Loading...
HomeMy WebLinkAboutmin light commission 09/14/05 '-i .~ \1 ,; ',I ... ,.~",' . ._... . " >'(':; PH-ICE r Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting September 14, 2005 oc'r \ 3 Pr'i I: ~ 9 .,,' . r""; I't.,." it.UJ Present: Chainnan Bernie Dolan; Vice Chainnan Louis P. 1A&.8tU~J{1~~~r~vid McCarter; Commissioner Roger Achille; Director Gary Babin; Engineer Ann Langille; Line Foreman Gary D' Ambra; Financial Assistant Jacqueline Lee and Manager John D' Agostino Light Commissioners Meeting The meeting was called to order at 7:45, followed by the Pledge of Allegiance. Motion: To approve the minutes from July 6, 2005 (Amoruso/McCarter) Passes 3/0/1 (Achille abstaining) Director's Report Financial Statements for Fiscal Year 2005 - Director Babin presented MMED's financial statements for the period from January to June 2005. This was the transitional, 6 month fiscal year so that MMED can align it's fiscal year with that of the Town, as voted by the Board on October 13, 2004,. r Director Babin first spoke about the FY05 Capital Budget. The FY05 Capital Budget estimate was $843,618 and the actual expense was $759,190, meaning MMED was $84,428 below budget. Engineer Langille was asked to go into further detail regarding the capital projects. She reviewed the Capital Budget Summary - Budget to Actual Comparison chart which had been distributed to the Board. She said she'd like to expand on the comments contained in that document. Engineer Langille began by explaining the lessons that were learned by the staff from this capital budget process. The first lesson was to allot adequate time to complete projects that are carried over from one fiscal year to the next when planning the work that can be completed in a year. One issue that came up in the FY05 budget was that the staff did not account for the amount of time needed to complete the FY04 projects which carried over into FY05. While developing the FY06 budget, an allowance was made for projects that would be carried over from the FY05 six month budget that the staff felt MMED wouldn't be able to complete on time. The second lesson learned was to make sure projects are doable and are within the ability of MMED's labor force to complete. Engineer Langille stated that not all factors that influence MMED's ability to complete its planned work are within MMED's control, such as weather, customer needs and unanticipated maintenance items. r' The third lesson learned was the experience gained in refining estimating techniques. Engineer Langille explained it has been a challenge to estimate the material and labor required to complete large projects. MMED now had a track record to go by. T .. r Engineer Langille then highlighted some of the major capital projects that MMED did accomplish. Eastman Street Underground Primary Upgrade was a significant project for MMED and is now complete, although the cost to complete the work was underestimated. Clerk McCarter questioned whether this project was, in an accounting sense, included in the six month budget. Director Babin answered that it was. Engineer Langille said the underground work on Williams Street was completed. The 1 W3 Gilbert Street to School Street primary upgrade was carried over into FY06 and is almost completed. She also explained that the porcelain cutout replacement project, which has been ongoing for more than two years, ended up with MMED replacing more cutouts than originally planned in FY05. Town Manager D' Agostino reiterated that MMED is in a two phase process with the transition to its new fiscal year. The first phase was the transitional six month interim budget for the period ending June 30, 2005. He explained that the second phase was MMED operating on its FY06 budget, which runs from July 1, 2005 through June 30, 2006. Director Babin confirmed that MMED's FY06 budget now aligned MMED with the Town budget cycle. Director Babin said he also wanted to mention that the capital budgeting process had greatly improved MMED's cost accounting. This was basically out of necessity because of the need to track costs of projects to compare estimates with actual expenditures. r Director Babin also indicated that MMED staff anticipates having to revisit FY06 budget and modify it, in order to include the specific FY05 projects that had been deferred to FY06, since there was not sufficient time to complete all the work that had been planned. The Board would then be presented with a revised budget for its consideration. Director Babin then gave an overview of the FY05 Operating Budget Summary - Budget to Actual Comparison. In total, MMED was $390,000, or 3.2%, under budget. The bulk of the savings was due to the reduced cost for purchased power since kilowatthour energy sales did not meet projections. Distribution expense was 2.2% over budget, transmission expense was 1.2% under budget and customer service was 3.5% over budget. A&G (Administrative & General) was 31 % under budget due to less outside services being employed than budgeted and also due