MINUTES OF BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

___________________________
Tuesday, April 24, 2001
___________________________

The Board of Commissioners met in regular session at 6:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order.

Present:	Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer, Nancy W. Duncan, Mark A. Murray, and Diane R. Royal.
Absent:	Commissioners Ernest J. Christian, and David O’Leary.

The Secretary declared a quorum present.

All said the Pledge of Allegiance.

APPROVAL OF MINUTES

Motion made by Commissioner Duncan, seconded by Commissioner Murray, to approve the minutes of regular session held February 27, 2001.

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.

Jack Larsen, representing the Grand River Expedition 2000 Awards Committee, presented a Stewardship Award to the Board of Water and Light (BWL) for outstanding contribution to the integrity of the natural resources of the Grand River watershed and for the BWL’s sponsorship of the Adopt A River Program. Mr. Larsen told the Board that Grand River Expedition 2000 is a non-profit volunteer organization. This group was involved in a 13-day canoe journey and river study held July 15-27, 2000, initiated to document the values, problems and opportunities of the Grand River and its watershed in an effort to foster awareness and responsibility for the Grand River.

Chairperson Royal accepted the award on behalf of the Board of Water and Light. General Manager Pandy noted that the BWL was involved in another successful Adopt A River cleanup effort on April 21.

COMMUNICATIONS

There were no communications or petitions.

REPORTS OF COMMITTEES

FINANCE COMMITTEE REPORT

The Finance Committee met on February 27, 2001, to discuss the following topics:
(1) Preliminary Review of the Purchasing Policy; (2) Preliminary Review of the VEBA Trust Investment Policy; (3) Review of Utility Performance Indicators; (4) Growth and Expansion Status Report; (5) Ottawa Station Redevelopment; (6) Proposed Revenue Bond Issue; and
(7) Quarterly Internal Audit Report.

Chair Mark Murray called the Finance Committee to order at 6:50 p.m. Committee Members in attendance were Commissioners Murray, Christian, Creamer, O’Leary, and Royal (ex-officio). Also present were Commissioners Callen and Duncan.

Preliminary Review of Purchasing Policy

The Committee reviewed Page 11 of the Purchasing Policy, dated June 29, 1987, which outlined the authority to award contracts. General Manager Pandy requested the Committee’s guidance in determining which cases would be subject to approval of the Board as opposed to those considered as administrative or managerial in nature. This direction will assist management in finalizing the Purchasing Policy, which will be brought to Board in the near future for approval.

The Committee concurred that the following items would require Board approval:

Expenditures not covered by the budget.
Contracts for outside professional services and consultants in excess of $100,000.
Purchase of real property or interests in real property, in excess of $15,000
General Manager’s discretion (any matter which the General Manager feels should receive Board approval).

VEBA Trust Investment Policy

A proposed VEBA Trust Investment Policy for the retiree health insurance benefit plan was reviewed. Chief Financial Officer Dana Tousley reported that an actuarial valuation to determine the funding level is to be conducted annually instead of biennially, due to the present market volatility. He reported that a startup communication issue with the actuaries resulted in a delay with making monthly contributions to the fund this fiscal year. He assured that management intends to contribute $300,000 to the VEBA Trust by June 30, 2001. Commissioner Murray commented on the importance for the BWL to maintain employee confidence that the organization is funding its obligations. Chief Financial Officer Tousley told the Commissioners that monthly transfers would begin immediately to fully fund the VEBA Trust at the $6,700,000 level by June 30, 2001 (this includes amounts from operating funds above the amount transferred from the defined benefit plan on July 1, 2000).

The Finance Committee recommends the following:

Resolution # 2001-4-1
VEBA Trust Investment Policy

RESOLVED, That the VEBA Trust Investment Policy, appended to these minutes, be adopted and implemented by staff effective immediately.

Review of Utility Performance Indicators

Presentation by General Manager Pandy

Mr. Pandy showed a series of graphs depicting the operating statistics of the BWL ranging from FY’s 1991 – 2000. The graphs are included with the meeting packet. The following were the highpoints of his presentation:

Electric Utility

Number of customers and sales are up per employee.
Net generation for FY’s 1999 and 2000 has maintained an even mix from Eckert, Erickson and Belle River.
Energy breakdown (% system total) for FY 2000 is: Erickson 26.15%, Belle River 26.13%, Eckert 47.72%.
Cost of production ($/Mwh Generated) was on an upward trend, and started dropping in FY 2000, primarily due to cost reductions in fuel.
Modest coal costs over the next five years are anticipated for both Western and Eastern coal.
Railroad transportation services and scheduling has become an issue for on-time coal deliveries, primarily due to the deregulation of the railroad industry. Staff is exploring coal storage alternatives.
Retail load and capability forecast indicates total peak demand with 15% reserves (MW); does not require additional BWL capacity until approximately 2019.
Electric outage average in FY 2000 was 30.69 minutes; FY 2001 to date was 33.38 minutes. Five-year average (FY 1996-2000) was 45.59 minutes. Gains in improving reliability would primarily come from the distribution system through a four-year tree trimming cycle. It is rare to lose the transmission system, as most substations are double-ended.
Electric revenue/Kwh has been lower than inflation. Average FY 2000 rate was 4.95 cents/Kwh (4.95¢Kwh vs. 6.68¢/Kwh if rates had risen at the rate of inflation).

Steam Utility

Steam outage average in FY 2000 was 11.11 minutes; FY 2001 to date was 17.75 minutes. Five-year average (FY 1996-2000) was 27.69 minutes.
Steam rates have been lower than inflation. Average FY 2000 rate was $7.27 /Mlb ($7.27/Mlb vs. $12.52/Mlb if rates had risen at the rate of inflation).

Water Utility

Water rates have been lower than inflation. FY 1999 average was 1.74 cents/CCF (1.74¢/CCF vs. 2.89¢/CCF if rates had risen at rate of inflation).
Water outage average in FY 2000 was 4.45 minutes; FY’01 to date was 2.5 minutes. Five-year average (FY 1996-2000) was 4.05 minutes.

Eckert Station and Moores Park Plant Configuration

General Manager Pandy distributed a diagram of the Eckert Station and Moores Park Steam Plant configuration. He noted that Eckert has six boilers serving six turbines. Three of the boilers are headered together and also provide steam to General Motors’ (GM) Plant 6 and to the Downtown Heating District. Moores Park has four boilers headered together to supply steam to GM, the Central Utility Complex, and the downtown Moores Park/Ottawa tie lines.

Presentation by Director of Metrics and Audits Kellie Willson

Director of Metrics and Audits Kellie Willson presented an overview of the BWL’s overall performance. A copy of her broad analytical review is included with the meeting packet. A series of graphs depicted the following analysis and trends:

There was significant improvement in the overall customer satisfaction rating in fiscal year 2000. BWL is at or approaching "Best in Class," primarily due to low cost and reliability.
The measure of restoring power during outages has been improving over the past several surveys.
BWL overall performance remained relatively flat. Performance in FY 2000 was better than in 1999, primarily due to cost reductions in fuel costs and in purchased power. The impact of the conversion to Western coal is being realized.
A total of $56 million was spent in FY 2000 on total compensation -- a slight increase from the prior year. The amount paid for time worked decreased slightly due to a reduction in overtime and a storm-free year.
A comparison of how much is paid to the City on return on equity (vs. how much remains as net income) indicates $6.4 million was paid to the City annually for FY’s 1999 and 2000. Remaining net income was about $5 million in FY 1999 and $11 million in FY 2000.
Significant changes are depicted for FY 2000 on the Balance Sheet for the BWL as a whole, based on assets, liability and equity. The sharp changes are the result of borrowing about $127 million during the year. In November, 1999, BWL borrowed $78.5 million to finance the General Motors (GM) Central Utilities Complex. GM will pay 105% of the debt service on those bonds. In January, 2000, BWL borrowed an additional $48.23 million to finance the following projects: chilled water district in downtown Lansing ($26.54M), water system expansion ($9.4M), a proposed new electric substation ($8.2M), and a replacement of a chemical feeder for the Water Utility ($840,000). The remaining $3.25 million was for debt service and legal, financial and administrative costs.
The Electric Utility had a better year than in FY 1999. As a result, the BWL also had a very good year in FY 2000.
The Belle River Power Supply Contract is disclosed as a footnote in the audit report, since technically the BWL does not own the 64.29% share of the Belle River Plant. Belle River is not listed in the BWL books as an asset or as a liability.
Water Utility revenues were fairly flat over the past year. Operating expenses continued to increase, narrowing the amount of operating income for the BWL. The Balance Sheet for the Water Utility indicates Water added more fixed assets in FY 2000 than the Electric Utility, after taking Contributions in Aid into account.
The Steam Utility’s financial position deteriorated during FY 2000. Although sales and revenues showed healthy increases of 3% and 4.6% respectively, operating expenses increased by 9%. This was primarily due to maintenance of both the production facilities and the transmission and distribution systems. The Steam Utility Balance Sheet shows Steam took total assets from about $35 million to about $70 million due to the chilled water plant. On the liability side, it depicts the borrowing associated with providing chilled water.
Utility comparisons indicate the Electric Utility represents about two-thirds of the total assets of the BWL.
Measures of profitability indicate the BWL Operating Income to Revenue in FY 2000 was 4.5 cents for the BWL as a whole (operating revenue for every dollar sold). The Electric Utility kept 5 cents, the Water Utility kept 6 cents and the Steam Utility made no profit. The overall corporate Return on Capital Assets in FY 2000 was about 2% (relation of operating income to production facilities). The Electric Utility earned a 3% return, the Water Utility just under 1%, and the Steam Utility had a zero return.

