2022 KUB Annual Report

ANNUAL REPORT 2022

From The President & CEO

Knoxville Utilities Board was first created with community service centered at its core. Since 1939, we have ensured the communities we serve have access to quality, essential services, beginning with electricity and water. At the community’s request, we added natural gas and wastewater to our host of services. Now the digital age has fashioned a new challenge – high speed internet in every home – and we are ready to meet the challenge. This Annual Report marks KUB’s first year as a five-utility provider. And in seven years, more than 215,000 customers will have access to lightning fast KUB Fiber.

As we build out our Fiber system, we have not lost sight of the work on our existing systems. Our Century II infrastructure maintenance program is stronger than ever. We continue to modernize our systems through new technologies and infrastructure replacement/rehabilitation. Century II maintenance assures our community of safe and reliable utilities for generations to come.

And there are more firsts. We are doubling down on our commitment to environmental stewardship and social responsibility. You can learn more about this in our first ever Environment, Social, & Governance Report.

It’s an exciting time for us and for our customers. As we move forward into this new era of KUB, we have modernized our look with a new KUB logo – one that speaks to the company we were, and continue to be, but also looks ahead to where we are going. As always, we are proud to serve this community and can’t wait to see where the change takes us.

Gabriel J. Bolas II, KUB President & CEO

Environment, Social, & Governance Reporting

KUB published its first Environment, Social, and Governance Report in Fiscal Year 2022 to provide stakeholders with an overview of its sustainability progress and a look at its aspirations for the future. This includes KUB’s commitments to renewable energy, further adoption of alternative fuels within its fleet, and a more intentional Diversity, Equity, and Inclusion initiatives. As outlined throughout the ESG Report, KUB works to improve its social impact within the company and throughout the community to ensure customer needs are at the forefront of KUB business decisions.

Environment

• Supporting the development of renewable energy and providing customers access to renewable energy programs

• Preparing for a clean and resilient energy grid compatible with distributed energy resources, smart technologies, and electric vehicles (EV)

• Paving the road to EV adoption through partnerships and charging infrastructure investments

• Ensuring sustainable operations that prioritize efficiency, reduce emissions, protect our rivers, streams, and natural habitats, promote air quality, and reduce waste

• Helping customers conserve energy and save money

Social

• Engaging stakeholders and participating in the community

• Building partnerships and programs, which promote economic empowerment

• Addressing energy burden for our customers and ensuring equitable access to services

• Developing intentional programs and policies to promote Diversity, Equity, and Inclusion

• Ensuring the safety and well-being of KUB customers and employees

Governance

• Ensuring community needs are at the forefront of KUB business decisions

• Maintaining a financial balance between KUB utility infrastructure operations and its commitment to sustainability and the community

• Operating ethically as a provider of essential public services

• Ensuring the integrity and reliability of our utility systems

Electric Division

With more than 215,000 customers in its 688-square-mile service territory, KUB’s Electric Division is its largest. KUB works to maintain and improve its electric system reliability through innovative technologies and its Century II infrastructure maintenance program. KUB met its FY 22 reliability goals, with the average customer experiencing 1.45 occurrences of power interruption and the average customer outage duration lasting 1.89 hours. Through the use of approximately 100 fault location, isolation, and service restoration (FLISR) devices, KUB has saved more than 7.75 million minutes of service interruption since FY 18. The deployment of KUB’s fiber network means that number will increase exponentially, as KUB deploys approximately 1,200 FLISR devices in the next six years.

As part of Century II, 1,354 poles, 6.58 miles of transmission line, and 6.43 miles of underground cable were replaced in FY 22. KUB’s substation modernization project is 72% complete. Modernization includes upgrades for 16 existing substations, increased capacity in three substations, three new distribution substations, and a new infeed substation.

Additionally, KUB works to ensure reliability through proper vegetation management. KUB trims trees and other vegetation on a five-year cycle, and in FY 22, KUB invested $12.7 million to trim along 1,024 miles of electric lines and remove 2,393 hazardous trees.

Fiber Division

In FY 21, KUB received approval from its Board of Commissioners and Knoxville City Council to establish a fiber division and provide broadband services to customers within its electric service territory. Throughout FY 22, KUB Fiber became a reality. Phase One of construction began in FY 22, with 70 miles of fiber and four fiber huts added throughout KUB service territory. At the end of KUB’s seven-year fiber buildout, KUB will have 5,100 miles of fiber and 20 huts.

In FY 22, KUB announced plans to install 300 miles of fiber in the initial stages of the buildout and increase the pace to peak at 800 miles per year. Each year, an average of 30,000 customers will be eligible for KUB Fiber service with all customers within KUB’s existing electric service territory eligible by FY 29.

KUB Fiber will allow customers to subscribe to fiber internet starting at 1 gigabit upload and download speeds, the first service of its kind in the Knoxville area. KUB will also offer faster speeds up to 10 gigabits, television packages, and telephone services.

