MINUTES OF THE BOARD OF COMMISSIONERS' MEETING

LANSING BOARD OF WATER AND LIGHT

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Tuesday, May 25, 2004

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The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan.

The Secretary declared a quorum present.

Chairperson Callen called the meeting to order at 5:30 p.m.

APPROVAL OF MINUTES

Motion by Commissioner Haggart, seconded by Commissioner Duncan, to approve the minutes of the regular Board meeting held March 25, 2004.

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.

Jim Harkin, 315 Bingham, Lansing, suggested the Board of Water and Light should consider shutting down Erickson and Eckert Stations and instead purchase its power from another electric provider at a lower cost.  He stated that this option would eliminate unnecessary capital expenditures and reduce labor costs by trimming down the number of employees needed for operations.  Mr. Harkin said he would like to see an analysis of this concept to compare the savings between a locally owned utility versus purchasing power from another provider.  Mr. Harkin asked if the electric, water and steam utilities are self-supporting.

Commissioner Callen thanked Mr. Harkin for speaking to the Board and referred Mr. Harkin to Bill Cook, Vice President of Operations, to discuss the issues raised in more detail and for a response to questions raised.

Curt Gates, Business Manager of IBEW Local 352, raised several concerns and issues.  He expressed concern with staff’s proposal to engage outside consulting services to assist with the BWL’s funded benefit plans.  He noted that the Defined Benefit Pension Plan and the Retiree Benefit Plan are currently managed internally and questioned whether spending for an outside pension fund investment consultant is necessary.  Mr. Gates welcomed Dennis McFarland, the new Senior Vice President of Finance and stated that Mr. McFarland is an excellent addition to the Board of Water and Light.  He inquired about the rationale for hiring Mr. McFarland at a higher salary than his predecessor when a portion of his job responsibility is being contracted to an investment consultant.  Mr. Gates stated that the fee for this service could make a difference of providing retiree health benefits and funding the VEBA fund for future health care costs.

Mr. Gates expressed concern over proposed revisions to the performance increase matrix for Non-Bargaining Unit employees.  Mr. Gates stated he believes there is a double standard in favor of Non-Bargaining Unit employees over the Bargaining Unit.  He noted that the union contract remains unresolved since October 2003.

Mr. Gates thanked the management group for inviting union members to hear the BWL’s handling of the Lansing combined sewer overflow (CSO) abatement program in advance of the Board meeting.  He noted, however, that there was no mention in the presentation BWL will expand its inspection of CSO projects by BWL employees.  Mr. Gates stated it is his belief the Board gave a directive that inspections would be expanded to include CSO projects.  He commented that the problems previously experienced with the Customer Choice program have been eliminated due to improved field inspection services performed by BWL personnel.

Chairman Callen noted that several of the issues raised would be discussed later during the course of the meeting.

Glenn Kirk, Finance Director, City of Lansing, thanked General Manager Sanford Novick and the management team for their efforts and the Board’s consideration of the proposed street light and hydrant riders for the City of Lansing.  Multiple recommendations submitted by BWL were reviewed by City administration, and the best alternative was determined to be the economic recovery rate riders to assist the City of Lansing with its budget problems.  Mr. Kirk indicated that municipal governments across the country and specifically in the State of Michigan are experiencing financial difficulties brought on by a poor economy.  He stated that although the City of Lansing is facing economic challenges, Lansing is in much better shape than other communities across the nation.  He stated City administration has embarked on a mission to find ways to reduce costs, eliminate waste and minimize the impact on services to citizens and minimize the impact to City of Lansing employees.  The BWL has made a commitment to partner with the City to explore other alternatives to reduce Lansing’s energy consumption.  The proposed rate riders will serve as insurance for the City, which hopefully will not need to be used.  Mr. Kirk noted the City and BWL agreed this arrangement would be acceptable as long as Lansing citizens and BWL ratepayers would not be harmed.

COMMUNICATIONS

There were no communications.

COMMITTEE REPORTS

Resolution 2004-5-1

COMMITTEE OF THE WHOLE REPORT

Present:  Commissioners Calkins, Callen, Duncan, Haggart, Joseph, Smith and Wonch.

The Committee of the Whole met on April 20, 2004 at 5:30 p.m. to discuss the following items:

1. MPPA Power Pool Amendment Resolution
2. Status of Erickson Project
3. Status of Eckert #2
4. Discussion of Proposal to City of Lansing
5. Request for Qualifications for Development of Ottawa
6. Internal Auditor Position
7. Status of General Manager’s FY 2003-04 Objectives
8. Union Negotiations Update (Closed Session)

There were no comments made by the public at the meeting.

