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Home My WebLink About13 Power Point Budget 2022 2023 Workshop #1 August 18, 2021 Workshop #1-Budget 2022/2023 WORKSHOP ITEM # 13 Budget 2022/2023 Key Assumptions•2023 Goals and Objectives 2022 and Budget •Budget Cycle Timeline and Background Information•Today’s Agenda AgendaAgenda Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 IT/CyberRegulatoryReservesGoalsInitativesMaintRepairs & PersonnelDebt ServiceInvestmentCapital act for manydoing a balancing balanced budget a BackgroundBackground Workshop #1-Budget 2022/2023 Workshop #1- The BACKGROUND / HISTORYBACKGROUND / HISTORY Workshop #1-Budget 2022/2023 Workshop #1-Budget 2022/2023 Budget 2022 & 2023Review and approval of –Public Hearing and Action Item –(6pm start) 3, 2021November services, Revenue/Rates, Reserves & Financial Master Plan draftsOperating and Capital Budgets for all support –Workshop #3 –7pm) -(5pm20, 2021October Notice of 11/3/2021 Public Hearing on Budget 2022 & 2023 ApprovalBudgets for Electric and Water Utilities, and Financial Master Plan drafts; Public Hearing Purchased Power Plan, Operating & Capital –Workshop #2 –7pm) -(5pm6, 2021October Assumptions Discussion of Goals, Objectives, and Key -Workshop #1 –(tonight) 18, 2021 August schedule is as follows:2023 workshops and approval -2022current Board approved (6/16/2021) Budget Budget 2022/2023 BACKGROUND / HISTORYBACKGROUND / HISTORY Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 BACKGROUND / HISTORYBACKGROUND / HISTORY Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 power costsmillion is pumping Of the $6m, $1.3 Reserve DepositsDebt ServiceAll Other OpExpRent ExpenseWater Op Exp Uses-WATER -2021 Budget 8%1,295,697 13%2,008,954 19%3,087,521 20%3,266,118 3%536,536 37%5,991,981 BACKGROUND / HISTORYBACKGROUND / HISTORY Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 –Work Life Balance•commitmentsMeet our goals and –Timeliness•Own it–Accountability•ethicalHonest and –Integrity•Send and receive –Communication•Safety is our way –Safety •Values of the District•at the lowest practical cost. resources in a safe, open, responsible, and environmentally sound manner reliable, high quality utility and customer services while managing District The Mission of the Truckee Donner Public Utility District is to provide •Alignment with the Mission and Values of the District•Goals and Objectives -Budget 2022 and 2023 New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 and successGoal #5: Developing and inclusive culture drives organizational integration •add value to the communityGoal #4: Take the best of private sector thinking to modernize the utility and •transparent way to identify opportunitiesGoal #3: Engage with our customers and communities in a welcoming and •Goal #2: Environmental Stewardship•Goal #1: Manage for financial stability and resiliency•Goals-Alignment with the Strategic Plan of the District •Goals and Objectives -Budget 2022 and 2023 New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 solar, hydro or biomass energy-Clean Power GenerationLocal •% Clean Renewable100•Speed BroadbandHigh •Undergrounding of Overhead Power Lines•Initiatives-Alignment with the Strategic Plan of the District •Goals and Objectives -Budget 2022 and 2023 New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Refer to Strategic Plan for additional details.community engagement, employee training, and staff development programs.engineering, Drone program, -various projects such as new construction reWater, Customer Service, Administration, and Information Technology. Also includes identified in the Strategic Plan. This includes various capital projects in Electric, Goals, as and 2023 Budget includes specific sub goals of each of the above 2022 The successGoal #5: Developing and inclusive culture drives organizational integration and •Goal #4: Take the best of private sector thinking to modernize the utility and add value to the community•Goal #3: Engage with our customers and communities in a welcoming and transparent way to identify opportunities•Goal #2: Environmental Stewardship•Goal #1: Manage for financial stability and resiliency•Strategic Plan Goals–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 initiatives. Staff Report has $160,000 per year as placeholder