fy2021 covid-19 · 2020. 8. 26. · fy2021 covid-19 financial impacts 2020 presented by: gary gold...

FY2021 COVID-19 FINANCIAL IMPACTS AS OF JULY 31, 2020

PRESENTED BY:Gary Gold

Interim Chief Financial Officer (CFO) & Assistant TreasurerAugust 31, 2020

In fo rmat iona l Upda te

August 31, 2020 Board Meeting - UPDATE ON CHAIR’S PRIORITIES

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DISCLAIMERWe continue to work through the unprecedented global, national,state, and local implications of COVID-19. Our current financialprojections were prepared in-light of COVID-19 for preliminaryinformational discussion purposes only. We are all early in thisperiod of COVID-19 implications, and as such, these financialprojections are preliminary and subject to change at any time inthe future. Please be assured that we worked hard to thoughtfullythink through our financial analysis. This said, since there istremendous uncertainty across the current economic and financiallandscapes, the actual results for this fiscal year could be lower,comparable, or higher than what we are projecting at this time.


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OBJECTIVES & TAKEAWAYS

• FINANCIAL RESULTS FORECAST• HIGHLIGHT FINANCIAL PERFORMANCE &

METRICS


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AGENDA

• NET INCOME YTD• ELECTRIC SALES• NET INCOME FORECAST• FLOW OF FUNDS• KEY FINANCIAL METRICS• ACTIONS & NEXT STEPS


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NET INCOME JULY 2020 YTD ACTUAL PERFORMANCE

Highlights: Net operating revenue – Driven

by lower sales due to COVID-19, offset by warmer weather.

O&M – Favorable due to hiring freeze and achieved budget mitigations.

Interest & debt-related –Reflects actuals from refinancing transactions and delay of GASB implementation regarding capitalized interest.

($ in millions)

Description

Revenue available for nonfuel expensesElectric $ 1,269.9 $ 1,198.1 $ (71.8) Gas 73.9 67.5 (6.4) Total operating revenue 1,343.8 1,265.6 (78.2)

Less:Electric fuel, distribution gas & regulatory 507.8 433.5 74.3 Payments to the City of San Antonio 163.2 162.5 0.7 Net operating revenue 672.8 669.6 (3.2)

Nonoperating revenue 10.8 14.2 3.4 Total revenue available for nonfuel expenses 683.6 683.8 0.2

Nonfuel expensesOperation & maintenance 356.7 340.1 16.6 Depreciation, amortization & decommissioning 219.6 214.6 5.0 Interest & debt-related 117.8 95.4 22.4 Total nonfuel expenses 694.1 650.1 44.0

Net Income (Loss) $ (10.5) $ 33.7 $ 44.2

FY2021

Budget ActualsVariance:Favorable

(Unfavorable)


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Customer Sector Usage% of

Total Load% Impact onTotal Usage

Residential 9.5% 46.7% 4.4%

Churches & Services ‐9.3% 7.9% ‐0.7%

Manufacturing ‐1.4% 3.9% ‐0.1%

Retail ‐4.1% 5.2% ‐0.2%

Educational Services ‐9.1% 4.0% ‐0.4%

Hotel & Food Services ‐16.3% 4.9% ‐0.8%

Other** ‐5.0% 27.4% ‐1.3%

Total System 100.0% 0.9%

ELECTRIC SALES BY CUSTOMER SEGMENT- JULY 2020*

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**Other sector includes other commercial sectors, food & wood product manufacturing, municipals, lighting, etc.

*Billed July actual performance to budget.


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NET INCOME POTENTIAL EFFECTS OF COVID-19

Assumptions: Operating Revenue - Retail Electric Sales estimated to be

4.7% lower. Assumes $28M of Bad Debt; $20M

higher than budget; 50% greater than the recession level of 2008.

Wholesale Revenue Net Fuel reduced from budget to $44M for the Medium Impact scenario. Lower market prices driven by assumed reduced ERCOT-wide demand & higher wind volumes.

Reflects actuals through July.

Interest & debt-related – Reflects actuals from refinancing savings & delay of GASB implementation regarding capitalized interest.

O&M – Reflects identified cost savings & reduction to labor associated with unfilled positions.

($ in millions)

Revenue available for nonfuel expensesElectric $ 2,522.1 $ 2,306.9 $ (215.2) $ 2,269.6 $ (252.5) Gas 183.0 158.3 (24.7) 158.3 (24.7) Total operating revenue 2,705.1 2,465.2 (239.9) 2,427.9 (277.2)

Less:Electric fuel, distribution gas & regulatory 995.1 896.2 98.9 887.0 108.1 Payments to the City of San Antonio 365.3 335.9 29.4 326.1 39.2 Net operating revenue 1,344.7 1,233.1 (111.6) 1,214.8 (129.9)

Nonoperating revenue 71.2 70.1 (1.1) 43.1 (28.1) Total net revenue available for nonfuel expenses 1,415.9 1,303.2 (112.7) 1,257.9 (158.0)

Nonfuel expensesOperation & maintenance 712.8 664.8 48.0 669.8 43.0 Depreciation, amortization & decommissioning 457.1 454.3 2.8 454.3 2.8 Interest & debt-related 242.1 212.5 29.6 212.5 29.6 Total nonfuel expenses 1,412.0 1,331.6 80.4 1,336.6 75.4

Net Income (Loss) $ 3.9 $ (28.4) $ (32.3) $ (78.7) $ (82.6)

COVID-19Medium Impact

Budget

FY2021

COVID-19High

Impact

Variance:Favorable

(Unfavorable)

Variance:Favorable

(Unfavorable)


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-$34.0

+$7.5 +$0.8 +$2.7

-$4.0

-$1.4

-$60.0

-$50.0

-$40.0

-$30.0

-$20.0

-$10.0

$0.0

PreviousForecast

Net RetailRevenue

Net WholesaleRevenue

OtherRevenues

Depreciation &Amortization

Debt‐RelatedExpenses

COVID‐19MediumImpact

($ in millions)

NET INCOMEPOTENTIAL EFFECTS OF COVID-19MEDIUM IMPACT: PREVIOUS TO CURRENT FORECAST

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Updated for

actuals thru July

Delay of GASB implementation

regarding capitalized

interest & Finance Plan savings

Performance lower due to higher wind volumes and softer market prices in July.


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FLOW OF FUNDSPOTENTIAL EFFECTS OF COVID-19

Assumptions: Operating Revenue - Retail Electric Sales estimated to be

4.7% lower. Assumes $28M of Bad Debt; $20M

higher than budget; 50% greater than the recession level of 2008.

Wholesale Revenue Net Fuel reduced from budget to $44M for the Medium Impact scenario. Lower market prices driven by assumed reduced ERCOT-wide demand & higher wind volumes.

Reflects actuals through July.

Interest & debt-related – Reflectsactuals from refinancing savings.

O&M – Reflects identified cost savings & reduction to labor associated with unfilled positions.

Capital – Reflects identified cost mitigations.

($ in millions)

Revenues, net of unbilled $ 2,758.2 $ 2,511.2 $ (247.0) $ 2,445.3 $ (312.9) Less: city payment (CP) per flow of funds 365.3 335.9 29.4 326.1 39.2

Revenues, net of unbilled & CP 2,392.9 2,175.3 (217.6) 2,119.2 (273.7) Less: fuel & regulatory expense 995.1 896.2 98.9 887.0 108.1 Revenues, net fuel & regulatory 1,397.8 1,279.1 (118.7) 1,232.2 (165.6)

Operation & maintenance 714.4 669.0 45.4 674.0 40.4 Debt service 425.9 406.1 19.8 406.1 19.8 Total expenses 1,140.3 1,075.1 65.2 1,080.1 60.2

6% Gross Revenue to R&R 165.5 150.7 (14.8) 146.7 (18.8) Remaining to R&R 92.0 53.3 (38.7) 5.4 (86.6) Total R&R fund additions $ 257.5 $ 204.0 (53.5) $ 152.1 (105.4)

Total capital expenditures $ 625.8 $ 581.1 44.7 $ 581.1 44.7

FY2021

BudgetCOVID-19Medium Impact

COVID-19High

Impact

Variance:Favorable

(Unfavorable)

Variance:Favorable

(Unfavorable)


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KEY FINANCIAL METRICS, PART 1POTENTIAL EFFECTS OF COVID-19

1 Aligned to Credit Ratings Agency Guidance

ADSC & DCOH degraded resulting from COVID-19 Could signal a monitor from Credit Ratings AgencyLegend

Outside of Credit Ratings Agency GuidanceOn Target with Credit Ratings Agency Guidance

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Metric FY2020Actuals Budget

Accountability Plans

Threshold

COVID-19 Medium Impact

COVID-19 High

Impact

Adjusted Debt Service Coverage (ADSC)

1.94 1.60 1.501 1.50 1.37

Days Cash on Hand (DCOH) 225 161 1501 167 157

• Management will work to implement additional mitigations to improve financial performance


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Metric FY2020Actuals Budget

Accountability Plans

Threshold

COVID-19 Medium Impact

COVID-19 High

Impact

Debt Capitalization (DC)

59.9% 61.7% 61.7%1 60.5% 60.8%

KEY FINANCIAL METRICS, PART 2POTENTIAL EFFECTS OF COVID-19

1 Aligned to the Financial Gate Protocol Set by the Board of Trustees11

LegendOn Target with Credit Ratings Agency Guidance

• Management will work to implement additional mitigations to improve financial performance


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ONGOING ACTIONS• Continue to monitor COVID-19 landscape• Analyze actual sales results to better understand

demand patterns• Monitor accounts receivable & bad debt, providing

customers with information on assistance programs• Focus on cash flows to ensure liquidity• Prioritize ongoing spend to identify additional cost

reductions & cash savings• Scan for emerging risks• Continue to provide monthly updates


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Thank You


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COST SAVINGS: SWEETWATER 3 WIND FARM REPOWER

PRESENTED BY:

Kevin PolloInterim VP

Energy Supply & Market Operations

August 31, 2020

In fo rmat iona l Update


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• HIGHLIGHT CUSTOMER BENEFITS FROM WIND REPOWERING & CONTRACT NEGOTIATION


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AGENDA

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• BACKGROUND

• STRATEGIES

• SAVINGS SUMMARY

• ONGOING FOCUS


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BACKGROUND• We were contacted last year by the owner/operator of the

Sweetwater 3 Wind Farm to seek our agreement to repower the turbines

• Repowering consists of replacing blades & turbines with more efficient technology such as longer, lighter blades & higher capacity turbines

• Owner/operators are incentivized to repower to leverage advancing technology and due to the federal Production Tax Credit (PTC)

Benefits of repowering include increased output, improved reliability, & lower cost.


