INTERMOUNTAIN RURAL ELECTRIC ASSOCIATION Colorado 16 Jefferson Sedalia, Colorado A regular meeting of the Board of Directors of the lntermountain Rural Electric Association was called to order at the office of the Association at 5496 North U.S. Highway 85, Sedalia, Colorado, at 9:30 a.m., October 19, 2017. The following Directors were present, constituting a quorum: Tim White, Jim Anest, Bob Graf, Mike Kempe, Duke Dozier, Gene Sperry, and Bruff Shea. Patrick Mooney, the CEO, also was present. Agenda Approval Upon motion by Mr. Graf, seconded by Mr. Anest, the Board of Directors unanimously approved the agenda. Public Comment There was no public comment, as there were no individuals present who wished to address the Board of Directors. Minutes Approval Upon motion by Mr. Graf, seconded by Mr. Shea, the Board of Directors unanimously approved the minutes of the September 21, 2017, regular meeting, as presented. Mr. White presented the CREA report. CREA Report Mr. White attended the CREA budget meeting. Mr. White reviewed the budget including contributions, special CREA projects, and Colorado Country Life Magazine funding. Finance Report Ms. Dede Jones presented the Finance report. The margin for the month of September was just under $2.1 million, about $1.2 million higher than what was budgeted. Sales were higher than budgeted for the month of September. Distribution operation and maintenance expenses were $621,000 for September; of that, about $400,000 is tree trimming invoices. As previously discussed, we will see higher than budgeted depreciation expenses for the next couple of months. Year-to-date, the margin is just over $35.2 million, $12 million higher than budgeted. Sales net of unbilled revenue and power costs year-to-date are lower than budgeted.
Page2 Ms. Jones reviewed the risk management, safety data, and vehicle incident reports. Ms. Jones reported that there were no OSHA recordable injuries or vehicle incidents in the month of September. Operations and Engineering Report Ms. Pam Feuerstein presented the Operations and Engineering report. In September, Comanche Unit 3 had a plant capacity factor of 88%. IREA's effective capacity factor was 91%. Demand for the month of September was 513 MW, up from September 2016. kwh sales were up slightly from the previous year. There were 372 new service applications in September. There were 153 new services completed, while 3,174 services were in construction and 1,431 services were in design or under contract. The Association has 156,378 services now in place. There were a few outages in September. On September 24, a tree outside of the rightof-way broke and fell causing an outage on a circuit out of the Como substation. On September 25, there were three larger outages: a cable fault in Woodland Park, a cut cable out of the Sulphur substation, and an insulator failure out of Sedalia. Victory Solar produced 2.5 million kwh in the month of September, with a capacity factor of 27.36%. In September, IREA received 31 new applications for small generation interconnect ion. To date, IREA has 1,526 solar interconnections, 1,514 of which are net-metering customers. Mr. Kempe noted someone contacted him regarding battery storage. Discussion ensued. Ms. Feuerstein reviewed the third quarter construction budget. Consumer Services Report Ms. Mandi Lesher presented the Consumer Services report. Disconnect notices for September 2017 are down from September 2016. The number of calls is still trending fairly low with 11,920 calls for the month of September. The abandon rate went down a bit, the average speed to answer went up slightly from last month, and the service level dipped a bit, but the service goal was achieved.
