MINUTES OF BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

___________________________
Tuesday, March 28, 2000
___________________________

The Board of Commissioners met in regular session at 5:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. The meeting was called to order by Chair Diane Royal.

The Secretary declared a quorum present.

The Pledge of Allegiance was said by all.

APPROVAL OF MINUTES

Motion was made by Commissioner O’Leary, seconded by Commissioner Christian, to approve the minutes of regular session held February 22, 2000.

Carried unanimously.

PUBLIC COMMENTS

THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING.

No persons spoke.

COMMUNICATIONS

No communications.

REPORTS OF COMMITTEES

#2000-3-1
Personnel Committee Report

The Personnel Committee met on February 28, 2000, to review the results of the Board of Water and Light Employee Satisfaction Survey, conducted by Market Strategies, Inc. (MSI).

Committee members present were Commissioners Christian, Royal, O’Leary, and Werbelow (via speakerphone). Also present was Commissioner Callen.

Communications Director John Strickler presented the results of the Employee Satisfaction Survey. The main objectives of the survey were to explore links between employee satisfaction and customer satisfaction and to provide basic information about employee performance, perceptions of the work environment, employee satisfaction and retention. The survey was developed with cooperation and input from IBEW Local 352 as well as from non-bargaining employees who participated in focus groups. To ensure confidentiality, the survey was conducted by written questionnaire, passed out to employees at the workplace in sealed envelopes provided by MSI. Management did not see the results of individual survey returns. Employees mailed the completed questionnaire directly to MSI.

Survey results were communicated to all employees through a special issue of the Board Digest and by group presentations on a face-to-face basis between Process Directors and their employees.

The survey concluded that there is a strong link between employee satisfaction and employee retention and between conditions in the workplace and employee satisfaction. It found moderate links between employee satisfaction and customer satisfaction and between workplace conditions and customer satisfaction. Satisfaction was found to be somewhat higher among non-bargaining employees than bargaining unit employees.

Perceptions of senior management direction and senior management performance received the lowest marks among employees. Employees were also strongly critical of supervision’s performance in providing feedback and evaluation. Results in these areas were reviewed in detail. The MSI report points to areas that will have the greatest impact on improving employee satisfaction. Improvements in employee perceptions of senior management performance and direction will have the most significant impact, followed by improvements in areas related to work environment and support.

General Manager Pandy acknowledged that the survey results are serious and that it is clear there is a lot of work to do to improve how managemen t works together as a group and to communicate the strategic directions to the workforce. He reviewed topics discussed at a two-day retreat and the next steps as senior management journeys to address the issues that emerged from the report. This included an outline of actionable items, listing specific areas that management has committed to address relevant to corporate direction, work environment, communication, relationship and senior management performance. Mr. Pandy stated that senior management intends to involve employees in seeking solutions.

The Personnel Committee engaged in lengthy discussion regarding the survey and its findings. The committee encourages participation by all the Commissioners on how to monitor and validate the progress of senior management’s initiatives to improve employee satisfaction. The committee will continue to monitor staff’s progress in developing solutions that will lead to better employee satisfaction and higher customer satisfaction with regular reports to the Board for input.

Respectfully submitted,
/s/ David O’Leary, Chair
Personnel Committee

Motion by Commissioner Callen, seconded by Commissioner Christian, to adopt the Personnel Report as presented.

Action:   Carried unanimously.

COMMITTEE OF THE WHOLE REPORT

The Committee of the Whole met on March 14, 2000, to discuss the following topics:

1.     Policies Relative to Growth
2.     Steam and Chilled Water Services
3.     Water Service Agreement for City of DeWitt and DeWitt Township

Present were Commissioners Aquilina, Callen, Christian, Creamer, Royal, and Werbelow (by speakerphone). Absent were Commissioners Murray and O’Leary.

