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HomeMy WebLinkAboutlc_01182012 RFCEIVEp Mansfield Municipal Electric Department OW �w K� Minutes of Light Commissioners Meeting QFF SCE January 18,2012 011 APR Q A 8 Present: Chairman George Dentino, Commissioner Douglas Annino WRVIAFGE4Effiyvin Moran; Clerk Olivier Kozlowski; Commissioner Jess Aptowitz; Direc o VaildErrim Manager William Ross Absent: None Light Commissioners Meeting The meeting was called to order at 7:00 PM. Chairman Dentino stated that this meeting was being televised and taped by Mansfield Cable Access. Commissioner Kozlowski requested a change to the minutes of December 21,2011. Motion: To hold the minutes of December 21, 2011 subject to change. (Moran/Kozlowski) November 2011 Financial Statements-Director Babin said that net operating income year- to-date through November is$1,304,870 while non-operating revenue is$43,528. This figure has also been adjusted to account for the FY12 overcollection of Generation Charge revenues of$1,159,888. MMED's operating cash position through November 2011 was $9,714,573. Adjusted cash taking into account Generation Charge overcollection is $9,013,782. Operating cash was $8,060,654 for the same period in FY11. Director Babin said that Generation Charge through November had an overcollection of $700,791. This balance sheet item represents the total over or under collection of the Generation Charge since January 1, 2008. This overcollection was then be figured into the calculation of the Generation Charge for the 1'quarter of 2012. Director Babin said kWh energy sales for November 2011 are down 3.6% from November 2010. For the year, there is a 3.8%reduction in energy sales between FY11 and FY12. He stated that the decline in sales over the last 12 months is due almost in its entirety to the closing of the ADM Cocoa facility. MMED's depreciation fund balance stands at $6,540,985. This money will begin to be drawn down as equipment is received and contractor costs accrue when the East Mansfield substation construction begins,probably in February. Commissioner Aptowitz had some questions relating to current/retained earnings and Director Babin will consult with the accounting staff for clarification. Chairman Dentino asked why there were two different Generation Charge figures in the (Th financials. Director Babin said that the Generation Charge shown on the profit and loss statement is to reflect the over/undercollection of the Generation Charge only in the fiscal year whereas the balance sheet figure represents the aggregate over/undercollection since the new rates were implemented on January 1,2008. He indicated that the balance sheet figure was the amount used when calculating each quarterly Generation Charge. Chairman Dentino was concerned that MMED continually overcharged customers and this was reflected in the overcollected Generation Charge figure. Director Babin assured him that it was always trued-up and said he would provide information showing this. Chairman Dentino also had questions about bank charges for resident use of credit cards to pay bills. Director Babin stated that the charge is minimal,perhaps 1 percent. Chairman Dentino also had questions about a $4,000 bill he believed was a phone bill that MMED had. Director Babin stated it was for prepaid postage for billing service. Motion: To temporarily adjourn MMED and start Board of Selectmen meeting. (Aptowitz/Moran) 5:0 passes Street Lighting - Chairman Aptowitz asked Director Babin to summarize street light patrol results. Director Babin referred to the data summary he had provided in the Board package. The results,as shown below,were then reviewed. • The summary is based on 8 hours of patrolling weekly (4 hours the first week) to develop a repair list with the actual repair of lights performed during the work day as soon as it can be scheduled. Approximately 2/3 of the Town has been patrolled. Total hours patrolled-44 Number of streets patrolled- 167 Number of lights checked-1,737 Number of lights burnt out-316 Number of repairs from patrol -238 Number of lights repaired from customer calls-42 • According to the MMED streetlight database, there are currently 2,891 streetlights in the system,of which 1,068 streetlights were intentionally turned off, or 37% • The current FY12 monthly bill is $6,236 and is a flat charge per month. This computes to$75,000 annually. • The additional cost of electricity billed to the Town if the lights were to be turned back on would be approximately $45,000 annually. This is based on a current streetlight rate of 12.58 cents per kWh that went into effect on July 1, 2011. This cost per kWh varies year to year according to the filed streetlight tariff. • At the time the decision was made to turn the streetlights off, the streetlight rate was 16.68 cents under the tariff. Streetlight costs for FY10 were originally projected to be 2 • The agreed upon criteria implemented to turn off the lights (every other light turned off, keep lights on intersections and corners lit, etc.) was followed between February 2009 and June 2009 and the database now shows a total of 1,068 lights off. • In 2009, the labor, material and equipment costs to turn off the lights between February and June was $34,684 with benefits applied, $22,858 if only straight labor costs are used. • It is estimated that to turn all the