Loading...
HomeMy WebLinkAboutmin light commission 05/11/05 . . \ ~:.c'\ ! 1./ ~_ J t'" Ii C:, f)r.:'C\CE . ""._ I r r Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting)5 '"'UN I 4 M1 9: 24 May 11, 2005 . ~ ['iAi,3 It.LD Present: Chairman Bernie Dolan; Vice Chairman Lou Amoruso; ~lk~,^,id\Y:~JJ~; Commissioner Mike McCue; Commissioner Roger Achille; Director Gary Babin; Engineer Ann Langille; Engineer Chris Cox; Line Foreman Gary D' Ambra; Office Man~ger Laurie Anderson; 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. The following reorganization took place for the Board of Selectmen: Motion: To appoint Roger Achille as Chairman of the Board of Selectmen (McCue/Dolan) Passes 5/0 Motion: To appoint Bernie Dolan as Vice Chairman of the Board of Selectmen (McCarter) Passes 5/0 Motion: To appoint David McCarter as Clerk of the Board of Selectmen (Amoruso) Passes 5/0 r The following reorganization took place for the Board of Light Commissioners: Motion: To appoint Bernie Dolan as Chairman of the Board of Light Commissioners (Amoruso/McCarter) Passes 5/0 Motion: To appoint Lou Amoruso as Vice Chairman of the Board of Light Commissioners (Dolan) Passes 5/0 Motion: To appoint David McCarter as Clerk of the Board of Light Commissioners (Amoruso) Passes 5/0 Roger Achille congratulated David McCarter and Lou Amoruso on winning the election. He also recognized and thanked Steve MacCaffrie for his years of service on the Board and for his many contributions to the Town as well as for the fine race that he ran. Motion: To approve the minutes from the March 30, 2005 meeting (Amoruso/Achille) Passes 3/0 with McCarter and McCue abstaining r Motion: To approve the minutes from the April 13, 2005 meeting (Amoruso/Achille) Passes 4/0 with McCarter abstaining . . r Director's Report Financial Statements - Director Babin presented the financial statements for January, February and March of 2005. The net income for 2005 through March was $522,446, which was $30,000 above budget. He pointed out that the balance sheet showed free cash at $1,116,431. Director Babin's minimum target for free cash is $1.5 million, which would cover 90 days expenses, excluding purchased power. ISO Market Participant Service Agreement - Director Babin explained that New England Power Pool (NEPOOL) was formed after the 1965 Blackout, in an attempt to avoid allowing conditions to develop which could lead to another blackout. At the 1975 Annual Town Meeting, a vote was passed which allowed MMED to join NEPOOL. Since then, a new Independent System Operator (ISO) has taken over management of the generation and transmission system in New England, as the Federal Energy Regulatory Commission (FERC) has directed. Since New England has probably the most highly refined transmission network in the country, FERC decided that New England was an ideal spot for implementing their plans to deregulate the electric utility market. All individual utilities have been asked to execute a contract with ISO instead ofNEPOOL since the ISO now manages the marketplace. Director Babin stated that he and Manager D' Agostino have agreed that Director Babin would be the proper person to execute the agreement, and are now asking the Board to r authorize Director Babin to sign the vote certification proposed by MMWEC. Clerk McCarter questioned whether this was just an administrative issue or a formality. Director Babin answered that this was more of an administrative issue. Manager D' Agostino added that usually the Manager would sign but he had no problem delegating the authority to Director Babin, as he would be more familiar with the ISO agreements. Vice Chairman Amoruso asked if it would require a Town Meeting vote because it did in 1975. Manager D' Agostino said it was not necessary, as the original vote was to accept the provisions of Chapter 164A. He explained that this vote was consistent with that chapter. Motion: That the Mansfield Municipal Electric Department Commission authorize the MMED Director to execute any and all agreements between the Independent System Operator (ISO New England Inc.) and the Mansfield Municipal Electric Department for the purposes of allowing the Mansfield Municipal Electric Department to participate in the New England market system in accordance with the terms of the Proposed Vote Certification, which is attached as a part of this vote (McCue/Amoruso) Passes 5/0 Collection Write-Offs - Chairman Dolan stated he wants to table any vote on this item, and that he wants to meet with the staff separately because he has a lot of questions regarding collections. He feels there is a need to come up with policies to put a stop to r' how