Memorandum · 2019-04-18 · Memorandum Date: September 20, 2017 To: Board of Directors From: Jason Frisbie, General Manager/CEO Dave Smalley, Deputy General Manager and Chief Financial

Memorandum Date: September 20, 2017

To: Board of Directors

From: Jason Frisbie, General Manager/CEO Dave Smalley, Deputy General Manager and Chief Financial Officer Shelley Nywall, Controller

Subject: 2018 Proposed Annual Budget Work Session Attached is a copy of the 2018 Proposed Annual Budget for your review. Also included for reference is the 2018 Proposed Budget at a Glance document. Staff will give a presentation on the proposed budget at the Board meeting. The presentation will focus on key activities in 2018 with less emphasis on budget-to-budget comparisons; however, the detail slides and related trend information will be included in the slide deck for your reference. We are continually refining the budget as the market-based model is updated each quarter and new information becomes available regarding operating and capital expenses. The outcome of the changes is anticipated to be insignificant and will not impact the rate increase. Those changes will be discussed at the October Board meeting. A second review session and the required public hearing are scheduled for October. Board adoption is scheduled for December. Attachments

2018 Proposed

Annual Budget

Table of Contents

General Manager’s Budget Message ...................................................................................................................... 1

Platte River’s Budget Process ................................................................................................................................. 5

Budget Process .................................................................................................................................................... 5 Budget Schedule ................................................................................................................................................. 5 Board of Directors and Senior Management Team ...................................................................................... 6 Vision, Mission, and Values ................................................................................................................................. 7

Strategic Initiatives ................................................................................................................................................... 8

Key Goals and Activities .......................................................................................................................................... 9

Financial Review...................................................................................................................................................... 12

Financial Summary .............................................................................................................................................12 Comparative Statements of Revenues and Expenses ..................................................................................13

Budget Summary .................................................................................................................................................... 14

Revenue and Expenditure Budget .................................................................................................................. 14 Budget Contingency .......................................................................................................................................... 17 Source and Use of Funds ................................................................................................................................. 18 Revenue and Expenditure Detail..................................................................................................................... 20

Electric System Resources .................................................................................................................................... 22

Power Resources ............................................................................................................................................... 22 Resources and Deliveries ................................................................................................................................. 24

Operating Revenues ............................................................................................................................................... 25

Municipal Loads ................................................................................................................................................. 26 Wholesale Municipal Rates .............................................................................................................................. 27 Municipal Sales ................................................................................................................................................... 28 Surplus Sales and Other Electric Revenue .................................................................................................... 29 Surplus Sales ....................................................................................................................................................... 30 Wheeling Revenues ........................................................................................................................................... 30

Other Revenues ...................................................................................................................................................... 31

Interest and Other Income ...............................................................................................................................31

Operating Expenses ............................................................................................................................................... 32

Purchased Power............................................................................................................................................... 33 Fuel ....................................................................................................................................................................... 36 Production .......................................................................................................................................................... 38 Transmission....................................................................................................................................................... 41 Administrative and General .............................................................................................................................. 43

Debt Service Expenditures .................................................................................................................................... 46

Long-Term Debt Outstanding ........................................................................................................................ 47 Debt Service Coverage ..................................................................................................................................... 48

Capital Additions ..................................................................................................................................................... 49

Capital Additions Summary .............................................................................................................................. 51 Production Capital Additions .......................................................................................................................... 53 Transmission Capital Additions ....................................................................................................................... 58 General Plant Capital Additions ...................................................................................................................... 61

Acronyms and Terms ............................................................................................................................................. 63

2018 Proposed Annual Budget | 1

To the Board of Directors I am pleased to provide you Platte River Power Authority’s 2018 Annual Budget. The budget supports Platte River’s mission, values, strategic plan, and financial plan established by you for the organization.

In addition to the traditional budget-to-budget comparisons, this document now includes a list of key goals and activities planned for 2018 that support our strategic initiatives. This new format is the first step of a longer-term effort to review and renew the overall budget process to more effectively explain our plans for the future. Our story includes the five strategic initiatives you identified, which provide direction for the next three to five years (see page 8). Listed below are those initiatives and the key activities planned to support each. These initiatives and supporting activities will allow Platte River to continue to manage costs and operate our infrastructure in a safe, reliable, and compliant manner, while taking advantage of new opportunities and expanding on our record of environmental stewardship.

1. Customer Solutions/Products

Demand Side Management (DSM) – DSM programs help reduce consumers’ demand for and use of electricity, which not only benefits customers but also Platte River operations. These programs include energy efficiency (EE), demand response (DR), and distributed energy resources (DER). We collaborate with municipalities to implement DSM programs and focus resources on the most cost effective programs that benefit everyone (i.e., “Common Programs”). The municipalities focus the majority of their DSM resources on programs that align with their respective policies or goals, but provide some funding to expand Common Programs or further leverage collaborative efforts.

The budget for EE programs continues to expand, consistent with the Strategic Plan, Integrated Resources Plan (IRP), and DSM/EE Funding Policy. EE products and services are helping more customers lower their energy bills, reduce the need for new resources, improve environmental performance, and support the regional economy. To manage and support a residential energy audit and rebate program, currently done by a contractor, our budget includes two new staff positions directly funded by the municipalities. By bringing these services in-house, we will improve continuity, control, and flexibility, which will also lead to greater program savings.

We will continue implementation of the DR pilot program with partner municipalities through 2018 to learn how DR resources can be operated by Platte River to maximize system level benefits and to help identify the value of specific resources. Once completed, we will jointly review results and determine next steps including how DR can be operated in an organized energy market to efficiently align wholesale and retail value through a combination of rates or incentives.

We will also continue to collaborate with municipal staff to develop a DER strategy. Our objectives are the adoption of new, proven technologies that maintain or improve reliability and manage risks while offering customers viable options for self-generation.

Customized Resource Plan – Platte River staff will take the next steps to develop the Customized Resource Plan (CRP) by building upon the draft results provided to the municipalities in July 2017. We will work with each municipality to evaluate and determine a set of resource planning options that align with municipal goals. We will then produce additional cost analyses specific to the resource options of interest, and begin to create the administrative and pricing programs necessary to manage each customized resource portfolio.

Jason Frisbie General Manager/CEO

2 | 2018 Proposed Annual Budget

Rate Tariff Framework – To improve overall transparency and support integrated solutions among our Customer Solutions/Products, we will continue to develop a more robust rates framework that will include a clear rates policy and revisions to cost allocations.

2. Resource Diversification and Alignment

Renewable Resource Additions – Platte River produces approximately 9 percent of its energy through 108 MW of renewable resources (78 MW wind, 30 MW solar) under long-term contracts and we will proactively incorporate more renewables within the next few years. Our staff in 2018 will finalize potential contracts, secure transmission, prepare to integrate these additional renewable resources, and consider new opportunities to incorporate more renewable energy or emerging technologies, as directed by the 2016 IRP Action Plan and strategic initiatives.

Community Solar Project and Program – We plan to unveil a new 5 MW community solar program during 2018 to provide solar power. From a single solar project, we and our municipal owners will help meet growing customer demand for solar energy resources and better integrate solar generation into our system operations. Staff will also work with municipal partners to promote the new community solar program to retail customers.

3. Organized Energy Market Participation

Platte River, along with seven other regional utilities, plans to join the Southwest Power Pool, a regional transmission organization (RTO) and organized wholesale energy market. This will enable Platte River to: (1) pool energy resources over a larger footprint; (2) use existing transmission systems more efficiently; (3) increase the integration of renewable resources; (4) improve transmission and interconnection planning; and (5) potentially lower costs to our owner municipalities.

Risks include exposure to congestion costs, higher market energy prices during unexpected resource outages, and regional cost responsibilities with new transmission infrastructure development. However, we believe the benefits of RTO participation are greater than the risks by a significant margin, not just in the short-term, but also the long-term. Most budgeted expenses cover items needed during the onset of entering a market, such as software and modeling tools. Additional investment will need to be made for staff and other tools and resources to successfully implement and operate in an organized energy market.

4. Infrastructure Advancement

Service Reliability – In 2018, we will make a significant, proactive investment in Rawhide Unit 1 to ensure service reliability. We plan a six-week maintenance outage to replace the original turbine generator and re-wind the original generator stator, as well as, perform inspection and maintenance on the boiler and other critical assets. Other projects include the upgrade of high voltage motor control centers, the replacement of the 102 feed water heater, replacement of the air pre-heater baskets, and an upgrade to the voltage regulator system. These future projects are necessary to maintain plant reliability and maximize its efficiency.

Environmental Responsibility – During the outage, we plan to replace and upgrade the bottom ash system of the unit to comply in advance with federal and state solid waste management regulations. This system will also provide redundant capabilities allowing for maintenance while the unit remains online. In addition, staff will prepare for closure of two ash ponds in the first quarter of 2019.

Windy Gap Firming Project – Platte River is a participant in this regional water storage project to secure the long-term water needs of the Rawhide Energy Station. Planning for this project began in 2003 and it should become operational by 2022. A portion of the $95 million debt financing planned in 2018 will help fund construction of this project.

Headquarters Campus Project – We plan to break ground on the new headquarters campus in spring 2018. The new facility will help us better manage the next generation of technologies and new market challenges and opportunities. It will also provide the communities with better access to the region’s energy experts and the policy leaders who will guide our clean energy future. A portion of the $95 million debt financing planned in 2018 will help fund construction of this project.


Physical security – We will embark on a multi-year effort to improve the physical security of Platte River’s substations and generating facility by building control rooms along with enhanced video surveillance and intrusion detection. These systems will meet or exceed all NERC/CIP requirements for physical security and will align with our plans to join an RTO.

Cyber security – Aligned with physical security, we will enhance our focus on implementing enterprise-wide cyber security principles and best practices, with the goal of ensuring the continued security of the business network. We strive to proactively address this rapidly changing environment through regular technology updates.

Communication infrastructure – We will make three significant investments in technology during 2018. First, the Control Center and its underlying telecommunications and fiber optic infrastructure must be moved as part of the new Headquarters Campus Project without interrupting electric operations, SCADA, and protective relaying. This will require considerable planning and testing prior to execution.

Second, we will perform significant work on the redundant fiber line to Estes Park, which will ensure reliable fiber communications capabilities between Estes Park and Platte River. During the year, staff will continue locating, auditing, and digitizing fiber assets into the management system in time for completion in early 2019.

Third, staff will continue to monitor the municipalities’ broadband initiatives and work with each to support future implementation. In 2017, for example, we helped investigate strategies for the efficient use of the fiber network. The results will be analyzed in 2018 and we will collaborate on next steps.

5. Community Outreach

Communications and Marketing Plan – Platte River will develop a plan that supports the board-approved “Community Support and Involvement Policy” and advances the key initiatives of the organization, including new market opportunities, CRP, emerging renewable energy products, rate innovations, expanded community support/outreach, and the new headquarters campus.

Collaboration – Platte River will continue to enhance collaboration and communication with municipalities and local/regional stakeholders through regular meetings and electronic communications, sharing of best practices, and by providing support to municipal communicators when and where needed.

Rate Design Philosophy

Platte River’s Strategic Financial Plan (SFP) is designed to provide long-term financial sustainability by generating adequate cash flows, maintaining access to low cost capital, effectively managing risk, and providing stable and competitive wholesale rates. Based on the 2018 Budget projections, a rate increase was not required to meet minimum SFP targets this year, but it is critical to note that current estimates forecast the need to raise rates by approximately 2.3 percent per year. This increase is driven in part by continued portfolio diversification, general cost escalations, and infrastructure investment. As part of our planning efforts, we recommend providing our municipal owners and those whom they serve a more predictable path of smaller annual rate increases rather than dramatic increases in out years. The 2018 Budget therefore calls for a 2 percent increase to the Tariff—Schedule 1: Firm Resale Power Service (Tariff 1) Demand and Energy seasonal charges. This strategy will not only help our owner municipalities improve their long-term budgeting processes, it will also maintain a strong balance sheet for Platte River by generating additional reserves, thus reducing the need for future debt financing.

2018 Budget Summary

In addition to the activities noted above, the 2018 Budget supports ongoing operations and maintenance expenses. The budget results for surplus sales, fuel, and purchased power are based on an in-house hourly dispatch model and related expenses that are based on contract terms, escalations, and/or third party projections. Operations and maintenance and administrative and general expenses are determined by the needs of the organization. Management held multiple work sessions to thoroughly review the budget justifications, resulting in overall reductions of operations and maintenance expenses, as well as capital additions.


Total revenues for 2018 are projected to be $220.5 million, an increase of $3.5 million from the 2017 Budget. Expenditures are forecast to be $292.2 million, reflecting an overall increase of $20.7 million when compared to the 2017 Budget. The budget includes a $5 million increase in the contingency appropriation to $25 million that can be used to meet circumstances unforeseen at the time the budget was prepared. Historically, contingency was a fixed amount. Beginning 2018 and going forward, the amount will represent approximately 10 percent of operating expenses and capital additions to better align with fluctuations in the budget. Expenditures in excess of revenues will be funded by prior reserves and reimbursed with funds from the 2016 and 2018 debt financings. Details of the revenues and expenditures are contained in the subsequent sections of this document, along with a budget-to-budget comparison.

Next steps in the budget process include a budget work session on September 28, 2017. A public hearing with review of the proposed budget will also be held on October 26, 2017, and an action item will be included on the December 7, 2017, board agenda to adopt the budget. Once adopted, a copy of the 2018 Budget will be filed with the State of Colorado.

We look forward to the challenges and opportunities that will be presented in 2018 and working with you over the next few years on implementing our strategic plan. As always, we appreciate your continued leadership and support.

Jason Frisbie General Manager/CEO


Budget Process

Platte River is a political subdivision of the State of Colorado and is subject to the Local Government Budget Law, C.R.S § 29-1-101, et seq. Platte River accounts for its financial operations as a proprietary fund and the 2018 Budget has been prepared using the accrual method of accounting and accepted governmental budgeting practices. Since Platte River operates as a proprietary fund, it is not subject to Colorado’s Taxpayer’s Bill of Rights provisions. The statutory deadline for submission of Platte River’s annual budget to its board of directors is October 15 of each year. By that date, a notice is published in newspapers of general

circulation stating that the annual budget is available for inspection by the public. The date and time for the public hearing is also published. The budget document can be found on Platte River’s website at www.prpa.org and at Platte River’s headquarters at 2000 East Horsetooth Road, Fort Collins, Colorado.

State law allows Platte River to carry over into 2018 any unexpended balance of funds appropriated for 2017 expenditures. The 2017 unexpended amounts may be due to construction delays, change in scope, or payment timing differences and will be determined after the December 31, 2017, year-end closing. The amounts required in 2018 to complete 2017 projects will then be transferred to the appropriate budget categories in 2018. The 2018 capital additions will be funded either from current operations and/or proceeds from the 2016 and 2018 debt financings.

Budget Schedule


Board of Directors Platte River is governed by an eight-person board of directors designed to bring relevant expertise to the decision-making process. The board includes two members from each of the owner municipalities.

The mayor may serve or designate some other member of the governing board of their owner municipality to serve in their place on Platte River’s Board of Directors. Each of the other four directors is appointed to a four-year staggered term by the governing body of the owner municipality being represented by that director.

