FY 2011 Budget Workshop April19, 2010 1 April 19, 2010 Draft Budget Workshop
Agenda • Management Introduction • Financial Highlights • Administration Highlights • Energy Resource Planning Highlights • Engineering & Operations Highlights • Customer Resource Highlights • Workshop Recap 2 April 19, 2010 Draft Budget Workshop
Management Introduction (Girish Balachandran) 3 April 19, 2010 Draft Budget Workshop
Purpose Statement: Increase value to Alameda by providing safe, reliable, cost-effective, and environmentally responsible electricity RELIABILITY s Strategies e i g e t a r t S Metrics CUSTOMER/COMMUNITY Metrics Metrics RESOURCES RATES VALUE AND SATISFACTION s c i r Strategies t Strategies e M WORKFORCE 4 April 19, 2010 Draft Budget Workshop
Ten Strategies Approved 1. Re-focus on the core electric 6. Implement energy efficiency, business via developing a new renewable power and customer corporate identity and renewing service programs to increase partnerships with the City Council, customer satisfaction. customers, workforce and industry 7. Set rates to meet environmental, partners. reliability, community and fiscal health 2. Ensure utility financial health is objectives while being equitable for all preserved through short and long- customer classes. term risk management and planning. 8. Plan for the long-term reliability of 3. Attract and retain an effective utility distribution system assets workforce that is appropriately while ensuring that annual operations aligned, well trained, equipped with and maintenance are implemented. the right tools and technology, and 9. Endeavor to maintain local control properly recognized. over utility programs including energy 4. Utilize policies and procedures that efficiency, renewable power and allow for superior customer distribution system standards. satisfaction and workforce 10. Manage short-term and long-term effectiveness. power supply reliability and cost, 5. Continue to add value to the while maintaining a loading order of community through the General Fund efficiency and demand response, transfer and other means. renewable energy resources, and clean and efficient fossil generation. 5 April 19, 2010 Draft Budget Workshop
How do we prepare to address Critical Issues, Threats and Opportunities? • Build on the positive work of the past several years • Continue strengthening the foundation 6 April 19, 2010 Draft Budget Workshop
Essence of the January Presentation • Strengthening the Foundation • Plan for future needs – Rates • Remaining telecom issue - Litigation 2007-08 Theme Telecom Focus 2009 Theme Transition the Business 2010 Theme Strengthening the Foundation 7 April 19, 2010 Draft Budget Workshop
34 PUB Comments Summarized in 6 areas 8 April 19, 2010 Draft Budget Workshop
Long Term Drivers • Purchased Power costs are projected to increase • Capital and equipment costs are projected to increase • Labor, service, material, and other direct costs, are projected to increase • Reserves need to be funded at levels to cover foreseeable risks • Revenues need to be sufficient to cover costs in compliance with bond requirements, and good business practices • Increasing costs affect cash-on-hand 9 April 19, 2010 Draft Budget Workshop
Revenue requirements increasing KEY DRIVERS Power and transmission costs are projected to increase as new resources are obtained, and new load requirements are fulfilled. Capital and equipment costs are projected to increase as infrastructure ages, and new technology requirements are implemented Labor, service, material, and other direct costs, are projected to increase as economic conditions improve. Reserves are needed to cover foreseeable risks. Bond requirements and good financial practices. 10 April 19, 2010 Draft Budget Workshop
Example of Cost Increases Cost Category $000 Increase from % of Increase FY 2011 to FY 2020 FY 2011 to FY 2020 Power Costs $ 10,099 68.05% Labor $ 2,240 15.09% Debt Service $ 1,499 10.10% Capital and Equipment $ 634 4.27% Material and Services $ 334 2.25% Other $ 35 0.24% Total $ 14,841 100.00% In 10 years, total costs are about $14.8 million (28%) greater than today, with power cost being almost 70% of the increase 11 April 19, 2010 Draft Budget Workshop
Financial Highlights (Robert Orbeta) 12 April 19, 2010 Draft Budget Workshop