MPPA Power Pool Amendment Resolution.  Senior Vice President of Operations Bill Cook discussed proposed amendments to the Michigan Public Power Agency (MPPA) Power Pool Agreement to bring the agreement into compliance with present Power Pool operations and billing.  Mr. Cook noted that covenants of each Project Participant remain the same and the amendment conforms to its stated intention of updating the contract to reflect changes in the industry and operation of the MPPA Power Pool.   Mr. Cook reported that the MPPA Power Agreement was developed in 1989-1990 and the Pool began operation in mid-1992.  An overview of the Pool operations was presented.

Main issues addressed in the proposed amendment include:

• Formal change from incremental pricing to Average Energy Pricing for intra-pool transactions.

• Addition of Emission allowances to the definition of allowable fuel costs.

§         Addition of language permitting Pool members the opportunity to sell or purchase capacity within the Pool on a multi-year basis.

• Allocation of Administrative and Overhead expenses.
• Clarification of language.
• New language addressing the approval of new members.
• Modification of language to reflect current transmission arrangements.
• Update of contract definitions.
• Green Power.
• Ancillary service provisions.

The benefits and risks to the Board of Water and Light were also detailed.  Following discussion, the General Manager was authorized to present a resolution on proposed amendments to the MPPA Power Pool Agreement at the next regular meeting for approval.  (See General Manager’s Recommendations)

Status of Erickson Project.  Director of Production Dick Peffley gave an update on the status of the Erickson project to convert the plant to Powder River Basin (PRB) coal.  Following the conversion, the plant was back on line at reduced load on April 14^th.  Erickson Station is expected to undergo a full load test on Wednesday, April 21^st.  Mr. Peffley reported there are still a few items that need some fine-tuning, but the job went well.  He congratulated BWL forces on a job well done, noting that with all the work that was completed, it was almost like building a new plant.

Status of Eckert #2 H.P. Turbine.  Director of Production Dick Peffley presented an update on the Eckert #2 turbine overhaul.  He reported that problems continue with the turbine overhaul.  Three additional rows of blading need to be replaced in addition to the six rows originally damaged.  The BWL was unable to negotiate a contract with TurboCare to perform the repair work; consequently, an agreement was made with ReGENCo to complete the work.  An engineer from the BWL will oversee the work.  June 15 is the target date for the unit to go back on line.

Proposal on City of Lansing Economic Recovery Riders.  Senior Vice President of Finance Dennis McFarland presented a proposal made to the City of Lansing to assist their budget problems, without affecting BWL ratepayers.  The BWL has proposed offering the City of Lansing discounted utility rates for two years.  The discounted rates will reduce City utility bills by approximately $1,500,000 in Fiscal Year 2005 and $750,000 in Fiscal Year 2006.  The discount will be recovered over the subsequent eight years.  The BWL will schedule a public hearing regarding riders to Rate Schedules No. 6  (Fire Hydrant Charges) and No. 31 (Street Lighting Service) to accomplish this.  The discount riders will be available only to the City of Lansing.

Request for Qualifications for Development of Ottawa Station.  Commissioner Nancy Duncan recused herself from discussing and voting on this issue because of her position at the State of Michigan.  Recently, a developer approached the BWL expressing interest in developing Ottawa Station.  Mayor Benavides had a concern that any development of Ottawa Station should be an open process.  Therefore, staff will send out a Request for Qualification to open the process to all parties interested in developing Ottawa Station for state offices or other purposes.  Interested developers will be asked to provide their experience and qualifications and then a developer will be chosen to develop the property.

Filling the Internal Auditor Position.  General discussion was held on the Human Resources Department and Management’s involvement in the process of filling the Internal Auditor position.  The job description, specifications and proposed advertisement for the Internal Auditor position were discussed.  A proposal was made that the Human Resources Department provide a recommendation as to how the process should go forward.  This will be presented to the Human Resources Committee on April 22, 2004 for discussion.

Status of General Manager’s FY 2003-04 Objectives.  General Manager Sanford Novick updated the Commissioners on the status of his 2003-2004 objectives.  He briefly touched on each objective.  Overall each objective is moving forward.  General Manager Novick expressed disappointment with two of the objectives, namely negotiating with the union and safety statistics at the BWL.