Senior Management Team Platte River operates under the direction of a general manager/CEO who serves at the pleasure of the board of directors. The general manager/CEO is the principal executive officer with full responsibility for planning, operations, and administrative affairs of Platte River. The senior management team also includes a deputy general manager/chief financial officer, a chief operating officer, a chief administrative services officer, a general counsel, a chief strategy officer, and an executive assistant to the general manager/CEO.

Photo to be added.

Photo to be added.


Our Mission Provide safe, reliable, environmentally responsible, and competitively priced energy and services.

Our Vision As a respected leader and responsible energy partner, improve the quality of life for the citizens served by our owner communities.

Values Our values define who we are and how we conduct our business. Employees are essential to our success and their ability to demonstrate this set of foundational values is critical to the execution of our strategic initiatives and operational goals. Communication of and commitment to these values is important as we navigate future challenges. Adherence to these values will enhance customer satisfaction both internally and externally, and will bolster the long-term viability of our organization and communities.

Safety

Working safely to protect the public, our employees, contractors, and the assets we manage.

Integrity

Being ethical and holding ourselves and contractors accountable to conduct business in a fair, honest, transparent, compliant, and environmentally responsible manner.

Service

Providing quality service at a competitive price while being responsive to our owners’ needs.

Respect

Encouraging constructive dialogue that promotes a culture of inclusiveness, recognizes our differences, and accepts differing viewpoints.

Operational Excellence

Engaging employees and contractors to strive for excellence and continuous improvement.

Sustainability

Maintaining financial integrity, minimizing our environmental impact, and supporting responsible economic development in our owner communities.

Innovation

Striving to be creative, pioneering, and the best in class at solving tough challenges with resourcefulness and non-traditional approaches.


Strategic Initiatives Platte River is engaged in many important activities that support our Mission and Vision. These strategic initiatives provide direction for the next three to five years in specific areas that are critical to our future success. They are intended to be clear and actionable, yet flexible enough to allow creativity in terms of tactics required to achieve them.

Customer Solutions/Products Through this initiative, we will provide our owner municipalities and their customers with choices that enable them to achieve their energy goals in new ways. We recognize that our owner communities have varied motivations for exploring alternative energy solutions, and diverse expectations from Platte River. It is also clear that Platte River must seek collaborative, integrated solutions to deliver desirable outcomes for the owner communities and their customers. Examples of potential solutions include:

Distributed energy resource strategies and systems integration (supporting energy efficiency and demand-side technology products and services)

Customized resource portfolios

Consolidated value-added services

Enhancements to electric rate design that increase transparency and support integrated solutions

Resource Diversification and Alignment Decisions regarding future resource technologies and systems integration will be driven by regulatory compliance, diverse community needs, and risk mitigation. In order to provide new solutions for our owner communities and their customers—and to continue cost-effectively providing reliable electric supply—resource mix changes will be required over time. Key aspects of this initiative include:

Strategies for exiting the Craig Station coal facilities

Expanded wind and solar resources

Collaboration and integration regarding community solar and distributed resource options

Organized Energy Market Participation Organized energy markets in the mountain west region will be a key driver for the future of our industry. Opportunities include pooling of energy resources over a larger footprint, more efficient utilization of existing transmission systems, increased integration of renewable resources, improved transmission/inter-connection planning, and lower costs to our owners. Risks include exposure to additional congestion costs, higher market energy prices during unexpected resource outages, and loss of local control over transmission infrastructure development. Key areas of focus include:

Updated purchasing and selling strategies

Enhanced analytics and staff skill development required for organized energy markets

Risk identification and exposure mitigation

Infrastructure Advancement Platte River’s generation and transmission assets continue to perform well, through investment in capital improvements and maintenance. However, additional investments are needed, including:

Physical and Cyber Security

Communication infrastructure

Water storage enhancements

Headquarters campus

Community Outreach A positive perception of Platte River and its value to the communities we serve is critical to our future. We must clearly and transparently tell our story through expanded communications, broader public outreach, enhanced co-branding with the municipalities, and broader use of evolving social media and other technologies. Leveraging of resources can be achieved through expanded partnerships and collaborations as we align with identified priorities of our owner communities.


Key Goals and Activities Platte River is a wholesale generation and transmission provider that delivers reliable and competitively priced energy and services in a safe and environmentally responsible manner. Platte River consistently takes a proactive approach to its responsibilities as a member of the Northern Colorado community by investing in preventative maintenance, through early adoption of regulatory mandates, by enhancing and improving infrastructure, and by maintaining its financial sustainability. These proactive measures allow Platte River to meets its goals of focusing on the needs of its customers and providing high quality service.

The focus for 2018 will include a planned maintenance outage at Rawhide, firming a critical water source, and improving infrastructure with several production and transmission capital projects. Platte River will continue its proactive commitment to environmental responsibility through a new bottom ash removal system at Rawhide, which will improve solid waste management and further reduce mercury emissions through more aggressive use of flue gas chemical processes. Investments will continue in cyber security and physical security to keep data, equipment, and employees safe. Staff will focus on preparing for the formation of an organized energy market, expanding DSM programs, optimizing the fiber network, preparing for the NERC/CIP compliance audit, expanding collaboration and communications with stakeholders, and integrating renewable energy into the system. Also, a debt financing is planned to support two major capital projects: Headquarters Campus Project and the Windy Gap Firming Project.

Platte River’s strategic initiatives support this proactive approach through several key goals and activities in the 2018 Budget listed on the next page. Below are the operating expenses and capital additions shown by category of significance.

Operating Expenses and Capital Additions: $246.9 Million

Generation

35%

Fuel

19%

Facilities

15%

Contract

Renewables &

Hydro

13%

General Business

9%

Transmission

5%

DSM

3%Market Purchases

1%


Generation

Six-week outage at Rawhide Unit 1 to upgrade turbine generator, replace bottom ash system to proactively comply with future federal and state solid waste management regulations, as well as boiler and other maintenance

High voltage motor control center switchgear replacements

Rotary car dumper conversion to variable frequency drives enabling full utilization of the aluminum railcars

Windy Gap Firming Project development

Rawhide coal stockpile survey to improve accuracy

Engineering document conversion project completion

Emerson control system training continuation

NERC/CIP compliance audit support

Solid waste management requirements for future federal and state regulatory requirements, i.e., decommission bottom ash ponds, monofill process changes, and related permitting

Mercury emissions reduction of 33 percent to 0.0087/lb per GWh of generation with increased use of BPAC to comply with mercury removal regulations

Transmission

Organized energy market preparations

Boyd Substation completion

Oil circuit breakers replacements

Battery bank replacements

NERC/CIP compliance audit

Vegetation management compliance

Municipal broadband support and optimization of fiber network

Fiber locate, audit, and digitize into the fiber management system

Redundant fiber route to Estes Park completion

Infrastructure planning and implementation for Headquarters Campus Project (telecom and fiber systems)

Customer Service

EE program expansion

DR pilot program completion

DER exploration

Community solar program development

Communications

Overarching marketing and communications plan development that aligns with and supports the organization’s strategic plan

Communications plan development and implementation for key activities, including organized energy markets, customized resource plan, emerging renewable products, rate development, community outreach, and the Headquarters Campus Project

Collaboration with communications staff of municipalities and local/regional stakeholders

Transmission outage communication plan

Emergency preparedness and crisis communications alignment

Existing communication channels or tactics (e.g., social media) expansion

General Business

Organized energy market preparations

Property rights audit

Windy Gap Firming and Rawhide Unit 1 outage support

Rate framework development

Financial and pension audits

Risk management enhancements

Project management continuation

Leadership training emphasis

Employee health and wellness programs


Facilities

Headquarters campus design and construction

Wall and reinforcement restoration of buildings at Rawhide Energy Station (multi-year project)

Information Technology

Enterprise cyber security program

Hardware and software upgrades

Infrastructure planning and implementation for Headquarters Campus Project and organized energy market preparation

Security and Safety

Low impact physical security CIP compliance standards implementation at the Rawhide Energy Station and substations (secure key access points at the plant and control centers)

Video surveillance coverage for faster intrusion detection and appropriate response at the Rawhide Energy Station

Emergency management program (improve response plans, proactive approach, better preparation for disaster recovery, and enhance community partnerships)

Soft tissue injury prevention through programs such as active release techniques program

Qualified electrical worker training on NFPA 70E compliance

Industrial hygiene monitoring (high-hazard tasks and environments)

Resource Planning

Organized energy market analysis and intelligence and model enhancements

Wind resource expansion in supply portfolio

Renewable energy supply integration

Markets and emissions outlook

Alternative generation analysis

Distribution/wholesale joint modeling effort

Customized resource planning



Financial Review

Financial Summary

The Local Government Budget Law of Colorado, generally accepted accounting principles, Platte River’s Fiscal Resolution, General Power Bond Resolution, and SFP provide the framework for Platte River’s financial activities. The 2018 Budget was developed in compliance with this framework, as well as having an adaptive strategy to effectively maintain reliability, manage risk, and ensure regulatory compliance.

Platte River is committed to sound financial and management planning. The key to meeting this commitment is in following the goals of the SFP, which include a minimum annual net income of $6 million, minimum total debt service coverage of 1.50 times, a debt-to-capitalization ratio of 50 percent or less, and a target minimum of 200 unrestricted days cash on hand. The SFP is designed to provide long-term financial stability by generating adequate cash flows, maintaining access to low cost capital, providing stable and competitive rates, and effectively managing financial risk.

Financial results shown below for 2018 are positively impacted by a reduction in depreciation expense, which is a non-budgeted expense. Depreciation expense is approximately $2.6 million lower in 2018 primarily as a result of approximately $177 million of original Rawhide Energy Station assets that are now fully depreciated. In addition, during 2017, Platte River sold Windy Gap water units generating $39 million in proceeds. The sale will be recognized through 2046, the projected remaining useful life of Rawhide Unit 1, positively impacting net income by $1.3 million each year. The sale proceeds also increase available reserves, which reduces future debt financing requirements.

The following table is a comparison of the key financial indicators.

2016 2017 2017 2018

SFP Targets Actual Budget Estimate (2)

Budget

Net income ($000) $6 Million Minimum 17,965$ 11,762$ 11,708$ 23,417$

Debt service coverage 1.50 Times Minimum 1.78x 1.65x 1.64x 2.56x

Debt-to-capitalization ratio 50% or Lower 28% 31% 32% 35%

Unrestricted days cash on hand(1)

200 Minimum 222 202 273 250

Other Selected Data ($000)

Accumulated net assets 516,437$ 525,449$ 528,145$ 551,562$

Dedicated reserves and available funds(1)

143,647$ 114,218$ 151,075$ 182,073$

Long-term debt, net 250,838$ 223,568$ 223,568$ 300,474$

Capital additions 38,384$ 52,310$ 47,763$ 78,303$

(1)

(2) 2017 Estimate represents seven months actual and five months budget adjusted for revised projections on all budget

schedules.

Amounts shown for 2017 Budget were restated from the adopted 2017 Annual Budget document.


Comparative Statements of Revenues and Expenses

2016 2017 2017 2018

Actual Budget Estimate Budget

Operating Revenues

Sales to municipalities 185,213,723$ 191,943,294$ 190,819,041$ 197,072,600$

Sales for resale and other 20,079,504 23,305,399 22,795,251 21,037,036

Total operating revenues 205,293,227 215,248,693 213,614,292 218,109,636

Operating Expenses

Purchased power 33,270,508 35,430,832 35,435,186 34,173,236

Fuel 46,360,663 48,800,015 48,761,416 47,691,528

Operations and maintenance (1)

57,480,647 65,589,129 65,583,989 62,034,405

Administrative and general (1)

17,366,272 22,036,208 21,431,354 24,741,607

Depreciation (1) 27,219,736 26,436,900 26,139,694 22,504,195

Total operating expenses 181,697,826 198,293,084 197,351,639 191,144,971

Operating income 23,595,401 16,955,609 16,262,653 26,964,665

Nonoperating Revenues (Expenses)

Interest income 1,083,493 1,158,551 1,328,693 2,119,794

Other income 846,032 497,552 505,232 255,629

Interest expense (10,065,757) (9,582,070) (9,582,067) (10,946,142)

Amortization of bond financing costs (1)

1,542,603 2,122,665 2,123,015 2,193,015

Allowance for funds used during construction 1,137,163 560,009 960,992 2,835,851

Net (decrease) increase in fair value

of investments (1)

(174,112) 49,941 109,541 (6,244)

Total nonoperating revenues (expenses) (5,630,578) (5,193,352) (4,554,594) (3,548,097)

Income 17,964,823$ 11,762,257$ 11,708,059$ 23,416,568$

(1) Actual and estimate include nonappropriated expenses of vacation accrual, depreciation expense, amortization of bond financing

costs, and unrealized investment holding gains and losses.


Budget Summary

Revenue and Expenditure Budget 2018 Budget Compared to 2017 Budget

The 2018 Budget includes total revenues of $220.5 million, an increase of $3.5 million over the 2017 Budget. Expenditures total $292.2 million, a $20.7 million increase over the 2017 Budget. The 2018 Budget includes a contingency appropriation of $25 million, an increase of $5 million, that can be used to meet expenditures that could not be foreseen at the time the budget was prepared. This amount represents approximately 10 percent of the operating expenses and capital additions planned for 2018. Operating expenses are projected to be $168.6 million, a decrease of $3.2 million. Capital additions total $78.3 million, an increase of $26 million. Debt service expenditures are projected to be $20.3 million, decreasing $7.1 million based on scheduled debt service payments. A new debt financing of approximately $95 million is planned for 2018. Expenditures in excess of revenues will be funded by prior reserves and reimbursed with funds from the debt financing that occurred in 2016 and the new debt financing planned for 2018.

Described below are significant revenue and expenditure items contained in the 2018 Budget compared to the 2017 Budget.

Revenues are expected to increase $3.5 million mainly as a result of increases in municipal sales and interest income, offsetting decreases in short-term surplus sales. Major revenue items are described below.

Municipal sales are projected to increase $5.1 million in 2018 due to an average 2 percent Tariff 1 rate increase and the 4 percent Tariff—Schedule 7: Renewable Energy Service (Tariff 7) rate increase. Energy deliveries and total billing demand are projected to increase 0.9 percent and 0.3 percent, respectively.

Interest income is expected to increase $0.9 million as a result of higher projected interest rates.

Short-term surplus sales are decreasing $2.2 million due to lower projected surplus sales prices and energy. The average price is 3 percent lower than 2017 at $22.67 per MWh. Energy to be sold is also decreasing 9 percent due to the planned maintenance outage described below and lower market prices which, at times, are less than the marginal cost of generation.


Operating expenses are expected to decrease $3.2 million. Production expenses represent the largest decrease of $4.2 million followed by purchased power of $1.3 million and fuel expense of $1.1 million. Administrative and general expenses are expected to increase $2.7 million and transmission expenses $0.6 million. The following are significant items impacting the change in operating expenses.

Maintenance Outage:

A six-week maintenance outage is planned for Rawhide Unit 1 for $12.9 million, which includes personnel expenses and additional operations and maintenance expenses. The ten-day maintenance outage in 2017 better defined scope of work and costs for this outage. Details of the maintenance outages can be found in the Operating Expenses – Production section of this document.

Replacement power for the planned maintenance outage consists of purchasing power in addition to running the combustion turbines. The majority of the increase of $2.1 million in supplemental purchases is for the outage.

The outage accrual policy is to accrue 100 percent of the estimated costs ahead of the planned maintenance outage and reverse those amounts the year of the outage to alleviate a significant increase in expenses. A portion of the outage expenses will be accrued in 2018 up to the outage, then the cumulative amount accrued will be reversed in the months of the outage resulting in a net reversal of $9.1 million, comprised of $7 million in operations and maintenance expenses and $2.1 million in replacement power.

