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6.1.a. ERMUSR 11-18-2014 Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Troy Adams, P.E.—General Manager John Dietz—Chair Al Nadeau—Vice Chair Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: November 18, 2014 6.1a SUBJECT: Staff Updates—General Manager DISCUSSION: • Amendment language review is complete for the proposed Sprint 2.5 Upgrade which will increase attachments at the Gary Street, Auburn Street, and Johnson Street water towers. Amendments may be ready for approval as early as this November Commission meeting. Prior to approval, there is a temporary rent issue to be resolved for the Auburn Street water tower. • I attended the 50th Annual Minnesota Power Systems Conference(MIPSYCOM)on November 4-6 in Brooklyn Center. There were other municipal utility personnel in attendance from Shakopee, Willmar, Marshall, Central Minnesota Municipal Power Agency(CMMPA), Rochester, Southern Minnesota Municipal Power Agency (SMMPA), Moorhead, and Austin. I spoke with many people from Alliant,Xcel, Great River Energy, Connexus, and Dakota Energy about presentation and common industry topics. The conference is sponsored by the UofM and provides continuing educations credits required to sustain my professional engineering license. This year may have been the best one I've attended. There were more presentations from utility personnel regarding challenges they have overcome, or projects they have worked on. And there were fewer presentations by sales representatives highlighting new products. Some of the sessions of most interest were: o Emerging Issues and Trends as Viewed from Washington, D.C. o Applied Professional Ethics for Engineers o Determining the Capacity Impacts of Plug-In Electric Vehicles on Xcel Energy's Distribution System o Great River Energy Distributed Generation Pilot Program o Photovoltaics Outlook for Minnesota o Renewable Energy Lessons Learned by Dairyland Power Cooperative o Solar Valuation—Process for Determining Economic Value by Dakota Electric Association o A Panel Discussion of Revenue Metering, Arc Flash Hazards, and Mitigation o Power Quality Measurements from Smart Revenue Meters ■�R, POWERED 81 INA Page 1 of 3 NATURE Reliable Public Power Provider P O W E R E D T o S E R V E 86 o Distribution Planning by Connexus Energy, Xcel Energy, and STAR Energy Services • ERMU hosted the Elk River Rotary on November 13 and provided a short presentation and tour of the historic Diesel Power Plant. As always, Steve Ziemer did an excellent job giving the tour. Michael Price, Russ Stuhr, Ben Elsenpeter, Wade Lovelette, and Tom Sagstetter also helped in planning, organizing, and conducting the event. It was great to bring in these leaders from our community and be able to share our story and talk about our plant. • On November 12, I participated on an American Public Power Association(APPA) Local Arrangements Committee conference call regarding the 2015 APPA National Convention which will be held in Minneapolis June 5-10. The Committee also includes representatives from municipal utilities in Rochester,Willmar, Marshall,Austin, Owatonna, Detroit Lakes, and Brainerd. Most of the MN municipal associations are represented on the committee as well as Minnesota Municipal Utilities Association and Iowa Association. The Committee has the role of coordinating locally sponsored conference activities and also suggests programs of interest for the conference. The conference will kick off with a day of volunteering through APPA's Day of Giving on Friday June 5. APPA works with the Local Arrangements Committee to identify local opportunities. For example when the conference was in New Orleans in 2008 some volunteers worked to restore a park that had sustained hurricane damage. When the conference was in Denver last year, some volunteers provided restoration work to an area that had recently sustained flood damage. Pre-conference seminars are held on Saturday June 6 and Sunday June 7. These seminars typically run a half to a full day per topic. APPA works with the Committee to plan these seminars so to provide national and local appeal. There will be an opening reception on Sunday night. Monday and Tuesday will have shorter and more focused break-out sessions which will likely include presentations from MN municipal utilities. Wednesday morning, APPA will a closing presentation for the conference. • In my transition out of the Midwest Municipal Transmission Group Chair, I spoke with a representative from MCR Performance Solutions. They provide transmission strategy services including formula rate/cost analysis and Federal Energy Regulatory Commission filings. Although ERMU is currently not in need of those services, I have a meeting scheduled with them for December 2. It would be good to know what options consultant are out there in the event ERMU needs help relating to the transmission system. Information is attached. • A meeting with Springsted regarding bonding for an early buy-in to Minnesota Municipal Power Agency was held on November 13. I will provide an update to the Commission at the board meeting. • The Minnesota Municipal Power Agency(MMPA)board has approved the creation and publication of quarterly reports intended for public purpose. Attached is the first of these quarterly reports for the 3` quarter of 2014. ed Page 2 of 3 P O W E R E D 0 1 NALURE Reliable Public Power Provider P O W E R E D T o S E R V E 87 The MMPA board had been provided the attached KPMA Agile Utility Report. This was great report highlighting many of the challenges our industry will be facing in the future. I welcome feedback and questions in regards to this report. If there are particular items that the Commission would like to research and discuss, they could be brought back for a future meeting. • ERMU's 100`h Year Anniversary Vision Committee has been established and the first meeting is being scheduled. Attached is the flyer that had been distributed internally. • Taking a cue from the City of Elk River, ERMU management is planning to hold an Employee Recognition Luncheon in December to recognized significant milestones in years of service. • As discussed during the October Commission meeting, ERMU will be participating along with MMUA and other municipal utilities in the planning and implementation of the 2016 APPA Lineworkers Rodeo. ERMU will be co-sponsoring one of the yet to be determined journeyman events. This will have a financial obligation of approximately $4,000 in materials such as poles. ERMU will have the option to get the material back after the event, or donate the material to the MMUA training center in Marshall, MN. Attached is a letter from MMUA outlining the event needs. • Mark Fuchs, Wade Lovelette, and I will be attending the MMUA Technical and Operations Conference in St. Cloud on December 9-11. I will be giving a presentation on pay equity in a competitive environment. The conference brochure is attached. MMUA also holds a board meeting during this conference. ATTACHMENTS: • MCR Performance Solutions Brochure and Letter dated October 3, 2014 • Minnesota Municipal Power Agency Quarterly Report- 3rd Quarter 2014 • KPMG—The Agile Utility Report • ERMU's 100`h Anniversary Vision Committee flyer • Minnesota Municipal Utilities Association 2016 Public Power Lineworkers Rodeo Planning and Needs letter dated October 22, 2014 • Minnesota Municipal Utilities Association 2014 Technical &Operations Conference Brochure ma r3 Page 3 of 3 NATURE Reliable Public Power Provider P O W E R E D To S E R V E 88 riC MCR PERFORMANCE SOLUTIONS,LLC 155 N.Pfingsten Road,Suite 155 Deerfield,Illinois 60015 847.56 2.0066 October 3, 2014 Troy Adams Elk River Municipal Utilities 13069 Orono Pkwy NW Elk River MN 55330 Dear Troy: I'm following up on my voice message I left for you this morning. One of our clients, Wes Hompe from Willmar suggested that I give you a call, given your role as head of MMTG. The enclosed document describes our transmission-related services and provides quotes from many of our clients in MISO. Recognizing, of course, that CMMPA (one of our long time and highly valued clients) already provides many services to you and other MMTG members, perhaps there are other areas where we could be of assistance to MMTG. If you don't mind I'd like to set up a brief meeting in Elk River to introduce our firm and the types of transmission services we have provided to our public power clients in the event that any MMTG members may need our types of services in the future. If I may, I'll follow up this letter with an email in about one week suggesting some dates in mid- November for a meeting. Sincerely, 44,1p, Jim Pardikes Vice President of Transmission Strategy and Capital Planning MCR Performance Solutions, LLC 89 VCR Transmission Strategy Services ,.., ,,,,., _ /.., !I , : I `` ,,,_---..-„,„. 2...7 j` i T• ..\ . , _. „),. : ...„ ,/,-.......,--_,/ , ---, • .. •••., '' '''ai \.:'-■ ,,\T,---•' <\ / '1 .� ,��,_ 10( a •i y- -- -. T � :,tea j 7 '■ "y:I'''! ---' :''' r ' *Y'! i t b w. l �• .t.. i• MCR develops solutions to key issues facing public power utilities and G&T cooperatives. 90 MCR Transmission Strategy Services MCR provides transmission strategy support to joint , . action agencies, municipals, public power districts and G&Ts in MISO and SPP. Our services include: r ;. r%�� -�--- - Formula Rate and Cost Analysis va :: • Transmission Formula Rate Review and Protocol "��•''`' Compliance for Existing Transmission Owners !Gyve ,,r�� p g • Development of Transmission Formula Rate Cost Data for Prospective New Transmission Owners FERC Filings • Section 205 Rate Filing Support • Transmission Incentive Rate Filings Strategic Analysis • Economic Evaluation of New Transmission Projects • RTO Membership Evaluation MCR's Approach MCR uses a collaborative approach MCR's function may include taking a to conduct its transmission lead role to drive the desired results; engagements. The common theme in serving in an advisory capacity; all MCR projects is to find and augmenting client staff in specific generate value for our clients. Before areas; or, providing expert testimony on starting an assignment, we invest the specific topics. We believe that time to understand our client's unique knowledge transfer from MCR to our situation and then work closely with clients, whether through formal training our clients to determine the right sessions or informal interaction with combination of roles for MCR. client staff, is critical for success. "MCR is our go-to consultant." 91 MCR Transmission Strategy Services Transmission Formula Rate Review and Protocol Compliance WHAT WE DO: MCR conducts reviews of formula rate cost data, such as for Yom, the MISO Attachment 0 and SPP Attachment H, for existing transmission %.„,,,„ 47,6' owners. We ensure optimization of transmission revenue, proper recording of costs and sufficient documentation to withstand the increased scrutiny of - r""° °- outside stakeholders as a result of RTO transmission rate protocols. WHAT OUR CLIENTS ARE SAYING: "... everyone l know would do well to have MCR come in at least once to do a review. it's good to have an independent resource that isn't attached to MiSO."--CFO, joint action agency "We felt the money was well-spent even though we had already been preparing an Attachment 0 for a few years. it was good to have an expert in the field to guide us on some of our questions ... MCR's Attachment 0 Workshop was very helpful. They provided background on the Attachment 0, reviewed changes in the MiSO protocols, walked through how the Attachment 0 works and highlighted topics that came up during the Attachment 0 Review."----Head of Power Supply, municipal utility "The results of MCR's Attachment 0 review compelled us to actually change the way we approach transmission accounting; we have upgraded our processes and our accounting to make sure our involvement in transmission is on equal footing with the IOUs."—General Manager, municipal utility Development of New Transmission Formula Rate Cost Data -,___„.: ,w WHAT WE DO: MCR develops the MISO Attachment 0, GG and MM and the SPP Attachment H for new prospective transmission owners to ,pww... optimize cost recovery. We ensure that financial data typically used by G&Ts and public power entities within MISO and SPP (e.g., the RUS Form t'. -- -` `'f 12, EIA Form 412 and GASB-based accounts) properly map to FERC t\ accounts and the referenced accounts in the formula rate template. WHAT OUR CLIENTS ARE SAYING: "As a small organization, we don't have a solid knowledge base of the transmission industry. I was very impressed with MCR's ability to guide us through the Attachment 0 process. They have a great deal of knowledge in FERC accounting and how to properly fill out and map the accounts."