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SAVINGS STRATEGYCONTRACT AMENDMENT

We successfully negotiated a contract amendment that will give us lower cost power without changing the original contract length.

We remain committed to renewable energy sources through our Flexible Path.

Annual Savings

Remaining Years

Total Savings

$1.4M 5 $7M


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SAVINGS STRATEGYBENEFITS

The $7 million in savings will be passed on to our customers, helping keep bills affordable.

Customer Affordability is one of our Guiding Pillars.


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SUMMARY

• We are committed to keeping our energy affordable & will continue our efforts to be a trusted energy advisor for our customers & community.


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OUR GUIDING PILLARS &FOUNDATION

Identifying savings supports our Financially Responsible foundation & Customer Affordability pillar.

SecurityCustomer

AffordabilityReliability

EnvironmentalResponsibility Resiliency Safety

FINANCIALLYRESPONSIBLE


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Thank You


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Draft for review and approval at the August 31, 2020 meeting

CPS ENERGY MINUTES OF REGULAR MEETING OF THE BOARD OF TRUSTEES

HELD ON JULY 27, 2020

The Regular Meeting of the Board of Trustees of CPS Energy for the month of July was held on Monday, July 27, 2020, by telephone conference in order to advance the public health goal of limiting face-to-face meetings (also called “social distancing”) to slow the spread of the Coronavirus (COVID-19). There was no in-person public access to the meeting. Chair John Steen called the meeting to order at 1:00 p.m. Present via phone were Board members: Mr. John Steen, Chair Dr. Willis Mackey, Vice Chair Mr. Ed Kelley Ms. Janie Gonzalez Mayor Ron Nirenberg

Also present via phone were: Ms. Paula Gold-Williams, President & CEO Dr. Cris Eugster, Chief Operating Officer Ms. Carolyn Shellman, Chief Legal Officer & General Counsel and Board Secretary Mr. Fred Bonewell, Chief Security, Safety & Gas Solutions Officer Ms. Vivian Bouet, Chief Information Officer Mr. Frank Almaraz, Chief Administrative & Business Development Officer Mr. Rudy Garza, Interim Chief Customer Engagement Officer CPS Energy Staff Members City of San Antonio officials Interested Citizens I. ROLL CALL OF BOARD MEMBERS Ms. Shellman called the roll and confirmed the presence of a quorum. II. SAFETY MESSAGE The Board meeting began with a safety message delivered by Mayor Nirenberg and Ms. Gold-Williams. Mayor Nirenberg noted that hospitalizations in Bexar County due to COVID-19 are leveling off, but we remain under an order limiting large indoor gatherings and requiring face coverings. He asked the public for patience and compliance. He commented on the recent dialogue which has focused on how schools can safely reopen for Fall 2020 classes. Ms. Gold-Williams thanked Mayor Nirenberg and Judge Nelson Wolff for their diligence in keeping our community safe, especially since our employees perform an essential service for the community. She noted that as of July 23, 2020, 67 CPS Energy employees have tested positive for the COVID-19 virus, and 251

August 31, 2020 Board Meeting - CONSENT AGENDA

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are quarantined because of possible exposure. To date, there have not been any employee deaths and there are currently no employee hospitalizations due to COVID-19. CPS Energy employees continue practicing physical distancing and wearing face coverings. Chair Steen thanked Mayor Nirenberg and Ms. Gold-Williams for their leadership during this challenging time. III. INVOCATION An invocation was delivered by Ms. Melissa Sorola, Interim Senior Director, Corporate Communications, Marketing & Smart City Outreach. IV. PUBLIC COMMENT Chair Steen announced that public comments would be taken and outlined the guidelines for making public comment. The following people made comments:

1. Mr. Rey Chavez, President & CEO of the San Antonio Manufacturer’s Association (SAMA), stated that SAMA opposes the creation of the Rate Advisory Committee (RAC) because the Citizens Advisory Committee has been an efficient and effective liaison between the public and CPS Energy.

2. Ms. Henrietta LaGrange spoke about her concerns with the poles and wires around her home and requested that someone call her to discuss.

3. Mr. John Agather spoke against the creation of the RAC, commenting that it is being proposed for political expediency and will result in unnecessary bureaucracy.

4. Mr. Richard Perez, President & CEO of the San Antonio Chamber of Commerce, stated that this challenging time is not right for the creation of the RAC and that efforts to advance it should be postponed.

5. Dr. Meredith McGuire, Sierra Club, noted her interest in the FlexPOWER Bundle and asked CPS Energy to implement the next iteration of Save for Tomorrow Energy Plan (STEP). She also expressed concern about the impacts of the COVID-19 pandemic and urged rehabilitative programs.

V. CEO REPORT Ms. Gold-Williams provided context for several agenda items, including the FlexPOWER Bundle update. She highlighted the global request for information (RFI) being issued today. Ms. Gold-Williams reminded the Board that we have been looking for ways to partner with the San Antonio Water System (SAWS) to leverage our buying power. Currently, there is a potential opportunity to partner with them on a project which, if successfully advanced by SAWS, we may broach with the Board in August. Notably, the City of San Antonio (City) has encouraged this type of collaboration which creates economic, service and operational benefits. Ms. Gold-Williams noted that there are a host of tariffs, such as the Resiliency Tariff, Electric Vehicle (EV) Tariff, Wholesale Distribution Services Tariff, and On-Site Solar Tariff that we plan to discuss with the Board. The Line Extension Policy, which needs to be updated, will also be discussed at a future meeting.


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Ms. Gold-Williams thanked Trustee Gonzalez for participating in a recent virtual program for our interns who are unable to partake in an in-person internship this summer due to the pandemic. Regarding the RAC, we continue to take input and are working internally on proposed options to present to the Board. In conclusion, she listed recent awards earned by CPS Energy, including Peak Load Management’s Thought Leadership for Public Engagement award and Escalent’s Most Trusted Brand award, which we have received for five consecutive years. VI. ADDITIONAL UPDATES A. FY2021 COVID-19 Financial Impact, Cont. Mr. Gary Gold, Vice President, Corporate Services & Assistant Treasurer, presented the FY2021 COVID-19 Financial Impact. This update includes actual results through June 30, 2020, and projections for the remainder of the fiscal year. Because of the uncertainty related to the full impact of COVID-19, these projections were noted to be preliminary and subject to change. Mr. Gold explained that for the fiscal year through June 30, 2020, the Company budgeted a net loss of $3.2 million. However, the actual year-to-date net income amount is $25.8 million, a favorable variance of $29 million. The favorability is driven by lower operations and maintenance (O&M) expense, as well as lower interest and debt-related expenses. Turning to June electric sales by customer segment, commercial and industrial customers used less power than projected. Residential customers, on the other hand, increased their usage. Overall, total system sales are approximately 3.7 percent below budget. Regarding the potential effects of COVID-19 on net income for FY2021, a net loss of $34.0 million is projected, assuming a Medium Impact scenario. A High Impact scenario is projected to result in a net loss of $63.2 million. These projections are based on assumptions that retail electric sales will be 5.4 percent lower than projected, wholesale revenues will be lower than budget and bad debt levels will be higher. Turning to the Flow of Funds, Mr. Gold stated that Total Repair and Replacement (R&R) Fund additions for the year were budgeted to be $257.5 million. Considering the effects of COVID-19, R&R Fund additions in a Medium Impact scenario are projected to be $201.1 million, slightly lower from the June projections. A High Impact scenario is projected to result in R&R Fund additions of $170.5 million. Mr. Gold highlighted that actual capital expenditures year-to-date are $44.7 million under budget, reflecting cost mitigations. Turning to the key financial metrics, the forecasted Adjusted Debt Service Coverage (ADSC) is 1.49x for the Medium Impact scenario, lower than the June projection of 1.50x, and slightly below the accountability plan threshold of 1.50x. In the High Impact scenario, ADSC is projected to be 1.42x. Days Cash on Hand (DCOH) for the Medium Impact scenario is projected at 166, better than the accountability plan’s threshold of 150. In the High Impact scenario, DCOH is projected to be 161. The Debt Capitalization (DC) ratio is projected to


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be 60.5 percent for the Medium Impact scenario and 60.7 percent for the High Impact scenario, both favorable to the accountability plan threshold of 61.7 percent. We continue to monitor the pandemic and take the following steps to minimize its impact:

- Analyze actual sales results to better understand demand patterns - Monitor accounts receivable and bad debt, providing customers with information on assistance

programs - Focus on cash flows to ensure liquidity - Prioritize ongoing spend to identify additional cost reductions and cash savings - Scan for emerging risks - Continue to provide monthly updates

Dr. Mackey complimented Mr. Gold on doing an outstanding job, particularly under difficult circumstances. B. Moving forward with the FlexPOWER Bundle Dr. Eugster provided an overview of CPS Energy’s next step regarding the FlexPOWER Bundle, which is to issue an all-source RFI to identify transformative and innovative solutions to power our community. He recapped the Flexible Path strategy, transitioning from traditional power plants to more generation sources that include traditional sources plus renewables, energy storage, smart grid technology and energy efficiency. The FlexPOWER Bundle is the future of the Flexible Path strategy, providing more zero-emission power generation sources to our customers. The Flexible Path strategy is grounded in our Strategic Pillars, with particular focus on Environmental Responsibility. Dr. Eugster recapped the milestones achieved to get where we are today, including the retirement of the Deely coal power plant in 2018, the FlexPOWER Bundle launch and the public input session in 2019. Most recently, we issued a request for proposals (RFP) for a consultant to assist with the FlexPOWER Bundle. Our next step is the issuance of an RFI that will support and shape the FlexPOWER Bundle RFP later this year. Over 30 percent of CPS Energy’s capacity comes from plants that are over 40 years old. Dr. Eugster explained that the FlexPOWER Bundle is intended to replace and supplement these aging power plants with new low-to-zero emission technologies. The FlexPOWER Bundle seeks to add up to 900 MWs of solar, 50 MWs of energy storage and an all-source firming capacity to our generation portfolio. It is a meaningful step towards the City’s Climate Action and Adaptation Plan, which the Board supported through a resolution adopted in August 2019. The approach for the all-source RFI is to “think globally and apply locally” so that we can get valuable and innovative solutions for our customers. This approach will also raise our global visibility, identify global and local players, reveal market conditions and help us to understand COVID-19 impacts as we move towards issuing the RFP. Audio messages announcing the FlexPOWER Bundle RFI recorded by Mayor Nirenberg and Ms. Gold-Williams were played at this time.


