Item 12 FY23 AE Budget Presentation — original pdf

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Item 12 Fiscal Year 2023 Proposed Budget Presentation Electric Utility Commission August 8, 2022 © 2022 Austin Energy 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 materially 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 Annual Comprehensive Financial Reports for the City of Austin, which was published on March 14, 2022: http://finance.austintexas.gov/web/controller/annual_comprehensive_financial_report/annual_comprehensi ve_financial_report_2021.pdf 2 Agenda • Budget Adoption Schedule • Proposed Budget Summary • Financial Health • Major Business Unit Discussions • Proposed Tariff and Fee Changes 3 Fiscal Year 2023 Proposed Budget Presentation Budget Adoption Schedule 4 FY 2023 Budget Adoption Schedule • July 15 – City Manager Proposed Budget Presentation • Aug 2 – Set max tax rate and budget & tax rate hearings – City Council • Aug 2 – Set public hearing on Austin Energy rates & fee schedule – City Council • Aug 8 – Electric Utility Commission Proposed Budget Presentation • August 9, 11 – Budget work sessions – City Council • August 17-19 – Budget readings and adoption – City Council • Budget public input meeting (August 17) • Public hearing on Austin Energy rates and fee schedule (August 17) • September 29 – Propose updated FY 2023 Power Supply Adjustment, Community Benefit Charge, and Regulatory charge 5 Fiscal Year 2023 Proposed Budget Presentation Proposed Budget Summary 6 Austin Energy’s Share of the FY 2023 City Budget Austin Energy’s total Expenditure Budget of $1.6B in FY 2023 is 30% of the City of Austin’s total expenditures budget of $5.0B 7 FY 2023 Austin Energy Fund Summary ($millions) Beginning Balance Revenue/Transfers In Expenditures Operating Expenses Power Supply Expenses Debt Service CIP Transfer General Fund Transfer Other Transfers & Requirements Total Expenditures Excess (Deficiency) Ending Balance (Adjusted) FTEs FY 2020 FY 2021 FY 2022 FY 2023 Change from FY 2022 Amended to FY 2023 Proposed Actual Actual Estimated Amended Proposed $413.4 $1,389.9 $387.8 $1,288.8 $234.3 $1,501.6 $261.0 $1,490.3 $204.9 $1,577.3 ($56.1) $87.0 (21.5%) 5.8% $634.3 $376.4 $152.0 $80.5 $111.0 $65.2 $1,419.3 ($29.5) $387.8 1,784 $659.3 $281.3 $159.5 $143.1 $114.0 $74.7 $1,431.9 ($143.1) $234.3 1,813 $668.3 $431.4 $158.6 $88.3 $114.0 $70.4 $1,531.0 ($29.4) $204.9 1,897 $698.1 $431.4 $161.9 $40.2 $114.0 $63.9 $1,509.6 ($19.4) $241.7 1,897 $729.1 $417.9 $166.2 $90.3 $115.0 $67.2 $1,585.7 ($8.4) $196.5 1,897 $31.0 ($13.6) $4.3 $50.0 $1.0 $3.3 $76.1 $10.9 ($45.2) 0 4.4% (3.1%) 2.7% 124.3% 0.9% 5.2% 5.0% (56.5%) (18.7%) 0.0% 8 FY 2023 Austin Energy Sources of Revenue ($1.6 Billion) Regulatory $157.6M Transmission Revenue $92.3M Community Benefit $74.2M Interest Income $6.8M Other $87.2M Power Supply Adjustment $469.3M Base Revenue $677.5M Congestion Revenue Rights $26.4M Product Revenue $0.8M District Cooling Revenue $36.8M Infrastructure Revenue $6.4M Miscellaneous Revenue $16.8M 9 FY 2023 Revenue Budget Highlights • Base revenue is projected to increase • Customer growth projected at 1.7% • Energy sales growth forecasted at 0.6% • Base revenue projected to increase by $40M starting January 2023 • Power Supply Adjustment to be finalized in September • Regulatory Charge to be finalized in September • 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 • Pending rate adoption review in late November 10 FY 2023 Austin Energy O&M Requirements ($1.6 Billion) Joint Projects $97.7M Transmission Expense $174.5M O&M $456.8M Other Transfers & Requirements $67.2M CIP Transfer $90.3M General Fund Transfer $115.0M Debt Service $166.2M Power Supply $417.9M Labor & Benefits $280.6M Contractuals $161.7M Commodities $14.5M 11 FY 2023 Operating Expense Highlights • O&M budget of $456.8M re-aligns business areas with predicted spending levels with considerations given to the pending rate case and the overall financial condition of the utility • $2.5M decrease (0.5%) from FY 2022 Amended of $459.3M • $45.5M increase (11.1%) from FY 2022 estimated spending of $411.3M • Personnel – 1,897 FTEs • No new FTEs added • Citywide across-the-board cost-of-living wage increase – $7.6M total, or 4% per FTE • Insurance cost per FTE increasing from $12,546 to $13,550 12 Payments to the City FY2023 Proposed Payments to the City General Fund Transfer $115.0M $182.0M $180.0M $177.0M $174.6M $169.3M Payment for Direct Services $21.2M $185.0M $180.0M $175.0M $170.0M $165.0M $160.0M $155.0M $150.0M Payment for Indirect Services $34.6M Other Transfers $11.2M FY 2019 Actual FY 2020 Actual FY 2021 Actual FY 2022 Amended FY 2023 Proposed 13 Capital Improvement Program (CIP) 5-Year Spend Plan ($millions) Business Unit FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 2023 – 2027 Total FY 2022 Approved $123.6 23.1 56.6 203.3 36.6 40.6 39.5 Distribution Distribution Substation Transmission* Electric Service Delivery Power Production District Cooling* General Total $105.3 $82.4 $87.0 $72.6 $97.6 $444.9 16.6 64.9 186.8 35.6 21.1 39.9 22.6 65.1 170.1 31.4 9.5 56.9 15.9 84.9 187.8 27.3 0.8 5.9 10.2 78.2 161.0 16.2 0.2 3.6 3.4 55.7 156.7 11.8 0.2 2.7 68.7 348.8 862.4 122.3 31.8 109.0 $320.0 $283.4 $267.9 $221.8 $181.0 $171.4 $1,125.5 * Recovery of capital expenditures is not a component of electric retail rates 14 Financing CIP ($millions) Business Unit FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2022 Approved 2023 – 2027 Total Total Capital Improvement Plan $320.0 $283.4 $267.9 $221.8 $181.0 $171.4 $1,125.5 Contribution in aid of construction 148.7 149.1 105.2 89.7 45.0 73.8 45.0 71.6 45.0 81.8 54.2 45.0 63.5 62.9 45.0 $320.0 $283.4 $267.9 $221.8 $181.0 $171.4 $1,125.5 Contribution in aid of construction % 15.9% 16.8% 20.3% 24.9% 26.3% 52.5% 55.7% 47.4% 45.2% 37.0% 31.7% 27.5% 32.3% 29.9% 36.7% Debt Cash Total Debt % Cash % 184.3 96.2 39.5 57.6% 30.1% 12.3% 548.3 352.2 225.0 48.7% 31.3% 20.0% 15 Fiscal Year 2023 Proposed Budget Presentation Financial Health 16 Typical Residential Customer Bill Impact FY2022 bill based on current rates / FY2023 bill based on proposed rates (Inside City of Austin Customer) presented on April 18th, 2022. $ Change from BY2022 (Budget) Average Monthly Bill Energy (kWh) FY 2022 FY 2023 % Change Customer Charge Base Electricity Charge $10.00 $25.00 $15.00 150.00% $35.01 $35.10 $.09 Power Supply Adjustment (PSA)* $24.74 $24.74 Community Benefit Charge (CBC)* $4.44 $4.92 $.48 Regulatory Charge * Total Monthly Bill Total CAP Customer Discounted Bill* $10.37 $10.37 $84.56 $15.57 $ 100.13 18.4% $65.92 $ TBD $ TBD TBD% * The PSA, Regulatory Charge and Community Benefit Charges will be updated in September. 0.3% 0.0% 10.8% 0.0% - - 860 860 860 860 860 860 17 Debt Service by Fiscal Year FY 2019-2023 Prior Lien Subordinate Lien Separate Lien Total $153 $161 $160 $167 $126 s n o i l l i M $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Debt Outstanding 2019 $1,818 2020 $1,739 2021 $1,845 2022 $1,764 2023 $1,906 18 Austin Energy Financial Health 2022 Minimum 2021 Actual 2022 Estimate 2023 Forecast Standard & Poor’s (S&P) credit rating on separate-lien revenue bonds AA AA AA AA Working Capital $118M $329M $259M $184M Days Cash on Hand (Fitch) 150 days 213 Debt Service Coverage (before GFT) * Debt Service Coverage (after GFT) * Debt to Capitalization 180 2.1 1.4 150 2.2 1.5 54% 55% 55% 1.9 1.2 2.5X 2.0X 50% Net Income $10M ($57M) ($18M) ($0.2M) Debt service coverage ratios presented do not include imputed debt associated with power purchase agreement • • Metrics are based on proposed rates presented on April 18, 2022 