Page3 The total number of consumer electronic contacts in September was 3,340, down from last month but up about 19% from September 2016. The number of customers enrolled in ebilling continues to increase; there are 60,105 ebilled accounts as of September. The new Utilitec bills have been sent out, and overall we are getting very good responses from our customers. We are continuing to work with Utilitec to complete a few outstanding items and make enhancements. Customer surveys will be conducted through NRECA in late October or early November. Corporate Services Report Mr. Gerry Hacker presented the Corporate Services report. Mr. Hacker reviewed the Association's human resources statistics, including employee turnover rates. Mr. Hacker updated the Board on the Association's current health insurance benefit. He reported that on September 11 two carriers made presentations to the Human Resources staff. After comparisons and discussions, it was determined that the Association would request a renewal package from its current health care plan provider. Mr. Hacker reported that a contract has been executed for the 9/80 payroll system. The expected completion date is December 15. Mr. Hacker reviewed the Cayenta software upgrade project. The upgrade took place the weekend of October 7 and 8 and was successful. Mr. Hacker discussed the Association's website, email activity, cybersecurity measures, and network risk assessments. Mr. Hacker reviewed other miscellaneous items from his report. Corporate Affairs Report Mr. Josh Liss presented the Corporate Affairs report. The EPA has taken official steps to repeal the Clean Power Plan. A Notice of Rulemaking was published in the Federal Register on October 10. The EPA will take public comments on whether or not it will do a full repeal of the Clean Power Plan or a repeal and replace of the rule. The materials released by the EPA focused on different economics than were used by the EPA under the Obama Administration. The new analysis considers the savings of not implementing the Clean Power Plan and focuses
Page4 on costs and benefits within the U.S. The previous administration's economic forecasts were focused more on cost-savings that could be realized world-wide by reducing carbon emissions. There are differing viewpoints on how the Clean Power Plan would impact the financial world. The confirmation of the last two FERC nominees has been delayed. Senator Jim lnhofe (R-OK) objected to a motion to confirm Richard Glick and Kevin McIntyre. lnhofe's objection comes from perceived delays of other Trump nominees that have not gone through. Xcel Energy has filed with the PUC a request for a $244.9 million rate increase over the next four years. Xcel's justifications for the rate increase are to fund the advanced metering infrastructure system it plans to implement, infrastructure investment, and accelerated depreciation of coal plants it proposed to shut down. A working group has formed to develop legislation for the 2018 session to reform the 811 One-Call system. This resulted from recent explosions of gas pipelines in Grand Junction and Firestone and also due to a federal rule passed requiring enforcement mechanisms for any one-call system as it relates to natural gas pipelines. The approach of this working group so far has been to treat all buried utilities the same and try to legislate requirements that apply to all underground utilities. A first draft of the bill has been released and a second draft is expected within the next week or so. IREA is not part of the working group but is very involved in communications regarding the bill. Mr. Liss reviewed the special legislative Discussion ensued. session to address pot tax allocations. Mr. Liss reported that, nationwide, November is Utility Scam Awareness month. IREA will be increasing public awareness of utility scams on both social media and Watts and Volts. IREA is sponsoring an event hosted by Cherokee Ranch on November 4 at the Douglas County Fairgrounds. It is a clinic on humane cattle-handling practices, featuring worldrenowned Dr. Temple Grandin and stockman expert Curt Pate. Legal Report Ms. Amy Watson presented the Legal report. / The Town of Parker has withdrawn the assessed sales tax, penalties, and interest. IREA is current on its tax obligations to the Town. IREA filed an appeal with the Colorado Department of Revenue regarding the Town of Parker's denial of use tax refund. The appeal has been assigned to a hearing officer,
Page 5 and the hearing is tentatively scheduled for November 14, 2017. The Town's attorney contacted Ms. Watson, and through discussions, the Town has agreed to withdraw the appeal and issue a refund and also has agreed that IREA will not be subject to use tax going forward. Ms. Watson is drafting settlement terms that will clearly define the scope of use tax and when it should and should not be applied. It is expected that a settlement will be reached prior to the hearing. The Town of Castle Rock sales tax audit is still ongoing. IREA is waiting for a response from the Town. In the City of Boulder's separation plan from PSCo, the parties have 90 days to reach agreement on and submit the requested filings to the PUC. Ms. Watson reviewed three measures on the ballot for Boulder's election on November 7. The City of Pueblo adopted a resolution to create a municipal electric utility. Three years from now the City will be able to terminate its agreement with Black Hills. The resolution allows the City to hire consultants to conduct legal, financial, and operational capability studies to evaluate options. Ms. Watson reviewed parts of the resolution, and discussion ensued. The U.S. Trade Commission by a 4-0 vote determined that the increase of imports of crystalline silicon photovoltaic cells is causing substantial injury to domestic industry. The next step is that the commission may recommend tariff changes and import fees to the executive branch. The executive branch, i.e., President Trump, will make the decision whether there will be any sort of restriction on trade. In the United Power v. Town of Frederick case, the parties are conducting discovery, and a trial date has been set for July 16, 2018. Mr. White called for a ten-minute break. Chief Executive Officer's Report Mr. Patrick Mooney presented the CEO report. The California ISO legislation did not pass in September, which would have modified Cal ISO governance to facilitate expansion. No one outside of California wants to join Cal ISO under its current governance structure, but the California legislature so far refuses to give up state control of the ISO. Another failed bill would have required California to use 100% renewable energy by 2054. Mr. Mooney briefly reviewed the status of integration between Mountain West Transmission Group and Southwest Power Pool.