Status of Union Negotiations – Closed Session.  By motion of Commissioner Wonch, seconded by Commissioner Callen, that the Committee of the Whole convene in closed session to discuss the status of collective bargaining negotiations and the status of Eckert #2 H.P. Turbine dispute (7:50 p.m.).

Action:  Adopted by roll call vote:

The Committee of the Whole met in closed session at 7:50 p.m.

No recommendations were brought forth from the closed session.

There being no further business, the Committee of the Whole adjourned at 8:40 p.m.

Respectfully submitted,

Tim Haggart, Chair Pro Tem

Committee of the Whole

Motion by Commissioner Haggart, seconded by Commissioner Duncan, to approve the report as presented.

Action:  Carried unanimously.

Chairman Callen announced that if there are no objections, he would co-mingle the General Manager’s Recommendations associated to the items listed in each of the Committee Reports.

See General Manager’s Recommendations for Resolutions associated to the items discussed in the Committee of the Whole Report:

Resolution 2004-5-6 regarding Amendments to MPPA Power Pool Agreement

Resolution 2004-5-2

HUMAN RESOURCES COMMITTEE REPORT

Present:  Commissioners Haggart, Calkins, Callen, and Wonch

The Human Resources Committee met on April 22, 2004 at 5:30 p.m. to receive reports on the following items:

1.                  Non-Bargaining Unit Employee Compensation for Fiscal Year 2004-05

2.                  Health Care Sharing

3.                  Post-Retirement Health Care Costs

4.                  Internal Auditor Position

5.                  Quarterly Pension Fund Investment Performance

6.                  Pension Fund Investment Consultant

Non-Bargaining Unit Employee Compensation for Fiscal Year 2004-05.  Wendy Bradley, Human Resources Employment/Compensation Administrator, presented the recommended Skill Family Range Adjustments and Performance Level Matrix for FY 2005.  Items discussed were the BWL pay philosophy, activity that supports BWL pay philosophy, competitive market reviews, the methodology used in determining range adjustments, competitive pay, how data is analyzed, financial impact on the BWL, performance based pay, design performance level matrix, and the components of market-based salary increase budget.  Ms. Bradley reported that the BWL annually reviews its salary plan for non-bargaining employees in an effort to keep salaries in line with comparable positions in a competitive marketplace.

Following discussion, it was moved by Commissioner Wonch and seconded by Commissioner Callen that the General Manager is authorized, on behalf of the Human Resources Committee, to present resolutions at the next regular meeting concerning adjustments to the Skill Family Range Adjustments for non-bargaining unit employees and revisions to the Performance Increase Matrix for non-bargaining unit employees for Board consideration.

Health Care Sharing.  Over the past five years, the BWL has realized double-digit increases in health care costs.  This year the BWL’s health care costs increased 13% and have more than doubled over the past five years.  The annual cost for health and prescription drugs for FY 2005 is projected at $7,205,000 for active employees and $5,805,000 for retires.  Changes in the health insurance plan for non-bargaining employees include premium sharing, deductibles and increased co-pays.  It is recommended that this change take effect July 1, 2004.  Nationwide, 75% of employees covered by company health care plans pay deductibles and share some of the cost of their monthly premiums.  Out-of-pocket costs for employees can be lowered by paying with pre-tax dollars under the BWL’s flexible spending program.

Following discussion, the General Manager was authorized to present a resolution at the next regular meeting concerning Health Care Cost Sharing for Non-Bargaining Unit Employees for Board consideration.

Post-Retirement Health Care Costs.  Senior Vice President of Finance and Administration Dennis McFarland presented a report on the status of the Board’s post-retirement benefit plan.  The plan offers retirees medical, dental and life insurance benefits comparable to active employees.  Annual “pay as you go” costs for such benefits approximates $6 million.  The Board also has a liability for future benefits to both retirees and active employees that approximated $170 million as of February 2003.  A portion of that liability, roughly $12 million, has been funded over the last four years by means of a VEBA trust fund.  The VEBA funding has been made up of contributions from operating cash and surplus funds transferred from the Defined Benefit Pension Plan.  As allowed by an April 2000 Board resolution, an additional transfer of $5.1 million of surplus pension funds will be made in June 2004.