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In conclusion, Dr. Eugster noted that, barring any issues, the RFI would be issued today. In response to an inquiry by Trustee Kelley, Dr. Eugster stated that the 500 MWs of all-source capacity must be available at all times to firm up intermittent renewable sources. Initially, we contemplated that the firming capacity would be natural gas, but in response to feedback, we are open to other sources that meet the defined operating characteristics needed to serve our customers. Trustee Kelley asked about a scenario in which pricing of the firming capacity is significantly less than that of the solar component. Dr. Eugster replied that the RFI is intended to bring some clarity to the economics and environmental aspects of certain sources. For example, the cost of solar has recently dropped significantly, but it is not constant. The RFI will help us understand how solar can work with storage and other firming capacity before we issue the RFP. Trustee Kelley commented that utility assets are long-lived. He asked how our generation portfolio ratio of plants older than 40 years compares with our historical ratio and asked whether the ratio was inordinate. Dr. Eugster stated that assets 40 years and older tend to experience reliability issues and require more maintenance. Plants are typically retired in the 40 to 55-year timeframe and, from an accounting perspective, plants older than 55 years are considered “end of life.” Utilities consider many factors when determining when to retire a plant. We are fortunate to have some flexibility around how we want to replace our aging assets. Trustee Kelley concluded his comments by emphasizing the “all-source” component of the FlexPOWER Bundle and cautioned against an overreliance on renewable energy, recognizing that this has been an issue for some municipal utilities. Dr. Eugster agreed, stating that we will be looking closely at many factors, including the operating characteristics of resources that are available to us. VII. APPROVAL OF CONSENT ITEMS: On motion duly made by Dr. Mackey, seconded by Trustee Kelley, and upon affirmative vote by all members present, the following items on the Consent Agenda were unanimously approved. Approval of Minutes

Minutes of the Regular Board Meeting held on June 29, 2020, were approved as submitted. Approval of Payment to the City of San Antonio for June 2020

The New Series Bond Ordinance that took effect February 1, 1997, provides for a total cash payment to the City of San Antonio (City) in an amount not to exceed 14% of gross revenue as calculated pursuant to such Ordinance, less the value of other services provided to the City, with the percentage (within the 14% limitation) to be determined by the governing body of the City. The cash transfer to the City for the month of June 2020 is based on actual gross revenue per the New Series Bond Ordinance of $215,516,163.02, less applicable exclusions. The revenue for the month of June 2020 is calculated as follows:


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Gross revenue per CPS Energy financial statements

Electric revenue $227,156,673.67

Gas revenue 9,101,499.16

Interest and other income 2,578,470.44

Gross revenue per CPS Energy financial statements 238,836,643.27

Excluded revenue

School and hospital revenue per City Ordinance 55022 (5,780,309.52)

LVG revenue per City Ordinance 100709 0.00

Fuel cost component of off-system nonfirm

energy sales per City Ordinance 61794

and revenue for wholesale special contracts (7,653,485.23)

Noncash and other income, GASB 31

investment market value change, miscellaneous

Interest income, gas billing adjustment and unbilled

revenue (9,886,685.50)

Total excluded revenue (23,320,480.25)

Gross revenue per New Series Bond Ordinance subject to

14% payment to the City $215,516,163.02

City payment per Bond Ordinance for June 2020

based upon June 2020 revenue $30,172,262.82

City payment per memorandum of understanding (MOU) regarding wholesale special contracts 519,011.68

Wholesale Special Contract Annual True Up 751,228.87

City Payment reduction per gas customer billing adjustment MOU (12,500.00)

City payment per Bond Ordinance plus adjustments for

memorandums of understanding 31,430,003.37 A

Utility services provided to the City for June 2020 (2,400,721.98)

Net amount to be paid from June 2020 revenue to

the City in July 2020 $29,029,281.39

Comparison of City payment per Bond Ordinance (plus adjustments for memorandums of understanding) vs. Budget before deduction for utility services provided to the City:

(Dollars in thousands)

June 2020 Actual Budget Variance

Current Month* A $31,430 $32,921 ($1,491) -4.5%

Year-to-Date* $124,959 $132,536 ($7,577) -5.7%

* This amount does not include any additional funding authorized by the Board of Trustees.

Approval of the following resolution is requested:

"BE IT RESOLVED by the CPS Energy Board of Trustees that payment to the City of San Antonio in the amount of $29,029,281.39, representing 14% of applicable system gross revenues for the month of June


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2020, such payment being net of City utility services ($2,400,721.98), is hereby approved.” The Board ratifies that June 2020 revenue was sufficient to recover $18,046,652.38 in funds that were advanced to the City in prior fiscal months. The remaining amount to be recovered from future months’ revenues for fiscal year 2021 is $40,541,644.00. VIII. COMMITTEE REPORTS Audit & Finance (A&F) Committee Meeting Dr. Mackey stated that a report of the A&F meeting which took place on July 8, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “A”) to the meeting minutes. Employee Benefits Oversight Committee (EBOC) Meeting Dr. Mackey stated that a report of the EBOC meeting which took place on July 8, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “B”) to the meeting minutes. A&F & EBOC Aligned Risk Sub-Committee Meeting Dr. Mackey stated that a report of the A& and EBOC Aligned Risk Sub-Committee meeting which took place on July 8, 2020, was posted with the public notice of this meeting and will be attached (as Attachment “C”) to the meeting minutes. IX. NEW PRODUCT: GREEN TARIFF Mr. Chad Hoopingarner, Senior Director, Strategic Pricing & Cost Recovery, presented the Green Tariff for Board approval. He reminded the Board that the Tariff was presented during the June 2020 Board meeting and, because of questions and requests for additional information, further discussion was occurring today. The Tariff provides several strategic benefits. It meets customer needs by providing flexible options available in other markets. The Tariff also creates optionality for our Flexible Path while contributing to the fixed cost of our existing generation fleet. Finally, the Tariff design maintains revenue and improves our recovery of fixed costs. Mr. Hoopingarner recapped CPS Energy’s efforts since 2017 to develop and finalize the design of the proposed Tariff. He highlighted our objective in crafting the Tariff - designing a pricing structure that fairly recovers the cost of infrastructure through fixed charges, not volumetric charges, while also improving renewable energy access. Mr. Hoopingarner explained that about 56 percent of the current cost to serve commercial customers is variable. The remaining 46 percent comprises fixed costs, such as the cost of infrastructure and operating & maintenance costs. However, our current commercial rate structures deliver about 72 percent of revenue from the variable, volumetric elements of the bill, and only 28 percent from fixed elements, resulting in a difference between fixed costs and recoveries through the fixed recovery elements on the bill. The Green Tariff fixes that problem by decreasing the variable components and increasing the fixed components of the


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rate. Notably, the Tariff produces the same amount of revenue as the current commercial rates and maintains the same amount of CPS Energy’s general fund transfer to the City. In response to Board feedback about the Tariff received during the June 2020 Board meeting, CPS Energy will carefully monitor the efficacy of the Tariff and provide quarterly updates to the Board during Board committee meetings and annually during the July Board meeting. Additionally, the Tariff has been modified to restrict additional participation if unintended consequences are identified. Relative to other new product offerings, we will undertake increased Board engagement as the products are being developed and before Board approval is requested. Mr. Hoopingarner requested Board approval of the Green Tariff. Responding to Chair Steen’s concerns, Mr. Hoopingarner and Ms. Gold-Williams stated that all Trustees, including Mayor Nirenberg at his convenience, will receive updates on the Tariff. Trustee Kelley commented that he was not comfortable voting for the Tariff during the June Board meeting because he did not have enough information about it, having previously discussed only general terms about it. The improvements made as a result of Board feedback address his concerns. Finally, Trustee Kelley stressed the value of work sessions to prepare the Board on emerging tariffs before they are presented for Board approval. Chair Steen concurred. Mayor Nirenberg commented in favor of the Green Tariff. On motion duly made by Mayor Nirenberg, seconded by Trustee Gonzalez, and upon affirmative vote by all members present, the Green Tariff was unanimously approved. X. OUR BRAND JOURNEY Mr. Rudy Garza, Interim Chief Customer Engagement Officer, provided an overview of CPS Energy’s brand and logo. He defined the basic concepts and discussed the evolution of each, noting that, when properly aligned, a company’s logo should fit on a well-designed brand. So, periodically considering a logo refresh is appropriate. CPS Energy’s brand – taking care of our customers – is presently very strong. Our current logo was introduced 15 years ago, in 2005. Our brand has been tested through customer feedback, including surveys and focus groups. Since 2016, we have strengthened our brand and have improved service satisfaction by 3 percent, or 26 points. Mr. Garza noted the Cogent/Escalent awards CPS Energy has earned since 2015, indicating a positive brand trend. Trustee Gonzalez, Ms. Gold-Williams and Mr. Garza discussed some pros and cons of rebranding and changing our logo. Trustee Gonzalez noted that during these challenging times, updating the logo may not carry the same priority as other initiatives, such as the FlexPOWER Bundle or rate affordability. She offered specific feedback on the current logo’s design. Ms. Gold-Williams thanked her for her input and agreed to continued discussion if there is Board interest to continue exploring rebranding and updating the logo.