Growth and Expansion Status

Assistant General Manager Bill Cook reported that in November 2000, the General Manager assigned him the task of reviewing BWL activities related to Growth and Expansion. In January, Mr. Cook provided a status update to the Finance Committee and was requested to return to the Committee in February with solutions to the issues identified. He reported that this undertaking is a work in progress as staff conducts its analysis to identify systemic problems. Mr. Cook’s written report is included with the meeting packet. A highlight of conclusions were presented as follows:

Findings to Date:

Growth in capital spending at the BWL has taxed the utility’s cash resources and borrowing capacity. Capital spending is being carefully reviewed to minimize the need for additional borrowing. Problems in this area are being addressed.
Left unchecked, added borrowing could affect the BWL bond rating and require rate increases and/or large operations and maintenance cuts.
The return on BWL expansion, particularly in the Water Utility, has been disappointing, and is an extremely long-term proposition. Water extensions historically across the country are long-term investments.
Such long-term paybacks may be causing adverse impact on existing BWL customers. A process has been implemented to identify and assure collection of supplemental connection and frontage fees in the future.
Preliminary estimates indicate that there is little room financially for unexpected events/expenses without added revenue. A major potential environmental liability relating to Nox emissions must be considered in future planning.

Corrective Actions:

Wholesale water rate increases were initiated on January 1, 2001.
An expanded justification process including training, prioritization, uniform format, standard economic parameters, added quality control, and a follow-up process is being implemented.
Economic return requirements have been developed which are increased based on priority and Board assumed risk.
A process has been implemented to identify and bill appropriate fees and charges in a more timely and accurate manner.
A process has been implemented to ensure the annual updating of fees and charges.
Rules and Regulations are being reviewed for each utility, under the premise of increased levels of customer contribution. The target is to bring the Rules and Regulations to the Board for approval and implementation the start of FY 2002.
Sufficient information has been gathered to define a scope for a performance audit of past BWL performance in the abovementioned areas as well as a review of staff’s corrective actions. A draft scope will be provided to the Finance Committee for review by March 13th.
Staff is keenly aware that these actions are a beginning of the needed process improvements for growth and expansion.

The Commissioners and staff engaged in lengthy discussion as to whether the water system expansion is a good investment. The Commissioners questioned the information provided to them at the time the individual agreements were approved. General Manager Pandy pointed out that the BWL has been in the water business for 115 years. Although it has never been a profitable business, the strategic vision of the utility has been to supply potable water to the community because it is a municipal public purpose and it creates a greater good in the community. He assured that a process to reimburse inter-utility transfers would be implemented this fiscal year so that each utility is self-supporting. Following discussion, the Committee concurred with the following actions identified in the Growth and Expansion Report, and recommends Board approval:

Actions Identified in the Growth and Expansion Report – dated February 21, 2001:

(Complete Report included with the Finance Committee Meeting packet.)

Page	Item	Action
100	2C	Implement process to collect supplemental connection and frontage fees, including training.
101	3B	Use new Capital Project Justification Form and Evaluation Form
103	5D	Establish annual return levels. Mandatory 5.5% Necessary 8.5% Discretionary 12.0%
103	6A	Direct staff to establish budgets for next 6 years with fixed obligation coverage (i.e., including Belle River) of > 1.7x.
103	8	Report tracking of major projects to Board annually.
104	9A	Modify Rules and Regulations. Electric Invest only 1.5x annual revenue (change from 3x) Charge for trenches, temporaries, inspections and relocations Adopt new charges for underground service
104	9B	Water: Eliminate BWL funding (50%) for border streets, over sizing; require all main extensions funded by developers.
105	11	Update formal Economic Standards and Parameters (Attachment 6).
105	14	A draft scope of the RFP for consultant to evaluate BWL policies on growth and expansion for Finance Committee member review by March 13th.

Action Identified in the Internal Audit Report:

Page	Item		Action
500 & 592		2	Reimburse inter-utility transfers from 1985-2001 within 10 years: Water Utility pays Electric Utility $7.8 million Steam Utility pays Electric Utility $4.4 million Steam Utility pays Water Utility $2.6 million

Ottawa Station Development

Staff Attorney Larry Wilhite updated the Committee on four main areas involving the redevelopment of the Ottawa Station:

Convergency Centers - Update

Mr. Wilhite and General Manager Pandy met with representatives of the Building Trades Council (Iron Workers, IBEW Local 352, Plumbers and Fitters), Convergency Center, and the Mayor’s Chief of Staff to discuss union concerns regarding Convergency’s general contractor, Pioneer Construction.
The local Building Trades Council received word that Pioneer was going to redevelop the Ottawa Station. They expressed concerns over non-Lansing labor, non-union labor, and Pioneer’s safety record.
Pioneer’s response was that they would allow an open shop and bid out locally. This seemed to appease the union during the meeting, but later their response indicated otherwise.
The union offered to help find labor and contractors and they suggested a project labor agreement, similar to the one used for the legislative offices and Oldsmobile Stadium. The main element of the project labor agreement is temporary union membership in exchange for a no-strike clause.

Joint Development Agreement

A meeting was held with Convergency to discuss so-called cornerstone principles, which the BWL provided to them a couple of months ago. Convergency agreed to provide security in the form of a letter of credit to ensure the BWL recovers its utility infrastructure investment. In addition, it was agreed that the BWL could approve contractors and subcontractors. The construction and redevelopment schedule is to be provided by Convergency. To that end, the BWL has prepared a draft Joint Development Agreement (JDA) for internal review only. The JDA is based on the premise of separate condominium units. (a) Floors 1 through 3, (b) Floors 4-10, and (c) Floor 11.

Oldsmobile/GM Heritage Center

A letter of interest has been received from the Oldsmobile GM Heritage Center. They are looking for a convenient, downtown location for the R.E. Olds and Oldsmobile/GM Heritage Center. They are interested in approximately 55,000 to 60,000 square feet of space at the Ottawa Station. The Center will be able to provide its own labor for build out. Mr. Wilhite intends to proceed with discussions regarding a sale price.

Clean Michigan Grant

General Manager Pandy met with representatives from the Michigan Department of Environmental Quality and the Michigan Economic Development Corporation. They are still interested in funding this effort, but have requested that the City of Lansing resubmit its application based on Convergency Centers and other riverfront development. All other conditions of the grant remain effective; namely, (1) BWL to retain ownership, (2) BWL must obtain a developer, and (3) BWL must remediate the coal pile area.

After a question and answer period, there was unanimous consensus for Staff Attorney Wilhite to continue with negotiations.

Proposed Revenue Bond Issue

General Manager Pandy displayed a business profile published in Standard & Poor’s Credit Week Municipal, dated February 5, 2001, which lists the measure of risk for approximately 119 public power systems around the country. The BWL is listed as AA/Stable, which indicates the utility is in the favorable high end of the rating. He noted that while staff first proposed a $17.5 million bond issue, staff has been working to find alternatives to reduce the amount of borrowing. At the January 23, 2001 Finance Committee, staff was asked to look at several alternatives in the method and timing of borrowing.

Chief Financial Officer Dana Tousley reviewed the following FY 2001 proposed bond projects and costs:

Water Utility

	Total
Refurbish Controls on Cedar Pump #3 Install Dye High Lift Pump #3 Refurbish Dye Filters #9 and #10	$348,000 $615,000 $1,460,000

Steam Utility

	Total
Chilled Water District, Phase II	$11,084,000

Staff reviewed proposed financing alternatives and associated costs for the above projects. The calendar of events and Bond Resolution details were also discussed.

Calendar of Events

February 2001

- Review Projects and Costs

April 2001

- Resolution Approved

May 2001

- Competitive Sale

June 2001

- Settlement

Bond Resolution Details

Fifth Supplemental to original dated: October 24, 1989
Same terms as 1989, 1994, 1999 bond issues
Bond Term: 15 years
Interest Rate: 4.90% to 5.25%
Levelized Debt Service for all BWL debt
Book Entry Bonds
Redeemable at par after 10 years

Following discussion, the Commissioners reaffirmed their preference to minimize the amount of borrowing, given the anticipated magnitude of added borrowing within the next year associated with environmental compliance (Nox), unexpected changes in the competitive market, and other utility revenue requirements. Emphasis was made on using care with future issuances to ensure the BWL’s bond rating is not put at risk. Following discussion, the Committee recommended the following resolution for Board consideration:

Resolution #2001-4-2

Staff to Draft a Resolution to Issue Revenue Bonds

RESOLVED, That staff is hereby authorized to proceed in drafting a resolution to issue revenue bonds to finance the Chilled Water District, Phase II at an estimated cost of $11,084,000 for Board approval in April or May, 2001.