Mr. McFarland cautioned that the unfunded liability is likely to increase in the future as health care costs escalate and that continued funding of the VEBA trust is critical.  Moreover, pending accounting pronouncements addressing the unfunded future health care liability could require the Board to recognize substantially higher annual expenses than it is currently recognizing.

BWL retirees’ medical, dental and life insurance benefits are comparable to those of active employees.  However the BWL retains the right to reduce or eliminate benefits subject to any legal or contractual limitations.  Currently there are approximately 1,700 plan participants – 45% are active employees and 55% are retired or surviving spouses of retirees.  Management advised the Committee that an outside expert was being hired to evaluate what can or cannot be done with respect to existing retirees.

Internal Auditor Position.  Discussion was held with respect to filling the Internal Auditor position, and it was agreed to move the following action plan forward to the full Board for consideration at the regular meeting of May 25, 2004:

Action Plan Regarding Filling the Internal Auditor Position

·          To adopt Option 1 of the Recommended Action Plan for Filling Internal Auditor Position (appended to this report.)

·          The Executive Team, referenced in the Option 1 Action Plan, will include the following participants: Board of Commissioners’ Committee of the Whole, General Manager, Senior Vice President of Finance and Administration and the Director of Human Resources & Organizational Development.

·          The following draft documents will be distributed to the Board of Commissioners for review: job description, job posting, advertising options, and recommended salary range.

·          The Board of Commissioners will submit additions, deletions or suggestions of the aforementioned documents within a period of two days back to Human Resources.

·          Human Resources will distribute the Selection Process Tool (draft interview questions) to the Executive Team for review, and comments will be submitted to Human Resources for inclusion.

·          The Board of Commissioners will approve the following documents at the May 25, 2004 Board meeting: job description, job posting, advertisement, selection process, selection tool (interview) and salary.

Quarterly Pension Fund Investment Performance.  Senior Vice President of Finance and Administration McFarland presented a report on the investment performance of the Defined Benefit Pension Plan, the Defined Contribution Pension Plan and the Retiree Benefit Plan as of March 2004.  The Defined Benefit Plan had a market value of $134.8 million as of the end of March 2004 and experienced an overall annual return of 22.8% for the period. The returns for all asset classes were above the respective benchmark returns for each class.  As a result of strong returns in the equity class, the portfolio was overweighted in equities and would be rebalanced. The Plan had a funded ratio of 152.6% as of February 2004.

The Defined Contribution Pension Plan had a market value of $102.0 million as of the end of March 2004.  Approximately 65% to 70% of the moneys in the fund were invested in equities or equity-like securities.  The vast majority of the investment options in the Plan experienced returns for the reporting period comparable to or better than the respective benchmarks.

The Retiree Benefit Plan, or VEBA, had a market value of $16.6 million as of March 2004 and experienced an overall return of 15.4% for the period.  The Plan has been underweighted in equities while at the same time its equity portfolio had underperformed relative to its benchmark.  The plan will be rebalanced using existing cash reserves to increase the equity holdings.

Pension Fund Investment Consultant.  Senior Vice President of Finance and Administration McFarland reported that a Request for Proposal had been distributed to 13 firms seeking consulting services for our funded benefit plans.  Currently the Defined Benefit Pension Plan and the Retiree Benefit Plan are managed internally.  While the investment returns for both plans have been quite good, the procedures for managing the funds need to be reviewed to define risk management strategies and insure that all fiduciary responsibilities are adequately fulfilled.  It is planned that an advisor will be selected over the next several months and introduced to the Board shortly thereafter.

There being no further business, the meeting was adjourned at 8:40 p.m.

Respectfully submitted,

Tim Haggart, Chair

Human Resources Committee

Motion by Commissioner Haggart, seconded by Commissioner Smith, to approve the report as presented.

Action:  Carried unanimously.

Resolution 2004-5-3

Motion by Commissioner Haggart, seconded by Commissioner Calkins, to approve the Action Plan for filling the Internal Auditor position as submitted by the Human Resources Committee.

Action:  Carried unanimously.

See General Manager’s Recommendations for Resolutions associated to the items discussed in the Human Resources Committee Report:

Resolution 2004-5-10 regarding Skill Family Salary Range Adjustments for Non-Bargaining Employees.

Resolution 2004-5-11 regarding Revisions to Performance Increase Matrix for Non-Bargaining.

Resolution 2004-5-12 regarding Health Care Cost Sharing for Non-Bargaining Unit Employees.

