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CITY OF ANAHEIM
PUBLIC UTILITIES BOARD
MINUTES
JANUARY 25, 2023
The agenda having been posted on Thursday, January 19, 2023, the Regular Meeting of the Public Utilities Board (Board) was called to order by Chairperson Seymour at 5:00 p.m. on Wednesday, January 25, 2023, in the Gordon Hoyt Conference Center, 2nd floor, Anaheim West Tower, 201 S. Anaheim Blvd., Anaheim, California.
Board Members Present: Chairperson J. Seymour, A. Abdulrahman, N. Campos Kurtz, M. L ee, A. Pham, T. Bilezikjian
Board Members Absent: Board Member-Elect A. McMenamin
City Staff Present: D. Lee, P. Starr, A. Kott, B. Beelner, J. Lehman, M. Avelino-W alker, C. Parker, J. Lonneker, Y. Saldivar, T. Castaneda, M. Seifen, A. Nguyen, E. Krause, H. Nielsen, T. Chen, A. Lee, B. Mendoza
Guest(s) Present: Sherry Charlene Stewart
AGENDA ITEM
ACTION TAKEN
Board Member N. Campos Kurtz was recognized for her service on the Public Utilities Board. N. Campos Kurtz participated in Board recognitions of students and schools, and supported projects and programs that benefit the community. N. Campos Kurtz was appointed to fill the District 4 City Council vacancy. The Board congratulated N. Campos Kurtz on her appointment and wished her well.
A. Kott, Assistant City Attorney, introduced the new Deputy City Attorney, A. Lee, to the Board.
1. RECOGNITION: VINCENT BAROLDI FOR HIS SERVICE TO
THE ANAHEIM COMMUNITY AS VICE-CHAIRPERSON OF
THE PUBLIC UTILITIES BOARD.
V. Baroldi, Vice-Chairperson, was not in attendance; therefore, the recognition did not take place at this time.
2. OATH OF OFFICE: NEW AND REAPPOINTED PUBLIC
UTILITIES BOARD MEMBERS. **
A. Kott, Assistant City Attorney, administered the Oath of Office to the newly elected and reappointed members of the Board. The Board members include:
Tanya Bilezikjian, At Large
John Seymour, District 6
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3. PUBLIC COMMENTS.
There being no electronic or
oral public comments,
Chairperson J. Seymour
closed the public comments of
the meeting.
4. ELECTION FOR PUBLIC UTILITIES BOARD VICE-
CHAIRPERSON. **
A. Kott, Assistant City Attorney, opened the floor for nominations for Vice-Chairperson. N. Campos Kurtz nominated A. Abdulrahman, who accepted the nomination. By voice vote, the Board members unanimously voted to close the nominations. By voice vote, the Board members elected A. Abdulrahman to the position of Vice- Chairperson of the Public Utilities Board.
By voice vote, the Board
closed the nominations.
Chairperson J. Seymour
moved the election of A.
Abdulrahman as Vice-
Chairperson of the Public
Utilities Board. N. Campos
Kurtz seconded the motion.
MOTION CARRIED: 6-0.
ABSTAINED: 0.
ABSENT: 0.
5. ELECTION FOR ONE UNDERGROUND CONVERSION
SUBCOMMITTEE MEMBER. **
A. Kott, Assistant City Attorney, opened the floor for nominations for one Underground Conversion Subcommittee Member. N. Campos Kurtz nominated A. Pham, who accepted his nomination. By voice vote, the Board members unanimously voted to close the
nominations. By voice vote, the Board members elected A. Pham to serve on the Underground Conversion Subcommittee.
By voice vote, the Board
closed the nominations.
Chairperson J. Seymour
moved the election of A.
Pham to serve on the
Underground Conversion
Subcommittee. M. Lee
seconded the motion.
MOTION CARRIED: 6-0.
ABSTAINED: 0.
ABSENT: 0.
6. APPOINTMENT OF ONE MEMBER AND ALTERNATE
MEMBERS FOR THE PUBLIC UTILITIES HEARING BOARD.
**
Chairperson J. Seymour indicated that he is seeking one volunteer to serve as a member on the Public Utilities Hearing Board and another volunteer to serve as an alternate on the Public Utilities Hearing Board. Board Member M. Lee volunteered and agreed to be appointed as the member. Board Member T. Bilezikjian volunteered and agreed to be appointed as an alternate. Chairperson J. Seymour confirmed these appointments to the Public Utilities Hearing Board.