19 Austin Energy Financial Health - Reserves 2022 Minimum 2021 Actual 2022 Estimate 2023 Forecast Working Capital $118M $329M $259M $184M Contingency Reserve $118M $108M $108M $108M Power Supply Stabilization Reserve $104M $110M $110M $110M Capital Reserve $140M $70M $70M $70M Total $479M $617M $547M $472M Non-Nuclear Decommissioning 2022 Estimate 2023 Forecast $46M $40M 20 Fiscal Year 2023 Proposed Budget Presentation Major Business Unit Discussions 21 FY 2023 Customer Care & Customer Account Management Budget O&M Budget Employees CIP Plan CIP Actual 470 460 450 440 430 420 410 s e e y o p m E l s n o i l l i M $5 $4 $3 $2 $1 $0 s n o i l l i M $60 $50 $40 $30 $20 Other Contractuals 21.6% Oracle Contract 16.6% Staffing Services 8.5% FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed Commodities 0.5% O&M FY23 Proposed Budget Labor & Benefits 52.8% • $2.6M increase in telephony technology for both 311 and COA Utilities contact centers to replace Avaya Solutions with Genesys contract • $3.0M decrease in Customer Information Systems for removal of one-time CC&B licenses and upgrades costs 22 FY 2023 Customer Energy Solutions Budget O&M Budget Employees CIP Plan CIP Actual s n o i l l i M $50 $45 $40 $35 $30 $25 $20 150 140 130 120 110 100 90 s n o i l l i M s e e y o p m E l $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed Commodities 1.4% O&M Other Contractuals 27.6% Solar Program 18.1% FY23 Proposed Budget Labor & Benefits 29.1% Energy Efficiency Services 23.8% • FY2023 proposed budget meets or exceeds all Council and GenPlan goals • $2.85M increase to meet demand of the Solar PV Performance Based Incentive Program • 16 positions transferred to other Austin Energy areas 23 Energy Efficiency Services Program Budget & Tariff Development EES Policy Objectives (Continuous) EES Budget Development (January – May) EES Tariff (July – September) 24 Community Benefit Charge: Energy Efficiency Services Incentives Component 2022 Amended 2023 Proposed Change AE Weatherization-D.I. Multi-Family Rebates Multi-Family WX-D.I. Loan Options Commercial-Existing Construction Small Businesses Solar Program Solar PV Performance Based Incentive Program Residential Power Partner-Aggr Load Coop Home Performance w Energy Star School Based Education Appliance Efficiency Program Direct Install Partners and Events SPUR Strategic Partnership w Utilities & Retailers Municipal Conservation Program Behavioral Demand Response Pilot Total $1,577,000 900,000 1,800,000 400,000 2,250,000 1,100,000 2,500,000 2,750,000 1,499,910 2,000,000 1,300,000 200,000 1,500,000 150,000 1,000,000 60,000 0 $20,986,910 $1,577,000 850,000 1,800,000 500,000 2,250,000 1,100,000 2,500,000 6,000,000 1,600,000 2,000,000 1,600,000 350,000 1,500,000 150,000 1,250,000 60,000 200,000 $25,287,000 $0 (50,000) 0 100,000 0 0 0 3,250,000 100,090 0 300,000 150,000 0 0 250,000 0 200,000 $4,300,090 25 FY 2023 Electric Service Delivery Budget O&M Budget Employees CIP Plan CIP Actual s n o i l l i M $160 $140 $120 $100 $80 $60 $40 660 640 620 600 580 560 540 s e e y o p m E l $230 $200 s n o i l l i M $170 $140 $110 $80 O&M FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed Line Clearance Contract 10.3% Labor Capital Projects 13.3% FY23 Proposed Budget Other Contractuals 22.3% Commodities 3.1% Labor & Benefits 51.0% • $2.6M decrease to align with spending trends • $946K increase for Landis+Gyr advanced metering infrastructure contract • $250k increase for Distribution Design North and South contractors to keep up with growth • CIP projects highlighted on next slide 26 FY 2023 Electric Service Delivery CIP Highlights 5-Year Spend Plan East Village Substation Southeast Substation Overhead Reliability Program LS-NL CKT 916 Reconductor Dunlap Transformer 2 (672MVA Addition) FY 2022 Estimate $0.6 $0.2 $0.5 $5.9 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 2023 – 2027 Total $7.2 $1.0 $0.1 $14.9 $3.9 $10.0 $10.0 $10.