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HomeMy WebLinkAboutmin light commission 10/16/06 ti! (' trfc r.;,"", E' J V. ':, ;', '~J, 'F'.o ~ 06 a '. . " "r., - ~' 'E"C 14 . '/!/c.~ JJ l"', 4/f 8'J t 114SS;/~tJE.LD ' S Present: Chairman Michael McCue; Vice Chairman Louis P. Amoruso; Commissiofgr,s David McCarter; Commissioner Ann Baldwin; Director Gary Babin; Engineer Ann Langille; Engineer Chris Cox; Line Foreman Gary D' Ambra; Financial Assistant Jacqueline Lee and Town Manager John D' Agostino Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting October 16, 2006 Light Commissioner Meeting The meeting was called to order at 7:30 PM. Motion: To approve the minutes of September 18, 2006 (Amoruso/McCarter) Passes 3/0/1 (Commissioner Baldwin abstained) Director's Report (' Board Discussion with Mayhew Seavey Regarding Power Supply Contracts - Director Babin introduced Mayhew Seavey to the Board, explaining to them that Mr. Seavey served as MMED's power supply consultant and was at the meeting to begin educating the Board on power supply contracts. Director Babin also said that the discussion of electric rates requested by the Board at the September meeting was being deferred until the next Board meeting as Clerk Dentino would not be in attendance at this meeting. Director Babin explained that since Mr. Seavey was already scheduled to attend, he thought it would be beneficial that he come to this meeting to begin the process of familiarizing the Board with the power supply market. Director Babin mentioned that MMED's contract with Dominion expired at the end of 2008, so it was time to begin preparing to replace that contract and since the natural gas commodity market prices were now extremely low, that MMED might consider executing a contract in the near future. Commissioner McCue asked that since gas prices had already dropped, whether MMED had missed the window of opportunity. Mr. Seavey responded that yes, MMED had missed the lowest prices and they were on the way up but that gas prices are still good now compared to months ago. He explained that the price of electricity is very much tied to the price of gas. Mr. Seavey went on to explain there are two kinds of spot markets; the day ahead spot market and the real time spot market. The day ahead spot market is a less volatile market but results in slightly higher costs and is financially binding. The real time market has slightly lower costs, is more volatile but in the long run, results in the lowest price. Mr. Seavey stated that some buyers don't like the market's volatility so most hedge their costs by going out and buying a long term contract(s) from another power supplier as a significant portion of their portfolio. He advised that the overall goal is to reduce the amount of volatility in your power supply, which results in more stable prices. (' (' Mr. Seavey explained two types of power contracts that are currently available. The first one is a fixed price contract where the price is known for the remainder of the contract. The other is a heat rate contract, which is similar to a variable rate mortgage. There can be no cap with this because electricity is not a well-developed commodity market. By entering into a heat rate contract you would get energy at the lowest price in the market. Mr. Seavey said there are risks you take on by contracting in the market and the best protection is to spread the risk with more than one contract. His advice is to have a balanced portfolio. He said you do not want to lock in at today's price as it will invariably be higher and present a risk in the event prices go down. In many ways, a heat rate contract is a desirable alternative. His recommendation to the Board is to think about replacing the Dominion contract with a heat rate contract as opposed to a fixed price contract. Between now and 2009 when the price starts to drop is when you would begin to lock in on a price. Mr. Seavey indicated that several of his clients have sent out requests for pricing proposals and that he was currently analyzing them. He mentioned Dominion, Constellation, J.P. Morgan and W.P.S. as prospective bidders, saying they are all credit worthy companies and all provide credit ratings. W.P.S. has been spear-heading the heat rate contracts and is currently the most competitive. (' Director Babin reiterated that he wants to start educating the Board regarding power contracts. He said he will be requesting at some point that the Board vote to allow Light Department Manager D' Agostino the authority to enter into a power contract when the time is right in order to take advantage of the window of opportunity should it present itself. He wants the Board to start thinking about this process but said he's not asking them to do anything this evening. However, Director Babin stated that he doesn't want to wait until 2008 to enter into the process and possibly be forced to enter into a contract that is not advantageous. Mr. Seavey advised all Board members that their authorization to allow the staff to enter into a contract be in place because pricing offers are good for only a couple of hours in the commodities market. He thinks the Board should begin thinking about having a written policy or strategy so that the Light Department Manager or Director can lock in on a price. Vice Chairman Amoruso inquired as to how much MMED buys in the spot market. Mr. Seavey answered that about 20% is in the open market. He also noted, however, that most of MMED's open position is hedged by its ownership in the MMWEC Stony Brook units which provide a price cap for MMED. He calculated that only about I % of MMED's total load is unhedged. Financial Statements for July and August 2006 - Director Babin reviewed the financial statements for July and August 2006. He stated that the net operating income is 20% higher than last year, due in large part to record energy sales in August. He pointed out that had MMED not had the Calpine rate stabilization fund to draw down to make up the difference in price between the Dominion contract and the Calpine contract, MMED would have had a negative net income year-to-date of $265,681. He said MMED's free cash position of (' ..,. , (' $1,278,554 is still less than what he would like to see. Director Babin also