7. APPROVAL OF THE MINUTES OF THE PUBLIC UTILITIES
BOARD MEETING OF DECEMBER 21, 2022. *
N. Campos Kurtz moved the
approval of the Minutes of the
Public Utilities Board Regular
Meeting of December 21,
2022. A. Pham seconded the
motion.
MOTION CARRIED: 6-0.
ABSTAINED: 0.
ABSENT: 0.
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8. PRESENTATION: WATER AND ELECTRIC RATES AND
RULE PROPOSALS.
Utilities Financial Planning Manager, A. Nguyen, began with an overview of utility financial strategies, indicating APU has no profit margin built into its rates, customers do not pay a utility user’s tax, and cost recovery remains essential to maintaining affordable rates.
He reviewed water rate components comprising a customer’s bill and explained the need to adjust the Water Commodity Adjustment (WCA) to recover costs to serve customers. He described the significance of the agreement with Orange County Water District (OCWD) to reimburse Anaheim’s PFAS related groundwater
treatment facility capital costs. He explained that Metropolitan Water District’s (MWD) investment in drought-resiliency projects and OCWD’s cost of reimbursing groundwater treatment infrastructure continue to drive wholesale water costs higher. He explained that Anaheim’s shift towards more groundwater helps defray higher wholesale water costs.
A. Nguyen described how the investment in water capital infrastructure correlates with a reduction in water main breaks over the last several years. He explained that a modest adjustment to the Water System Reliability Adjustment (WSRA) supports the goal of cash-funding a greater portion of capital for financial flexibility and system reliability. A. Nguyen indicated that an adjustment to the WCA and WSRA results in an increase of $1.84 for a typical residential customer using 16 hcf monthly.
A. Nguyen described the proposed electric modifications that do not result in rate increases. The first is to temporarily suspend a residential electric vehicle (EV) rate; he noted the electric industry’s transition towards sub-metering and how this should allow customers to utilize their charger and avoid purchasing a costly secondary meter.
He described another proposal to change the commercial time-of-use (TOU) schedule, allowing customers with properties spanning multiple adjacent parcels (similar to a campus) the option of receiving a single totalized bill, provided they meet minimum demand requirements. He also described a proposal to move a 6 am – 8 am winter period on this TOU schedule from mid-peak to off-peak, suggesting that such a change will make it easier for customers to optimize their energy use.
Additionally, A. Nguyen described an electric and water fee proposal allowing APU to bill for actual labor and materials versus applying an outdated fixed fee when attempted theft of utility service results in equipment damage. He also described a proposal to consolidate the list of courtesy credits to a single line allowing a credit of up to $50 for incidental billing errors or missed appointments.
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A. Nguyen showed bill comparisons, indicating that Anaheim residential customers’ bills remain lower than many other customers in the county. He talked about APU’s efforts to inform customers about these proposals through mailed notices, bill inserts, and other publications, and spoke about the major events scheduled to occur in the coming weeks. A Board Member asked to confirm that the proposals do not include any electric rate increases. A. Nguyen confirmed that the proposals do not contain any electric rate increases.
9. PRESENTATION: BATTERY ENERGY STORAGE SYSTEM
OVERVIEW.
E. Krause, Integrated Resources Manager, gave a presentation to the Board on the Battery Energy Storage System (BESS) project currently under evaluation. E. Krause began with a discussion on the need for utility-scale battery storage systems within the power grid and how the intermittency of renewables such as wind and solar can be firmed with storage shifting energy from when it is more abundant and less expensive to those times of the day when energy demand is scarce and therefore more expensive. E. Krause also discussed how BESS would assist APU in its transition in power supply resources towards the 2030 renewables target of 60% and eventually carbon free by 2045.
E. Krause then discussed the planned 50 Megawatt (MW) project currently under consideration by APU, and how it would benefit APU’s customers. The benefits include a sustainable zero emissions resource, the flexibility to mitigate price spikes due to market volatility to smooth power supply costs for APU’s customers so that peak time prices can be avoided while taking advantage of lower price off-peak energy, and the potential of utilizing the Inflation Reduction Act to ease cost pressures. B. Beelner, Assistant General Manager - Finance and Energy Resources, expanded upon the ability for Anaheim to receive the tax credits as a non-tax paying entity to defray the cost of the project.
E. Krause described the potential location next to a high voltage substation which would require incremental improvements to the substation itself, along with enhanced safety and security measures such as a 20 foot tall brick wall. E. Krause then detailed the various physical elements of the project such as battery containers, fire and venting systems, and United Laboratories certification.
The Board asked a series of questions on the specifics of the project and asked if an alarm system would be used for monitoring purposes.
