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HomeMy WebLinkAboutLCMIN12/21/2011l irf: IVED Mansfield Municipal Electric Department s OFFICE ICE Minutes of Light Commissioners Meeting 1u(j t rn r December 21, 2011 D ^ 8 Present: Chairman George Dentino, Commissioner Douglas Anninti Vice Chlgon'an'Kevin Moran; Clerk Olivier Kozlowski; Commissioner Jess Aptowitz; Director Gary Babiti ' Town Manager William Ross Light Commissioners Meeting The meeting was called to order at 8:00 PM. Chairman Dentin stated that this meeting was being televised and taped by Mansfield Cable Access. Motion: To approve November 16, 2011 minutes (Kozlowski/Moran) 5:0 passes Consolidated NEPPA Headquarters and Training Facility - Outgoing Executive Director, Pat Hyland, and incoming Executive Director, Larry Brownell, of NEPPA were present for the meeting to lend insight to the Board regarding MMED's assistance in finding this facility. Mr. Babin provided the Board with an information package from the Northeast Public Power Association ( NEPPA) which provides the details of a consolidated facility for all of NEPPA's office and training staff as well as for a state of the art training facility in which NEPPA will conduct technical training, professional seminars, workshops and meetings. ( Director Babin said that NEPPA has been in existence for 46 years as the voice of public power, both in New England and nationally. In all that time, they have operated out of several locations; technical training facilities have been located in Wellesley, Peabody, Taunton and now in Pascoag, Rhode Island. Office facilities have been located in Wellesley, Southborough, Westborough and now in Milford. Technical and non - technical training has been offered at literally dozens of locations. Never at any time have the office and technical facilities been located together. Director Babin indicated that in 2008 the Littleton Electric Light and Water Departments offered to construct a joint use facility on land they own adjacent to their headquarters and to provide more than half of the building to serve as NEPPA's central headquarters. Littleton performed and paid for all of the architectural requirements, preparation of technical specifications, public bidding, and bid evaluation. He said that LELWD will continue to serve as project managers throughout the process. NEPPA will enter into a 20 year lease agreement to rent the space in the building and NEPPA is responsible for all build -out for the office facilities, meeting space and technical training facilities. The NEPPA Board of Directors voted a special assessment to all members to raise money for the build -out of the facility, which is estimated at $500,000, and. is one year's dues for each utility. For MMED this would be a cost of $15,086. The assessment is payable over one, two or three year installments. This assessment is in addition to the annual dues payment. / The total cost to construct the facility is $2.3 million, of which NEPPA is responsible for $1.8 l million over the 20 year period through lease payments. Director Babin indicated that the location of the facility in central Massachusetts is ideal; it allows members from all reaches of New England to drive there in a reasonable amount of time. In addition, Littleton's location adjacent to Route 495 provides close proximity to hotels and restaurants and makes it convenient for those coming from great distances for multiday training. Mr. Hyland described to the Board the historical background which led the NEPPA Board to vote to construct this facility. He indicated that it had long been the desire of the membership and of the staff to centralize operations. A unique opportunity was presented by Littleton which, while requiring NEPPA to make a significant financial commitment, finally fulfilled this long term goal. As the representative for the municipal utilities and joint action agencies in New England, it was the sense of the membership to move forward with this project. Mr. Brownell addressed how the facility will impact the future of the NEPPA organization. He said that the nature of the facility will allow NEPPA to provide some types of training it has never been able to before and that it should also help them save money on facility rental. Director Babin then reminded the Board what NEPPA does and how it plays an important part in providing a forum for all of public power in New England as an advocate for its 74 members. This is not limited to technical training but also for legislative activities, mutual aid, and professional and non - technical training. Commissioner Aptowitz asked about the lease of the building in Littleton. He was wondering if it is a municipal building now, would NEPPA have any ownership interest. Mr. Hyland indicated that because of how municipalities operate under the General Laws, the issue of selling the facility to NEPPA could not be brought to the Littleton Town Meeting until the end of the lease. Commissioner Annino asked how the lease is structured and how the property will be developed to combine all NEPPA activities and training, which Mr. Hyland addressed. Commissioner Kozlowski asked about the special assessment, if it was a requirement, and what would happen if a substantial number