Policies on Growth and Development. Director of Audits & Metrics Kellie Willson made an executive summary presentation on proposed Board of Water and Light (BWL) policies on growth and development. The following three policies were developed to assure consistency and compatibility with respect to growth, clearly define authority delegated to the General Manager, and define authority retained by the Board of Commissioners:

Line Extensions and Service Territory

• Define the authority delegated to the General Manager with respect to line extensions and service territory expansions.
• Define the criteria for extending service and for expanding the service territory after the adoption of this policy. This policy does not apply to planned replacements or upgrades of existing infrastructure.

Resolved, That the Board of Commissioners adopt the BWL’s "Line Extensions and Service Territory Policy."

#2000-3-2
Line Extensions and Service Territory Expansions Policy

The General Manager may authorize the extension of service to new or existing customers when the following criteria are met:

• The project is economically justified according to the approved guidelines and parameters and the justification has been formally documented.
• The project complies with all regulatory and legal constraints.
• Utility services will not be adversely affected.
• The project does not specifically require approval by the Board of Commissioners.

The General Manager shall establish project evaluation guidelines and parameters and review them at least annually with the Commissioners.

• Projects will be evaluated according to established guidelines.

Approval of the Board of Commissioners shall be required for the following:

• All new agreements with a municipality for water service territory expansions after the adoption of this policy.
• Any project that is not included in the capital budget, is justified for other reasons, but does not meet the standard economic justification criteria.
• Any project that is not included in the capital budget, and the total project cost is expected to exceed $1,000,000. And, the capital budget in total will not be exceeded.
• Any project included in the capital budget, but expected to exceed the budgeted amount by the greater of 15% of the budgeted amount or $200,000. This applies to the aggregate for electric, water and steam expenditure forecasts in the Annual Capital Budget and to individual projects in the Planned Capital Budget.
• Any project the law requires be approved by the Commissioners.

Economic Development

• Define the responsibility of the Commissioners with respect to Economic Development.
• Define BWL support for economic development within its service area after the adoption of this policy.

Resolved, That the Board of Commissioners adopt the BWL’s "Economic Development Policy."

#2000-3-3
Economic Development Policy

Approval of the Board of Commissioners shall be required for BWL participation in any economic development project that does not fit the requirements for the Electric Economic Development Rider Rate.

• The project contributes to the economic vitality of the BWL service area.
• The project retains, grows, or diversifies the BWL customer base.
• The project is done pursuant to a contract and the length of the contract permits BWL to recover its investment.

There appears to be a long-term benefit to BWL and its customers. A long-term benefit is defined as a benefit that is realized over a period of more than the ten years typically used for evaluation of projects.

New Ventures

#2000-3-4
Resolution Adopting the New Venture Policy

The number of Board of Water and Light (BWL) competitors has increased with the advent of deregulation in the electric utility industry, as a result of mergers, acquisitions, and the development of new energy entities. These competitors are offering increased and varied utility and ancillary services to their customers. It is the business judgment of BWL staff that the inability to offer ancillary services may erode the BWL’s customer base, which may result in future rate increases to compensate for the loss.

BWL staff has concluded that it has both the personnel and the resources to offer competitive ancillary services and, by meeting certain criteria as set out below in the "New Venture Policy," may offer such services without adversely impacting its current customers.

The Board of Commissioners has determined that the offering of ancillary services is within the BWL’s lawful authority, since, under Michigan law, the BWL may undertake those business activities naturally connected with and belonging to the running of a utility business which a private competitor would be able to undertake. In addition, such ancillary services will benefit BWL customers as a whole and constitute a proper public purpose.

Resolved, That the Board of Commissioners adopt the BWL’s "New Venture Policy."

New Venture Policy

New ventures are those ancillary services, which flow from utility services expressly authorized by Council resolution or City Charter, and which are naturally connected to services expressly authorized by Council resolution or the City Charter. The Commissioners must approve all new ventures that involve the net expenditure of $50,000 or more. Staff will evaluate each new venture separately to avoid creating unfair competition.