Quarterly Internal Audit Report

Director of Metrics and Audits Kellie Willson gave an overview of internal audit activities. A copy of her report is included with the meeting packet. Her involvement in the following projects were highlighted:

Review of major water system extensions, which involved working with the Assistant General Manager and Task Force to revise economic evaluation criteria and approval processes for all capital spending.
Followed up with management on compliance concerns related to transfers of funds between utilities. Board policy 16-02, was adopted by the Commissioners in October, 1985, but it has not yet been implemented.
Followed up with management to assure management complies with the funding process approved by the Commissioners to fund the VEBA Trust for retiree health care benefits.
Reviewed compliance issues related to the City Ethics Ordinance and the Commissioners’ expectations. The Commissioners directed the Director of Metrics and Audits to prepare a recommended policy on this matter for review and Board consideration.

General Manager’s Statement of Financial Interests

General Manager Pandy handed out a copy of his Statement of Financial Interests, recently filed with the City Clerk.

There being no further business, the Finance Committee meeting adjourned at 9:27 p.m.

Respectfully submitted,
Mark A. Murray, Chair
Finance Committee

Moved by Commissioner Callen, seconded by Commissioner Murray, that the Finance Committee Report be considered as read in full and approved.

Action: Carried unanimously.

Moved by Commissioner Callen, seconded by Commissioner Murray, that Resolution 2001-4-1 (VEBA) be approved.

Action: Carried unanimously.

Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution 2001-4-2 (to draft Revenue Bond Resolution), be approved.

Action: Carried unanimously.

REPORT OF THE FINANCE COMMITTEE

The Finance Committee met on March 27, 2001, at 5:30 p.m., to discuss the following topics: (1) Sales Forecast, (2) Capital Projects and Preliminary Forecast, (3) Steam Fuel Cost Adjustment, (4) Hydrant Rates, (5) Risk Assessment, and (6) to comment on the Request for Proposal and scope of performance audit services.

Committee Members in attendance were Commissioners Murray, Christian, Creamer, and O’Leary. Also present were Commissioners Callen and Duncan.

Sales Forecast

Resource Planning Engineer, Dave Bolan, presented an overview of the BWL’s base, high and low load forecasts developed for retail Electric, Steam (including Chilled Water) and Water utilities covering FY 2001 – 2012. The forecasts will be used in planning studies, budget development, capital expenditure decisions, load and capability analysis, and revenue forecasts.

Base forecasts indicate retail electric and steam sales steadily climbing the next three years as new General Motors (GM) load comes on line, then declining as older GM plants are retired in 2004 or 2005. The water utility has shown significant sales growth in the past few years, credited to wholesale water agreements. With existing plant capacity, new production capability may not be required prior to 2012. However, with recent growth and associated uncertainty regarding water future load, this situation is being monitored to assess capital projects to increase water production and pumping capacity. The forecast for Chilled Water was based on present contracted loads.

Assistant General Manager William Cook reported that electric sale for resale net revenues for FY 2002 are expected to reach $6.9 million. This amount reflects known agreements only, and as such, is down $2.4 million from expected FY 2001 levels. Due to an increase in retail sales as a result of expected simultaneous operation of all GM facilities, sale for resale revenues are projected to be reduced during the period from FY 2003 through FY 2005. Wholesale sales to the Michigan Public Power Agency are expected to increase in the next ten years. The BWL projects it will see lower cost per unit at Belle River in 2005 when a larger debt service credit is taken.

Capital Projects and Preliminary Forecast

General Manager Pandy presented a summary status report of BWL annual, planned and bonded capital projects. A handout detailing the individual projects as of February 28, 2001 showed a projected overrun of $3.6 million (1%). The Commissioners and staff discussed methods used to improve the accuracy of project estimates to eliminate cost overruns. The BWL typically uses a contingency factor of 10% to 15%, depending on the type of project. Staff is in the process of developing procedures to better identify high-risk cost elements of a project. The FY 2002 Capital Budget and Operating and Maintenance Budget will be thoroughly reviewed with the Finance Committee on April 24. 2001.

Steam Fuel Cost Adjustment

General Manger Pandy presented an overview of the fuel conversion project implemented in January 2001 at the Moores Park Plant. Switching from Eastern to Western coal is projected to lead to lower steam bills for BWL customers. A proposed two-year freeze of the BWL’s steam fuel cost adjustment would capture the savings from burning Western coal to pay for the capital investment made at the Moores Park Plant.

Chief Financial Officer Dana Tousley presented justification for rebasing the steam fuel cost adjustment for Steam Rates 1, 2 and 3 from 168.3 to 127.1 cents/million BTU from July 1, 2001 to July 1, 2003. The steam fuel cost was last rebased in 1984. Plans are in process to commission a steam cost of service and rate study using FY 2001 as the base year. The study will be used to determine if current steam rates are appropriate for central steam customers and the General Motors (GM) Plant 1/Lansing Grand River Plant. It will also serve as a baseline for the general steam rate review called for in the GM steam contract for Plant 6 in 2003. Staff recommends a sunset provision on the fuel cost adjustment clause in the steam rate schedules to drop and/or change by July 1, 2003. It was pointed out that a recent comparative analysis indicates existing BWL steam prices are 22%-40% below natural gas prices.

The Finance Committee recommends the following resolution:

Resolution # 2001-4-3
Public Hearing Set for Steam Rates 1, 2 and 3

RESOLVED, That the attached, proposed Steam Rates 1, 2 and 3 be the subject of a public hearing prior to further consideration by the Board of Commissioners.

FURTHER RESOLVED, That a public hearing to solicit public input on this matter be set for Tuesday, June 26, 2001 at 5:30 p.m., in the Board of Water and Light Offices at 1232 Haco Drive. Also that the Corporate Secretary be directed to file with the City Clerk information regarding pending changes in the steam rate structures on or before April 27, 2001.

Fire Hydrant Rates

Chief Financial Officer Tousley reported that a rate design error has been discovered in the fire hydrant rates approved by the Board on July 25, 2000 and effective January 1, 2001. Water Rate No. 6 inadvertently over-recovers the revenue required from fire hydrants as a class. Mr. Tousley noted that for administrative reasons, the fire service and fire hydrant rate was split into two rate schedules–Rate 4 and Rate 6. Previously the fire service and fire hydrant rate had been included in one rate schedule and considered one rate class. The split of the revenue requirements between the two classes/rates was a complicating factor leading to the error. The rate modification will be retroactive to January 1, 2001.

The Commissioners urged staff to maintain personal contact with customers prior to the hearing process to communicate the impact of the proposed change. This relationship brings the rate matter to their attention on a timely basis and provides the customer an opportunity to review the proposed change prior to the hearing for input.

The Finance Committee recommends the following resolution:

Resolution # 2001-4-4
Public Hearing Set for Fire Hydrant Charges – Rate No. 6

RESOLVED, That the attached proposed Fire Hydrant Charges - Rate No. 6, as revised, be the subject of a public hearing.

Annual Risk Review

Chief Financial Officer Director Tousley reported that the primary reason for conducting a risk assessment is to identify risks associated with the BWL’s business and ensures they are being managed or mitigated in some manner. An overview of four types of reviews the external auditors conduct during the annual audit was presented.

Potential financial loss due to accident, natural disaster or negligence risks. The primary focus is on property and liability insurance to minimize the financial loss due to these risks.
Potential financial loss due to environmental risks. The primary focus is on current environmental issues and the financial loss of mitigation or removal of an environmental problem.
Potential financial loss due to legal risks. The primary focus is on current or future litigation and the financial loss associated with large adverse judgments.
Potential financial loss due to operational risks. The primary focus is on large dollar transactions and the contractual commitments involved. Examples of the type of contract examined include coal contracts, wholesale power contracts, purchase power contracts, large capital expenditures and associated contracts or bond issues, etc.

The following types of insurance policies were summarized:

Property Insurance
- Fire and Other Perils
- Boiler and Machinery
- Flood

Liability Insurance
- General Liability
- Workers’ Compensation
- Automobile
- Public Officials and Employees
- Pension and Welfare Fund Fiduciary

Surety and Bonds
- BWL Employee Faithful Performance Bond
- Pension Employee Faithful Performance Bond

Other Insurance
- Business Travel Accident
- Special Travel Risk

The BWL is self-insured for major storms and any major disruption of the transmission and distribution (T&D) system. Damage claims against contractors who damage the BWL T&D system are billed and collected from the offending party. The BWL is also self-insured up to $400,000 for workers’ compensation with a specific excess policy to cover claims over $400,000.

The purchasing policy currently has insurance purchases going to the Commissioners for approval. The committee was requested to consider a resolution that authorizes the General Manager or designee to purchase insurance as is appropriate. In light of the variability of market conditions for insurance and surety bonds, staff should follow the basic parameters listed below:

Property Insurance

Maintain fire and boiler and machinery insurance on the major real property assets preferably on a replacement cost basis. Personal property may be insured on an actual cash value basis.

Liability Insurance

Maintain general liability insurance for bodily injury and property damage liability at a minimum level of 10% of the annual gross revenue.
Maintain Automobile Liability Insurance that complies with the Michigan No-Fault Insurance laws.
Maintain excess liability insurance for the self-insured workers’ compensation program.
Maintain wrongful acts insurance for Commissioners and Employees.

Surety Bonding

Maintain faithful performance bonding on employees with a limit of $100,000 per loss.
Require dishonesty bonding with similar limits on outside service workers and independent contractors.

Mr. Tousley reported that regular updates would be provided to the Finance Committee on each of the four areas of risk assessment.