—General Manager, municipal utility "MCR has an expertise that was very difficult or even impossible to find. MCR's expertise has allowed us to move forward with our strategic plan on transmission."—General Manager, municipal utility Section 205 Rate Filing Support WHAT WE DO: MCR provides expert FERC testimony for formula rate changes and cost recovery, including new incentive rate implementations, forward looking test years, cost allocations and regulatory asset recovery. WHAT OUR CLIENTS ARE SAYING: "MCR's forward-looking test year - �. ---,----7and construction work in progress analysis helped justify our filing with our - --_._ – - internal Board as well as the ultimate filing with FERC, which was subsequently approved." Transmission Planning Manager,joint action agency "They helped us vet out issues before we finalized positions and pursued strategies; they were willing to tell us what we may not have wanted to hear, but needed to hear."--CEO, joint action agency 92 MCR Transmission Strategy Services Tran W -'• A. ! -ntive Rate Filin•s at., •:, ' ;*:11/.....4' .-/ 7' , WHAT WE DO: MCR is the leader in providing expert testimony and 1 fi ,, . "" . analytics for transmission incentives rate applications to FERC for public , power and G&Ts, including requests for hypothetical capital structure, CWIP in rate base, abandoned plant recovery and regulatory asset account. 1 WHAT OUR CLIENTS ARE SAYING: 'MCR helped us justify a hypothetical capital structure for FERC. it's very technical and something we couldn't have done on our own ... MCR helped us make a successful filing with no intervention."--Transmission Planning Manager, G&T "It was absolutely critical we get incentive rates approved by FERC; otherwise, our investment wouldn't have made economic sense. What impressed me is MCR was proactive about helping us understand what we needed, the process and what the timelines would be."—Vice President, joint action agency "I enjoyed working with them. They were good team players working with senior staff, FERC attorneys, etc. They were very important contributors to our success."—CEO, joint action agency Economic Evaluation of New Transmission Projects /r WHAT WE DO: MCR analyzes the costs and expected revenues for - "7" ) proposed transmission projects. MCR's modeling tools, including the -' Transmission Project Evaluation ToolTm, highlight how value is created under -_ various return, cost allocation and recovery scenarios and how to mitigate ri% large anticipated transmission rate increases in the future. WHAT OUR CLIENTS ARE SAYING: "MCR presented the results to our Board, which is made up of everyday citizens, not utility people. MCR did an excellent job of explaining the results and a very complicated tariff to our Board, whom ultimately makes the decision of whether or not to move forward with the project." General Manager, municipal utility "MCR takes complicated concepts and presents them in a way that's easily understood by our Board of Directors, who are not immersed in the transmission industry." Transmission Planning Manager, G&T ""MCR does a great job on the analysis ...they do the detailed analysis and sum it up in a presentation at a high level, so it can be presented to a Board"—Transmission Planning Manager,joint action agency "MCR has a good mix of skills. They provide comprehensive yet targeted, worthwhile analysis... and(are) very good at explaining and communicating complex issues. They were both very detailed and also very strategic thinkers; (they)never lost sight of the big picture or strategy." CEO, joint action agency MCR brings in-depth transmission knowledge, functional expertise and innovative thinking to every client engagement. 93 MCR Transmission Strategy Services RTO Membership Evaluation r` ! WHAT WE DO: MCR conducts economic and risk analysis using MCR's RTO Membership Evaluation Model TM to assess whether it makes financial �' sense to become a transmission owner in an RTO, such as MISO or SPP. ;� {, WHAT OUR CLIENTS ARE SAYING: "MGR helped us analyze the benefits „ ° r and costs of becoming a MISO transmission owner. MCR was very timely, was within budget, met or exceeded our expectations with regards to the information supplied and the support for the filing."--Transmission Planning Manager, joint action agency "They have done this for others and brought that history and knowledge base of what they've run into previously and were able to guide us through potential pitfalls that we might run into."—General Manager, municipal utility Working with MCR: Industry Know _ At MCR, our collective knowledge is our most prized asset. Our staff has extensive previous experience working in the utility industry, participates in `,° industry organizations and monitors industry changes. Furthermore,we “A1.11 ;'Ca a w openly communicate with clients (past, present and future)to determine the issues they face in the context of industry changes. WHAT OUR CLIENTS ARE SAYING: "MCR helped me understand the industry issues and how we can translate them into transmission revenues."—CFO,joint action agency "They were willing to take on challenges that i don't think other consultants would be willing to do. Yet, they were able to help us stay disciplined and realistic about what strategies we should be willing to take on." —CEO,joint action agency "I was extremely impressed with MCR and their ability to guide us through the Attachment 0 process. They have a great deal of knowledge in FERC accounting and properly filling out and mapping the accounts." —General Manager, municipal utility MCR provides knowledge and services that cannot be duplicated anywhere else. We relentlessly work to provide value to our clients. WHAT OUR CLIENTS ARE SAYING: "MCR was very helpful and very 46/l rf�♦f` informative in terms of teaching me what the Attachment 0 does for my r f/ organization. For our agency and three of our members, MCR was able to 4� point out some significant areas where we weren't recovering all we could; and, for one of those organizations, those numbers were substantial."--CFO,joint action agency "As a municipal utility, we don't have available resources to devote to transmission. It's well worth the investment dollars to hire MCR to get additional information and insights we wouldn't otherwise achieve." --General Manager, municipal utility 94 "MCR has become more than just a consultant; they've become a partner in our operation."—General Manager, municipal utility Working with MCR: C The key to sharing our knowledge and providing value is partnering with our Ii l l` clients. Before a project begins, we work with our clients to determine the exact issues our client is facing. During projects, we work jointly towards a r ', , t" solution, sharing our knowledge along the way. After project completion, we don't just disappear; we stay connected to ensure our clients are better off than before the project began. WHAT OUR CLIENTS ARE SAYING: "MCR is always available to answer questions. All of this is part of the added value– they don't just walk away when the report is done." —CFO,joint action agency "Even during periods when we weren't actively engaged in projects, we have collaboratively worked with MCR to share information to benefit both parties."—Transmission planning manager,joint action agency "MCR always answered questions, both immediately and during times when they needed to follow-up. MCR got everything done in a timely manner." Transmission Planning Manager, joint action agency "MCR is our go-to consultant."—Transmission Planning Manager, G&T Working with MCR: Key Staff - a. _ Jim Pardikes is a Vice President at MCR and leads the Transmission Strategy Practice. He has 30 years of experience consulting to the utility industry, including public power, G&Ts and IOUs. His expertise includes electric transmission strategy and capital project economic and risk evaluation. Jim has extensive experience in facilitating client working teams and presenting to executive management and Boards of Directors. Jim has written extensively on transmission-related topics, such as factors in RTO membership, the value of transmission investments and making the case for transmission incentives. "Jim is very good at explaining complex issues, which led to good, effective testimony." CEO, joint action agency "Jim has a way of getting to the core concept; he's able to present it in a way that's understandable. He has a confidence when he's presenting, which is quite valuable." Transmission Planning Manager, G&T Ron Kennedy is a Director with MCR. He has 14 years of experience in consulting to the utility industry, including municipals, G&Ts and IOUs. His expertise includes development and review of formula rates and RTO protocol compliance, FERC filings for Section 205 rate changes and transmission rate incentives and evaluation of major capital projects. In the transmission strategy and cost analysis arena, Ron has worked with numerous public power and G&T clients on economic evaluations of RTO membership, implementation of formula rates, changes to formula rates and revenue cost recovery. Ron is experienced in presenting to executive teams and Boards of Directors. "Ron was very helpful and very informative in terms of teaching me what the Attachment 0 does for my organization."--CFO,joint action agency "There were some gray areas in the Attachment 0, where it came down to a judgment call. Ron provided very good guidance on what to do in those situations."—Head of Power Supply, municipal utility "Ron knows those FERC accounts like the back of his hand."—Vice President,joint action agency 95 For further information on these services, please contact: Jim Pardikes V.P., Transmission Strategy OFFICE: 847-504-2549 MOBILE: 847-226-2084 jpardikes @mcr-group.com Kik MCR Performance Solutions LLC To learn more about MCR,visit us 155 North Pfingsten Road,Suite 155 online at www.mcr-group.com Deerfield,IL 60015 ©2014 MCR Performance Solutions 96 Minnesota Municipal Power Agency I Quarterly Report IMM.Flik 3rd Quarter 2014 MMPA Posts Strong Third Quarter Financial Hometown BioEnergy Receives $8.2 Million Grant Results Despite Unusual Weather In August, Hometown BioEnergy, LLC, a subsidiary of MMPA had strong financial performance in the third MMPA, received an $8.2 million federal grant for the quarter of 2014, resulting in an increase in net position Hometown BioEnergy (HTBE) project located in Le of$3.8 million. These results occurred despite only Sueur, Minnesota. HTBE is an innovative 8 MW electric three hours of temperature (at the MSP airport) at or generation facility that uses anaerobic digestion of above 90 degrees in the quarter. As a result, peak agricultural processing and animal wastes to produce demands were lower than anticipated for most of the biogas that is used in reciprocating engines to create quarter. dispatchable on-peak renewable energy. The project is part of MMPA's approach to meeting the State of The Agency's unrestricted cash position increased Minnesota's renewable energy standard. The $8.2 by $8.4 million during the quarter and MMPA's rate million grant reduces the total project cost. The stabilization fund grew by$0.3 million to just over $30 Agency used a similar approach to receive a $25 million million. grant for its Oak Glen Wind Farm project in 2012. Total operating revenues for the quarter were $29.8 MMPA Refunds Bonds; Gets Upgraded by Moody's million. Energy sales to members were 403,000 MWh, a decrease of 3% compared to the third quarter of 2013. The Agency refunded all of its outstanding 2004 bonds This decrease is primarily attributable to significantly in a bond sale that closed on September 24. Total cooler weather in 2014 compared to 2013. Total present value savings of the transaction were almost $8 operating expenses (including depreciation) were $23.8 million with first year interest savings of approximately million for the quarter compared to $23.3 million for the $750,000. Moody's Investors Service upgraded its same quarter in 2013. rating of MMPA from A3 to A2 with a stable outlook in its review of the Agency. Fitch maintained its A rating MMPA's increase in net position for the first nine months for the Agency with a stable outlook. MMPA also of 2014 is $6.5 million, compared to $5.9 million for the funded approximately $6.5 million in new investment in first nine months of 2013. transmission with the bond sale. -,. , 'fie Y f i --- ' It — __,...r1,_,_,-,,,,,..,._„ � ilUledlE4 <,,, �' S, p��,,,/' \� �j� r A� The Hometown BioEnergy Facility in Le Sueur, Minnesota Minnesota Municipal Power Agency I Quarterly Report 3rd Quarter 2014 Statements of Net Position(unaudited) September 30 September 30 2014 2013 Assets Current Assets: Cash &Investments-Unrestricted $ 37,990,437 $ 30,373,801 Cash &Investments-Restricted 12,652,395 13,033,214 Receivables 9,402,372 13,008,460 Other Current Assets 4,172,716 2,929,326 Total Current Assets 64,217,920 59,344,801 Noncurrent Assets& Deferred Outflows: Cash &Investments-Restricted 27,705,517 39,984,039 Net Plant in Service 265,895,460 237,618,951 Construction in Progress 10,396,036 36,071,795 Deferred Outflows 54,260 — Future Recoverable Costs 33,783,611 29,291,086 Other Noncurrent Assets 568,919 599,625 Total Assets&Deferred Outflows $402,621,723 $402,910,297 Liabilities, Deferred Inflows& Net Position Current Liabilities: Accounts Payable and Accrued Liabilities $ 9,506,978 $ 16,242,873 Interest&Principal Payable 12,646,434 14,245,504 Other Current Liabilities 859,303 759,689 Total Current Liabilities 23,012,715 31,248,066 Long-Term Liabilities&Deferred Inflows: Long-Term Debt, Net 274,246,567 276,063,143 Capital Lease Liability 20,984,718 21,789,761 Deferred Inflows 36,638,725 32,780,249 Total Long-Term Liabilities and Deferred Inflows 331,870,010 330,633,153 Net Position 47,738,998 41,029,078 Total Liabilities, Deferred Inflows& Net Position $402,621,723 $402,910,297 Statement of Revenues, Expenses and Changes in Net Position(unaudited)as of September 30,2014 Quarter ended Quarter ended 2014 2013 September 30 September 30 Year To Date Year To Date 2014 2013 Operating Revenues $ 29,827,400 $ 33,039,426 $ 81,005,073 $82,044,680 Operating Expenses: Operating Expenses 20,918,046 20,773,751 58,976,206 59,432,781 Depreciation 2,891,948 2,538,276 8,691,459 7,609,396 Total Operating Expenses 23,809,994 23,312,027 67,667,665 67,042,177 Operating Income 6,017,406 9,727,399 13,337,408 15,002,503 Non-operating (Income) Expenses: Other Income (420,623) (254,144) (1,051,333) (779,277) Loss on Disposition of Property — 2,662,317 — 2,662,317 Interest Expense 3,684,410 3,563,041 11,076,256 10,696,991 Future Recoverable Costs (1,069,193) (1,150,139) (3,215,917) (3,458,286) Change in Net Position $ 3,822,812 $ 4,906,324 $ 6,528,402 $ 5,880,758 k;;AC4ii :- cutting through complexity KPMG Global Energy Institute kpmgGlobalEnergylnstitute.com The Agile Utility , .....04 7.111Mikk:1111.'410111111.1w I 1 i ••4 I, 1 t 1 14 =....)..1 —---■.. 111/ ' === ''.".1111 1 - - 1 i I 4* '-'4', r.,..-• 1 ,i-P-r. . li Wel,: "-'7- i'ri. h , 7. :,:, i -..,...... 1;4;-1. . _:I M -L1.4.■r._51 - . .... 7 ---- --. -7- •;:.?':,;41- ''.:1;A. .--' 71i ; . Ai...4 l'il. - ----:-.1ii,r...:-., 1 - --- . -il „ , 1 ....,.. -::i , zz= - „.: , = - - . •N-. ,-.1.1•;:l',.-.. '''.:-7. ...........". . . '-. . !......—. ..- • 7 -— - _-' ' '''.1 : . .''•-4.P:mt : i - .....'.f.,:7";.: al....L.3,1ff-:72* r. I mi Part I: An Approach to Establishing a i Thriving Business in a Changing and Uncertain Environment The Agile Utility Part 1 An Approach to Establishing a Thriving Business in a Changing and Uncertain Environment Key Forces at work changing the Industry combination of electric demand from new electronic devices (i.e., electric transportation), accelerating Today's utility company has never operated economic recovery, and increasing electric prices? in such a dynamic, challenging and Customers want more choices of more affordable uncertain environment. The long-term cleaner, greener more reliable energy. At the same growth outlook is promising but filled time, new competitors representing both traditional with uncertainties. There are a number of utilities and non traditional companies (i.e., solar, fuel significant transformational forces at work cell) have entered the market offering ever lower prices, changing the industry in profound yet new products and services and greener more affordable unpredictable ways. energy alternatives. Which new innovation or emerging technology will customers move to adopt and how fast The economy appears to be improving; however, the will it happen? Promising innovations in technologies in outlook for growth is unevenly distributed. The arrival areas such as electric storage, electric transportation, of abundant new supplies of natural gas is both an rooftop solar, fuel cells, and microgrids continue to opportunity and a challenge for the industry. Will the low mature, and some appear to be coming closer to being gas and electric price environment and a slow economic commercially viable without government subsidies. recovery continue to result in a flat-to-declining revenue Will distributed energy systems take hold and become outlook or will the outlook suddenly brighten from a more prevalent? a r J� _ •Or _ -------- , .. ir W. i ''FF t s 1111®-... ; f 4 0 KPMG The Agile Utility-Forces at Work Changing the Industry in North America 2 100 Top Areas of Concern for Directors Risks and threats have emerged to challenge the and General Counsel phenomenal track record of reliability the industry has built up over the past 75 years. Denser population centers appear more vulnerable to seemingly increased Data security 48% veracity of environmental events. Aging infrastructure, Operational risk 40% efficiency programs and reduced reserve margins in many systems make the margin for error smaller. The Company reputation 40% adoption of greener and more advanced technologies Sec/regulatory compliance 28% (i.e., smart grid, electric transportation, solar, wind) poses new and more challenging operational issues. Disaster recovery 27% The digitization of many of the operating systems has Internal controls 26% enhanced the threat of cyber attacks. Weather patterns are becoming more extreme, mostly due to climate change... resilient grids! 250 Floods - Storms 200 Earthquakes - Droughts Regression lines • Climate change leads to higher temperatures,rising sea 150 levels and more rainfall • Increasing number of extreme weather events 100 101, • Increasing urbanization and settlement patterns lead to 0) higher damages 50 • 2012:US$160 bn damage worldwide(67%in USA) • dir a /.. 1970 1980 1990 2000 2010 Figure 1:Number of recorded disasters Source:EMDAT-CRED,Brussels KPMG The Agile Utility-Forces at Work Changing the Industry in North America 3 101 VT- ME OR MN L• NH , 1 (MI RI _ IA PA ' CT- -. i NJ CA a MO, " Y _ A A D.G. NM AR„op_ _ .. KEY _ . . Gas(Limited)Only I X Gas(Limited)Only Oas(Pilot)Only ,‘- ElectdcltylGas 3 Electricity/Gas(Pilot) D None Federal and state regulatory agendas are being Federal and state regulatory policies and actions heavily influenced by a number of the factors continue to orient towards additional customer mentioned above and a number of key events. choice, incentives for investment in innovation and These influences include: emerging technologies, greener energy standards isThe desire of customers for additional choice and the (i.e., emission controls, renewable portfolio standards), promise of distributed energy technologies. grid resiliency and energy efficiency programs. Finally, an aging workforce poses both a VOW Global sustainability movement and the desire for a challenge and an opportunity. The great shift cleaner, more sustainable energy systems. change has finally arrived. Over the next few years, The hangover caused by recent disasters such as a whole generation of experienced professionals Hurricane Sandy, Fukushima, San Bruno and Macondo will give way to the millennial generation with a whole new set of skills, values and expectations. The emerging threats to reliable energy systems such There is a need for utilities to engage with this as physical security and cyber security. generation to establish an energized workforce that is up to the task of transforming its businesses to capitalize on the opportunities of the marketplace. 50 percent of the workforce is over 45 13.6 percent of the workforce expect years old- the average age is 56.' to retire in the next 5 years.2 KPMG The Agile Utility-Forces at Work Changing the Industry in North America 4 102 Scenarios Technology Breakthrough and the Power of the People- One or a number of breakthroughs in innovation and Exactly how all these forces will play out technology lead to attractive cheap new energy sources is still evolving and there are significant and services and customers rapidly move to adopt them. uncertainties. To envision the future, it's Promising areas include energy storage, rooftop solar, helpful to consider a number of microgeneration, automated home management systems, plausible scenarios. and fuel cells. These breakthroughs lead to a new cycle of deregulation and open market access in markets Flat Economy and Customer Conservation- not already deregulated as well as more robust and Slow economic growth combined with continued energy competitive markets that are already deregulated. In conservation advances results in a flat or even declining this scenario, the most successful companies are those energy growth outlook. In this scenario, the most success- that invest in and are positioned well to market the new ful companies are those that adopt aggressive efficiency, technologies being adopted by the marketplace. capital project rationalization, and asset management Indirectly, the most successful utilities are those initiatives designed to streamline operations, conserve who work closely with their regulators to establish capital, and enhance asset productivity. In addition, the regulatory constructs that support investments in most successful companies work to establish stronger enabling infrastructure and market access. Companies relationships with local regulators and the communities who are most challenged are those who are slow to they serve to support aggressive programs for economic invest in the new technologies or incumbent utilities development in the region. Diversification, merger and that do not move to quickly invest in infrastructure needed acquisitions strategies are also options to gain additional to enable the new markets. Incumbent utilities may face critical mass, synergy savings and diversification into potentially stranded investment in old systems and higher growth regions. U.S.Solar PV Installation Frequency and Volume 90.0 10,000 80.0 9,000 0 70.0 8,000 f° 7,000 2 m 60.0 N H = 6,000 0 50.0 co 5,000 co ai 40.0 C = 4,000 30.0 3,000 20.0 2,000 10.0 1,000 — mow. gun MI ® ■2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E As third party distributed solar PV vendors(e.g.,Solar City)have gained experience,they have been instating more reesE►eCH and more distributed solar PV systems faster and faster. KPMG The Agile Utility-Forces at Work Changing the Industry in North America 5 103 infrastructure made obsolete by the new products. In Services disruptions similar to the examples described addition, some utilities may also face flat or declining above concern the market. A market rapidly develops for sales as customers choose alternative sources of energy the excess energy from customers who have invested in from new entrants into the marketplace. their own micro generation, electric transportaion or other Regulators Rule. A rapidly recovering economy energy storage technologies. These factors lead to the combined with a warming climate leads to escalating rapid adoption of microgrids and other distributed energy electric prices and an escalating increase in demand. systems. Similar to Power to the People scenario above, Mothballed fossil fuel power plants are brought back the most successful companies are the ones invested in on line to attempt to meet peak service loads. Unhealthy and positioned well to market the new technologies being ozone and pollution levels continue to plague many cities. adopted by the marketplace. The most successful utilities Blackouts, brownouts and other service disruptions are the ones that work with regulators to establish occur as a result of a number of factors including: regulatory constructs that provide enabling infrastructure shrinking reserve margins, severe weather, and physical and market access. Disadvantaged are those companies and cyber attack incidents. Any number of these factors who are slow to invest or utilities that are slow to invest in may lead to significant reregulation efforts in a number the needed enabling infrastructure. Potentially stranded of deregulated markets and extended new regulations in investment and a flat or declining sales outlook are also areas such as cybersecurity, physical security, rate caps, risks for the incumbent utility as customers go "off-grid." portfolio management, grid resiliency, and market reform. Gas World—A long-term abundant supply of cleaner The utilities that fare best in this scenario are the ones natural gas creates a sustained low natural gas price with strong regulator and community relationships, environment for the foreseeable future. This leads to a trusted rate and compliance organizations, established significant shift in electric supply towards natural gas regulatory constructs that incentivize greener energy fueled projects and technologies. A resurgence in supply portfolios and grid resiliency investments, strong manufacturing occurs. The most successful utilities are disruption and service recovery plans, and strong the ones that significantly enhance the inclusion of natural stakeholder management organizations. gas and natural gas services and products into their Microgrids and Distributed Energy Supply business strategies. This would include increased gas Breakthroughs in technologies regarding lower-cost micro generation and projects to increase access to purchase energy supply technologies such as micro generation, power fueled or priced by natural gas. Successful utilities fuel cells and rooftop solar and/or a breakthrough in micro will also develop strong customers, state, and municipal energy storage technologies makes microgrids and partnerships to attract new manufacturing projects in the distributed energy supply commercially viable. markets that they service. Some utilities will be successful United States Shale Gas Plays t /?.. r' . {-w 'AA':.