Budget Policy Highlights • Policy is periodically reviewed and approved by the Board • The General Manager submits to the Board a proposed operating budget…which includes proposed expenditures and the means of financing them. • Ratepayer comments are solicited during regular Board meetings • The budget is legally enacted through passage of a resolution. • Formal budget integration is employed as a management control device during the year. • Budgets are adopted on a basis consistent with generally accepted accounting principles, except that AMP budgets capital asset outlays as current year expenditures . 13 April 19, 2010 Draft Budget Workshop
General • The draft budget assumes the Board will approve rate adjustments prior to the start of the fiscal year. • Purchased Power costs are identified in NCPA’s draft FY 2011 budget. • This is the last year that AMP will receive funds from the 2000AT bond. • Staffing levels are reduced and will be aligned to the functional needs of the organization. • The 5-year CIP plan has been incorporated. • The draft budget “passes” all compliance tests. 14 April 19, 2010 Draft Budget Workshop
FY 2011 Financial Summary FY 2010 Budget FY 2011 Budget Total Revenue $ 49,236,000 $ 50,833,000 AT Proceeds $ 3,883,080 $ 3,812,040 Reserve Spending $ 287,000 $ 368,600 $ 53,406,080 $ 55,013,640 Purchased Power $ 32,869,200 $ 26,907,470 Operating Expense $ 17,114,660 $ 19,849,110 Non-operating Expense $ 5,694,650 $ 7,555,500 Non-Cash Items ($ 3,044,550) ($ 3,544,550) Reserve Funding $ 974,000 $ 997,500 Capital Projects & Eqpt $ 3,778,230 $ 3,173,000 $ 57,386,190 $ 54,937,690 Net Adjustment ($ 3,980,110) $ 75,950 15 April 19, 2010 Draft Budget Workshop
Electric - FY2011 Budget Co mparis io n to FY2010 Budget (Excluding Depreciatio n) Non-operating & Capital work Revenue Operating Expense 60,000,000 FY2 0 10 FY2 0 11 $ 5 0 ,8 3 3 ,0 0 0 FY2 0 10 FY2 0 11 $ 4 9 ,2 3 6 ,0 0 0 50,000,000 $ 4 6 ,9 8 3 ,8 0 0 $ 4 3 ,2 5 6 ,5 8 0 40,000,000 30,000,000 20,000,000 FY2 0 10 FY2 0 11 $ 11,7 2 5 ,7 10 $ 10 ,4 4 6 ,8 8 0 10,000,000 0 16 April 19, 2010 Draft Budget Workshop
Revenue • The draft budget reflects that “rate adjusted” Revenue will be sufficient to meet expenses. • There is a shortfall of funds in the 2000AT due to current interest rate levels. AMP will provide the trustee with cash to make-up the shortfall. • The trustee is expected to have ~$3,812,040 available for the last NCPA payment. • AMP will spend ~ $368,600 from existing Reserves. ($226,900 for 2000AT shortfall and $141,700 for UUD work). 17 April 19, 2010 Draft Budget Workshop
Operating Expenses Purchased Power & Operating Expenses Budget for FY2011 = $ 43,256,580 (excluding depreciation) 35,000,000 $32,869,200 30,000,000 $26,907,470 25,000,000 20,000,000 15,000,000 $8,340,835 10,000,000 $7,422,010 $4,231,800 $3,776,475 $3,253,390 $3,439,260 5,000,000 - Purchased Power Distribution & Maintenance Customer Accounts & Sales Administrative & General 2010 2011 18 April 19, 2010 Draft Budget Workshop
Operating Expense • The draft budget reflects that Purchased Power costs will decrease by $5,961,730. • “Labor” refers to the AMP workforce, “Service” refers to contracted labor and contractor supplied materials, and “Material” refers to AMP purchased equipment, tangible goods, and miscellaneous items. • The draft budget reflects that O&M expenses will increase by $978,410 primarily due to work priority changes. • The draft budget reflects that Customer Account expenses will increase by $238,515 primarily due to increases in energy efficiency and computer upgrades. • The draft budget reflects that Sales expenses will increase by $98,700 due to increased customer programs. • The draft budget reflects that Administrative & General expenses will increase by $918,825 due to reduced expense transferred to capital projects as a result of work priority changes. 19 April 19, 2010 Draft Budget Workshop
20 Draft Budget Workshop April 19, 2010
Purchased Power Costs • Purchased power costs are not final due to NCPA adjustments. • NCPA geothermal debt defeasance has reduced purchased power costs by ~ $4,800,000. • Sales are expected to be 0.5% less than last year and reflect approved Load Forecast values. • NCPA SCALD, and other management services, have been reduced by ~ $600,000. 21 April 19, 2010 Draft Budget Workshop
Expenditure make-up FY2011 Budget (Draft) Expenditure = $54,937,690 2010 = 16% $26,907,470 , 49% $8,797,940 , 16% 2010 = 56% Purchased Power Labor Service $7,424,720 , 14% Material 2010 = 17% 2010 = 11% $11,807,560 , 21% 22 April 19, 2010 Draft Budget Workshop
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