The Finance Committee recommends the following resolution:

Resolution # 2001-4-5
General Manager to Acquire and Maintain Insurance Coverage or Surety Bonding

RESOLVED, That the General Manager or designee shall acquire and maintain insurance coverage and surety bonding to finance various risks of loss on such terms and conditions, limits, deductibles or retentions and premiums as may in his judgment provide the best value for the Board of Water and Light. Coverage or surety bonding may be bid or negotiated with agents or insurers.

RESOLVED FURTHER, That additional insurance coverage and bonding may be acquired whenever it is appropriate in the judgment of the General Manager.

RESOLVED FURTHER, That a report on the current coverage shall be provided annually to the Commissioners.

Growth and Expansion

The Commissioners were asked for their comments on the performance audit specification on growth and expansion. Commissioner Murray suggested that Phases I and V be prioritized and itemized for separate bid, by virtue of their significance. Assistant General Manager Cook clarified that the Request for Proposal (RFP) was structured to receive bids for each of the five phases.

Other Matters

Habitat for Humanity: General Manger Pandy reported that Habitat for Humanity has approached the BWL on the possibility of teaming up with Meijer’s in Lansing to build a Habitat for Humanity house this summer. Meijer's has made a commitment of approximately $30,000 toward the project. Habitat is asking for BWL support in the form of a $20,000 sponsorship level, which would help purchase materials for the project. BWL volunteers to perform labor is also being requested. Mr. Pandy asked for the Committee’ s guidance on the appropriate amount of funds to support this project. WFMK Radio is considering a sponsorship in the form of advertisement in lieu of cash.

The Committee supports employee involvement in the Habitat project through volunteer labor, but is concerned with the $20,000 level of cash contribution requested. General Manger Pandy told the Committee that the BWL has a community involvement funding committee that meets periodically to review community requests. Mr. Pandy said he has authority of up to $15,000 for that purpose. Following discussion, there was consensus among the Commissioners to delegate the General Manager the authority to involve the BWL in the Habitat project with appropriate discretion on the amount of monetary sponsorship.

There being no further business, the Finance Committee meeting adjourned at 7:15 p.m.

Respectfully submitted,
Mark A. Murray, Chair
Finance Committee

Moved by Commissioner Duncan, seconded by Commissioner Murray, that the Finance Committee Report be received as presented.

Action: Carried unanimously.

Moved by Commissioner Creamer, seconded by Commissioner Murray, that Resolution # 2001-4-3 (Public Hearing – Steam Rates) be approved.

Action: Carried unanimously.

Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution #2001-4-4 (Public Hearing – Fire Hydrant Charges) be approved.

Action: Carried unanimously.

Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution #2001-4-5 (Insurance Coverage/Surety Bonding) be approved.

Action: Carried unanimously.

GENERAL MANAGER’S RECOMMENDATIONS

Background materials on items presented are on file in the Office of the Corporate Secretary.

Resolution # 2001-4-6
APPROVAL OF FIFTH SUPPLEMENT REVENUE BOND RESOLUTION

RESOLVED, that the Fifth Supplemental Revenue Bond Resolution Authorizing Water Supply, Steam and Electric Utility System Revenue Bonds of the City of Lansing, Michigan, as appended to these minutes, be approved.

Staff Commentary: The latest bond sizing (attached) from Speer Financial is $11,780,000 for the Chilled Water Phase II plus issuance costs. The bond sale date is tentatively set for May 17, 2001. The bond resolution has a new provision, Section 10, which allows the Board Chair or a Commissioner and either the General Manager or the Chief Financial Officer to accept competitive bids on May 17, 2001 in lieu of a special board meeting to award the bonds. The BWL’s bond counsel, Kester So from Dickinson Wright, drafted the resolution with input from staff and Speer Financial and will perform the final legal review.

Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved.

Discussion: General Manager Pandy commented that when staff first talked to the Board about borrowing money, a $20 million issue was in the original financial forecast. After receiving input from the Finance Committee and Commissioners, staff moved toward conservative borrowing and trimmed the bond issue down to about $11.8 million. Interest rates for the sale are expected to be in the range of 5%.

Action: Carried unanimously.

Resolution #2001-4-7
PURCHASE OF WATER TREATMENT CHEMICALS

RESOLVED, That the Board of Water and Light (BWL) enter into a purchase agreement with Nalco Chemical Company (NALCO) of Naperville, Illinois, for the supply of Water Treatment Chemicals for Electric, Steam and Chilled Water facilities. The purchase agreement particulars are as follows:

The term of this agreement shall be thirty-six (36) months (July 1, 2001 – June 30, 2004).
NALCO shall become the sole supplier of proprietary water treatment chemicals for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant.
The estimated cost of the proprietary water treatment chemicals for the duration of the agreement is $1,300,000.

Staff Commentary: By entering into agreement with NALCO, the BWL will be provided with analytical services, proprietary water treatment commodities and consulting services for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant.

Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved.

Discussion: Commissioner Callen indicated that in reviewing backup information submitted with the meeting packet, he could understand the difference between the alternate bids submitted by Nalco Chemical Company and BetzDearborn, but he asked for a clarification on the difference between the original bids submitted by Nalco and Betz. General Manager Pandy responded that he would look into the particulars of it and report back with the details.

Action: Carried unanimously.

OVERVIEW OF OTTAWA STATION DEVELOPMENT DOCUMENTS

Staff Attorney Larry Wilhite presented an overview of the general framework of the Joint Development Agreement (JDA) between the BWL and Convergency Centers Corporation and the Purchase and Development Agreement. Mr. Wilhite introduced Tom Maier, a senior attorney with Clark Hill and Associates. Mr. Maier drafted both documents and is a specialist in commercial transactions and utility law. He briefed the Board on the more complex aspects of the contract provisions. Mr. Maier noted the agreement provides that prior to undertaking construction, the developer is to provide plans, drawings, detailed engineering plans, specifications, bidders lists, bid documents, proposals, and all contract documents to the BWL for approval to assure that the developer complies with the terms under the agreement.

The three portions of the Ottawa Station redevelopment project involve the following:

Convergency Centers Corporation development for a telecommunications Carrier Hotel. This project will utilize the middle seven floors. The JDA authorizes the sale of a portion of Ottawa Station to Convergency Centers Corporation.
Oldsmobile/General Motors Heritage Center for a combination of the R.E. Olds Transportation Museum on Museum Drive and the GM Heritage Center on Michigan Avenue. This project needs about 58,000 square feet, and will take up the first, second and third levels of the Ottawa Station. The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement.
H&H Development for office space. This project involves the top floor (11th level). The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement.

A preliminary architectural exhibit attached to the JDA was reviewed. Mr. Wilhite noted that approval of a resolution to declare the Ottawa Station as surplus and no longer needed for the utility’s operation, would be subject to a condominium survey and the creation of a master deed to comply with the Michigan Condominium Act. The closing of the property itself is subject to a resolution by the BWL Board of Commissioners and a resolution by the Lansing City Council, approving the sale.

The Board engaged in lengthy discussion on the business case for the project.

EXECUTIVE SESSION

Moved by Commissioner Creamer, seconded by Commissioner Murray, that the Board convene in Executive Session to discuss purchase price parameters for Convergency Centers Corporation and other interested buyers. (7:20 p.m.)

Yeas:	Commissioners Aquilina, Callen, Creamer, Duncan, Murray, Royal
Nays:	None
Abstentions:	None
Absent:	Commissioners Christian and O’Leary

Action: Carried unanimously.

The Board returned to open session at 8:27 p.m.

Due to some uncertainty on the implications of declaring BWL property as surplus, and the consequences if the deal falls through, the Commissioners agreed to modify the General Manager’s recommendation--to declare a portion of Ottawa Station as surplus--by including language to the effect that subject to reaching agreement on a purchase price and wording of the Joint Development Agreement, the Board indicates it will declare those portions of the Ottawa Station to be surplus. This contemplates that the Joint Development Agreement and Purchase Agreement are conditioned upon a resolution from the Board to include a declaration that the property is surplus. This would provide the necessary assurance that the Board is prepared to complete this transaction.

Resolution # 2001-4-8
OTTAWA STATION TO BE DECLARED SURPLUS

RESOLVED, That subject to reaching successful negotiations with Convergency Centers, the Board will declare those portions of the Ottawa Station as reviewed with the Board on April 24, 2001 (as set forth on Exhibit A, filed in the Corporate Secretary’s Office), to be surplus property and no longer needed for the utility’s operation. Further, this action is subject to a condominium survey to be performed after execution of the Joint Development Agreement.

Staff Commentary: The Exhibit A schematic is a skeletal version of the manner in which the BWL plans to condominiumize the Ottawa Station. To create a legal condominium description, the BWL will have to perform a condominium survey. Upon completion of the survey, the legal description of each condominium unit will be finalized. A copy of Exhibit A is filed in the Corporate Secretary’s Office and appended to the Official Board minutes.

Moved by Commissioner Duncan, seconded by Commissioner Murray, that the resolution be approved.

Action: Carried unanimously.

Resolution # 2001-4-9
JOINT DEVELOPMENT AGREEMENT

RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Joint Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary’s Office (Exhibit B), between Convergency Centers Corporation and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001.

