Item 7: Austin Energy budget presentation — original pdf

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Item 7 Fiscal Year 2021 Proposed Budget Presentation Electric Utility Commission Austin Energy Joseph Gonzales, Finance Director July 17, 2020 © 2018 Austin Energy Agenda • Budget Adoption Schedule • Proposed Budget Summary • Financial Health • Major Business Unit Discussions • Proposed Tariff and Fee Changes 2 Fiscal Year 2021 Proposed Budget Presentation Budget Adoption Schedule 3 • • • • • FY 2021 Budget Adoption Schedule July 13 – Council Proposed Budget Presentation/Budget Work Session #1 • Proposed Budget available to the public July 17 – Electric Utility Commission Proposed Budget Presentation July 23 – Set public hearings July 28 - Budget work session #2 • Council deliberations on select topics July 30 - Public Hearing on Tax rate • August 4 – Budget work session #3 and Set Maximum Tax Rate • August 12 - Budget readings and adoption 4 Fiscal Year 2021 Proposed Budget Presentation Proposed Budget Summary 5 Austin Energy’s Share of the FY 2021 City Budget All City Funds for FY 2021: $4.2B Austin Energy’s total Expenditures Budget of $1.4B in FY 2021 is 31% of the City of Austin’s total expenditures budget of $4.2B 6 Fund Summary FY 2021 ($ millions) FY 2019 Actual FY 2020 Amended FY 2020 Estimated FY 2021 Proposed Beginning Balance $431.4 Revenue/Transfers In 1,469.8 $364.4 1,414.7 $413.4 1,417.8 $394.2 1,416.0 Expenditures: Operating Expenses Power Supply Expenses Debt Service CIP Transfer General Fund Transfer Other Transfers Reserve Transfers 603.0 469.3 131.6 66.6 110.0 53.9 39.4 Excess(Deficiency) Ending Balance FTEs ($4.0) $413.4 1,774 646.5 362.1 154.0 80.4 111.0 61.4 0.0 ($0.7) $363.7 1,784 644.6 366.6 151.2 102.2 111.0 61.4 0.0 ($19.2) $394.2 1,784 681.3 359.4 162.1 39.9 114.0 59.4 5.0 ($5.1) $389.1 1,813 Total Expenditures $1473.8 $1,415.4 $1,437.0 $1,421.1 FY 2021 Proposed To FY 2020 Amended % Change 29.8 1.3 34.8 (2.7) 8.1 3.0 (2.0) 5.0 $5.7 8.1% 0.0% 5.4% (0.7%) 5.3% 2.7% (3.2%) - 0.4% (40.5) (50.4%) $25.4 29 7.0% 1.6% This information is unaudited and should be read in conjunction with the audited Comprehensive Financial Reports for the City of Austin, when published on www.austintexas.gov/financeonline/finance/main.cfm 7 FY 2021 Sources of Revenue Net Power Supply $419.0M , 30% $1.4B Base Revenue $630.5M, 45% Regulatory $140.8 M, 10% Transmission Revenue $86.2M , 6% Community Benefit $56.5M , 4% Other Revenue $73.8M , 5% * Interest Income $9.2M , 1% *Other revenue includes District Cooling (chiller) $30.2M, Congestion Revenue $20.5M, infrastructure attachments $6.6M, Misc. Fees $15.1M 8 FY 2021 Revenue Budget Highlights • Base revenue remains relatively flat − Customer growth projected at 1.7% − No load growth in sales − Base rates will return to pre-COVID levels − Load and revenue forecasts are based on pre-COVID expectations. Forecasts will be updated in the future as information is available. • Power Supply Adjustment to be finalized in September − Power Supply Adjustment currently has a $6 million under-recovery, compared to a $20.9 million under-recovery at the start of the fiscal year. • Regulatory Charge to be finalized in September − Expected to revert to pre-COVID levels • No changes in Community Benefit Charge anticipated 9 Funding Needed for Austin Energy Operations FY 2021 Operating Requirements General Fund Transfer $114.0M, 8% City Services Transfers $59.4M, 4% Operations & Maintenance Commodities $15.1M, 6% Personnel $246.2M, 57% O&M $434.5M,31% Contractual Services $173.0M, 38% $1.4 B $434.5M Internal Transfers/CIP/ Reserves $44.9M, 3% Debt Service $158.0M, 11% Nuclear & Coal $85.4M, 6% Power Supply $359.4M, 25% Transmission & ERCOT $161.3M, 11% 10 FY 2021 Operating Expense Highlights • Power supply expenses to be finalized in September • Line clearance contractual increase; $9.7M • • Allow the utility to get caught up on line clearance cycle