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HomeMy WebLinkAboutmin of light comm 03032008 Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting March 3, 2008 Pl=Tl="IVFO ~ .~ "__ 0'.1 1._ " ,_ " H)fe; OFF/era ",hJ. t. z01m 1'1Mi 2 b P 2: 112 Present: Chairman David McCarter; Vice Chairman George Dentino; CQ~~si6~f~l ~~-," Amoruso; Commissioner Sandra Levine; Clerk Ann Baldwin; Director Gary Babin; Engfueet i S Ann Langille; Engineer Chris Cox; Staff Accountant Ken Thomson; Line Foreman Gary D' Ambra; Financial Assistant Jacqueline Lee; Financial Assistant Nancy Olson 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 January 23, 2008 Light Commissioners meeting (Amoruso/Baldwin) Passes 4/0 (Levine not yet present) Motion: To approve the minutes of January 30, 2008 Light Commissioners meeting (Amoruso/Baldwin) Passes 4/0 (Levine not yet present) Commissioner Levine joined the meeting at 7:12. Mansfield High School Robotics Program- Members of the Mansfield High School Robotics team attended the meeting along with their faculty advisor, Jim Carver-Brown. Mr. Carver-Brown explained that in prior years, the team had brought their equipment to the Board meeting for a demonstration but that last weekend they had been in a competition so did not have their robot with them this evening. He then gave some background information on the team, saying that there were 19 students on the team and 4 were graduating seniors. Currently, over 25% of the team is comprised of women. He said that this year the team had been able to engage another member of the faculty at Mansfield High School to work with them. Teamwork and problem solving is what he hopes students will be learning and Mr. Carver-Brown said he is very proud of the students as their level of work quality is improving. Mr. Carver-Brown said that the team competed last weekend in Manchester, NH. He said that unfortunately, the team did not qualify for the nationals. He informed the Board that because the team was not going to the nationals, the only funding they would request would be $1,000. This would be used for the purpose of renting a van to take students to other local events. The students who were in attendance were John Gildea, Alexandra Birch, Stephen Harland and Tony Delviscovo. They showed a video presentation of their competition in Manchester, NH. Commissioner Levine inquired as to what the requirements were for being a member of the team. Mr. Carver-Brown said that he looks at a student's attendance record at school as the program runs from September to April. Unlike sports, they must also be passing all their classes. Commissioner Amoruso wanted to clarify as to whether the request for funding was for $5,000, as Director Babin's memorandum stated. Mr. Carver-Brown reiterated that the team did not make the Nationals this year so they would only be in need of $1,000 for transportation to local events. He did say that he expects to return to the Board in the fall when he has a better idea of next year's costs. He explained that his goal is to be in more than one competition a year. Vice Chairman Dentino believed that the $5,000 had already been put into the PILOT for this expenditure in the currently approved Operating Budget. Director Babin said that MMED has not earmarked $5,000 for Robotics as part of its $480,000 PILOT and this would be a supplemental appropriation. Mr. Carver-Brown told the Board that their last $5,000 donation was for the 2006-2007 school year, not 2007-2008. He reiterated that they don't need $5,000 for this school year, only $1,000. Town Manager D' Agostino told the Board that they had not taken a vote to give the Robotics team $5,000 in the current school year. Vice Chairman Dentino believed that the Board did have this discussion and did take a vote. Motion: That the Mansfield Municipal Electric Department contribute $5,000 from unappropriated earned surplus in the form of a Payment-in-Lieu-of- Taxes, to be recorded as a below the line expense, to the Town of Mansfield for the purpose of donating this money to the Mansfield High School Robotics Program. (Amoruso/Baldwin) Passes 5/0 Vice Chairman Dentino suggested that the Board consult the two FINCOM members that were present, Jim Lazzara and Jack Goldberg, on this issue. Chairman McCarter said that he respected their opinion but felt the Board could make the decision themselves. FY09 Operating Budget - MMED Staff Accountant Thomson joined Director Babin in reviewing the proposed FY09 Operating Budget. Director Babin said that the Total Operating Expenses for the FY09 budget are $32,010,674, with a target rate of return of5.16%. There is an anticipated increase in cost of power of 16%. This is based on the assumptions that sales will increase by 1.9% and controllable expenses, which includes all of the department's labor, will increase by 4%. It is also based on the assumptions that there will be an 80% overhead mark-up on labor and a 17% overhead mark-up on materials. Director Babin stated that this is the first budget based on unbundled rates. He reiterated that the Dominion power contract will be ending in December. He also said that MMED predicts the generation charge will increase by an average of 1.1 cents for CY09 because ofthat. Director Babin said that transmission expenses are projected to increase by 2% and A&G expenses will increase by 1.8%. Distribution expenses will increase by 6%, which is driven by more labor costs in the operating budget. Director Babin stated that this is because MMED was doing less capital and billable work than in FY08, using