Item 12: Austin Energy FY22 Budget Presentation — original pdf

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Fiscal Year 2022 Proposed Budget Presentation Electric Utility Commission Austin Energy Executive Team July 15, 2021 © 2018 Austin Energy Agenda • Budget Adoption Schedule • Proposed Budget Summary • Financial Health • Major Business Unit Discussions • Proposed Tariff and Fee Changes 2 Disclaimer Certain information set forth in this presentation contains forecasted financial information. Forecasts necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materiality from any projections of future performance. Although the forecasted financial information contained in this presentation is based upon what Austin Energy management believes are reasonable assumptions, there can be no assurance that forecasted financial information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forecasts. In addition, this presentation contains unaudited information and should be read in conjunction with the audited Comprehensive Annual Financial Reports for the City of Austin, which was published on March 18, 2021: https://assets.austintexas.gov/financeonline/downloads/comprehensive_an nual_financial_report/comprehensive_annual_financial_report_2020.pdf 3 Fiscal Year 2022 Proposed Budget Presentation Budget Adoption Schedule 4 • • • • • • • • FY 2022 Budget Adoption Schedule July 9 – City Manager Proposed Budget Presentation Proposed Budget available to the public July 15 – Electric Utility Commission Proposed Budget Presentation July 22 – Set public hearings July 27 – Budget work session #1 Council deliberations on select topics July 29 – Public hearing on Austin Energy rates and fee schedule July 29 – Set max tax rate and budget & tax rate hearings • August 3 – Budget work session #2 • August 11 – Budget readings and adoption • September 30 – Set FY 2022 PSA, CBC and Regulatory charge 5 Fiscal Year 2022 Proposed Budget Presentation Proposed Budget Summary 6 Austin Energy’s Share of the FY 2022 City Budget All City Funds for FY 2022: $4.5B Austin Energy’s total Expenditures Budget of $1.5B in FY2022 is 33% of the City of Austin’s total expenditures budget of $4.5B 7 Fund Summary FY 2022 ($ millions) FY 2020 Actual FY 2021 Amended FY 2021 Estimated FY 2022 Proposed Beginning Balance Revenue/Transfers In $413.4 1,389.9 $394.2 1,416.0 $387.8 1,396.4 $261.0 1,490.3 FY 2022 Proposed To FY 2021 Amended % Change ($133.2) (34.0%) 74.2 5.2% Expenditures: Operating Expenses Power Supply Expenses Debt Service CIP Transfer General Fund Transfer Other Transfers Reserve Transfers 647.4 367.9 152.1 80.5 111.0 60.8 (.4) 686.4 359.4 158.1 39.9 114.0 64.4 5.0 Total Expenditures $1,419.3 $1,427.2 Excess(Deficiency) Ending Balance FTEs ($29.5) $387.8 1,784 ($11.2) $383.0 1,813 681.8 358.5 161.3 143.1 114.0 64.4 0.0 $1,523.1 ($126.8) $261.0 1,813 714.8 422.3 161.9 40.2 114.0 55.8 0.0 $1,509.0 ($18.8) $242.2 1,897 28.4 62.9 3.8 .3 0.0 4.1% 17.5% 2.4% 0.8% 0.0% (8.6) (13.4%) 5.0 $81.8 - 5.7% ($140.8) (37.0%) 84 4.6% 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 8 FY 2022 Sources of Revenue Net Power Supply $482.5M , 32% $1.5B Base Revenue $629.5M, 42% Regulatory $146.0 M, 10% Transmission Revenue $91.5M , 6% Community Benefit $58.2M , 4% Other Revenue $78.7M , 5% * Interest Income $4.0M , .3% *Other revenue includes District Cooling (chiller) $34.2M, Congestion Revenue $21.7M, Infrastructure Revenue $6.7M, Misc. Revenue $15.3M and Product Revenue $.8M 9 FY 2022 Revenue Budget Highlights • Base revenue remains relatively flat − Customer growth projected at 1.6% − Energy Sales Growth Forecasted at 0.8% − Base rates unchanged − Load and revenue forecasts are based on pre-COVID expectations • Power Supply Adjustment to be finalized in September • Regulatory Charge to be finalized in September − Expected to revert to pre-COVID levels • All Community Benefit Charges (CAP, SAL & EES) will be reviewed