this debt has been allowed to accumulate. , . r Director Babin explained that the staff is recommending writing off a large number of closed accounts, some of which go back as far as 1997. Director Babin indicated he first became aware of this debt accrual during the final stages of the 2003 audit in late 2004. The staff was then directed by Director Babin to make one final effort at collecting on these accounts over the last six months. Having done that and receiving minimal collections, MMED now feels they have exhausted all efforts at collection. This does not mean, however, that MMED would stop trying to collect these outstanding balances. These accounts could also be sent to a collection agency, if the Board so chooses, but chances of collection at this point would be slim given the aging on the accounts. The amount which the staff is requesting be written off is $271,187.48, which covers closed accounts from 1997 through 2003. This amount is now being carried on the balance sheet as a receivable. Director Babin said authorizing the write off of this amount would reduce accounts receivable by $271,187.48, and likewise, the $365,000 reserve for uncollectibles on the balance sheet would be reduced by the same amount. r He explained that the auditors recommend to MMED each year the amount that should be reserved for uncollectibles. The last audit saw a large increase in this item as the reserve for uncollectible accounts for 12/31/02 was $200,000, but for 12/31/03 it was $365,000, an increase of 82.5%. Director Babin said he would like to clean up this item and get the balance sheet in a better position of reflecting MMED's current assets, as he did not feel that classifying this amount in receivables accurately reflected MMED's ability to collect this debt. Given the questions surrounding how this situation developed, however, and the need for the Board to have better information, Director Babin said this request to write off these balances could wait so that the staff could better educate the Board. Commissioner McCue said he was in agreement with Chairman Dolan. Vice Chairman Amoruso made the comment that if something is written off, you can still try and collect it. He wondered how individuals could end up with a balance of $2,000, and commented it must have been a long period of time without getting any money from them. He said he'd be interested to see what MMED will do going forward. He questioned whether the MMED should collect deposits and knows it's an administrative pain in the neck, but wonders, looking at this, if it might not be appropriate. r Director Babin explained there are limitations on the staff, some significant and imposed by the Massachusetts Department of Telecommunications and Energy (DTE), in MMED's ability to collect on outstanding debt. For example, MMED is prohibited by the DTE from shutting off residential customers from November 15 to April 15. Some customers are also protected by the DTE. If they have the appropriate paperwork filed with MMED, this prevents MMED from being able to pull their meter for non-payment " r for an indefinite period of time, as long as the paperwork is current. Director Babin added that the amount of receivables determined to be uncollectible is less than 'i4 of 1 % of total billings over this period, although he acknowledged that it is still a significant amount of money. Chairman Dolan wondered how someone gets to the point that they owe $6,000. Vice Chairman Amoruso commented there must be some other solution other than giving them the electricity for free. Clerk McCarter commented that most on the list seemed to be apartments. Director Babin said MMED does have the ability to lien homeowners, which significantly increases MMED's ability to collect, but apartment dwellers are a problem. He reiterated that MMED has collection policies in place. Director Babin also noted that Wednesdays are shut off days and that MMED has a very formal notification process in place to perform service disconnects for non-payment from April 15 to November 15. In fact, Director Babin stated that one of the things that impressed him when he came to MMED a year ago was the consistency of the collections process to minimize bad debt, with shutoffs being scheduled every Wednesday during the period April 15 through November 15. r Vice Chairman Amoruso agreed that the receivables are falsely and misleadingly increased by these closed accounts. He also noted that, in some cases, he knows these people and where they reside. Town Manager D' Agostino commented that this information would be helpful in collecting on these balances. Clerk McCarter said he realizes