of departments said no. Mr. Hyland stated that it is not mandatory; it is a request for the member towns to assist NEPPA in finding the buildout of the facility. So far no communities have refused. However, if some do, NEPPA will have to delay parts of the project until they can raise the finds. Commissioner Moran stated that he was originally uncomfortable with the requested amount of $15,000 but once he has heard more about what the money is for he is in favor of moving forward. After the catastrophic storms of the past year and seeing how well municipal utilities performed, especially with mutual aid, he can really see the value in having this type of a training facility available to the town. Director Babin noted that NEPPA developed and administers the mutual aid system 2 Chairman Dentino asked how much money the town has spent in NEPPA training over the past five years. Mr. Babin stated he did not bring that information but he would guess approximately $15,000 per year, although he said he did not know. Chairman Dentino asked Mr. Babin to provide a breakdown of training costs over the past five years to justify such an investment. Director Babin pointed out that at the direction of the Board to deemphasize training as a cost cutting measure, the money spent would not be representative of what training MMED needed. Commissioner Moran added that by banning out of state travel for training and discouraging training in general, MMED wasn't even applying for training programs that were offered. After a lengthy conversation among the Board of Selectmen, Mr. Ross stated why he feels Mansfield would be best served to participate with NEPPA based training and services and that his recommendation was to support construction of the training center by paying the assessed cost. Motion: To agree to special assessment of $15,086 (Moran/Annino) Selectman Kozlowski asked if the preference of the Board was to pay it all up fi•ont or in installments. Selectman Moran stated they are fortunately in the position to pay it lump sum given MMED'S current financial health and also feels they will benefit fi•om NEPPA's programs in the future. Motion: To amend motion to spread cost over 3 years. (KozlowskiJAnnino) After discussion, Commissioner Moran withdrew his motion and Kozlowski his second. Chairman Dentino would like more information before voting this assessment. Mr. Ross then asked Chairman Dentino exactly what information he was looking for as he wanted to be clear to his request. Director Babin said he would compile a summary for review. October 2011 Financial Statements — Director Babin reviewed MMED'S financial statements through October 2011. He noted that Net operating income year -to -date through October is $1,227,203 while non- operating expenses are $9,321. MMED'S cash position was strong with approximately $9.4 million in operating cash, which when adjusted for the Generation Charge overcollection made available cash approximately $8.8 million. This compared to $8 million in operating cash through the same period in FYI l with available operating cash net of the Generation Charge liability at $7.3 million. The Generation Charge overcollection though October was nearly $541,000, which is reconciled with the calculation of the next quarter's Generation Charge. Energy sales (kWh) for October 2011 are up 7.2% from October 2010. For the year overall, sales are down 3.8% from the prior year, in large part due to the closure of ADM Cocoa. The Depreciation Fund balance stood at nearly $6.5 million, which will start to be drawn down to fiord the construction of the substation. The Commissioners briefly discussed the policy of collection of overdue accounts. The significant difference between commercial and residential collections is that residential accounts cannot be shut off after November 15"' for non - payment but there is no such prohibition for commercial accounts. Commissioner Aptowitz reiterated his concern about commercial collections and stated again that if businesses cannot pay their electric bills it was not the Town's responsibility to help them stay in business. Chairman Dentin referenced an email Director Babin sent about collections where it was indicated that the collections policy for commercial customers was not followed precisely. Director Babin stated that MMED works very closely with customers and, as lie has stated before, a certain amount of latitude is required in making payment plans with both commercial and residential customers to take into account any extenuating situations that affect their ability to pay. Mr. Babin stated it is not always possible to strictly adhere to the policy because there has to be some leeway to provide compassion for people in difficult circumstances, particularly in these economic times. Chairman Dentino said that if any change from the procedure is required it should always be brought to the Board. Commissioner Aptowitz stated that residential customers need a little more care than commercial accounts. He said that MMED is showing compassion for commercial customers but if a commercial customer cannot pay their bills they should be shut off. Chairman Dentino added that the MMED staff does not illustrate the same compassion for residential customers. Director