Staff Commentary: The Joint Development Agreement (JDA) authorizes the sale of a portion of Ottawa Station to Convergency Centers Corp. The JDA also requires Convergency to sign a Project Labor Agreement with the Southeastern Michigan Building and Trades Council. Convergency is also required to accept the terms of the BWL utility proposal and the BWL is granted approval rights for all contractors and subcontractors. A copy of the JDA is filed in the Corporate Secretary’s Office and appended to the official Board minutes.

Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved.

Action: Carried unanimously.

Resolution # 2001-4-10
AGREEMENTS WITH OLDSMOBILE/GM HERITAGE CENTER AND H&H, INC.

RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary’s Office (Exhibit C), between the Oldsmobile/GM Heritage Center and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001.

RESOLVED FURTHER, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form reviewed with the Board (Exhibit C), between H&H, Inc. and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001.

Staff Commentary: This document is designed as a companion document to the Joint Development Agreement. It will be utilized for sale of condominium units to Oldsmobile/GM Heritage Center and H&H, Inc., both of which have expressed an interest in floors 1-3 and the 11th floor of the Ottawa Station, respectively. A copy of the Purchase and Development Agreement is filed in the Corporate Secretary’s Office and appended to the official Board minutes.

Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved.

Discussion: Commissioner Duncan stated for the record that it is her understanding there will be information coming back to the Board as the negotiations progress with Convergency Centers Corporation, the Oldsmobile/GM Heritage Center and H&H, Inc. General Manager Pandy confirmed that information would be provided to the Board as negotiations move forward and prior to completing the transaction. Staff Attorney Wilhite commented that final approval would be dependent upon the nature of the arrangement presented to the Board at that time and consummated by a Board resolution.

Action: Carried unanimously.

UNFINISHED BUSINESS

None.

NEW BUSINESS

None.

RESOLUTIONS

None

GENERAL MANAGER'S REMARKS

IBEW Files Unfair Labor Charge. General Manager Pandy handed out a response letter from the Michigan Employment Relations Commission (MERC - dated April 19, 2001) to the unfair labor charge that was filed by the IBEW, Local 352. The essence of the letter is that the election results have been certified. The Administrative Law Judge states in the letter "I assume that both parties understand that if the Commission were to find a violation of Section 10(1)(a) of PERA based on this charge, the remedy would not include an order to rerun the March 29 election in Case…" MERC directed IBEW to show cause in writing as to why the allegations have been filed.

Status of Green Power. Staff has been working diligently to find green power to include in the BWL’s power supply portfolio. Two suppliers have been found from which the BWL can purchase a total of 1 MW of renewable power. Fifty percent of that will be from biomass (landfill gas) from the Granger Landfill in Lansing, and the remaining fifty percent will be from small hydro plants (500 kW each) located in Cheboygan County, Michigan. This would be power on a 100% basis, totaling 8,760 MWhs. Staff proposes to sell this to BWL customers who would be willing to pay the existing green power rate of $7.50 per block for 250kWh/month. This represents about a 3 cent per kWh premium on the current BWL electric rate, which is slightly below 6 cents. Customers will be notified of the availability of green power through a marketing campaign to be sent to all customers.

Commissioner Callen commended staff for efforts put forth into making renewable energy an option for BWL customers.

REMARKS BY COMMISSIONERS

Commissioner Creamer commented that as a new Rotarian, he recently heard an excellent presentation on electric deregulation delivered to the Lansing Rotary Club by General Manager Pandy. There was a great deal of interest on this topic and it was extremely well received by the members.

Commissioner Callen commented that in reviewing the cost estimation for the Chilled Water District, he noted there were unanticipated environmental demolition costs. He asked if more are anticipated. He asked if the project is projected to come in as estimated.

General Manager Pandy responded that staff believes all the environmental problems have been encountered, since the project is essentially completed, except for system controls checkout, which is taking place this week and next. The project is anticipated to come in within the estimates. Special Projects Director Jack Hill told the Board that the Chilled Water project is approximately 95% complete. The electric chiller was started earlier in the day for 40 minutes. All the systems are in place and are ready to serve and meet the May 1 startup date.

In response to Commissioner Callen’s question on contingency, General Manager Pandy reported that a contingency was included in the initial estimate and it has been spent.

Commissioner Callen asked for a clarification on Air Fees negotiated with the Michigan Manufacturers Association.

Assistant General Manager Cook reported that the Michigan Manufacturers Association, in conjunction with the Michigan Department of Environmental Quality, has developed a new set of Air Permit Fees. The original proposal would have increased BWL fees from $40,000 per year to $352,500. The BWL was able to negotiate a 43% reduction from the proposed fees, but the new fees will still represent an increase of 467%.

General Manager Pandy reminded the Commissioners that there is a legislative reception on Wednesday, May 9, 2001, from 5:30 p.m. to 7:30 p.m. at the Lansing Center. The reception is co-sponsored by the City of Lansing, BWL, Lansing Regional Chamber of Commerce, and Lansing Convention Visitors Bureau. Commissioners were invited to attend this function.

EXCUSED ABSENCES

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

Carried unanimously.

PUBLIC COMMENTS

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

None.

ADJOURNMENT

There being no objection, the meeting adjourned by unanimous consent at 8:45 p.m.

/s/ Mary E. Sova, Secretary

Filed with Lansing City Clerk
May 1 ,2001

(Attachment to Resolution #2001-4-1)

Lansing Board of Water and Light

VEBA Trust Investment Policy

Section 1. DEFINITIONS:

A. The Plan is the LBWL Retiree Benefit Plan and Trust Agreement, as amended, effective July 1, 1999.

B. The Trust is the trust fund established by the above agreement.

C. The Board is the appointed Commissioners of the Board of Water and Light.

D. The Trustees of the retiree benefit Plan and Trust are all the Commissioners of the Board of Water and Light.

E. The Personnel Committee is a subcommittee of both the Board and the Trustees charged with oversight responsibility of the Plan and Trust and thus the VEBA Trust Fund.

F. The VEBA Trust Fund receives contributions made by the Board. The Fund pays any benefits enumerated in the Plan. These funds are invested in various financial assets. This document articulates the investment goals and investment risk and return guidelines established for those investments. These funds are subject to the Public Retirement System Investment Act (MCL 38.1132 et seq.) as amended. This act restricts the type of investments and the amount of the total portfolio that can be invested in equity versus fixed income.

G. The Asset Manager for the investments in the VEBA Trust Fund is the Chief Financial Officer of the Board of Water and Light. This policy also describes the administrative procedures to be followed by the Asset Manager in investing the assets of the VEBA Trust Fund. The General Manager, Director of Human Resources and Chief Financial Officer of the Board of Water and Light are jointly responsible for the administration of the Plan and Trust.

Section 2. FUNDING POLICY AND ASSUMPTIONS

A. The Board of Water and Light’s funding policy is to have Plan assets exceed the best estimate of Plan liabilities by a modest margin. This goal can best be achieved by annual actuarial valuations using the following actuarial assumptions.

B.
Investment Returns 7.5%
Pay Projections 5.0%
Mortality Table 1983 Group Annuity
UAAL Amortization 15 years
Funding Target 100%
Rates of Inflation Probability Range as determined by actuary
Active Group Size Constant or declining as determined by actuary

Section 3. PLAN INVESTMENT GOALS

A. The Board recognizes that benefit costs arising under the Post-Retirement Benefit Plan for Eligible Employees of the Lansing Board of Water and Light will likely be paid from sources other than the Trust for about 10 years after said Post-Retirement Benefit Plan’s original effective date. During that time, the Trust will accumulate assets so that it is prepared to begin paying Post-Retirement Benefit Plan benefit costs at the end of said 10 years. The Board also recognizes the need to invest trust assets in a way that provides some current liquidity in the event that the Trust is unexpectedly asked to pay current benefit costs before the end of said 10 years. This Investment Policy is designed to achieve those accumulation and liquidity goals, together with other goals described in this Section 3.

B. The primary goal of the Fund is to ensure the solvency of the Plan over time and to meet retiree benefit obligations as required.

C. The secondary goal of the Fund is to earn the highest return possible, without taking excess risk and jeopardizing its primary goal or subjecting the Board to an undue amount of contribution rate volatility. Fund returns will be used to help finance Plan obligations, thus reducing the level of contributions into the Fund.

D. The third goal of the Fund is to achieve a minimum rate of return of 7.0% and a rate of return 4% greater than inflation.

Section 4. GOAL ACHIEVEMENT -- ASSET MIX POLICY

A. The Board of Water and Light recognizes that the Fund’s long-term investment results will be determined by the Fund’s long-term asset mix policy. Given its decision to fully fund the Plan, the long-term investment bias in the Fund will be toward a balance of equity and fixed income investments. The Asset Manager will advise the Personnel Committee on the asset mix policy weightings most consistent with Plan and Fund goals. The asset mix policy is as follows and is expressed in terms of these asset classes:

Equity- 50%	Fixed Income – 50%
Domestic common stocks 48%	Corporate bonds & notes 35%
Foreign stocks 1%	Government bonds & notes 5%
Other equity 1%	Foreign bonds 3%
	Preferred stocks 2%
	Cash 5%

B. There will at all times be a Fund asset mix policy expressed in terms of policy weights. The Trustees will review these policy weights at least once per year. The rate of return earned compared to the rate of return on an appropriately weighted portfolio representing the above asset classes. This comparison is a benchmark for evaluating the effectiveness with which the Asset Manager actually implements the Fund’s asset mix policy. The benchmarks listed below are used to evaluate the performance of the different asset classes.

