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HomeMy WebLinkAboutmin light comm 071607 Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting July 16, 2007 P EI\/EO !:" r Ire- SIP I 8 PIl 3: 09 . Ii... c._U Present: Chairman David McCarter; Vice Chairman George Dentino; rt~~~~f~i)dUe?C{1hS Amoruso; Director Gary Babin; Line Foreman Gary D' Ambra; Staff Accountant Ken Thomson; Engineer Ann Langille; Engineer Chris Cox; Financial Assistant Jacqueline Lee and Town Manager John D' Agostino Light Commissioner Meeting The meeting was called to order at 7:35 PM followed by the Pledge of Allegiance. Motion: To approve the minutes of June 18, 2007 (AmorusolDentino) Passes 3/0 Director's Report Settlement of Canal RMR Issue - Director Babin reported that a settlement has been reached in the Canal litigation and MMED will be receiving a $419,000 settlement. In an Executive Session in February 2007 the Board voted to allow the MMED staff to accept a tentative settlement consistent with the parameters described in that meeting, which the staff did. Director Babin explained that this settlement will allow MMED to lower the PPCA by 1 cent from 5.0 cents to 4.0 cents for two months, effective for the August and September billing. MMED will, however, still maintain rights to undertake litigation for charges from January 2008 forward. Motion: To release the minutes of the Mansfield Municipal Light Board Executive Session from February 14,2007, which were previously approved on April 9, 2007. (AmorusolDentino) Passes 3/0 Cost of Service Study and Rate Design- Mayhew Seavey from PLM returned to address the Board, as requested, with three different scenarios for rate design; rates producing a rate of return of 5%, 6% and 7% respectively, with no more than a 1 % increase to the residential rate. This also includes a 0% rate of return (ROR) on the municipal rate. In the first scenario of a 5% rate of return, the overall revenue increase would be 0.6%. The municipal rate would be decreased by 8.6% while all other rate classes would increase by 0.9%. The residential rate of return would be 0.3% in this case. In the second scenario of a 6% rate of return, the overall revenue increase would be 1.6%. The municipal rate would again be decreased by 8.6%, the residential rate would be increased by 1 % and all other classes would increase by 2.7%. The residential rate of return in this scenario would also be 0.3%. In the third scenario of a 7% rate of return, the overall revenue increase is 2.8%. The municipal rate would again be decreased by 8.6%. The residential rate would be increased by 1 % while all other classes would increase by 4.7%. The residential rate of return in this scenario is also 0.3%. Vice Chairman Dentino noted that in all three cases the municipal rate went down while the residential rate increased. He pointed out that all other rate classes are subsidizing the municipal side by being charged more through the meter. Director Babin said that the staff and consultant were doing what they had been asked to do by the Board. They were presenting the three scenarios that had been requested by the Board. He reiterated they were presenting them, not recommending them. Commissioner Amoruso agreed that Mr. Seavey and Director Babin had done what they had been asked to do. He also suggested bringing the municipal rate to a 4% rate ofreturn (ROR). Chairman McCarter asked Mr. Seavey what he saw in terms of the municipal rate of return at other Light Departments. Mr. Seavey answered that approximately half of the Light Departments he has seen have treated the municipal side as a commercial customer while the other half design rates for a very small amount of return from their municipal side. Chairman McCarter asked Director Babin about his time frame, pointing out that there were only three Board members present that evening. Director Babin answered that he could come back to the Board again in September and that they could also have a rate hearing then. Mr. Seavey said that he would like to get a sense from the Board that evening of what they wanted as it would be problematic if the staff came back in September with rates for the public hearing but the Board was thinking differently. He also made the suggestion of calling a special meeting specifically for the public hearing on rates. Vice Chairman Dentino said that he is going to do some research because he believes they need to have a public rate hearing ahead of time, instead of informing the public after the Board has already made a decision. Mr. Seavey addressed the issue of the Prompt Payment Discount. When compared to the unbundled bill, the amount of the Prompt Payment Discount calculated under the new rates will be reduced by half as it is applied only to the distribution charge. The first option presented by Mr. Seavey is to keep the 10% discount on the Distribution Charge only, which will make the discount less and potentially increase receivables. The second option is to increase the discount to 20% on the Distribution Charge which would preserve the present level of discount. This, however, creates an appearance issue with a large percentage discount on one portion of the bill. The third option is to decrease the discount to 5% and apply it to the entire bill which would preserve the present level of discount. It would, unfortunately, create an accounting issue in reconciling purchased power cost recovery. Mr. Seavey is recommending the second option. ,--., Mr. Seavey then explained the two options for the street light rate under M.G.L. Chapter 164. The first option is a formula defined in the statutes and based on last year's average operating expense plus depreciation and interest on debt service. This yields a rate of 12.37 cents based on CY06 data. The other option is the cost of service rate which yields a rate of 17.73 cents at a 0% rate of return. MMED' s present rate yields a negative 4.7% rate ofreturn. Mr. Seavey recommends the formula rate. Mr. Seavey then reviewed security lighting rates. He stated that MMED should not be losing money on security lighting, but unfortunately they are. He said that present rates produce a negative 3% rate of return. The proposed rate is a 12% increase and will produce a 0.4% rate of return without exceeding Mass Electric rates. Director Babin stated that he was also looking to eliminate