`d' aw�E"`"' ,, t l-P�,,/ )".;I:/11,}''',';':1C: Stacked Appalachian Plays `- - f.� , '� . f3 4 ray-:F pi' "�` <• ��' , Gammon \1 '�a ' -,N 0.1.41:,'„, ;,,'' r .JC `v! .�' Ha,.ms., f f I'a r�ca'.� s , � If f r*, '''' �.J ,:'/.41/` AL Ilat f,'�'e' t :,:.-.Ei I I Rh:IP Gas Mays py"'� r i ( to iar _ — ,( y) t 11/ •� 6 8san c..,.. i ,•-q'i54'®Marr Nlnl � i rn rr B11' i .1'./ 4 '(, I'"1 unca :✓4 any iii BM Devonian(OH SONG) f�lh kJ nr ' Ry l IO' —I4,„.Pwrom f "'." .t,` ..----- tl 4 s :Art. ,, ,4�J • try, ' x, _,- /1_ )-:::.,-'___!"°r- , November 2000 N .` /tia�.b n'» y Onv^ ,... .„. A Mlles *v� 1,„ f - / `?A /*Asn aaa444 NNN.�� co..... f 1 { Pa r ` . - and-Cant Be}� lOrere U I:/J MU fiUU '� :.`�=1—� - _ a"�-�aS� •�W+�:-• i I}' **Wan # rz ; . \\r- ?Banwn'> Gy . j�`-poydAlc�y}` .< #,.`° ' f J ~`PNm6n (� 1 lbws \ 1 . 1 "— Besn in NMfBt BaHr •�www.0lEndOebgO f,• \`�. afev•erx f �N, 6 e cP rit-Bn k • . . ,� � Information h L. ) '. ' °Administration ; '', -. c %r t ' " ' i awl+or aU aryl is; - - KPMG The Agile Utility-Forces at Work Changing the Industry in North America 6 104 in diversifying their business into natural gas related gas Similar to the transformation that has occurred in the businesses such as production, gathering, processing telecommunication industry from wired phone to cellular- and transportation. based data service, utilities must transform to adapt to the It is fully possible that each of these scenarios will evolving realities of the markets. Utilities must become play out differently depending upon the region of the much more agile to deal with accelerating change and dis- continent you live in. For example, there are already ruptions that are sure to occur over the next several years. significant regional differences in the electric systems What actions can management take now to become of the West Coast, Texas, Midwest, Gulf Coast, the more prepared to be successful in such an uncertain Southeast, and East Coast of the United States. environment?A few considerations are as follows: Each of these regions has a different market characteristic ur in Break down your business into its most basic functions n terms of consumer preferences, climate, and access (i.e., supply,transmission, distribution, services, etc.) to existing reserves of fossil fuels such as natural gas, and markets(i.e., regulated, deregulated,jurisdictions, population densities and regulatory preferences. customer class, gas, electric, etc.). Understand and define the key elements of your core business. More Agile and Customer Focused Assess how the transformational forces impact Target Operating Model strengths,weaknesses, opportunities and threats associated with each function and the overall lo capitalize on the opportunities which enterprise especially as it relates to the key elements of your core business. exist in such a transformative environment with so many divergent possible outcomes, Leverage scenario analysis to stress test business strategies for each of the functions and the overall it is important for utilities to consider enterprise. adopting a much more proactive, agile Refresh your strategy. Design target business and and customer-focused business model. operating models for the enterprise and each of the key functions. Long gone are the days of a utility charging ratepayers in its undisputed service territory for a predictably growing Develop and prioritize a road map of transformation/im- amount electric demand. The forces described in this paper provement initiatives that drive the enterprise and key functions towards optimal target operating models. are steadily chipping away at the traditional business model and the changes are occurring at an accelerated rate. 95% are optimistic and believe the economy will be the same or better Areas of Increased Spending Business Model Threats 1 Business model transformation Energy costs Impact of new Employee compensation and training regulations/legislation --- Geographic expansion within the U.S. 111111.111111111 30%believe Regulatory environment business Cyber-threats(e.g.,hacking, model data breaches) Expanding facilities transformation Customer/employee would remain mobility the major Regulation/control environment spending area Lack of qualified workforce 0% 10% 20% 30% 0% 10% 20% 30% 40% KPMG The Agile Utility-Forces at Work Changing the Industry in North America 7 105 Effective Utility Model 3-5 Year Markets and Geography BUSINESS MODEL Financial Core Functions(D,T,G) Performance Targets Customers&Regulators REVENUES Core Business Process OPERATING MODEL Operational infrastructure and technology People&Culture Management COSTS Organizational structure, governance and risk controls Measures information and key 9 & performance indications Incentives and dashboards t Transformation and Your Core Business An effective transformation program typically starts by articulating leadership's 3-5 year financial and performance Key to a successful strategy is to identify, aspirations. This foundation allows for a discussion of, analyze, and focus on the key elements of and ultimately agreement on, the trade-offs between yoi_ir core hi ISineSS growth, cost efficiency, profitability, available capital, An example may highlight some of the issues. return parameters and risk appetite as well as implications If you identify energy delivery as a key function of your for the business and operating models. business, it is important to identify the separate the The "business model" drives the essence of how a core and non core elements of this business. For many company will make money in the business-what the target companies, this function faces mounting challenges due geographic market footprint should be, what functions will to aging and obsolete infrastructure, increasing distributed constitute the core assets (i.e., generation, distribution and/ and intermittent generation sources, outdated rate or transmission), who are the key customers, regulators making paradigms, and increasing customer expectations. and other stakeholders, degree of integration across the How do you refresh your definition of core business to value chain (if any), and any unique core asset business now include investments in services and infrastructure extensions (i.e., energy storage, renewable energy, oil & needed to enable new forms of energy supply emerging gas production, and/or gas transmission)that will be invest- off the traditional electric grid? Further, how do you go ed in and/or developed.These choices will be articulated, about differentiating your core operation activites from evaluated and prioritized by materiality and criticality. noncore activities. For example, how much of customer As the business model options crystallize, the focus turns service operations is noncore and can be outsourced to to optimization. Each of the operating model elements providers with greater economies of scale? is assessed to identify initiatives that can be executed to In KPMG's experience, a successful transformation begins optimize the performance of the business. For example, by taking a fresh look at your business starting with a the need to transform an aging delivery business originally review of your strategy, followed by designing aligned set up to deliver energy from mass scale power plants business and operating models and finishing with into a more agile business which enables a multitude of developing the mechanisms needed to support ongoing energy sources and services requires a realignment of execution. The framework we use to support clients in key processes, rationalization of technologies, this approach is the nine-lever framework, which reassessment of risk, and robust change management rigorously links the strategy through execution, thought plans. Such operating model initiatives are captured in a process and design process. KPMG The Agile Utility-Forces at Work Changing the Industry in North America 8 106 migration road map and measures and incentives are What is the right amount of agility? Should the utility defined to monitor the progress of the transformation. be the agile point guard on the basketball court following Management information and KPI dashboards are created the ball wherever it goes or a center that maintains a to target improvements for the key value drivers of the relatively narrow position (in the paint) but is able to business. For example, the delivery business dashboard readily pivot to guard or score?We suggest that the would target areas such as key asset performance, utility should be more like a center by keeping focus truck rolls, outage times, customer and key stakeholder near the basket but able to move quickly to a new(but sentiment, and return on assets in order to provide not vastly different) position. Focus on core investments management with a practical control mechanism for and operations but stay in the game at in emerging managing the business. technologies and related businesses. Agility Is Key The key to being successful in this E_,;; changing and uncertain environment is to WORLD ensure that agility is built into the strategy, �_,"`' business models, target operating models, ? ,t and transformation initiatives USIN ` Examples of how utilities can improve agility include: Q ?`" lirDeveloping a list of key variables that can detect, ^ guide, and point towards key developments and .., changes of the transformational forces and scenarios '. occurring in the industry. Real-time systems and f` processes to track changes to these variables. Flexible business strategies. — . trategies. . riffFlatter and more flexible operating models with the ability to make faster decisions and execute actions. FitEnhanced and more proactive customer and key t - stakeholder sentiment systems and processes. Stronger feedback loops into strategy and operations. illEnhanced investment in innovative technologies that are aligned with targeted business models. © Better employee feedback and incentive programs oriented towards rewarding new ideas regarding efficiency, safety, innovation and customer service. KPMG The Agile Utility-Forces at Work Changing the Industry in North America 9 107 Conclusion There is no doubt the utility industry of the future will look very different from the industry we have today. The overall outlook is positive although growth is not a given. The landscape will be greener, more efficient, with more customer choice. New products and services will emerge and some will take hold with very promising results. Regional differences will continue to influence the way markets develop and companies operate. Inherent risks will tend to increase as the industry strives to adopt more advanced technologies, tap into more complex energy sources, and population centers become larger and denser. The utility that thrives in this environment is the one that is constantly striving to understand, influence and react to the transformational forces impacting the industry plus the ability to quickly make course corrections along the way. A successful utility proactively embraces these changes and adopts a clear but agile business strategy for the benefit of its customers and shareholders. III r , } { ' gfp' /(% r . w / r k F( 1 M1 _`J� / i ;—lkii ...,,, cutting through complexity 11111? ' Ili KPMG Global Energy Institute 4 kpmgGlobalEnergylnstitute.com , 1111011P"-1 r , The Agile U 4 4 ,. ., -...."41111111 ow .1 41111111"."'