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HomeMy WebLinkAboutmin light commission 10/13/04 ...' Mansfield Municipal Electric Department 0 F P! C E Minutes of Light Commissioners Meetin~i¡ fJO\l I 9 !I, M 9' 2 October 13, 2004 . ~ /·,11' ~ 2 f'i/U,!;,- il' i 0 Present: Chairman Roger Achille; Vice Chairman Louis P. AnttSJ\l~,iíf~!;~r Mike McCue; Commissioner Steven MacCaffrie; Director Gary Babin; Chief FinancIal Officer Kimberly Stoyle; Engineer Ann Langille; Engineer Chris Cox; Line Foreman Gary D' Ambra; Financial Assistant Jacqueline Lee and Manager John D' Agostino Light Commissioners Meeting The meeting was called to order at 7:30 followed by the Pledge of Allegiance. Chairman Achille requested a motion be made to appoint a temporary Clerk as Bernie Dolan, the Light Commissioners Clerk, was not in attendance. Motion: To appoint Steve MacCaffrie as Clerk for the October 13, 2004 Light Commissioners Meeting (Amoruso/McCue) Passes 4/0 Minutes of September 15, 2004 Motion: To approve (MacCaffrie/Amoruso) Passes 3/0/1 (Commissioner McCue abstained) Director's Report Financial Report - Chief Financial Officer, Kimberly Stoyle, reviewed the profit and loss statement and the balance sheet for August. Total metered sales revenue for August was $2,278,528. Total power production expense was $1,631,246. Net income before payment in lieu of taxes for the month was $148,339. There was an after payment in lieu profit of $91,338. Y-T-D net income before payment in lieu of taxes was $985,198. Y- T-D after payment in lieu profit was $616,198. CFO Stoyle reported these figures are behind the figures from the same time period last year, as well as behind budget, however, future months profits are expected to stabilize. She believed MMED would show a positive net income for the year, although probably not the allowed 8% profit. Follow-up on Verizon Pole Line Removal- North Main Street - At the September 15, 2004 Light Commissioners meeting, Director Babin requested that the Board increase the not-to-exceed $206,348 amount approved by the Commission on August 6, 2001 to $226,777.30 in order to reimburse Verizon for the cost of undergrounding their facilities on North Main Street. Director Babin distributed copies of a Verizon contract for the project signed by the former Director, Jack Beliveau, on October 5, 2001, which were unavailable at the last Commission meeting. Commissioner MacCaffrie reaffirmed his position that the Board should only pay Verizon the not-to-exceed figure of $206,348. He questioned whether there were detailed bills which show Verizon's manhours. He pointed out the time frame issue and said if Verizon had completed the work in a timely manner, it wouldn't have cost the Town more than the original estimate. It was Verizon's mismanagement which forced the cost overrun and he stated he would not vote " in favor of increasing the amount to be paid to them. Chairman Achille asked if there was an itemized bill. Director Babin answered he had not received one but would request a detailed invoice from Verizon. Commissioner McCue stated that although he agreed with Commissioner MacCaffrie, felt the signed contract, which has a clause requiring the customer to pay the actual cost of the work, left no choice but to pay the $226,777.30. Vice Chairman Amoruso said the clause in the contract regarding the customer paying additional costs after Verizon prepares an invoice of actual costs, should have been crossed out at the time the contract was signed. Although it was not what the Board had voted, he wondered what other options they had. Town Manager D' Agostino stated there were multiple issues involved here, including Verizon's inability to finish the job in a timely manner. He believed, even though there is a signed contract, MMED should ask for back-up documents and then consult with an attorney. Director Babin stated MMED had made only the first quarterly payment to Verizon. The issue of paying a total cost of $206,348.00 versus $226,777.30 would only come into play when making the last quarterly payment, so there is still time to resolve the matter. He also reminded the Board that Verizon indicated their actual cost of the project was approximately $400,000. MMED told Verizon they'd recommend paying the $226,777.30 to the Board, if Verizon would accept the payment in four installments. Once Verizon agreed to allow four quarterly payments without interest, the MMED staff then brought the issue to the Board for consideration. Commissioner MacCaffrie wanted to know how Verizon came up with the figure of $226,777.30. Chairman Achille said the Board needs an itemization before they can vote. Director Babin suggested the Board write Verizon a letter making them aware of the Board's concerns on this matter. Motion: To send Verizon a letter making known the Board's concerns regarding raising Verizon's payment from the authorized not-to-exceed amount of $206,348.00 to $226,777.30 for undergrounding their lines on North Main Street (Amoruso/MacCaffrie) Passes 4/0 Policy Manuals - There were two new MMED policy manuals given to the Board for their review at the September meeting. They were Customer Service Terms and Conditions and Construction Requirements for New Developments - Residential and CommerciaVIndustrial. Chairman Achille asked if the Board had any concerns or comments regarding MMED policies as set forth in these two manuals. There were none. Motion: To approve MMED's Customer Service Terms and Conditions manual (Amoruso/MacCaffrie) Passes 4/0 Motion: To approve MMED's Construction Requirements for New Developments - Residential and CommerciaVIndustrial manual (MacCaffrie/ Amoruso) Passes 4/0 2 Director Babin wanted to point out an additional item that had been included in the Construction Requirements for New Developments Residential and CommerciaVIndustrial