the residential off-peak rate class which is a rate class consisting of eight customers who were previously grandfathered. The off-peak meter records usage from llpm-7am only and often requires a meter person to go out and re-set the clock on the meter after outages. He says he is considering calling these customers to see how they feel about the elimination of this rate class. Mr. Seavey wondered if it was cost effective to maintain special billing for eight customers. Director Babin said he was considering a possible one time credit for the eight customers. Commissioner Amoruso said that he had a problem with the $4 monthly customer charge, if for example a customer closed their house for the summer, they would still be charged. Director Babin responded that MMED would still have to read the meter and produce a bill for that customer whether their house was closed for the summer or not so those costs would be incurred. All three ofthe Board members that were present said they would support a 4% rate of return on the municipal class and also a 20% discount on the distribution charge. It was decided that Mr. Seavey would come back to the Board with three sets of tariffs for the Board's consideration and that at some point there would be a public rate hearing. Vice Chairman Dentino commented that the public is interested in the dollar impact. Chairman McCarter said the Board wants to know what the cost is going to be for a typical customer. Financial Statements - May 2007 - Director Babin reviewed the financial statements for May 2007. He said that energy sales are still flat relative to prior years although the peak demand has increased significantly. Director Babin reported that MMED continues to build the Depreciation Fund in anticipation of the East Mansfield Substation. He says he's hoping to come to the Board in September with the results of the PLM planning study regarding the need for the new substation. Vice Chairman Dentino questioned whether this was the same study that had already been done. He believed the five year plan was to begin work on the new substation in 2003 and have it completed in 2008 for the opening of the new mall. He also believed money had been set aside for this. Director Babin responded by saying no money exists in the balance sheet for the substation aside from the Depreciation account. Mansfield Utility Assistance - Director Babin explained that usually this request from Social Services for a contribution to the Mansfield Electric Utility Assistance Program is made in the month of November. Social Services have gone through the money more quickly this year, however, because of the deposit program. Director Babin had a discussion with Gail Farrugia from the COA and the two of them determined that a contribution of $50,000 would be required to get through the winter. Director Babin said that he had invited Ms. Farrugia to tonight's meeting to address this issue but she was unable to attend. After some discussion among the Board members it was decided to have her attend the next meeting so that she could answer their questions. Director Babin then suggested to the Board that a contribution in the amount of $25,000 for the interim period may be appropriate. Motion: That the Mansfield Municipal Electric Department contribute $20,000 to the Town of Mansfield for the purpose of donating this money to the Mansfield Electric Utility Assistance Program (AmorusolDentino) Passes 3/0 Old and New Business Vice Chairman Dentino asked about the minutes from the last meeting in which he inquired about when the vote was taken by the Board to change the PILOT figure to a fixed amount. Director Babin answered that it had been researched but a formal vote could not be found. Chairman McCarter added that the Board votes on the budget annually and the PILOT is included in that. Vice Chairman Dentino again raised the question of depreciation funds being used to pay MMWEC bills. He believed this was done in 2001 and 2002 to pay for Town bills and MMWEC bills. Director Babin said that he had researched this and found that operating cash was used to pay these bills. He said that money was not taken from the Depreciation Fund to pay the bills but that the money was transferred from the Depreciation Fund to Operating Cash to reimburse the Operating Cash account for payment of capital work that had been done and funded from the Operating Cash account. He further explained that the money from Operating Cash was used to pay the MMWEC bill. Vice Chairman Dentino said that MMED' s 2003 audit was worded to say that what had been done didn't comply with Mass General Law which means in effect it was unlawful. Director Babin then explained that the situation he had explained was from 2006, not 2001 and 2002. He also said that a court of law determines what is unlawful and he believed that it was not for anyone here to determine. Town Manager D'Agostino stated that the Depreciation Fund money was used by the Town Treasurer as an investment. He said the investment was with the Town of Mansfield and that the rate of return received by the Light Department on those funds was better than any market certificate at that time. Vice Chairman Dentino asked Town Manager D' Agostino if he had instructed Town Treasurer Mr. Boucher not to do it again. Town Manager D' Agostino answered that he had. Vice Chairman Dentino also asked Town Manager D' Agostino if he had challenged the wording on the 2003 audit. Town Manager D'Agostino answered that he did address it with the auditors because it would affect the Town's Bond rating. Vice Chairman Dentino questioned the $552,000 miscellaneous credit to surplus on the April income statement. Director Babin indicated it is a flush of funds and said that MMWEC collects the cost of power on a monthly basis and then once a year they'll write MMED a check for any overcollection or that the overage can also be applied to future MMWEC bills. MMED Staff Accountant Ken Thomson explained it as MMED overpaid and MMWEC is crediting MMED back for that overpayment. He said that the flush of funds was being credited back to the MMED power bills in FY07. Adjournment Motion: To adjourn the Light Commissioner's meeting at 10:45 (AmorusolDentino) Passes 3/0 Respectfully submitted: Jacqueline Lee 9/17/07 Cuv, -iTh ~cfW}1xill1 ~ Signature of Clerk ~ Date of Approval -- ,