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HomeMy WebLinkAboutmin light comm 101507 Mansfield Municipal Electric Departm~.tt;,!'^" 'I Minutes of Light Commissioners Meeting ,j, 2/ October 15, 2007 " ~,. '" . t-r" . '~t' / i/ f:'f) " i'?/ /~ /j Present: Chairman David McCarter; Vice Chairman George Dentino;d~jssioner Lou Amoruso; Commissioner Sandra Levine; Director Gary Babin; Staff Accountant Ken Thomson; Engineer Ann Langille; Engineer Chris Cox; Line Foreman Gary" D' Ambra; Financial Assistant Jacqueline Lee and Town Manager John D' Agostino Light Commissioner Meeting The meeting was called to order at 7:30 PM followed by the Pledge of Allegiance. Motion: To approve the minutes of September 17, 2007 (Amoruso/Levine) Passes 4/0 Director Babin told the Board that the Mansfield Electric Assistance Program item which was listed on the agenda would be deferred until next month as the Director of Social Services, Gale Farrugia, was unable to attend this evening's meeting. Director Babin also said the executive session originally planned for this evening would have to be deferred as it had not been properly posted. Financial Results for August 2007 - Director Babin reported that MMED's net operating income year-to-date through August is $671,444. He noted that the expense of the Beliveau settlement of $1,665,385 was incurred during the month of August and is reflected in the miscellaneous credit to surplus section of the Profit and Loss Statement. He also said that MMED's operating cash position through August 2007 was $2,144,788, up from $1,278,554 for the same period in FY07. Energy sales year-to-date in FY08 were down 3.6% from the same period in FY07. Vice Chairman Dentino questioned the operating cash position and wondered if the increase was a spike. Director Babin answered that he believed that cash reserves were previously inadequate and needed to be built up. He indicated that MMED had begun to pay for capital expenditures from depreciation to achieve this. Director Babin then explained that two transactions are made monthly with the depreciation fund. First, a monthly transfer from operating cash into the Depreciation Fund is made to represent MMED's depreciation expense for the month. This is then followed by the second transaction where a transfer of money is made from the Depreciation Fund back into the Operating Cash account in the exact amount of the cost of capital additions which are performed during the month. Vice Chairman Dentino then questioned the MMWEC Reserve Trust Account which had decreased by 44%. MMED Staff Accountant Ken Thomson said that $1.6 million had been transferred from the MMWEC Reserve Trust Account to pay the Beliveau settlement. Vice Chairman Dentino inquired about the $463,562 change under AIR Light & Power Customers. Director Babin said that he will look into it. Vice Chairman Dentino asked about the $720,298 change under Accounts Payable and the $184,795 change under Miscellaneous Current! Accrued Liabilities. Director Babin and Staff Accountant Thomson believed the Accounts Payable difference was the result of a timing issue, that perhaps one bill that had not yet been paid. Director Babin stated that overall MMED was in good financial shape. He told the Board that they need to start thinking about replacing the Dominion contract, which will expire in December 2008. He explained that replacing that contract involves dealing in the commodities market. The nature of that market is that when bids are solicited for the price of power, those prices are good for that day only and are off the table at the end of the day. He said that the process usually requires emergency meetings by the Board for approvals and that he plans on starting to educate the Board on this process. Cost of Service and Retail Rate Presentation - Mayhew Seavey presented to the Board the three retail rate designs which they had requested on July 15. These are rates that would produce a 5%, a 6% and a 7% rate of return. He explained that the rate design criteria given by the Board included a residential rate of return of between 0% and 1 % and a municipal rate with a 5% rate of return. He also explained that unbundling the bills will make accounting for Purchased Power costs much clearer. Commissioner Levine commented that the greatest number of customers is the residential class while the greatest dollar amount is the commercial class. Mr. Seavey said that residential customers are in fact the largest number of customers by class and that the revenue produced is about one- third of the total revenue, He also noted that the large commercial class provides over half of the total revenue while the small commercial class produces only 3% of the total revenue. Commissioner Levine questioned what the plans were for the net income from that revenue stream. Director Babin answered that some of the net income would be put back into the plant through capital additions while the remainder would go back into surplus to build operating cash to pay expenses. Commissioner Amoruso noted that the rate of increase for the low-tension class of customers jumps out as it looks like they're going to take the biggest hit. He stated that they would be paying more than Mass Electric rates and wondered how this situation could be improved. Mr. Seavey said that this was an apples to oranges comparison. He explained that Mass Electric's price was their fall price and that it is not a true long-term comparison. Commissioner Amoruso asked if these low-tension customers would be the