer engagement • Value messaging and communications plan

– Values of your community and how the electric utility upholds these values

– Channels = website, newsletters, billboards, social media, community events

• Survey your customers to obtain “actionable” data– Track and measure your customer’s knowledge and needs

– Actively promote the utility• Today’s customers need to be educated • If you are not telling your story, someone else will and it may

not be the truth

Thank You

Tim BlodgettPresident and CEO

303-526-4515tblodgett@hometownconnections.com