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HomeMy WebLinkAboutmin light comm 121007 I \' r !-,U Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting December 10, 2007 ,~ f"..'.....~ "'--, r'r--, ' \\,cr.b--I :':~110: I 3 ;'1 1"._ I} I , I, '-', '," ,', ' ".'. -.. 'r s ", ,'.' ". .... (\ r \ ,- i Present: Chairman David McCarter; Vice Chairman George Dentino; Com~issloner' tC)U Amoruso; Commissioner Sandra Levine; Clerk Ann Baldwin; Director Gary Babin; Engineer Ann Langille; Engineer Chris Cox; Financial Assistant Jacqueline Lee and Town Manager John D' Agostino Light Commissioners Meeting The meeting was called to order at 7:08 PM followed by the Pledge of Allegiance. Motion: To approve the minutes of the November 15, 2007 Public Rate Hearing (AmorusolBaldwin) Passes 5/0 Motion: To approve the minutes of November 19,2007 (AmorusolBaldwin) Passes 4/0/1 (Levine abstained) Vice Chairman Dentino asked if MMED staff had found any evidence of a previous PLM power supply study that he had asked about in prior meetings. Engineer Cox said that he had found a copy of an old study and had sent copies to the Board member's homes just after the last meeting. Vice Chairman Dentino said he would look at home for it. Vice Chairman Dentino also questioned Director Babin as to whether adding on to Gilbert Street Substation, rather than building the new East Mansfield substation, was being considered. Director Babin said that it is an option being looked at since all options need to be considered as part of the due diligence. Motion: To approve but not release the minutes of the November 19, 2007 Executive Session (AmorusolBaldwin) Passes 4/0/1 (Levine abstained) Vice Chairman Dentino believes the Board is getting further behind in releasing executive session minutes as both the Light Commissioners and as Selectmen. Chairman McCarter said that periodically they ask Attorney Mangiaratti to go through them. Director Babin said he is not aware of any Executive Session minutes that are outstanding for the Light Department. Financial Results for October 2007- Director Babin reported that the net operating income year-to-date through October was $832,211. He stated that the Calpine Rate Stabilization Fund balance as of the end of October was $3,512,847. Energy sales for October 2007 were up 15.2% from October 2006. There was also a 2% increase in year-to-date energy sales. Commissioner Amoruso questioned the decrease to surplus and wondered if this was due to the lawsuits. Director Babin answered that yes, in fact, it was driven by the litigation settlement. Vice Chairman Dentino questioned "Other Power Supply Expense - CalpinelDominion" under Purchased Power on the Profit & Loss statement. Director Babin explained that it was the actual cost of power paid to Dominion. Vice Chairman Dentino asked whether "Total Power Costs" were based on the fiscal year or calendar year. Director Babin answered that they were based on the fiscal year. Vice Chairman Dentino noted that, unfortunately, there are still eight months to go. He also noted that although "Total Power Costs" have gone down, MMED fails to change the PPCA. He asked Director Babin to explain why last year's Transmission costs were $348,961 while this year to date they are $638,835. Director Babin stated that there were three items that would explain the difference. First, there was a regional network service credit in FY06 for approximately $50,000 that MMED did not get in FY08. Secondly, there was approximately a $90,000 increase in Transmission Expense. Thirdly, there was an accounting reversal done during the FY06 audit by the auditors that increased costs in FY08 by $128,000. Vice Chairman Dentino questioned why "Operations Expense" under "Distribution Expense" went down while "Operations Payroll - Expense" increased. He said he did not believe the number of employees increased. Director Babin said he would check into that. He thought it might possibly be overtime. Vice Chairman Dentino asked why "Other Income Jobbing - Etc." was at $9,572 last year and FY08 YTD actual is $(528,866). Director Babin explained that Mansfield Crossing was the biggest job that MMED undertook in 2008. Vice Chairman Dentino also questioned the "Miscellaneous Credit to Surplus". Director Babin stated that the driving force behind that were the litigation expenses. Vice Chairman Dentino pointed out that the "Accumulated Provision for Rate Refunds" went from $4,793,624 to $5,063,861 and wondered where the $4.8 million had gone. Director Babin said that it was an offsetting entry for the reserve trust. Town Manager D' Agostino questioned why Municipal Sales prior year actual was $232,886 and FY08 YTD actual is $301,953. Director Babin was unsure but thought it could represent a reclassification of accounts. He will look into that. Chairman McCarter wondered ifMMED would be in a reasonably sound financial position at the end of this