Resolution 2004-5-4

FINANCE COMMITTEE REPORT

Committee Members Present:   Commissioners Callen, Duncan, Joseph, and Smith.  Commissioner Calkins was also in attendance.  Excused Absence:  Commissioner Wonch.

The Finance Committee met on May 11, 2004 at 5:30 p.m. to discuss the following items:

1.      FY 2005 Financial Plan
a)   Operating Budget
b)   Capital Budget

2.      March Financial Report

3.      Payment of Liability to Defined Benefit Pension Fund

4.      City of Lansing Economic Recovery Riders

5.      Renewal of the Annual Sponsorship of the Capital Area United Way Advertising Initiative

6.      Utility Services Rules and Regulations (including Fees and Charges)

Finance Committee Chair Nancy Duncan changed the order of the agenda items.  Item Nos. 2, 3, and 4 were presented first, followed by Item Nos. 1, 5 and 6.

March Financial Report.  Senior Vice President of Finance and Administration Dennis McFarland reviewed the BWL’s financial performance for fiscal year-to-date through March 31, 2004.  For the nine months into this fiscal year, BWL net income is $11.8 million, which is $2 million ahead of the projected budget.  Mr. McFarland discussed financial performance by utility and noted on the consolidated income statement that revenue, as compared to budget, is up for steam and down for electric.  Following are items that have, either positively or negatively, caused variance in operating income:

• August 14, 2003 Blackout
• Premium Sharing on Health Insurance
• Over Collected Electric Energy Cost Adjustment
• Water Industrial and Wholesale Sales
• Steam Sales and Revenue from General Motors
• Over Estimated Electric KWH System Requirements

Mr. McFarland also discussed pending items and their affect on the budget.  These items may affect net income and/or cash flow either positively or negatively between now and the end of the current fiscal year:

• Union Contract
• Environmental Emission Allowances
• Ottawa Station
• Mainframe Replacement
• Pension Fund Loan Repayment
• Pending Litigation
• Environmental Liabilities
• Wholesale Electric Capacity Revenue Reduction
• Uncollectible Accounts
• Increase in accrued compensated absences

Payment of Liability to Defined Benefit Pension Fund.  Senior Vice President of Finance and Administration Dennis McFarland briefed the Commissioners on the repayment of the BWL’s liability to the Defined Benefit Pension Fund.  He noted that given current interest rates, it would be more economical for the Board of Water and Light to repay this liability at this time.  Following discussion, it was moved by Commissioner Smith, seconded by Commissioner Joseph that the General Manager is authorized, on behalf of the Finance Committee, to present a resolution at the next regular meeting for consideration.

Proposed City of Lansing Economic Recovery Riders.  General Manager Sanford Novick presented a proposal under discussion with the City of Lansing to assist the City in balancing their next fiscal year budget.  Economic recovery riders for Fire Hydrants and Street Lights solely for the City of Lansing were reviewed.  By offering these special rate adjustments to the City, it will give the City some temporary rate relief and it will not affect the BWL ratepayers.  The Riders provide for a surcharge beginning in years 3-10 after a discount in years 1 and 2.  The BWL also committed to the City to assist them in looking for ways to reduce their energy and water consumption so the savings could be used to fund the surcharge.  The riders will become part of the rate schedules.  The Committee concurred that the discount be offered for the first two years of the agreement and that the surcharge begin to be paid in the third year.

Motion by Commissioner Joseph and seconded by Commissioner Smith that the General Manager is authorized to present a resolution at the next regular meeting to schedule a public hearing on the proposed City of Lansing Economic Recovery Riders for Fire Hydrants and Street Lights.

FY 2005 Financial Plan.  Senior Vice President of Finance and Management McFarland presented an overview of FY 2005 financial plan.  In summary:

Financial Goals

• Maintain credit quality

• Ensure liquidity to meet potential contingencies

• Maintain rate competitiveness with a goal of 20% less than competitors

• Efficient and appropriate use of capital while maintaining safety and reliability.
  
  

Sales Forecast

Basic assumptions include normal weather, trended ten-year growth rates, General Motors (GM) consumption provided by GM, and that all available electric capacity not sold at retail is sold at wholesale.