An eight-week maintenance outage for Craig Unit 2 took place in 2017 and no outages are planned for either Craig unit in 2018, therefore lowering expenses by $2.7 million.

Coal Expense (overall coal expense is decreasing $1.2 million):

Rawhide Unit 1 coal expense is decreasing $1.9 million as a result of lower generation due to the planned maintenance outage. Pricing is increasing 5 percent per ton based on market pricing.

In 2018, the Craig units will be served with a single source of coal, Trapper Mine, as the Colowyo Mine coal contract will expire at the end of 2017. Coal expense is increasing $0.7 million. Higher generation is expected as 2017 had the Craig Unit 2 eight-week planned maintenance outage. The soft surplus sales market is anticipated to continue. The delivered coal price is decreasing 7 percent as lower prices per ton are driven by fixed costs recovered over an increase of tons mined.

Renewable Resources and DSM:

The DSM budget has increased $2.2 million for the expansion of programs, bringing Platte River’s total DSM budget to $7.9 million. Most of this funding is in the area of energy efficiency. Expanding EE programs is included in Platte River’s Strategic Plan, Integrated Resources Plan, and board-approved Demand Side Management—Energy Efficiency Funding Policy. EE is an economical way to help customers make cost-effective improvements to their facilities while also helping Platte River and the municipalities reduce load growth, delay the need for new resources, and reduce greenhouse gas emissions. Increasing the investment in EE is being phased in over several years and long-term funding goals are based on an energy efficiency potential study that identified a level of program investment that is cost effective compared to supply side options. Platte River will continue to refine its energy efficiency programs to ensure funding and results remain consistent with identified energy efficiency potential. In addition, funding is provided for a DR pilot program and exploration of other distributed energy resources.

The long-term power purchase agreements for 78 MW of wind generation are increasing $0.4 million due to contract price escalations.

The purchased power expense for hydropower from Western Area Power Administration (WAPA) is decreasing $0.5 million due to a proposed rate reduction for removal of the drought adder.


Salaries and Benefits (these expenses were developed in accordance with the board policy on Employee Total Compensation; salaries and benefits reflect an increase of $1.6 million):

Regular wages are increasing $1.2 million and include staffing increases, a market based adjustment of 3.1 percent, and projected position step increases. There are three new positions planned, two that will support DSM programs and will be fully reimbursed by the municipalities, and one that will support SCADA. The sources for the salary adjustment include data from a variety of published sources, both regional general industry and from other utilities.

Overtime reflects an increase of $0.6 million, which is mainly attributable to the Rawhide Unit 1 planned maintenance outage.

Benefits are decreasing $0.2 million. The defined benefit pension expense is decreasing $0.4 million mainly due to above-target market returns and actuarial plan assumptions. Medical and dental expenses are expected to increase $0.1 million based on a mid-year projection provided by Gallagher Benefit Services using historical claims and industry cost projections. There is an additional increase in social security of $0.1 million following the increase in wages.

Other Expenses:

The closure of two ash impoundments due to federal and state solid waste management regulations is planned for the first quarter of 2019. Since this activity is an environmental retirement obligation, $1.1 million will be expensed in 2018.

Other operations and maintenance expenses are reduced from the 2017 Budget by a net of $1 million and are described in detail sections of this document.

A debt financing for approximately $95 million is planned for 2018 to fund capital additions for the Headquarters Campus Project and the Windy Gap Firming Project. Overall debt service expenditures are decreasing $7.1 million based on scheduled debt service payments. Series GG bonds will be paid off in 2018 and $2.3 million is included in the debt service payments for the new debt. Interest of approximately $2.8 million will be allocated to capital projects during construction, partially offsetting debt service expenditures.

Capital additions are projected to increase $26 million to $78.3 million. The increase is primarily driven by the Headquarters Campus Project and planned maintenance outage projects. General plant capital projects are expected to increase $20.7 million and production capital projects are increasing $14.5 million, while transmission capital projects are expected to decrease $9.2 million. The capital additions do not include unspent 2017 capital funds that may be carried over into the 2018 Budget. Descriptions and details of the capital projects can be found in the Capital Additions section of this document.



Budget Contingency

The budget includes a contingency appropriation of $25 million, representing a $5 million increase over the 2017 Budget. Historically, contingency was a fixed amount. Beginning in 2018 and going forward, the amount will represent approximately 10 percent of the operating expenses and capital additions to better align with fluctuations in the budget. The contingency can be used to meet unexpected expenditures that could not be foreseen at the time the budget was prepared. Events that may require the use of the contingency include unplanned generation or transmission outages, significant increases in power market or natural gas prices, unplanned expenses to maintain power supply to the municipalities, or the adoption of an accounting policy which impacts expenditures. It may also be used for existing capital projects that require expenditures above those budgeted as the result of scheduling changes, payment timing differences, changes in work scope, price fluctuations, or new projects the board of directors deem important to be started before the next budget year. The contingency has been used four out of the last nine years and a contingency transfer is expected in 2017 for capital projects. Prior to transferring contingency to an expense category, staff must notify the board of directors of the reason for the transfer and present a resolution proposed for adoption.

Contingency Appropriation Appropriated

Year Budget ($000) Amount ($000) % Purpose

2008 $20,000 - -

2009 $20,000 - -

2010 $20,000 $6,000 30%

Additional expenditures for timing changes

related to the 230kV transmission expansion

capital projects.

2011 $20,000 $5,407 27%Cost overruns for the 230kV transmission

capital projects.

2012 $20,000 - -

2013 $20,000 - -

2014 $20,000 - -

2015 $20,000 $6,640 33%

Additional expenditures for several capital

projects including the Craig Unit 2 NOx

removal, the fiber route to Estes Park, and

the control room for the digital control

system, as well as ancillary services related

to additional wind generation.

2016 $20,000 $1,200 6%

Additional expenditures for the initial

progress payments for the generator rotor

replacement project and the generator

stator rewind project to be completed

during the 2018 planned maintenance

outage.

2017 $20,000 - (1) -

(1) Contingency transfer for capital projects are projected to be requested at the December 2017 Board of Directors meeting.



Source and Use of Funds

2016 2017 2017 2018


Source of Funds

Operating revenues

Municipal sales 185,213,723$ 191,943,294$ 190,819,041$ 197,072,600$

Surplus sales - short-term 15,769,400 18,638,431 18,102,921 16,416,800

Wheeling 4,310,104 4,666,968 4,692,330 4,620,236

Total operating revenues 205,293,227 215,248,693 213,614,292 218,109,636

Other revenues

Interest income 1,074,864 1,208,492 1,378,634 2,113,550

Other income 846,032 497,552 505,232 255,629

Total other revenues 1,920,896 1,706,044 1,883,866 2,369,179

Total revenues 207,214,123 216,954,737 215,498,158 220,478,815

Funds from prior reserves and debt financing 15,185,419 54,551,058 30,475,153 71,737,665

Total Sources 222,399,542$ 271,505,795$ 245,973,311$ 292,216,480$

Use of Funds

Operating expenses

Purchased power 33,270,508$ 35,430,832$ 35,435,186$ 34,173,236$

Fuel 46,360,663 48,800,015 48,761,416 47,691,528

Production 44,631,912 49,402,477 50,508,505 45,204,785

Transmission 12,797,626 16,186,652 15,113,154 16,829,620

Administrative and general 17,365,740 22,036,208 21,453,126 24,741,607

Total operating expenses 154,426,449 171,856,184 171,271,387 168,640,776

Debt service expenditures

Principal 20,660,415 18,317,504 18,317,504 12,162,085

Interest expense 10,065,756 9,582,070 9,582,067 10,946,142

Allowance for funds used during construction (1,137,163) (560,009) (960,992) (2,835,851)

Total debt service expenditures 29,589,008 27,339,565 26,938,579 20,272,376

Capital additions

Production 19,962,784 27,479,045 28,701,048 42,048,513

Transmission 13,030,897 12,519,887 11,270,212 3,270,863

General 5,390,404 12,311,114 7,792,085 32,983,952

Total capital additions 38,384,085 52,310,046 47,763,345 78,303,328

Total expenditures 222,399,542 251,505,795 245,973,311 267,216,480

Contingency appropriation - 20,000,000 - 25,000,000

Total Uses 222,399,542$ 271,505,795$ 245,973,311$ 292,216,480$

(1) Excludes projections for contingency transfer for capital projects to be requested at the December 2017 Board of Directors meeting.

(1)

(1)


Revenues and Expenditures

$207.2$217.0 $215.5 $220.5

0

50

100

150

200

250

300

2016 Actual 2017 Budget 2017 Estimate 2018 Budget

Operating Expenses Debt Service Expenditures Capital Additions Revenues

$ Millions

_

Source and Use of Funds

Municipal Sales67%

Funds from Prior

Reserves and Debt

Financing24%

Surplus Sales Short-

term6%

Wheeling2%

Interest and Other

Income1%

Municipal Sales 197,072,600$

Surplus Sales - Short-term 16,416,800

Wheeling 4,620,236

Interest and Other Income 2,369,179

Total Revenues 220,478,815$

Funds from Prior Reserves

and Debt Financing 71,737,665

Total Sources 292,216,480$

2018 Sources

Capital Additions

27%

Fuel16%

Production15%

Purchased Power12%

Board Contingency

9%

Administrative

& General8%

Debt Service Expenditures

7%

Transmission6%

Capital Additions 78,303,328$

Fuel 47,691,528

Production 45,204,785

Purchased Power 34,173,236

Administrative & General 24,741,607

Debt Service Expenditures 20,272,376

Transmission 16,829,620

Total Expenditures 267,216,480$

Board Contingency 25,000,000

Total Uses 292,216,480$

2018 Uses


Revenue and Expenditure Detail

2016 2017 2017 2018Actual Budget Estimate Budget

REVENUES

Municipal sales 185,213,723$ 191,943,294$ 190,819,041$ 197,072,600$

Surplus sales - short-term 15,769,400 18,638,431 18,102,921 16,416,800

Wheeling 4,310,104 4,666,968 4,692,330 4,620,236

Interest income 1,074,864 1,208,492 1,378,634 2,113,550

Other income 846,032 497,552 505,232 255,629

Total Revenues 207,214,123 216,954,737 215,498,158 220,478,815

Funds from prior reserves and debt financing 15,185,419 54,551,058 30,475,153 71,737,665

Total Revenues and Prior Funds 222,399,542$ 271,505,795$ 245,973,311$ 292,216,480$

EXPENDITURES

Personnel Expenses

Salaries

Regular wages 24,176,734$ 26,401,730$ 25,505,246$ 27,591,932$

Overtime wages 1,374,135 1,481,864 1,515,222 2,072,701

Total Salaries 25,550,869 27,883,594 27,020,468 29,664,633

Benefits

Pension - defined contribution 662,434 933,000 814,466 918,000

Pension - defined benefit 3,284,063 5,070,351 5,070,351 4,679,368

Social security 1,828,472 2,078,898 2,013,698 2,195,792

Long-term disability 151,954 145,000 148,273 156,000

Medical and dental 3,189,366 3,567,600 3,640,444 3,684,996

Recruiting 127,993 288,200 282,141 221,000

Life insurance 146,712 145,000 148,646 153,000

Accidental death 20,258 22,000 21,353 22,000

Workers' compensation 193,746 223,500 156,778 220,000

Unemployment compensation 33 10,000 2,528 10,000

Salary and pension services 321,432 334,639 338,369 364,477

Total Benefits 9,926,463 12,818,188 12,637,047 12,624,633

Total Personnel Expenses 35,477,332 40,701,782 39,657,515 42,289,266

Less charged to capital and other 1,879,586 2,245,899 1,459,051 2,103,261

Total Operating Personnel Expenses 33,597,746 38,455,883 38,198,464 40,186,005

Materials and Expenses

Office expenses 5,113 69,680 63,704 70,960

Safety expenses 167,919 216,327 203,248 261,420

Furniture and equipment 91,530 90,200 79,424 85,300

Local business expense 193,860 183,407 158,550 200,158

Postage and deliveries 24,003 35,760 28,919 35,368

Rawhide O&M materials 3,454,457 4,550,278 4,513,561 5,957,041

Other O&M materials 354,864 467,915 391,206 281,338

Rawhide coal 29,280,094 30,316,596 28,892,510 28,524,006

Yampa coal 14,706,397 17,163,314 17,615,258 17,846,329

Oil 111,613 115,000 142,699 130,000


2016 2017 2017 2018


Materials and Expenses (continued)

Natural gas (Rawhide A, B, C, D, and F) 1,574,347$ 226,985$ 1,282,579$ 301,971$

Natural gas (Craig startup) 117,530 100,000 81,283 100,000

Gasoline and diesel 135,312 147,420 123,894 171,160

Tools, shop, and garage equipment 126,595 126,250 131,051 137,150

Purchased power 32,089,297 34,557,525 34,561,879 36,263,389

Yampa operating expenses 11,234,637 13,136,985 12,938,571 10,372,409

Computer equipment 365,292 424,536 404,831 330,400

Wheeling expense 4,165,322 4,684,213 4,385,507 4,599,330

Outage accrual 3,794,450 5,293,948 5,293,948 (9,124,033)

Total Materials and Expenses 101,992,632 111,906,339 111,292,622 96,543,696

Contractual Services

Rawhide contracted services 3,811,200 4,200,586 5,601,458 13,187,847

Other contracted services 4,970,843 8,026,852 7,395,159 7,434,707

Insurance 1,165,758 1,224,800 1,176,462 1,205,900

Travel and training 718,421 792,349 656,648 717,008

Telephone services 184,034 181,158 185,311 189,354

Utilities 531,015 606,344 611,040 631,194

Dues, memberships, and fees 592,377 655,258 649,722 682,690

Trustees fees 30,134 36,536 37,835 43,748

Water leases and rents 3,443,082 735,245 677,836 716,825

Other leases and rents 92,794 98,289 102,771 102,206

Economic development 60,000 60,000 60,000 60,000

Fiscal impact payment 61,099 61,099 61,099 61,099

Energy efficiency - rebates/incentives 3,137,113 4,450,000 4,454,984 6,498,000

Demand response - rebates/incentives - 321,846 83,586 336,957

Total Contractual Services 18,797,870 21,450,362 21,753,911 31,867,535

Financing Expenses

Principal 20,660,415 18,317,504 18,317,504 12,162,085

Interest expense 10,065,756 9,582,070 9,582,067 10,946,142

Allowance for funds used during construction (1,137,163) (560,009) (960,992) (2,835,851)

Other financing expenses 38,201 43,600 26,390 43,540

Total Financing Expenses 29,627,209 27,383,165 26,964,969 20,315,916

Capital Additions

Personnel expenses 1,639,520 1,963,957 1,636,725 1,748,764

Capital expenditures 36,955,149 50,169,566 46,736,566 73,773,713

Capital reimbursements and trade-in value (1,347,747) (383,486) (1,570,938) (55,000)

Allowance for funds used during construction 1,137,163 560,009 960,992 2,835,851

Total Capital Additions 38,384,085 52,310,046 47,763,345 78,303,328

Total Expenditures 222,399,542 251,505,795 245,973,311 267,216,480

Contingency appropriation - 20,000,000 - 25,000,000

Total Expenditures and Contingency 222,399,542$ 271,505,795$ 245,973,311$ 292,216,480$

(1) Excludes projections for contingency transfer for capital projects to be requested at the December 2017 Board of Directors meeting.

