Board IN Business Plan Exec Summary - web

Island Network Business Plan
Executive Summary
A Brief History of Broadband in San Juan County
Design and
construction start
Average Broadband Speed
in North America
Interim Rates
Grid Control expansion
funding approved
Island Network
provides broadband to
government, schools,
libraries,…
Board broadband directive
to use equity and rates
Fiber to OPALCO
Eastsound office
CenturyLink submarine
cable blowout
17.6 Mbps, 37% CAGR
OPALCO starts broadband
feasibility study
OPALCO installs first
fiber optic cables
Average DSL Speed
in San Juan County
EDC report
Critical Needs Task
Force report
2000
2005
2010
2015
2020
Board Directive: Broadband Directive
November 21, 2013 Board Meeting!
Broadband Direction:!
The Board agreed that the Broadband Vision is to extend OPALCO’s fiber optic and communications infrastructure in support of electric system and for the benefit of our
membership by allowing data service providers access to our infrastructure. Our intent is to pay for incremental growth in communication infrastructure through user fees and
leases service agreements. It was agreed that the Direction is:!
A. OPALCO is to isolate its communication infrastructure for the electric system. This means that there will be some capital improvement projects on OPALCO's communication
system to isolate OPALCO's capacity/SCADA systems.!
B. OPALCO will be taking an “infrastructure provider” approach for providing members with access to OPALCO’s communication infrastructure. The main areas for potential
deployment include, but are not limited to, fiber optic backhaul support for ISPs (e.g. CenturyLink, Rock Island, Orcas Online, Island Network, etc.), wireless infrastructure and
direct fiber optic connection (FTTP).!
C. New infrastructure will be built to RUS standards (pre‐engineered, environmental issues addressed, post project inspection and sign off).!
D. Future deployment will be based on paying back the incremental cost of capital infrastructure through lease agreement s. The lease rates are not to include backbone
allocations.!
E. Lease arrangements are to be non‐exclusive in nature with OPALCO retaining ownership of this infrastructure.!
F. Staff will continue “open” dialogue communications with our membership while honoring confidentiality agreements.!
Directives:!
A. CenturyLink: Authorize staff to negotiate lease agreements with CenturyLink based on the above!
parameters.!
B. Spectrum: Purchase of the 700 MHz licensed spectrum as a backbone infrastructure component based on the terms and conditions outlined in the initial term sheet, with
language modified regarding maximum interference thresholds.!
C. System Design: Authorize staff to move forward with backbone communication infrastructure design, with expansion capability for backhaul fiber optic, wireless and FTTP
deployment.!
D. Island Network; Position Island Network as an ISP and lift the moratorium once designs and rate structures are completed and approved by the Board.!
E. Broadband Manager: Approve a new Broadband Manager staffing position and have staff initiate the hiring process.!
Motion made by Hall, seconded by Lett: !
“Our Island communities are suffering economic damage and safety issues caused directly by inadequate phone and internet infrastructure. Therefore, OPALCO shall accelerate
expansion of our local member‐owned robust, reliable high‐speed data infrastructure to provide internet, phone, and emergency communications services to our members.
Deployment will be supported and funded by OPALCO assets, including equity and rates.” After a lengthy and thorough discussion, the motion carried unanimously.
Grid Control Network
•
Energy Source Trends!
OPALCO Member Total Energy Requirements
•
BPA
Future demand will be met
through well managed
energy eﬃciency and
distributed local and
regional energy
sources
•
•
•
•
•
•
Increasing diversity - wind, solar, micro-hydro, tidal!
Local and regional!
High and low quality!
Firm and intermittent!
Predictable and unpredictable!
Efficient and inefficient!
Low and high cost!
!
•
Revenue Source Trends!
•
•
•
Less energy needed…!
• in a warming region!
• more efficient use!
• less waste!
Energy sales are leveling off, margins are falling!
Revenue will come from a diverse portfolio!
• Energy!
• Broadband!
• Energy Storage,…!
!
•
Broadband!
•
•
•
•
1900
1950
2000
2050
2100
Essential to managing diverse energy portfolio!
Essential to community economic wellbeing!
Broadband revenues will be the engine of growth
in the 21st century!
Beyond initial buildout, broadband margins will
rise, leading to a shift in member capital credit
sources – from energy, toward broadband
OPALCO Grid
Notes!
Substations Controls distribution of energy throughout grid and member homes and businesses
14,000 meters
Automatic
Meters
•••
Automatic
Meters
•••
Automatic
Meters
•••
Automatic
Meters
DLD Down Line Devices - interfaces OPALCO fiber to grid control elements including voltage regulators, switches, system diagnostics, etc.