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XI. BRAND SENTIMENT Mr. Garza introduced Ms. Mary Repole of Epiphany Research & Marketing, Inc. to provide the results of recent brand sentiment focus group research. The research, conducted in September 2019, sought to explore the strength of CPS Energy’s brand; gather reaction to the company’s visual and verbal brand identity; determine the attributes and perceptions that customers associate with brand personality; and gain an understanding of perceived consistency of selected communication efforts, content relevance, and delivery effectiveness. The focus groups were demographically and socio-economically diverse and included small and medium commercial customers. Regarding visual and verbal brand identity, the research indicated that participants recognized CPS Energy’s logo, acronym and name, and liked the logo. Spanish-speaking participants were less aware of what “CPS” stood for, and all participants noted some confusion with Child Protective Services. CPS Energy’s brand image is driven by field employees and the company’s practices of helping customers manage energy and lower cost. Our evolution towards renewable energy and giving back to the community also affects brand perceptions. The commercial customer group was the least positive and was not aware of programs tailored for them. Ms. Repole noted that most customers view CPS Energy as innovative and trustworthy and compared our “innovation and trustworthy” scores to those of other local companies and utilities. She stated that CPS Energy is currently more positively perceived than in the past. Overall, CPS Energy’s brand is positively viewed, but its strength is limited by customers’ lack of critical information about its role in the community, including our financial contribution to the City. Ms. Repole suggested strengthening the connection between the positive perception of field employees with the brand. Focus group participants were overwhelmingly impressed with Ms. Gold-Williams’ demeanor and found her to be the living embodiment of a progressive, innovative company. They were surprised and appreciative of her ethnicity and gender. Customers stated they want to know more about CPS Energy, including its plans for the future, and would like more communication in a method of their choosing. In contrast to past sentiments, they asked for more advertisements and streaming content on social media. Commercial customers stated that an account manager would be the best way to interact with them. Mr. Garza noted that since the research was conducted in 2019, CPS Energy has implemented many of the suggestions made by the participants, including television commercials, social media events, print ads, outbound customer calls, and account management for small and medium businesses. At Chair Steen’s request, Ms. Repole provided a brief background of her company, Epiphany, highlighting that it is a local business. Mayor Nirenberg commented that while a discussion about our brand may seem superficial at this time, it is meaningful as it contemplates what the next era of the company, including energy production, will look like. So, the conversation is welcomed, though we must remain judicious about the time and resources put into it. Chair Steen stated that this topic grew out a conversation with Ms. Gold-Williams prior to the COVID-19 pandemic. He noted that our logo has evolved over the years and it should not be static. Although the focus


33


groups indicated that we are a trusted brand, he opined that our logo looks old-fashioned and is not reflective of the innovative company that we strive to be. He acknowledged that there is a cost factor to updating the logo and that other initiatives have a higher priority at this time. He questioned whether any special efforts with small business customers are necessary given their responses in the focus group research. Trustee Gonzalez responded that small businesses want tools for effective decision-making and ways to leverage CPS Energy’s existing and future products and services. Regarding brand sentiment, she noted that customers want action regardless of the logo. We should understand the diversity and literacy levels, including digital literacy, of our community and provide different programs and services around communication. Cultural marketing should be part of our strategy. Mr. Garza agreed that there are many opportunities across differing customer segments, including small business, Spanish-speaking and elderly customers, and we are working to improve in those areas. Ms. Gold-Williams confirmed that she and Chair Steen discussed this topic before the pandemic. She acknowledged that we currently have a good brand foundation and, whether or not our logo is refreshed, the real value is in anything that helps our customers. We strive to remain self-critical for the benefit of our customers and community. Ms. Gold-Williams thanked the Board for their feedback and commented that while there is a need to control costs, we want to keep this topic on the Board’s agenda, so we will provide options tied to costs soon. XII. EXECUTIVE SESSION At approximately 3:30 p.m., Chair Steen announced that the required notice had been posted and that the Trustees, with only necessary parties in attendance, would convene into Executive Session, pursuant to the provisions of Chapter 551 of the Texas Government Code, for discussion of the following posted items:

• Attorney-Client Matters (§551.071)

• Competitive Matters (§551.086)

The Board reconvened in open session at 5:02 p.m. Ms. Shellman reported that only Attorney-Client Matters and Competitive Matters, and no others, were discussed and no votes were taken in Executive Session. XIII. ADJOURNMENT There being no further business to come before the Board and upon a motion duly made by Trustee Kelley and seconded by Trustee Gonzalez and upon an affirmative vote by all members present, the meeting was unanimously adjourned at 5:03 p.m. by Chair Steen. _____________________________ Carolyn E. Shellman Secretary of the Board


34

CPS Energy Board of Trustees Meeting August 31, 2020

Approval of Payment to the City of San Antonio for July 2020 The New Series Bond Ordinance that took effect February 1, 1997 provides for a total cash payment to the City of San Antonio (City) in an amount not to exceed 14% of gross revenue as calculated pursuant to such Ordinance, less the value of other services provided to the City, with the percentage (within the 14% limitation) to be determined by the governing body of the City. The cash transfer to the City for the month of July 2020 is based on actual gross revenue per the New Series Bond Ordinance of $266,169,432.17, less applicable exclusions. The revenue for the month of July 2020 is calculated as follows: Gross revenue per CPS Energy financial statements

Electric revenue $277,986,032.08 Gas revenue 9,044,021.16 Interest and other income 2,013,667.16 Gross revenue per CPS Energy financial statements 289,043,720.40

Excluded revenue

School and hospital revenue per City Ordinance 55022 (6,547,721.82)

LVG revenue per City Ordinance 100709 0.00 Fuel cost component of off-system nonfirm

energy sales per City Ordinance 61794

and revenue for wholesale special contracts (9,378,569.06)

Noncash and other income, GASB 31

investment market value change, miscellaneous

Interest income, gas billing adjustment and unbilled

revenue (6,947,997.35)

Total excluded revenue (22,874,288.23) Gross revenue per New Series Bond Ordinance subject to

14% payment to the City $266,169,432.17

City payment per Bond Ordinance for July 2020

based upon July 2020 revenue $37,263,720.50

City payment per memorandum of understanding (MOU) regarding wholesale special contracts 311,231.14

Wholesale Special Contract Annual True Up 0.00 City Payment reduction per gas customer billing adjustment MOU (12,500.00) City payment per Bond Ordinance plus adjustments for

memorandums of understanding 37,562,451.64 A Utility services provided to the City for July 2020 (2,605,907.17) Net amount to be paid from July 2020 revenue to

the City in August 2020 $34,956,544.47


35

CPS Energy Board of Trustees Meeting August 31, 2020

Comparison of City payment per Bond Ordinance (plus adjustments for memorandums of understanding)

vs. Budget before deduction for utility services provided to the City:

(Dollars in thousands) July 2020 Actual Budget Variance

Current Month* A $37,562 $40,782 ($3,220) -7.9%

Year-to-Date* $162,521 $173,318 ($10,797) -6.2% * This amount does not include any additional funding authorized by the Board of Trustees.

Approval of the following resolution is requested:

"BE IT RESOLVED by the CPS Energy Board of Trustees that payment to the City of San Antonio in the amount of $34,956,544.47, representing 14% of applicable system gross revenues for the month of July 2020, such payment being net of City utility services ($2,605,907.17), is hereby approved.” The Board ratifies that July 2020 revenue was sufficient to recover $40,541,644.00 in funds that were advanced to the City in prior fiscal months.


36

Executive Summary

Appointment of Treasurer & Assistant Treasurers For the CPS Energy Board of Trustees

Prepared By: Treasury 8/12/2020 Page 1 of 2

BACKGROUND:

Gary Gold was recently promoted to Interim Chief Financial Officer (CFO) to oversee CPS Energy’s financial functions.

There are currently three Assistant Treasurers:

• Gary Gold

• Shannon R. Albert • Maricela Benavides

With Gary Gold’s promotion to Interim CFO, we are recommending the following

appointments to help further facilitate effective and timely financial transaction coverage.

1. The appointment of Gary Gold as Treasurer effective September 1, 2020.

2. The appointment of Cory Kuchinsky as an Assistant Treasurer

effective September 1, 2020.

Gary Gold is the Interim CFO at CPS Energy. Gary joined CPS Energy in 2005 and has served in a variety of

positions, most recently as Vice President of Corporate Services & Assistant Treasurer. Gary is a Certified Public

Accountant (CPA) with over 30 years in the energy industry. He holds a BBA with an emphasis in Accounting

from the University of Texas at San Antonio.

Cory Kuchinsky is the Interim Vice President of Strategic Pricing & Enterprise Risk Management and Solutions. Cory

joined CPS Energy in 2006 and has served in several

positions, including as the Senior Director of Grid Transformation Management. Prior to joining CPS Energy,

Cory worked for Ernst & Young. He has over eight years as an adjunct instructor teaching numerous university level

accounting courses at several local institutions. Cory is a CPA and holds a Bachelor of Science in Business

Administration and a Master of Science in Accounting from

Trinity University in San Antonio.

August 31, 2020 Board Meeting - REGULAR AGENDA

37

Executive Summary

Appointment of Treasurer & Assistant Treasurers For the CPS Energy Board of Trustees

Prepared By: Treasury 8/12/2020 Page 2 of 2

3. The appointment of Julie Johnson as an Assistant Treasurer effective

September 1, 2020.

ACTION REQUIRED:

• Board approval of Appointment of Treasurer and two new Assistant Treasurers

(for a total of four Assistant Treasurers) • Should you have any questions or need any additional information, please

contact Shannon R. Albert at 210-353-3818 (office) or 210-319-0250 (cell) or

Gary Gold at 210-353-2523 (office) or 210-414-8311 (cell).

CONTENTS:

Board Resolution: Approving Appointment of Treasurer and Assistant

Treasurers

Julie Johnson is the Sr. Director, Treasury & Finance. Julie has been with CPS Energy for over 25 years and

has served in numerous roles within Financial Services,

most recently as the Sr. Director & Controller. Julie earned both a BBA with a concentration in Accounting

and an MBA from the University of Texas at San

Antonio. Julie is also a CPA.