discussion starter.as a placeholder for incremental cost estimated to commit to furthering the While detail specifics are not know, best practice would be to have some amount •momentum on these initiatives. The 2022 and 2023 Budget needs to include resources (costs) to further •solar, hydro or biomass energy-Local Clean Power Generation•100% Clean Renewable•High Speed Broadband•Undergrounding of Overhead Power Lines•Strategic Plan Initiatives–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 utilize 3.0% for years 2024 to 2031–Financial Master Plan •Adjusted as necessary for know variants•Budget 2022 + 3.0%•Budget 2023•Adjusted as necessary for know variants•Current cost estimates plus 3.0%•Budget 2022•There is general uncertainty as to what will actually occur.18 months closer to 2.0%. -are ‘transitory’ and will taper back down over next 12items less food and energy 4.5%. The current general consensus is current rates W (SFO) for June was 4.3% and for all -Federal Bureau of Labor Statistics (BLS) CPI•Inflation for Expenses–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Budget for 2022 and 2023 will be formulated for review at Workshop #2•3.4% over 2019 and 5.3% over the five year average.purchased of 169,091 was MHhaverage, all in. 2020 MWhBudget is based on 168,600MWh at $77.50/budget. 2021 Budget is $12.9 million and 2021 Forecast is $13.1 million, $225,000 or 1.7% over 2021 •(PY $50)MWh$68 / -2021 56) May (PY $MWh$80 / -2021 UAMPS: June Compared to prior year, demand is up slightly, while costs per MW are up significantly. June 2021 cost of $6.6 million is $225,000 or 3.5% over budget and $920,000 or 16% over last year. YTD •conservative either (have rate reserve)-not a line item miss in Budget; not a line item to be ultra•volatile can be Costs •consistent, is growing. Readily estimated.is relatively Demand •in Budgetapproximately 53% of Electric Utility’s operating expenses, therefore an important estimate Represents •Purchased Power–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Staff ReportNot in Budget for 2022 and 2023 will be formulated for review at Workshop #2•Funds available to balance future budgets are significantly reduced, as predicted•$700,000 less than 2020 year end•Forecast Reserve balance 12/31/2021–$900,000 •$729,960-2019 July YTD $664,434 -YTD July 2020 $347,700 -YTD July 2021 •2020 $1.4 million•Auction Proceeds•Budget 2020)same as (use of funds –2021 Budget -million) 1.4 ($•AB32 Reserve Fund Balance as of 12/31/2020 -million $1.6 •AB32 Cap and Trade–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 review during Workshop #2Budget 2022/2023 for draft plan be finalizing a structure discussions continue with staff and we will To ensure alignment with Mission, Values, and Strategic Plan; organizational •TechnicianWater Pump and Motor Controls –Water Ops •time/seasonal helpers (1 FTE)-two part–Water Ops •Vegetation Management Coordinator -Electric Ops •Communications Analyst/Tech–General Administration •+ 4.0 preliminary initial discussions with staff regarding changes for 2022/2023•@ 75.0 currently •24 months-+2.0 net effect of all structure position changes over past 12•73.0 Full Time Equivalents, Budget 2021•Full Time Equivalents–Personnel –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Favorable renewal, effective rate shift from 3.2% of wages to 2.2% of wages•$300,000 B’2021-Workers Compensation •Recent renewal notice coming in with modest premiums change +3.0% Medical, 0% Dental•-Medical/Dental •Insurance –Personnel –Key Assumptions \[use of October 2021 value is defined in union MOU\]4.3% at W (SFO) for June -Bureau of Labor Statistics (BLS) CPIBased on current trend of Federal •2023 for all employee classesRate of pay labor cost increase of 4.5% for Budget 2022 and 3.0% for Budget •Rate of Pay Change–Personnel –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 TTWHA JPA membership, Budget $20,000 / year (not in B’2021)••Capital investment related, included in IT Capital Budget estimates•Current placeholder adding consulting services $40,000 in 2022 and $20,000 in 2023•Increase in resources for this increasing risk to the District•Cyber Security •Estimating a minimum $1.5 million for Budget 2022 & 2023•$1.0 million in Budget 2020 and 2021, with actual / forecast at $1.5 million•Wildfire