Funding for KUB Fiber uses a balanced approach utilizing rates and debt, which includes an up-front $35 million loan from the Electric Division to be paid back over eight years.

Natural Gas Division

KUB is proud to provide its 297-square-mile natural gas service territory with a safe and reliable energy source. KUB’s Natural Gas Division is made up of 91% polyethylene pipe with plans to replace the remaining low-pressure steel pipe as part of the Century II infrastructure maintenance program.

System resiliency and safety are at the forefront of KUB’s work on its natural gas system. In addition to Century II replacement projects, maintenance programs include proactive safety surveys and inspection of 21,000 valves on a five-year cycle.

Natural gas expansion efforts continued in FY 22, as KUB added 1,379 customers and 30 miles of distribution main to its system. Through its Connect to Comfort growth initiative, KUB offers natural gas appliance rebates and water heater installation and financing options as part of the EasyConnect program. KUB’s public compressed natural gas (CNG) fueling station serves KUB’s fleet as well as public and commercial vehicles. As of 2021, station utilization was over 16 times what it was in 2017.

Water Division

KUB serves 82,110 customers throughout its 188-square-mile service territory with high-quality water. KUB takes in over 30 million gallons of water from the Tennessee River each day and treats it at the Mark B. Whitaker (MBW) Water Treatment Plant. KUB’s water lab team performs more than 100,000 tests for more than 150 contaminants at KUB’s state-certified Water Quality Lab. Details about KUB’s water quality can be found in the annual Water Quality Report published here

Through KUB’s Century II infrastructure maintenance and replacement program, KUB ensures its distribution system maintains efficiency and reliability for generations to come. In FY 22, 4.2 miles of galvanized pipe and more than 5.65 miles of cast iron/cement pipe were replaced on KUB’s system. KUB also maintains 8,500 hydrants on a three-year inspection cycle and 20,000 water valves on a five-year inspection cycle. Critical valves are inspected annually. KUB’s Mark B. Whitaker Water Treatment Plant is currently undergoing filtration upgrades as part of the Water Supply Master Plan. This construction project – the largest in KUB history –will provide a parallel treatment train with 38 million gallons per day (MGD) of capacity to MBW.

Wastewater Division

KUB takes in and treats 36.76 million gallons of wastewater each day from its 249-squaremile service territory. In FY 22, after nearly two decades of historic improvements to its wastewater system, KUB completed its final project under a consent decree put in place by the Environmental Protection Agency (EPA). The consent decree increased the pace of work KUB began when it acquired the wastewater system and ultimately led to the completion of 134 collection system projects and major plant upgrade projects at Kuwahee and Fourth Creek wastewater treatment plants. In total, the consent decree included $655 million of improvements.

Infrastructure maintenance continues beyond the consent decree, as part of KUB’s Century II program. In FY 22, 8.91 miles of pipe were rehabilitated or replaced and progress was made to update two pump stations, increasing daily capacity by 8 million gallons as KUB continues to reduce sanitary sewer overflows (SSOs) on its system.

Additionally, KUB’s inspection and cleaning investments continue to improve as technology advances. Video pipe inspections, manhole inspections, smoke testing, and blockage abatement allow KUB to reduce overflows through prevention.

Award-Winning Service

KUB’s utility systems are consistently recognized nationally by groups including the American Public Power Association, American Public Gas Association, and the National Association of Clean Water Agencies for excellent operations and exceeding standards.

KUB has also been recognized regularly for its continued commitment to sustainable operations across its systems and commitment to the community. Most recently, KUB was designated a Smart Energy Provider by APPA, received APGA’s inaugural Excellence in Environmental Stewardship Award, TVA’s EnergyRight North Star Award, and the awards listed below.

• Governor’s Environmental Stewardship Award

U.S. Environmental Protection Agency (EPA) ENERGY STAR certification

• AMWA Sustainable Water Utility Management Award

TVA EnergyRight Top Performers

• APGA Excellence in Environmental Sustainability

The Association of Metropolitan Water Agencies (AMWA) Sustainable Water Utility Management Award

• The American Water Works Association (AWWA) Award of Excellence in Distribution System Operations

Diamond level American Public Power Association Reliable Public Power Provider (RP3), with a perfect 100-point score

• American Public Gas Association’s System Operational Achievement Recognition (SOAR) Program

Utility of the Future Today Recognition from the National Association of Clean Water Agencies, the Water Environment Federation, the Water Environment Research Foundation, and WateReuse

TVA EnergyRight North Star Award for efforts to reduce low-income energy burden in underserved areas and Top Performer Awards for the following programs: Home Energy Workshops, Home Uplift, Do-It-Yourself Home Energy Assessments, and Home Energy Evaluations.

• American Public Power Association Smart Energy Provider designation

American Public Power Association Excellence in Public Power Communications Award

• Recognition by the 100 Best Fleets in the Americas Program and NAFA Fleet Management Association’s Green Fleet Awards

American Public Gas Association