times • Ensure system reliability and reduce outages Support the City’s wildfire mitigation efforts • City-wide across the board, cost of living increase in wages 2%; $3.6M Supplemental Retirement Contribution; $1.5M • • 29 new FTEs for a net impact of $1.86M; increasing count to 1,813 FTEs 11 City Transfers & Payments for Direct and Indirect Services FY2021 Proposed Budget : Transfers and Payments to the City (In millions of $) In millions of $ $175.9 $170.4 $181.5 $162.9 Payment for Indirect Services, $48.3 Payment for Direct Services, $18.9 Transfers, $114.3 $190.0 $180.0 $170.0 $160.0 $150.0 $140.0 $130.0 $120.0 $110.0 $100.0 2018 Actual 2019 Actual 2020 Amended 2021 Proposed 12 Capital Improvement Plan 5-Year Spend Plan Business Unit FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Distribution Distribution Substation Transmission* Electric Service Delivery Power Production District Cooling* General Total FY 2020 Approved $76.3 12.2 29.9 118.5 21.6 50.1 64.4 $254.6 $91.0 16.9 36.3 144.2 27.3 48.6 136.5 $356.5 * Recovery of capital expenditures is not a component of retail rates In millions of $ 2021 – 2025 Total $76.1 $75.7 $402.2 $79.5 10.6 24.9 115.0 31.9 25.0 34.6 $80.0 9.1 24.9 114.0 27.8 3.9 34.1 9.0 24.9 110.1 24.8 2.5 26.6 9.0 34.7 109.5 23.9 0.1 5.1 $206.5 $179.9 $163.9 $138.5 $1,045.4 54.7 135.8 592.8 135.6 80.1 236.9 13 Financing the Capital Improvement Plan Business Unit FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2020 Approved Total Capital Improvement Plan $254.6 $356.5 $206.5 $179.9 $163.9 $138.5 $1,045.4 In millions of $ 2021 – 2025 Total Contribution in aid of construction 215.8 103.5 37.2 81.6 87.7 37.2 65.0 77.7 37.2 62.7 64.0 37.2 45.7 54.6 37.2 $254.6 $356.5 $206.5 $179.9 $163.9 $138.5 $1,045.4 Contribution in aid of construction % 10.5% 18.0% 20.7% 22.7% 26.9% 60.5% 39.5% 36.1% 38.3% 33.7% 29.0% 42.5% 43.2% 39.0% 39.4% Debt Cash Total Debt % Cash % 128.4 93.2 33.0 50.4% 36.6% 13.0% 471.7 387.8 185.9 45.1% 37.1% 17.8% 14 Fiscal Year 2021 Proposed Budget Presentation Financial Health 15 Average Residential Customer Bill Impact Unbundled 5-Tier Inclining Block Energy Rate (Inside City of Austin) Customer) FY 2020 FY 2021 from BY2020 $ Change FY 2020 Budget Energy (kWh) Average Monthly Bill (pre-COVID) (post-COVID) Rate (Budget) % Change Customer Charge $ 10.00 $ 10.00 $ 10.00 $ - 0.0% Base Electricity Charge 860 $ 35.01 $ 35.01 $ 35.01 $ - 0.0% Power Supply Adjustment (PSA)* 860 $ 27.00 $ 27.00 $ TBD $ - TBD% Community Benefit Charge (CBC) 860 $ 5.27 $ 5.27 $ 5.27 $ 0.0% Regulatory Charge * $10.77 $ 7.32 $ TBD $ - TBD% Total Monthly Bill Total CAP Customer Discounted Bill $ 88.05 $ 84.60 $ TBD $ $ 69.06 $ 62.29 $ TBD $ TBD% TBD% * The PSA and regulatory charge will be updated with final proposed numbers in September 2020. 860 860 860 16 Debt Service by Fiscal Year FY 2017-2021 $151 $158 $124 $94 $90 $ f o s n o i l l i M $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2017 2018 2019 2020 2021 Prior Lien Subordinate Lien Separate Lien Total Debt Outstanding 2017 $ 1,181 2018 $1,145 2019 $ 1,818 2020 $ 1,739 2021 $2,028 17 Austin Energy Financial Health 2020 Minimum 2019 Actual 2020 Estimate 2021 Forecast Standard & Poor’s (S&P) credit rating on separate-lien revenue bonds AA AA AA AA Working Capital $117M $407M $385M $376M Days Cash on Hand (Fitch) 150 days 218 2.5X 2.0X 4.0 2.8 242 2.6 2.0 233 2.3 1.6 Debt Service Coverage (before GFT) * Debt Service Coverage (after GFT) * Debt to Capitalization 50% 52% 52% 53% Net Income $10M $3M $5M ($9M) * Debt service coverage ratios presented do not include imputed debt associated with power purchase agreements 18 Austin Energy Financial Health - Reserves 2020 Minimum 2019 Actual 2020 Estimate 2021 Forecast Working Capital $117M $407M $379M $376M Contingency Reserve $106M $106M $106M $106M Power Supply Stabilization Reserve $89M $108M $110M $110M Capital Reserve $102M $69M $69M $74M Total $414M $690M $668M $664M Non-Nuclear Decommissioning $30M $38M 2020 Budget 2021 Forecast 19 Fiscal Year 2021 Proposed Budget Presentation Major Business Unit Discussions 20 FY 2021 Power Generation & District Cooling Resources Budget Summary $ f o s n o i l l i M $200.0 $160.0 $120.0 $80.0 $40.0 $0.0 210 195 180 165 150 135 s e e y o p m E l $ f o s n o i l l i M $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 O&M Budget Employees CIP Plan CIP Actual • STP , FPP & Nacogdoches- O&M budget decreased by $11.3M due to decrease in cyclic planned outage and maintenance expense • District Cooling O&M proposed budget for FY21 $17.5M – 3 new plants online in FY2021 • ACC Cooling Plant capital expenses of $20.3M • Downtown District Cooling Plant 3 capital expenses of $10.8M • San Antonio St. Water Line capital expenses of $6.2M • Sand Hill Energy Center capital expenses of $13.3M Labor and Benefits Contractuals Maintenance Contracts Joint Projects Commodities 21 FY 2021 Power Generation & District Cooling CIP Highlights 5-Year Spend Plan FY 2020 Approved $21.0 $13.1 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 $10.8 $20.3 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 District Cooling Plant #3 Satellite - ACC Plant Sand Hill Energy Center Capital Program San Antonio St. Water Line $3.4 $6.2 $7.5 $13.3 $11.6 $13.2 $13.1 $7.5 $58.7 2021 – 2025 Total $20.8 $20.3 $6.2 in millions 22 FY 2021 Electric System Delivery Budget Summary $ f o s n o i l l i M $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 620 600 580 560 540 520 500 480 s e e y o p m E l $ f o s n o i l l i M $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 O&M Budget Employees CIP Plan CIP Actual • 21 new FTEs included in FY21 Proposed Budget • $9.7M increase to utility line clearance/vegetation management • $3.7M increase for vehicle leases/maintenance • $1M increase for transmission planning analysis • $14.0M Downtown and Bluff Springs substations Labor and Benefits Labor Capital Projects Line Clearance Contract Contractuals Commodities 23 FY 2021 Electric Service Delivery CIP Highlights 5-Year Spend Plan Meter Replacements Rainey Street Substation Bluff Springs Substation WAMS (Work Asset Management System) JL-MC Circuit 811 Upgrade FY 2020 Approved $13.4 $6.0 $7.0 $4.0 $3.1 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 $14.7 $14.0 $10.2 $8.6 $8.3 $6.3 $4.7 $5.4 $1.2 $3.2 $0.2 $4.9 $0.0 $0.0 $0.02 $8.0 $0 $0.0 $0.0 $0 $8.0 $0 $0.0 $0.0 $0 2021 – 2025 Total $54.9 $18.9 $9.5 $9.4 $4.8 In millions 24 FY 2021 Customer Care Budget Summary $ f o s n o i l l i M $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 460 440 420 400 380 360 340 s e e y o p m E l $ f o s n o i l l i M $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 O&M Budget Employees CIP Plan CIP Actual FY 16 FY 17 FY 18 FY 19 Approved Proposed FY 20 FY 21 • 2 new FTEs included in FY21 Proposed Budget • $1.5M increase in FY21 for Digital Self Service Portal • $10.7M included in 5 yr. CIP plan for Interactive Voice Response (IVR) enhancement Labor and Benefits Contractuals Oracle Contract Staffing Services Commodities 25 FY 2021 Customer Energy Solutions Budget Summary $ f o s n o i l l i M $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 140 130 120 110 100 90 s e e y o p m E l $ f o s n o i l l i M $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 O&M Budget Employees FY 16 FY 17 FY 18 FY 19 Approved Proposed FY 20 FY 21 CIP Plan CIP Actual • FY21 proposed budget meets or exceeds all Council and GenPlan goals • Demand side management budget of $39M – 73 MW target; 1% annual savings • Solar incentive budget totals $5.275M – 12 MW target • 2 new FTEs included in Green Building/EVET Proposed Budget Labor and Benefits Contractuals Energy Efficiency Incentives Solar Program • DC fast charging stations expenses of $0.5M in FY2021 26 Energy Efficiency Programs Community Benefits Charge: Energy Efficiency Services Incentives (in