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TABLE OF CONTENTS
- Financial Planning Process
- FY 2019 Budget Proposal
- Customer Growth
- Revenue
- Use of Revenue
- Operating & Maintenance Expenses
- Capital & Financing Plan
- Key Financial Metrics
FINANCIAL PLAN PREVIEW FISCAL YEAR 2019 PRESENT E D BY Gary Gold - - PowerPoint PPT Presentation
FINANCIAL PLAN PREVIEW FISCAL YEAR 2019 PRESENT E D BY Gary Gold - - PowerPoint PPT Presentation
FINANCIAL PLAN PREVIEW FISCAL YEAR 2019 PRESENT E D BY Gary Gold VP - Accounting April 30, 2018 A p p r o v a l R e q u e s t e d TABLE OF CONTENTS Financial Planning Process FY 2019 Budget Proposal Customer Growth Revenue
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FINANCIAL PLANNING PROCESS
Generation Resource = Load (Demand) + Reserve Margin
- Electric and Gas Sales
- Regulatory Costs (TCOS, ERCOT)
- Fuel Cost (gas, coal, nuclear)
- Generation Resource Plan
- Market Power Prices
- Wholesale Price, Revenue & Margin
- Financing Plan / Interest Rates
FORECAST INPUTS
WE DEPLOY AN ANNUAL UPDATE PROCESS
5-year detailed planning by business unit Historical & current year performance 25-Year Long Range Plan 1 2 – 5 6 – 25
Year 1 will be presented to Board for approval (outer years are refreshed in subsequent planning cycles, so they are considered preliminary & subject to change) A robust long range planning process is essential for long-term resource planning and yields budget targets, financial metric performance, and revenue support requirements.
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$617.2 $1,008.8 $421.5 $159.7 $345.9 $108.4
1a - Operating Expenses- Non Fuel O&M 1b - Operating Expenses- (Fuel, Regulatory Fees) 2 - Debt Requirements from Revenue 3 - R&R 6% of Revenue 4 - City Payment 5 - R&R Remaining Deposit
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FY 2019 BUDGET PROPOSAL
* FY 2018 Actual results are unaudited ** Excludes interest during construction and gross of customer contributions
CPS ENERGY’S TOTAL ANNUAL FUNDING REQUIREMENTS = $2,661.5M
- 1a = Expanded Mgmt. Responsibility; ◦ 1b Fuel = Ops / ESMO / EPSC Governance (Pass Thrus);
- 2+3+5 = Total Capital Funding
FY 2019 Uses of Revenue Total $2,661.5M
Numbered by flow of funds
1a 1b 2 3 5 4
($ millions)
ESMO = Energy Supply & Market Operations EPSC = Energy Portfolio Strategy Committee
- CPS Energy’s total budget is reflected in the Uses of
Revenue as defined by Bond Ordinance.
- Requesting the CPS Energy Board of Trustees to
provide approval of the FY 2019 Budget:
- Capital Budget = $688.4 million
- Non-Fuel O&M Budget = $617.2 million
- Management is focused on all elements of the
budget, for the benefit of our customers.
Budget
($ in millions)
FY 2018 AB FY 2018* FY 2019
Capital (**) $700.0 $558.0 $688.4 Total Non-Fuel O&M $620.2 $581.0 $617.2
Historical
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Budget Component Governance / Approval
Fuel Purchases Governed by Procurement Policy, with material fuel purchases approved by the Board Debt Issuance Bond Issuances approved by the Board R&R Additions Governed by the bond ordinance City Payment Approved monthly by the Board Non-Fuel O&M Budget approval annually by the Board Capital Budget approval annually by the Board
The Board of Trustees has oversight of the components of the planned Uses of Revenue through policy & various other approvals
GOVERNANCE / APPROVAL OF BUDGET COMPONENTS
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2.0% 2.5% 2.2% 2.3%
0.0% 1.0% 2.0% 3.0% 4.0% 2016 2017 2018* 2019
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ANNUAL ELECTRIC CUSTOMER GROWTH RATES
Electric Sales Growth – Driven by local population growth, offset by the continued success of our conservation STEP program.