The BWL may undertake new ventures when the following criteria are met:

1. The BWL customer base will benefit as a whole.
2. The new venture will meet or exceed the measures of the BWL’s corporate financial policy.
3. The customers benefiting from the new venture will pay the full cost of the new venture.
4. The new venture complies with all laws and regulations applicable to such new venture.
5. The new venture is for the purpose of optimally utilizing personnel and resources, or when credible market research indicates that a significant portion of the BWL’s customer base desires the new venture, or when a significant competitive advantage will accrue to the BWL.

Project Evaluation Guidelines. Project evaluation guidelines have been developed to: (1) standardize economic evaluation approach; (2) supplement the analysis with non-financial factors; and (3) review the major projects to improve future project evaluations.

OTHER MATTERS

Steam and Chilled Water Services. General Manager Pandy reported that the State of Michigan continues to express interest in utilizing the Board of Water and Light’s (BWL) chilled water loop in downtown Lansing. However, there are still some issues that need to be resolved before entering into a contract. The conceptual design for installing the chilled water system at the Ottawa Power Station is progressing on schedule. Detailed project estimates are due from Stanley Consultants by March 17. Initially 10,000 tons of capacity is planned, with space remaining for future chillers for a total of up to 20,000 tons of capacity. Construction could start as early as this June if signed agreements are secured within the next month from the State of Michigan and Ingham County for their consolidated courts.

City of DeWitt and DeWitt Township Retail Water Service. Marketing Manager Sue McCormick presented an executive summary of the analysis completed for the proposed City of DeWitt and DeWitt Township retail water service project, using the new evaluation guidelines described above (see Policies on Growth and Development). A spreadsheet was handed out consisting of analyses prepared for three cases (Basecase, Lowcase and Highcase) for review and discussion.

Ms. McCormick gave an overview of the strategic direction that spearheaded the water extension system to the DeWitt area. She briefed on water interconnect activities, which included: (1) the extension on Airport Road to Watertown Township; (2) the extension on State Road in DeWitt Township to serve Bath Township; and (3) the design decision of the reinforcement project (30" vs. 24") built from the Dye Water Conditioning Plant’s high pressure pumping station up to State Road along the Wood Road corridor. Also, Bath Township and Watertown Township have been secured as future water service areas. The BWL currently operates the existing Bath Township water system, which is detached from the BWL system; however, a connection to the BWL system is planned in the near future. In 1994, the BWL entered into a retail water service agreement for a portion of DeWitt Township, south of I-69. The interconnect under consideration would expand BWL’s service area to include all of the City of DeWitt’s corporate limits, including the remainder of DeWitt Township, north of I-69. Extension of retail service to these communities is a good fit and completes the three townships north of Lansing as all new water service areas.

A question and answer period followed relative to the projections used for the analyses. After lengthy discussion, the Commissioners indicated their support for staff to finalize negotiations. The City of DeWitt and DeWitt Township plan to sign the retail water service agreements in April. Upon receiving signed agreements, staff will then bring forward a recommendation in April for approval to enter into retail water service agreements with the City of DeWitt and DeWitt Township.

update issues

General Manager Pandy briefed the Board on the status of the following issues:

• Electric deregulation is picking up momentum in the Legislature.
• General Motors’ discussions with the City of Lansing and Delta Township relative to a new GM assembly plant in Delta Township are underway. Infrastructure details and BWL’s involvement were highlighted.

Commissioner Callen called attention to the Personnel Committee Report, dated February 28, 2000, regarding the employee satisfaction survey. He emphasized the importance of the survey and requested that an advance copy of the Personnel Committee Report be provided to all the Commissioners.

Respectfully submitted,
/s/ Charles M. Creamer, Chair Pro Tem
Committee of the Whole

Motion by Commissioner Christian, seconded by Commissioner O’Leary, to adopt the Line Extensions and Service Territory Expansions Policy (#2000-3-2).

Action:   Carried unanimously.

Motion by Commissioner Christian, seconded by Commissioner Callen, to adopt the Economic Development Policy (#2000-3-3).

Action:   Carried unanimously.