- litiv , / ,,._ . 1 , AI& ,,op , „:,t ---4;:°;)' 71:. 7fliZt a vtaffi `„:_s ,.vim'` . Part II: More on the Key Forces of Change Impacting the Power and Utility Industry in North America The Agile Utility Part 2 The Conundrum of New Supplies of Natural Gas and its Impact on Utilities U.S.Natural Gas Production,Consumption,and Net Imports Capturing the full benefits of the new cheap supplies of natural gas can be elusive. 40 History 2011 Projections The current low price natural gas/electric Netexp°ns 2000(,2% Tolal production price environment has put a lot of pressure 30 Net imports,1U71(a%) on utilities whose energy supply portfolio ^.l Total consumption is fixed to a diversified array of non gas 70 fired generation. 10 Natural Gas Prices Have Historically Been Volatile Netimports 0 Planning for a new generation mix historically has occurred within a 20-30 year time horizon with long lead times and for long-lived capital intensive assets. Planning 1990 2000 2010 2020 2030 2040 for no regrets over the long-term presents as a series of challenges wrapped in questions. For example, how Henry Hub Gas Price 13 do you take advantage of low-cost, abundant sources of North American natural gas when historical gas prices $/MMBTU 07 0 have proven to be volatile over the long-term? How do 065 you manage through the current earnings pressures associated with a low pricing environment? How do you s6.0 respond to consumers and regulators desiring a greener, 555 more sustainable energy response? How do you recover 550 costs prudently invested in non-gas related energy sup- 5545 plies expected to be productive for the next 20-30 years? 540 Natural gas has never shown more promise as a cleaner, 535 2018 Global Gas Market —Base g p Integration Coefficient=0.3 �H,dh Rape abundant fuel than with today's North American shale s3° Base=0.2 -Low S„„. gas revolution. But when natural gas prices are low, it 525 2017 9f11 2014 9110 90+6 70+7 2111R poses a significant dilemma as utilities have historically needed to take long-term positions and trade-off value Projected impact of U.S.exports of LNG on Henry retention of existing generating assets such as coal and Hub Liquid Natural Gas price ena nuclear. We have been down this road before. Natural the more you export natural gas, the more you will likely gas prices are volatile and have cycled from highs to lows push up its price at home. An overreliance on natural gas within the last decade. Gas fired generation also has a for power generation is a business with uncertainty.” higher proportion of fuel based operating costs relative to capital costs making unpredictable pricing even more The Need for Infrastructure and pronounced in a rising price environment. So gas is New Opportunities positioned as a more unpredictable resource in the electric generation business even with its seeming abundance "The reliance on natural gas has also revealed bottlenecks that extends for at least the next decade. and a growing concern of needed infrastructure to get the gas to market," added Matthew D. Smith, Advisory "Natural gas might be a good bet but we don't know if it's principal, KPMG LLP (U.S.). "It is a challenge to pull the a sure bet," said Andy Steinhubl, Advisory principal, KPMG gas through the existing transportation network in certain LLP (U.S.). "Today, we are simply dealing with a shift in areas of the country that are growing more dependent utilization. The bigger moves are in the next decade. Shale on gas-fired generation. Some solutions may include gas portends greater supply but we don't know how much investments in more robust electric transmission of it may be exported. LNG could prove to be a boon yet networks, localized natural gas delivery, and distributed KPMG The Agile Utility-The Conundrum of New Supplies of Natural Gas and its Impact on Utilities 12 110 m 1414 r aa. -ii Up to $200 billion is needed in U.S. natural oi3/4 gas infrastructure over the next 15 years --, ;1i $300 billion needed in investment globally to exploit resource base jj _(4 ' 4 42i i.I s 1 rA r ' C.; P. �xyzt y q s t �a �raa •J,T1 Y�G _ .' 4.S-'4 `.i R'.. _ �` energy systems. The Marcellus and Utica shale formations To capitalize on the full potential of the promise of natural provide a close market supply as an alternative to gas, a number of key questions should be considered in long-haul gas transmission. You will need infrastructure your business planning: but it's more localized," Are there gas transmission investment Mary Hemmingsen, Advisory services-National Sector opportunities that would accelerate access to Leader, Power and Utilities, KPMG LLP (Canada), agrees local shale gas supplies? pipeline development is a challenge. "New or expanded gas pipelines will be needed along with new regulatory El, Are long-term gas contracts or capacity commitments and contracting models to support development and available, and will regulators allow recovery of those mitigate gas price fluctuations." Hemmingsen added that costs to insure availability of supply? "deploying gas based power options, even with potential What is your strategy to avoid disruption from "lir price volatility offers an important portfolio value add and emerging distributed energy technologies such as can be a link into additional revenue generating ventures. fuel cells or microgeneration? You may be able to look at growth associated with gas distribution and marketing; expansion into other alternative Can regulatory agreements be developed to avoid the gas based fuels, and fueling stations." economic retirement of existing generation that will negatively affect reserve margins and reliability? "While the price of natural gas may be volatile, it will likely be the lowest cost generation option over the next 10-20 ur Should you diversify your business to invest in years," Smith advised. "Assess your current footprint and other natural gas based opportunities such as gas from a planning standpoint are you taking full advantage transmission, distribution, microgeneration and of gas? What is your particular circumstance as it applies liquefied natural gas(LNG)? to reserve margins and availability?With shrinking reserve margins in many areas, there is considerable urgency." KPMG The Agile Utility-The Conundrum of New Supplies of Natural Gas and its Impact on Utilities 13 111 Power to the People and Impact of Emerging Technologies Emerging technologies are presenting the sale of excess generation produced by customers back power and utility industry with a series of to the grid under net energy metering(NEM)policies. Lower electricity sales volumes(i.e., kWh)due to NEM opportunities and challenges in an era of means that utilities will have to charge higher prices or decreasing retail sales and increasing customer impose bigger fixed charges in order to maintain and invest expectations. Recent innovations will undoubt- in T&D infrastructure. edly spur the evolution of the utility business • Microgrids could also play a role in developing new utility model for both regulated and nonregulated business models in which pockets of customers are companies, as well as open the door for interconnected and supplied from smaller, local generation nontraditional service providers such as utility- resources, rather than continuing to obtain power from the scale and distributed solar energy companies. grid that has been produced by utility scale power plants. Microgrids could provide an answer for companies needing At the forefront of this industry transformation are a group less high voltage transmission but a stronger local distribution of disruptive technologies including smart grid, distributed network. Many utilities are looking at microgrids as a way to generation (e.g., solar photovoltaic (PV), combined heat avoid and/or better manage weather-related power outages, and power (CHP), fuel cells), and microgrids. and help differentiate what is otherwise a homogeneous product.They are also investigating the role microgrids could • Smart Grid Technologies include a group of software play in the utilization of distributed generation. and hardware technologies that enhance the measurement, management and delivery of energy on electric grid. Utility regulators generally are favorable towards Examples include real-time two-way metering, advanced communication systems and load monitoring devices.The distributed technologies and microgrids, and often promise of smart technologies and systems includes more provide incentives for them, which present competitive efficient operations, more rapid recovery from unplanned challenges. This can also be an opportunity for the outages, the integration of intermittent(wind and solar) distribution utility to make investments in smart grid tech- renewable energy, and the ability for customers to better nologies that improve grid stability and optimize variable leverage energy management systems and distributed resources. Enhancements in both large scale and distrib- energy sources. Smart grid systems are still in the process uted energy storage, cloud computing, and data analytics, of realizing their full potential.Various regions have begun also have the potential to transform utility operations. initial implementation of certain technologies, and the product offering themselves continue to rapidly evolve and improve. Weighing Delivery Choices and Technology • Distributed Generation (DG) is not a new concept. However, recent cost declines in the solar energy supply Within the past decade, there has been an industry-wide, chain, and a series of government incentives like federal government-supported call to action for utilities to invest and state investment tax credits (ITCs)and state-level net in new technologies that drive progressive business metering policies have made distributed generation more strategies. However, there is also consistent pressure to ubiquitous over the last several years. DG can create both focus on traditional priorities including providing reliable technical and financial challenges for utilities. Increased service without the need to increase customer rates. reliance on intermittent generation from distributed renewable resources like rooftop solar PV require careful interconnection While inaction could ultimately result in a decreasing and asset inventory planning studies by distribution utilities customer base and declining shareholder value, allocating to ensure that grid reliability and frequency stability can be capital and personnel to technologies that do not support maintained. From a financial perspective, the majority of a utility's core business model can result in capital expen- states in the United States have enacted laws to support the ditures that increase the risk of an insufficient return on KPMG Power to the People and Impact of Emerging Technologies 14 112 investment. "Utilities must sort through the emerging technologies to analyze, prioritize, and act based on what "Utilities must sort through is important to the future of their company," said Todd the emerging technologies to Durocher, Advisory managing director, KPMG LLP (U.S.). analyze, prioritize, and act based "A one-, two-or five-year strategic plan allows a utility to pursue technological solutions that are relevant and be on what is important to the ll selective in the choice of vendors knocking at their door." future of their company, -Todd Durocher,Advisory managing Finding the Right Shoe and Right Fit director,KPMG LLP(U.S.). Given the myriad of technology development opportunities that are available a well-thought-out investment strategy is important. To determine the right strategy for your company, a number of key questions should be considered: riff How does the technology investment align with my core business model? Is the investment critical to enhancing core business performance? Or is the investment an extension to my core business? Extension investments should be carefully reviewed and scrutinized to ensure it is managed properly. IffHow does your geographic and climate footprint impact the investment in or adoption of a new technology? Obviously, it is an advantage to invest in solar projects in the sunnier parts of the country and microgrid technologies can be compelling in more congested areas of the continent prone to storms. rirWhat is the