Revenue Assumptions

• No electric or water rate increases
• Chilled Water at minimum bill levels
• 2% increase in Electric Wholesale prices
• Special City of Lansing Rider - $1.5 million
• Lower fuel cost to result in $4.8 million revenue reduction

Operating Expenses

• Increase of 1 FTE employee
• Bargaining unit salaries based on continuation of current contract
• Non-bargaining salary increase based on market study
• Increase in health care cost of 13%
• Includes non-bargaining premium sharing
• Aggressive management of sick leave

Capital Expenditures

• Revenue producing capital additions to be justified by cost/benefit analysis
• Remaining capital limited to less than annual depreciation expense of $28 million
• Capital expenditures address result of August 14, 2003 outage analysis.

Mr. McFarland also presented the budget for fiscal year ending June 30, 2005.  Net income is projected at $2.4 million with no rate increases anticipated due to sufficient cash reserves.

There was much discussion regarding cash reserves, how much are they currently and what is the appropriate level.  The Committee recognized this is a Board Policy decision.  Management was requested to provide a detail of the various cash funds, as well as the details of the variances between the Fiscal ‘05 and ‘04 Budgets.

Senior Vice President of Operations Bill Cook presented the Capital Budget.  The FY2005 Capital Budget Assumptions are:

• Revenue producing capital additions to be justified by cost/benefit analysis (will be noted as “Revenue Projects.”
• Remaining capital expenditures targeted at less than annual depreciation expense.
• Capital expenditures included addressing result of August 14 outage analysis.
• Past environmental remediation projects were transferred to O & M Budget.  (FY2005 - $750 million)
• New BWL initiative was included.  15-year Lead Service Replacement Program (FY2005 incremental impact: $2 million)

Mr. Cook discussed the following FY 2005 Programs:

• CSO/Street Reconstruction (Presentation to be made at the May 25, 2004 Board Meeting)
• Lead/N. Std. Service Replacement
• Outage Management
• August 14 Outage Analysis Recommendations
• Production Upgrades
• Misc. Non-Revenue Projects
• T & D Upgrades
• Revenue Projects
• Vehicles/equipment and small tools

There was particular discussion about the lead service replacement program and whether it was aggressive enough.  There was also discussion about a lead reduction plan.  Management committed to provide the Board with a date for presentation of a comprehensive lead management plan for the BWL water system.

Following discussion, it was moved by Commissioner Joseph and seconded by Commissioner Smith that the General Manager is authorized to present a resolution at the next regular meeting recommending both the Operating and Capital budgets for approval.

Renewal of the Annual Sponsorship of the Capital Area United Way Advertising Initiative.  General Manager Novick reported that for the last several years, the BWL has provided corporate support for the Capital Area United Way (CAUW) by underwriting the advertising campaign for the CAUW’s annual fund-raising drive.  The BWL’s support has made it possible for United Way to buy paid advertising and to leverage its advertising budget by receiving additional free advertising in local media outlets.  In return for this support, the CAUW has provided sponsorship recognition in its published campaign materials.  The amount underwritten by BWL for the past several years was reviewed.

Motion by Commissioner Callen and seconded by Commissioner Smith that the General Manager is authorized to present a resolution at the next regular meeting recommending approval of an annual sponsorship of the Capital Area United Way.

Utility Services Rules and Regulations (Including Fees and Charges).  Kellee Christensen, Principal Engineer in the Customer Projects and System Integrity Department updated the Commissioners on proposed changes to the Rules and Regulations for Electric, Water, Steam, and Chilled Water services, including applicable fees and charges.  Among the proposed changes were editorial improvements as well as changes to reflect what was occurring in the day-to-day operation of implementing the Rules.  There were also several fee changes to reflect changes in costs incurred by the BWL.

Motion by Commissioner Joseph and seconded by Commissioner Callen that the General Manager is authorized to present a resolution at the next regular meeting recommending the approval of the proposed Utility Services Rules and Regulations and applicable Fees and Charges.

There being no further business, the meeting was adjourned at 8:20 p.m.

Respectfully submitted,

Nancy Duncan, Chair

Finance Committee

Motion by Commissioner Duncan, seconded by Commissioner Smith, to approve the report as presented.

Action:  Carried unanimously.

See General Manager’s Recommendations for Resolutions associated to the items discussed in the Finance Committee Report:

Resolution 2004-5-5 regarding Fiscal Year 2005 Operating and Capital Budget.

Resolution 2004-5-7 regarding Amendments to Utility Services Rules and Regulations (including Fees & Charges).

Resolution 2004-5-8 regarding Payment of Liability to Defined Benefit Pension Fund.