Motion by Commissioner Christian, seconded by Commissioner O’Leary, to adopt the New Venture Policy (#2000-3-4).

Action:   Carried unanimously.

Motion by Commissioner Callen, seconded by Commissioner Christian, to adopt the Committee of the Whole Report, with the resolutions, as presented.

Action:   Carried unanimously.

GENERAL MANAGER’S RECOMMENDATIONS

#2000-3-5
RETIREE BENEFIT PLAN AND TRUST AGREEMENT

Resolved, That the Lansing Board of Water and Light Retiree Benefit Plan and Trust Agreement is hereby adopted as of the date indicated therein; and

Further Resolved, That the Post-Retirement Benefit Plan for eligible employees of Lansing Board of Water and Light is hereby adopted effective as indicated therein; and

Further Resolved, That the signatures of the Chair of the Board of Commissioners and the Corporate Secretary on each document are hereby authorized and ratified.

Motion by Commissioner Christian, seconded by Commissioner O’Leary, to adopt the resolution.

Action:   Carried unanimously.

#2000-3-6
MOTOR CONTROL CENTERS 4, 5, 6 – ECKERT STATION

Resolved, That the original budget of $200,000 for the Planned Capital Project to upgrade the Motor Control Centers 4, 5, 6 at the Eckert Station be supplemented in the amount of $90,000.00 to cover the cost of changes in the project scope. Funding for Coal Handling Upgrade – Eckert Station will be reduced an equivalent amount to remain within the total Capital Budget for FY 2000.

Motion by Commissioner O’Leary, seconded by Commissioner Christian, to adopt the resolution.

Action:   Carried unanimously.

#2000-3-7
INCREASE IN CAPITAL BUDGET

Resolved, That the following Capital Budget projects for fiscal year 2000 be increased to reflect unexpected expenditures.

This resolution is being submitted in conformance with Board Policy 15-02 that was adopted January 25, 2000 for the reporting and approval of any Capital Project exceeding 15% or $200,000.

Motion by Commissioner Christian, seconded by Commissioner O’Leary, to adopt the resolution.

Discussion:   General Manager Pandy summarized the reasons for the unexpected expenditures. Project overruns are categorized in three areas: (1) customer driven issues due to the strong economy and unexpected demand, (2) contractual commitments, and (3) underestimated projects. Commissioners Callen and Murray asked for a summary showing the portion of the $4 million overrun that represents unanticipated demand versus early failure systems or underestimated costs. Staff agreed to prepare a comparison outline and send it to the Commissioners.

Action:   Carried unanimously.

UNFINISHED BUSINESS

None.

NEW BUSINESS

None.

GENERAL MANAGER'S REMARKS

Possible General Motors Plant in Delta Township. General Manager Pandy briefed on the most recent developments of a proposed General Motors (GM) manufacturing facility in Delta Township. The GM project probably will include a metal stamping plant (2001) and a possible assembly plant (2002). Mr. Pandy reported that the assembly plant would require a larger Central Utilities Complex (CUC), than the facility the BWL will own and jointly operate at the new Lansing Grand River Plant. The Board engaged in lengthy discussion about financing issues, operational limits with new business partnerships, and construction management. The Board will be kept abreast as more details unfold on this important new GM/CUC project.

Separate Water Meters. General Manager Pandy reported that the City Council’s Committee on Public Services is considering a resolution to allow for separate water meters for outdoor uses such as sprinkler systems. The legality of whether the resolution amends a 1994 City Ordinance, which disallowed the continued use of separate water meters for outdoor use, will be discussed with the City.

Electric Deregulation. General Manager provided an overview on the status of legislative efforts on electric deregulation, which is meeting with opposition from the Small Business Association and the Attorney General’s Office. They claim that the transition costs that private utilities will collect will not save anybody any money. Director of Delivery Bill Cook reported that SB 937 was originally developed by a coalition, which the BWL was a part of. He reviewed the fundamental issues that need to be resolved before the BWL could support the bill; those issues are the tie-bar to other legislation dealing with territorial limits and the Board’s autonomy.