FY Fiscal Year 2016 2017 2018* 2019 Electric Customers Residential Customers (YTD Average) 687,431 704,446 719,838 736,289 Avg Residential Usage (MWh/Cust) 13.8 13.4 13.4 13.3 Non-Residentail Customers (YTD
Average)
90,654 91,822 92,753 93,761 Avg Non-Residential Usage (MWh/Cust) 136.7 139.2 137.6 136.7 Electric Sales TWh 21.9 22.2 22.4 22.6
* FY 2018 Actual results are unaudited
Historical Budget
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0.8% 1.2% 1.0% 1.1%
0.0% 1.0% 2.0% 3.0% 4.0% 2016 2017 2018* 2019
7 Distribution Gas Sales Growth – While customer growth in the short term is comparable to last year, we anticipate a longer term rebound as population levels rise and we pursue a strategy to grow our gas business.
Fiscal Year 2016 2017 2018* 2019 Gas Customers Total Gas Customers (YTD Average) 337,400 341,397 344,649 348,584 Avg Gas Usage (MCF/Cust) 70.8 64.6 68.3 70.6 Gas Sales BCf 23.9 22.0 23.5 24.6
* FY 2018 Actual results are unaudited
ANNUAL GAS CUSTOMER GROWTH RATES
FY
Historical Budget
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$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2016 2017 2018 AB 2018* 2019 Retail Electric Revenue Distribution Gas Revenue Wholesale Electric Revenue Non-Operating Revenue
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SOURCES OF REVENUE
$ in millions
FY
$2,514.7 $2,494.1 $2,624.4 $2,661.5 Fiscal Year 2016 2017 2018 AB 2018* 2019 Retail Electric Revenue $2,098.1 $2,138.8 $2,274.8 $2,221.6 $2,263.9 Distribution Gas Revenue 174.4 168.5 210.3 179.8 188.0 Wholesale Electric Revenue 223.4 166.9 214.1 198.9 186.3 Non-Operating Revenue 18.8 19.9 21.4 24.1 23.3 Total Sources Revenues $2,514.7 $2,494.1 $2,720.6 $2,624.4 $2,661.5
* FY 2018 Actual results are unaudited
$2,720.6 Historical Budget
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$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2016 2017 2018 AB 2018* 2019 Operating Expenses Debt Requirements from Revenue City Payment R&R 6% of Revenue R&R Remaining Deposit
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USES OF REVENUE
FY
Includes CPS/STP O&M and Fuel /Regulatory items
$ in millions
Fiscal Year 2016 2017 2018 AB 2018* 2019 Operating Expenses $1,484.7 $1,489.7 $1,718.2 $1,587.9 $1,626.0 Debt Requirements from Revenue 379.8 395.1 406.0 397.7 421.5 City Payment 320.5 324.5 350.6 338.4 345.9 R&R 6% of Revenue 150.9 149.6 163.2 157.5 159.7 R&R Remaining Deposit 178.8 135.2 82.6 142.9 108.4 Total Revenues = Costs $2,514.7 $2,494.1 $2,720.6 $2,624.4 $2,661.5
* FY 2018 Actual results are unaudited
$2,514.7 $2,494.1 $2,720.6 $2,624.4 $2,661.5
Total Uses are projected to increase $37.1M, or 1.41%. Additional increases in
- perating
expenses will be offset by lower R&R.
Historical Budget
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$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 2016 2017 2018 AB 2018* 2019
Electric Fuel Expense Distribution Gas Regulatory/Other Non Fuel O&M
Fiscal Year 2016 2017 2018 AB 2018* 2019 Non Fuel O&M $570.7 $598.9 $620.2 $581.0 $617.2 Electric Fuel Expense 770.0 741.3 899.9 837.6 829.9 Distribution Gas 75.5 72.8 106.0 83.0 85.0 Regulatory/Other 68.5 76.8 92.1 86.3 93.9 Total $1,484.7 $1,489.7 $1,718.2 $1,587.9 $1,626.0
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OPERATING & MAINTENANCE (O&M) EXPENSES
FY
$ in millions
Management remains keenly focused on operating cost control.
$1,484.7 $1,489.7 $1,718.2 $1,626.0
* FY 2018 Actual results are unaudited
Historical Budget $1,587.9
The increase in O&M expenses is spread throughout the categories.