customer sentiment relating to new technologies? Do your customers place a high value on greener energy technologies even at higher prices? Do they move to adopt new technologies such as electric transportation, home management systems or distributed energy sources(i.e.,fuel cells)quickly? ErWhat is the regulatory agenda like for the adoption of new technologies?Are incentives or regulatory constructs in place for recovery of and return on these investments? KPMG Power to the People and Impact of Emerging Technologies 15 113 Regulatory Issues Associated with Distributed Generation and Renewable Energy Renewable energy technologies continue to Net Metering Policies and its Impact on evolve at a rapid rate. Specifically, various Customer Rates distributed generation technologies, such as The growth of distributed renewable generation is due in solar PV, fuel cells, micro- wind turbines and part to utility retail rate design, and at the same time is other types of distributed energy storage are starting to put upward pressure on retail electricity prices. improving in performance, and declining in "Customers that substitute electricity from their own cost, although at different rates. Customer rooftop solar systems for power provided by a utility are demand for distributed generation that not independent from the grid, unless they also purchase provides for predictable pricing at lower costs energy storage and back-up power systems," said Glenn George, principal and co-head of Economic& Regulatory, continues to increase, as evidenced by the KPMG LLP (U.S.). To date, they still rely on the grid, and rapid growth in the number of residential, utility-owned transmission and distribution wires, to commercial and even public-sector customers obtain utility-supplied power when the sun does not shine, with on-site solar systems. The combination or lack of wind idles their micro-turbines. In addition, in of on-site generation with net metering states with net metering policies, customers use utility- policies available in most states is putting owned "wires" to sell back to the grid any distributed downward pressure on utility sales that in generation that exceeds their own consumption, usually at the retail prices that they would have otherwise paid most regions are already declining or for that electricity. growing more slowly than in the past. "The bill reductions achieved by residential customers that Retail and commercial customers often are use rooftop solar PV to supply themselves, and in some unaware of the role growing penetration of cases 'sell' excess generation back to the grid, usually renewable energy can potentially play on exceeds the costs utilities avoid as a result," said Bruce long-term electricity prices. Perlstein, a director of regulatory Advisory services KPMG LLP (U.S.), who has advised several utilities on these "The attractive initial costs of renewable issues. "Those bill reductions are based on volumetric power has taken distributed generation from ($/kWh) charges that recover fixed T&D costs, as well a niche base of customers interested in as the costs of back-up generation capacity needed to green power to more of a mass addressable integrate customer-sited intermittent renewable resources market," added John Gimigliano, principal in into the grid, in addition to variable power production costs that are avoided when customers use power they gener- charge, Energy Sustainability Tax practice, ated for themselves, rather obtaining that energy from the KPMG LLP (U.S.). "However the costs of grid." As a result, utilities must charge other customers maintaining a reliable grid infrastructure have higher prices, thereby creating a cross-subsidy, benefiting to be passed on somewhre. The question customers with on-premises renewable generation at the remains if consumers who are ultimately expense of other customers. That gives nonsolar PV willing to pay a higher price for green power customers an even greater financial incentive to install solar PV, particularly residential customers on inclining block rates that use relatively larger amounts of electricity and therefore pay higher marginal prices for that energy. 7s KPMG Regulatory Issues Associated with Distributed Generation and Renewable Energy 16 114 Let the Debate Begin resource and financial planning. This can be accomplished by considering a number of key questions, including: These developments have triggered debates in regulatory proceedings in a growing number of states. For example, How much are different types of customers willing state regulators recently authorized Arizona Public Service to pay for greener energy? Is that willingness to pay (APS) to temporarily charge net metered solar PV higher, lower, or the same if the energy is provided by customers a 70 cent-per-kilowatt ($5.00 per month) fixed distributed generation resources, rather than utility scale generation resources? charge, and deferred the broader issue to the utility's next general rate case. "I view Arizona as a victory for the What is the total actual cost of different distributed vs. utilities," said Gimigliano. "In their attempt to recapture utility-scale renewable energy generation resources, cost from solar customers, establishing a fee sets a and how do those costs compare with the cost of precedent as one way to tackle recouping some cost. electricity generated by conventional resources?What Arizona's$5 fee may well set the floor, not the ceiling, is your company's plan for communicating these costs for the magnitude of fees in other states." However, as to your customers and regulators, and how will it measure the success of those efforts? Perlstein noted, "The debate is far from over, if only because the actual cross-subsidy solar PV customers of Are net metering and other public policies in the APS are receiving is more than $5 per month." jurisdictions in which your company serves The issue is being debated in a growing number of states customers subsidizing certain generation technologies and/or energy providers over others?Are those with significant solar generation potential. The discussion differences consistent with public policy, and/could is particularly vigorous in Colorado and California where a those incentives be provided in a more efficient way? 2013 California PUC-sponsored study concluded that What is your company's strategy for engaging the current$1 billion cross-subsidy received by net regulators and other key stakeholders on these issues, metered solar PV customers will reach $20 billion by and what policy changes would your company like to 2020. This debate is growing, and is unlikely to be see? How would your company articulate and measure resolved for some time. the benefits of those policies? Regardless of the magnitude of the impact of distributed What role(s), if any, should your regulated utility or its and utility-scale generation on retail electricity prices, it nonregulated subsidiary play in the growth of distrib- may be time to be much more direct and transparent uted generation within and/or outside your regulated with customers regarding the actual costs of distributed service area? Should it own, lease,and/or help custom- generation. Direct customer communications, rate design ers finance their purchases of distributed generation changes and tariffs could be adjusted to accomplish this. systems?What is your company's strategy for engaging Adding the correct pricing signals may have the added regulators and other key stakeholders on these issues, and what policy changes would you like to see? benefit of encouraging energy management and conservation efforts by customers, mitigating rising What impact is the design of your current electricity energy costs. Ultimately these actions should result in rates having on the strength of customer preferences more sustainable greener energy strategies and policies. for or against distributed generation, as opposed to purchasing power produced by conventional generation Therefore it's important for utilities to be active in working resources? Should certain retail rates be redesigned to with regulators and other key stakeholders in refreshing remove unintended incentives,or add incentives, energy policies in areas they serve and to take a fresh look in light of public policy and utility goals?What is your at their own strategies for enhancement. company's strategy for engaging regulators and other Key Considerations for Your Distributed key stakeholders on these issues, and what policy changes would you like to see? and Green Energy Strategy How will your company's renewable and distributed In light of these developments, it may be time for your 6 energy resources and/or policies be affected by foresee- company to focus more on its green and distributed able innovations in energy storage, fuel cell, and/or energy generation policies and strategies in doing microgrid technologies or changes in natural gas prices? KPMG Regulatory Issues Associated with Distributed Generation and Renewable Energy 17 115 Managing the Increasing Risk of Power Supply Disruptions Reliable electric and gas service has never characteristics of key components of electric delivery been more vital to society. In the digital age, infrastructure such as transformers, substations and reliable electricity is a necessity that we take distribution lines. "A number of leading delivery companies are leveraging advanced data management for granted. We live in a largely cash free and analytic capabilities to understand the performance society that relies on electronic everything to risk associated with some of its key delivery assets. function. Much of our population has located This is leading to enhanced asset management practices, in harsh winter and summer climates because capital allocation methodologies, and preventative utilities have provided relatively inexpensive maintenance plans," said Hiran Bhadra, Advisory and reliable energy service for decades. principal KPMG LLP (U.S.). "They believe that this will lead to longer lived assets, fewer outages, faster While there are a myriad of issues and recoveries, and more reliability." challenges facing the industry, at the end of The more advanced companies have invested appropri- the day, utilities must maintain a core focus of ately in making their delivery systems more resilient. The reliable delivery of energy to customers. This rationale behind these initiatives is that there are going to core business function faces mounting risks be security breaches or faults that are going to impact the due to a number of factors including: ability of the delivery system to operate normally. Having Er buiAging and obsolete infrastructure requiring lt-in, preventive countermeasures that makes the massive investment system self-healing is one aspect of mitigating this risk. lirStorms and other significant incidents on the system and increasing expectations from customers regarding real-time communications in the event of an incident Increasing threats from physical and cyber attacks. y Aging Infrastructure and Asset ` r � Management Planning :f "While you can't control the weather, there are things you can control to proactively manage interruption to • supply" said Tate Anderson, Advisory partner, KPMG LLP (U.S.). "Part of risk management is developing data driven insights on identifying risks to the electricity network and I taking proactive measures through asset maintenance and •- Aging Infrastructure planning the right capital projects at the right time." Number of significant power outages in the United Incorporate a heightened risk view into capital allocation States has increased over 300 percent since 2007 and key operational practices, and you will be able to be 11 Hil I Weather much smarter in the deployment of your capital and maintenance dollars. For example, recent investments in Total economic losses related to 296 natural smart technologies have led to an exponential increase disaster events reached$192 billion in 2013 in data that is available relating to the performance KPMG Managing the Increasing Risk of Power Supply Disruptions 18 116 with new methods to detect and mitigate information risk, the mounting shifts in the security landscape are creating new challenges that need to be addressed," said Michael Gomez, Advisory principal, KPMG LLP (U.S.). "We recommend you don't put off what needs to happen today." Business Continuity Management and Good Communication Power disruptions inevitably do occur, and when they do, it is important to have a regularly tested set of business °$ �{ continuity management plans that once