38

RESOLUTION APPROVING APPOINTMENT OF TREASURER AND ASSISTANT TREASURERS FOR THE CPS ENERGY BOARD OF TRUSTEES

WHEREAS, the CPS Energy Board of Trustees is required to designate and authorize specific officers and staff to conduct financial transactions on behalf of CPS Energy; and

WHEREAS, effective August 1, 2020, CPS Energy appointed Gary Gold to serve as the Interim Chief Financial Officer (CFO), to oversee all of CPS Energy's financial functions; and

WHEREAS, in his new role as Interim CFO, Mr. Gold will assume responsibility for managing and directing the financial transactions that require Board of Trustees approval and will be providing support to the Board related to these financial matters; and

WHEREAS, Mr. Gold was most recently and currently serves as an Assistant

Treasurer, and

WHEREAS, the role of Board Treasurer has been vacant since the departure of the prior CFO on July 31, 2020; and

WHEREAS, the Board previously appointed Shannon R. Albert, who now serves as Interim Vice President - Accounting and Maricela Benavides, who now serves as Sr. Director, Financial Systems & Strategic Projects to serve as Assistant Treasurers to the Board; and

WHEREAS, one Treasurer and four Assistant Treasurers will facilitate more

effective and timely financial transaction coverage, and the below named individuals have broad experience in financial matters;

NOW, THEREFORE, BE IT RESOLVED that the CPS Energy Board of Trustees hereby approves the appointment of Gary Gold as Treasurer as well as Cory Kuchinsky and Julie Johnson as additional Assistant Treasurers to the Board of Trustees, effective September 1, 2020.


39

EXECUTIVE SUMMARY

New Products / Tariffs

Resiliency and WDS

August 31, 2020 Board of Trustees Meeting

Prepared By: Strategic Pricing Page 1 of 4 08/31/2020

ACTION REQUIRED:

As discussed and previewed at the August 17, 2020, Board of Trustees Special Meeting, we will next request your approval on two tariffs:

1. Resiliency Service 2. Wholesale Distribution Service (WDS)

CONTENTS: To be responsive to the questions and comments we received at the August 17,

2020, Board of Trustees Special Meeting we have prepared this Executive

Summary and have attached a PowerPoint document that will be presented to the Board at its upcoming August 31, 2020, Regular Meeting. The points of the

Executive Summary are as follows: • Resiliency Service:

o While all the questions for this tariff were answered in the Special Meeting, in the next section of this document, we will provide basic background

information for your convenience. • WDS:

o Most of your previous questions related to this tariff. ▪ Accordingly, this Executive Summary is more focused on this updated

tariff ▪ A White Paper is attached that dives deeply into the advance battery

technology aspect of the service

EXECUTIVE SUMMARY:

Resiliency Service: This product applies to back-up power systems on customer premises. It does not relate to our generating assets. Third parties make an

investment in generators that our customers can use when they have an unplanned outage.

This occurs for example when a retail customer services unexpectedly go offline

because a vehicle hit a pole and knocked down our distribution lines down. Another example of this is a storm. The back-up system can be used by the customer until

we can reconnect the customer to the grid.


40

EXECUTIVE SUMMARY


Resiliency and WDS



While we are paid a fee by the third-party to broker their power transactions, we

have no obligation to take their power. We also are not exposed to market timing. We only move the power at the price they have contracted in the wholesale market.

While currently not necessary, in the long-term we could also consider purchasing

the excess power from the generators, when and if that could be helpful to us. This increases our portfolio of potential energy supply resources.

WDS: For years, we have been required by law to let new customers use our

distribution grid to access the Electric Reliability Council of Texas (ERCOT) wholesale market.

Historically for us, existing customers on this tariff have not had their own power

generation resources. They have been our customers for years. While we

originally treated them as retail customers, based upon their changing preference, they are now considered wholesale customers. They currently are not delving into

batteries. Their connections are fairly basic and accordingly they will stay on the original tier of the tariff.

Our new proposal modernizes the existing WDS tariff to enable positive benefits to

the community and ensure full cost recovery of distribution infrastructure. New customers located in San Antonio bring strategic benefits to our community.

Importantly, since batteries can be charged with and can discharge power, we are not supplying them energy from our energy resources.

This proposal is not a general rate increase, and it only impacts new battery storage

customers. Our 2 existing WDS customers will not be impacted by this change.

How others can use our distribution assets.

Anytime someone wants to use our distribution assets, we can charge them for

that use. While our existing rate has served its purpose over the years, because of the changes in technology, the tariff needed updating.

A new kind of customer is coming, along with energy storage technology, that also

wants to use our distribution assets. However, unlike our existing customers, they only want to utilize our distribution assets. They will buy power from the wholesale

market to charge their battery and then sell that stored power back to the wholesale market during advantageous times. Other than auxiliary load, they are

not asking that any retail power to charge the battery be supplied by us.


41

EXECUTIVE SUMMARY


Resiliency and WDS



Connecting to our distribution assets is allowed by ERCOT so long as they pay us

for the use of our distribution assets. Since they will use our distribution grid in different ways through connections at different points, the existing WDS tariff,

which is a “one size fits all” tool, cannot be used to fairly & appropriately recover distribution system costs from all types of customers. Therefore, since these new

types of customers will be coming to market across ERCOT and we must allow access, it is prudent for us to update our pricing. With our revised pricing and new

customers arriving, this will provide for additional revenue and is a benefit to our system. With the revised pricing, we do not lose money on the use of our assets.

To modernize, with our existing 2 customers, we are going to migrate the cost

recovery for the use of our distribution assets to their existing wholesale contracts. Since we are their energy supplier in addition to providing distribution service, this

is a more effective means to recover related costs. Thereby, these existing

relationships will be effectively unchanged.

Prospectively, the revised WDS tariff will now be structured with more precise tiered pricing and include recovery for upfront costs that would be necessary for

interconnection to our distribution assets. These new customers will only be charged for the use of our distribution assets, as they will buy and sell power from

the ERCOT wholesale market. Should they ever decide they want to change and buy power from us, we can always be ready to serve.

We are required to provide open ERCOT market access through our

distribution system upon request.

This requirement is a function of our state’s efforts to create a healthy, vibrant energy market in Texas. Regulations from the Public Utility Regulatory Act (PURA),

the Public Utility Commission of Texas (PUCT) and ERCOT require utilities, like CPS

Energy, to provide open access to the transmission & distribution systems for generators & wholesale providers. Generators and wholesale providers are

required to pay utilities for the use of their distribution systems through PUCT-approved tariffs.

While providing open access is a requirement, having these battery

storage operators locate in San Antonio provides strategic benefits to CPS Energy and the community.

These battery storage operators can locate anywhere they want within the ERCOT

market. However, having them locate in our community has strategic benefits.


42

EXECUTIVE SUMMARY


Resiliency and WDS



These customers will contribute additional revenue and city payment in exchange for providing access to our distribution system (enabled by the Wholesale

Distribution Service tariff). There is also a potential for revenue from other wholesale market services (e.g., scheduling services).

These systems provide increased reliability by mitigating outages when deployed

in our service area. This could lead to the development of new resiliency service offerings in the future.

This is an evolution of an existing tariff. It is not a general rate increase,

and it does not impact customers broadly.

We have an existing Wholesale Distribution Service tariff (Rider E14) that is over

20 years old. It has a single price of $0.50/KW of contracted interconnection to our distribution infrastructure. If no changes are made to the current tariff, these

new customers will pay the current rate. By stratifying the rate into three tiers, we have more appropriate price points to assess to the new customers.

This change is not a rate increase in the traditional sense that would apply to most

or all customers. Our 2 existing full service wholesale customers on the current tariff will not be impacted by this change. We will migrate their charges for using

our distribution assets into our existing wholesale contracts. Only new battery storage operators will be impacted by the proposed changes. In fact, because

these batteries will utilize existing assets in many cases, their incremental revenue contributes to keeping rates low for other customer classes over time.

The key take-aways from our WDS tariff modernization effort are:

• Customers use our distribution assets in different ways, and the WDS tariff

is being modernized to recover costs accordingly. New customers will be coming across ERCOT & utilities are required to connect these customers

• This provides for an additional revenue opportunity • There are strategic, tangible benefits to us that will be realized in the future

– (e.g. revenue, resiliency, etc.) • This is not a rate increase – the proposal has a narrow focus to these new

types of customers

We look forward to discussing this topic with you further at our Board of Trustees on August 31, 2020. Thank you!


43

NEW PRODUCTS:WHOLESALE DISTRIBUTION SERVICE

& RESILIENCY SERVICEPRESENTED BY:

Cory KuchinskyInterim V.P., Strategic Pricing & Enterprise Risk Management

& Solutions

August 31, 2020

Approva l Reques ted


44


2

• REVIEW OUR ALIGNED PRODUCT ROADMAP• ALIGN WITH COMMUNITY GOALS WHILE

MAINTAINING FINANCIAL STABILITY

o PROVIDE OVERVIEW OF UPDATED WHOLESALE DISTRIBUTION SERVICE (WDS) PRODUCT & PROPOSED RESILIENCY SERVICE PRODUCT

• REQUEST FOR APPROVAL


45

AGENDA

3

• ALIGNED ROADMAP• WDS OVERVIEW• RESILIENCY SERVICE OVERVIEW• REQUEST FOR APPROVAL


46

Q2 Q3 Q4

4

Environmental Responsibility

Resiliency

Reliability

Green Tariff On-site Solar

EV Pilots

Wholesale Distribution

ServiceLine Extension

Resiliency Service

PRODUCT ROADMAP FOR FY2021

Alig

ned

with

Gui

ding

Pill

ars

Pilot Programs(Under New Service

Options Tariff)

Rooted in Financial Stability

APPROVEDAPPROVED

INFORMEDINFORMED


47

5

OBSERVING EVOLUTIONThe “greening of the grid” is driving noticeable innovation…

…and customers are finding new ways to use & interact with the grid.

Yesterday’s Grid Today’s Grid• 2-way power flows

• Distributed resources

• Battery storage


48

6

ENABLING NEW OPPORTUNITIES

Generators

TransmissionGrid

Battery operators will use our system differently than our retail energy customers. Updating our WDS product unlocks new

revenue streams & has operational benefits for all customers.

