MINUTES OF BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

Thomas J. Katona, representing the Office & Professional Employees International Union (OPEIU), Local 512, 2178 Commons Parkway, Okemos, Michigan, objected to engaging the services of a labor consultant to assist management in preparing for the union election on September 22. He urged the Commissioners to thoroughly research the subject of "union busting" before voting on the resolution.

General Manager Pandy told the Board that he had responded to all of Mr. Taylor’s questions by letter, dated August 11, 2000, in which the 65th percentile issue relative to the Technical Skill Family was clarified. He reported that the 65th percentile of the Technical Skill Family was $42,824 (using Grade 3 as an example). When the Board suggested setting the control point at the 50th percentile, plus 10 percent, this equated to $40,400 plus 10 percent for a total of $44,440. Consequently the 50th percentile plus 10 percent was a higher rate than the 65th percentile rate. The action taken by the Board is in favor of Mr. Taylor and the other positions in the Technical Skill Family.

GENERAL MANAGER’S RECOMMENDATIONS

Resolved, That the General Manager be authorized to renew the BWL’s sponsorship agreement with the Lansing Lugnuts for a five-year period at an annual cost of $53,000.

The sponsorship agreement names the Board of Water and Light (BWL) as the exclusive utility sponsor of the Lugnuts and includes nightly promotions and special events that promote the utility and its community involvement. The sponsorship package has been designed to complement the BWL’s overall branding goal that positions us as Lansing’s hometown utility. The renewal represents an increase of five percent over our current sponsorship agreement and is protected from future increases over the five-year term of the contract.

Discussion: Commissioner Creamer requested general feedback on the success rate of the sponsorship and how it fits into the BWL’s overall branding concept.

Communications Director John Strickler responded that overall, the BWL has been very pleased with the relationship it has had with the Lansing Lugnuts. Several meetings are held with the Lugnuts personnel on an annual basis to discuss the sponsorship package and to develop promotions that fit into the BWL’s objectives. This ensures the right strategies are being implemented. A memo addressed to General Manager Pandy, from Mr. Strickler, dated August 3, 2000, was included with the Board packet outlining the successes of the program and components of the five-year agreement.

General Manager Pandy updated the Board on efforts to offer a green power energy option to customers. He reported that staff had been negotiating a proposal with a dairy farm in southwest Michigan on a project that would utilize the methane fuel produced from cow biomass waste to generate one megawatt of power (enough to supply 2,800 residential customers with half their electricity requirements). In conducting a due diligence on the project, the Michigan Department of Environmental Quality (DEQ) became involved and determined that the water runoff from the dairy farm had Ecoli bacteria several hundred times the allowable limits. The DEQ issued a consent order for the dairy farm to clean up the water runoff problem. In light of the environmental concerns, the BWL determined that the proposal did not meet commonly accepted conditions for qualifying as green power. The viability of working with the dairy farm on the biomass is a long-term project, pending the clean up. Another green energy option being explored includes wind turbine generation. Negotiations are in process between the Michigan Public Power Agency (MPPA) and the Chippewa Indian tribe near Traverse City where a successful wind turbine generator has been developed. A joint venture through the BWL’s membership in MPPA may include additional wind power for BWL participation as part owner of the project. Also, staff is exploring the economics of refurbishing a portion of the BWL’s hydroelectric power on the North Lansing Dam. Mr. Pandy noted that hydropower has its limits due to the river flow and elevation change in the North Lansing portion of the Grand River. Wind and hydropower are emerging, while biomass has dropped down in the order of probability due to the dairy farm’s water runoff problem. A wind turbine generator could happen within a year; and if economically feasible, hydroelectric power could occur by two years. Biomass is approximately two years out.

ABSENT: Aquilina, O’Leary

Discussion: Commissioner Murray noted that a fairly obvious issue exists with regard to appropriate communication versus the alleged "union busting." He asked if the consultant’s experience with other similar campaigns resulted in unfair labor practices or simply allegations in which no unfair labor practices actually occurred.