fiscal year. Director Babin answered yes, that there would be a $1.7 million projected net income for the year. Meeting with Glenn Steiger, General Manager of MMWEC- Director Babin had asked Mr. Steiger to come to this evening's Board meeting because the Board had previously discussed terminating MMED's membership with MMWEC. Director Babin thought it would be useful to have Mr. Steiger come in and address the Board's concerns. Mr. Steiger began with an overview of where MMWEC stands today, as the organization has changed dramatically over the last few years. He said that what was once NEPOOL has become the ISO (Independent System Operators). He also explained that MMWEC has everything under one roof, including financial investments and energy trading. He pointed out that MMWEC is recognized in the financial markets. Mr. Steiger explained that due to an increase in costs over the last few years, more funding has had to be put into MMWEC, which should have been done prior to that. He stated that MMED should now see a decline in their bills. MMWEC has litigated to bring costs down for its members by challenging Reliability Must Run status for generators. Mr. Steiger pointed out that this is one reason why it's beneficial to have a membership in MMWEC even though there has been a cost. Mr. Steiger then reviewed the services that MMWEC provides to MMED. He said that the basic service they provide is being the representative between MMED and the ISO. Commissioner Levine inquired as to who makes the rules. Mr. Steiger answered that there are committees who make the decisions, not MMWEC. He explained that MMWEC would raise an issue to the committees who bring it to the ISO who makes the decision. Mr. Steiger stated that MMWEC operates in a commodity market. He said they are expecting a reduction in their costs, as they project that approximately 15-20% of employees will take a voluntary retirement package that will be offered to them shortly. He also noted that the vacated positions would not be arbitrarily filled. Vice Chairman Dentino commented that he is not a big believer in the commodities market and wondered how good MMWEC is at bidding. He noted that he thinks MMED should be compared to other municipals only, not investor owned utilities, and that he would like to see Mansfield in a better position. He stated that realistically, the Board needs to decide whether to stay with MMWEC or not. Vice Chairman Dentino told Mr. Steiger that so far, this was the only presentation the Board had seen, so they had no alternative at this point. He then asked Mr. Steiger for a sheet that would explain all the abbreviations used in the handout the Board had received. Commissioner Levine asked if the capacity was going up. Mr. Steiger answered yes, and that they have already seen the impact of that. Commissioner Levine commented that as communities drop out of MMWEC, those remaining have to absorb the cost. She wondered why, if MMWEC is not providing services for these communities any longer, would the costs increase. Mr. Steiger said that in 2007 they knew they would be losing members in 2008 and tried to reduce their costs. Commissioner Levine also wondered where MMWEC might cut costs to keep others from leaving. Mr. Steiger answered that they are bound by the services agreement and that they do more than supply power. He said that they would probably come back to the Board and ask them what services they want, as the agreement can be amended. This would be for everyone, not just Mansfield. Commissioner Amoruso noted that there are currently sixty employees at MMWEC. Mr. Steiger said they have had a maximum of sixty-eight employees. He added that five communities have served notice to terminate their membership, which means the number of members could go from twenty-four to nineteen. He reminded the Board that giving notice doesn't mean they'll definitely leave. Commissioner Amoruso questioned the management of MMWEC and how well it can be controlled. He wondered how extensively are the member's words taken. Mr. Steiger responded that they do listen and members are taken seriously. He also said that Director Babin did a good job previously of explaining the MMED Board's concerns. Commissioner Amoruso asked what kind of success MMWEC has had with FERC. Mr. Steiger said they are leading New England in litigating with FERC. He said there's been an increase in the dues but that they have gotten certain things changed at FERC. Commissioner Amoruso had concerns about how decisions are being made and what is being done to communicate with the members and get feedback from them. Mr. Steiger answered that at least once a month they speak directly to the members, get feedback from them, and then get back to them to explain the steps taken. Clerk Baldwin asked how many more members MMWEC is going to lose for 2008. Mr. Steiger answered that if they all who have served notice follow