(1)

(1)


Electric System Resources

Power Resources

Platte River’s power resources include generation from coal and natural gas units, allocations of federal hydropower from WAPA, wind and solar purchases, spot market purchases, and a forced outage exchange agreement.

Coal – Coal-fired generation includes Rawhide Unit 1 (280 MW), located 25 miles north of Fort Collins, and 18 percent ownership in Craig Units 1 and 2 (154 MW combined), located in northwest Colorado.

Natural Gas – Gas-fired combustion turbines located at Rawhide Energy Station (Rawhide) include five simple cycle combustion turbines, which includes four GE 7EAs (65 MW each) and a GE 7FA (128 MW). The combustion turbines are utilized to meet peak load demand, to provide reserves during outages of the coal-fired units, and to make short-term surplus sales.

Hydropower – Hydropower is received under two long-term contracts with WAPA. Colorado River Storage Project (CRSP) contract rate of delivery amounts are 106 MW in the summer and 136 MW in the winter. Actual capacity available varies by month. During the summer season, available capacity ranges from 51 MW to 60 MW. In the winter season, available capacity ranges from 72 MW to 85 MW. Loveland Area Projects (LAP) capacity is 30 MW in the summer and 32 MW in the winter.

Wind – Wind generation includes 78 MW provided under long-term power purchase agreements. The agreements are for deliveries from Spring Canyon Wind Energy Center (60 MW) in Colorado, Silver Sage Windpower Project (12 MW) and Medicine Bow Wind Project (6 MW), both in Wyoming.

Solar – Solar generation includes 30 MW provided under a long-term power purchase agreement from the Rawhide Flats Solar facility located at Rawhide. In addition, Platte River purchases solar capacity of approximately 4 MW and 0.5 MW from Fort Collins and Loveland, respectively. For these two facilities, the municipalities retain the renewable attribute.

Other Purchases – Spot market purchases provide energy to satisfy loads, replacement power during outages, and reserve requirements.

Forced Outage Exchange Agreement – Platte River has a forced outage exchange agreement with Tri-State Generation and Transmission, Inc. (Tri-State), whereby in the event that either Rawhide Unit 1 or Tri-State’s Craig Unit 3 is out of service the other utility will provide up to 100 MW of generation on a short-term basis.


2016 2017 2017 2018


Power Operations

Rawhide Unit 1 (280 MW)

Generation (GWh) 2,218 2,292 2,228 2,056

Capacity factor 90.2% 93.4% 90.8% 83.8%

Fuel cost ($/MWh) 13.4$ 13.4$ 13.2$ 14.1$

O&M cost ($/MWh) 10.9 11.8 12.7 18.7

Total Rawhide ($/MWh) 24.3$ 25.2$ 25.9$ 32.8$

Craig Units 1 and 2 (154 MW) (1)

Generation (GWh) 819 800 814 891

Capacity factor 60.5% 59.3% 60.3% 66.1%

Fuel cost ($/MWh) 18.4$ 22.2$ 22.2$ 20.7$

O&M cost ($/MWh) 13.4 15.8 15.4 10.8

Total Craig ($/MWh) 31.8$ 38.0$ 37.6$ 31.5$

Combustion Turbines (388 MW) (2)


Capacity factor 1.2% 0.1% 0.9% 0.2%

Fuel cost ($/MWh) 39.2$ 49.0$ 42.8$ 44.8$

O&M cost ($/MWh) 30.5 296.8 43.4 188.8

Total Combustion Turbines ($/MWh) 69.7$ 345.8$ 86.2$ 233.6$

Purchased Power

WAPA-CRSP (106 MW-Summer/136 MW-Winter) (3)


Capacity factor 47.3% 47.4% 48.9% 47.4%

Total WAPA-CRSP ($/MWh) 27.1$ 27.1$ 26.7$ 27.1$

WAPA-LAP (30 MW-Summer/32 MW-Winter)


Capacity factor 40.2% 40.3% 41.7% 40.3%

Total WAPA-LAP ($/MWh) 39.2$ 34.6$ 34.1$ 29.7$

Wind (78 MW) (4)


Capacity factor 46.0% 43.0% 41.7% 43.2%

Total Wind ($/MWh) - Delivered 46.2$ 48.7$ 48.7$ 49.6$

Solar (30 MW)


Capacity factor 12.9% 24.8% 22.3% 24.7%

Total Solar ($/MWh) 53.5$ 53.5$ 53.5$ 53.5$

Solar - Municipal Programs (4.5 MW) (5)


Capacity factor 17.4% 19.3% 16.6% 18.8%

Total Solar - Municipal Programs ($/MWh) 37.7$ 35.3$ 33.3$ 31.2$

Other Purchases

Energy (GWh) 67 39 79 130

Total Other Purchases ($/MWh) 25.1$ 27.1$ 23.1$ 24.8$

(1) Craig Units 1 and 2: 77 MW each = 154 MW

(2) Rawhide Units A, B, C, D = 260 MW, Rawhide Unit F = 128 MW

(3)

(4) Medicine Bow = 6 MW, Silver Sage = 12 MW, Spring Canyon = 60 MW

(5) Solar - Fort Collins = 4 MW, Solar - Loveland = 0.5 MW; the municipalities retain the renewable attribute.

WAPA-CRSP capacity amounts shown represent the Contract Rate of Delivery. Actual capacity available varies by month. During

the summer season, available capacity ranges from 51 MW to 60 MW. In the winter season, available capacity ranges from 72 MW to 85 MW.

Generation by resource is determined utilizing an in-house market-based hourly model which incorporates resource availability, purchase power contract terms, and market-based assumptions. The table summarizes the power resources available with related generation, capacity factors, and costs to either generate or purchase energy.

.


Resources and Deliveries

Total Resources = 4,087 GWh

Rawhide Unit 1

2,056 GWh

Craig Units

1 & 2 891 GWh

CRSP

502 GWh

Wind

296 GWh

Other

Purchases 130 GWh

LAP

110 GWh

Solar

65 GWh

Forced Outage

Exchange 23 GWh

Combustion

Turbines 7 GWh

Solar -

Municipal Programs

7 GWh

Total Deliveries = 4,087 GWh

Municipalities

3,263 GWh

Surplus

Short-term 724 GWh

Losses and

Other 77 GWh

Forced Outage

Exchange 23 GWh


Operating Revenues Operating revenues of $218.1 million are anticipated during 2018, a $2.9 million increase from the 2017 Budget. Municipal sales are projected to be $197.1 million, short-term surplus sales $16.4 million, and transmission wheeling revenues $4.6 million. The municipal revenues are based on Platte River’s load forecast and wholesale rates. Short-term surplus sales are for a term of one year or less and include seasonal, monthly, and hourly spot market sales. The spot market prices are based on current market projections. Wheeling revenues represent payments from other utilities for the use of Platte River’s transmission system.

2016 2017 2017 2018

Operating Revenues ($000) Actual Budget Estimate Budget

Municipal Sales 185,214$ 191,943$ 190,819$ 197,073$

Surplus Sales – Short-term 15,769 18,638 18,103 16,417

Wheeling 4,310 4,667 4,692 4,620

Total Operating Revenues 205,293$ 215,248$ 213,614$ 218,110$

0

40

80

120

160

200

240


Municipal Sales Surplus Sales - Short-term Wheeling

$ Millions


Municipal Loads

Platte River’s long-range load forecast is developed using an econometric model that incorporates independent variables including population, employment, and weather. The forecast also includes demand and energy changes anticipated from EE programs. The 2018 Budget monthly demand and energy load projections were based on the Ten-Year Official Load Forecast resulting in an increase of 0.3 percent for billing demand and 0.9 percent for energy.

2016 2017 2017 2018Municipal Loads Actual Budget Estimate Budget

Summer Peak Demand (MW) 659 650 662 658

Winter Peak Demand (MW) 528 587 581 573

Billing Demand (MW) 6,021 6,164 6,135 6,183

Energy (GWh) 3,216 3,235 3,203 3,263

Municipalities’ Energy Usage

0

50

100

150

200

250

300

350

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2016 Actual 2017 Estimate 2018 Budget

GWh


Wholesale Municipal Rates

Platte River’s General Power Bond Resolution and Power Supply Contracts with the municipalities require that wholesale rates be established to provide revenues sufficient to meet operation and maintenance costs, capital additions, and debt obligations. Additionally, wholesale rates are required to provide an earnings margin adequate to meet bond covenants and provide for the establishment and maintenance of necessary reserves.

A 2 percent increase in the Tariff 1 rate to the municipalities is scheduled to take effect January 1, 2018. The renewable premium for Tariff 7 is proposed to increase 4 percent to $26 per MWh. It is estimated that the average rate to the municipalities, after the increases, would be $60.39 per MWh. In 2018, Platte River’s wholesale rate will continue to be among the lowest in the region.

Average Municipal Rate

$57.58 $59.33 $59.57 $60.39

0

10

20

30

40

50

60

70


$/MWh


Municipal Sales

Total municipal revenues in 2018 are projected to be $197.1 million, an increase of $5.1 million over the 2017 Budget. Demand revenues are projected to be $58.5 million, an increase of $1.4 million, and energy revenues are projected to be $135.9 million, an increase of $3.6 million. Municipal revenues also include $2.7 million in renewable energy premiums, an increase of $0.1 million over the 2017 Budget.

2016 2017 2017 2018


Fort Collins

Demand MW 2,836 2,884 2,884 2,919

Energy MWh 1,541,509 1,534,393 1,528,612 1,562,183

Demand 25,582,764$ 27,326,088$ 27,361,797$ 28,153,169$

Energy 61,924,138 62,802,329 62,536,807 64,940,863

Renewable energy premium 1,823,998 1,899,994 1,899,994 1,975,999

Total Fort Collins 89,330,900$ 92,028,411$ 91,798,598$ 95,070,031$

Longmont

Demand MW 1,553 1,581 1,587 1,593

Energy MWh 812,037 810,600 806,767 822,828

Demand 14,098,604$ 15,019,000$ 15,103,665$ 15,459,332$

Energy 32,499,962 33,048,517 32,896,931 34,219,837

Renewable energy premium 519,336 540,973 540,973 562,614

Total Longmont 47,117,902$ 48,608,490$ 48,541,569$ 50,241,783$

Loveland

Demand MW 1,280 1,328 1,313 1,312

Interruptible demand MW 137 151 133 137

Total Demand MW 1,417 1,479 1,446 1,449

Energy MWh 639,906 651,980 634,715 648,320

Interruptible energy MWh 91,744 107,094 103,414 96,720

Total Energy MWh 731,650 759,074 738,129 745,040

Demand 11,635,317$ 12,643,990$ 12,546,492$ 12,749,973$

Energy 25,615,637 26,627,899 25,921,380 26,965,215

Interruptible 4,220,351 4,466,890 4,529,181 4,235,898


Total Loveland 41,603,304$ 43,876,280$ 43,134,554$ 44,094,085$

Estes Park

Demand MW 215 220 218 221

Energy MWh 131,275 131,190 129,677 133,025

Demand 1,871,598$ 2,031,833$ 2,007,246$ 2,084,579$

Energy 5,230,955 5,336,755 5,275,549 5,518,136


Total Estes Park 7,161,617$ 7,430,113$ 7,344,320$ 7,666,701$


2016 2017 2017 2018


Total Municipalities

Demand MW 6,021 6,164 6,135 6,182

Energy MWh 3,124,727 3,128,163 3,099,771 3,166,356

Interruptible energy MWh 91,744 107,094 103,414 96,720

Total Energy MWh 3,216,471 3,235,257 3,203,185 3,263,076

Demand 53,188,283$ 57,020,911$ 57,019,200$ 58,447,053$

Energy

Energy 125,270,692 127,815,500 126,630,667 131,644,051

Interruptible 4,220,351 4,466,890 4,529,181 4,235,898

Total Energy 129,491,043 132,282,390 131,159,848 135,879,949

Renewable energy premium 2,534,397 2,639,993 2,639,993 2,745,598

Total Municipal Sales 185,213,723$ 191,943,294$ 190,819,041$ 197,072,600$

Municipal Sales (continued)

Surplus Sales and Other Electric Revenue

Total surplus sales and other electric revenues for 2018 are projected to be $21 million, a decrease of $2.3 million from the 2017 Budget. The budget includes short-term surplus sales of $16.4 million and wheeling revenues of $4.6 million.

2016 2017 2017 2018


Surplus Sales 15,769,400$ 18,638,431$ 18,102,921$ 16,416,800$

Wheeling Revenue 4,310,104 4,666,968 4,692,330 4,620,236

Total Surplus and Wheeling 20,079,504$ 23,305,399$ 22,795,251$ 21,037,036$

0

5

10

15

20

25


Surplus Sales Wheeling Revenue

$ Millions


Surplus Sales

Short-term surplus sales are projected to be $16.4 million, a decrease of $2.2 million. Energy to be sold will be less as a result of lower generation due to the planned maintenance outage of Rawhide Unit 1 and a continued soft surplus sales market. The estimated average short-term sales price is $22.67 per MWh versus $23.38 per MWh included in the 2017 Budget. The short-term surplus energy sales represent 724 GWh, a decrease of 9 percent.

2016 2017 2017 2018

Surplus Sales Actual Budget Estimate Budget

Surplus Sales ($000) 15,769$ 18,638$ 18,103$ 16,417$

Short-term Energy (GWh) 722 797 823 724

Average Price ($/MWh) 21.83$ 23.38$ 21.99$ 22.67$

Wheeling Revenues

Platte River charges other utilities for the use of its transmission system per Tariff―Schedule 4:

Wholesale Transmission Service (Tariff 4). The wheeling revenues include charges for network transmission service for delivery to various Xcel Energy and Tri-State substations over Platte River’s transmission system. The transmission system usage rates are adjusted annually based on the prior year’s actual transmission system costs and loads. Also included is a long-term contract with PacifiCorp for 29 MW of capacity on the Craig-Bonanza transmission line. Wheeling revenues are projected to be $4.6 million, a decrease of $0.1 million. The decrease is based on a lower load projection received from Tri-State and a reduced Tariff 4 rate.

2016 2017 2017 2018

Wheeling Revenues ($000) Actual Budget Estimate Budget

Craig-Bonanza 918$ 910$ 918$ 916$

Network and Other 3,392 3,757 3,774 3,704

Total Wheeling Revenues 4,310$ 4,667$ 4,692$ 4,620$



Other Revenues

Interest and Other Income

Interest and other income of $2.4 million is anticipated for 2018, an increase of $0.7 million over the 2017 Budget. Interest income is estimated to be $2.1 million. This is a $0.9 million increase due to a projected increase in interest rates. Other income of $0.3 million includes fiber and tower leases, in addition to other miscellaneous revenues and is $0.2 million less than the 2017 Budget due to the expiration of a water lease to a local municipality.

Interest and 2016 2017 2017 2018

Other Income ($000) Actual Budget Estimate Budget

Interest Income 1,075$ 1,208$ 1,379$ 2,113$

Other Income 846 498 505 256

Total Interest and Other Income 1,921$ 1,706$ 1,884$ 2,369$

0.0

0.5

1.0

1.5

2.0

2.5


Interest Income Other Income

$ Millions


Operating Expenses Operating expenses to perform the operations of generating and delivering electricity include purchased power, fuel, production, transmission, and administrative and general expenses. Total operating expenses in 2018 are estimated to be $168.6 million, a decrease of $3.2 million from the 2017 Budget. Decreases in production, purchased power, and fuel are partially offset by increases in administrative and general and transmission expenses.

