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HomeMy WebLinkAboutmin of light comm 04142008 Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting April 14, 2008 RECEIVED I""; CDLlS 0 F th.L.. nn F ICE zana Jut -2 A q: llb Present: Chairman David McCarter; Vice Chairman George Dentino; Clerk Anv~.I}~~nr"" U) Commissioner Lou Amoruso; Director Gary Babin; Engineer Chris Cox; Engiiieer':',Muf ,!. E T T S Langille; Staff Accountant Ken Thomson; Financial Assistant Elaine Peri; 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 March 24, 2008 Light Commissioners meeting (Amoruso/McCarter) Passes 2/0/1 (Dentino abstained/Baldwin had not yet arrived) Power Supply Contract - Mayhew Seavey from PLM and Ken Barna from Rubin and Rudman addressed the Board regarding a new power supply contract for MMED. Mr. Seavey reminded the Board that at the last meeting they had discussed procuring energy to replace the Dominion contract which MMED currently has in place. The Board had previously discussed a heat rate contract and how it could be used to lock in prices in the future when possibly they'd be lower. The Board had directed MMED staff to pursue this type of contract within specific boundaries. Mr. Seavey began the discussion by describing the contract that MMED executed with Constellation Energy Commodities Group, Inc. Mr. Barna then explained the specifics of the contract. Mr. Barna stated that MMED had issued a RFP written by Mr. Seavey and that the market was used to obtain the most competitive prices for MMED. Mr. Barna also stated that the terms of the new contract with Constellation are better than the Calpine contract MMED previously had. He explained that if the market price at any point in time is higher than the contract price, under certain conditions Constellation not only has to post margin to a bank account but MMED has control of that account. With Calpine the margin was held in escrow where both parties had to agree to any release of monies. Mr. Barna then explained there were four triggers for posting of margin, which is the difference between the contract price and the current market price at that point in time. The first event or trigger is if Constellation loses its investment grade rating. The second is if MMED believes Constellation's credit worthiness has become unsatisfactory. The third trigger is if MMED has knowledge that Constellation is defaulting on other contracts. The fourth trigger is if the margin posted by Constellation is not refreshed within 30 days upon request or if there are any other adverse changes in their financial condition. Mr. Barna stated that with the Calpine bankruptcy, margin was triggered when they lost their investment grade rating. With the Constellation contract, however, MMED gets a secured interest in the money. Also, if Constellation were to go bankrupt, MMED would make a determination of an appropriate amount of damages and receive payment which would make MMED whole. This contract also has a requirement that if Constellation tries to terminate the obligation then the guarantor would be liable. Mr. Barna told the Board that Mr. Seavey would make certain that this contract meets the ISO rules. He also told them that if Constellation did not deliver, there were penalties which get MMED back to the contract pnce. Vice Chairman Dentino questioned whether this contract is really better than the Calpine contract. He believes that, price-wise, MMED will never get another contract for 3.7 cents. Mr. Barna responded that with the Dominion contract, MMED ratepayers did get the benefit of the Calpine contract because ofthe escrow, but now the Dominion contract was coming to an end and needed to be replaced. He added that these contracts are not one-sided but are reciprocal. He believes that the heat rate contract will keep MMED whole. Vice Chairman Dentino said that he does not agree with the justification that the ratepayer was made whole by using funds from the escrow account to make up the difference from the Calpine contract. Mr. Barna stated that Calpine had no obligation to MMED once they declared bankruptcy. Director Babin stated that MMED ratepayers were made whole because they ended up paying the Calpine price after the subsidization with the escrow money. He stated the ratepayers were not adversely affected by Calpine's bankruptcy. Mr. Seavey then reviewed for the Board the Power Contract Risk Management Strategy Policy which he was proposing for MMED. He said that under the contract MMED is locked into a Heat Rate but has flexibility as to when they can lock into a price. He told the Board it is advisable to have a policy in place for the Director and the Manager. Mr. Seavey noted that what he was proposing is based on strategies that are widely used. Commissioner Baldwin then joined the meeting at 8:40. Mr. Seavey said that if the gas price gets lower relative to the historical price that the strategy tracks, the more volume MMED would purchase at that time. He explained there are also time triggers which would lock in 25% of the volume