Mitigation Costs•Other Items–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Network System Improvements $550,000, Various IT specific $265,000 •$ level consistent with current budget-Information Technology •+ 4 in 2022 for $316,000 and +2 in 2023 for $512,000•Vehicle Additions•10 year replacement schedule updated and refined to balance cash flows y2y•Vehicle Replacements •at this timeall projects/amounts are preliminary planning -See next two pages for further information •Integrate into budget and financial master plan•Electric and Water have 10 year capital improvement plans•Capital Expenditures–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 projects/amounts are preliminary planning at this timeAll $3.3m average per year-2024 to 2031 –Electric •projects1.6m all other various $••$0.5m Pole replacements•$1.4m Martis Valley Substation Rebuild•2023 $4.8mElectric •$1.6m all other various projects•$1.3m SCADA Reliability Phase 6•$1.5m District Office Drainage System and Paving•$3.0m District Office Building Modernization•$6.0m new Electric Operations Building (new debt candidate)•Electric 2022 $15.3m•Electric–Capital Expenditures –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 projects/amounts are preliminary planning at this timeAll $7.3m average per year-2024 to 2031 –Water •$3.9m all other various projects•$1.3m Pump Replacements (8, 100hp)•$2.1m 8” Water Main Replacement, 3000’ (new debt candidate)•Water 2023 $7.3m•$5.3m all other various projects•$1.0m New Water Tank (6170) and pipeline (facility fees portion)•$3.0m New Water Tank (6170) and pipeline (new debt candidate)•$2.0m 8” Water Main Replacement, 3000’ (new debt candidate)•Water 2022 $11.3m•Water–Capital Expenditures –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 DWR Prop55 Loan (ended in 2021)-2015/2016 Refunding COPS-40% of current Pension Obligation Bonds-2023+ ~1,032,000/year to 2035•drop of $1m-$1,252,200 –2022 •$2,286,669–2021 •$2,441,989–2020 •Water Utility (excluding DLAD/SRF)both end in 2022-Dark Fiber loan-Obligation Bonds60% of current Pension -$0-2023+ •$340,729–2022 •$656,266–2021 •$648,722–2020 •Electric Utility Current LTD Debt Service–Key Assumptions BackgroundBackground Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 term.refinanced with 20 year After 10 years, 2006 COP term 30 years$30M, DS Total 19.6mPrincipal $, $10.4mTotal Interest 3.00%, years, Rate 30 Term •, DS Total $25M17.9mPrincipal $, $7.1mTotal Interest %, 2.75years, Rate 25 Term •20M, DS Total $Principal $15.6m , Total Interest $4.4mTerm 20 years, Rate 2.50%, •Principal amounts:month\] equates to the following per $5.95 -Debt Service of $1.0m •month\]per 3.82 $-customers Service $641,000 \[@14,000 Debt Annual •Total Interest Cost $2.8m•2.5%Years, Interest Rate 20 $10 million, Term -Principal •$3.04 per month\]-Annual Debt Service, $510,000 \[@14,000 customers •$5.3mTotal Interest Cost •$10 million, Term 30 Years, Interest Rate 3.0%-Principal •Debt Impact Examples –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 payment.. Bond debt service payment replaces all/portion of current UAL alternativePension Obligation Bonds will be evaluated as a potential refinancing •.the PEPRA plan, the UAL payment in 2021 was $15,000For •CalPERS projects a $1.2 million UAL payment requirement in 2022. $1,036,000 with full annual payment in July 2021 (which the District paid). required minimum annual payment for 2021 was $1,071,000, discounted to Miscellaneous Plan (Traditional) Unfunded Actuarial Liability (UAL) CalPERS •$1,150,000 from prior year end. The 12/31/2020 Net Pension Liability was $14.0 million, an increase of 9% or •Pension Liability and POBs–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 term savings-financing alternative, with the goal of generating long-rePension Obligation Bonds will be evaluated as a potential Net Pension Liability •3.07 Debt Issuance and Management Policy and section 3.01.03 Debt GoalsAny debt issuance will be in accordance with District Code, Title 3, Chapter •Master Plan modelIntegrate into Budget 2022/2023 cash flows, as well as, the 10 year Financial •Be aligned with District’s goals, objectives, and strategic plan•issuances, Electric and Water, as applicable; and further:Budget will assess and incorporate, as applicable, potential new debt •Debt Service / New Debt–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 Financial Master Plan%, and rising to 0.75% by 2031 in 0.3-current low investment yield levels of 0.2Budget 2022 and 2023 are recommended to be conservatively budgeted at •Both Forecast amounts are lower than in provided budget workshop Staff Report•30,000Water $ 50,000 Electric $ -Forecast 2021 •Electric $389,000 Water $103,000 –Budget 2021 •Conservative investment policy, preservation of principal is paramount•due to financial market conditionsexpectations Current investment yields are significantly below current budget •Investment Income–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 requesting 40%+ increase–Liberty 2022 Rate Case Comparative2020 Rates –Key BackgroundBackground Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 incorporation in Budget revenue expectations to balance the budget.revenue requirement will be determined and recommended for As the cost of service develops for 2022 and 2023 Budget this fall, the •mitigation costs. wildfire regulatory mandates, and , labor costs, strategic services firm. The cost of service includes numerous headwinds, including party electric cost of service professional -being performed by a thirdElectric Utility currently has an active cost of service study underway The •for changesto be reviewed Fees and Connection Charges Facility •2.7% increase for 2020 3.0% increase for 2021•2017 was the first rate increase since 2009•Electric Rates–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 approved water ratesStaff does not currently forecast any change to the above •.incorporation in Budget revenue expectations to balance the budgetrevenue requirement will be determined and recommended for The •Facility Fees and Connection Charges to be reviewed for changes•2023of 8.9% for 2021, 8.9% for 2022 and 7.9% for Water rate approvals in December 2020 included an average increase •3.3% increase for 2020•Water Rates–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 budgeted operating expenses, excluding depreciation and purchased powergeneral fund should have a cash reserve equal to one half of the annual Electric •revision to the following:Recommended •budgeted operating expenses, excluding depreciationgeneral fund should have a cash reserve equal to one half of the annual Electric •District code wording for Electric is as follows:Current •process.to this policy during the budget revision recommends Staff –\] 3.01.04Fund Operating Reserve \[District Code General Reserve modification–District Code –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 End result, shift some General Fund dollars to Capital Reserve.. designationThe subject funds are rate generated, the reserve fund ‘bucket’ is a Board •calculation seems duplicative, considering the existence of RRIncluding purchase power costs in General Fund ‘operating’ cash reserve •RR balance is currently $6.4 million and is at target goal for 2021•balance of 50% of annual purchase power costsAlready have a separate Electric Rate Reserve (RR) with target goal reserve •operating costsAs currently written, includes Purchased Power costs, which are 53% of •Rational for 3.01.04 wording change Reserve modification–District Code –Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- Budget 2022/2023 programs.electrification specific $60,000 range per year in cash funds to be utilized for transportation -This is currently forecasted to conservatively provide $50,000 •earned each year though EV registrations into restricted cash funds. District plans to convert LCFS credits accumulated life to date and The •LCFS Credits Monetization–Key Assumptions New InformationNew Information Workshop #1-Budget 2022/2023 Workshop #1- •FISCAL IMPACTFISCAL IMPACT Workshop #1-Budget 2022/2023 Workshop #1-Budget 2022/2023 30 years into the future.-debt is planned, impact 20the upcoming next two years, 2022 and 2023; and to the extent new will affect the District’s expenditures and revenue requirements for This budget workshop is part of an overall budget cycle process that There is no direct fiscal impact associated with this workshop item. •RECOMMENDATIONRECOMMENDATION Workshop #1-Budget 2022/2023 Workshop #1-Budget 2022/2023 Thank You direction to staffReceive this report and provide