2016 2017 2017 2018

Operating Expenses ($000) Actual Budget Estimate Budget

Purchased Power 33,270$ 35,431$ 35,435$ 34,173$

Fuel 46,360 48,800 48,761 47,692

Production 44,632 49,402 50,509 45,205

Transmission 12,798 16,187 15,113 16,830

Administrative and General 17,366 22,036 21,453 24,741

Total Operating Expenses 154,426$ 171,856$ 171,271$ 168,641$

0

20

40

60

80

100

120

140

160

180


$ Millions

Purchased Power Fuel Production Transmission Administrative and General


Purchased Power

Purchased power includes purchases made under long-term contracts for hydropower, wind energy, solar energy, and renewable energy credits. Spot market purchases provide energy to satisfy loads, replacement power during outages, and reserve requirements. An accrual for estimated future replacement power costs during specified maintenance outages is also included.

Total purchased power is projected to be $34.2 million in 2018, a decrease of $1.3 million from the 2017 Budget.

Purchases of $5.2 million are required to replace power during outages, meet peak loads, and purchase reserves. This is an increase of $2 million mainly due to an increase in purchases to serve load requirements during the Rawhide Unit 1 planned maintenance outage. Purchased reserves are decreasing mainly due to a tariff rate reduction in the supplemental reserve charge related to wind integration.

The replacement power outage accrual includes a reversal of $2.1 million to offset the replacement power required for the Rawhide Unit 1 planned maintenance outage.

During 2018, $16.9 million in hydropower will be purchased from WAPA to meet a portion of the municipalities’ load requirements. WAPA-LAP is proposing a rate reduction for removal of the drought adder, resulting in a $0.5 million decrease.

Wind purchases are projected to be $9.9 million, an increase of $0.4 million based on price escalations from the long-term power purchase agreements. Wind is purchased from the following facilities: Spring Canyon of $7 million, Silver Sage of $2.2 million, and Medicine Bow of $0.7 million.

Solar purchases include $3.5 million from the long-term power purchase agreement for the Rawhide Flats Solar facility. In addition, $0.2 million is planned to be purchased from the Fort Collins and Loveland solar programs.

Renewable energy credits are $0.6 million, which is a slight decrease from the 2017 Budget.



Purchased Power

2016 2017 2017 2018


WAPA Purchased Power

Loveland Area Projects (LAP)

Demand (kW-Mo) 372,606 372,606 372,606 372,606

Demand $ 2,023,251$ 1,784,784$ 1,784,784$ 1,535,136$

Energy (kWh) 109,536,421 109,536,421 113,136,421 109,536,421

Energy $ 2,268,499$ 2,002,326$ 2,068,134$ 1,721,911$

Total LAP 4,291,750$ 3,787,110$ 3,852,918$ 3,257,047$

Colorado River Storage Project (CRSP)

Demand (kW-Mo) 1,450,002 1,450,002 1,450,002 1,450,002

Demand $ 7,511,010$ 7,511,010$ 7,511,010$ 7,511,010$

Energy (kWh) 502,466,838 502,466,838 517,890,008 502,466,838

Energy $ 6,125,071$ 6,125,071$ 6,313,079$ 6,125,071$

Total CRSP 13,636,081$ 13,636,081$ 13,824,089$ 13,636,081$

Total WAPA 17,927,831$ 17,423,191$ 17,677,007$ 16,893,128$

Other Purchases

Energy (kWh) 67,074,000 39,267,721 78,919,225 129,920,181

Energy $ 1,685,570$ 1,062,925$ 1,823,050$ 3,214,891$

Reserves $ 2,181,284$ 2,153,387$ 1,929,022$ 1,992,030$

Total Other Purchases 3,866,854$ 3,216,312$ 3,752,072$ 5,206,921$

Wind

Energy (kWh) 314,911,757 294,044,600 284,783,583 295,406,316

Energy $ 9,924,660$ 9,553,277$ 9,224,121$ 9,911,267$

Solar

Energy (kWh) 11,305,464 65,184,776 58,485,255 64,858,619

Energy $ 604,268$ 3,484,128$ 3,126,023$ 3,466,693$

Solar - Municipal Programs

Energy (kWh) 6,227,770 7,604,196 6,544,884 7,404,439

Energy $ 234,693$ 268,428$ 217,935$ 231,068$

Forced Outage Exchange (978,657)$ -$ (28,375)$ -$

Other Power Charges (11,171)$ 24,000$ 4,907$ -$

Renewable Energy Credits 520,819$ 588,189$ 588,189$ 554,312$

Replacement Power Outage Accrual 1,181,211$ 873,307$ 873,307$ (2,090,153)$

Total Purchased Power 33,270,508$ 35,430,832$ 35,435,186$ 34,173,236$


Purchased Power

-5

0

5

10

15

20

25

30

35

40


LAP CRSP Wind

Solar Solar - Municipal Programs Renewable Energy Credits

Other & Exchange Outage Accrual

$ Millions

Energy Purchased

0

200

400

600

800

1,000

1,200


LAP CRSP Wind Solar Solar - Municipal Programs Other

GWh


Fuel

Fuel expense includes coal purchased for Rawhide Unit 1, Craig Units 1 and 2, and natural gas expense for the combustion turbines. Rawhide Unit 1 coal is purchased under a long-term market based contract with Cloud Peak Energy. Coal for the Craig units for 2018 is purchased under the long-term contract with Trapper Mining, Inc. Prior to 2018, coal was also purchased under a long-term contract with Colowyo Coal Company which will expire at the end of 2017. Natural gas is purchased at market prices as needed.

Total fuel expense is forecasted to be $47.7 million, a decrease of $1.1 million.

Fuel expenses are decreasing $1.9 million for Rawhide Unit 1, mainly due to lower generation as a result of the planned Rawhide Unit 1 maintenance outage. Pricing is increasing 5 percent per ton based on market pricing.

The Craig facilities fuel expenses are increasing $0.7 million as higher generation is expected due to the completion of the Craig Unit 2 eight-week planned maintenance outage in 2017. However, a continued soft surplus sales market is expected to continue. Delivered coal pricing for the Craig units is decreasing by 7 percent. Lower prices per ton are driven by fixed costs recovered over an increase in tons mined.

Natural gas for the combustion turbines is increasing $0.1 million as a result of higher generation due to market-based model projections and the planned maintenance outage. The delivered gas price is $3.35 per MBtu, a 7 percent decrease from the 2017 Budget, which is also based on current third party market projections.

2016 2017 2017 2018


Rawhide Unit 1

Coal burned MBtu 22,418,027 23,191,964 22,585,060 20,810,227

$/MBtu 1.30$ 1.30$ 1.27$ 1.37$

Coal expense 29,054,021$ 30,074,096$ 28,670,422$ 28,503,506$

Car lease and other 226,072 242,500 222,088 20,500

Oil 99,889 95,000 122,767 115,000

Fuel ash disposal - - - (46,000)

Fuel handling 281,525 369,327 315,952 247,413 Testing and analysis 41,085 51,665 40,705 105,000

Total Rawhide Unit 1 29,702,592$ 30,832,588$ 29,371,934$ 28,945,419$

Craig Units 1 and 2

Coal burned MBtu 8,352,431 8,157,145 8,191,342 9,093,194

$/MBtu 1.76$ 2.10$ 2.15$ 1.96$

Coal expense 14,723,302$ 17,134,293$ 17,610,733$ 17,846,329$

Trapper post-mining reclamation (16,905) 29,021 4,523 -

Oil 11,725 20,000 19,932 15,000

Natural gas 117,530 100,000 81,283 100,000

Fuel handling 248,072 457,128 390,431 482,809

Total Craig Units 1 and 2 15,083,724$ 17,740,442$ 18,106,902$ 18,444,138$

Rawhide Units A, B, C, D, and F

Gas burned MBtu 478,392 56,867 366,834 83,379

$/MBtu 3.28$ 3.58$ 3.46$ 3.35$

Natural gas expense 1,569,553$ 203,666$ 1,268,002$ 279,085$

Other gas expense 4,794 23,319 14,578 22,886

Total Natural Gas 1,574,347$ 226,985$ 1,282,580$ 301,971$

Total Fuel 46,360,663$ 48,800,015$ 48,761,416$ 47,691,528$


Fuel

0

4

8

12

16

20

24

28

32

36


Rawhide Unit 1 Craig Units 1 and 2 Combustion Turbines

$ Millions

Fuel Unit Cost Per MBtu

0

1

2

3

4

5



$/MBtu


Production

Production expenses include operating and maintenance expenses (excluding fuel) incurred at the Rawhide generating station, Craig generating stations, and power operations. Total 2018 budgeted production expenses of $45.2 million reflect a decrease of $4.2 million from the 2017 Budget.

Rawhide Unit 1 expenses are projected to be $31.4 million, the same as the 2017 Budget. There are several items impacting Rawhide Unit 1 in 2018.

The Rawhide Unit 1 maintenance outage is scheduled for six weeks in the fall of 2018. The size and scope of the outage is nearly as extensive as the last major outage in 2015. It is not common for Rawhide to have six-week outages in consecutive outage seasons. The main reason for the six-week schedule is the duration requirements of the turbine generator upgrade and the bottom ash replacement projects. These two projects are the largest in scope, complexity, and cost. Other projects include the upgrade of several high voltage motor control centers, the replacement of the 102 feed water heater, replacement of the air pre-heater baskets, and an upgrade to the voltage regulator system. In addition to these major projects, there will be extensive repair and replacement work in the back pass section of the boiler. This work is very labor intensive and will require a great deal of coordination to complete. Other major activities include the overhaul of the turbine valves, extensive inspections of the boiler, burners, cleaning and inspection of critical motors, replacement of a critical boiler feed pump and condensate components, cleaning and inspection of all ductwork, inspections and repairs of the spray dryer absorber equipment and bag house, inspections of the circulating water system and condenser, as well as other outage related inspections and repairs. Total capital projects for the outage are estimated to be approximately $33.7 million. The total cost of the operations and maintenance expenses are projected to be approximately $12.9 million. Accrual of 100 percent of future major outage maintenance costs was previously approved by the board of directors to help stabilize wholesale rates to the municipalities, thus reducing the impact on expenses in the year of the outage.

After the outage, the ash ponds will no longer be used and are planned for closure in the first quarter of 2019 due to federal and state solid waste management regulations. The 2018 accrued expense is $1.1 million. Other increases in expenses include personnel expenses, other environmental expenses for waste management, and a building wall and reinforcement restoration project.

Partially offsetting these increases are decreases in expenses related to the 2017 planned maintenance outage, finalizing the document conversion project, and a reduction in chemical usage due to the outage and process changes. Other expenses for non-routine projects and ongoing operations and maintenance were also reduced from the 2017 Budget.

Craig Units 1 and 2 expenses total $9.6 million, a decrease of $3 million mainly as a result of the planned maintenance outage that occurred in 2017.

Production expenses for the combustion turbines are projected to be $1.3 million, $0.1 million less than the 2017 Budget, mainly due to personnel expenses.

Power operations expenses are $2.9 million, which are down $1.2 million primarily due to moving SCADA services from a production function to a transmission function for proper classification. Expenses are planned in 2018 for software and training in preparation of entering an organized energy market.


Production

2016 2017 2017 2018


Rawhide Unit 1

Personnel Expenses

Regular wages 9,220,311$ 9,924,789$ 9,883,646$ 10,410,716$

Overtime wages 842,629 796,202 910,396 1,325,339

Benefits allocation 3,826,081 4,900,664 5,056,911 4,879,399


Operations and Expenses

Office expenses 22,322 28,350 23,896 83,700

Safety expenses 87,621 102,400 101,110 138,300



O&M materials and supplies 3,630,817 4,756,063 4,714,529 6,181,271


Tools and shop equipment 66,663 80,550 95,218 84,550


Total Operations and Expenses 4,015,050 5,178,283 5,125,256 6,747,489


Contracted services 3,770,114 4,148,921 5,522,056 13,082,847

Insurance 474,978 484,500 466,245 489,100

Travel and training expenses 187,827 215,205 167,888 194,408


Utilities 394,131 470,680 485,995 500,320


Outage accrual 2,613,239 4,420,641 4,420,641 (7,033,880)


Windy Gap

Nonallocable expenses 2,052,090 - - -

Rawhide operating portion 1,398,992 735,245 677,836 716,825

Total Windy Gap 3,451,082 735,245 677,836 716,825

Total Rawhide Unit 1 Production 28,899,623 31,376,369 32,816,909 31,422,884

Craig Units 1 and 2

Yampa operating expenses 10,865,640 12,549,271 12,443,409 9,569,069

Fiscal impact payment 61,099 61,099 61,099 61,099

Total Craig Units 1 and 2 Production 10,926,739 12,610,370 12,504,508 9,630,168

Total Thermal Production 39,826,362 43,986,739 45,321,417 41,053,052

Rawhide Units A, B, C, D, and F

Regular wages 396,238 416,201 405,890 379,135

Overtime wages 51,660 45,150 45,606 43,315

Benefits allocation 170,617 211,893 202,055 176,319

O&M materials and supplies 151,103 126,515 112,042 127,395

Contracted services 192,426 272,360 244,654 247,627

Insurance 258,592 290,900 274,081 272,300

Travel and training expenses - 8,500 8,676 18,000

Telephone services 551 600 573 600

Utilities 1,823 2,000 1,982 2,000


Total Rawhide Units A-D, and F Production 1,224,050 1,375,159 1,301,504 1,272,691


2016 2017 2017 2018

Production (continued) Actual Budget Estimate Budget

Power Operations Expenses

Regular wages 2,214,781$ 2,268,049$ 2,238,959$ 1,762,457$

Overtime wages 43,971 89,784 72,080 61,924

Benefits allocation 851,694 1,069,049 1,020,159 746,134



Yampa operating expenses 24,985 35,393 20,246 34,764

Computer equipment 42,283 100,970 52,088 -



Telephone expenses 16,443 16,660 16,993 16,056

Dues, memberships, and fees 200 1,450 525 1,175

Total Power Operations Expenses 3,581,500 4,040,579 3,885,584 2,879,042

Total Production 44,631,912$ 49,402,477$ 50,508,505$ 45,204,785$

Generation Output

0

500

1,000

1,500

2,000

2,500

3,000

3,500



GWh

Production

0

10

20

30

40

50


Rawhide Unit 1 Craig Units 1 and 2 Combustion Turbines Power Operations

$ Millions


Transmission

Transmission expenses include all operations and maintenance expenses incurred on Platte River’s regional transmission system, Platte River’s share of operating and maintaining jointly owned transmission facilities, ancillary services for regulation of wind and solar, and wheeling expenses paid to WAPA and/or others. Platte River’s share of joint ownership projects include costs for the Ault-Fort St. Vrain, Craig-Bonanza, Hayden-Blue River, Craig-Ault transmission lines, and the Yampa Project transmission costs. The joint ownership project budgets were developed by the operating agents and approved by the participants through the engineering and operating committees.

The 2018 budgeted transmission expenses total $16.8 million, reflecting an increase of $0.6 million.

Personnel expenses are increasing $1.4 million primarily as a result of a reclassification of SCADA expenses from a production function to a transmission function for proper classification. Further, more wages are allocated to operations and maintenance and less to capital projects in 2018. A new position for a SCADA supervisor is also included.