at 3 months out, 6 months out and 9 months out if the price triggers did not kick in. Mr. Seavey then reviewed the implementation procedure. He said that the consultant, which in this case would be he, would monitor the price on a daily basis and would notify Director Babin if action needed to be taken. He then added that if MMED entered into this contract now, 25% of January 2009's volume would get locked in some time this month. Commissioner Amoruso assumed that this information being presented is based on experience, as he said he spent an hour reviewing it and it was still unclear to him. He said he did, however, understand that time is of the essence with the triggers. He pointed out that there must be more than one person involved on both sides, in the event of vacation, etc. Director Babin said that either he or Town Manager D' Agostino is always available. Mr. Seavey said that he was going to suggest adding Town Manager D' Agostino to the contact list as he is not currently on it. Vice Chairman Dentino asked what the prices were for the 5 year fixed contract. He wondered if they would end up actually looking good by next January. Mr. Seavey answered they were approximately .10 cents per kWh. Vice Chairman Dentino asked the cost ofMr. Seavey performing the work associated with the contract. Mr. Seavey said it is approximately $1,500 per month for the other contracts that he is currently managing. Vice Chairman Dentino stated that he is unsure of the Town being involved in the commodities market. He said he is more conservative with the Town's money. Mr. Seavey assured him that this is a fairly conservative strategy. He said it should not be thought of as gambling because it's not about winning, it's about price stability. Constellation is not making any money from the gas price MMED locks in. Chairman McCarter inquired as to what percent of MMED's portfolio this would be. He understood that not everything was riding on this as this is only one part of MMED's portfolio. Mr. Seavey answered that this is less than 20% of the portfolio. Vice Chairman Dentino questioned a statement in the March 24 minutes made by Mr. Seavey regarding a 50% probability of the fixed rate price being higher than if you wait to exercise the heat rate contract. Mr. Seavey explained that with fixed pricing you will never do any better than the price that day but with the heat rate contract you could possibly do better. Mr. Barna added that doing it this way, instead of a five year fixed rate contract, you would reduce fees from consultants which would otherwise need to be paid every month. Motion: To approve the Power Contract Risk Management Strategy as proposed by MMED through their consultants and attorney as provided to the Board effective April 2008 (Amoruso/Baldwin) Passes 3/0/1 (Dentino abstained) East Mansfield Feasibility Study - Engineer Cox joined Director Babin to discuss the study regarding the proposed East Mansfield Substation. Director Babin then introduced Allan Rice from PLM who presented the results of Phase 2 of the feasibility study for the substation. Chairman McCarter questioned whether all the neighbors had been contacted regarding this evening's meeting. Engineer Cox answered that a couple of years ago was the last time a neighborhood meeting was held but that he had notified the abutter who had kept in contact with him since the last meeting. Chairman McCarter commented that if he lived in that neighborhood he wouldn't want to hear about this meeting after the fact. Director Babin urged that the Board listen to the presentation first. Vice Chairman Dentino stated that this meeting should have been advertised to the neighbors that are involved. He believed they were doing them a disservice. Allan Rice from PLM explained that the purpose of this study is to increase the capacity of MMED's system. One approach that is being considered is the expansion of the Gilbert St. Substation. Another possibility is building a new substation in East Mansfield. The first alternative is to build the East Mansfield substation with one transformer. The second alternative would be to install two transformers in East Mansfield, eliminating the need to extend the I WI feeder from Gilbert St. which would be required in the first scenario. The third alternative is to expand the Gilbert St. Substation but there would still be a need for a second substation in East Mansfield in 2019 with one transformer. The fourth alternative is the same as the third but with two transformers at East Mansfield. The fifth alternative is a major expansion of Gilbert St. Substation which would size the transformers at 50% more capacity than those installed under alternatives three and four. Mr. Rice said that there are some significant disadvantages, however, to expanding the Gilbert St. Substation, such as having all infrastructure feeding the entire town concentrated at one location. The Gilbert St. Substation is also not well suited physically or electrically for expansion. The limitations and difficulty of extending circuits