Equity	Fixed Income
S&P 500 Index	Lehman Brothers Govt/Corporate Index
Russell 1000 Index	Salomon Brothers Broad Bond Index
Wilshire 5000 Index	US T-Bills

Section 5. GOAL ACHIEVEMENT- ASSET MIX POLICY IMPLEMENTATION

A. The Asset Manager shall have the responsibility and the authority to implement the decided asset mix policy. The Asset Manager shall employ prudently the following techniques and outside services.

Subject up to 5 percent of the Fund to foreign currency exposure.

Engage asset class investment specialists to advise on specific asset classes.

Engage one or more master custodian(s) capable of meeting the Fund’s custodial
and information needs in an accurate and timely fashion. The custodian may have the authority to engage in security lending activities on behalf of the Fund to generate incremental revenues.

Engage such other information and/or consulting services as are deemed needed to
effectively manage the Fund .

Section 6. GOAL ACHIEVEMENT: MEASUREMENT

A. Total Fund return means the market return on assets. Total Fund return will be measured regularly and broken down into three basic components; (1) the risk-free rate of return, (2) the asset mix policy return impact, and (3) the asset mix policy implementation return impact. Component 1 will be the one-year Treasury bond rate. Component 2 is the difference between the rate of return on a portfolio exactly like the asset mix percentages and the risk-free rate of return. Component 3 is the difference between the total Fund return and the returns in component 1 and 2 above.

B. Fund results will be evaluated from a multi-year and market cycle perspective. Generally, component 1 indicates how much return the capital markets are providing for an investment in risk free government bonds and notes. Component 2 indicates how much of a premium the capital markets are providing for adopting the chosen asset mix policy; and component 3 indicates how effectively the chosen asset mix policy is being implemented.

Section 7. FUND GOVERNANCE

A. The Plan’s financial operations will be bound by all laws governing the behavior of fiduciaries.

B. The Personnel Committee will ensure the existence of a Plan conflict of interest policy that will cover Committee members, Plan operations personnel, and third party fiduciaries such as external investment advisors.

C. The Asset Manager shall vote the shares held by the Plan. Any voting must be in the best economic interest of the Plan.

Section 8. FINANCIAL INFORMATION, COMMUNICATION AND DISCLOSURE

A. The Plan and Fund are subject to annual independent audits.

B. The Board of Water and Light will disclose the Fund balance sheet annually to plan participants.

C. The Asset Manager will send a quarterly report to the Trustees. The report will review the portfolio to ensure compliance with this investment policy and allow the Trustees to perform the following tasks:

Compare the asset manager’s report with the custodian report to discover and resolve any differences.

Review the valuation method for all assets.

Review portfolio returns for all asset classes and the total Fund.

Review portfolio returns compared to appropriate benchmarks

Review the fees paid for administration of the Fund.

D. The Trustees will annually review and examine cash management and investment procedures and performance. The review includes, but is not limited to, the following tasks:

Examine trading practices, brokerage costs, quality of execution, portfolio turnover, and other procedures used to administer the Fund.

Consider proxy voting policies.
Evaluate the communications to the participants and the Trustees of the Fund.

Examine portfolio performance in depth.
Review changes in investment style and brokerage affiliation and practices.
Examine the integrity of the investment process and personnel turnover.
Review and discuss proposed changes in investment policy and benefit plan policy or procedure. Proposed changes in either the investment policy or the plan documents will be referred to the Board for approval.
Review the annual audit, actuarial valuation and portfolio performance reports

E. The Personnel Committee will meet quarterly to review the items in Paragraph C above. The Trustees will meet annually in October of each year to review the items in Paragraph D above.

(Attachment to Resolution #2001-4-3)
PROPOSED GENERAL STEAM SERVICE – RATE NO. 1

Availability - This rate is available to any customer receiving service from the Board of Water and Light (BWL) steam distribution system with a maximum gauge pressure of fifteen pounds per square inch (15 psi). Steam services at gauge pressures above 15 psi but not exceeding 100 psi, when available, may be supplied at the option of the BWL or upon request by the customer.

Nature of Service - Saturated steam up to a maximum gauge pressure of 15 psi except as indicated above.

Monthly Rate

	1/1/01	1/1/02	1/1/03
Basic Service Charge	$5.00	$6.00	$7.00		per customer per month
Commodity Charge				Billing Months of June through November
	$6.55 $6.90	$6.75 $7.15	$6.95 $7.35		per 1000 lbs. for the first 200,000 lbs. per 1000 lbs. for all 1000 lbs. over 200,000 lbs.
	$6.55 $6.90	$6.75 $7.15	$6.95 $7.35
				Billing Months of December through May
	$6.65 $7.00	$6.85 $7.25	$7.05 $7.45		per 1000 lbs for the first 200,000 lbs. per 1000 lbs. for all 1000 lbs. over 200,000 lbs.
	$6.65 $7.00	$6.85 $7.25	$7.05 $7.45

Surcharge - A surcharge of ten (10) percent shall be added to the above rates for steam service supplied upon customer's request for service at gauge pressure above 15 psi but not exceeding 100 psi.

Fuel Cost Adjustment - The fuel cost adjustment shall consist of an increase or decrease of 0.16 ($0.0016) cents per thousand pounds of steam billed for each full 0.1 ($0.001) cent or fraction thereof increase or decrease in the average delivered cost of fuel burned monthly above or below 168.3 ($1.683) 127.1 ($1.271) cents per million Btu. (A fraction of 0.05 ($0.0005) cents or less will not be considered a full 0.1 ($0.001) cent; a fraction of 0.06 ($0.0006) cents or greater will be considered a full 0.1 ($0.001) cent.) The price per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding calendar month. This fuel cost adjustment clause expires on July 1, 2003.

Amine Treatment Adjustment - The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actual cost incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs) billed. The factor shall consist of 1.124 times the weighted average amine cost per 1000 lbs treated during the previous month.

Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases.

Minimum Charge - The Basic Service Charge included in the rate except that Special Minimum Charges shall be billed when the revenue received does not adequately compensate the BWL for the cost of furnishing service.

Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill, which is not paid on or before the due date.

Reconnect Charge - A reconnect charge of $25.00 shall be added to any account which discontinues and reconnects service at the same address within a twelve (12) month period.

Rules and Regulations - Service under this rate is subject to the BWL Rules and Regulations for Steam Service, which is incorporated herein by this reference.

Adopted: July 25, 2000

Effective: January 1, 2001

PROPOSED INDUSTRIAL STEAM SERVICE

RATE NO. 2

Availability: This rate is available to any customer engaged in mining or manufacturing and receiving steam at any BWL plant wall at a minimum gauge pressure of 250 psi. Service will be provided upon customer entering into a steam supply contract with the BWL. Terms and conditions of the contract may vary due to customer requirements and the impact on BWL facilities.

Monthly Rate:

Demand Charge:	$0.80 per pound per hour (lb/hr) for all lb/hrs of contract demand.
	$0.70 per pound per hour (lb/hr) for all lb/hrs exceeding contract demand

Commodity Charge:	$3.88 per thousand pounds (Mlb)

Fuel Cost Adjustment: The fuel cost adjustment shall consist of an increase or decrease of 0.16 ($0.0016) cents per thousand pounds of steam billed for each full 0.1 ($0.001) cent or fraction thereof increase or decrease in the average delivered cost of fuel burned monthly above or below ~~168.3 ($1.683)~~ 127.1 ($1.271) cents per million Btu. [A fraction of 0.05 ($0.0005) cents or less will not be considered a full 0.1 ($0.001) cent; a fraction of 0.06 ($0.0006) cents or greater will be considered a full 0.1 ($0.001) cent.] The price per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding calendar month. This fuel cost adjustment clause expires on July 1, 2003.

Minimum Charge: Monthly Demand Charge above.

Tax Adjustment: Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, or any other charges against the BWL's property or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases.

Billing Demand: The billing demand is the maximum demand (lb/hrs) supplied during the 15 minute period of maximum use during the month, but not less than the contract demand.

Delayed Payment Charge: A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill, which is not paid on or before the due date.

Rules and Regulations: Service under this rate is subject to the BWL Rules and Regulations for Steam Service, which is incorporated herein by this reference.

Adopted: ~~December 20, 1994~~

Effective ~~January 13, 1995~~

PROPOSED GENERAL STEAM SERVICE

RATE N0. 3

Availability - This rate is available to any customer receiving service from the Board of Water and Light (BWL) steam transmission or distribution system with a gauge pressure in excess of 100 psi. Service will be provided upon customer entering into a steam supply contract with the BWL. Terms and conditions of the contract may vary due to customer requirements and the impact on BWL facilities. This service may include both firm and curtailable service.

Monthly Rate - Per contract terms.

