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Task 6 - Determine Colton Electric's Risk Exposure <br />Colton Electric's risk exposure is both individual and cumulative. Individual risks can <br />either increase or decrease the cumulative risk associated with an event or events. <br />Unmanaged individual risk can lead to a cumulative risk exposure that may be greater <br />than the sum of individual risk events, while the managing of individual risks can lessen <br />the cumulative overall risk resulting from individual risk events. <br />Risks associated with Colton Electric's largest operating costs (fuel and purchased <br />power) modeled around the forecast of fuel requirements, power purchases and sales, <br />the transmission system, distribution system and overall system reliability and security <br />will be assessed and determined on both an individual and cumulative risk basis. <br />Task 7 — Risk -Related Topics <br />Several aspects of electric utility operations overlap with risk management activities. <br />NCI believes that an assessment that purports to address risk management would be <br />incomplete without addressing these related topics: Fund Reserve Levels, System <br />Vulnerabilities, Disaster Preparedness, Catastrophic Events/Failures, and Asset <br />Management. All will be addressed from a risk management perspective. <br />Recommendations regarding prudent and appropriate fund reserves for contingencies <br />relating to operating and capital needs as well as bond reserves will be addressed from <br />the perspectives of both probability and industry practices. <br />Working with local law enforcement personnel, electric system vulnerabilities will be <br />identified from both a specific threat and perimeter protection perspectives. Mitigation <br />measures and specific security improvements will be proposed. Both Colton Electric's <br />and the City's Disaster Preparedness Plans will be reviewed and recommendations <br />offered. <br />Earthquakes have the potential to cause a catastrophic failure of the electric system. An <br />analysis of how Colton Electric might deal with such an event will be undertaken. The <br />role of how asset management relates to risk management will also be discussed. <br />Task 8 — Risk Policy and Program Development <br />The final report will provide risk policy and program guidelines that are compatible <br />with Colton Electric's operations and that establish methods whereby Colton Electric <br />will be able to identify, measure, document, manage and exercise controls over its risk - <br />related activities. Starting with the City Charter, ordinances and resolutions, existing <br />Colton Electric — Risk Assessment and Management Plan 5 <br />...-..-._- .. <br />--- - <br />