activated, ,�� A ensure some level of delivery system operations during -- • '4s'ca - • abnormal conditions, while the recovery activities are o�; being completed. Key to these plans is to have a strong communication plan. This plan includes plans for each f7 "� • of the key stakeholders such as customers, mayors and other municipal officials, and the media. When power is disrupted, all parties want information in real time. Being timely and transparent with the right information is essential. Those are tenets for a utility's success with social media. Use it but use it wisely. The speed in which social media operates is a double-edged sword. While you can provide a nimble response during Revisiting Your Security Plan power outages for your customers, they are also developing instant opinions based on how you perform The security risk landscape that utilities face is in a and will share their thoughts for all to see. Be accurate and constant state of flux. In fact, the Federal Energy useful in times of power disruption. Do social media right, Regulatory Commission in March 2014 directed that a and you are leveraging a powerful tool to your advantage. standard be developed that addresses physical security threats and vulnerabilities. FERC laid out a strategy it feels Enhancing Risk Management of Power offers utilities flexibility-focusing on your most critical Supply Disruptions facilities, incorporating risk management and affirming In light of the evolving threats to your business, consider "foundational" physical security efforts. Gerry Cauley, the following questions: president and chief executive officer for the North American Electric Reliability Corporation wrote, "NERC Have you incorporated a risk view into your commends FERC for outlining an approach in this directive capital budgets, maintenance budgets,and asset that calls for a risk assessment to identify critical facilities." management plans? Because the systems and assets that comprise the © How have you leveraged data and analytics in your nation's power grid are vital to growth, safety, and defense asset management plans to better target capital and of the U.S. critical infrastructure, cybersecurity is quickly maintenance budgets and ultimately improve reliability? becoming or should be one of the most important How have you addressed emerging physical and cyber strategic and operational topics in the board room. Fs threats into your risk management strategies? "Even though new security tools, protective Have you updated your significant incident countermeasures, data analytic algorithms, and grid management and communication plans to take health monitoring mechanisms are providing organizations advantage of advanced social media tools? KPMG Managing the Increasing Risk of Power Supply Disruptions 19 117 Building a Workforce for the 21st Century Call it the "great shift change;" utilities are KPMG LLP(U.S.). "But offer them compelling work right losing their "brain trust" through person- out of the gate and you can attract and retain them. nel attrition and retirement. Without enough This generation doesn't just want a job, they want to qualified replacements coming up through the contribute and make a difference. They also want to climb faster within an organization." ranks and even fewer recruits interested from the outside, the industry is facing a labor force The increasing use of technology and innovation associated with sustainable energy might be a draw to quandary. With advances in technology, maybe a younger worker," said John Kunasek, National Sector your company can function with a smaller Leader-Energy and Natural Resources, KPMG LLP (U.S.). workforce, but even with fewer staff, you will "Consider the role of technology and innovation that need to hire to sustain today's company cleans up the environment, automates your home, and into the future. electrifies the transportation industry. This could be an It can be a challenging road. How do you appeal to employee's dream." talent that may not be inspired by utility work? It starts Your Existing Workforce with understanding the next generation of workers. In light of all the changes occurring in the industry, The "that's the way we've always done things" attitude its time to conduct a current skills inventory of your is not one millennials will embrace. They are interested in workforce. Get a handle on what you have and what you'll companies committed to innovation, collaboration, need. Take that information and create a forward-looking, and altruism. organizational model that identifies capability gaps within l!{ i I i the company. Look to your existing workforce as a source ,� °$ `'j �� , II �`� ,�' ' for talent. No one wants to be in a dead-end job; consider _ job rotations and leverage the talent you have to IA�� mentor or train other employees. Remember, your existing It i h ;' ' workforce is your currency; make the best use of them. vi, "Mobility within a company can be a retention strategy but it may require different jobs within the company," said / . Thompson. "Avoid silos so your workers are exposed to Generation Gap 0111.1 ilk different departments and jobs; this is a great way to create deeper capabilities and flexibility that is needed to Significant motivational difference run a utility. Gen Y isn't looking for a lifelong partnership between Gen Y and Boomers with a company, but provide varying experiences and opportunities for growth within the same organization and that restlessness can work to your advantage." Understanding Generation Y Millennials (some 82 million born between 1982 Losing employees to competitors and 2002) will replace the baby boomers as they retire. "Generation Y" is plugged into technology like no other is the #1 reason for attrition group. They comfortably multitask, and are more ethnically diverse. They also expect to change careers Internal succession plans are important—both to find the multiple times. "For this generation, they are not next person to fill the job, but also to identify the skills that inherently interested in the issues associated with the are transferable within various areas within the company. utility industry," said Zoe L. Thompson, Advisory principal, KPMG Building a Workforce for the 21st Century 20 118 r �, r. � - / k' �' ' I'•T (' p '` /o 4, p.,- . ,. ,..„ .„---- 4_. , , ,:_., ,. ,_ - „------ ; ,.., , . .,, „,...... „.. ; .. ,, ,, . �y , Y i I.- I f .,---- �/ A Stronger Employee Strategy Have you developed succession plans for key positions? The great shift change is both a challenge and an opportunity to transform your workforce. The key will to How clear is the career path for recruits? How flexible leverage and capture the experience of your existing are they-are employees stuck within a particular employees while at the same time attracting and retaining function or division or can they transfer their skills to a new highly energized workforce. This objective requires other areas of the organization? a different strategy in today's environment. Consider the following questions to strengthen your employee strategy: ® Have you developed a key position rotation plan for high performers? EirHave you taken an inventory of the current skills and experiences of your current most talented employees? What role does innovation play in your organization? Do you have an understanding of your capability gaps in 6 Is it visible to recruits? light of the changes occurring in the industry? Do you have recruiting plans targeting key WWhat is the typical experience for an employee's first universities? How strong are your relationships with 18 months with the company? Do new employees faculty and students regarding innovations occurring get exposure to the "heart" of the business?Are in the industry? there opportunities to contribute meaningfully in the beginning of their tenure? KPMG Building a Workforce for the 21st Century 21 119 Contacts John Kunasek Michael Gomez National Sector Leader, Energy,Natural Resources Principal,Security Risk Management P.713-319-3513 P:202-533-5007 E:jkunasek @kpmg.com E.michaelgomez @kpmg.com Regina Mayor Zoe Thompson National Advisory Industry Leader, Energy Principal,Talent Management P:713-319-3137 P.713-319-2795 E.rmayor @kpmg.com E:zthompson @kpmg.com Matt Smith Glen George Principal,Management Consulting Principal, Regulatory Consulting P:312-665-2123 P.267-256-2688 E.matthewdsmith @kpmg.com E.grgeorge @kpmg.com Andy Steinhubl Bruce Perlstein Principal, Energy Strategy Director, Regulatory Consulting P.713-319-2614 P.415-963-5163 E:asteinhubl @kpmg.com E:bperlstein @kpmg.com Todd Durocher Hiran Bhadra Managing Director,Technology Enablement Principal,Utility Asset Management P:617-988-1278 P:214-840-2291 E:turocher@kpmg.com E.hbhadra @kpmg.com John Gimigliano Mary Hemmingsen Principal, Energy Sustainability Canada Sector Leader for Power and Utilities P:202-533-4022 P.416-777-8896 E:jimigliano @kpmg.com E: mhemmingsen @kpmg.ca Tate Anderson Partner,Utility Risk Management P.214-840-6766 E.tkanderson @kpmg.com cutting through complexity 120 VISION COMMITTEE i Our 100 Year Anniversary is quickly approaching and we want to make it a yearlong celebration. So how should we celebrate this exciting milestone? WE INVITE YOU TO BE PART OF OUR 100TH ANNIVERSARY VISION COMMITTEE We're looking for people that are interested in sharing their ideas on how we celebrate and promote our anniversary. Some of the topics we'll discuss are: branding, open houses, BBQ's, power plant tours, press releases, social media, promotional giveaways, etc... What is your vision? We want to know. Please consider being a part of this committee. We're looking for some people from the inside office staff, the outside field staff and someone from the Commission. Our Vision Committee is bound to be made up of a diverse and talented group of individuals, and I can't wait to hear the ideas we'll come up with. The sky's the limit! Worried about the time commitment? We know everyone's time is valuable and anticipate meeting twice a month for about a half hour to brainstorm. Additional details will follow once we've firmed up who will be on the committee. If you're interested in being part of the committee, please contact Michelle Canterbury at 763-635-1330, or via email at mcanterbury @elkriverutilities.com. "If you are working on something exciting that you really care about, you don't have to be pushed. The vision pulls you." - Steve Jobs 121 2016 Public Power Lineworkers Rodeo Planning and Needs October 22, 2014 Planning for APPA's 2016 Public Power Lineworkers Rodeo has begun. Our first planning meeting was held September 30 and was an overwhelming success. We accomplished a lot, but have much more to do. A special thank you to all who attended! A key development from this meeting was to provide the membership with estimated budget figures so our cities and utilities can contribute funds to a category of their choosing. Below you will find the estimated construction and ancillary costs needed to make the rodeo a success. Members who have already committed to donating to each event are noted. To be a part of the construction process, let me know if there is someone on the list you would like to work with. The more cities we have sharing an event the more affordable it becomes for all. Construction Donation Needs Estimated cost per event $8,000 Apprentice Events (4) Event#2— Hurtman Rescue— MRES, Fairmont, Brainerd Event#3—Willmar, Sauk Centre Event#4—Chaska, Glencoe Event#5—Owatonna, Sleepy Eye Journeyman Events (5) Event#1— Hurtman Rescue— MRES, Fairmont, Brainerd Event#2— Detroit Lakes, Elk River Event#3—Shakopee, New Prague Event#4— Marshall, Hutchinson, New Ulm Event#5—Austin, Rochester Funding for the event construction will be needed by September 2015. We will be constructing the rodeo grounds late summer/early fall next year so things are set come April 2016. Please do not send money now. We are only asking for commitments at this time. 122 Following are the estimated ancillary donation needs. If you would like to donate your funds either in whole or in part to a particular need, please contact Rita Kelly at MMUA to reserve your spot on the donation list. Estimated Ancillary Donation Needs Friday Night Pre-Event BBQ $19,008 Food and Concessions $8,000 Portable Toilets and Wash Stations $4,000 Stage Rental $1,000 Children's Play Area $3,000 Golf Cart Rental $1,500 Field Security $3,300 Tent Rental $7,000 On-Site EMTs $1,000 Portable Radio Rental $490 Scoring -Venue $1,190 Ice $860 Field Clean-up $750 Trash Containers $750 Media (Advertising, Banners, Signage, Video) $14,500 Miscellaneous $5,500 