Supervisory Control and
Data Acquisition
(SCADA)
DLD 1
60 down-line
devices
•••
16 substations
DLD 60
•••
Substation 1
Substation 16
OPALCO Crew Communications
OPALCO Grid Control Backbone
Internet
Fiber
LTE
Wi-Fi
ROIP
•
Expanding grid control down-line devices (voltage regulators, switches, system diagnostics) from 23 to 60
•
Upgraded automatic meters from daily to hourly reads to help members who use SmartHub for energy use insight
•
Adding LTE wireless to improve crew communications in dead zones
•
Exploring Radio over IP to improve crew and First Responder communications
Steadily Improving Reliability
4
Occurrences
SAIFI (Average Outage Occurrence per Service)
SAIDI (Average Outage Duration per Service)
CAIDI (Average Outage Duration per Occurrence)
•
Under-Grounding Program Improves Grid Reliability!
•
•
70+% reduction of outage occurrences!
20+% reduction of outage duration per service!
!
•
Hours or Occurrences
3
When an outage occurs!
•
•
30+% increase of outage duration per occurrence!
Because underground failures are more difficult to repair than above ground!
!
2
Duration
•
Comparables: SAIFI!
! OPALCO:! 2.1 occurrences!
!
NRECA:! 1.3!
✔
!
CA:! 2.1!
!
•
Comparables: SAIDI!
! OPALCO:! 1.6 hours!
✔
1
!
!
NRECA:! 2.1!
CA:! 2.4!
!
Duration per Occurrence
0
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13 1/14 4/14 7/14
•
Comparables: CAIDI!
! OPALCO:! 0.6 hours per occurrence!
✔
!
!
NRECA:! 1.6!
CA:! 1.1
“Where member owned infrastructure
can serve members, it should.”
OPALCO Grid
Notes!
Substations Controls distribution of energy throughout • Effective March 2015 - opening grid
grid and member homes and businesses
14,000 meters
Automatic
Automatic
Automatic
Automatic
control
backbone
up
to
homes
and
business
•••
•••
•••
Meters
Meters
Meters
Meters
•
DLD Down
Line ISPs
Devices
- interfaces
OPALCO Working
with
too
(Roche
Harbor Resort, etc.)
•
Pilot
•
Opened up ferry terminal wi-fi to members for free access with SmartHub subscription
•
70 down-line
Exploring improving dead zone
communications with first 16
responders,
substations using LTE wireless and Radio Over IP (ROIP)
fiber to grid control elements including voltage regulators,
switches,for
system testing
LTE wireless
homes
diagnostics, etc.
Supervisory Control and
Data Acquisition
(SCADA)
DLD 1
and businesses in areas with poor broadband options
devices
•••
DLD 70
•••
Substation 1
Substation 16
OPALCO Crew Communications
OPALCO Grid Control Backbone
Community
Internet
LTE
Fiber
Schools
Homes
Businesses
Remote
Homes and
Businesses
ISPs
Wi-Fi
Ferry
Terminals
ROIP
Police
OPALCOcares
Libraries
Government
Island Network
Businesses
Homes
Fire/Rescue
Notes!
LTE An advanced wireless voice, data and cell phone network - Long Term Evolution
ROIP Radio Over Internet Protocol - improves first responder communications in “dark” areas
ISPs Internet Service Providers such as Rock Island, Orcas Online, etc.
County
OPALCO Grid
14,000 meters
Notes!
Substations Controls distribution of energy throughout grid and member homes and businesses
Automatic
Meters
•••
Automatic
Meters
•••
Automatic
Meters
•••
Automatic
Meters
DLD Down Line Devices - interfaces OPALCO fiber to grid control elements including voltage regulators, switches, system diagnostics, etc.
Supervisory Control and
Data Acquisition
(SCADA)
DLD 1
60 down-line
devices
•••
16 substations
DLD 70
•••
Substation 1
Substation 16
OPALCO Crew Communications
OPALCO Grid Control Backbone
Community
Internet
LTE
Fiber
Schools
Homes
Businesses
Remote
Homes and
Businesses
ISPs
Wi-Fi
Ferry
Terminals
ROIP
Police
OPALCOcares
Libraries
Government
Island Network
Businesses
Homes
Fire/Rescue
Notes!
LTE An advanced wireless voice, data and cell phone network, Long Term Evolution
ROIP Radio Over Internet Protocol - improves first responder communications in “dark” areas
ISPs Internet Service Providers such as Rock Island, Orcas Online, etc.
County
•
•
Strong Interest
•
1300 Requests for Service
•
Countywide
•
Significant demand for fiber
Home Owner Association (HOA)
and individual requests
Island Network Member Growth - 2014
IN Subscribers & Scheduled
80
1,200
IN Subscribers
Installation Scheduled
RFQ (right scale)
60
•
Request for Quote (RFQ)!
•
•
•
960
PROJECTED
720
IN moratorium lifted
40
480
20
Request For Quote (RFQ)
100
1300 requests for quote!