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$0 $100 $200 $300 $400 $500 $600 $700 $800 2016 2017 2018 AB 2018* 2019
Financial & Other Security & Safety Office Legal & Administrative Office Customer Engagement Office EIT Operations Office
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CAPITAL PLAN
FY
$ in millions
* FY 2018 Actual results are unaudited
Fiscal Year 2016 2017 2018 AB 2018* 2019 Customer Engagement Office $5.5 $6.8 $13.2 $12.6 $18.5 Operations Office $492.4 $537.4 $538.4 $469.5 $530.0 Distribution & Transmission
260.8 307.0 286.7 284.5 294.9
Power Generation
139.1 113.0 140.9 80.7 100.0
Gas, CDP & ESMO
92.5 117.3 110.7 104.3 89.6
JBSA
45.5
EIT 78.5 48.5 66.4 35.3 45.1 Legal & Administrative Office 13.9 45.7 54.6 20.7 71.2 Security & Safety Office 24.0 19.9 13.3 21.2 18.6 Financial & Other 1.6 2.1 14.2
- 1.3
5.1 CPS Energy Total (Excluding AFUDC) $615.9 $660.4 $700.0 $558.0 $688.4
$615.9 $660.4 $558.0 $688.4 Historical Budget $700.0
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44.6% 49.5% 68.4% 62.8% 50.6% 55.4% 50.5% 31.6% 37.2% 49.4% $0 $100 $200 $300 $400 $500 $600 $700 $800 2016 2017 2018 AB 2018* 2019 Funded with Debt Funded with Cash and CIAC
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CAPITAL FINANCING PLAN
FY
Over time balanced Debt & Cash Funding for the capital program is essential for achieving the goal of reducing the Debt to Capitalization ratio below 60%. $ in millions
(Excluding AFUDC) Fiscal Year 2016 2017 2018 AB 2018* 2019 Funded with Debt $274.8 $326.9 $478.8 $350.4 $348.1 Funded with Cash and CIAC $341.1 $333.5 $221.2 $207.6 $340.3 Gross Construction Total $615.9 $660.4 $700.0 $558.0 $688.4
* FY 2018 Actual results are unaudited
Historical Budget $615.9 $660.4 $558.0 $688.4 $700.0
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Budget
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KEY FINANCIAL METRICS
Management’s approved budget in FY 2018 was outperformed as a result of strong
- stewardship. The same diligent effort will be made in FY 2019.
Fiscal Year 2016 2017 2018 AB 2018* 2019 Adjusted Debt Service Coverage (> = 1.5 target) 1.87 1.72 1.61 1.76 1.64 Days Cash on Hand (> = 150 Days) 203 197 172 211 199 Debt / Capitalization (< = 60%) 63.7% 62.2% 62.8% 61.8% 62.2%
* FY 2018 Actual results are unaudited
Historical
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REQUEST FOR APPROVAL
The FY 2019 year proposed budget will support our People First focus that will benefit our community and meet our commitments, including:
- Top tier safety, reliability, & environmental performance
- Investment in customer facing functions and security
- Meeting customer growth while continuing Infrastructure Modernization Projects
Maintaining and strengthening key financial metrics will remain an important focus for management during FY 2019. Requesting Board Approval of Capital & Non-Fuel O&M Budget for Fiscal Year 2019.
($ in millions)
FY 2019
Capital $688.4 Total Non-Fuel O&M $617.2
Total Uses of Revenue
$2,661.5
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GLOSSARY OF TERMS
AFUDC (Allowance for Funds Used During Construction): A cost accounting procedure whereby interest on the debt used to finance construction is added to the cost of the asset being constructed. Also referred to as capitalized interest. Capital Asset: An asset with a life of more than one year that is not bought and sold in the ordinary course of business. CIAC: CIAC stands for Contributions in Aid of Construction and is a funding source for the capital program. Days Cash on Hand: An estimate of the number of days of operating expenses that a company could pay with its current cash available. Debt Service Coverage Ratio: The amount of revenues available to meet annual interest and principal payments
- n debt.
Depreciation: The amount allocated during the period to expense the cost of acquiring a capital asset over the useful life of the asset. GASB (Governmental Accounting Standards Board): The authoritative standard-setting body for accounting and financial reporting for governmental entities in the United States. GASB Statement No. 68: An accounting pronouncement issued by the Governmental Accounting Standards Board (“GASB”) that provides revised regulatory requirements for accounting for pension expense and obligations. O&M: Operating and Maintenance expenses. AB: Approved Budget.
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MAJOR INITATIVES
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