reported that energy sales were the highest ever in August, up 10% from August 2005. Director Babin pointed out that purchased power costs have also gone up 35%. A portion of this increase is due to the costs incurred for the Canal RMR decision by ISO New England while some is due to the fact that MMED has purchased 5% more energy than last year. Chronology of Proposed East Mansfield Substation Project - Director Babin began by informing the Board that MMED is preparing to issue a Request for Proposals (RFP) for the feasibility analysis of building a new substation in East Mansfield, which will be issued in about another week. He anticipates having the results of the study in April or May 2007. Engineer Cox then gave a summary of the history of the proposed East Mansfield substation. In 1998-1999, MMED considered modernizing and expanding Gilbert St. Substation or building a new substation. The decision was made to expand Gilbert St. In 2001-2005, Gilbert St. Substation was expanded and modernized in two phases and in 2005 the second phase was completed. (' He then went into further detail by explaining that in 2001 the system peak jumped significantly and that the Director at that time began looking into building a new substation. In 2003, National Grid was notified that MMED was interested in building a new substation. MMED worked with National Grid on a study, located a parcel of land owned by National Grid that seemed to be the best location and conducted the first neighborhood meeting on April 20, 2004. The residents who attended the meeting had strong opinions against the proposed substation and concerns regarding EMF, and wanted MMED to consider other parcels ofland. Four other parcels were considered. The first was parcel 39-38, located on Bird Road and owned by National Grid. The second parcel was parcel 39-8, located directly across from the property owned by National Grid but owned by the Town. Parcel 39-10, the third parcel, was located directly behind the National Grid parcel. The fourth parcel was Parcel 39-27 located off Maple Street and owned by the Town of Mansfield. On July 20, 2004 MMED held their second neighborhood meeting where there were more of the same concerns as at the first meeting. After the meeting MMED staff made home visits and took EMF readings for the customers. Also, after this meeting, an abutter came forward and offered his own parcel of land to be considered. In September 2004 the Board instructed MMED staff to evaluate alternative substation designs. In early 2005, MMED commenced its own planning study and in August 2005 went before the Conservation Commission to determine the feasibility of using Parcel 39-8. The Conservation Commission, however, opposed lifting restrictions for that parcel. (' . " (' Engineer Cox stated that in the following weeks, RFPs would be reviewed for preparation of a planning study to forecast Mansfield load growth as well as to evaluate potential substation sites. Chairman McCue questioned as to whether the EMF expert should talk to the Board. Director Babin answered he thought that might be helpful. Updates to Policy Manuals - Engineer Cox outlined proposed changes to MMED's policy manuals. The first change was to the tree trimming policy. One line was removed from Section 210 "Tree or limb removals on private property shall be the responsibility of the landowner". This was to reflect the need to trim around MMED facilities on private property. This allows MMED to reserve the right to trim its facilities on private property and the homeowner is not solely responsible any longer. Director Babin interjected that this was advantageous to both MMED and the customer. Motion: To amend Section 210 (Tree Trimming) of MMED's Information and Requirements for Electric Service policy to allow MMED to reserve the right to trim around MMED facilities on private property (McCarter/Amoruso) Passes 4/0 The second change was regarding a permanent connection charge. The revision now includes a $150 charge for a new underground service connection. (' Motion: To amend Section 1008 (Permanent Connection Charge) of MMED's Information and Requirements for Electric Service policy to include a $150 charge for a new underground service connection (McCarterlBaldwin) Passes 4/0 There were also three changes made to Section 501 of the Residential Customer Deposit Policy. Motion: To approve the addition of three new subsections to the Residential Customer Deposit Policy. The first states that if a security deposit is made by check, the account is not considered active until the check clears. The second addition is that after one year of service, the customer has the right to appeal to have the amount of their deposit reduced based on energy use in the prior year. The third addition takes into account that when the customer of record dies, the deposit will be refunded to their estate. (AmorusolMcCarter) Passes 4/0 Commissioner McCarter stated that the Board needs to take a look at requesting deposits from commercial customers after a situation that had just recently transpired with a commercial account. r Update on Status of Canal Generating Station Issue- Director Babin stated that he had distributed to the Board copies of all the correspondence he had received from Barney Frank's office, the DTE and Senator Kerry's office regarding the Canal Generating Station issue. The suggestion was also made to have a letter on MMED's website that customers could download and send on their own. ..,. , ~ , ,. (' (' r Old and New Business- Director Babin wanted to respond to a question asked by Commissioner McCarter at the previous meeting regarding the disposal of old vehicles when new ones are purchased. He informed Commissioner McCarter that the digger-derrick truck that had been replaced was eleven years old and had a trade-in value of$17,000. Director Babin stated that the Board had not yet taken a formal vote for entering into a three year contract with the auditor R.E. Brown. This is so that there will be a single audit function for both the Town and the Light Dept. Motion: To approve the three year contract with auditor R.E. Brown (AmorusolMcCarter) Passes 4/0 Adjournment Motion: To adjourn the Light Commissioner's meeting at 9:10 Passes 4/0 ~ Date of Approval ." ,