95% residential!
Currently adding about 10 to 15 RFQ’s per
day!
!
•
Scheduled for Installation!
•
16 accounts!
!
!
•
•
4! commercial!
12! residential!
Currently adding about 5 accounts per month!
About 250 accounts within HOAs ready to be
installed, pending board action!
!
•
IN Customers!
•
51 accounts!
!
!
!
240
•
•
6! ISPs!
38! commercial!
7! residential!
90 locations!
Currently adding about 3 accounts per month!
!
0
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
0
!
•
834 members within 200’ of fiber
Island Network Business Plan
•
IN Business Outline
•
Advantage of Grid Control
•
Market Overview
•
•
Member profiles
•
Competition
•
Cooperation
Product Overview
Service levels and pricing
•
PAL heat map
s
e
n
i
s
u
B
•
Operation – Description of Support of Customers and Net Monitoring
•
Deployment – Community Based/Incentive Structure/Product Offering
•
Schedule
•
Structure - Self Sufficient/Wholly Owned Subsidiary/etc.
•
Finances – Summary of Capital Funding/Summary Expenses/Revenue
•
•
n
a
l
P
s
•
w
e
i
v
r
e
v
O
Income statement out to 2020
Coop Justification for Investment
•
Coop Finances and Risk from Investment
•
Low-income services
Island Network Business Plan Overview
Vision
Establish subsidiary that becomes financially viable and sustainable
within 3 to 5 years. Minimize risk exposure by capping short-term
investment and tracking budget to actual break-even metrics.!
Initial Subscriber Target Market
Rather than deploying infrastructure to 100% of service territory,
concentrate on dense neighborhoods (e.g. HOAs) in 25% to 35% of our
service area, in close proximity to OPALCO’s grid control infrastructure
as it expands. !
Break-Even
Given a market of 8,000 potential subscribers, it will take 3 to 5 years to
connect 2,000 to 3,000.!
Connection Incentives
Subscription Incentive
•
•
•
•
$1,500 to cover initial construction cost
Repaid in monthly service charge
Available for
• Direct
• Seasonal
• Non-Active service categories
$4.5 million for first 3,000 connections
!
Discount Incentive
•
•
Member fully funds their construction upfront
$20 monthly discount on service charge
IN Direct Product Offering
10Mbps
25Mbps
50Mbps
100Mbps
Data/VoIP
$95
$105
$145
$195
Data ONLY
$80
$90
$130
$180
Data/VoIP Seasonal*
$45
$45
$45
$45
Data/VoIP
$75
$85
$125
$175
Data ONLY
$60
$70
$110
$160
Data/VoIP Seasonal*
$25
$25
$25
$25
Non-Active w/ Sub Incentive
$25
$25
$25
$25
Discount Incentive
Subscription
Incentive
Service Category
Growth Strategy Example
Co-Mo Connect
•
Similar territory to SJI, in MO
•
Rural Electric Cooperative
•
32,000 member meters
•
Neighborhood HOA approach
•
Neighborhood priority by take rate
•
Pilot 32% take rate, growing to 55+%
•
Low churn
•
64% added phone service
•
4,000 miles overhead fiber ~$2/ft
•
130 miles underground ~$7/ft, 6” to
24” deep
•
Competition: CenturyLink and AT&T,
with minimal competitive response
HOA Targets: Phase 1
Area
Homes
Goal
FTTP
LTE
Start
2 Sites
Nov 2014
Cattle Point, Cape SJ
194
70
Yes 50/6
Doe Bay,
Eagle Lake
60
50
Yes
1 Site
Nov 2014
South Lopez
86
50
Yes
1 Sites
Nov 2014
Deer Harbor
120
75
Yes
2 Sites
Jan 2015
SJI West
59
30
Yes
2 Sites
Jan 2015
Deployment: Phase 2
Widespread demand and broad
engagement county wide
!
30+ HOAs and Urban Cores
Areas that are moving quickly on
engineering and costs estimating:
•
•
•
•
•
SJI - Mineral Point/Highlands
SJI - Greater Roche Harbor Area
LOZ - Greater Lopez Village/Whiskey Hill
ORC - Victorian Valley
ORC - Channel Rd West/Pole Pass
Target HOA’s
HOA
#
HOA
#
Boundary Bay Water Project
65
North Beach
134
Bright Water
11
Orcas Highlands
97
Brown Island
47
Pole Pass
68
Cattle Point
167
Portland Fair
103
Cayou Valley
21
RH Resort
38
Rosario
184
SJ mineral Point/ Highlands
62
South Lopez
86
Spring Point
97
Cessna Loop
Channel Road West
Crane Island
Eagle Lake
393
52
50
42
Eliza Rd
27
Sunset Acres
Foster Point/Shag Rock
56
Sunset Ranch Water Assoc
View Haven
Vusario
Whiskey Hill
White Point
Yacht Haven
Gear Lane
30
Golf Course/ ES Shores
81
Grindstone Harbor
22
Harney Park
30
Mount Dallas
59
24
42
42
15
56
163
142
•
Expressed interest
•
Will have cost estimate to
all HOA’s on this list by end
of 2014
•
32 HOAs (2,506 members)
•
834 members within 200’ of
fiber
Low/Fixed Income Broadband PAL Program
$
$
Low Income
Power
Members
PAL Funding
Pool
Member Bill
Roundup
Approval
$
Community
Broadband
Fundraising
Approval
PAL
Application
Independent
Volunteer
Council
Review
Application
Broadband
PAL Funding
Pool
Low Income
Broadband
Members
Investigating Low Income Service Package
e.g. 3 Mbps internet + Phone
Source!