thousands) ORGN_NAME CAP Weatherization D.I. AE Weatherization- D.I. Appliance Efficiency Program Commercial-Exist Construction Home Performance w Energy Star Load Coop Multi-Family Rebates Multi-Family WX-D.I. Residential Power Partner-Aggr Small Businesses Solar Program Solar PV Performance Based Incentive Program SPUR Strategic Partnership wUtilities & Retailers Water Heater Timers Other Grand Total FY2020 Amended FY2021 Proposed 1,000 1,277 1,800 2,250 1,500 1,850 900 1,800 1,500 1,100 2,500 2,750 1,150 200 460 21,037 1,000 1,277 1,600 2,335 1,800 1,487 1,060 1,060 1,500 2,260 3,000 2,500 1,000 495 360 21,734 Variance - - 200 (85) (300) 364 (160) 740 - (1,160) (500) 250 150 (295) 100 (697) 27 FY 2021 Support Services Budget Summary $ f o s n o i l l i M $150.0 $125.0 $100.0 $75.0 $50.0 $25.0 $0.0 480 460 440 420 400 380 s e e y o p m E l $ f o s n o i l l i M $125.0 $100.0 $75.0 $50.0 $25.0 $0.0 O&M Budget Employees CIP Plan CIP Actual FY 16 FY 17 FY 18 FY 19 Approved Proposed FY 20 FY 21 • $1.25M increase in security contracts • FY2021 includes $88.4M in capital expenses for new headquarters • $5.5M in FY2020 capital expenses for Energy Trading and Risk Management system and ERCOT Nodal Market system Labor and Benefits IT Labor and Benefits Contractuals • The Support Services Information Technology budget is IT Staffing Contracts Commodities detailed on the next slide IT Contractuals IT Commodities 28 FY 2021 Information Technology Budget Summary $60.0 $ f o s n o i l l i M $45.0 $30.0 $15.0 $0.0 175 150 125 100 75 s e e y o p m E l $ f o s n o i l l i M $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 FY 16 FY17 FY 18 FY 19 Approved Proposed FY 20 FY 21 O&M Budget Employee Contractor $0.8M, 1% CIP Plan CIP Actual $23.5M, 41% $23.1M, 40% $10.5M, 18% Labor & Benefits Contractuals Staffing Contracts Commodities • O&M increase related to two technology initiatives, Strategic Infrastructure Transformation & Identity Governance Program (infrastructure, data center, security, cloud readiness, business continuity) • CIP – IT Infrastructure Transformation program at $8.0M in FY2021; Identity Governance Program at $2.9M in FY2021 29 Fiscal Year 2021 Proposed Budget Presentation Proposed Tariff and Fee Changes 30 FY 2021 Tariff and Fee Changes Fee Schedule Changes Current Proposed Hit and Damaged Pad Mount Transformer Hit and Damaged Streetlight Pole Hit and Damaged Utility Pole Impacted Streetlight Pole (without replacement) Impacted Utility Pole (without replacement) Return Trip / Customer Initiation Fee Design Consultation Tariff Changes: • Proposed PSA pass through rate to be finalized in August $ 9,430.00 $ 5,400.00 $ 11,500.00 $ 540.00 $ 1,150.00 $ 250.00 - $ 8,670.00 $ 6,040.00 $ 13,460.00 $ 600.00 $ 1,350.00 $ 300.00 $ 165.00 Changes to Fee Language: • • • Installation of and Billing for Meter Totalization – “at cost +15%” changed to “AE Specialty Metering Costs @ Estimated Costs” “Construction Loop Service” to “Temporary Construction / Homebuilder Loop” “Tree Trimming Consultation Fee” to “Field Ops Consultation” and the fee amount from $100 to $160 31 Power Supply Adjustment Drivers Major Elements Impacting PSA Load Zone Costs Owned Assets Contracted Assets Customer Growth Weather Generator Availability Market Price Intermittency Location Over / Under Balance PSA Rate to Market Price Spread s r e v i r D t s o C Natural Gas Price Transmission Congestion Market Price Contract Price Forward Price Curve Future power prices are inherently uncertain 32 Average PSA and Over (Under) Balance 3.12¢ 2.77¢ 2.76¢ 2.96¢ 2.88¢ $80 $60 $40 $20 $0 -$20 -$40 s n o i l l i M 3.69¢ 3.93¢ 3.12¢ / 2 1 0 1 3 1 / 2 3 1 / 6 / 3 1 0 1 4 1 / 2 4 1 / 6 / 4 1 0 1 5 1 / 2 5 1 / 6 / 5 1 0 1 6 1 / 2 6 1 / 6 / 6 1 0 1 7 1 / 2 7 1 / 6 / 7 1 0 1 8 1 / 2 8 1 / 6 / 8 1 0 1 9 1 / 2 9 1 / 6 / 9 1 0 1 0 2 / 2 O/U Balance 33 Confidential & Proprietary ©2018 Austin Energy. 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