from that location to the load areas and the long distance of the cross-town circuits also means lower system voltage and reliability. Mr. Rice reviewed a summary of the costs of each alternative. Alternatives I and 3 have the lowest present worth costs. Alternative 1, however, has significant advantages and is recommended over Alternative 3. Mr. Rice then presented the East Mansfield Substation Siting Analysis. He said there are five potential sites which have been identified that are near the existing transmission right-of-way. Parcel A, located under the transmission lines, is the recommended site. It is owned by National Grid who has indicated this site is available for long-term lease. It has frontage on Bird Road and the transmission line proximity is its biggest advantage. Parcel B is owned by the Town of Mansfield but it is conservation land with restrictions. The Conservation Commission voted against lifting the restrictions so this is the "parcel of last resort". It is, however, still an option. Parcel C also has frontage on Bird Road. It is privately owned and the owner is amenable to allowing MMED to use it but the purchase price is unknown. There is also a possible wetlands issue. Site D is made up of two parcels, the first is owned by the Town of Mansfield and the second parcel is privately owned and the purchase price is unknown. It does have frontage on Maple St. but there are limitations with this site. Parcel E is located on Langley Drive. It is a lot that would have to be sub-divided and wetlands are also a concern. Mr. Rice said that PLM's recommendation to MMED is to construct a new substation in East Mansfield by the year 2010 on Parcel 39-38 on Bird Rd. As part of this recommendation, MMED should supply the substation via a 115kV line extension from Easton which would be constructed on an existing right of way. He also recommends construction of two new 13.8 kV distribution feeders to supply the East Mansfield area. Vice Chairman Dentino said he agreed with the site and the recommendation of the two transformers but he does question service to Mill Street. Mill Street is currently being fed by Gilbert St. Substation and he believes Mill Street is a problem. He also questioned how many neighbors are involved with the recommended site. Mr. Rice answered that there are residential homes on Bird Rd. Vice Chairman Dentino said he would like to see a study showing the type of effect this would have on those residents. Resident Michelle Woods of61 Bird Rd. said her house would be approximately 150 ft. away from the proposed substation. She told the Board that her family purchased the house one week before the last neighborhood meeting. She said there was a representative from the Department of Health at that meeting who explained that an acceptable EMF reading would be 2 and that the reading for her home would be an 8 or a 9. Mrs. Wood said she doesn't understand why another site isn't chosen which doesn't involve children. She also told the Board that at the last neighborhood meeting, the residents were told that they would be given notification of the next meeting, so the suggestion of a vote by the Board for this evening angered her. Vice Chairman Dentino said that he would like a field study done. Director Babin said he wanted to make clear that there's no definitive study linking electric fields to possible health Issues. Resident Jay Zola of 12 Colonial Drive approached the Board with an alternative suggestion. He owns two of the parcels and thinks that he can show dry access to Parcel 39-10 (Site C) which may be helpful and would skew the results which had been presented this evening. He suggested that this should be re-visited and considered as an option. Commissioner Amoruso commented that the MMED staff was looking for a vote tonight but that it's been suggested that the Board doesn't have complete information in regards to Parcel 39-10. He wondered ifMMED should take a look at that. Chairman McCarter said that he was reluctant to move forward since there had been no formal notification to all the neighbors involved. Director Babin then said he would withdraw his recommendation to vote on siting the substation tonight. Vice Chairman Dentino asked Mr. Zola if he could get the remainder of the wetlands flagged. Mr. Zola declined, saying he didn't think it was his responsibility. Chairman McCarter asked what the pleasure of the Board was as he said he was concerned about how this process was being handled. Director Babin said he wanted the Board to know that Mr. Rice's study was complete and that any further work on their part would cost more money. He wanted to make certain the Board was aware of that. Motion: To recommend that MMED pursue an East Mansfield Substation on one of the lots that have been studied upon further review and upon a public hearing (Amoruso/Dentino) Passes 4/0 Vice Chairman Dentino questioned the issue of the two transformers and stated that this would have an effect on which parcel was ultimately chosen. He then offered to walk the proposed sites