E. Krause explained that Anaheim Fire & Rescue Department will be included in parts of the design phase, to ensure needed alarms and recipients are identified, as well as camera systems to maintain security at the site.
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The Board followed up with an additional question on site location, asking if the apartments pictured in one of the slides were the new ones built on East Street. D. Lee explained that the apartments pictured were not on East Street, and the site location is west of East Street and in addition to the block wall, the set of railroad tracks also provide a physical break between the project and the residences.
The Board asked if neighboring residents or businesses would hear any noise as the batteries cycle. E. Krause explained that there would be minimal noise due to cycling, but explained the systems do have fans as well as cooling systems to keep the enclosures cool, and the wall will provide a buffer to the sound.
The Board also questioned if the system was leased or owned by Anaheim. E. Krause explained that it was a design build contract and that it would be Anaheim-owned and operated. B. Beelner added that Anaheim would dispatch the system similar to peaking plants and there will be a service agreement to maintain the capacity of the system.
The Board asked about the expected life of the battery system. E.
Krause responded that the system is assumed to have a 10-year life cycle; however it would not need to be completely replaced at year 10, but it would need to be analyzed to ensure it made economic sense to replace worn-out cells in the battery to bring it back to full capacity. B. Beelner added that the amortization of the bonds to be used for the project are at 10-years.
The Board then asked if the system would only be charged from solar. B. Beelner responded that the system will pull energy from the wholesale grid at the lowest priced times of day and that energy would come from a multitude of sources, including solar energy.
The Board asked the cost of the project. D Lee explained that current projections show it will cost more than the $75M allotted for in the recently issued bonds; however, APU is seeking offsets, such as the Inflation Reduction Act, to mitigate these increased costs.
The Board asked if the proliferation of negative activity along railroad tracks would affect the BESS from a safety standpoint. D.
Lee explained that currently there are issues due to the chain-link fence being broken into leading to theft, and the best solution is having the 20 foot wall described in the presentation which would prevent such activities at the site.
When a community outreach meeting is scheduled, the Board will be invited to attend.
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10. APPROVAL OF THE POWER SALES AGREEMENT, WHICH
IS IN SUBSTANTIALLY FINAL FORM, THE FINAL FORM
OF WHICH SHALL BE CONCLUSIVELY EVIDENCED BY
THE EXECUTION AND DELIVERY THEREOF, BETWEEN
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY
(SCPPA) AND THE CITY OF ANAHEIM FOR THE SAPPHIRE
SOLAR AND ENERGY STORAGE PROJECT IN THE
APPROXIMATED ANNUAL SUM OF $6.6 MILLION FOR A
TWENTY YEAR TERM. *
B. Beelner explained the Power Sales Agreement between Anaheim and SCPPA to provide 39 MW of solar and energy storage to the City. The project is located in Desert Center, California. B. Beelner discussed how this project would increase the City’s renewable power supply (RPS) portfolio by 4.6% as it continues to grow its RPS portfolio to meet various state mandates, while still providing operational flexibility with energy storage. Because solar power does not provide energy when the City’s customers need it most, this project would store that solar power in batteries until the demand for the power materialized, typically between 4 PM and 9 PM, long past peak solar production times.
B. Beelner mentioned that APU proposed this project with SCPPA because APU could partner with other local publicly-owned power agencies, the cities of Pasadena and Vernon, in order to build a bigger project and leverage economies of scale. B. Beelner also mentioned that the final price would be solely dependent on the final cost of the project in order to provide the developer cost flexibility as material and labor price volatility remains high during this time of higher than typical inflation. The annual price has a floor of $5.2 million per year and a ceiling of $7.1 million with the final costs to be audited and affirmed by an independent third party auditor. The City forecasts that the project will cost approximately $6.6 million per year with the City only paying for energy actually received. The project will deliver approximately 95,000 kWh powering, an estimated 15,000 homes.
The Board asked how this project compares in cost to other renewable projects. B. Beelner mentioned that he projects the all in cost at $53.75 per Megawatt hour (MWH). This compares favorably with APU’s average price of renewables closer to the $85 per MWH, or the price of peak time power which has recently reached as high $1,000 per MWH.
The Board then asked why APU is not developing more of these projects with these types of contractual arrangements instead of procuring, constructing, and owning a battery storage project as discussed earlier in the meeting. D. Lee, Public Utilities General Manager, shared with the Board that this project would actually
produce energy, whereas APU would use the battery storage project solely for operational and financial flexibility and would be able to N. Campos Kurtz moved the
approval of the scheduled
Public Hearing at 5:30 PM on
February 22, 2023. M. Lee
seconded the motion.