Mom and Pop stores. Mr. Seavey answered that those types of customers would typically be classified as commercial customers. Vice Chairman Dentino commented that there was a 10% reduction on the municipal rate while all others increased. He said that this was indirectly taking tax revenue and putting it through the meters. He also believed that MMED should not be comparing themselves to Mass Electric and was concerned that MMED rates are becoming closer to those of Mass Electric. Director Babin noted that when taking into account overall customer satisfaction, you can't disregard system reliability and customer service. He believes that we sometimes focus so much on the numbers that we lose sight of the value the utility provides in other ways. Vice Chairman Dentino pointed out that MMED is made up of the same personnel that it has always had and said he wouldn't accept using them as an excuse for raising the rates. Commissioner Levine said that she had attended a conference about lowering municipal energy use. She wondered if it would hurt the rate or hurt the income that could be gained. She also wondered what would be the incentive to lower costs. Mr. Seavey said he believes the Board had reacted properly by lowering the municipal rate because it was producing excess income. He also noted that if the municipal rate were high and the usage dropped this would produce a loss of income. Director Babin said that coincidentally, later that wee~ there was going to be an energy audit done at some of the municipal buildings in town. MMED staff members have also met with personnel from the School Department to discuss how they can reduce their energy costs. Chairman McCarter then asked the Board if they intended to send Mr. Seavey back to the drawing board. Vice Chairman Dentino said he was thinking of a 5% rate of return while lowering the municipal rate by 7.5% instead of 10%. Mr. Seavey said that the overall rate of return would then be 5.1 % (vs. 5%). Commissioner Amoruso said he was originally thinking the 7% rate of return was appropriate but was now considering 6% because of the impact he saw with the low-tension customers. He said he's thinking that small rate increases would allow accrual of money in anticipation of the new substation. He believes he would be satisfied with the 6% rate of return as proposed. Motion: To approve a 6% rate of return as proposed and to publish a public hearing notice (Levine/Amoruso) Passes 3/1 (Dentino against) Chairman McCarter suggested having the public hearing at the next Light Commissioners meeting. Commissioner Levine wondered if it should be separate from the Light Commissioners meeting. Chairman McCarter then suggested Thursday, November 15 for the public hearing. Vice Chairman Dentino asked if it would be possible to show the residents some examples of typical bills as he believed that's what they would be interested in seeing. Motion: To hold a public rate hearing on Thursday, November 15, 2007 at 7:00 PM and to instruct Director Babin to post this meeting on the MMED web site (Levine/Amoruso) Passes 4/0 Chairman McCarter suggested Monday, November 19 as the next Light Commissioners meeting for routine business, which was agreed upon. Request for 100% Green Power Portfolio - Director Babin stated that one of MMED's largest customers has inquired about obtaining 100% green power. This was in response to one of their customers who has a requirement that vendors providing services to them adopt environmentally sound practices. Director Babin said this has become an issue of competitive advantage for this customer since competing vendors have adopted and advertise green power portfolios for their business. He informed the Board that he had engaged the assistance of Mr. Seavey on this matter and that they believe MMED is in a position to accommodate this customer and could possibly extend this type of power option to other customers as well. This would be contingent on those customers' willingness to pay a premium for this option. Chairman McCarter asked Director Babin if this business was urgent. He reminded him that there were other people who had been patiently waiting for their turn to conduct their business. Director Babin said it could be deferred but thought that since Mr. Seavey was in attendance he hoped to at least discuss the issue. Mr. Seavey told the Board that the utility doesn't need to do anything in terms of procurement to provide this service. A choice can be offered to provide either 50% or 100% renewable energy. He explained that this gives customers a choice of buying renewable energy through their own electric department. Chairman McCarter then reiterated that the subject of green power would need to be put on next month's agenda in order to allow those who had been waiting a chance to conduct their business. Old and New Business Director Babin announced the MMED Annual Safety Luncheon for the Council on Aging will be held on Friday, October 26. Commissioner Levine told Director Babin she will be calling him to set up a meeting with him. Chairman McCarter asked Director Babin if he had contacted anyone from MMWEC. Director Babin answered he had spoken with the General Manager who said he would be willing to address the Board whenever they wanted. Director Babin said he was considering setting that up for the month of December. Motion: To adjourn the Light Commissioners meeting at 9:10 (Amoruso/Levine) Passes 5/0 Respectfully submitted: Jacqueline Lee 11/19/07 C_I'-I)- ~,~\\0~ Signature of Cler ~ Date of Approval