Mansfield Crossing as an example of a large billable job in FY08. Director Babin explained that the labor overhead rate in the budget is 80% and that sick pay, vacation pay, jury duty pay, workers compensation, life insurance, medical, retirement, etc. are among the components that contribute to the calculation of the rate. Director Babin explained that the stores expense of 17% is a material handling charge. Director Babin told the Board that the MMED staff did meet with the FINCOM previously to review the FY09 operating budget. Chairman McCarter thanked the FINCOM members for their time. He said that even though it is not in the Charter, he appreciates them taking on the responsibility. He then asked them if they had any issues with the. budget or had any recommendations. Director Babin clarified that only the Board has the authorization to approve the budget. He stated that the FINCOM doesn't vote on MMED's budget and cannot make a formal recommendation on it. Jim Lazzara said that the FINCOM questioned the change in the rate of return in FY08 from 1.4% to 5.62%. Director Babin explained that the Board had previously rejected the budget with the 1.4% return and that's why a rate study was performed. Mr. Lazzara said that the FINCOM did realize that this year there was less capital work, which meant higher labor costs for the operating budget. He said that he feels more comfortable now than the way it was presented last year although he believes the rate of return should be closer to 6%. He thinks 6% should be the ultimate goal. Vice Chairman Dentino stated that rates were raised both before the unbundling because the PPCA was raised and again after the unbundling so that MMED could back into the number that they wanted of 5.62%. He believes that the rate of return is the driving force and MMED backs into it. Director Babin stated that MMED did not raise the PPCA in FY08 and in fact lowered the PPCA by a penny for August and September to flow the Canal refund directly to MMED customers in those months. He reiterated that the PPCA was 5 cents in July, was lowered to 4 cents in August and September and then went back to 5 cents for the rest of the year until the unbundled rates went into effect in January. Vice Chairman Dentino asked the cost per kilowatt hour in the Dominion contract. Director Babin answered that it varies by month and explained that the price in July is higher than in autumn. He stated there would be a total of 24 prices over the 12 month period; one on-peak price and one off-peak price for each of the twelve months. Vice Chairman Dentino asked what the average of the 24 prices would be. Director Babin said he didn't have that information. Vice Chairman Dentino said he would like a copy of the Dominion contract and he would figure it out. Commissioner Amoruso said that he would like to see MMED build up some sort of financial cushion for future projects. He feels profitability is going in the wrong direction. Director Babin responded by saying that MMED is building up the Depreciation Fund in anticipation of that work. Mr. Lazzara said that the FINCOM questioned the customer early payment discount. Mr. Goldberg told the Board that MMED has a long standing policy of a 20% discount if the bill is paid within 15 days. He believes this is very generous and that MMED could increase their bottom line by lowering the discount. Commissioner Amoruso clarified that the discount had been increased from 10% to 20% only since the unbundling of the bills in January. The 20% discount is actually on a smaller portion of the bill, which kept it equivalent to the 10% discount that was given before the unbundling of the bills. Commissioner Levine questioned the budget billing and the discount and wondered if that made the cash flow less. Director Babin explained that the discount is automatically built in to a budget customer's bill. He believes that many customers take advantage of the discount. Vice Chairman Dentino wondered if a customer doesn't make their budget payment on time, what happens in regards to the discount. He said he doubted that the customer got rebilled. Director Babin said that he did not want to get into the specifics of budget billing at this time since he was unaware of the particulars but would get back to the Board on it. Commissioner Amoruso asked if the legal fees for FY09 came under the Administrative and General <A&G) Expenses. Director Babin said they did. Staff Accountant Thomson added that the legal fees budgeted for FY09 are $250,000. Commissioner Levine wondered, if going forward, MMED would again consider using Dominion or would MMED be done with them. Director Babin said that Dominion being a future power supplier was a possibility. Commissioner Levine inquired as to whether the line crew received hazard pay for climbing the poles. Director Babin answered that compensation for that duty is built in as part of their base rate. He also explained that if they get called out they are compensated for that and that they also receive stand-by pay to be available. Commissioner Levine asked if a member of the line crew would be expected to go out in a storm and climb a pole. Director Babin answered yes. Vice Chairman Dentino asked if the legal expenses of $250,000 for FY09 would be paid from the MMWEC Reserve Trust Fund. Director Babin answered no, only the Beliveau settlement was paid from the MMWEC Reserve Trust Fund. Payment of the legal fees would come from the operating budget. Vice Chairman Dentino said he had expected a more detailed summary of the operating budget. He would like to