Funding for these events will be needed in January 2016. Again, do not send money now. We are only looking for commitments at this time. Volunteers Needed Along with all the financial needs, we have many opportunities for people willing to volunteer their time helping this rodeo become one of the best ever. Below you will find a list of volunteer positions: Pre-Registration Volunteers—Need 25 Thursday, March 31, 2016 Shift 1 — Need 15 Shift 2— Need 10 Registration Volunteers— Need 16 Friday, April 1, 2016 123 Rodeo Event Day Saturday, April 2, 2016 Children's Area Volunteers— Need 30 Shift 1— Need 10 Shift 2 — Need 10 Shift 3 — Need 10 Parking Volunteers—Need 5 Event Judge Volunteers— Need 40 - Must have lineworker background to be an Event Judge Greeter, Entry and Exit Auditor Volunteers— Need 30 Bucket Truck Operators for Hurtman Rescue Event Volunteers— Need 16 - Must be qualified to operate bucket truck proficiently If you have any questions or want to get on the list to donate and/or volunteer, we are happy to assist. Contact Information Mike Willetts Email: mwilletts @mmua.org Phone: 763-746-0705 Rita Kelly Email: rkelly @mmua.org Phone: 763-746-0707 Thank you for your support! Mike Willetts Director of Training & Safety Minnesota Municipal Utilities Association 124 wMII q Technical & Operations Conference December 9 - 11 r 2014 Holiday Inn & Suites , St . Cloud , Minnesota 444 1111/4 4 ii _ 1Ir 4' t • 9 ,.'47,-.7 '`:-; This conference is designed to offer useful information to superintendents, managers, supervisors and crew leaders about the upcoming challenges utilities are going to face with the economy, employee retention, and preserving the craft of the electrical industry. It is also designed to create great leaders within the municipal utility industry. Training Center Mission: To promote, perform, and enhance safe work environments in our municipal utilities, with the willingness to learn and pass on the passion of the craft. Minnesota Municipal Utilities Association 3025 Harbor Lane North,Suite 400 Phone:763-551-1230 www.mmua.org Plymouth,MN 55447 Fax:763-551-0459 125 14th Annual Technical a Operations Conference GENERAL SESSIONS Updated OSHA 1910.269 Effective Leadership&Accountability Mike Willetts, MMUA John Miner, Collaborative Learning, Inc. The Occupational Safety and Health Administration(OSHA)recently Today's utility manager often has no effective role model or mentor to updated the 1926 Subpart V(construction)and 1910.269(general guide his or her professional development.At the same time, industry)standards for electric power generation,transmission, managers in today's utility environment are confronted daily with a distribution and electrical protective equipment. rapid succession of diverse work situations and challenges. Managers have simultaneous responsibility for managing upward and This session is of the utmost importance so each utility understands outward to the governing board,and inward to the organization and the new and updated OSHA rules and how they will affect their daily employees.This seminar explores the relationship between utility operations. MMUA is offering this session to help members management and governing board as well as ways to improve a gather the appropriate tools and resources to streamline the needed utility's overall governance through management support to the board changes within their electrical systems. and pro-active accountability for delegated management authority. Living with Pay Equity in a Competitive Environment At the conclusion of this seminar,participants will: George Gmach, George Gmach Compensation Consulting • Understand and be able to explain the role and responsibility of Dan Boyce, East Grand Forks Water&Light the local governing board in relation to the role and responsibility Troy Adams, Elk River Municipal Utilities of management. • Be better prepared to support the local governing board in Municipal electric utilities experience the challenge of complying with Minnesota Pay Equity in an environment where competitive carrying out its responsibilities, including effective management pressures are requiring higher pay levels for line workers. of governing board meetings. Cooperatives and stock utilities are not faced with similar compliance • Be better prepared to demonstrate management accountability requirement and are free to pay to market. for the authority that the board has delegated to management. • Understand ways to improve the board-management working This session will explore a range of strategies that may be used by relationship and to effectively handle dysfunctions in that municipal electric utilities that may be considered as ways to relationship. legitimately comply with the law while paying competitive rates.Each strategy is dependent on the organization,its employment base,pay Cross-functional Collaboration practices,and tools used for compliance. Steve Zahner, Skill Path Attendees are asked to be prepared to share the challenges they are Cross-functional collaboration breaks down departmental silos and experiencing and strategies they may be using during the panel fosters creativity and consistency in working toward an organization's discussion of this session. goals. United people from different disciplines for collaboration allows for CREW LEADER/FOREMAN TRACK improved strategic thinking,maximized efficiencies and better problem solving. SPCC Planning In this course,you will learn about the benefits and challenges of Joe Schmidt, MMUA cross-functional collaboration along with best practices for making these teams a success. This session will present an overview and update of the Spill Prevention,Control and Countermeasures(SPCC)rule,a highlight of Lee's Story Triumph Over Tragedy where the rule began and where it has ended up.We will also Lee Shelby present possible approaches to assure effective implementation of y the state and federal regulations. In August of 1991, Lee Shelby was employed by a utility company in Tennessee as a power lineman and was considered to be a hard LED Technology&Roadway Applications worker and good at his job.On that Monday morning,Lee made a Jeff Libbesmeier, Primus Marketing decision that impacted his life and the lives of those around him forever. With LED lighting becoming a popular solution for utilities around the country it becomes very important to understand the correct Safety is personal. It's not just what is written in a safety manual. It's applications.This program will cover. about wanting to be safe for the right reasons. Lee's story of When should you switch to LED Picking the right product "Triumph Over Tragedy"has brought about an awareness of how Mistakes&solutions Longevity personal safety is -Surge protection -Energy savings&labor cost -Your return on investment -Maintenance cost MANAGER TRACK Choosing the Right AMI System Dale Narlock, Thief River Falls Municipal Utilities Creative Leadership Tom Thorson, Eatons Cooper Power Steve Zahner, Skill Path Choosing an Advanced Metering Infrastructure(AMI)system is a daunting task with more manufacturers involved than ever and To be successful,leaders need to inspire their teams to collaborate, technology changing as fast as you can say AMI.This session will be innovative,solve problems creatively,take smart risks and cover step by step ups and downs of a utility's search for equipment improve the bottom line.That's the new job description for leaders in and a vendor they can trust. today's competitive business environment. Inspiring others to want to achieve professional excellence is one of your toughest challenges. (continued on next page) To meet this challenge,you've got to coach,motivate,reward and ignite your teams and team members. 126 14th Annual Technical a Operations Conference Identifying, Using and Managing PCBs Registration Joe Steffel, City of Buffalo The cost to attend this conference is$440 for the first person It's your responsibility to know. Now is good time to audit your registered and$340 for all additional attendees from the same utility, city or company.The registration fee covers tuition,materials,organization's PCB management program includin g your compliance refreshment breaks,lunch on Wednesday and admission to the with state and federal guidelines before receiving the notice of an audit.This brief overview will assist in the development of an reception and trade show on Tuesday. effective approach to identifying,using,and managing PCBs. A completed registration form must be returned to MMUA no later than November 25,2014.All fees will increase$50 on or after New Product Showcase November 26.Cancellations are subject to a$25 charge per person if received by 4:30 pm on November 26. No refunds given after that This session will give you a rapid-fire look at the latest in goods and date. services for the utility industry.We give each participating vendor a few minutes;they give us their best shot. Hotel Information MMUA's room block at Holiday Inn and Suites in St.Cloud, Reception& Trade Show Minnesota has standard rooms at$82.95 or suites for$99.95+tax, Be sure to join us for our product show.There is always a lot of good single/double occupancy.Call the hotel directly at 320-253-9000 for information changing hands at the show.This is a great place to see reservations or call 1-800-HOLIDAY toll free.Be sure to ask for the what is new to the industry and also provides an opportunity to make MMUA room block when you call.Hotel reservations must be made new connections. no later than November 8,2014.The hotel will continue to accept reservations after the cut-off date on a space availability basis at prevailing rates. Conference Program Tuesday, December 9 Manager Track(cont.) noon- 1:00 Registration 3:00-4:30 Living with Pay Equity in a Competitive Environment 1:00- 1:15 Welcome&Opening Remarks George Gmach, George Gmach Compensation 1:15-3:00 Effective Leadership&Accountability Consulting John Miner, Collaborative Learning, Inc. Dan Boyce, East Grand Forks Water&Light Troy Adams, Elk River Municipal Utilities 3:00-4:00 New Product Showcase Crew Leader/Foreman Track 4:30-7:00 Trade Show&Reception 1:00- 1:45 SPCC Planning Joe Schmidt, MMUA Wednesday, December 10 1:45-2:30 LED Technology&Roadway Applications 8:30- 11:30 Cross-functional Collaboration Jeff Libbesmeier, Primus Marketing Steve Zahner, Skill Path 3:00- 3:45 Choosing the Right AMI System 11:30-noon Apprentice Lineworker Recognitions Dale Narlock, Thief River Falls Muni. Utilities Mike Willetts, MMUA Tom Thorson, Eatons Cooper Power Don Harbuck, Northwest Lineman College 3:45-4:30 Identifying, Using and Managing PCBs noon- 1:00 Luncheon Joe Steffel, Buffalo Municipal Utilities The afternoon will offer a choice of two tracks. Thursday, December 11 Manager Track 8:30-9:30 Lee's Story-Triumph Over Tragedy 1:00- 1:45 Creative Leadership Lee Shelby Steve Zahner, Skill Path 10:00- 10:30 APPA Lineworker Rodeo Update 1:45-2:30 Updated OSHA 1910.269 Mike Willetts&Jack Kegel, MMUA Mike Willetts, MMUA 10:30-noon MMUA Update MMUA Staff 127 2014 Technical & Operations Conferenee 4418 December 9-11, 2014 11w1111/8 Holiday Inn & Suites n,,,,vi� 75 South 37th Avenue Minnesota Municipal Utilities Association St. Cloud, MN 56301 3025 Harbor Lane North,Suite 400 Phone: 320-253-9000 Plymouth, MN 55447 Phone 763-551-1230 Fax 763-551-0459 www.mmua.orq Attendee Information Registration Fees Name : Members Title: $440 first person on or before Nov.25,2014 Email : $340 all additional on or before Nov.25,2014 Name(2) : Title(2): Rates represent attendees from the same city, utility or company. Email (2) : All fees increase$50 on or after Nov.26,2014 Name(3) : Title(3): Total Due: $ Email (3): Utility/Co.: Address: Payment ❑ Check Payable to MMUA ❑ Bill Utility/Company Main Contact: ❑ Purchase order Email: ` J Phone: REFUND: A full refund (minus $25 per person processing fee)will be given on advance registrations if the MMUA office is notified by 4:30 pm on November 25,2014. PHOTOGRAPHS: By registering for this conference, I authorize Minnesota Municipal Utilities Association (MMUA)to photo- graph me at this event and use such photographs in MMUA marketing pieces(both electronic and print). I understand that I will not be paid for giving this consent. QUESTIONS: Please contact Rita Kelly by email rkellymmua.orq or phone 763-746-0707. Register by mail: Minnesota Municipal Utilities Association 3025 Harbor Lane North, Suite 400 Plymouth, MN 55447 Registration Deadline is November 25, 2014 Register by email: rkelly(a�mmua.orq Hotel Deadline is Register by phone: 763-746-0707 November 8, 2014 Register by fax: 763-551-0459 128