and updated as necessary in September ₋ Customer Assistance Program (CAP) returns to a 10% discount 10 Funding Needed for Austin Energy Operations FY 2022 Operating Requirements General Fund Transfer $114.0M, 8% City Services Transfers $55.2M, 4% Operations & Maintenance Commodities $15.3M, 3% Personnel $249.3M, 54% O&M $459.3M,30% Contractual Services $194.7M, 42% $1.5 B $459.3M Internal Transfers/CIP/ Reserves $40.8M, 3% Debt Service $161.9M, 11% Nuclear & Coal $87.8M, 6% Power Supply $422.3M, 28% Transmission & ERCOT $167.7M, 11% 11 FY 2022 Operating Expense Highlights • Power supply expenses to be finalized in September • City-wide across the board, cost of living increase in wages 2%; $3.75M • One-time $500 employee payout - $882k • 85 new FTEs for a net impact of $4.6M; 1 FTE transferred to City of Austin Financial Services Department; Increasing FY22 count to 1,897 FTEs Insurance cost per FTE reduced from $14,760 to $12,546 • 12 Winter Storm URI Budget Ramifications • Work is underway on a number of initial After Action Findings using current contracts, vendor relationships and funding. This includes a continued focus on vegetation management, software upgrades (outage map/text notifications), Austin Energy/Austin Water improvement team, exploration of feeder sectionalizing and AMI load shed, and plant weatherization/heat tracing The full Austin Energy After Action Report is expected in Fall 2021 and may impact spending in the future Regulatory changes, a summary of which will be discussed in a separate presentation, may also impact future spending The 2022 PSA balance and rate will be addressed when the rate is set in September; the new rate would will go into effect November 1st. • • • 13 City Transfers & Payments for Direct and Indirect Services FY2022 Proposed Budget : Transfers and Payments to the City (In millions of $) In millions of $ $174.6 $178.0 $176.8 $169.3 $161.8 Payment for Indirect Services, $43.9 Payment for Direct Services, $18.6 $190.0 $180.0 $170.0 $160.0 $150.0 $140.0 $130.0 $120.0 $110.0 $100.0 Transfers, $114.3 2018 Actual 2019 Actual 2020 Actual 2021 Amended 2022 Proposed 14 Capital Improvement Plan 5-Year Spend Plan Business Unit FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Distribution Distribution Substation Transmission* Power Production District Cooling* General Total FY 2021 Approved $91.0 16.9 36.3 144.2 27.3 48.6 136.5 $356.5 $124.4 $114.1 $97.7 $101.9 $101.1 $539.1 23.1 56.6 36.6 40.6 38.7 10.5 39.8 34.2 8.4 28.7 33.9 59.9 191.5 28.1 0.7 8.2 11.1 36.9 149.9 17.9 0.3 7.5 9.0 36.3 146.4 22.7 0.2 6.7 87.7 229.4 856.2 139.5 50.2 89.9 $320.0 $235.7 $228.5 $175.6 $176.0 $1,135.8 Electric Service Delivery 204.1 164.4 * Recovery of capital expenditures is not a component of retail rates In millions of $ 2022 – 2026 Total 15 Financing the Capital Improvement Plan Business Unit FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2021 Approved Total Capital Improvement Plan $356.5 $320.0 $235.7 $228.5 $175.6 $176.0 $1,135.8 In millions of $ 2022 – 2026 Total Contribution in aid of construction 184.3 125.7 108.4 96.2 39.5 70.5 39.5 80.7 39.4 80.4 55.3 39.9 89.5 46.5 40.0 $356.5 $320.0 $235.7 $228.5 $175.6 $176.0 $1,135.8 Contribution in aid of construction % 12.3% 16.8% 17.2% 22.7% 22.7% 57.6% 53.3% 47.5% 45.8% 50.9% 30.1% 29.9% 35.3% 31.5% 26.4% Debt Cash Total Debt % Cash % 211.9 107.9 36.7 59.4% 30.3% 10.3% 588.3 349.2 198.2 51.8% 30.7% 17.5% 16 Fiscal Year 2022 Proposed Budget Presentation Financial Health 17 Average Residential Customer Bill Impact Unbundled 5-Tier Inclining Block Energy Rate (Inside City of Austin) Customer Average Monthly Bill Energy (kWh) FY 2021 FY 2022 % Change Customer Charge Base Electricity Charge Power Supply Adjustment (PSA)* Community Benefit Charge (CBC)* Regulatory Charge * Total Monthly Bill Total CAP Customer Discounted Bill* 860 860 860 860 860 860 $ Change from BY2021 (Budget) $10.00 $ - $35.01 $ - 0.00% 0.00% $10.00 $35.01 $26.47 $4.44 $8.68 $ TBD $ TBD $ TBD $84.60 $ TBD $ TBD% $62.29 $ TBD $ TBD% * The PSA, Regulatory Charge and Community Benefit Charges will be updated with final proposed rates in September 2021. 