to a reduction in personal services expenses because of CFO Stoyle's resignation in January. Overall, the cost of labor was $45,000 under budget, again due to the savings from CFO Stoyle's resignation. Expenses were down $375,000 because of reduced purchased power expenses. Director Babin then reviewed the lessons learned from the operating budget process. First, the MMED staff needs to pay greater attention to the allocation of labor and expenses between sub-accounts. Secondly, the 60% overhead factor applied to straight time labor proved to be an accurate estimate as the actual overhead rate calculated out to be 64%. The third thing the staff learned is they need to continue working on their cost accounting to allow for more accurate reporting. A proposal from NDS, the supplier of r' MMED's general ledger software, to expand the cost accounting system from 6 to 9 digits is now being considered. T _ r Director Babin stated that some costs are within MMED's direct control but many are not. Examples of expenses not in MMED's control are transmission and purchased power costs. Three things that are in MMED's control, however, are distribution, customer account and A&G expenses. DireCtor Babin pointed out that these three controllable expense areas came in under budget by approximately $170,000 in total. Director Babin said he was pleased with this aspect of the budget and that, overall, he was very pleased with the budget results in general, as it was the staffs first attempt to produce such a detailed budget and monitor it in this fashion. Security Deposit and Collection Procedure Update - Director Babin gave the Board an update on the residential security deposit policy and collection procedures which were approved at the July 6 Board meeting. r- He said that for the most part, MMED had not experienced any problems with. implementing its deposit policy. In fact, he felt it had gone better than expected. Most of the negative feedback had come from landlords with electric heated apartments, for which the deposit to set up an electric account is $500. Their criticism was that the deposit placed them at a disadvantage in the rental market. Director Babin explained that MMED could ask for a larger deposit for electric heated units, as one months electric bill for an electric heated apartment could be a several hundred dollars, since MMED is allowed under M.G.L. Chapter 164, Section 58A to collect a deposit which would cover three months worth of electricity. The MMED staff felt, however, that would have been excessive and that $500 for an electric heat account was deemed to be adequate. Director Babin said he has spoken with all landlords that have called the MMED office regarding the policy and has tried to work with them. He said he told them that the deposit policy was implemented at the Board's initiative because MMED had to write off $271,187.48 in bad debt. Clerk McCarter commented that the landlords are afraid they will not be competitive in the rental market with neighboring towns. Director Babin said that MMED is not aware of any instances where someone has been unable to sign up for service because they are unable to pay the deposit. Vice Chairman Amoruso commented that the policy may need some tweaking and perhaps it should be looked at when the next budget is discussed. Director Babin said he wanted to let things settle before any changes were made to the policy, and believed from the beginning there should be no knee-jerk reaction changes made as a result of criticism of the policy. He did agree with revisiting it at a later date. Director Babin then reviewed the new collections procedure for closed accounts. Letters are sent to customers of unpaid closed accounts at 30, 40 and 50 day intervals, with each letter being a little more urgent, before the account is referred to collections. As of September 8, MMED has received over $43,600 in revenue out of $65,000 in receivables on accounts that have been closed since July 1. The staff feels the letters have had some impact. r- Director Babin told the Board that Action Collection Agency (ACA) of Middleboro has been retained to follow up on MMED's collection efforts. He said the staff has given .. ... r' them all unpaid 2002, 2003 and 2004 closed accounts to try to collect, and now will now routinely refer to them 2005 closed accounts after the 50 day letter has been sent. Commissioner Achille asked if MMED had considered going to small claims court for these outstanding receivables. Director Babin stated this course of action had been discussed previously but that MMED had shied away from legal action since it presented MMED in a negative light. Of course, it could possibly be considered in the future. Mansfield High School Robotics Program- Director Babin discussed a letter that MMED had received from Dan Gracia, President of Mansfield High School FIRST Robotics Team, thanking them for their past sponsorship and asking once again for their support for the current school year. Director Babin recommended