manual since the Board had received their draft manuals at the September meeting. There was a building being constructed in Town where the design of the building violated National Electric Safety Code (NESC) standards, and which required MMED to perform a reconstruction of the pole line to allow this facility to comply with NESC clearance requirements. The policy which was added into the manual stated that the developer would have to pay MMED the cost to remedy any NESC violations which occurred because of the design or construction of any new or reconstructed facility. Director Babin also pointed out that the Massachusetts Department of Telecommunications and Energy, as jurisdictional authority of the NESC, looks to the individual utilities to enforce the National Electric Safety Code. Holiday Lighting - Director Babin told the Board that MMED plans to illuminate the Town with the same amount of holiday lighting in 2004 as in 2003. Director Babin reviewed for the Board the locations which will have holiday lighting or signage: South Common; West Mansfield Common; Route 106 Underpass; North Main Street Underpass; West Street at Old Colony Motors; Copeland Drive at Benny's; North Main Street next to Barrows Insurance; as well as 36 wreaths in various locations, He noted that the North and East Mansfield commons lack proper underground conduit facilities to accommodate holiday lighting in accordance with the National Electric Code. Vice Chairman Amoruso stated he would eventually like to see the North Common lit. Town Manager D' Agostino said he would like to achieve that objective but it would necessitate running conduit underground, which would require donations. Commissioner MacCaffrie added he would also like to see the East Mansfield Common eventually have holiday lighting as well. Annual Senior Citizen's Safety Luncheon - Chairman Achille made mention of the Annual Safety Luncheon at the Mansfield Council on Aging, which is sponsored by MMED, It will be held on Friday, October 22, 2004 at 11 :30, Finance Committee Recommendation: Accounting Year - Jim Lazarra from FINCOMM was in attendance. Mr. Lazarra indicated that he, along with Jack Goldberg and Andy Gazzolo, have been working with MMED and have made suggestions to the MMED staff regarding budget issues and accounting procedures. Mr. Lazarra stated that the FINCOMM's primary recommendation is to change MMED's accounting year from a calendar year to the same fiscal year as that of the Town (July-June). The FINCOMM feels that this change would better integrate MMED with the Town, From the FINCOMM perspective, it would be a chance to review MMED's budgets at the same time as other Town budgets and that one accountant could review both the Light Department and the Town. Chairman Achille thanked Mr. Lazarra and reiterated that the recommendation to be discussed tonight dealt only with changing MMED's fiscal year from a calendar year to a 3 fiscal year coincident with the Town. Other recommendations of the FINCOMM would be addressed by the Board at later meetings, Chairman Achille asked Director Babin what he and his staff had to say regarding this proposed change. Director Babin responded that the biggest issue involved from the staff s point of view would be the changes that would be necessary to the general ledger system, which now accrues MMED's costs and revenues on a calendar year basis. Director Babin indicated that he and CFO Stoyle have spoken a few times with Northern Data Systems (NDS), MMED's general ledger system provider, on the telephone regarding the software modifications which would be necessary to make the change from a calendar year to a fiscal year. NDS's estimated cost to modify the software is approximately $6,000. Director Babin believes the change could be made but would be very work intensive at the staff level. MMED would have to run two general ledger systems in parallel at the same time, which is typical in any conversion of a billing system or a general ledger system, Director Babin stated the reason is that you need to have the old system, which you know to be correct, available to confirm that the information that the new system is calculating is also correct. In addition, since the Massachusetts Department of Telecommunications and Energy (MDTE) requires all utilities to file their annual reports on a calendar year basis, MMED . will have to modify the general ledger system to compile information on both a calendar year basis for the MDTE while also compiling information on a fiscal year basis for budget and cost control purposes. Director Babin indicated that there are no exceptions to the MDTE reporting requirements being performed on a calendar year basis. There are forty municipal light departments in the state, and as far as Director Babin could ascertain, only one (Wellesley) does not currently keep their budget year on a calendar year basis. He explained that the task will undoubtedly be more complicated than he anticipates and the primary responsibility to make the conversion a success would fall on CFO Stoyle. Assuming a January 2005 start to the process, CFO Stoyle would need to maintain both parallel systems for a minimum of a year in order to confirm that the calendar year figures computed by the new general ledger for the 2005 MDTE reports are correct. Mr. Lazarra inquired if MMED generated monthly figures which may be helpful in producing the year-end MDTE report? CFO Stoyle answered they did not, only an annual MDTE report. She informed the Board there were other ways to approach this, which would allow MMED to provide the reports that FINCOMM desires without disturbing the general ledger. Chairman Achille asked ifbeing on the same fiscal year as the Town would mean greater efficiency or savings for the Light Department. Director Babin answered no, there would