with Engineer Cox, the Town Conservation Agent and Jay Zola. Financial Statements for February 2008 - Staff Accountant Thomson reported that net operating income year-to-date through December was $522,820 and MMED's operating cash position through February 2008 was $2,777,980. Year-to-date energy sales are now up 4.8% from FY07. MMED's depreciation fund balance stands at $3,510,534. Staff Accountant Thomson stated that February was a good month for MMED. He said that the net income during February was $565,000. Vice Chairman Dentino noted the decrease in Customer Accounts Payroll. Staff Accountant Thomson explained that one employee had been out of work for a couple of months and was not being charged to that account. Vice Chairman Dentino questioned the 1.5% decrease in Administrative-Payrol1/Benefits. Staff Accountant Thomson will look into it. Commissioner Amoruso explained to Director Babin that in the past, MMED staff notified the Board of outages which had occurred since the previous meeting, for their general knowledge. Commissioner Amoruso then asked if Director Babin anticipated achieving its net income target at the end of this fiscal year since the new rates were implemented last quarter. Director Babin explained that MMED had undercollected the Generation Charge for the first three months, which contributed to net income being down, and then adjusted the Generation Charge for the second quarter. He anticipated that MMED would not meet the target. Clerk Baldwin questioned the A&G increase of $180,000. Staff Accountant Thomson stated that half of that was outside legal expenses. The remainder was outside engineering services and increases in the cost of office supplies, telephone expense and GIS services. Proposed ADM Cocoa Interruptible Tariff- Director Babin reported that MMED staff met with ADM in January and will meet with them again April 30 to review this tariff. To implement this, MMED needs to hold a public hearing but since ADM is the only customer involved, it should go smoothly. Director Babin said he'd like to have this tariff implemented on June 1. Vice Chairman Dentino said he would like to attend the meeting with ADM so that he will have a better understanding. Director Babin offered to sit down with Vice Chairman Dentino and give him an explanation of the process. Vice Chairman Dentino will call Director Babin to set up a time. Motion: To support the initiative of adjusting the interruptible rate schedule along the lines provided herein following the final negotiation with ADM (Amoruso/Baldwin) Passes 3/1 (Dentino against) Budget Billing Plan Information- Director Babin reported to the Board that there are 302 customers who take advantage of the Budget Billing Plan. The customer pays the same amount for eleven months and the twelfth month is a true-up of the actual billing and the estimated billing. He said that the issue had been raised as to whether the budget billing customers were guaranteed the discount. Director Babin reported that yes, even if the customer does not pay within 15 days of billing, they have been receiving the discount. In order to avoid this conflict in the future, he was proposing that the budget billing customers be required to go on direct debit or recurring credit card, which will guarantee that the bill will be paid on time. He did say that unfortunately, MMED would lose some budget customers by instituting this policy. Commissioner Amoruso stated that this is supposed to be for the convenience of the customers and that this would dissuade them from participating in the budget billing. He believes it suggests something to each of the customers currently on it and he would not want to see fewer people taking advantage of it. Vice Chairman Dentino commented that there's got to be a way to make the budget billing system work with fairness to both sides. Director Babin said he would get back to the Board about trying to modify the billing system so that the budget billing customer would not receive the discount if their payment was not received on time. He did caution the Board that this would be very labor intensive, however. Old and New Business Vice Chairman Dentino said that when the Board had decided to send MMWEC the letter of intention to withdraw MMED's membership from the organization, they had also requested that Director Babin provide a spreadsheet to the Board. They asked that it show what services MMWEC has been providing, as well as what services and at what cost an alternative source could provide them. Director Babin said that he will track down those services and provide information at or before the next meeting. Vice Chairman Dentino questioned whether Director Babin had been notified about limiting or canceling out-of-state travel which has been eliminated on the Town side due to budget constraints. Director Babin said that he had discussed the subject with Town Manager D' Agostino. Vice Chairman Dentino inquired as to whether it had been implemented at the Light Department. Director Babin said he already had made out-of-state