The Yampa Project’s transmission expenses are increasing $0.2 million for planned work on the transmission lines.

The water line near the Longmont Northeast Substation is planned to be completed in 2018 for $0.1 million, a reduction of $0.4 million from 2017 when the project was started.

Joint facilities expenses are planned for $0.2 million mainly for compliance vegetation management, a reduction of $0.3 million to better align expenses with actual spend.

WAPA’s Craig-Ault transmission line outage continues into 2018, but for a shorter period of time. As a result, wheeling expenses are less than the 2017 Budget by $0.1 million.

Ongoing operations and maintenance expenses are planned to decrease $0.2 million.

2016 2017 2017 2018


Personnel Expenses

Regular wages 3,465,723$ 4,140,187$ 4,029,975$ 5,201,206$

Overtime wages 265,449 313,761 291,659 348,660 Benefits allocation 1,417,755 2,027,980 2,020,670 2,295,244


Materials and Expenses

Office supplies 4,587 9,000 10,578 9,000

Safety expenses 6,376 12,805 10,723 9,270





Tools and shop equipment 48,372 33,200 23,696 32,000 Computer equipment - 2,016 840 46,900

Total Materials and Expenses 293,054 503,066 361,309 338,536


Contracted services 2,418,170 3,656,602 3,228,490 3,021,502



Utilities 17,224 19,964 15,592 14,070


Leases and rents 92,794 98,289 102,771 102,134 Yampa transmission expenses 95,941 128,421 98,331 318,995


Total Transmission 8,632,304 11,502,439 10,727,647 12,230,290

Transmission by Others Wheeling expense 4,165,322 4,684,213 4,385,507 4,599,330

Total Transmission 12,797,626$ 16,186,652$ 15,113,154$ 16,829,620$


Transmission

0

2

4

6

8

10

12

14

16

18


Personnel Expenses Materials and Expenses Contractual Services Wheeling

$ Millions



Administrative and General

Administrative and general expenses include all expenses incurred that are not directly allocated to capital or assignable to fuel, production, or transmission expenses. These expenses are budgeted by operations, maintenance, and DSM functions.

The 2018 Budget projects administrative and general expenses to be $24.7 million, an increase of $2.7 million.

The DSM budget is increasing $2.2 million to $7.9 million in accordance with the Strategic Plan, Integrated Resources Plan, and Demand Side Management—Energy Efficiency Funding Policy. This budget includes EE programs and DER programs.

Personnel expenses are increasing $0.5 million mainly due to the proposed market adjustment and step increases.

Other expenses represent a net increase of $0.2 million mainly for consulting services related to the organized energy market, information technology, rate development, budget analysis, and a marketing and communications plan. If an organized energy market moves forward, the modeling software will be enhanced to accommodate the new business model. Partially offsetting this increase is a reduction in facilities maintenance expenses with a focus on the Headquarters Campus Project.

Expenses of $0.2 million were removed for the marketing and development of the community solar program as the details of the program are worked through.

2016 2017 2017 2018


Operations

Personnel expenses

Regular wages 7,408,147$ 7,880,075$ 7,729,120$ 8,429,747$

Overtime wages 41,938 28,640 40,072 33,000

Benefits allocation 2,838,929 3,593,606 3,609,147 3,550,464


Office Operations and Expenses

Office expenses (23,884) 23,430 26,430 30,460

Furniture and equipment 89,322 79,600 70,480 18,500

Local business expenses 83,559 88,944 68,689 69,758




Total Office Operations and Expenses 401,466 461,184 454,153 347,478

Safety and Training Expenses

Safety expenses 7,125 8,300 7,412 35,300

Local business 700 2,000 882 2,000


Dues, memberships, and fees 910 1,500 534 900

Wellness and incentive program 120,771 152,797 141,362 152,550


Total Safety and Training Expenses 430,872 454,246 390,287 448,780





Utilities 117,837 113,700 107,473 114,804


Other financing expenses 38,200 43,600 26,390 43,540

Total Contractual Services 711,056 868,483 945,705 1,058,400

Insurance 432,188 449,400 436,136 444,500

Board and Enterprise Expenses




2016 2017 2017 2018

Operations (continued) Actual Budget Estimate Budget

Board and Enterprise Expenses (continued)

Dues, memberships, and fees 113,217$ 121,425$ 113,836$ 142,285$

Trustees fees 30,134 36,536 37,835 43,748

Economic development 60,000 60,000 60,000 60,000

Total Board and Enterprise Expenses 224,717 248,161 237,185 280,033

Reporting and Other Expenses

Office expenses 2,734 9,500 3,101 4,600

Local business expenses 35,806 33,000 36,657 38,000


Total Reporting and Other Expenses 143,507 175,750 135,234 228,690

Planning and Customer Service Expenses


Travel and training expenses 3,410 - 1,782 -

Total Planning and Customer Service Expenses 285,884 534,975 495,597 450,421

Total Administrative and General Operations 12,918,704 14,694,520 14,472,636 15,271,513

Maintenance

Building and Grounds Maintenance

Materials and supplies 54,521 94,800 88,651 48,280



Total Buildings and Grounds Maintenance 429,145 440,290 312,988 256,790

Computer Maintenance

Contracted services 641,424 907,541 1,010,581 1,154,491

Total Computer Maintenance 641,424 907,541 1,010,581 1,154,491

Office Equipment Maintenance

Contracted services 749 3,000 2,083 1,000


Total Office Equipment Maintenance 18,185 18,641 21,733 18,949

Vehicle Maintenance


Tools and shop equipment 137 3,000 1,250 6,000


Total Vehicle Maintenance 27,003 27,400 28,056 85,500

Security Maintenance




Total Security Maintenance 78,365 119,000 137,412 77,935

Total Administrative and General Maintenance 1,194,122 1,512,872 1,510,770 1,593,665

Demand Side Management Expenses

Energy Efficiency


Rebates/incentives 3,137,113 4,450,000 4,454,984 6,498,000

Total Energy Efficiency Expenses 3,252,914 5,251,970 5,251,970 7,309,472

Distributed Energy Resources (DER)

Contracted services - DER - general - - - 120,000

Contracted services - DER - demand response - 55,000 47,919 35,000

Rebates/incentives - DER - demand response - 321,846 83,586 336,957

Contracted services - DER - electric vehicles - - - 75,000

Total Distributed Energy Resources - 376,846 131,505 566,957

Total Demand Side Management Expenses 3,252,914 5,628,816 5,383,475 7,876,429

Community solar - 200,000 86,245 -

Total Administrative and General 17,365,740$ 22,036,208$ 21,453,126$ 24,741,607$


Administrative and General

0

5

10

15

20

25

30


$ Millions

Personnel Expenses Operations Maintenance

Demand Side Management Community Solar



Debt Service Expenditures The 2018 Budget includes debt service expenditures of $20.3 million, a decrease of $7.1 million from the 2017 Budget. Principal repayments are decreasing $6.2 million and interest expense is increasing $1.4 million, based on scheduled debt payments. Series GG will be paid off in 2018; however, a new debt financing of approximately $95 million is planned for 2018 and the related debt service payments represent $2.3 million of the overall debt expense. Interest during construction of approximately $2.8 million will be allocated to capital projects in 2018, an increase of $2.3 million over the 2017 Budget. The projects identified to be funded with the new debt, the Headquarters Campus Project and the Windy Gap Firming Project, will be allocated $2.1 million and the 2016 debt financing projects of Rawhide Unit 1 and transmission will be allocated $0.7 million of the interest during construction.

Debt Service 2016 2017 2017 2018

Expenditures ($000) Actual Budget Estimate Budget

Principal 20,660$ 18,318$ 18,318$ 12,162$

Interest Expense 10,066 9,582 9,582 10,946

Power Revenue Bond Service 30,726 27,900 27,900 23,108

Allowance for Funds Used

During Construction (1,137) (560) (961) (2,836)

Net Debt Service Expenditures 29,589$ 27,340$ 26,939$ 20,272$

Power Revenue Bond Service

0

5

10

15

20

25

30

35


$ Millions

Principal Interest Expense


Long-Term Debt Outstanding

Long-term debt outstanding on December 31, 2018, is projected to be $300.5 million consisting of fixed-rate debt issued under Platte River’s General Power Bond Resolution. The weighted average cost of debt during 2018 is forecast to be approximately 3.5 percent.

2016 2017 2017 2018


Power Revenue Bonds

Series GG 30,520,000$ 12,755,000$ 12,755,000$ -$

Series HH 8,185,000 8,085,000 8,085,000 7,985,000

Series II 31,955,000 26,270,000 26,270,000 26,170,000

Series JJ 147,230,000 147,230,000 147,230,000 145,605,000

Series KK (1) - - - 95,000,000

Total Power Revenue Bonds 217,890,000 194,340,000 194,340,000 274,760,000

Unamortized bond premium 32,948,360 29,227,725 29,227,725 25,713,536

Total Net Long-Term Debt 250,838,360$ 223,567,725$ 223,567,725$ 300,473,536$

(1) Estimated amount of Series KK debt issuance planned for 2018.

Credit Ratings for Power Revenue Bonds

Platte River is committed to maintaining a strong credit rating, which is a significant factor in determining cost of debt. The senior lien debt credit is rated AA by all three credit rating agencies: Moody’s, Fitch, and Standard & Poor’s (S&P). The key factors in determining these ratings are the diversity and economic strengths of the municipalities, Platte River’s financial position, management expertise, and overall competitive position. Platte River’s competitive position is determined, in part, by analyzing various financial indicators, such as wholesale rate competitiveness, debt service coverage, and various balance sheet ratios including debt-to-capitalization and working capital.

Bond Issue Moody's Fitch S&P

Series GG Aa2 AA AA

Series HH Aa2 AA AA

Series II Aa2 AA AA

Series JJ - (1) AA AA

(1) A credit rating was not obtained from Moody's for the Series JJ

debt issuance.


Debt Service Coverage

Debt service coverage is a key indicator of financial strength and is reviewed by the credit rating agencies when assessing Platte River’s credit quality. Debt service coverage is a measure of Platte River’s ability to generate cash to pay bondholders. Under the General Power Bond Resolution, Platte River is required to charge wholesale electric energy rates to the municipalities that are reasonably expected to yield net revenues for the forthcoming 12-month period that are at least equal to 1.10 times total power bond service requirements.

Under the General Power Bond Resolution, Platte River has established a Rate Stabilization Reserve Account. Deposits to this account are a reduction to current net revenues for purposes of computing debt service coverage. Future withdrawals will increase net revenues for purposes of computing debt service coverage and could assist Platte River, at such time, in meeting its wholesale rate covenant. Withdrawals from the reserve account have not occurred to meet debt service coverage in Platte River’s history and the current Rate Stabilization Reserve Account is a balance sheet item of $20 million.

2016 2017 2017 2018


Net Revenues

Operating revenues 205,293,227$ 215,248,693$ 213,614,292$ 218,109,636$

Operating expenses, excluding depreciation (154,478,090) (171,856,184) (171,211,945) (168,640,776)

Net operating revenues 50,815,137 43,392,509 42,402,347 49,468,860

Plus interest and other income 1,920,896 1,706,044 1,883,866 2,369,179

Net revenues before rate stabilization 52,736,033 45,098,553 44,286,213 51,838,039

Rate Stabil ization

Deposits - - - -

Withdrawals - - - -

Total net revenues 52,736,033$ 45,098,553$ 44,286,213$ 51,838,039$

Bond Service

Power revenue bonds 30,726,171$ 27,899,574$ 27,899,571$ 23,108,227$

Allowance for funds used during

construction (1,137,163) (560,009) (960,992) (2,835,851)

Net revenue bond service 29,589,008$ 27,339,565$ 26,938,579$ 20,272,376$

Coverage

Power revenue bonds 1.78x 1.65x 1.64x 2.56x


Capital Additions

Capital additions are budgeted by production, transmission, and general plant functions. Capital additions include expenditures of five thousand dollars or more for property, equipment, or construction projects with an estimated useful life greater than two years. Expenditures less than five thousand dollars are reflected within the operating expense budget. In general, capital additions consist of projects aimed at improving system reliability, replacing and upgrading aging infrastructure, implementing technology improvements, and firming water resources. These projects are necessary to maintain a reliable low cost energy system.

Project management continues to be a focus for 2018. The project management framework establishes guidelines for initializing, planning, executing, controlling, and closing a project. All capital and operations and maintenance projects that meet certain criteria follow this framework. This process will continue to evolve striving towards operational excellence.

The 2018 capital additions total $78.3 million: $42 million for production, $3.3 million for transmission, and $33 million for general plant. In total, this represents a $26 million increase over the 2017 Budget. A portion of unspent 2017 Budget capital additions will be requested to be carried over into the 2018 Budget, which the estimated amounts are specified within each project description.

2016 2017 2017 2018

Capital Additions ($000) Actual Budget Estimate Budget

Production 19,963$ 27,479$ 28,701$ 42,048$

Transmission 13,031 12,520 11,270 3,271

General plant 5,390 12,311 7,792 32,984

Total Capital Additions 38,384$ 52,310$ 47,763$ 78,303$

0

10

20

30

40

50

60

70

80


Production Transmission General Plant

$ Millions


Capital Additions: $78.3 Million

Major Outage

(Environmental &

Reliability)

43%

Headquarters

Campus

41%

Asset Management

& Maintenance

8%

Windy Gap Firming

Project

3%

Purchases

2%

Compliance

2%

Yampa

1%

The focus of the 2018 capital additions will be outage projects and the Headquarters Campus Project. Capital additions are required to ensure reliability and compliance, improve efficiency, or because

they are reaching the end of their useful life.