Staff Attorney Wilhite added that Mr. Hall has been involved in over one thousand pre-election campaigns, and no unfair labor practices have been filed against him. The BWL previously utilized his services in 1988, which resulted in a clean, above-board campaign. Mr. Wilhite assured the Board that there would be no direct interaction between Mr. Hall and the employees. Mr. Hall will meet only with the management group to assist in developing communication strategies and delivering its message consistent with the Public Employee’s Relations Act.

ABSENT: Aquilina, O’Leary

Whereas, Judson M. Werbelow was appointed to the Board on September 16, 1996, as an At-Large Commissioner. He served on the Finance, Personnel and Nominating Committees and on the Board’s Special Committee on the Development of the Ottawa Street Power Station; and

Whereas, Judson M. Werbelow’s knowledge has been tapped by countless officials in the Lansing region, who sought his advice. His legal expertise has been an immense assistance during economic development and revenue bond issues. His wisdom, professionalism, and generosity have earned him widespread acclaim and our deepest appreciation. We are confident that the Lansing Board of Water and Light and its customers will long benefit from his service.

Status of General Motors’ Steam Main Repairs. General Manager Pandy reported that progress on replacing the 36 expansion joints is two weeks ahead of schedule, and the integrity of the line has been restored. Cleanup and restoration work remains to fully complete the job. BWL management is reviewing legal options in recovering costs associated with the steam line rupture.

Report on Major Projects. General Manager Pandy handed out a tracking list of major projects. He reported that all the projects listed would not automatically be served by the BWL. Many are competitive projects left for the customer to determine choice between BWL and Consumers Energy. Commissioner Murray suggested adding a column to the list indicating a unit of workload or dollars involved to quickly assess the key organizational challenges. He said a quarterly or semi-annual assessment to monitor the BWL’s competitive position would also be beneficial. Mr. Pandy reported on competitive projects the BWL has gained and lost over the past several years. He added that approaches and strategies in dealing with the competition is an important topic for the Board to discuss at a future meeting.

The Next Central Utilities Complex (CUC) – Delta Township. General Manager Pandy updated the Board on activities involving the next central utilities complex to serve the General Motors (GM) Mid-Michigan Plant in Delta Township. Mr. Pandy reported that he was contacted by GM requesting the BWL’s commitment to work with the CUC bidders to formulate an acceptable business case for a combined heat and power project at the GM Mid-Michigan Plant. Mr. Pandy noted that the BWL has a long-term contract with GM to supply all their electricity at the new facility. A benefit to the BWL would be having a black start capability to provide gas-fired generation to start the system in the event of a Midwest blackout. The potential of marketing the new generating capacity on the wholesale market adds value for the parties.

GM has requested a commitment indicating the BWL is willing to cooperate and work in good faith to jointly investigate with the selected CUC bidder the business case of a cogeneration facility at GM’s Mid-Michigan Plant. Mr. Pandy pointed out that the commitment letter is not intended to create a binding offer or contract for the purchase or sale of electric energy or capacity between the BWL and the bidder, nor does it in any way obligate either of the parties to enter into any agreement or to proceed with any possible relationship or transaction without the Board’s approval.

Mr. Pandy discussed financing issues relevant to the project. The proposed central utilities complex (in Delta Township) is expected to cost approximately $100 million. He noted that when initial discussions on the next CUC were held, the Board clearly indicated it did not want to finance and own the entire project as was done with the first CUC project for GM’s Grand River Assembly Plant. The BWL issued $78 million of taxable bonds, participated in the design and construction of the complex, and is involved in its operation and maintenance. Mr. Pandy stated that if the Board elects to finance a piece of the next CUC project for a combined heat and power option, the BWL would be adding generation to its system at an estimated $10-$15 million investment secured by a 15-year contract from GM.

Following lengthy discussion, the Commissioners gave their consensus for the General Manager to submit a "comfort" letter to General Motors. Mr. Pandy told the Board that follow-up information on the specifics of the project would be submitted to the Board by the end of the current calendar year.

Mr. Pandy noted that at the July 25th Board meeting, he reported about another telecommunications firm that expressed interest in the building, however, they have fallen by the wayside. Steiner & Associates has not indicated a willingness to proceed with the project. Steiner’s study indicated the project would involve $20-$25 million of grant funds. Gregg Hanner, a vice president of Steiner & Associates verbally indicated his interest to pursue the project, but nothing has been proposed in writing.