through, they will be down to nineteen members. Clerk Baldwin then asked Mr. Steiger why he thinks they are leaving and what is being done to retain them. He said there are issues they don't agree with, for example, one member does not agree with hedging power supply costs. He said there are also political issues. He believes that some of those who are pulling out are attempting to let MMWEC know how high costs have gotten. Chairman McCarter asked what is the mark-up on a bill from MMWEC. Mr. Steiger said that they have direct labor costs, in addition to all non-specific overhead. Town Manager D' Agostino said that Mr. Steiger had indicated that MMWEC has partnered with municipals on litigation that resulted in large refunds. He wondered if MMWEC will pay for these issues going forward with the Canal issue. Mr. Steiger responded that going forward, only those who will benefit will pay. Town Manager D' Agostino asked what was the timeframe and options in regards to withdrawing MMED's membership. Mr. Steiger explained that the letter giving notice to MMWEC would be a one-year window and that MMED would be responsible during that year for the costs of what is provided by the service agreement. Town Manager D' Agostino inquired as to the actual reduction in operating expenses. Mr. Steiger said there is about a $1 million reduction in operating expenses for CY08 that will be offset by a $700,000 loss in membership dollars in 2008. Town Manager D' Agostino then asked if MMED pulled out how would those costs be allocated. Mr. Steiger answered that the increase in costs over the last few years was not because other municipals pulled out and he believes MMWEC has been pretty consistent at 25 members. Director Babin wondered if Mr. Steiger was at all concerned about an intellectual drain of institutional knowledge with the early retirements and severance package. Mr. Steiger answered yes, there will possibly be two or three areas where that will happen. Mr. Steiger then departed from the meeting and Chairman McCarter asked the Board what their position was now that they had heard from Mr. Steiger. Vice Chairman Dentino said that he wanted a list of the services provided by MMWEC along with a list of who could replace these services. Director Babin said that he was working on that and had heard back from one possible vendor whose cost would be approximately $100,000. He said he was still waiting on another source. Vice Chairman Dentino said he would need a comparison, line item by line item. Chairman McCarter asked Director Babin if the Board could have that in writing for next month's meeting. Commissioner Amoruso believed there are risks and benefits to sending the letter now. Director Babin recommended sending the letter now and putting MMWEC on notice. He suggested asking them what they are doing to downsize and perform core services. Vice Chairman Dentino believed it would be more beneficial to be the sixth to withdraw rather than tenth. He thought the sooner the better to send the letter. Motion: To send a letter of notification to MMWEC of MMED's intention to withdraw their membership from the organization (AmorusolDentino) Passes 5/0 Clerk Baldwin left the meeting at 9:30pm. FY08 Operating Budget request - Director Babin notified the Board that the current budget approved by the Board only extends through the end of December. This was because of the rate study MMED had undertaken, which resulted in new rates to be implemented January 1. Director Babin told the Board that MMED projects a net income of $803,832 for the six- month period of January 2008 to June 2008. There is a projected net income of $1,730,160 for FY08. Motion: To approve the FY08 Operating Budget for the period of January 2008 to June 2008 as proposed by Director Babin (AmorusolLevine) Passes 4/0 Power Supply Planning for Expiration of Dominion Contract - Director Babin informed the Board that the process of replacing the energy supplied by Dominion is something they need to start thinking about now. The current contract with Dominion expires in December 2008. Director Babin plans on starting the process of educating the Board so that they can make an informed decision. Director Babin then wanted to discuss a proposed meeting schedule. It was agreed to meet on both Wednesday, January 16 and Wednesday, January 23. Vice Chairman Dentino asked if it would be at all possible to receive their Board packets any sooner than the Friday prior to the meeting so that he would not have to spend his weekend reviewing the material. He hoped it would be possible to have them on the Thursday before the meeting. Old and New Business Commissioner Levine said that she would be rescheduling her meeting with Director Babin. Motion: To adjourn the Light Commissioners meeting at 9:45 (Amoruso) Passes 4/0 Respectfully submitted: Jacqueline Lee 1/30/08 ~l ~d '. Cl.t\xy ~.. __ l0u0 Signature of Clerk ~ Date of Approval