MOTION CARRIED: 6-0.
ABSTAINED: 0.
ABSENT: 0.
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dispatch power when the community needs it to save customers money during the peak demand times of the day. B. Beelner also mentioned that APU may develop more of these solar plus storage projects in the future in order to directly leverage subsidies potentially available from the Inflation Reduction Act.
11. APPROVAL OF A PROFESSIONAL SERVICES AGREEMENT
AND LICENSE AGREEMENT WITH SPATIAL WAVE, INC.
TO UPGRADE WATER INFRASTRUCTURE MAINTENANCE
SOFTWARE AND PROVIDE AS-NEEDED PROFESSIONAL
SERVICES AND SOFTWARE LICENSES, FOR AN ANNUAL
AMOUNT NOT TO EXCEED $75,000 WITH A TEN PERCENT
CONTINGENCY, AS NEEDED. *
B. Beelner explained the Spatial Wave system provides an operational tool for water operators and engineers to view the water system in real-time, including the location of outages and customers affected by outages. The upgrade of the current system is needed to include the latest features, add licensing flexibility, and allow for future service enhancements.
The Board asked about the unlimited number of annual renewals and escalation of the agreement amount of $75,000. H. Nielsen, Business Information Systems Administrator, explained that the $75,000 was determined as the annual amount, because it covers the current maintenance fees of $11,500, one-time fee of $25,000 for the upgrade, purchase of additional licenses as needed, and professional services for future software enhancements.
N. Campos Kurtz moved
approval for the Professional
Services Agreement and
License Agreement with
Spatial Wave to upgrade the
Water infrastructure
maintenance software and
provide as-needed
professional services and
software licenses. A. Pham
seconded the motion.
MOTION CARRIED: 6-0.
ABSTAINED: 0
ABSENT: 0.
12. QUARTERLY STATUS REPORT ON PRE-QUALIFIED
PROFESSIONAL SERVICES, CONSTRUCTION, AND SPOT
BID ELECTRIC MATERIAL PURCHASES FOR THE
QUARTER ENDING ON DECEMBER 30, 2022.
D. Lee provided an update on the quarterly report that covers pre- qualified agreements and purchases.
J. Lonneker, Assistant General Manager – Electric Services, reviewed the current status of Electrical Capital Project expenditures, which are on track for mid-fiscal year and noted that completion of active projects are delayed due to material shortages, particularly with distribution transformers.
C. Parker, Acting Assistant General Manager – Water Services, shared that the Groundwater Treatment Program (GWTP) and pipeline replacement were the largest items in the Water Capital Improvement Projects. The GWTP is moving along well with the La Palma site planned for producing water by next month, Linda Vista site planned for April/May of this year, and the remaining facilities by the end of the calendar year. The pipeline replacement program is
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proceeding well for the fiscal year with three projects highlighted on the Santa Ana Street Railroad Crossing, Lincoln Avenue and Dwyer Drive, and Orangewood Avenue.
13. UPDATE ON ELECTRIC SYSTEM ITEMS.
J. Lonneker shared that the overall electric system reliability metrics for the past month remained within the monthly average despite the heavy rains and inclement weather experienced during January 2023.
The resilience of the system is attributed to the direct buried cable replacement program which is approximately 80% complete. J.
Lonneker noted that subsurface transformer failures also contributed to a few of these outages and continue to be addressed with the ongoing transformer replacement program and noted that with supply-chain constraints for distribution transformers, the replacement of the transformers is anticipated to take longer than initially planned.
J. Lonneker also shared recent news of substation vandalism across the country, including North Carolina and the Pacific Northwest. J.
Lonneker shared pictures showing remote locations and minimum access controls to these substations, while explaining the security features in place at APU facilities and physical hardening efforts that have taken place. She explained that further physical hardening is planned for APU facilities.
14. UPDATE ON WATER SYSTEM ITEMS.
C. Parker shared that the groundwater basin is near optimum levels and that APU may be able to pump as much as 85% of Anaheim’s supply needs from the basin after completion of groundwater treatment. The State Water Project is in much better condition than last month with the incredible rain season to date and major reservoirs at about 50% full. The Colorado River supply is still constrained, but the snow level is at 140% to date. In addition, it has been very cold on the Colorado River, which reduces evaporation and snow melt. Even with all that, there is probably a strong likelihood that water agencies, such as APU, will have to go to Level 3 in the Water Shortage Contingency Plan (moving from 3 days per week of outside watering to 2 days per week).