lights back on it would cost approximately$25,000 if only straight labor costs are applied. Selectman Kozlowski asked Director Babin to clarify which costs are"town"costs and which are MMED costs. He said that turning the lights off and on is paid by the town through a streetlight tariff charge from MMED to the town. The town pays only the streetlight rate. Chairman Dentino also had questions about the cost to the Town of turning on additional lights. Director Babin stated it would be about $45,000 and that if you divide that by 12 months it's a little less than a$4,000 monthly increase to the bill. Commissioner Annino stated that works out to about $45 per light. He believes, like Mrs. Levine stated, that some streets need more light than others. The every other light pattern doesn't work well for some older treed streets. Commissioner Annino stated he has gotten a lot of calls from residents and as such, would like to revisit the streetlight policy. Director Babin stated that DPW Director Azinheira has done an informal study on lights per mile, how much it costs and what kind of light other towns have. According to this study Mansfield is well lit. Commissioner Annino stated that some Mansfield streets are not lit well enough, even if better lit than in some other towns. Mr.Ross stated that the town is trying to save money and provide the best service they can. If residents want more lighting they unfortunately need to pay more. With that said, the DPW and MMED can try to be more specific in locating where more lighting is needed and not needed. However,the level of lighting needed is subjective. Selectman Annino would like to see some sort of lighting study done. Mr. Ross had tried to inform people when they call the office that the MMED cannot pay for cost of street lighting under the law. Even though the MMED has surplus funds they cannot pay to turn on additional lights in town. By statute,the costs of streets lights must come from the town's general fund. Selectman Moran concurred and stated that perhaps they can budget more for next year but we do not have any money in the current budget to pay for it. 3 Selectman Kozlowski asked who is paying for the street light patrol. Director Babin stated MIMED is paying for it and the service is part of the town's streetlight rate. There were a few questions about whether the Town is paying for burned out lights. The town pays for the same number of lights every month, regardless of whether if they are on or not. Chairman Aptowitz stated that the Board of Selectmen has talked about this issue extensively and they need to come up with a way to address this matter. Motion: To adjourn Board of Selectmen's meeting and resume MMED meeting. (Moran/Aptowitz)5:0 Passes East Mansfield Substation Financing- The Board referred to information contained in the Board package to discuss whether to fund construction of the East Mansfield Substation through the issuance of debt. Mr. Ross summarized his memo to the Board regarding financing of the substation. Included in the package were: • A letter from Lynne Foster, Vice President of UniBank Fiscal Advisory Services, Inc, the Town's financial advisor, regarding their opinion of financing the substation from debt and, if doing so, its impact on the Town's bond rating. Ms. Foster recommended the town use cash reserves. • Two analyses from Ferrand Consulting Group, Inc. that project the debt service payments assuming a$4 million borrowing over a 20 year term with(1) level payment method, which the Town typically elects for a payment schedule and (2) declining payment method • A cash flow analysis initially prepared to assess the financial impact of a$2.2 million rebate to customers in the January and February 2012 billing. The purpose of its inclusion was to illustrate the effect on operating cash and depreciation of funding the entire cost of the substation through available funds. This analysis assumes no borrowing is done to finance the substation. • A summary of the rate impact of issuing$4 million in debt to fund the $7 million cost of the substation. The impact is measured both in annual terms and collectively over the 20 year period for a typical 750 kWh residential customer and also for a 100,000 kWh large commercial customer. The results are presented in both nominal terms (actual cash) and also in a Net Present Value format. • A copy of the Standard and Poor credit rating for the Mansfield Municipal Electric Department. The rating was confirmed at A stable in December 2011. 4 It was also stated that future ratepayers will be paying a depreciation expense of$233,000 through rates that will be included in the annual MMED operating budget beginning in FY14. Tom Ratliff from FinComm was present and reviewed a prepared statement from the Finance Committee. In summary, they do not feel the Town of Mansfield should pay cash for such a large capital project. Commissioner Kozlowski asked several questions about the FinCom's suggestions. Commissioner Moran also had questions about depreciation costs of the project. Commissioner Aptowitz has mixed feelings about the use of cash reserves vs. borrowing costs. He would like to see a mix of cash and borrowing. However, Chairman Dentino does not feel the town should be paying for bond debt when they have cash reserves to utilize. Another point is how the MMED surplus was created