PAL
National School Lunch Program
member request
BPP
Broadband !
PAL!
Program
Financing
2014-15
2016
2017
2018
Sub-Incentive
$1,500,000
$1,500,000
$1,500,000
$0
Working Capital
$1,400,000
$600,000
$0
$0
$1,000,000
$0
$0
$2,900,000
$3,100,000
$1,500,000
$0
IN Backbone
Expansion
Total
Finances
Consolidated OPALCO Financials
Creating such a stand-alone entity will require the support
of OPALCO through cash, equity, and rates.!
•
$1.5m through year end 2014 for entity formation,
staffing, equipment/material procurement, capital
infrastructure for subscriber connections (200).!
•
In order to level Tier and equity targets, we estimate
each member will pay approximately $3 per month,
for 24 months (to be further reviewed at budget time).
Grants
FCC’s Connect America Fund Phase II
•
Investigating opportunities
•
OPALCO was among over 1,000 organizations that
submitted an Expression of Interest to participate in trials
•
FCC’s current stance is incumbent has priority
•
Working with NRECA to get FCC to allow co-ops to apply
•
It’s a long shot, but we are working it.
OPALCO Capital Projects Plan
Managing a Growing Portfolio of Services
2014 - 2020
Capital Projects: Managing an Expanding Portfolio of Services
Industry Key Ratio Trend Analysis (KRTA)
2013 Rural Electric Cooperative Financial Condition
Median system’s equity as a percentage of assets: 43%
Median times interest earned ratio (TIER): 2.62
!
Source: National Rural Utilities Cooperative Finance Corporation
Capital Projects: Managing an Expanding Portfolio of Services
65%
60%
55%
50%
•
Submarine
Cable
Equity Level
45%
40%
35%
OPALCO without IN Forecast
OPALCO with IN Forecast
30%
25%
20%
15%
10%
5%
0%
2014
2015
2016
2017
2018
2019
2020
Grid Control Backbone with IN Expansion!
•
While initially increasing debt, within 3
years it becomes cash-flow positive, with
compelling margins!
•
Those margins will quickly rival and
surpass declining energy margins
OPALCO Debt Per Meter Connection
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
1956
(inflation adjusted)
1966
1976
1986
1996
2006
2016
Steadily Improving Reliability
4
Occurrences
SAIFI (Average Outage Occurrence per Service)
SAIDI (Average Outage Duration per Service)
CAIDI (Average Outage Duration per Occurrence)
•
Under-Grounding Program Improves Grid Reliability!
•
•
70+% reduction of outage occurrences!
20+% reduction of outage duration per service!
!
•
Hours or Occurrences
3
When an outage occurs!
•
•
30+% increase of outage duration per occurrence!
Because underground failures are more difficult to repair than above ground!
!
2
Duration
•
Comparables: SAIFI!
! OPALCO:! 2.1 occurrences!
!
NRECA:! 1.3!
✔
!
CA:! 2.1!
!
•
Comparables: SAIDI!
! OPALCO:! 1.6 hours!
✔
1
!
!
NRECA:! 2.1!
CA:! 2.4!
!
Duration per Occurrence
0
1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13 1/14 4/14 7/14
•
Comparables: CAIDI!
! OPALCO:! 0.6 hours per occurrence!
✔
!
!
NRECA:! 1.6!
CA:! 1.1
Capital Projects
$16,000,000
•
$14,000,000
IN
$12,000,000
Objectives!
•
Maintain URD replacement!
•
Ensure transmission submarine cable
redundancy!
•
Shift overhead to underground
conversions on as needed basis!
•
Reliability driven!
•
Improved Grid Control Backbone
allows for much better monitoring and
proactive dispatch of problems
Grid Control Network
$10,000,000
Submarine Cables
$8,000,000
$6,000,000
$4,000,000
All Other
$2,000,000
Distribution - all other
Underground Distribution (URD)
$0
2015
2016
2017
2018
2019
2020
Thank You!

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