Fuel Cost Adjustment - The fuel cost adjustment shall consist of an increase or decrease of 0.16 ($0.0016) cents per thousand pounds of steam billed for each full 0.1 ($0.001) cent or fraction thereof increase or decrease in the average delivered cost of fuel burned monthly above or below ~~168.3 ($1.683)~~ 127.1 ($1.271) cents per million Btu. (A fraction of 0.05 ($0.0005) cents or less will not be considered a full 0.1 ($0.001) cent; a fraction of 0.06 ($0.0006) cents or greater will be considered a full 0.1 ($0.001) cent.) The price per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding calendar month. This fuel cost adjustment clause expires on July 1, 2003.

Amine Treatment Adjustment - Per contract terms.

Minimum Charge - Per contract terms.

Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill, which is not paid on or before the due date.

Rules and Regulations - Service under this rate is subject to the BWL Rules and Regulations for Steam Service, which is incorporated herein by this reference, unless superceded by the terms and conditions of the customer contract.

Adopted: ~~July 30, 1996~~ Effective: ~~August 15, 1994~~

(Attachment to Resolution #2001-4-4)
PROPOSED FIRE HYDRANT CHARGES

RATE NO. 6

Annual Fire Hydrant Charge - Water Supply and maintenance of a fire service line to a public or private fire hydrant shall be provided in accordance with the following annual schedule of charges:

	1/1/01	1/1/02	1/1/03
All Hydrants	$~~305~~ $245	~~$320~~ $270	~~$336~~ $295

Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the Board's property, or its operation, or the production and/or sale of water, to offset any such cost and thereby prevent other customers from being compelled to share such local increases.

Minimum Charge - Billings subject to this rate are not subject to a minimum charge.

Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill, which is not paid on or before the due date.

Rules and Regulations - Service under this rate is subject to the Board of Water and Light Rules and Regulations for Water Service, which is incorporated herein by this reference.

Adopted: ~~July 25, 2000~~ Proposed

Effective: January 1, 2001

(Attachment to Resolution # 2001-4-6)
THE FOLLOWING FIFTH SUPPLEMENTAL REVENUE BOND RESOLUTION AUTHORIZING WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM REVENUE BONDS WAS ADOPTED BY THE BOARD OF WATER AND LIGHT COMMISSIONERS OF THE CITY OF LANSING, MICHIGAN, ON APRIL 24, 2001

RESOLVED THAT:

Section 1. Supplemental Resolution. This Fifth Supplemental Revenue Bond Resolution is supplemental to, and is adopted in accordance with Section 23(a)(i) of, the Bond Resolution.

Section 2. Definitions. Unless the context indicates that another meaning is intended, the following words and terms used in this Fifth Supplemental Revenue Bond Resolution shall have the following meanings, and any other words and terms which are defined in Act 94 or in the Bond Resolution shall have the meanings as therein defined:

"Award of Sale of Series 2001A Bonds" means the award of sale of the Series 2001A Bonds, as authorized in Section 10 herein.
"Bond Resolution" means the Amended And Restated Bond Resolution adopted by the Board on October 24, 1989, as supplemented and amended from time to time.
"Junior Lien Bonds" means the Series 1999B Bonds and any additional junior lien bonds issued pursuant to the Bond Resolution.
"Series 1989A Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1989A issued pursuant to the Bond Resolution.
"Series 1989B Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1989B issued pursuant to the Bond Resolution.
"Series 1994A Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1994A issued pursuant to the Bond Resolution.
Series 1994B Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1994B issued pursuant to the Bond Resolution.
"Series 1999A Bonds" means the Water Supply, Steam And Electric Utility System Revenue Bonds, Series 1999A issued pursuant to the Bond Resolution.
"Series 1999B Bonds" means the Water Supply, Steam And Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) issued pursuant to the Bond Resolution.
"Series 2001A Bonds" means the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2001A authorized by Section 4 of this Fifth Supplemental Revenue Bond Resolution.
"2001A Project" means the acquisition, construction and installation of phase II of the chiller plant and related distribution system to serve the downtown chilled water district, together with related costs and expenses.

Section 3. Necessity, Estimate of Cost and Useful Life. It is determined to be necessary for the public health, safety and welfare of the City to undertake the 2001A Project, and extend the life of the System by acquiring the 2001A Project. The estimated cost of the 2001A Project is $11,870,000 and the estimated useful life of the 2001A Project is not less than 30 years.

Section 4. Authorization of Series 2001A Bonds. To pay a portion of the cost of acquiring, constructing and equipping the 2001A Project, including making a deposit to a reserve fund and payment of legal, financial and other expenses of the issuance of the Series 2001A Bonds, the City, by and through the Board, shall borrow a sum not in excess of Thirteen Million Dollars ($13,000,000), as finally determined in the Award of Sale of Series 2001A Bonds, which sum is presently estimated to be Eleven Million Eight Hundred Seventy Thousand Dollars ($11,870,000), pursuant to the provisions of Act 94, Public Acts of Michigan, 1933, as amended.

Section 5. Bond Details, Parameters and Security. The Series 2001A Bonds shall be designated "Water Supply, Steam And Electric Utility System Revenue Bonds, Series 2001A," shall be of equal standing in priority of lien on the Net Revenues of the System with the Series 1989A Bonds, the Series 1989B Bonds, the Series 1994A Bonds, the Series 1994B Bonds, the Series 1999A Bonds and any other Additional Bonds, shall be senior in priority of lien to any Junior Lien Bonds issued hereunder, including, but not limited to the Series 1999B Bonds, and shall be payable solely out of Net Revenues and any other moneys pledged under the Bond Resolution and shall not be a general obligation of the City. Series 2001A Bonds shall be issued in denominations of $5,000 or any integral multiples of $5,000 not exceeding the amount of the Series 2001A Bonds maturing on the same date and shall be numbered in consecutive order of authentication from 1 upwards. The Series 2001A Bonds shall be issued as fully registered bonds without coupons and shall have an original issuance date of their dated date, or such other date as the Board shall approve in the Award of Sale of Series 2001A Bonds.

The Series 2001A Bonds shall bear interest at a rate or rates to be determined in the Award of Sale of Series 2001A Bonds, not exceeding seven percent (7%) per annum, and shall mature no later than July 1, 2017. Interest shall be payable commencing on January 1, 2002 and on each July 1 and January 1 thereafter, or such other dates specified in the Award of Sale of Series 2001A Bonds, by check drawn on the Transfer Agent and mailed to each Registered Owner at the registered address, as shown on the registration books of the City maintained by the Transfer Agent. Interest on the Series 2001A Bonds shall be payable to each Registered Owner as of the 15th day of the month prior to the date on which the interest payment is due. Interest on the Series 2001A Bonds shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The principal of the Series 2001A Bonds shall be payable at the principal office of the Transfer Agent upon presentation and surrender thereof; provided, however, if part of an Outstanding Series 2001A Bond registered in the name of a securities depository company as part of a book-entry system is selected for redemption, the securities depository company may retain the Series 2001A Bond and make an appropriate notation on the Series 2001A Bond indicating the date and amount of the reduction in the principal amount of the Series 2001A Bond resulting from the partial redemption, however, in the case of the final payment of the remaining principal amount of the Series 2001A Bond, the Series 2001A Bond shall be presented and surrendered to the Transfer Agent as a condition of payment. The aggregate principal amount of the Series 2001A Bonds, the amount of each maturity and the designation of serial and term bonds, if any, shall be as finally determined in the Award of Sale of Series 2001A Bonds.

The Series 2001A Bonds shall be subject to redemption as provided in the Award of Sale of Series 2001A Bonds.

Section 6. Series 2001A Bond Proceeds. From the proceeds of the sale of the Series 2001A Bonds, there shall be immediately deposited in (a) the Redemption Fund an amount equal to the accrued interest and premium, if any, received on delivery of the Series 2001A Bonds and the City shall receive a credit equal to the amount so deposited against the amount required to be deposited in the Redemption Fund for payment of the next maturing interest and (b) the Bond Reserve Account, the amount required by the Bond Resolution. The remaining proceeds of the Series 2001A Bonds shall be used to pay the costs of acquiring, constructing and installing the Series 2001A Project and to pay the costs of issuing the Series 2001A Bonds.

Section 7. Book-Entry System - Series 2001A Bonds. Initially, one fully-registered Series 2001A Bond for each maturity, in the aggregate amount of such maturity, will be issued in the name of Cede & Co., as nominee of The Depository Trust Company, for participation in the book-entry transfer system of The Depository Trust Company. In the event the City decides to discontinue participation in the book-entry transfer system of The Depository Trust Company (or a successor securities depository), the City shall notify the Transfer Agent and The Depository Trust Company, in writing, and thereafter the City shall execute and the Transfer Agent shall authenticate and deliver Series 2001A Bonds requested by the bondholders or to a successor securities depository. In the event The Depository Trust Company discontinues providing services as a securities depository for the Series 2001A Bonds and the City does not designate a successor securities depository, the City shall execute and the Transfer Agent shall authenticate and deliver Series 2001A Bonds to the bondholders.