Status on BWL Gas Aggregation Program. General Manger Pandy handed out a 15-month recap of the gas aggregation program (April 1999 – June 2000). Results indicate a positive net income of $60,225.82. Savings to BWL gas customers were $211,337.80, customers of AMI (township customers) $123,647.19 for a total of $334,984.99. The program matures in 2001.

External Audit Contract. General Manager Pandy distributed a copy of a memo to the Mayor and his staff regarding the annual independent audit of the BWL. The five-year agreement with the firm of Deloitte & Touche concludes with this year’s audit (FY 2000). The BWL will need to work with the City to determine the new auditing firm for fiscal year 2000-01 and future years. Director of Metrics & Audits, Kellie Willson, will be working with City staff on this process.

Competitive Issue by the Capital City Airport. General Manager Pandy reported that he has advised the Mayor and his staff that the Capital Region Airport Authority will consider the development of an approximate 85-acre industrial park tract on the east side of the Capital City Airport. The BWL’s competitor is competing for electric service at this development by virtue of their franchise to operate in DeWitt, as does the BWL.

Capital Area United Way and Cash Contributions. The Capital Area United Way (CAUW) has recognized the BWL for its leadership in the 2000 Corporate Council. The BWL was acknowledged in the Bronze level of sponsorship for the campaign report in the Lansing State Journal. The BWL also installs and maintains the campaign thermometers that report to the community how the campaign is progressing. The CAUW has asked the BWL if it would be preferable to write a check and let another organization take care of the thermometers. Mr. Pandy stated that the BWL’s policy is not to make cash contributions, but instead has provided in-kind services and sponsorships to the CAUW at an approximate annual cost of $10,000 over the past eight to nine years. He stated that it would be more cost effective for BWL to write a check to CAUW than to continue to maintain, install, and remove the campaign thermometers. He invited comments from the Board on this issue.

Proposed BWL History Book Project. The BWL has been approached by Raymond G. Kuhl, a retired executive of the Michi gan Electric Cooperative Association, regarding a proposed BWL history book project. Mr. Kuhl is the author of a book entitled, On Their Own Power – A Story on Michigan’s Electric Coops. Mr. Pandy reviewed the cost associated with the project. Following discussion, the Commissioners determined that the project would not be practical at this time.

Commissioner Callen commented that the California experience with deregulation appears to be a disaster. He suggested that it would be worthwhile for staff to provide information on what has gone wrong and how that compares with Michigan’s new deregulation law. He also noted that in reviewing the BWL’s Share the Success results for Fiscal Year 2000, it was noted that the residential customers’ degree of confidence of the BWL is somewhat lower than what is desired. He urged that careful thought be given on the implications of that survey result.

On motion by Commissioner Christian, seconded by Commissioner Murray, that the absences of Commissioners Aquilina and O’Leary be excused.

Deb Bittner, Vice President of the Clerical-Technical Union of Michigan State University, stated that as a member of a labor union, she believes people have the right to choose their own paths and work to make sure they have a voice in their workplace. She said that unions are not the enemy, but instead provide support to the community. She asked why the BWL would want to jeopardize its relationship with the community by hiring a consultant for the sole purpose of discouraging workers from belonging to a union. She urged the Board to make sure the election is indeed as "squeaky-clean" as the one management claims the consultant will run.

BWL employee Joseph Davis, President of IBEW Local 352, stated that the IBEW is still here, and the vote will proceed on September 22. The IBEW will in no way take the outcome negatively. Mr. Davis also stated for the record that a recent article, which appeared in the Lansing Business Journal, included a photograph of Mr. Davis and George Bibbings, Manager of the Maintenance and Construction Resource Center. He noted that the article erroneously listed Mr. Bibbings as a union member. Mr. Davis set the record straight that Mr. Bibbings—a former union member—is currently his manager. He noted that there was no intent to misconstrue Mr. Bibbings’ position.

Chair Diane Royal reassured those who addressed the Board on the unionization matter, that the Board’s intentions are completely above board. The firm of Gabriel Hall and Associates is being retained strictly to provide labor-consulting services to management. It is the Board’s understanding that Mr. Hall operates a professional business and the Board intends that will happen on this consultation.