commitments and was unsure as to how they would be handled. He stated that most NEPP A training is also conducted out of state. Director Babin then reminded the Board that the Light Department is a separate entity from the rest of the Town under the Mass. General Laws. He stated that the Light Department doesn't work off tax revenues as the Town does but works off the rate revenue so he did not think that restriction applied to MMED. Chairman McCarter commented that the Selectmen had taken a vote putting a stop to out-of- state travel in an attempt to reduce costs and balance the budget. He said they did not intend for that to cover the Light Department because they have a totally different revenue source. Vice Chairman Dentino questioned how the Board could ask that of the municipal side but not of the Light Department and other enterprise accounts. Chairman McCarter asked Director Babin to submit a list of travel for the Light Department. Director Babin said that he felt it was inappropriate for in-state travel for training to be a requirement for this list. Town Manager D' Agostino suggested that this should be handled on a case by case basis. Clerk Baldwin asked if the Board could get a list of in-state seminars, not including meetings. Director Babin then informed the Board that he is going to be inducted as president of NEPP A which holds meetings all over New England. He felt that this was a positive thing for the Town's image. He said that although he perceived this elimination of out-of-state travel as part of the Town's budget cutting process, the Light Department is not a part of that process because the Light Department is separate from the Town. He stated that the Light Department is completely different and that MMED goes to great lengths to point this out. Vice Chairman Dentino pointed out that the ratepayers and the taxpayers are the same so the Board should not ask only % of the Town to adhere to this request. Town Manager D' Agostino suggested that he and Director Babin could make the decisions about travel for the Light Department. Chairman McCarter said that he did not think it was unreasonable for the Board to request a list. Vice Chairman Dentino said he had the opportunity to go to the Light Department and look at the plans for the renovation of the office and then he asked the dollar amount that was budgeted for this project. Director Babin answered that the budgeted amount was $25,000. Vice Chairman Dentino questioned whether this was for furnishings only or were construction costs included. Director Babin answered that it covered everything and that it had been approved by the Board during the FY08 capital budget process. Vice Chairman Dentino said that he was going to ask the other members of the Board to go to the Light Department and have a look at the proposed project, as he did not see this expenditure as a necessity. The cost is primarily to extend one office into an oversized office and he also doesn't find the expansion of the outer office to be sound. He also noted that the proposed plan will result in an awkward flow of traffic in the outer office. Director Babin said that there are three financial assistants who work side by side in a very small area, eight hours a day with no privacy. His goal is to expand and utilize the available extra space to give these three individuals adequate working space as they have no privacy. In his opinion, it is far too crowded in the existing front office area. Director Babin then posed the question that since there is clearly vacant space, why shouldn't it be utilized. Vice Chairman Dentino answered that it should not be utilized because of the tough economy. He also said the outer office is not the real cost but pointed out that the real cost is the humongous office which is being built for one person. Director Babin responded that he has an obligation to his employees to create a good working environment for them. Commissioner Amoruso stated that this evening was Chairman McCarter's and his final Light Commissioners meeting. He thanked everyone in the Light Department for their hard work and their patience. He said no one ever complained to him about a bad job being done at the Light Department. He said it had been a pleasure working with everyone and thanked everyone for their part. Chairman McCarter wanted to reiterate what Commissioner Amoruso had said, saying that it had been a pleasure working with everyone at the Light Department over the years. He said that he wished that he was leaving with all the litigation resolved but didn't feel that was necessarily going to happen. He apologized for not spending more time at the Light Department over the years but explained that he doesn't work in Town which made it difficult. He said the people he has worked with have all acted in a professional manner and thanked everyone for all they have done. Motion: To adjourn the Light Commissioners meeting at 10:40 (Amoruso) Passes 4/0 Respectfully submitted: Jacqueline Lee 6/23/08 ~ If/j~ Signature of Clerk t li3102/. Date of Approval