Mansfield has grown, but in 1997 and 1998, which wasn't too long ago, there were far fewer accounts listed as uncollectible on MMED's listings. He noted the dramatic increase since then. Director Babin said his understanding is that none of the current customer service staff were employed by MMED back then, but suspects that a lot of outstanding debt was written off by the staff, and these are the only remaining accounts that have not been written off. Commissioner McCue asked if there is information going back to 1996 showing the amounts being charged off. Director Babin and Office Manager Laurie Anderson did not believe that there is. Commissioner McCue suggested that perhaps a policy be set that after a certain amount of time, an account goes into the uncollectible account. Director Babin agreed with that concept. He indicated that the trail for a closed account is considered "hot" from a collections agency perspective for about ninety days but after 1- 2 years it is probably uncollectible. He stated MMED does have a strong collections program but some customers know all the tricks, such as being protected by the DTE. Shutting off is the ultimate weapon but it can only be done between April and November. Commissioner McCue suggested coming back to the next meeting and setting a policy so the Board isn't going through this every few years. Vice Chairman Amoruso said he supported the proposal and agreed the Board could talk about policies and procedures. r " r Retail Rate Comparison for March 2005 - Director Babin presented a retail rate comparison for Massachusetts electric utilities covering the month March 2005. He said he had given the Board a similar analysis one year ago for March 2004. The March 2005 time frame was particularly relevant since it was the first month in which the investor-owned utilities (IOUs) no longer offered a subsidized "standard offer" service for the power component of the bill. Instead, they were now required to offer what is referred to as "basic" service, which is far more reflective of the current market for power. As a result, IOUs had significant rate increases which took effect in March 2005, which ranged from 3% to 13% depending on the utility, Director Babin said that since March 2004, MMED's relative rate position has deteriorated. This is wholly due to the increase in the PPCA from 2.65 cents to 3.65 cents, effective in October 2004. Director Babin explained this increase was necessary as MMED had been under recovering the cost of purchased power with a 2.65 cent PPCA. r Director Babin noted, however, that MMED's rates are very competitive with the communities that surround Mansfield. He pointed out that MMED significantly undersells Boston Edison, which services Foxboro and Sharon, in all 9 categories compared. MMED undersells Mass Electric, which services Easton and Norton, in 8 out of 9 categories. Although MMED does not undersell North Attleboro Electric in any category, the difference in the rates is a marginal difference of less than one half cent in 8 of the 9 categories. Overall, it is clear from the ranking of the utilities that municipal light plants continue to offer better rates than IOUs, as well as better reliability and customer service. Commissioner McCue wondered if apples were being compared to apples and oranges to oranges, He stated that MMED is obviously good compared to investor owned utilities but how about as compared to other municipals. He noted that MMED ranked better than only 3 or 4 other municipals in most of the comparisons. Director Babin stated that out of 40 municipals, 36 are included in this comparison. The reason that MMED did not fare well relative to those utilities was due to its power supply costs. The Purchase Power Agreements (PP A), which MMED entered into many years ago with MMWEC, had significant costs allocated for the payment of the bonds associated with purchase of those plants. This is what has really driven MMED's power supply costs. Director Babin pointed out that over 77% of MMED's operating costs are power supply. He explained that while the average rate for MMED's consumers is 10 or 10.5 cents, approximately 8.5 cents of that is the cost of power supply. As a general matter, Director Babin pointed out that IOU's have higher costs of operation than municipal light plants. In other words, municipal light plants can operate more efficiently. The downside, however, is that power supply contracts that were entered into many years ago, for which MMED is now paying debt service, are fixed costs that aren't going away until the debt service is paid. .r' " ., " r Clerk McCarter questioned Director Babin as to what