Capital Additions Summary

2018 Total

Budget Cost Estimate (1)

Rawhide Projects

Rotary Car Dumper Drive Conversion to Variable Frequency Drives (2) 1,248,925$ 2,955,000$

Gas Yard Balance of Plant Controls Replacement - Combustion Turbines 462,573 687,000

Protective Relay Replacement - Combustion Turbine Unit F 297,772 503,000

Condenser Unit Replacement - Rawhide Construction Management Building 286,031

Low Impact Security - Rawhide (2) 234,108 728,000

Fixed Fire Suppression System - Combustion Turbines 230,941 1,230,000

Controls Upgrade to Ovation Distributed Control System (DCS) -

Combustion Turbine Unit F 211,887 653,000

Protective Relay Replacement - Combustion Turbine Unit D 190,662 316,000


Combustion Turbine Unit D 151,887 503,000

Enterprise Data System (EDS) Integration to Corporate Network 115,350

LED Lighting 115,000 635,000

Electric Hoist - Air Heater Platform 42,000

Total Rawhide Projects 3,587,136$

Rawhide Outage Projects

Bottom Ash and Reclaim Pond - Coal Combustion Residuals Compliance 17,128,358$ 19,183,000$

Generator Stator Rewind - Rawhide Unit 1 5,178,960 7,536,000

Generator Rotor Replacement - Rawhide Unit 1 4,075,692 6,434,000

High Voltage Motor Control Center Switchgear Replacements 2,429,274 2,451,000

Evergreen Controls Hardware Upgrade - Rawhide Unit 1 2,226,220

Air Heater Basket Replacement 1,574,980 1,740,000

Feedwater Heater 102 Replacement - Rawhide Unit 1 (2) 514,571 645,000

Voltage Regulator Upgrade 309,961 451,000

Spray Dry Absorber (SDA) Feed and Feed Preparation Pump Replacement 190,416

Igniter and Scanner Air Pneumatic Replacement - Rawhide Unit 1 53,537

Total Rawhide Outage Projects 33,681,969$

Rawhide Purchases

Mobile Crane Replacement 710,000$

Engine 12 Replacement 420,000

Vacuum Truck Replacement 380,000

CAT Skid Steer Replacement 42,000

HART 475 Communicator Replacement 18,000

Dual Feed Welder Replacement 15,000

Portable Motor Analyzer 15,000

Power Quality Analyzer Replacement 10,353

Total Rawhide Purchases 1,610,353$

Total Rawhide Capital Additions 38,879,458$

Other Production Projects

$ - Windy Gap Firming Project 2,559,952$ $ 74,632,000

Yampa Work Orders (2) 417,710

Yampa Controls Project 191,393 3,115,000

Total Other Production Projects 3,169,055$

Total Production Capital Additions 42,048,513$

Production Capital Additions


2018 Total


Transmission Projects

Boyd 115/230kV Substation Transformer (T2) Addition (2) 769,313$ $ 10,357,000

Low Impact Security – Substation Control Building Access Control (2) 598,748 1,620,000

Circuit Switcher (T1, T2) Addition - Richard Lake Substation 565,423

Circuit Switcher (T3) Addition, Breaker Replacement, Relay Upgrade -

Harmony Substation (2)

309,147 658,000

Transmission Line Vault Upgrades - Rogers Road Substation 267,125 358,000

Airflow Spoilers 255,138 1,012,000

Circuit Switcher (T1) Addition, Breaker Replacement, Relay Upgrade -

Harmony Substation (2)

128,483 736,000

Battery Bank Replacements 89,543 437,000

Walls and Security - Loveland Substations 79,612 454,000

HVAC Unit Replacements - Substations 69,537 600,000

Transmission Line Vault Upgrades - Crossroads Substation 28,829 654,000

Oil Breaker (164) Replacement - Terry Street Substation (2) 28,184 167,000

Nitrogen Generator - Boyd Substation Transformer Bank #1 24,894

Nitrogen Generator - LaPorte Substation Transformer Bank #1 24,894

Low Impact Security - Substations (Owned) (2) 5,624 1,275,000

Oil Breaker (2082) Replacement - Longs Peak Substation 5,223 210,000

Breaker Replacements - Boyd Breaker 2062, 3062, 3166 (2) 4,546 299,000

Total Transmission Projects 3,254,263$

Transmission Purchases

Sweep Frequency Response Analyzer Replacement 16,600$

Total Transmission Capital Additions 3,270,863$

Transmission Capital Additions

2018 Total


General Plant Projects

Headquarters Campus (2) 32,140,052$ $ 46,332,000

Disaster Recovery Center Uninterruptible Power System Replacement 272,744

Backup Environment Replacement 140,000

Digital Cross Connect Equipment Replacement 89,955 397,000

SCADA Periodic Network Equipment Replacement 72,963 228,000

Border Router Replacement - Headquarters 48,000

Network Topology Mapping Software 25,000

Total General Plant Projects 32,788,714$

General Plant Purchases

Vehicle Fleet Replacements 176,536$

Locating Equipment Replacement 18,702

Total General Plant Purchases 195,238$

Total General Plant Capital Additions 32,983,952$

Total Capital Additions 78,303,328$

(1) If no amount is shown, the 2018 Budget amount represents the total project cost estimate.

General Plant Capital Additions

(2) Projects with estimated unspent 2017 funds that will be requested to be carried over to the 2018 Budget.


Production Capital Additions

Production capital additions include power plant upgrades, equipment purchases and replacements, and compliance related and other projects at the Rawhide and Craig generating stations. Also included in production additions is the Windy Gap Firming Project.

The 2018 production capital additions total $42 million and consist of $38.9 million for Rawhide projects, $2.5 million for Platte River’s share of the Windy Gap Firming Project, and $0.6 million for Platte River’s share of the Yampa Project capital additions. The Yampa capital budget was prepared by the Yampa Operating Agent (Tri-State) and has been approved by the Yampa Engineering and Operating Committee of which Platte River is a member.

Rawhide Projects

Rotary Car Dumper Drive Conversion to Variable Frequency Drives $1,248,925

Project time frame: 2017-2019 | Total cost estimate: $2,955,000 | Carryover estimate: $513,000

Gas Yard Balance of Plant Controls Replacement - Combustion Turbines 462,573

Project time frame: 2017-2018 | Total cost estimate: $687,000

Protective Relay Replacement - Combustion Turbine Unit F 297,772


Condenser Unit Replacement - Rawhide Construction Management Building 286,031

Low Impact Security - Rawhide 234,108

Project time frame: 2017-2018 | Total cost estimate: $728,000 | Carryover estimate: $234,000

Fixed Fire Suppression System - Combustion Turbines 230,941

Project time frame: 2017-2021 | Total cost estimate: $1,230,000

Replace the obsolete balance of plant controls on each combustion turbine with upgraded technology.

The current controls impose a reliability issue during peak demand. Upgrading the system to the Ovation

system will allow for a better understanding of the equipment and provide troubleshooting guidelines.

Small HVAC units will also be installed to protect hardware from weather extremes.

Install variable frequency drives on the entrance and exit of the rotary car dumper. Currently, the entry-

end gearbox bears nearly the entire load of the train cars and has a higher failure rate than the exit-end

gearbox which is only slightly loaded. The drives will be tuned to equally distribute the load of the train

car across each gear box. As a result, maintenance costs and gearbox failures will be reduced.

Replace the protective relays on Combustion Turbine Unit F with microprocessor-based relays. Each

relay will have a data concentrator installed to collect analog and digital information for the Ovation

system. Redundant relaying will be installed on Unit F to increase reliability of the unit.

Install a fire suppression system in place of the current CO2 system to protect the combustion turbines.

The current system has become obsolete and parts are no longer available. It is a standalone system and

trouble alarms are often set off. The new system will allow tie-in to the plant-wide fire alarm and

detection system, reduce the number of trouble alarms, reduce risk of asphyxiation during a release of

agent, and eliminate damage to computers and electronics during a release. This project will be

completed on one combustion turbine each year.

Replace two condenser cooling systems that serve the construction management building with an

upgraded system. The current units are several years past their life expectancy. The replacement will be a

chilled-type condenser unit which provides better temperature control and has a longer life expectancy.

Secure the Rawhide low impact CIP control centers to meet North American Electric Reliability

Corporation (NERC) requirements. This project will include installing new door access controls,

cameras, security structures, and glass break detectors around the control centers at Rawhide.


$211,887


Protective Relay Replacement - Combustion Turbine Unit D 190,662


151,887


Enterprise Data System (EDS) Integration to Corporate Network 115,350

LED Lighting 115,000


Electric Hoist - Air Heater Platform 42,000

Total Rawhide Projects 3,587,136$

Rawhide Outage Projects

Bottom Ash and Reclaim Pond - Coal Combustion Residuals Compliance $17,128,358


Generator Stator Rewind - Rawhide Unit 1 5,178,960


Install an electric hoist on the air heater platform of the boiler building. This electric hoist will assist in

installing the new air heater baskets during the 2018 outage and will be used for other future projects.

Replace all exterior and interior lighting throughout the plant with LED (light emitting diode) lighting

which is more energy efficient and requires less maintenance than the standard high pressure sodium

lighting.

Install an EDS integration to the corporate network. Due to current network constraints and firewall

measures, employees are not able to view EDS information outside of Rawhide premises. The new EDS

will replicate the Ovation network data information and will allow view-only access for troubleshooting

from remote locations.

Upgrade the DCS on Combustion Turbine Unit D. The current hardware and software are obsolete. The

new Ovation DCS will create a more unified platform and will make training and troubleshooting more

efficient.

Upgrade the DCS on Combustion Turbine Unit F. The current hardware and software are obsolete. The

new Ovation DCS will create a more unified platform and will make training and troubleshooting more

efficient.

Replace the protective relays on Combustion Turbine Unit D with microprocessor-based relays. Each

relay will have a data concentrator installed to collect analog and digital information for the Ovation

system.


Combustion Turbine Unit F


Combustion Turbine Unit D

Rewind Rawhide Unit 1 generator stator. The generator stator is original plant equipment and is nearing

the end of its design life. The stator rewind is being planned to coincide with the necessary generator

rotor replacement. This will also ensure the components are under the same design conditions and

requirements, and allow the components to be on the same inspection intervals.

Install an ash handling system to comply in advance with federal and state solid waste management

regulations. The project will include installing an under boiler chain conveyor which conveys bottom ash,

pyrites, and economizer ash into a new bunker. The new system will possess redundant capabilities

allowing for maintenance while still online. The existing reclaim pond will also be modified to comply

with State Section 9 requirements.


Generator Rotor Replacement - Rawhide Unit 1 $4,075,692


High Voltage Motor Control Center Switchgear Replacements 2,429,274


Evergreen Controls Hardware Upgrade - Rawhide Unit 1 2,226,220

Air Heater Basket Replacement 1,574,980


Feedwater Heater 102 Replacement - Rawhide Unit 1 514,571


Voltage Regulator Upgrade 309,961


Spray Dry Absorber (SDA) Feed and Feed Preparation Pump Replacement 190,416

Igniter and Scanner Air Pneumatic Replacement - Rawhide Unit 1 53,537

Total Rawhide Outage Projects 33,681,969$

Replace the igniter and scanner air pneumatic drive. The new equipment will improve air control to the

igniters, allowing automatic variable control unlike the current fixed position damper. Unit start-ups will

be more stable and quicker as a result. Reducing start up time increases reliability and allows for

increased production.

Replace six feed pumps and four feed preparation pumps in the SDA. The current pumps are original

plant equipment. The bases and support structures are also rotting and causing issues. The pumps are

critical to maintaining environmental standards.

Upgrade the current voltage regulator for the Rawhide Unit 1 generator to a fully reliable and redundant

system. The current voltage regulator is unreliable causing multiple unit trips and delayed startups.

Redesign and replace low pressure feedwater heater 102. Piping in the current heater is reaching the

recommended replacement criteria of 10 percent plugged. Additionally, it has been degrading quickly

due to added stress from heater 101 underperforming and significant wall loss. Replacement will allow

for changes in incoming water and steam conditions and prevent problems from cascading into heater

103.

Purchase and install hot, cold, and intermediate air heater baskets. Over time, baskets break apart and

become plugged which reduces heat transfer and increases differential pressure. This leads to an

increased heat rate, eventual load reduction, and increased fan consumption. The replacement will

increase the air heater efficiency and decrease heat rate.

Upgrade the hardware and software for the evergreen controls to the latest Ovation revision before the

system becomes obsolete and repairs can no longer be made. This software will match the Ovation

revisions for the gas yard and Combustion Turbine Unit A upgrade.

Replace the switchgears used in operating the rotary car dumper, coal crusher, and coal conveyor. This

project will upgrade 4160V HVMCC 1A, 1B, 2A, and 2B. The equipment is obsolete and uses a manually-

operated interlocked switch which can be dangerous.

Replace Rawhide Unit 1 generator rotor. The rotor is original plant equipment and is nearing the end of its

useful life. Engineering has been monitoring two known shorts on the rotor for years. Recent testing

showed the shorts are worsening over time. Because of this, the rotor needs to be replaced earlier than

planned. The replacement will include the latest Siemens design, state of the art materials, and modern

fabrication and manufacturing techniques.


Rawhide Purchases

Mobile Crane Replacement $710,000

Engine 12 Replacement 420,000

Vacuum Truck Replacement 380,000

CAT Skid Steer Replacement 42,000

HART 475 Communicator Replacement 18,000

Dual Feed Welder Replacement 15,000

Portable Motor Analyzer 15,000

Power Quality Analyzer Replacement 10,353

Total Rawhide Purchases 1,610,353$

Total Rawhide Capital Additions 38,879,458$

Replace a vacuum truck that is used for cleaning out fly ash piping, ducts, trenches, and tanks, especially

during outages. The new truck will provide reliability when emergent vacuum work needs arise.

Replace a vintage fire engine at the plant that is used in case of fire emergencies to protect the plant

structure and surrounding area. The new engine will meet National Fire Protection Association safety

standards, possess foam capabilities, and a larger capacity storage tank.

Replace the mobile crane with a larger capacity crane. The plant has many locations in which the mobile

crane is the only lifting device that can safely remove and install equipment. The current crane capacity is

limited to 45 tons and requires extensive repairs due to its aging condition. The new crane has double the

load capacity, reducing repair costs and eliminating expenses for renting larger cranes.

Replace the power quality analyzer with a new version. The power quality analyzer is used to analyze the

quality of the power coming into or out of power feeds. The current analyzer takes a power sample on a

one-second interval, which is not fast enough to pick up power issues such as an instantaneous trip or a

ground fault. The new analyzer takes power samples in microseconds and can read and analyze ground

faults or instantaneous trips.

Purchase a portable motor analyzer for testing, troubleshooting, and diagnosing performance issues on

motors and electrical devices. The current equipment used for analyzing motors is outdated and is too

large and heavy to be used in certain areas of the plant. The new portable motor analyzer will perform

multiple types of diagnostic testing, can be transported to remote locations, and can save and print

reports.

Replace the dual feed welder. The current welder is old and is too large to be moved around to welding

jobs in the field. The new welder will have more welding capabilities and will be smaller, providing

greater mobility.

Replace the HART (Highway Addressable Remote Transducer) 475 communicator. The devices are used

to communicate with smart electronics throughout the plant. The current devices have reached end of

life and are no longer supported by the manufacturer. The new devices will be used with other new

technology at the plant.

Replace the CAT skid steer that is used in the fuel handling area. The current skid steer experiences high

usage and has reached end of life. The skid steer has the ability to handle material in small spaces such as

the baghouse, spray dryer absorbers sump lines, under converyor belts, and the rotary car dumper.


Other Production Projects

Windy Gap Firming Project $2,559,952


Yampa Work Orders 417,710

Carryover estimate: TBD

Yampa Controls Projects 191,393


Total Other Production Projects 3,169,055$

Total Production Capital Additions 42,048,513$

Platte River is participating in the Windy Gap Firming Project storage system. The Windy Gap system

currently has very limited water storage capability putting Rawhide at risk. Therefore, this project will

provide storage and help ensure a continuous water supply. The project is expected to move into the

design phase and construction is estimated to be complete with the reservoir ready to fill in the spring of

2022. The amounts shown represent Platte River’s share of the project.

The Yampa Engineering and Operating Committee approved capital projects for plant improvements and

additions at the Craig Station. The budget includes expenses for a bottom ash system, low pressure

turbine bucket upgrades, generator circuit breakers, cooling tower fill upgrade, and other projects for

upgrades and replacements. The amount shown represents Platte River’s ownership share responsibility.

The Yampa Engineering and Operating Committee approved capital projects for continuing work on the

controls projects at the Craig Station. The amount represents Platte River’s ownership share.


Transmission Capital Additions

Transmission capital additions include transmission lines, substations, and supporting equipment. Projects are based on transmission studies and consultation with the municipalities’ staffs through the Joint Technical Advisory Committee. These projects will provide enhanced system reliability and add capacity to serve new and existing loads.

The 2018 transmission capital additions total $3.3 million for expansion and upgrades to Platte River’s transmission system. This amount includes substation expansions, new transformers, breakers, relays, and battery bank replacements.