15. UPDATE ON FINANCE & ENERGY RESOURCES ITEMS.
B. Beelner discussed the monthly finance dashboard through December 2022. Year to date water revenue was 2.5% ($1.4M) below budget due to ongoing conservation measures undertaken by customers. Water operating costs fell below budget by 4.2% ($1.8M) causing a net positive budget variance of $0.4M. He then mentioned that the year to date electric revenue was 15.4% above budget ($33.4M) due to increased wholesale revenue driven by much higher than normal wholesale energy prices, which in turn were caused by
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extreme spikes in natural gas prices. Electric costs for the fiscal year were above budget as well by 12.4% ($25.5M) also due to higher than expected fuel and energy prices, causing a net positive budget variance of $7.9M.
B. Beelner then discussed with the Board the power supply dashboard and discussed the continued higher than normal wholesale energy costs and how high natural gas prices drive up wholesale energy prices. B. Beelner discussed that natural gas prices in December averaged approximately $31 per Million British Thermal Units (MMBTU) in California when the same natural gas cost
approximately $7 per MMBTU one year earlier.
B. Beelner added that the forces driving these spikes in natural gas prices include the recent winter freezes and an explosion at a major pipeline that delivers natural gas to Southern California. B. Beelner mentioned that there is no timeline for the pipeline to return to service as repairs will not be completed until the end of January, and the Pipeline and Hazardous Materials Safety Administration (PHMSA) will then need to review that the repairs are sufficient for continued safe operation of the pipeline.
B. Beelner then discussed how APU hedges its natural gas costs to protect customers from these spikes in fuel costs required for its must run unit capacity levels at Magnolia Power Project, and added the various medium and long term contracts APU has entered into that ensured price stability with an average price of $9.42/MMBTU, as opposed to the market price of 31.42/MMBTU. This hedging strategy saved APU customers $3.3 million in December 2022.
16. UPDATE ON ADMINISTRATION & RISK SERVICES ITEMS.
J. Lehman, Assistant General Manager - Administration and Risk Services, invited the Board’s attention to the Administration and Risk Services Dashboard and pointed out that the Dashboard now highlights the legislative updates as the residential water and electric arrearage funding has been received and applied to the applicable customer accounts. J. Lehman shared that it was still very early in this first year of a two year session, and highlighted bills staff is monitoring and added that the PUB Legislative Working Group met prior to the Board meeting to discuss legislative matters in more detail.
J. Lehman then highlighted the safety metrics and shared that there had been no reportable injuries during the reporting period. J. Lehman shared that the metrics help APU monitor the Safety Program and proactively identify areas that may require further attention.
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17. ITEMS BY SECRETARY.
D. Lee, Public Utilities General Manager, shared agenda items planned for next month:
Electric and Water Public Hearings to Consider Modifications to the Electric and Water Rates, Rules and Regulations
Community and Sustainability Program Update
Groundwater Treatment Program Update
Grant Application Authority for Federal, State and Local Funding Opportunities Related to Utility Electric and Water System Improvements
Low-Income Home Energy Assistance Program Direct
Payment Agreement with the State of California of Community Services and Development
D. Lee shared photographs and mentioned that at the request of the Mayor’s office, APU provided support to the Buhos Marching Band from Veracruz, Mexico; the band was participating in the Pasadena Tournament of Roses Parade on January 2, 2023. APU staff attended their practice at the Great Park in Irvine and distributed snacks and water to the band members.
D. Lee updated the Board on Beach Boulevard, which is a major City initiative. The Covered Wagon Motel has been demolished based on the Housing and Community Development Department acquisition and purchase with the demolition of the motel. APU has ongoing projects on Beach, including undergrounding of power lines.
D. Lee added that APU held a Rain Barrel Promotion to encourage residents to conserve water and be sustainable; he showed photographs of the two winners of the free 50-gallon rain barrel.
D. Lee shared that Mayor Pro Tem Rubalcalva asked for APU’s support for students painting murals at a variety of elementary schools in Anaheim. Staff attended the mural painting and provided reusable water bottles and drawstring packs.
Lastly, D. Lee requested that the Board close the meeting in memory of two former APU employees, John “Jack” Johnson, Superintendent of Substations, and Ed Glotfelty, Maintenance Pipefitter. Both former APU employees were remembered for being kind, helpful to customers, and great representatives for Anaheim.
18. ITEMS BY BOARD MEMBERS.
N. Campos Kurtz thanked staff for the advance notice regarding a planned water outage in her neighborhood. Although the water restoration was delayed, APU staff was customer focused and