be no financial benefit, but rather it was more of a policy decision. He indicated that it was fair to say this change would not be made for financial efficiencies. Town Manager 4 D' Agostino reiterated it was more of a policy decision and that his preference is to move in this direction. Mr. Lazarra added it would mean more continuity within departments from the FINCOMM perspective. Town Manager D' Agostino stated that if a change is made to one auditor for both the Town and the Light Department, then there would be only one bill for one auditor. This may result in some savings. Vice Chairman Amoruso asked if MMED's budget was ready to be passed out to FINCOMM. Director Babin answered it was not ready to be handed out as the staff was still working on it. He explained that since his arrival, he had initiated an overhaul of the budget process. His hope is to have the capital budget ready for the November Light Commissioners Meeting and the operating budget ready for the December meeting. Director Babin indicated that a transitional process would be required to align MMED's financial year with the Town's fiscal year. The first step would be to submit 6 month budgets (January 2005 to June 2005) to the Board for approval in November and December, respectively. In February or March of 2005, a twelve month budget would then be submitted for the Board's approval that would cover the period of July 2005 through June 2006 (FY06). Director Babin stated that one problem with the accuracy of the budget in switching to a fiscal year of July through June is that in mid-October, MMED receives the power supply cost projection for the following calendar year from MMWEC. He explained this is the most critical item in the budget, as it accounts for more than 75% of MMED's costs. In the fiscal year budget for FY06, to be submitted in March 2006, MMED will not have the power supply cost projections for the period of January through June 2006. He indicated that he will see what MMWEC can do about providing the information earlier because it is such a big part of the equation. Mr. Lazarra suggested that estimates would need to be used in regards to costs so that FINCOMM could proceed, although with respect to the capital budget there are other issues. Chairman Achille requested MMED staff give their budget to FINCOMM as soon as it's ready. Director Babin felt that the FINCOMM would receive MMED's budget at the same time the Board receives it in their package, as it is a work in progress. Motion: To change MMED from a calendar year fiscal year to the same fiscal year as that of the Town (July-June) with the DTE receiving it's annual report by April 15 (MacCaffrie/Amoruso) Passes 4/0 Old Business - Commissioner MacCaffrie said that at the last Light Commissioners meeting, Director Babin was asked about pension costs and that he answered he was comfortable with the way they were distributed. Director Babin reiterated that yes, he was comfortable with the allocation methodology as it was explained to him by the Town Accountant and Town Treasurer. He explained that it was based on actual costs paid by the department to retirees in the fiscal year, with an additional assessment for the 5 ¡ . . ... unfunded pension liability that was assessed by Bristol County and which was allocated by the Town to departments based on a percent of payroll method. New Business - Director Babin announced the Purchased Power Charge Adjustment (PPCA) has been increased from 2.65 cents to 3.65 cents per kWh and this change will be reflected in the October billing. He explained the increase was necessary for two reasons: (1) a significant portion of MMED's energy comes from Stony Brook Energy Center, of which MMED is part owner, where operating costs have grown because of the increased cost of natural gas and oil. Director Babin also noted fossil fuel prices have increased approximately 50% in 2004. (2) A portion ofMMED's energy comes from the spot market. Spot market prices have also been affected by the increase in price of fossil fuels. He added that many utilities are in the same position of having to make this increase. Director Babin indicated that this increase had been recommended by MMED's rate consultant, PLM, based on an analysis of the PPCA that he had requested shortly after his arrival at MMED. The PPCA helps recover MMED's power supply costs and this increase in the PPCA would help with the current under-recovery of power costs driven by increased fossil fuel prices. Vice Chairman Amoruso asked if there was any anticipation this would be the only increase, Director Babin answered that his goal is to adjust the PPCA no more than every six months since customers like rate stability and predictability. He explained this increase will help stabilize the situation for 2004. In December, MMED'will project its 2005 power supply costs and should have a better indication of what to anticipate with the PPCA. Should the price of fossil fuel keep spiraling over the next three months, MMED may have to raise the PPCA yet again. Director Babin hoped, however, that the PPCA would not be adjusted again until March 2005, at the earliest. Chairman Achille had concerns if the rate was being raised for the purpose of making a certain profit. He didn't feel the burden should be passed onto the customer just to maintain the allowable 8% profit. Director Babin responded it was not done for that reason. Since it is a filed tariff with the MDTE, MMED is required to collect the costs for purchased power in accordance with the tariff. As of now, MMED has under collected for their power supply costs, which is why the PPCA needed to be raised, Adjournment Motion: To adjourn the Light Commissioner's meeting at 8:40 (MacCaffriel Amoruso) Passes 4/0 Respectfully submitted: Jacqueline Lee 11/10104 ~~~ JJ~ /0- 0 t.J Date of Approval 6