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $7.3 $15.9 $30.0 $1.0 $3.9 $7.7 $6.5 $27.5 $0.0 $0.0 $0.0 $0.0 In millions $0.0 $0.0 $0.0 $8.4 $0.0 27 FY 2023 Power Generation & District Cooling Budget O&M Budget Employees CIP Plan CIP Actual s n o i l l i M $190 $140 $90 $40 170 160 150 140 130 120 110 100 s e e y o p m E l s n o i l l i M $100 $80 $60 $40 $20 $0 FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed FY23 Proposed Budget Joint Projects 65.2% Other Contractuals 14.1% O&M Commodities 1.8% Labor & Benefits 12.3% Maintenance Contracts 6.5% • $9.9M increase in Austin Energy's share of operating costs for Joint Projects • • $7.2M – South Texas Plant – Two refueling outages during FY2023 $2.7M – Fayette Power Plant – Increase due to maintenance costs and increase in G&A expense • Reduction in employees is a result of Decker retirement. Positions were reallocated across the utility • CIP projects on next slide * District Cooling expense is not a component of electric retail rates 28 FY 2023 Power Generation & District Cooling CIP Highlights 5-Year Spend Plan District Cooling – Satellite – ACC Plant Sand Hill Energy Center Capital Program District Cooling - Downtown – DT Red River Transmission Pipe FY 2022 Estimate FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 2023 – 2027 Total $3.1 $1.0 $0.0 $0.0 $0.0 $0.0 $1.0 $13.6 $21.0 $15.3 $13.1 $3.3 $3.0 $55.7 $3.5 $3.0 $0.0 $0.0 $0.0 $0.0 $3.0 Decker Dam Improvements $0.0 $2.0 $4.0 $0 $0 $0 * District Cooling expense is not a component of electric retail rates in millions $6.0 29 FY 2023 Technology & Data Budget O&M Budget Employees CIP Plan CIP Actual s n o i l l i M $70 $65 $60 $55 $50 $45 $40 s e e y o p m E l 190 180 170 160 150 $25 $20 $15 $10 $5 $0 s n o i l l i M O&M FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed FY23 Proposed Budget Commodities 0.7% Labor & Benefits 39.5% Other Contractuals 46.8% Staffing Contracts 13.0% and solutions CIP project • $1.1M increase in utility-wide information technology services • 14 positions transferred in from Customer Energy Solutions • $9.2M for completion of the infrastructure transformation • $3.7M for hardware (servers, laptops, networking gear, etc.) • $0.8M for web content management system migration 30 FY 2023 Support Services Budget* O&M Budget Employees CIP Plan CIP Actual s n o i l l i M $70 $60 $50 $40 $30 $20 350 340 330 320 310 300 290 280 s e e y o p m E l s n o i l l i M $125 $100 $75 $50 $25 $0 O&M CIP FY2020 Actuals FY2021 Actuals FY2022 Amended FY2022 Estimated FY2023 Proposed FY2019 FY2020 FY2021 FY2022 Approved FY2023 Proposed Contractuals 56.4% FY23 Proposed Budget Commodities 3.4% • 14 employees transferred in from other Austin Energy areas to allow for better organizational alignment • Austin Energy Warehouse project - $61M projected through Labor & Benefits 40.2% FY2024 *Technology & Data not included 31 Fiscal Year 2023 Proposed Budget Presentation Proposed Tariff and Fee Changes 32 FY 2023 Tariff & 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) Austin Energy Re-Inspection Fee Auxiliary Power Electrical Permit Base Fee Building Service Planning Application Review Special Locates of Underground Austin Energy Electric Facilities Tariff Changes: • The PSA, Regulatory Charge and Community Benefit Charges will be updated in September. $ 9,810.00 $ 5,570.00 $ 12,020.00 $ 560.00 $ 1,200.00 $ 75.00 - $100.00 $250.00 $ 11,050.00 $ 6,320.00 $ 14,030.00 $ 630.00 $ 1,400.00 $ 165.00 $ 101.51 $200.00 $330.00 33 Confidential & Proprietary ©2018 Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the City of Austin, Texas. Other names are for informational purposes only and may be trademarks of their respective owners.