Major Project Status Report. Marketing Analyst Randy Roost provided a demonstration of a new web application to assist with Major Project status reporting. It was developed for the Marketing Process’ intranet site, designed to serve as a tool for employees to access information internally about projects the BWL is competing for and hopes to acquire. A number of options are available to help employees keep track of projects and their location, some of which are graphical in nature and others are in text format. Employees also have the ability to submit information and suggestions from the intranet site via a project data form relative to potential projects in the Greater Lansing area.

MPPA Municipal Competitive Trust. The Michigan Public Power Agency (MPPA) is setting up a Municipal Competitive Trust with proceeds from the Belle River fuel dispute over how much was paid for the coal delivered to the Belle River Project. MPPA has realized approximately $20 million of funds from the resolution of the dispute. The BWL share is approximately 65 percent of that amount. The Trust will have $13,235,492 in the BWL account to reduce future Belle River invoices. Since 1997, Belle River is calculating the fuel rates at a more appropriate rate. The dispute is close to final settlement.

Chilled Water Project Update. General Manager Pandy reported that bids have been received on the chiller equipment for the Chilled Water Project. Staff is reluctant to award the bid on March 31, 2000, until a signed contract is received from the State of Michigan. The BWL’s ability to meet the State’s project completion schedule is at risk. Mr. Pandy indicated that staff has done everything possible to move the project forward, however, it is now up to the State to commit in writing. He noted that the State has indicated they are still well intentioned and trying to respond.

Report to NAACP on BWL Purchasing Practices. General Manager Pandy handed out a copy of a letter sent to the local branch of the NAACP in response to their request for a report on the BWL’s purchasing activity with minority, women, and handicapper suppliers. Mr. Pandy summarized the high points of the report. Commissioner Christian observed that although there is an increase in purchase order dollars, the penetration with minority/women/handicapper-owned suppliers has remained at a two percent level. He urged that more emphasis be given to increasing the percentage of purchase order dollars spent with these suppliers.

BWL Suite for Lansing Lugnuts Games. General Manager Pandy reported that the BWL co-sponsors a suite for the Lansing Lugnuts home games. The suite is shared with Capitol Bank Corp, and used to entertain customers, employees, and occasionally donate it to local charities. A listing of dates the suite is available for BWL-use was distributed. Up to twenty tickets are available for each of the dates listed on the sheet.

Committee of the Whole Topics: General Manager Pandy named two tentative topics for the next Committee of the Whole meeting to be held April 11th: (1) New Compensation System and (2) Preliminary FY 2001 Budget. Mr. Pandy noted that there have been some questions about the budget for advertising in the electronic and the printed media. This item will be a subpart of the budget review.

Union Negotiations Update. General Manager Pandy reported that the management bargaining team continues to meet with the IBEW Local 352 team. More negotiations are scheduled this week. Both sides hope to reach a mutual agreement on a contract.

REMARKS BY COMMISSIONERS

Commissioners Werbelow and O’Leary raised concerns about plans for a Board retreat and Commissioner Royal responded to the issues raised. Regarding topics for the retreat, the agenda will be developed with the consensus of the Commissioners.

Commissioner Royal asked if the report from Steiner & Associates on the redevelopment of the Ottawa Power Plant would be available by the next Committee of the Whole meeting. Mr. Pandy indicated that he is hopeful the report will be received by then; but if he hears the report will not be available until a couple of days after April 11th, he may slide the date of the Committee of the Whole meeting.

EXCUSED ABSENCES

By Commissioner Christian, seconded by Commissioner Murray, that the absences of Commissioners Aquilina and Creamer be excused.

Adopted unanimously.

THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT.

No persons spoke.

On motion by Commissioner Christian, seconded by Commissioner Callen, the meeting adjourned at 6:58 p.m.

                                            /s/ Mary E. Sova, Secretary

__________________________

Marilynn Slade, City Clerk