DistributionGrid

PUCT rules & ERCOT protocols are designed to create a healthy, efficient energy market. These rules stipulate:

We are the sole retail energy provider in our market. Bills recover the cost of generation, transmission & distribution infrastructure, as well as the cost of energy.

1

2 We must allow battery operators to use our distribution grid to access the wholesale market. Bills recover the cost of distribution infrastructure.

Retail Energy Customer

Battery Operator

Wholesale Energy Market

Wholesale Energy Market


49

Our modernized tariff delivers value, aligns with community goals & protects our community’s electric infrastructure investment.

7

STRATEGIC BENEFITS

• ENABLES new technologies that support intermittent renewable resources on the grid

• ENHANCES resiliency & reliability of ERCOT & our system

• PROVIDES new revenue streams & recovers cost of infrastructure


Service


50

The WDS tariff recovers costs based on how much of our distribution system the customer uses.

8

HOW THE PRODUCT WORKSGeneration Transmission Distribution Service

Primary Voltage Service:

Extended Primary Voltage Service:

Secondary Voltage Service:

$0.50/KW

$1.21/KW

$1.78/KW

A

A

B

B

C

C

A tiered rate accommodates various

connection points.


Service


51

• WDS monthly bill covers the cost of distribution infrastructure

• In addition, we will coordinate battery charge and discharge timing with ERCOT on behalf of the customer (i.e., “scheduling”)

9

FINANCIAL ASSESSMENT

Note: Cost of Service consists of O&M, A&G, debt service, internal funds and city payment

$12.1k $12.1k

COST TO SERVE PI LOT BI LL

Wholesale Distribution Service Monthly Bill Sample

By locating in San Antonio, battery operators will incrementally contribute to the cost of distribution assets and will also

generate other revenue for wholesale scheduling services.

Cost to Serve Customer Bill

10MW Battery x $1.21/KW


52

10

DELIVERING DEPENDABILITY

• Commercial customers want a solution for dependable power during critical weather events

• For a monthly fee, we will provide access to onsite generation

• Pilot was launched in mid-2019 & we are ready to finalize the rate for broader customer use Ice/Snow

Hurricane

High Winds

Flooding

Resiliency Service

Our new Resiliency Service offering is an excellent fit for large businesses that require continuous operations.


53

11

• Builds & maintains facilities to interconnect generators

• Revenue:o Resiliency Service fee from retail

energy customero Share of proceeds for brokering

3rd Party’s wholesale market access

• Builds & maintains back-up generators at customer sites

• Wholesale market revenue

• Pays monthly Resiliency Service fee ($1.04/kW)

• Receives enhanced reliability

3rd Party Solution Provider

Large Retail Customer

HOW THE PRODUCT WORKS

Resiliency Service

In exchange for a monthly Resiliency Service fee, the customer is guaranteed to experience minimal disruption of service.


54

• The Resiliency Service fee is designed to recover the cost of:

o Infrastructure & system costs

o Operations & maintenance expenses

o Energy from back-up generation

• We expect to see additional revenue from our share of the 3rd Party’s wholesale market revenue

12

FINANCIAL ASSESSMENT

$1,040 $1,040

COST TO SERVE PI LOT BI LL

Resiliency Service Fee Monthly Bill Sample

The Resiliency Service rate is designed to cover the fixed cost of interconnecting with our distribution grid

Cost to Serve Customer Bill

1MW Resiliency Service x

$1.04/KW


55

13

RECAP

• Our industry is changing as customer expectations & technologies evolve

• We are committed to providing product options & flexibility to our customers

• New products align with community goals & maintain financial responsibility

• The proposed products support & align with our Guiding Pillars


56

14

We respectfully request the Board of Trustees’ approval of:

• The updated Wholesale Distribution Service Tariff• The new Resiliency Service Tariff following our

successful pilot

REQUEST FOR APPROVAL


57

Thank You


58

Appendix


59

17


Our product & rates strategy is supported by our Guiding Pillars.

SecurityCustomer

AffordabilityReliabilityEnvironmentalResponsibility Resiliency Safety



60

18

GLOSSARY

Acronym or Word Definition

kW A kilowatt (kW) is 1,000 watts of instantaneous power.

Pilot A program with very strict operational guidelines including that allows for data collection

Tariff A pricing structure or policy that governs how a utility provides services & generates revenue from those services


61

1 August 2020

Wholesale Distribution Battery Energy Storage Executive Summary This whitepaper is intended to provide context and explain why wholesale

distribution battery storage is being deployed across the Electric Reliability

Council of Texas (ERCOT) and how distribution service providers can recover

cost through a Wholesale Distribution Service (WDS) rate.

CPS Energy is a leader in renewable energy and supports the integration of

new technologies to support the grid. Energy storage, and specifically

batteries, are key to our future as our utility and industry move toward a more

distributed energy system. The thoughtful addition of more renewables and

new technologies also aligns with our strategic Flexible Path that will

transform our generation fleet to lower and non-emitting resources.

Energy storage is unique in that it provides power (generation) and consumes

power (places a “load” on our circuits). We therefore need to be thoughtful in

how to integrate this technology to ensure the reliability and security of our

grid. This technology continues to accelerate at a greater pace in the ERCOT

market. This paper will focus on one type of storage technology, battery

energy storage, and highlight the multiple factors that are contributing to the

increased use of batteries. This paper will also highlight key strategic benefits

of battery energy storage to CPS Energy and the community. Key points to

consider:

• Wind and solar capacity in Texas have grown at an incredible rate; the

intermittency of these resources creates challenges requiring ERCOT to

encourage storage integration in the market

• Battery storage technology has become much cheaper and more

capable in recent years (and this trend will continue), making batteries

a potential solution for renewable intermittency (e.g., smoothing, solar

shifting, firming)

• Regulations from the Public Utility Regulatory Act (PURA), the Public

Utility Commission of Texas (PUCT) and ERCOT require utilities, like CPS

Energy, to provide open access to the transmission and distribution

systems for generators and wholesale providers. Generators and

wholesale providers are required to pay utilities for the use of their

distribution systems through published wheeling tariffs, while

transmission costs are recovered through a separate mechanism called

Transmission Cost of Service (TCOS).

• CPS Energy is updating and modernizing our Wholesale Distribution

Service tariff to recover the use of our assets as we continue to look for


62

2 August 2020

opportunities to develop value-added services. An ERCOT meter at the

battery site will track the power dispersed and consumed by the battery.

• Our Wholesale Distribution Service tariff is not a new service, as CPS

Energy has provided service under this tariff to existing wholesale

customers. We are updating this tariff to reflect the current cost of

providing this service.

• The ERCOT market uses the Ancillary Services (AS) market to mitigate

the risks caused by intermittency; for example, they buy “operational

reserves” that can rapidly provide energy/power to the grid when the

wind suddenly stops blowing or the sun stops shining.

• There are strategic benefits of having battery energy storage located in

our community, including:

o Revenue from providing access to our distribution system

(enabled by the Wholesale Distribution Service tariff), as well as

the potential for revenue from other wholesale market services

(e.g., scheduling)

o Future value-added services as more systems are deployed.

o Increase in reliability by mitigating outages when the systems are

deployed in our service area, which could lead to development of

new resiliency service offerings.

Overview of Battery Energy Storage Batteries have been developed over a long period of time, but their usage

grew to a greater degree during the 20th century. Their development and use

have since grown exponentially during the early part of the 21st century with

the increase of renewable energy production and the adoption of electric

vehicles.

The battery was first invented in the 1800’s but it was in 1908, with the

invention of the Edison Alkaline cell, that batteries began to be used in

industry. We now see batteries used in all aspects of life, including an increase

in the use of storage in the power industry. Due to the widescale use across

multiple industries, battery applications continue to grow.


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3 August 2020

The growth in the electric vehicle (EV) market has driven more research and

innovation in the battery space. Infrastructure to design, build and mass

produce the battery components and units themselves has been constructed,

making batteries more available than ever before. Batteries have now been

built into Battery Energy Storage Systems (BESS) that can store and deliver

hundreds of megawatts over hours.

Battery Types There are varied types of battery chemistries in use (I.e. lead-acid, nickel

based and sodium-based) today but the one most commonly used in the

energy market is the Lithium-ion battery. This chemistry accounts for more

than 90% of the batteries currently deployed in the energy market. The reason

why Lithium-ion batteries are so commonly used is due to their high-cycle

efficiency, fast response times, and high energy density.

Battery Operational Capabilities The benefits and challenges posed by

renewable generation have been well

documented. Batteries have low to zero

total emissions which is great for the

environment. The major challenge with

renewable generators is that they are not

completely controllable (i.e. they only

produce power when the sun is shining, or

the wind is blowing). At times the

intermittent nature of renewables can be

constant throughout production periods, at times producing at the maximum

capacity (referred to as “nameplate capacity”) or zero, all in the matter of

seconds. By combining BESS with solar, it is possible to turn intermittent

solar into a uniform and consistent generator by providing power when solar

production is reduced (e.g. cloud over solar park) and absorbing power spikes

(e.g. clouds pass). This smoothing of the generation curve provides a more

stable power source and reliable distribution grid, solving the challenges of

integrating solar.


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4 August 2020

Solar shifting uses the BESS to charge using solar energy during the solar

peak and discharge the solar energy during peak hours or when electricity

prices are significantly higher. Solar is unable to provide constant operating

capacity (e.g. exactly 10 MW for 6 hours), thus the solar needs firming

(dependable operating capacity) via battery energy storage. This enables the

total system (solar and storage) to provide consistent energy to the grid.

Benefits to a utility include avoided cost of ancillary service procurement or

deferred cost of building peaking units.

BESS units can play an important role in the concept of virtual power plants.

Virtual power plants connect different sources of renewable power production

and storage and can solve one of the major challenges to renewables: weather

dependency. These components are connected remotely utilizing software

systems to behave like a conventional power plant. BESS in these systems

charge when the renewable power is over-producing and can discharge when

they are underproducing to mirror the controllable generation of a

conventional power plant.