Pages Governors in seven states reached an agreement regarding enhancing electric vehicle use in the west. More automakers are announcing they will produce electric vehicles and whole countries are claiming they will be going electric. We are on the cusp of seeing some significant new numbers of electric vehicle models for sale. Mr. Mooney noted that in the next year IREA will examine costs and other issues regarding charging station infrastructure within our territory. Mr. Mooney reviewed methodology and calculations for a proposed power cost adjustment. Discussion ensued. Mr. Mooney reviewed revised Board Policy 100 regarding compensation and expenses of directors. He made a recommendation for the 2018 budget that would cover the cost of continuing education, conferences, and industry events. The proposed budget amount will be presented with the 2018 budget at the November meeting. IREA has revised its pole use attachment agreement to include wireless connections. Mr. Mooney reviewed proposals to the agreement from an interested party. Mr. Mooney addressed his interest in purchasing the property adjacent to the Sedalia headquarters site. He will review last year's negotiations and make a new offer. IREA was approached by a company interested in purchasing IREA's transmission assets. Discussion ensued. Mr. Mooney reminded the Board of the upcoming CREA fall meeting in Denver. Action Items Upon motion by Mr. Anest, seconded by Mr. Sperry, the Board of Directors unanimously approved the consent agenda, including refunds of deceased consumer patronage capital in the amount of $56,606.22 for the month of September and write-offs in the amount of $112,217. Approval of Association of Large Distribution Cooperatives Group Membership Upon motion by Mr. Graf, seconded by Mr. Kempe, the Board of Directors unanimously approved IREA membership in the Association of Large Distribution Cooperatives. Proposed Resolution Mr. Mooney recommended approval of Resolution BR17-19, which authorizes an unbudgeted expenditure to acquire and implement hyper-converged infrastructure for IREA's datacenter. The resolution also approves Nutanix as the vendor providing the software and implementation of the HCI system. This upgrade will replace IREA's
Page? current datacenter equipment and software that are approaching the end of their useful life. The new equipment has been tested and will reduce licensing fees and other costs each year going forward. Upon motion by Mr. Shea and seconded by Mr. Dozier, the Board of Directors unanimously adopted the following resolution: BOARD RESOLUTION BR17-19 Whereas, ("the Association") has the need to replace its datacenter equipment and software because the assets are approaching the end of their useful life and reaching a point of obsolescence; and Whereas, the Association's information technology staff has recommended that the Association acquire and implement a hyper-converged infrastructure ("HCI") system which is a software-centric platform that replaces outdated network and datacenter hardware; obviates the need for costly disaster recovery and backup systems; enhances operational efficiencies; reduces licensing and maintenance costs for redundant systems; and assists cloudbased services; and Whereas, following a thorough evaluation of available options and vendors, Association staff has recommended that the Association negotiate and execute a contract with Sanity Solutions Inc. to acquire and implement a Nutanix HCI system; and Whereas, the Nutanix HCI system is an unbudgeted expense estimated to cost $681,000, which expenditure will be partially offset by immediate savings on other information technology expenditures; and Whereas, the Board of Directors has determined that such recommendations are in the best interest of the Association and its members; Now, therefore, be it resolved that the Board of Directors hereby authorizes the Association's Chief Executive Officer to negotiate and execute one or more contracts with Sanity Solutions Inc. for the Nutanix HCI system and ancillary support services at an estimated cost of $681,000 and to incur such other expenditures as may be necessary to fully implement the Nutanix HCI system.
Pages Executive Session Mr. White called for an executive session for the purpose of discussing Comanche Unit 3. Upon motion by Mr. Graf, seconded by Mr. Shea and carried unanimously, the Board of Directors approved an executive session. The Board convened in executive session with Mr. Mooney. There being no further business to discuss, President Tim White adjourned the meeting. The next regular meeting will be held on November 16, 2017.