Section 8. Bond Form. The Series 2001A Bonds shall be in substantially the following form:

[SERIES 2001A BONDS]
UNITED STATES OF AMERICA
STATE OF MICHIGAN
CITY OF LANSING
WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM
REVENUE BONDS, SERIES 2001A

Interest Rate Per Annum	Maturity Date	Date of Original Issuance	CUSIP

%

REGISTERED OWNER:
PRINCIPAL AMOUNT:

The CITY OF LANSING, State of Michigan (the "City"), for value received, promises to pay the Principal Amount to the Registered Owner on the Maturity Date with interest thereon from the Date of Original Issue, or such later date to which interest has been paid, until paid at the Interest Rate Per Annum, payable on January 1, 2002, and on each July 1 and January 1 thereafter until the obligation of the City to pay the Principal Amount is satisfied. Principal of this Bond is payable at the principal office of National City Bank of Michigan/Illinois, or such other transfer agent as the City may hereinafter designate by notice mailed to the registered owner not less than 60 days prior to any interest payment date (the "Transfer Agent"). Interest on this Bond is payable to the registered owner of this Bond as of the 15th day of the month next preceding the payment date as shown on the registration books of the City kept by the Transfer Agent by check or draft mailed to the registered owner at the registered address. The revenues of the facilities of the City for the supply and distribution of water and the generation and distribution of electricity, steam and heat (the "System") after provision has been made for reasonable and necessary expenses of operation, maintenance and administration of the System (the "Net Revenues"), are irrevocably pledged and a statutory lien thereon has been created to secure the payment of the principal of and interest on this Bond, when due; however, the pledge of Net Revenues and the statutory lien are on a parity with the pledge of Net Revenues and statutory lien in favor of the City of Lansing's Water Supply and Electric Utility System Revenue Bonds, Series 1989A, its Water Supply and Electric Utility System Revenue Bonds, Series 1989B, its Water Supply and Electric Utility System Revenue Bonds, Series 1994A, its Water Supply and Electric Utility System Revenue Bonds, Series 1994B, its Water Supply and Electric Utility System Revenue Bonds, Series 1999A and any Additional Bonds (as defined below) which may be issued by the City, and senior in priority of lien to its Water Supply Electric Utility Revenue Bonds, Series 1999B (Taxable Series) and any additional junior lien bonds issued pursuant to the Resolution (defined below). Interest on this Bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

This Bond is one of a series of bonds of like tenor, except as to denomination, rate of interest, date of maturity and prior redemption, aggregating the principal sum of $____________, issued pursuant to a Bond Resolution adopted by the Board of Water and Light of the City (the "Board") on October 24, 1989, as amended and supplemented from time to time, including by a Fifth Supplemental Revenue Bond Resolution adopted by the Board on April 24, 2001 (collectively, the "Bond Resolution"), and under and in full compliance with the Constitution and statutes of the State of Michigan, including specifically Act 94, Public Acts of Michigan, 1933, as amended, for the purpose of paying part of the cost of remodeling, updating and extending the life of the System, making a deposit to a bond reserve account and paying the costs of issuing the bonds.

For a complete statement of the revenues from which and the conditions under which this Bond is payable, a statement of the conditions under which additional bonds ("Additional Bonds") of equal standing may hereafter be issued, the rights and limitations on the owners of the bonds and the general covenants and provisions pursuant to which this Bond is issued, reference is made to the Bond Resolution.

Bonds of this series maturing prior to July 1, _____, are not subject to redemption prior to their respective dates of maturity. Bonds of this series maturing on and after July 1, ______, are subject to redemption prior to maturity, at the option of the Board, at any time on and after July 1, _____, in whole or in part, in the amount selected by the Board, in order of maturities selected by the Board and within a maturity by lot, at the redemption price of par, [without premium,] plus accrued interest to the date of redemption.

Notice of the call of Bonds for redemption shall be mailed to the registered owner not less than 30 days prior to the date fixed for redemption at the address shown on the registration books of the City. Failure to receive such notice shall not affect the validity of the proceedings for redemption. Bonds called for redemption shall not bear interest after the date fixed for redemption, provided funds are on hand with the Transfer Agent to redeem the bonds called for redemption.

This Bond is a self-liquidating bond and is not a general obligation of the City or the Board and does not constitute an indebtedness of the City or the Board within any constitutional, statutory or charter limitation, but is payable, both as to principal and interest, solely from the Net Revenues of the System.

The Board has covenanted and agreed, and covenants and agrees, to fix and maintain at all times while any bonds payable from the Net Revenues of the System shall be outstanding, such rates for service furnished by the System as shall be sufficient to provide for payment of the principal of and interest on the bonds of this issue and any other bonds payable from the Net Revenues as and when the same shall become due and payable, to provide for the payment of expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the same in good repair and working order, and to provide for such other expenditures and funds for the System as are required by the Bond Resolution.

This Bond is transferable only upon the registration books of the City kept by the Transfer Agent by the Registered Owner hereof in person, or by his or her attorney duly authorized in writing, with a written instrument of transfer satisfactory to the Transfer Agent duly executed by the Registered Owner or his or her attorney duly authorized in writing, and thereupon a new registered bond or bonds in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor as provided in the Bond Resolution and upon the payment of the charges, if any, therein prescribed. The City shall not be required to register the transfer of or exchange any Bond selected for redemption in whole or in part, except the unredeemed portion of bonds being redeemed in part.

It is certified and recited that all acts, conditions and things required by law precedent to and in the issuance of this Bond and the series of bonds of which this is one have been done and performed in regular and due time and form as required by law.

This Bond is not valid or obligatory for any purpose until the Certificate of Authentication on this Bond has been executed by the Transfer Agent.

IN WITNESS WHEREOF, the City of Lansing, State of Michigan, by and through its Board of Water and Light, has caused this Bond to be executed with the facsimile signatures of its Chairman and its Secretary and the corporate seal of the City to be printed on this Bond.

CITY OF LANSING, BY AND THROUGH THE BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN

By:___(FACSIMILE)____________________
Chairman

By:___(FACSIMILE)_____________
Secretary

(Seal)

Certificate of Authentication

This Bond is one of the bonds described in the within-mentioned Bond Resolution.

NATIONAL CITY BANK OF MICHIGAN/ILLINOIS

Transfer Agent

By: ___________________________________
Authorized Representative

Date of Authentication:

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto ______________________________________________________________________________

______________________________________________________________________________
(Please print or typewrite name and address of transferee)

______________________________________________________________________________

the within bond and all rights thereunder, and irrevocably constitutes and appoints _______________________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated: ______________________________________

_____________________________         ______________________________________
Signature Guaranteed:                                 NOTICE: The signature(s) to this assignment
                                                                  must correspond with the name as it appears
                                                                  upon the face of the within bond in every
                                                                  particular, without alteration or enlargement
                                                                  or any change whatsoever.

_____________________________

Signature(s) must be guaranteed by an eligible guarantor institution participating in a Securities Transfer Association recognized signature guaranty program. The Transfer Agent will not effect transfer of this Bond unless the information concerning the transferee requested below is provided.

Name and Address:_____________

PLEASE INSERT SOCIAL SECURITY

NUMBER OR OTHER IDENTIFYING ______________________________________

NUMBER OF TRANSFEREE.

_____________________________        ______________________________________
                                                                  (Include information for all joint owners
                                                                    if the bond is held by joint account)

_____________________________
(Insert number for first named transferee
if held by joint account)

Section 9. Notice of Sale. The Series 2001A Bonds shall be sold at a public sale pursuant to a Notice of Sale published in a publication to be selected by the Chief Financial Officer for the Board in substantially the following form:

OFFICIAL NOTICE OF SALE
[$11,870,000]
CITY OF LANSING, BY AND THROUGH THE
BOARD OF WATER AND LIGHT OF THE CITY OF LANSING
WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM
REVENUE BONDS, SERIES 2001A

SEALED BIDS for the purchase of the above bonds will be received by the undersigned at the Secretary's office, Board of Water and Light of the City of Lansing, 1232 Haco Drive, Lansing, Michigan, on the 17th day of May, 2001, until __:__ o'clock, _.m., Eastern Time, at which time and place the bids will be publicly opened and read.

IN THE ALTERNATIVE: Sealed bids will also be received on the same date and until the same time by an agent of the undersigned at the office of the Municipal Advisory Council of Michigan, 1445 First National Building, Detroit, Michigan 48226, where they will be publicly opened and read. Bids opened at Detroit, Michigan, will be read first. Bidders may choose either location to present bids and good faith checks, but may not present bids at both locations.

BOND DETAILS: The bonds will be fully registered bonds without coupons and, when issued, will be registered in the name of and held by Cede & Co., as nominee for The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities deposi-tory for the bonds. Purchases of beneficial interests in the bonds will be made in book-entry form, in denominations of $5,000 each or any integral multiple thereof. The bonds will have an original issuance date of May 15, 2001, and will bear interest from the date of original issuance payable on January 1, 2002 and semiannually thereafter. The principal or redemption prices of and interest on the bonds will be paid by National City Bank of Michigan/Illinois, as Transfer Agent. So long as DTC or its nominee, Cede & Co., is the registered owner of the bonds, such payments will be made directly to DTC or such nominee. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursements of such payments to the beneficial owners is the responsibility of the DTC Participants and Indirect Participants.

The bonds will mature on the first day of July as follows:

Year	Principal Amount	Year	Principal Amount
2002	$130,000	2009	$ 300,000
2003	215,000	2010	310,000
2004	230,000	2011	325,000
2005	240,000	2012	345,000
2006	255,000	2013	365,000
2007	270,000	2014	380,000
2008	280,000	2015	&

February 2001	- Review Projects and Costs
April 2001	- Resolution Approved
May 2001	- Competitive Sale
June 2001	- Settlement