is Wellesley' s secret to its low rates, as evidenced by the rate comparison charts. It was noted that Director Babin worked in Wellesley for 20 years until joining MMED last year. Director Babin answered that the timing for going out into the power supply market is the key. He said that Wellesley went into the market at the right time, in mid-2000 when fossil fuel prices were at an all time low (when adjusted for inflation), and that future market prices reflected those low fossil fuel prices. Wellesley's contract, however, will expire in September 2007 and the replacement cost for that power will be at least 2 cents per kWh higher. This will cause them to raise rates in all likelihood, Director Babin noted. Director Babin stated that MMED will be facing important power supply decisions within a few years. The Calpine contract runs through 2008 and accounts for approximately 25% of Mansfield's energy. MMED is starting to entertain proposals from MMWEC for the replacement of the Calpine contract. At a future meeting, Director Babin plans to layout for the Board MMED's debt service requirements for its MMWEC projects. He explained that MMED won't see any relief until the debt service on the big contracts, Seabrook for example, starts to run out in 2014. Old and New Business r There was none. Adjournment Motion: To adjourn the Light Commissioner's meeting at 8:15 Passes 5/0 Si r r PROPOSED VOTE CERTIFICATE I, the Secretary of the Municipal Light Board of the Town of Mansfield, Massachusetts hereby certify that at a meeting of the board held on ~~ II , 2005 of which meeting all members of the board were duly notified and at which a quorum was present, the following vote was passed by a vote of ~ to D , all of which appears in the official records of the board in my custody: VOTED: (1) that the city/town, acting by and through its municipal light board, hereby acknowledges that certain Settlement agreement Resolving Specific Issues dated August 20, 2004 by and among the New England Power Pool r (''NEPOOL''), ISO New England, Inc. ("ISO"), the Filing Party Transmission Owners, the Settling Publicly Owned Entities (including the Massachusetts Municipal Wholesale Electric Company ("MMWEC") on its own behalf as a NEPOOL participant and on behalf of its members as NEPOOL Participants) and certain other NEPOOL Participants ("Settlement Agreement"), including without limitation Paragraph 5(d) thereof, which provides, among other things, that the Settling Publicly Owned Entities shall seek an affirmative declaratory ruling from the Massachusetts courts regarding whether their participation in the RTO for New England conforms with the requirements of G.L. c. 164A ("Declaratory Ruling"); and r r' (2) that, pursuant to the Settlement Agreement, the director of the municipal light department is hereby authorized to execute and deliver on behalf of the city/town acting by and through its municipal light department as it is a member of NEPOOL, the Market Participant Service Agreement ("MPSA") with ISO New England, Inc., substantially in the form of the document presented at this meeting and attached hereto, which is hereby made a part of the permanent records of this meeting; and r' (3) that the foregoing authorization is subject to the provisions of the Settlement Agreement and contingent upon the Declaratory Ruling and that the director's execution and delivery of the MPSA shall not constitute a waiver of the municipal light department's rights with respect to the Settlement Agreement, G.L. c. 164A, the MPSA or the Declaratory Ruling; and (4) that all action previously taken by the director of the municipal light department and MMWEC consistent with the purposes of this vote are hereby ratified and confirmed. I further certify that the above votes were taken at meeting open to the public, that notices stating the place, date, and time of the meeting was filed with the City/Town Clerk and a copy thereof was posted in the offices of the City/Town Clerk on the principal official bulleting board of the city/town at least 48 hours, including Saturdays but not Sundays or legal holidays, prior to the time of the meeting and remained so posted at the time of the meeting, that no deliberation or ,.-.. r' r r' decisions in connection with the above votes were taken in executive session, and that the official record of the meeting was or will be made available to the public promptly and will remain so available to the public, all in accordance with Chapter 39, Section 23B of the Massachusetts General Laws, as amended. ~~ Secre to the Municipal Light Board Dated: 9,1/1-;- --; Q:\NJS\009890S I \GENERAL\Certificate Mansfield.doc