Transmission Projects

Boyd 115/230kV Substation Transformer (T2) Addition $769,313


Low Impact Security – Substation Control Building Access Control 598,748


Circuit Switcher (T1, T2) Addition - Richard Lake Substation 565,423

Circuit Switcher (T3) Addition, Breaker Replacement , Relay Upgrade - Harmony Substation 309,147


Transmission Line Vault Upgrades - Rogers Road Substation 267,125


Airflow Spoilers 255,138


Circuit Switcher (T1) Addition, Breaker Replacement, Relay Upgrade - Harmony Substation 128,483


Add a circuit switcher to replace the existing T3 motor operated disconnect switch and provide

segregation between the City of Fort Collins and Platte River, minimizing the NERC standard

requirement for the City and equipment maintenance for Platte River. This project will also replace two

oil circuit breakers with SF6 gas circuit breakers and upgrade the relaying and protection system to

improve system reliability.

Add a six bay 230kV breaker-and-a-half with nine circuit breakers and a new 115/230kV auto transformer

to enhance the output from Rawhide, thereby increasing reliability.

Secure the low impact CIP substation control buildings to meet the NERC physical security standard for

substations in which Platte River owns only the control building. Security measures include door access

controls, cameras, and glass break detection for all control buildings.

Add circuit switchers to replace the existing T1 and T2 motor operated disconnect switches. The addition

will provide segregation between the City of Fort Collins and Platte River thereby minimizing the NERC

standard requirement for the City and equipment maintenance benefits for Platte River. This project will

also add dual winding slipover bushing current transformers to T1 and T2 and upgrade the relaying and

protection system to improve system reliability.

Add a circuit switcher to replace the existing T1 motor operated disconnect switch and provide

segregation between the City of Fort Collins and Platte River minimizing the NERC standard requirement

for the City and equipment maintenance benefits for Platte River. This project will also replace two oil

circuit breakers with SF6 gas circuit breakers and upgrade the relaying and protection system to improve

system reliability.

Install new airflow spoilers on the four transmission circuits near Rawhide where high wind damage has

occurred in the past. The new airflow spoilers will prevent icing and galloping, increase reliability, and

resist outages and damage to transmission lines.

Upgrade two vaults along the transmission line to separate the existing circuits. Due to increased load, it

will no longer be possible to de-energize both circuits at the same time. Separation of the underground

115kV circuits will improve the performance of vault maintenance while keeping one circuit energized.


Battery Bank Replacements $89,543


Walls and Security - Loveland Substations 79,612


HVAC Unit Replacements - Substations 69,537


Transmission Line Vault Upgrades - Crossroads Substation 28,829


Oil Breaker (164) Replacement - Terry Street Substation 28,184


Nitrogen Generator - Boyd Substation Transformer Bank #1 24,894

Nitrogen Generator - LaPorte Substation Transformer Bank #1 24,894

Low Impact Security - Substations (Owned) $5,624


Oil Breaker (2082) Replacement - Longs Peak Substation 5,223


Breaker Replacements - Boyd Breaker 2062, 3062, 3166 4,546


Total Transmission Projects 3,254,263$

Replace battery bank, rack, and spill containment equipment at three substations. The battery bank test

results have been declining indicating that they are reaching end of life. Locations will be determined

based on substations with the greatest need.

Purchase a nitrogen generator. Currently, large nitrogen bottles are being transported to the site to keep

a sufficient stock. Purchasing and installing a nitrogen generator onsite will make the process more cost

and labor efficient.

Replace the 30-year-old oil breaker 164 with new SF6 gas circuit breakers. The current oil breakers are

less reliable, require more maintenance than the new SF6 breakers, and are a potential oil spill hazard.

Spare parts are also difficult to source. Upgraded relays will enhance fault location.

Upgrade five vaults along the transmission line to separate the existing circuits. Due to increased load, it

will no longer be possible to de-energize both circuits at the same time. Separation of the underground

115kV circuits will improve the performance of vault maintenance while keeping one circuit energized.

Install a security system after the substation wall has been built. The security system will be maintained

and operated by Platte River. The City of Loveland will pay for 100 percent of the wall and 50 percent of

the security system. This project will improve the overall security and aesthetics of the substation.

Replace HVAC units at the Drake, Longs Peak, Timberline, and Valley Substations. The units are quickly

deteriorating and have been operating past the expected service life. HVAC units will be replaced with

like units.

Replace the 30-year-old oil breakers 2062, 3062, and 3166 with new SF6 gas circuit breakers and

upgrade relays. The current oil breakers are less reliable, require more maintenance than the new SF6

breakers, and are a potential oil spill hazard. Spare parts are also difficult to source. Upgraded relays will

enhance fault location.

Secure the low impact CIP substations to meet the NERC physical security standard for Platte River’s

wholly owned substations. Security measures include intrusion detection to monitor the perimeter walls

and video surveillance to track and monitor any intrusion into the substations yard. Also included are

door access controls, cameras, and glass break detection for all control buildings.

Replace the 33-year-old oil breaker 2082 with new SF6 gas circuit breakers. The current oil breakers are

less reliable, require more maintenance than the new SF6 breakers, and are a potential oil spill hazard.

Spare parts are also difficult to source. Upgraded relays will enhance fault location.

Purchase a nitrogen generator. Currently, large nitrogen bottles are being transported to the site to keep

a sufficient stock. Purchasing and installing a nitrogen generator onsite will make the process more cost

and labor efficient.


Transmission Purchases

Sweep Frequency Response Analyzer Replacement $16,600

Total Transmission Capital Additions 3,270,863$

Replace the existing sweep frequency response analyzer as the unit is obsolete. The analyzer is used to

investigate mechanical integrity of transformers, reactors, and other equipment consisting of windings.


General Plant Capital Additions

General plant capital additions include computer hardware and software, communication equipment, vehicle replacements, building and grounds modifications, compliance projects, and other general plant equipment purchases.

The 2018 general plant capital additions total $33 million and consist of $32.1 million for a new headquarters campus, and the remaining $0.9 million on communications upgrades, software purchases, equipment, and vehicle replacements.

General Plant Projects

Headquarters Campus $32,140,052

Project time frame: 2017-2020 | Total cost estimate: $46,332,000 | Carryover estimate: $1,625,000

Disaster Recovery Center Uninterruptible Power System Replacement 272,744

Backup Environment Replacement 140,000

Digital Cross Connect Equipment Replacement 89,955


SCADA Periodic Network Equipment Replacement 72,963


Border Router Replacement - Headquarters 48,000

Network Topology Mapping Software 25,000

Total General Plant Projects 32,788,714$

Design and build a cost effective and viable Headquarters campus to better manage the next generation

of technologies and infrastructure to power and protect the communities. It will also provide the

community with better access to the region’s energy experts and the policy leaders who will guide a

cleaner and more diverse energy future.

* Owner, contractors, design, and bid contingencies, as well as $2.9 million for interest during construction are built into the

project costs. Project cost estimates are still being refined and will potentially be modified.

Replace network equipment that has reached end of life and is no longer supported by the vendor.

SCADA reliability, security, and compliance rely on the availability of patches and vendor support which

will be restored by this project.

Replacement of the digital cross connect system for the communications room and the Disaster

Recovery Center (DRC). The current equipment that is used for communications to the substation has

been discontinued by the manufacturer.

Replace the backup environment due to aging equipment. This includes replacing server hardware and

disk array, as well as the addition of replication software for disaster recovery.

Replace the disaster recovery center uninterruptible power system (UPS) with two complete systems.

Since installation in 2014, the current UPS has had two identical failures in the static switch; this switch is

not utilized and is non-resettable. Each system will have individual battery cabinets connected with a tie

cabinet that acts the same as a standard electrical automatic transfer switch.

Install network topology mapping software to improve accuracy of documentation. This project will map

out both the physical and logical structure of the network.

Purchase a new border router to support the anticipated increased bandwidth requirements for the next

three to five years. This project will be done in conjunction with the Headquarters Campus project.

*


General Plant Purchases

Vehicle Fleet Replacements $176,536

Locating Equipment Replacement 18,702

Total General Plant Purchases 195,238$

Total General Plant Capital Additions 32,983,952$

Total 2018 Capital Additions 78,303,328$

Replace five vehicles which meet or exceed Platte River’s vehicle replacement criteria of twelve years or

90,000 miles. Platte River utilizes a fleet team to review fleet replacement processes and criteria. Platte

River’s vehicles have been maintained through average to long replacement cycles compared to other

utilities. Replacement of these vehicles will bring the fleet up to standards.

Replace the equipment that is used in locating electric, gas, water, and communications utilities. The

equipment has reached end of life and is less accurate.


Acronyms and Terms A&G Administrative and general.

Accrual An expense is recognized before cash is paid out.

Amortization Gradual reduction of book value for a non-depreciable asset.

Capacity Factor The ratio of the average load on a generator for the period of time considered to the capacity rating of the generator.

Capital and Debt Management Fund A dedicated fund authorized by Platte River’s Strategic Financial Plan to be used in managing debt and to provide reserves for future capital additions.

CIP Critical Infrastructure Protection – regulated by NERC.

Contingency An appropriation of funds to cover unforeseen expenditures, which may occur during the budget year.

CRSP Colorado River Storage Project – division of Western Area Power Administration.

Debt Service Bond interest and principal.

Debt Service Coverage Net revenue divided by debt service.

Debt-to-Capitalization Ratio Long-term debt divided by net position plus long-term debt.

Depreciation That portion of the cost of a fixed asset charged to operations to allow for lost usefulness.

DSM Demand Side Management.

Estimate Current estimate of revenues and expenditures to reflect seven months actual revenues and expenditures (January through July) and five months budget revenues and expenditures (August through December). Some modifications were made to reflect more accurate projections.

FERC Federal Energy Regulatory Commission.

Fiscal Resolution A resolution that governs the financial transactions of Platte River.

General Power Bond Resolution A resolution for providing the issuance of power revenue bonds.

GW One thousand megawatts; one million kilowatts.

GWh One gigawatt of power delivered steadily for one hour.


kW Kilowatt; one thousand watts.

kW-Mo The maximum kW reached during a calendar month used for billing demand.

kWh One kilowatt of power delivered steadily for one hour.

kV Kilovolt; one thousand volts.

LAP Loveland Area Projects – division of the Western Area Power Administration.

MBtu One million Btu. A Btu is a British thermal unit and is the standard unit for measuring quantity of heat energy, and represents the amount of heat energy necessary to raise the temperature of one pound of water one degree Fahrenheit.

Municipalities Estes Park, Fort Collins, Longmont, and Loveland. The four owner municipalities of Platte River.

MW Megawatt; one thousand kilowatts.

MWh One megawatt of power delivered steadily for one hour.

NERC North American Electric Reliability Corporation.

Net Income Revenues less operating costs, depreciation, amortization, and interest expense.

Net Revenue Total revenues less operation and maintenance expenses during a period.

O&M Operations and maintenance.

Projected Estimate of revenues and expenditures based on past trends, current economic conditions, and future financial forecasts.

Rate Stabilization Fund An account provided for by Platte River’s General Power Bond Resolution and funded in accordance with Platte River’s Strategic Financial Plan.

Restricted Assets Cash and investment accounts restricted to use by bond covenants or laws and regulations.

SCADA Supervisory Control and Data Acquisition.

SFP Strategic Financial Plan.

Short-term Surplus Sales Sales of electric energy having limited or no assured availability for a period of one year or less.

WAPA Western Area Power Administration.

Wheeling Use of transmission facilities of other utilities.

Yampa Project Craig Station Units 1 and 2 and related transmission facilities.

• Solar, wind and hydropower resources, including renewable energy credits, will represent approximately 31 percent of the energy provided to the municipalities in 2018. We will proactively incorporate more carbon free resources into our general portfolio of energy resources within the next few years. Our staff will use 2018 to finalize potential contracts, secure transmission and prepare to integrate these additional resources and consider additional carbon free energy sources or other emerging technologies.

• A new 5 MW community solar program will be implemented during 2018 to provide solar power to help meet growing customer demand for solar energy.

• Expanding energy efficiency programs will help more customers use less energy but will also drive increases in the demand side management (DSM) expenses. The DSM budget, within the administrative and general category, represents 5 percent of all operating expenses budgeted in 2018. We will also continue collaboration with owner municipalities on the demand response pilot program to identify the value of specific resources and to develop a distributed energy resource strategy.

2018 Proposed Budget at a Glance

Expenses are managed from a broad perspective, operating the system in a safe, compliant and reliable manner, while cost effectively optimizing resources and expanding environmental stewardship. Platte River communicates and collaborates with owner municipalities to align processes and outcomes to the benefit of all customers.

Key Points

Operating Expenses

Platte River Power Authority’s 2018 Budget supports the mission, values, strategic plan and financial plan established by Platte River's Board of Directors.

2018 Budget Summary (millions)

Revenues $220.5

Operating Expenses $168.6

Debt Expenditures $20.3

Capital Additions $78.3

$207 $217 $215 $220

0

50

100

150

200

250

300


Operating Expenses Debt Service Expenditures Capital Additions Revenues

$ Millions

_

• Platte River, along with seven other regional utilities, plans to join a regional transmission organization (RTO) and an organized wholesale energy market. This will enable Platte River to 1) pool energy resources over a larger footprint; 2) use existing transmission systems more efficiently; 3) increase the integration of renewable resources; 4) improve transmission and interconnection planning; 5) and potentially lower costs to our owner municipalities. Budgeted expenses will cover items needed during the onset of entering a market.

• In 2018, we will make a significant, proactive investment in Rawhide Unit 1 to ensure service reliability and efficiency. Work includes replacement of the original turbine generator and re-winding of the original generator stator. We will also replace and upgrade the bottom ash system of the unit to comply in advance with federal and state solid waste management regulations.

• In spring 2018 we will break ground on the new headquarters campus, which will ultimately help us better manage the next generation of technologies behind a secure and robust electrical grid and the critical infrastructure necessary to power and protect the communities we serve. Working with several agencies since planning began in 2003, we will also begin construction on the Windy Gap Firming Project to secure the long-term water needs of Rawhide Energy Station.

• Approximately $95 million in debt will be issued to finance construction of the Headquarters Campus and Windy Gap Firming projects. Platte River’s AA credit rating will enable Platte River to achieve favorable financing terms.

• We have been able to control our core generation and transmission expenses through continued preventative and predictive maintenance strategies and proactive capital investments. We are committed to managing costs, providing long-term financial sustainability, and maintaining competitive rates.

• Billing demand and energy deliveries to the municipalities are projected to increase 0.3 percent and 0.9 percent, respectively, from the 2017 Budget. However, surplus sales revenues are projected to continue decreasing in 2018 due to lower market prices and less energy available for sale because of the planned maintenance outage.

Based on 2018 budget projections, a rate increase was not required to meet Strategic Financial Plan targets in 2018. However, current estimates forecast the need to raise rates annually beginning in 2019, some years more dramatically than others. As part of our planning efforts, we recommend providing our municipal owners and those whom they serve a more predictable path of smaller, more consistent annual rate increases.

Operating Expenses $168.6 million

Revenues $220.5 million

Revenues

28%

27%

20%

15%

10%Fuel

Purchased Power

Production

A&G

Transmission

89%

8%

2% 1%

Municipal Sales

Surplus Sales Short-term

Wheeling

Interest and Other Income

Documents

Memorandum · 2019-04-18 · Memorandum Date: September 20, 2017 To: Board of Directors From: Jason Frisbie, General Manager/CEO Dave Smalley, Deputy General Manager and Chief Financial