see what the Board sees for the Enterprise accounts which is a line by line personnel cost showing FY09 and FY08 budgeted and FY07 actual. Director Babin responded that the staff does prepare a schedule like that but it's more for internal use. He explained that they prepare the information for the Board on a macro level so as not to bog the Board members down. Chairman McCarter said he agreed with Vice Chairman Dentino and wanted to see more detail. He said that you couldn't tell anything by looking at the summary the Board currently had and that it didn't give sufficient detail. Director Babin said that the responsibility to determine what is in the budget presentation for the Board is his but he would provide more information to the Board if they would like. Vice Chairman Dentino stated that they were not asking for anything that they don't ask for from everyone on the municipal side. He said that he meant no disrespect to the FINCOM but pointed out that they have no authority. Director Babin again offered to give the Board an additionallevel of detail. Commissioner Amoruso suggested to Director Babin that next time, perhaps he could include more comparisons. He said that while reviewing the FY09 operating budget, he did refer back to some of the previous budgets he had from before. Vice Chairman Dentino wondered why the Board should vote on the budget that evening and then receive the information they were looking for after the fact. He asked when the next Light Commissioners meeting was scheduled. Director Babin said that he had suggested March 24. Town Manager D' Agostino questioned whether the Board would choose not to vote this budget based on the information they were looking for, such as employee salaries. He pointed out that the request for the information was not done in a timely manner and suggested the request should have been made much sooner. Vice Chairman Dentino stated that he was just saying the Board did not get the detail they wanted. Chairman McCarter questioned whether this meant they were no longer going through a budget process. Town Manager D' Agostino answered that there is a budget process and that at the Boards direction, that process involves the FINCOM. Director Babin suggested that the Board take a look at page 13 of the budget. He believed it would give them much of the information they were looking for with respect to individual employees. Town Manager D' Agostino pointed out, however, that it didn't give a total salary for each individual employee. Town Manager D' Agostino also pointed out that the Board was given the information ahead of time and wondered why they hadn't spoken up sooner. Chairman McCarter questioned what it was they were supposed to do between the time the packet of information comes to their door and the night of the meeting. Clerk Baldwin said she felt they should have spoken up sooner since they had the budget for some time before the meeting. Director Babin stated that the information he gave was based on the direction from the Board as it was presented in prior years' budgets. Vice Chairman Dentino pointed out that only 2 out of the current 5 members were on the Board at that time. Director Babin also pointed out that the Board directed the MMED staff to work with the FINCOM to review the budget on a detailed basis, acting on behalf of the Board to look at the detailed information, which the staff had done for the last several years. Chairman McCarter said that the budget they were given tells them nothing. Director Babin apologized, saying he would provide more information in hopes that it will be what the Board is looking for. Chairman McCarter said that it would be too late for him. Motion: To approve the MMED FY09 Operating Budget in the amount of $32,010,674. (BaldwinlLevine) Passes 3/111 (Dentino againstlMcCarter abstains) Town Manager D' Agostino stated that Director Babin would provide the information to the Board that they were requesting. Financial Results for January 2008- Director Babin reported that the net operating income year-to-date through December was $414,065 and that the net income year-to-date is negative $881,060. The remaining balance in the Calpine Rate Stabilization Fund as of the end of January was $2,728,221. Director Babin said that MMED's operating cash position through January 2008 was $2,362,297. The depreciation fund balance is $3,417,400. Staff Accountant Thomson followed up on a question that had been asked at the last meeting. Commissioner Amoruso had asked why the December 2007 Commercial kWh sold was 44.1 % greater than December 2006. Staff Accountant Thomson explained that the energy use of two low-tension customers, Kohl's and Trellborg, had been incorrectly included in that number. After removing these two accounts from the commercial category, the 44.1 % falls to 10.3%, which is in line. Director Babin added that the revenue from those two customers was correctly credited to the proper customer category, however. This correction also results in a 16.6% increase in energy use for the low-tension category that can be directly traced to the customers at Mansfield Crossing. Vice Chairman Dentino questioned the 40% change in customers account expenses from 2007 to 2008. Staff Accountant Thomson said it was due to the nature of how bad debt expense was booked and that the amount of the January write-off accounts for the difference. Vice Chairman Dentino asked how much of the bad debt is from customers who have been given assistance by Social Services. Director Babin said that he was not positive but believed that currently $83,000 is owed by protected accounts. Vice Chairman Dentino questioned whether they could be shut-off from November to March. Director Babin answered that MMED could not shut off residential customers during that time, only commercial. Vice Chairman Dentino said he wanted to know if there was a correlation between those who get assistance and those who end up as a non-payment account. He wondered if it was tracked at all, as he noted it is a lot of debt. Director Babin said he would look into it. Vice Chairman Dentino questioned transmission expense and wondered if the difference was the result of the unbundling of the bills. Staff Accountant Thomson said that the transmission expense for FY08 was abnormally high and that the FY07 amount was abnormally low because of an accrual done by the auditors and a regional network service credit. Director Babin indicated that this issue had been covered at prior Board meetings. Commissioner Amoruso questioned the decrease to surplus of 62% and wondered if MMED would be able to catch up. Staff Accountant Thomson said no, he did not anticipate being able to do that because that reduction was due to the litigation settlement. Chairman McCarter asked for an overall picture. Director Babin said that MMED had not earned as much net income as he would've liked. He explained that is why the rate study was done and the rates had been unbundled. Power Supply Information-Director Babin told the Board that the Dominion power supply contract runs out in December 2008. Mayhew Seavey of PLM will be at the next Light Commissioners meeting to make recommendations on a successor contract. Director Babin stressed there is a timing issue involved and that he will be asking the Board to move forward in sufficient time to allow the MMED staff some flexibility in entering a new contract. Director Babin then distributed a handout to the Board regarding the market outlook to show the commodities nature of the business. He said that the recommendation for the next contract will be a heat rate contract that will lock in energy pricing based on the price of gas. He pointed out that there is a lot of volatility in the gas market and urged the Board that they may want to lock in early (before summer) to create flexibility. He said he will be sending something in detail to each of the Board members before the next meeting. Chairman McCarter asked when they could expect to get this information. Director Babin responded by saying he would like the Board to authorize the staff to go forward with the process at the next meeting. He said they really don't want to wait until November to take care of this. He proposed Light Commissioners meetings for March 24 and April 14. Chairman McCarter questioned whether the Board would be expected to vote on a power supply contract as quickly as April 14. Director Babin said it depends on what happens at the March 24 meeting. He also said that at the April 14 meeting, the staff will present the PLM feasibility study for the East Mansfield Substation. Clerk Baldwin left the meeting at 9: 1 O. Old and New Business Commissioner Levine stated that the School Committee had projected a 20% increase in the cost of electricity for their budget. She asked Director Babin if he knew why that was. Director Babin said that MMED had developed a new municipal rate that actually lowered municipal rates by almost 10% so he was unsure why they were projecting a 20% increase. He also noted he had forwarded a copy of the new rate to the Schools so they could calculate their projected budget. Town Manager D' Agostino explained that the schools utilities were under funded in FY08 in order to balance their budget. There was a question as to whether the Town had helped out with that but Town Manager D' Agostino clarified that they had picked up the difference on special education, not the utilities. Commissioner Levine said that she had heard about new legislation that would allow a tax on the telecommunication pole. She asked Director Babin if he knew anything about it but he said he did not. Town Manager D' Agostino said that it would raise revenue for the communities. Vice Chairman Dentino asked about the PLM feasibility study for the East Mansfield Substation and where MMED stood with the choice of sites. Director Babin answered that the study evaluates all five sites but that he didn't want to get into the specifics of that study at this time since the report will be presented April 14. Vice Chairman Dentino told Director Babin that he appreciated how he and Staff Accountant Thomson had returned to each Light Commissioners meeting with the answers to the questions they had been unable to answer at the previous meeting. Director Babin said he was aware that the Selectmen had previously voted to put logos on Town cars. He told them that the Light Department had 2 vehicles this would apply to, one driven by him and the other was a staff car. He assumed that they would want to take the same vote as Light Commissioners since everyone is careful about segregating the Light Commissioners authority from the Selectmen. Chairman McCarter verified that Director Babin only drove his car back and forth to the Light Department and that it was not meant for his personal use. Chairman McCarter then said that their previous vote as Selectmen was sufficient to cover the two Light Department cars. Motion: To adjourn the Light Commissioners meeting at 9:20 (Amoruso) Passes 4/0 Respectfully submitted: Jacqueline Lee 3/24/08 ~p~( Signature of Clerk ~ c...";:;' '" J C lo(' I"l::: ~/:2'tlo~ Date of Approval