but that is another issue entirely. Mr. Ross commented that the FinComm's comments in their letter did not account for power supply debt owed by MMED to MMWEC. There are other issues that FinComm did not take into account, such as other capital projects the town is obligated to borrow for and the impact of this borrowing on the town's debt rating. The Commissioners, Director Babin, Mr. Ross and Mr. Ratliff discussed account surpluses and bonding at length. Motion: To fund substation with cash, not to exceed $7 million. (Kozlowski/Annino) Passes 4:1 (Aptowitz nay) Solar Energy Facility Purchased Power Agreement - Director Babin referred to the final version of the Purchased Power Agreement (PPA) between Mansfield Municipal Electric Department (MIMED) and SunEdison Origination3, LLC, which was being presented to the Light Commission so they might authorize Light Plant Manager Ross to execute it. SunEdison provided the most favorable proposal in response to an RFP issued by the Town of Mansfield for installation of a solar energy facility on the capped East Street landfill site. Director Babin pointed out that this PPA is the first of three agreements that must be executed for this project to be constructed. The second agreement is a Lease Agreement to be negotiated by SunEdison with the DPW outlining the terms of the use of the landfill site with all the required environmental permitting. The last agreement is an Interconnection Agreement that SunEdison and MMED must finalize to ensure that the facility complies with all technical requirements needed to interconnect with the MMED system. Director Babin was accompanied by Rod Hoffman, an attorney from the Town Counsel's office with whom Director Babin worked in the negotiation of the contract with SunEdison. Director Babin and Attorney Hoffman reviewed the highlights of the PPA agreement, which are as follows: 5 • MMED will purchase energy at a fixed price of 5.25 cents per kWh from SunEdison. This price will be in effect for the full 20 year term of the PPA. • The facility is rated at 1.5 MW of capacity with an estimated annual output of 2 million kWh. This will provide about 0.8% of MMED'S total annual energy purchases based on 2012 requirements. The output of the facility is expected to decline about 0.5%per year over the 20 year period. • This is a 20 year long-term contract that cannot be terminated by MMED `for convenience', but rather only for uncured material breach (default) by SunEdison. This is because almost all of SunEdison's investment and financing will be in place and at risk by the time the facility goes into operation. The investors and lenders base their financial commitments to the project on the tax incentives and stream of revenue to be received from MMED over the full term of the PPA. • If MMED were to default on the contract by, for example,not appropriating sufficient funds to pay for the energy, it would be liable for a `settlement amount' equal to the present value of SunEdison's losses. This would include the stream of payments for the remaining term of the PPA and for any lost tax benefits. • On the other hand, if SunEdison were to default on the contract, MMED is required to give notice to the lender who made the fmancial commitment to fund SunEdison's project. The lender will then have the option to step in and cure the breach. If the breach is not cured,the PPA can then be terminated. • If SunEdison fails to supply the minimum amount of power guaranteed by the contract, SunEdison is liable to pay the difference between the contract price and the spot market price on that shortfall. This potential liability is secured by a letter of credit in favor of MMED that will be renewed annually for the amount at risk in a particular year. The board members had reservations about signing an agreement without a land lease in place. However,Atty. Hoffman and Town Manager Ross stated that it would not be an issue. If the proposal falls through the lease is a moot point. Commissioner Kozlowski has several questions regarding the proposed contract and Atty. Hoffman and Mr.Ross addressed them one by one. The Board expressed concern about any liability the town might incur if only one or two of the three agreements required to move forward were executed. Director Babin suggested that the Board vote to allow Mr. Ross to execute the contract contingent upon the Town Manager's review and approval of the changes suggested by the Board to address these issues. Attorney Hoffman said he would contact SunEdison's attorneys to finalize the language that carried out the Board's wishes. 6 After an extended conversation about sites like this around the state, lease agreements and other capital projects the town is planning the Board concluded the discussion. Mr. Ross thanked Mr. Babin and Atty. Hoffman for working so hard on this RFP and completing the subsequent contract. Motion: To have Mr. Ross execute the contract after satisfactory language changes to address the Board's concerns are made and accepted by Mr. Ross. (Annino/Moran) 5:0 passes Chairman Dentino asked the board if they had any old and new business prior to adjournment. There being none he called for a motion to adjourn. Motion: To adjourn the Light Commissioners meeting at 10:13pm and resume the BOS meeting. (Kozlowski) 5:0 passes 3 (4-j am Signature of Clerk Date of Approval 7