Battery Cost Battery cost has experienced a decline and is projected to continue declining

over the next decade. Between 2010-2018, the cost of Lithium-ion batteries

was reduced by approximately 85% to $176 per kilowatt-hour (kWh). This

cost reduction has made BESS attractive in the power industry to address

issues that face the power grid.

ERCOT Wholesale Market ERCOT has seen an increased capacity installation of wind and solar resources.

Since 2000, wind capacity increased from just over 100 MW to more than

24,000 MW. Also, as of June 2020, there is nearly 2,700 MW of installed utility-

scale solar capacity in ERCOT, with another 72,000 MW under study. This

demonstrates the potential for an uptick in renewable generation in

comparison to overall capacity, which is currently 82,000+ MW.

Due to the variability of these two resources, ERCOT procures operational

reserves called Ancillary Services (AS), grid support functions (i.e. smoothing


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5 August 2020

and firming), to ensure reserve capacity is available to address variability. AS

creates a market opportunity for not only generation resources but Distributed

Generation Resources (DGRs) that include battery energy storage. This

market encourages the increased installation of battery storage in Texas.

BESS units are ideal for AS because they can provide fast acting operating

capacity that helps balance the generation and load as well as frequency

regulation to the grid. Currently most of the storage units available in ERCOT

are being used for AS. As the deployment of these units continues to increase,

so will the efficiency of how the grid operates. Battery operators are

responding to energy market pricing signals and can monetize their

investment in several ways (e.g., buying and selling energy, AS). The BESS

units participating in the market are metered by ERCOT. They pay market

prices when charging, and they are paid market prices when discharging.

Their energy is metered separately from the utility’s energy requirements.

PURA requires open access to the ERCOT market on both the transmission and

distribution systems. The PUCT also mandated the real-time co-optimization

(RTC), which will create a real-time energy and AS market, to be implemented

by ERCOT. This market improvement will lead to increased opportunities for

storage to participate in the real-time AS market. The total battery project

size in the ERCOT interconnection queue as of November 2019 was 7,214 MW.

Almost 50% of these projects are hybrid projects (i.e. battery project co-

located with a solar project). Forty-two percent of the remaining 50% are

stand-alone battery projects. The ERCOT market rules and infrastructure

prove to be an enabler for future installations.

Effect of Market on CPS Energy Just as ERCOT has seen a growth of interconnection request, units requesting

to connect within the CPS Energy service territory has increased, as can be

seen in the figure below. As required by law, CPS Energy, as a Transmission

and Distribution Service Provider (TDSP), facilitates the interconnection of

both solar and BESS units on the grid. We recover the cost of the

interconnection based on established cost causation principles. We are

updating and modernizing our Wholesale Distribution Service tariff to realize

revenue from access to our distribution system.


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6 August 2020

New potential revenues sources exist in the process of BESS units being

installed on the CPS Energy systems that can be evaluated. For example, CPS

Energy can serve as the Qualified Scheduling Entity (QSE) for the units,

connect their ancillary load as a retail customer and may be able to provide

backup services for the units. We continue to look for opportunities to partner

with the BESS operators.

CPS Energy also continues to advance our own generation portfolio by

incorporating renewable energy and now BESS. In the spring of 2019, CPS

Energy and the Southwest Research Institute partnered to build a BESS

located on the westside of San Antonio. The BESS can charge and discharge

up to 10 MW for an hour and was installed along with a 5 MW solar plant to

demonstrate the benefits of storage paired with renewables (i.e., hybrid

projects). The unit is also designed to provide AS in the ERCOT market.

In the FlexPOWER Bundle, CPS Energy will seek to pair renewable

generation (up to 900 MW of solar) with battery energy storage (50 MW),

realizing both the need and potential of the pairing.

Opportunities and Risks

Opportunities Risks Future value-added services as more

systems are deployed. Increase in

reliability by mitigating outages when

the systems are deployed in our service

Reliability of the grid can be

compromised based on operation

of the BESS units requiring CPS

Energy to perform detailed studies


67

7 August 2020

area, which could lead to development

of new resiliency service offerings.

New revenue opportunities such as

scheduling the battery provider’s bids

into the market.

Communication protocols can

pose cybersecurity risks

If sited properly, can provide a non-

wires alternative to transmission and

distribution needs on our system.

Rules from regulating agencies

can change requirements based

on equipment types and origins

Provides the ERCOT system additional

support as more renewables and

intermittent resources are added to the

grid.

Standards (i.e. electrical

connection, fire) being developed

due to BESS technology improving

capabilities

Provides local capacity on congested

parts of our system, helping to resolve

the congestion (overloading power

lines) and reduce congestion costs to

our customers.

ERCOT developing protocols that

will affect distribution connected

BESS

Future partnership opportunities as this

new technology continues to mature.

On the customer side, if the BESS is

installed behind the meter, the system

could help reduce peak demand and

even allow for micro-grid capabilities.

Conclusion CPS Energy is a leader in renewable energy and supports the integration of

new technologies to support the grid. We realize that energy storage, and

specifically batteries, are a key component of our Flexible Path as our utility

and industry move toward a more distributed energy system.

The increased deployment of renewables and other intermittent energy

sources continue to drive the need for wholesale battery storage on the

transmission and distribution system. The ERCOT region and CPS Energy

service territory anticipate increased applications of distribution-connected

battery storage.

CPS Energy is required by law to provide access to our distribution lines in

order to promote open access to the ERCOT market. We are modernizing our

Wholesale Distribution Service tariff to recover our cost, and we have

positioned ourselves to provide other value-added services that will generate

new revenue streams. CPS Energy will continue to pursue partnerships and

explore new business models that benefit the community and customers we

serve.


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WHOLESALE DISTRIBUTION SERVICE - RIDER E14 DRAFT City Public Service Board of San Antonio Page 1 of 3

Revision Number: 1 Effective Date: TBD

CITY PUBLIC SERVICE BOARD OF SAN ANTONIO

______________________________________

RIDER E14 WHOLESALE DISTRIBUTION SERVICE

WDS

APPLICATION

City Public Service Board of San Antonio (CPS Energy) Wholesale Distribution Service (Rider E14, or WDS) is offered to Wholesale Distribution Service Customers who are eligible for and complete a formal request to purchase distribution level wholesale transmission services at CPS Energy’s standard distribution voltages and as defined in Public Utility Commission of Texas (Commission) Substantive Rules, Subchapter A, 25.5. CPS Energy will accommodate such request, provided that the Wholesale Distribution Service Customer executes a Service Agreement with CPS Energy for service and agrees to pay the WDS Charges as specified below. The distribution facilities utilized to connect the Wholesale Distribution Service Customer to the CPS Energy transmission system shall be planned and installed per standard CPS Energy engineering practices and in accordance with the current version of CPS Energy’s Electric Service Standards. Such interconnection distribution facilities may include but are not limited to the following: transformers, electric circuits, metering devices, system protection devices, and communications and control equipment. This rate schedule is not applicable to electric service offered by CPS Energy under any other rate schedule. Service offered under this rate schedule is available only to Wholesale Distribution Service Customers and is not available for retail service.

TYPE OF SERVICE

CPS Energy will provide service at one point of delivery and measured with one meter, using facilities rated at less than 60 kV, at 60 hertz, alternating current, and at one of the service levels defined below:

Primary Voltage Service — Substation-connected service supplied at standard primary voltage (13kV or 35kV) supplied by the substation transformer. This service is subject to available substation capacity determined by CPS Energy.

Extended Primary Voltage Service — Distribution-connected service supplied at standard primary voltage (13kV or 35kV) supplied by the substation transformer.

Secondary Voltage Service — Secondary-connected service supplied at standard voltages below 13kV.


69



MONTHLY BILL

Grid Share

$13.00 Primary Voltage Service

$19.00 Extended Primary Service

$21.00 Secondary Voltage Service

Demand Charges

$0.50 Per kW for Primary Voltage Service

$1.21 Per kW for Extended Primary Voltage Service

$1.78 Per kW for Secondary Voltage Service

The demand charges shall be per kW of Contract Demand or Contract Capacity per month as specified in the Service Agreement. At termination of the Service Agreement for any reason, the Wholesale Distribution Service Customer shall also pay CPS Energy a sum equal to the estimated present worth of the unamortized original undepreciated cost (or book) value (if any) for all remaining distribution facilities plus removal costs for all remaining distribution facilities.

Wholesale Distribution Service Customer will also be billed for the following, if applicable: additional equipment required and related operation and maintenance expense, including metering devices; additional transformation services; monthly data services; operating and regulatory expenses caused by the operation of the Wholesale Distribution Service Customer's generation or energy storage assets; distribution system line losses; and transmission and market charges billed to CPS Energy for the Wholesale Distribution Service Customer's generation or energy storage assets. These billings and related payment due dates may be more frequent than monthly as agreed to within the Service Agreement.

LATE PAYMENT CHARGE

The Monthly Bill will be charged if payment is made within the period indicated on the bill. Bills not paid within this period will be charged an additional 2 percent times the Monthly Bill excluding the adjustment for fuel costs, garbage fees and sales taxes.

TERMS OF SERVICE

A customer requesting electric service under this rate schedule shall make the request in accordance with the Commission's Substantive Rules Applicable to Electric Service Providers and execute a Service Agreement with CPS Energy for wholesale distribution service.

Wheeling of power to other retail service locations connected to CPS Energy’s distribution system or within CPS Energy’s certificated service area is prohibited.

The Wholesale Distribution Service Customer shall be responsible for all costs of interconnecting with CPS Energy’s distribution system. If it is necessary to construct new or modify distribution or


70



transmission facilities for interconnection, CPS Energy will construct new facilities, or alter existing facilities as necessary, and make the service available as soon as reasonably possible provided, however, that the Wholesale Distribution Service Customer pays a contribution in aid of construction in advance of CPS Energy's commencement of such construction or alteration.

CPS Energy shall estimate the cost for the construction or alteration based on CPS Energy's then-current material, labor and overhead costs, and the Wholesale Distribution Service Customer must agree in writing to pay such costs before construction or alteration commences. The actual cost is the total cost of all construction or alteration, as applicable, including not only the labor and materials used in constructing the new facilities or altering existing facilities, but also costs for planning, engineering, licensing, regulatory, permitting, right-of-way acquisition and clearing, overheads, interconnection studies, cyber-security and safety-standard testing, and all other costs directly attributable to such construction or alteration. All facilities constructed or altered by CPS Energy shall remain the property of CPS Energy.