Babin took issue with this and stated that MMED has compassion for all of its customers. He pointed out that the close relationship that MMED maintains with customers is what makes us unique and provides a connection to its customers. He went on to say that he is saddened that the Board seems to think that the MMED staff cannot professionally handle collections situations on a case by case basis taking into account a customer's needs. The MMED staff takes great care to assure quality customer service in the collection of bills and setting up payment plans. However, Director Babin indicated that if the Board wants the MMED staff to apply the policy exactly as it is written that it will do so, -,vhich means commercial customers with 30 days arrearages will be subject to immediate shutoff. ISO New England Financial Assurance Policy — Director Babin wanted to make the Board aware that ISO New England has implemented a new Financial Assurance Policy under FERC Orders 741 and 741A. Under the revised ISO tariff, member towns of MMWEC must submit their own quarterly and annual financial statements to ISO New England and that MMWEC cannot do so on its behalf. M He said that the ISO now requires each member utility to submit a quarterly balance sheet, which is not required to be audited, within 65 days after the completion of the quarter and that MMED submitted the balance sheet for the quarter ending September 30, 2011 in early December. He said that this was taken fiom the monthly financial statements presented to the Board each month. Director Babin stated that the ISO's purpose for the policy is to assure financial solvency and credit compliance for all market participants who execute transactions in the ISO markets. The concern is that an entity may default on a transaction and may not have sufficient resources to cure the default, in which case the cost would be socialized to all market participants. Director Babin noted that there is an additional requirement that annual audited financial statements be submitted within 120 days of the end of each entity's fiscal year. Since MMED'S fiscal year ends on June 30, this requires the audited financial statements to be submitted to the ISO by October 281h of each year. The ISO does offer an alternative to the audit that involves a CPA certifying specific financial statements that meet the ISO requirements. Director Babin discussed the alternative options with R.E. Brown, the Town's auditor, and he indicated that he can provide statements which should satisfy the ISO requirements within the 120 day timeframe (should they be retained to perform the Town's audit in FY12). Lastly, Director Babin noted that should an alternative be chosen, the ISO must approve the alternate submittal method before the submittal is actually due to meet this requirement. Old Business - Director Babin distributed a spreadsheet labeled: "Cash flow analysis Assuming Rebate of $2.2 Million to Customers in January and February 2012" He said this analysis was prepared at the request of the Board to assess the impact on cash of the $2.2 million rebate the Board was considering. Director Babin reviewed the spreadsheet and stated that the assumptions in the analysis included projections of all operating revenues and expenses and all capital expenditures through June 2013, including paying cash for the East Mansfield substation and not borrowing. He stated that even by issuing the $2.2 million rebate, it was projected that the operating cash balance would only go down to a low of $7.2 million in June 2012 and that would still allow a $2 million balance in the Depreciation Fund. Combined, MMED would still have a minimum of over $9 million in reserves, will have returned over $2 million to customers and assumed no debt for the substation. Mr. Ross had discussed ways to implement the rebate with Director Babin and Ms. Anderson. It was concluded that the best way to return the money was to reduce the monthly Generation Charge to customers. Trying to show the specific benefit for each customer as a line item on the bill would require too many modifications to the billing system and the risk of a problem developing was too great to attempt this. It was noted that this reduction will be distributed to both commercial and residential customers alike on a kWh used basis. The Finance Committee was also present and wanted to discuss the cash flow analysis that Director Babin had prepared. It was noted by Mr. Goldberg that the analysis was based on funding the entire cost of the substation from cash on hand. Mr. Goldberg and Mr. Gazzolo reminded the Board that the FinCom had previously recommended that the Board fimd half the cost of the substation, approximately $4 million, through borrowing. They reviewed their logic for making this recommendation as having future MMED customers pay the cost of the station since they will benefit from it. Motion: To rebate MMED customers $2.2 million from operating cash, to be distributed as $1.1 million on each of the January and February 2012 billing. (Kozlowski/Aptowitz) 5:0 passes Motion: To adjourn the Light Commissioners meeting at 10:40pnr and resume the Board of Selectmen meeting. (Kozlowski) 5:0 passes Signature of Clerk C Date of Approval March 14, 2012