18 Debt Service by Fiscal Year FY 2018-2022 $153 $161 $162 $126 $92 $ f o s n o i l l i M $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2018 2019 2020 2021 2022 Prior Lien Subordinate Lien Separate Lien Total Debt Outstanding 2018 $ 1,145 2019 $1,818 2020 $1,739 2021 $1,845 2022 $2,141 19 Austin Energy Financial Health 2021 Minimum 2020 Actual 2021 Estimate 2022 Forecast Standard & Poor’s (S&P) credit rating on separate-lien revenue bonds AA AA AA AA Working Capital $117M $405M $264M $273M Days Cash on Hand (Fitch) 150 days 232 2.5X 2.0X 2.3 1.3 194 2.3 1.5 180 2.2 1.4 Debt Service Coverage (before GFT) * Debt Service Coverage (after GFT) * Debt to Capitalization 50% 52% 54% 56% Net Income $10M ($35M) ($41M) ($19M) * Debt service coverage ratios presented do not include imputed debt associated with power purchase agreements 20 Austin Energy Financial Health - Reserves 2021 Minimum 2020 Actual 2021 Estimate 2022 Forecast Working Capital $117M $405M $264M $273M Contingency Reserve $106M $107M $107M $107M Power Supply Stabilization Reserve $89M $110M $110M $110M Capital Reserve $102M $70M $70M $70M Total $414M $594M $644M $641M Non-Nuclear Decommissioning $38M $32M 2021 Estimate 2022 Forecast 21 Fiscal Year 2022 Proposed Budget Presentation Major Business Unit Discussions 22 FY 2022 Power Generation & District Cooling 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 $90.0 $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 increased by $3M due to increase in planned outage and maintenance expense • District Cooling O&M proposed budget for FY22 $19.4M – 2 new plants coming online in FY22 – MEC2 & ACC Highland • $4M reduction in FY22 related to Decker O&M • District Cooling - Mueller Energy Center Plant No. 2 capital expenses of $19.5M • Sand Hill Energy Center capital expenses of $19.1M • District Cooling - Downtown - Tower 5C Customer Connection capital expenses of $6.6M • District Cooling - Domain - Switchgear Upgrade capital expenses of $4.2M 23 Labor and Benefits Contractuals Maintenance Contracts Joint Projects Commodities FY 2022 Power Generation & District Cooling CIP Highlights 5-Year Spend Plan District Cooling - Mueller Energy Center Plant No. 2 Sand Hill Energy Center Capital Program District Cooling - Downtown - Tower 5C Customer Connection District Cooling - Domain - Switchgear Upgrade FY 2021 Approved FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 2022 – 2026 Total $1.8 $19.5 $0.0 $0.0 $0.0 $0.0 $19.5 $13.1 $19.1 $19.1 $13.3 $7.5 $10.4 $69.5 $0.3 $6.6 $0.9 $0.0 $0.0 $0.0 $7.5 $6.0 $4.2 $0 $0 $0 $0 in millions $4.2 24 FY 2022 Electric System Delivery Budget Summary $ 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 $0.0 660 640 620 600 580 560 540 520 500 480 s e e y o p m E l $ f o s n o i l l i M $210.0 $180.0 $150.0 $120.0 $90.0 $60.0 $30.0 $0.0 O&M Budget Employees CIP Plan CIP Actual • Rapid growth has continued in the Austin region and requires staffing increases • 29 new FTEs included in FY 2022 Proposed Budget; CIAC (Customer reimbursements) will offset some financial impact • $2.2M Increase for Distribution Design North and South contractors to keep up with growth • $1.7M Smart grid and network maintenance and security • $1M Pole inspection contract Labor and Benefits Contractuals Commodities Labor Capital Projects Line Clearance Contract • $1M Increase for computer hardware maintenance for replacing and upgrading current systems 25 FY 2022 Electric Service Delivery CIP Highlights 5-Year Spend Plan FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2021 Approved $15.3 $8.6 Meter Replacements Rainey Street Substation Overhead Reliability Program Cistern Substation Dunlap AT2 (672MVA) Addition $16.6 $15.0 $11.2 $0.0 $8.7 $0.0 $8.7 $0.0 $7.0 $10.0 $10.0 $10.0 $10.0 $0.0 $2.1 $6.6 $4.