that the Board make a $5,000 contribution, consistent with prior years. Director Babin added that Engineer Langille has again generously offered to continue working with the students. Motion: That the Mansfield Municipal Electric Department contribute $5000 from unappropriated earned surplus, to be recorded as a below the line expense, to the Town of Mansfield for the purpose of donating this money to the Mansfield High School Robotics Program (McCarter/Amoruso) Passes 4/0 r New Record Peak Demand for MMED - On July 27, 2005, MMED established a new system peak demand of 52,474 kW. This broke the previous week's record peak demand, established on July 19, of 51,034 kW. Director Babin explained that a system peak is the maximum amount of energy delivered by the system in anyone hour period. Prior to this year, the peak had been 49,262 kW, reached on August 22, 2003. Based on these figures, the peak has increased 6.5% between 2003 and 2005. This is a significant increase which Director Babin believes is representative ofthe growth ofthe Town. Director Babin indicated that another factor to take into account was that when the peak was experienced in 2003, ADM Cocoa was not generating it's own power. ADM is on an interruptible rate tariff, which means MMED can ask them to generate their own power if necessary, which MMED requested from ADM 12 times this summer. At the time of the July 27, 2005 peak, ADM's self generation shaved 1,300 kilowatts off MMED's system. Adjusting MMED's peak for ADM's load, the revised peak would have been 53,734 kW, which means that MMED's peak actually increased 9.2% over the 2003 peak. Finally, Director Babin indicated that the New England electric system also experienced an all time peak on July 27 as well. Director Babin said that MMED is continuing to address this load growth issue through its internal construction to meet the demand and by studying the feasibility of the proposed East Mansfield Substation. Director Babin was questioned about brown-outs and explained a brown-out is when MMED is ordered by ISO New England to implement reduced voltage on its system for a certain period of time to help get through a difficult period. He added that this would be New England wide, not just Mansfield. r Clerk McCarter inquired as to whether MMED has set aside any money for the East Mansfield Substation. Director Babin answered that with all the upward pressure on rates because of the cost of fossil fuel, he did not think MMED would be able to set aside the r if I . '. ~ r' cash to pay for the proposed substation. Director Babin said the East Mansfield substation won't be paid for internally, like Gilbert Street Substation was. He expects MMED will have to borrow to fund the station and believes this is not necessarily a bad thing. Town Manager D' Agostino reiterated that borrowing was definitely not a bad way to fund projects. He added that some money would possibly come from the depreciation fund but most of it would be borrowed. Clerk McCarter wondered if there was any way MMED could put some money away for the substation. Director Babin answered that MMED is currently building up the depreciation fund. He also said MMED has been trying to build up free cash since last year when the construction of the Gilbert St. Substation created a cash drain on MMED, from which it has been trying to recover ever SInce. Final Payment of Stony Brook Debt - Director Babin notified the Board that the bonds issued in 1980 by MMWEC for the Stony Brook Peaking Unit, in which MMED is a participant, were retired in August. MMED owns 7.22% of the plants output or 12.27 MW. MMED was paying approximately $370,000 annually for the debt service on these bonds. r" The next such milestone will occur in 2008 when the Stony Brook Intermediate Plant bonds will be retired. Those bond payments now represent about $720,000 annually for MMED. Director Babin commented that the fixed costs associated with its ownership of these plants drives MMED's rates and, as a result, there's not much MMED can do to lower its power supply costs until these bonds start to become paid off. MMED staff performed a presentation on this subject at the June 2005 meeting. Director Babin did note that he believes MMED's ownership of generation facilities has positioned MMED well in the newly emerging power supply market. Annual Safety Luncheon - Director Babin reminded the Board that the Annual Safety Luncheon will be held on Friday, October 21, 2005 at 11 :30AM at the Mansfield Council on Aging. Ray Gouley will make a presentation on electrical safety. Donna Fitch from Energy New England will also be on hand to present information on energy conservation. Director Babin also said he intends to discuss with the school department MMED possibly making safety presentations for the students. Old and New Business There was no old or new business. Adjournment Motion: To adjourn the Light Commissioner's meeting at 8:40 Passes 4/0 .--- Respectfu y s mitted: Jacqueline Lee 10/12/05 /~~ Signature of Clerk r'1