Resolution 2004-5-9 regarding Renewal of Capital Area United Way Sponsorship.

Resolution 2004-5-13 regarding Setting a Public Hearing Date for Street Light and Hydrant Riders for the City of Lansing.

MANAGER’S RECOMMENDATIONS

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

Resolution 2004-5-5

RESOLVED, that the annual Operating and Maintenance Budget covering Fiscal Year 2005 is hereby approved as presented. (Attachment C)

RESOLVED FURTHER, that the Capital Budget for Fiscal Year 2005 is hereby approved as presented. (Attachment D)

RESOLVED FURTHER, that the capital projects are authorized in the amount of the project estimate.  Capital expenditures for Fiscal Year 2005 are limited to the new amount included in the budget.

Motion by Commissioner Duncan, seconded by Commissioner Haggart, to approve the resolution.

Action:  Carried unanimously.

Resolution 2004-5-6

WHEREAS, the Lansing Board of Water and Light has been a member of the Michigan Public Power Agency (MPPA) Power Pool since its inception in 1992; and

WHEREAS, the original Power Pool Supply and Capacity Purchase Agreements have not been updated or amended during this period; and

WHEREAS, during this time there have been many changes in the way the Pool has been operated and billed; and

WHEREAS, there is a need to update the MPPA Power Pool Supply and Capacity Purchase Agreement to reflect current operations.

RESOLVED, that the Board of Commissioners hereby approve Amendment No. 1 to the Power Pool Supply and Capacity Purchase Agreement between the Michigan Public Power Agency and the Lansing Board of Water and Light.

Staff Remarks:  A summary of the amendments is attached (Attachment E).  A complete contract reflecting the amended changes is on file with the Corporate Secretary.

Motion by Commissioner Duncan, seconded by Commissioner Smith, to approve the resolution.

Action:  Carried unanimously.

Resolution 2004-5-7

WHEREAS, in accordance with Board Policies 19-05 (Electric), 19-13 (Water), 19-15 (Steam), and 19-16 (Chilled Water) of the Utility Services section, the Utility Rules and Regulations shall be subject to review and modifications by the Commissioners.

RESOLVED, that the Board of Commissioners hereby moves to amend the Rules and Regulations for the Electric, Water, Steam, and Chilled Water Services as submitted and reviewed by the Finance Committee on May 11, 2004, with an effective date of July 1, 2004.

Staff Remarks:  The amendments to the Utility Services Rules and Regulations were included with the packet for the Finance Committee meeting of May 11. 

Motion by Commissioner Duncan, seconded by Commissioner Joseph, to approve the resolution.

Action:  Carried unanimously.

Resolution 2004-5-8

WHEREAS, the Finance Committee discussed the repayment of the Board of Water and Light’s liability to the Defined Benefit Pension Fund on May 11, 2004.  Given current interest rates, it would be more economical to repay this liability at this time, and

WHEREAS, by resolution on February 12, 1973, the Board of Commissioners approved the 40 year amortization of the liability owed to the Defined Benefit Pension Fund utilizing equalized annual payments of $242,500 per year at an interest rate of 5.5% per annum, and

WHEREAS, the Board of Commissioners reserved the right, should funds be available, to pay more than the yearly principal amount due.

RESOLVED, That the remaining outstanding principal owed to the Defined Benefit Fund on June 30, 2004 be paid in its entirety.

Staff Remarks:  On June 30, 2004, after the annual payment of $242,500, the outstanding principal will be $1,533.892.11.

Motion by Commissioner Duncan, seconded by Commissioner Joseph, to approve the resolution.

Action:  Carried unanimously.

Resolution 2004-5-9

WHEREAS, the Finance Committee received a briefing from management on May 11, 2004 regarding the Board of Water and Light’s sponsorship over the past years to the Capital Area United Way by underwriting the advertising campaign for their annual fundraising drive.  The BWL’s new Purchasing Policy requires Board approval for sponsorships with a value of $5,000 or more.

RESOLVED, That the Board of Commissioners approve an annual sponsorship of the Capital Area United Way (CAUW) in the amount of $7,500 a year for a period of three years.  Funds from this sponsorship are to be used to finance CAUW’s advertising campaign in support of its annual fundraising drive.  Sponsorship will be taken from the Communications budget for community sponsorships.

Motion by Commissioner Duncan, seconded by Commissioner Joseph, to approve the resolution.

Action:  Carried unanimously.

Resolution 2004-5-10