Wholesale Distribution Service hereunder shall be subject to, and CPS Energy and the Customer will comply with, the regulatory and operational procedures established under Applicable Rules and ERCOT protocols.

TERMS AND CONDITIONS

The terms and conditions or the service are those stated in Commission Substantive Rules, Subchapter I, 25.191-25.203, CPS Energy Distributed Generation Manual and the Service Agreement.


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Effective Date: TBD DRAFT Page 1 of 2

CPS Energy _______________________

RIDER E21

RESILIENCY SERVICE

APPLICATION

This Resiliency Service Rider (the “Rider”) is applicable to Customers for whom a separate contract or agreement (Service Agreement) between CPS Energy and the Customer exists for resiliency service, which is a redundant service to increase the reliability of electric retail service.

DEFINITIONS

Customer— a non-residential, CPS Energy electric retail customer Resiliency Mode — the state and time period during which power from a Resiliency Unit is redirected from grid operations to provide energy to the Customer’s connected load during an unforeseen outage of standard service Resiliency Unit— a natural gas generator, energy storage, or other energy technology unit capable of providing energy in Resiliency Mode; CPS Energy holds title to the energy from such unit, which is used to provide resiliency service to the Customer within the timeframes specified in the related Service Agreement ELIGIBILITY CRITERIA

This Rider is only applicable to customers that meet the minimum eligibility criteria. The proper application of the Rider shall be determined at CPS Energy’s sole discretion. A Customer must meet the following Minimum Requirements to be eligible for the Rider:

1. A CPS Energy Customer in good standing without any delinquent payments over the last 12 months; 2. Resiliency Unit(s) procured by CPS Energy or a third-party must be available at time of the request

for resiliency; and 3. Customer must meet financial criteria established by CPS Energy.

Resiliency service is complex and must be appropriately integrated into CPS Energy’s operations. In addition to the Minimum Requirements, CPS Energy will consider the following operational criteria in determining the applicability of the Rider to any prospective customer:

• Effective physical integration into CPS Energy’s existing electric generation, transmission, and distribution facilities;

• Effective integration into CPS Energy’s system operations and dispatching software and processes; • Generation diversity (type and physical location) consistent with generation resource planning; • Economic impact on CPS Energy’s generation fleet, and/or • Any other relevant generation or operational matters.


72

Effective Date: TBD DRAFT Page 2 of 2 MONTHLY BILL

Demand Charge $1.043 Per kW-AC of installed capacity

The Rider will be applied to the installed capacity of the Resiliency Unit(s) and included in the Customer’s monthly electric retail bill.

Additional Charges Prior to the start of construction, a standard capital contribution is required from Customer for each resiliency project. As specified in the Service Agreement, additional upfront capital contributions, monthly facilities charges, and/or monthly operations and maintenance charges may be required for

− Distribution system connection costs in excess of the standard amount included in the Rider, and/or − Customer support costs in excess of the standard amount included in the Rider, and/or − Resiliency Unit costs and equipment.

During Resiliency Mode, the standard applicable electric rate will be applied to energy provided to the Customer for a predetermined quantity of kWh as specified in the Service Agreement. Customer may incur additional charges for energy provided during Resiliency Mode that exceeds the predetermined number of kWh as specified in the Service Agreement.

Adjustments A bill adjustment shall be made as follows: plus or minus the proportionate part of the increase or decrease in taxes, required payments to governmental entities or for governmental or municipal purposes which may be hereafter assessed, imposed, or otherwise required and which are payable out of or are based upon CPS Energy electric system revenues.

The Monthly Bill amount for resiliency service shall consist of the demand charge stated above, plus any monthly adjustments or additional charges as may be specified in the Customer's Service Agreement.

LATE PAYMENT CHARGE

The Monthly Bill will be charged if payment is made within the period indicated on the bill. Bills not paid within this period will be charged an additional 2% times the Monthly Bill excluding the adjustment for fuel costs, garbage fees, and sales taxes.

TERMS AND CONDITIONS

Resiliency service shall be supplied for the length of time agreed to in the Service Agreement. Customer will execute a Service Agreement, subject to the applicable Rider, that may include additional terms and rates that ensure adequate capital, operations and maintenance, and fuel cost recoveries.

At all times during the delivery of resiliency service, the Customer shall remain solely served by CPS Energy. If the Resiliency Unit requires natural gas, it must be served exclusively by retail gas or transport service from CPS Energy.

Where applicable, resiliency service is subject to CPS Energy Customer Terms and Conditions Applying to Retail Utility Service (Terms and Conditions), as well as CPS Energy’s Electric Service Standards and Distributed Generation Manual (Technical Standards), as may be amended from time to time, which are incorporated herein by this reference as if set forth in full. In the event that the Terms and Conditions, Technical Standards, the terms of this Rider, and/or the Service Agreement conflict or are inconsistent with one another, the order precedence is as follows: (1) the Resiliency Service Rider, then (2) the Service Agreement, then (3) the Technical Standards, and then (4) the Terms and Conditions.


73

CPS ENERGY / SAWS AMI PARTNERSHIP

PRESENTED BY:

Jonathan R. Tijerina Sr. Director, Business & Economic Development

August 31, 2020

App rova l Reques ted


74

OBJECTIVES & TAKEWAYS

2

• REVIEW THE POTENTIAL PARTNERSHIP WITH SAWS FOR WATER AMI PROJECT AND SEEK SUPPORT FOR OUR PARTICIPATION


75

AGENDA

3

• GUIDING PILLARS• FLEXIBLE PATH• SAWS AMI PROJECT• DEAL STRUCTURE• NEXT STEPS• REQUEST FOR APPROVAL


76

4


The CPS Energy / SAWS AMI partnership leverages community assets to maximize customer benefits while enabling our

Smart City vision.

SecurityReliabilityEnvironmentalResponsibility Resiliency Safety


CustomerAffordability


77


78

CPS ENERGY / SAWS AMI PARTNERSHIP

Our strategic partnership with SAWS & Itron optimizes value to our community

• Expands the intelligence of the

SAWS water distribution system

• Promotes the means for better cost

management

• Improves information & services to

customers

The strategic partnership will leverage a community asset that brings value to our shared customer base that enables value and

new benefits.

San Antonio’s multipurpose network leveraged for water AMI, Intelligent Streetlights, & other Smart City applications

6


79

7

CPS ENERGY AS THE NAAS PROVIDER

This partnership expands our ability to maximize our investment for the betterment of the community.

500W

Communication Network

500W w / Water

Leak Sensor

CPS Energy

Electric meter

Gas

module

SAWS Owned

Equipment

CPS Energy

Owned Equipment

• We have created additional protocols for security.

• Will utilize the pilot to test and adjust the security architecture as needed.

Security Ring

Security Ring


80

8

DEAL STRUCTURE

Unique partnership that leverages our existing AMI network while providing SAWS with a proven, reliable & cost effective

water AMI solution.

Existing AMI contract:

- Electric Meters + Network

equipment + Field tools

- Network monitoring

We provide Network as a Service

(NaaS)

Itron provides Software as a Service

(SaaS), hardwareThis potential partnership presents an

opportunity to develop new

revenue streams.


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9

NEXT STEPS

• Pending SAWS’ notification of selection, begin pilot phase of AMI Project

▪ SAWS Board Meeting, September 1, 2020▪ Begin rollout phase with our expanded partnership▪ Track & test performance of systems

• Keep our Board & key stakeholders up to date on pilot & full deployment efforts


82

10

REQUEST FOR APPROVAL

We respectfully request that the Board of Trustees approve a resolution in support of our involvement in CPS Energy / SAWS AMI Partnership


83

Thank You


84

Appendix


85

13

GLOSSARY / DEFINITIONS

Acronym or Word

DefinitionAcronym or Word

Definition

AMI Advanced Meter Infrastructure

NaaS Network as a service

SaaS Software as a service


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RESOLUTION IN SUPPORT OF SAWS AUTOMATED METERING INFRASTRUCTURE PROJECT

WHEREAS, San Antonio Water System (“SAWS”) intends to pilot and

potentially implement an Advanced Metering Infrastructure (“AMI”) system for its customers (also referred to as the “SAWS AMI Project”);

WHEREAS, in 2019, SAWS released a request for proposals for vendors

to provide technology and services for the planning and implementation of advanced metering infrastructure to the SAWS customers; and

WHEREAS, CPS Energy, joined a third-party provider of its network

infrastructure (Itron), to submit a proposal to provide Network-as-a-Service (“NaaS”) to SAWS for the SAWS AMI Project. CPS Energy adds value to the SAWS AMI Project by providing an existing network that is reliable, proven,

secure and competitively priced; and

WHEREAS, SAWS, plans to pilot, refine and implement a fully effective AMI system, as determined at their sole discretion; and

WHEREAS, CPS Energy and the third party may be chosen for a city-

wide deployment of the AMI technology solution; and

WHEREAS, CPS Energy’s NaaS pricing model allows recovery of reasonable operation and maintenance costs while anticipating a variety of endpoints to be served on its network; and

WHEREAS, the NaaS fees are outside the scope of CPS Energy’s base

rates, and the transaction will be cost-neutral to all other customers served by CPS Energy; and

WHEREAS, CPS Energy will continually strive to be a strong steward of

the community’s energy utility assets while effectively balancing its following Guiding Pillars:

• Reliability;

• Customer Affordability; • Security; • Safety; • Environmental Responsibility; • Resiliency;

• Financial Responsibility; and


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WHEREAS, CPS Energy’s participation in the SAWS AMI Project supports San Antonio & metropolitan citizens to better leverage infrastructure investment by both utilities and further enable future smart communities’

initiatives. NOW, THEREFORE, BE IT RESOLVED that after careful consideration, and in light of the foregoing, the CPS Energy Board of Trustees expresses its

support for CPS Energy’s participation in the SAWS AMI Project.


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fy2021 covid-19 · 2020. 8. 26. · fy2021 covid-19 financial impacts 2020 presented by: gary gold...

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