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 2022 – 2026 Total $53.9 $15.0 $40.0 $6.6 $4.5 In millions $ 8.7 $0.0 $0.0 $0.0 $0.0 26 FY 2022 Customer Care & Customer Account Management Budget $ f o s n o i l l i M $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $ f o s n o i l l i M 460 440 420 400 380 360 340 s e e y o p m E l $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 O&M Budget Employees CIP Plan CIP Actual FY 17 FY 18 FY 19 FY 20 Approved Proposed FY 22 FY 21 • 20 new FTEs included in FY22 Proposed Budget; In accordance with City of Austin’s insourcing initiative. 19 conversions and one new FTE • $1.6M increase in FY22 O&M for CC&B licenses and upgrades • $1.8M increase for new Oracle Field Services product • One-time $3.0M increase in software/licenses for DSS Labor and Benefits Contractuals Oracle Contract Staffing Services Commodities system • $100K included in 5 yr. CIP plan for Contact Center phone 27 FY 2022 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 17 FY 18 FY 19 FY 20 Approved FY 21 Proposed FY 22 CIP Plan CIP Actual • FY22 proposed budget meets or exceeds all Council and GenPlan goals • Solar incentive budget totals $5.25M – 12 MW target • 5 new FTEs in FY22 proposed budget; Energy Efficiency 4 New FTEs and Key Accounts 1 New FTE • $2.1M included in 5 yr. CIP plan for EV Charging Stations Growth Labor and Benefits Contractuals Energy Efficiency Incentives Solar Program 28 Energy Efficiency Programs Community Benefits Charge: Energy Efficiency Services Incentives 29 FY 2022 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 $0.0 500 480 460 440 420 400 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 17 FY 18 FY 19 FY 20 Approved FY 21 Proposed FY 22 • 31 new FTEs included in FY22 Proposed Budget; Facilities positions added as a result of moving from leased space to the new AE Headquarters • $35.0M included in 5 yr. CIP plan (FY 2022 & FY 2023) for New AE warehouse using COA Public-Private Partnership • Insurance premiums increased by $1.24M (38%), primarily in property insurance as a result of recent disaster claims within the pool • The Support Services Information Technology budget is detailed on the next slide 30 Labor and Benefits IT Labor and Benefits Contractuals IT Staffing Contracts Commodities IT Contractuals IT Commodities FY 2022 Information Technology Budget Summary $ f o s n o i l l i M $60.0 $45.0 $30.0 $15.0 $0.0 170 145 120 95 70 45 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 O&M Budget Employee Contractor FY 17 FY 18 FY 19 FY 20 Approved FY 21 Proposed FY 22 CIP Plan CIP Actual • 7 new FTEs included in FY22 Proposed Budget • 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 $6.3M in FY2022; Identity Compliance System at $730K in FY2022 31 Labor & Benefits Contractuals Staffing Contracts Commodities Fiscal Year 2022 Proposed Budget Presentation Proposed Tariff and Fee Changes 32 FY 2022 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 Shared Solar Set Up Tariff Changes: • CAP discount rate returned to pre-COVID rate of 10% • The PSA, Regulatory Charge and Community Benefit Charges will be updated with final proposed rates in September 2021. $ 8,670.00 $ 6,040.00 $ 13,460.00 $ 600.00 $ 1,350.00 $ 300.00 - $ 9,810.00 $ 5,570.00 $ 12,020.00 $ 560.00 $ 1,200.00 $ 300.00 $ 17.00 33 Average PSA and Over (Under) Balance 2.77¢ 3.12¢ 2.76¢ 2.96¢ 2.88¢ s n o i l l i M $150 $100 $50 $0 -$50 3.69¢ 3.93¢ 3.12¢ 3.06¢ 2 1 0 1 / 3 1 / 1 3 1 / 4 3 1 / 7 3 1 0 1 / 4 1 / 1 4 1 / 4 4 1 / 7 5 1 / 1 5 1 / 4 5 1 / 7 4 1 0 1 / 5 1 0 1 / 6 1 / 1 6 1 / 4 6 1 / 7 6 1 0 1 / 7 1 / 1 7 1 / 4 7 1 / 7 7 1 0 1 / 8 1 / 1 8 1 / 4 8 1 / 7 9 1 / 1 9 1 / 4 9 1 / 7 8 1 0 1 / 0 2 / 1 0 2 / 4 0 2 / 7 9 1 0 1 / 1 2 / 1 1 2 / 4 0 2 0 1 / O/U Balance 34 Confidential & Proprietary ©2018 Austin Energy. 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