FINAL – APPROVED BY BOARD 1/25/05
MINUTES OF THE BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
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The Board of Commissioners met in the Boardroom of the Administrative Offices,
1232 Haco Drive, Lansing, Michigan.
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Present: |
Commissioners Gary L. Calkins, Ronald C. Callen, Nancy W. Duncan, Tim Haggart, Ifield Joseph, Santiago Rios, Robin M. Smith and Nancy Wonch. |
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Absent: |
None |
The Secretary declared a quorum present.
Chairperson Smith called the meeting to order at 5:30 p.m.
Motion by Wonch, seconded by Commissioner Duncan, to approve the minutes of the regular meeting held September 28, 2004 and special meeting held October 21, 2004.
Carried unanimously.
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.
Ron Byrnes, BWL retiree, asked for an explanation on several issues related to retiree benefits and quoted from Board Resolution # 98-5-3, which states: “Whereas, the Board of Water and Light agreed during negotiations to review pensions every three-years with a one-year look back...” Mr. Byrnes stated that when Mr. Novick was questioned about that resolution at a recent retiree breakfast meeting, he responded that it was a one-time deal and no longer valid. Mr. Byrnes stated that on behalf of retirees, he requests a clarification to that response. He said that the three-year issue with a one-year look back was a negotiated item and approved by the Board when the contract was ratified. Mr. Byrnes further stated he has documents in his possession clearly indicating the union also negotiates for pensioners. Mr. Byrnes stated this is the first time in the BWL’s history retirees have had to seek legal advice on benefits and added that retirees should not have to look to outside counsel for legal advice on these matters; it should be resolved in-house. He urged the Board and management to treat retires fairly and to uphold and honor promises made.
Mike Brown, president of the Capital Area United Way thanked the Board, staff and all employees for the support given to the campaign. The BWL provided in-kind assistance by putting up signs and campaign thermometers in the community. The employees’ generous contributions and the BWL’s leadership in the community were very much appreciated.
Roger Jeffers, BWL retiree, registered his concern with respect to health care premium sharing. Although retirees have not yet been asked to share in the cost of health care premiums, Mr. Jeffers stated he wanted to address the fairness issue addressed by General Manager Novick in the April 2004 issue of PIPELINE. Mr. Jeffers pointed out that BWL employees have an opportunity to receive raises annually to help offset a portion of their health care cost. Retirees, however, live on a fixed income and cannot afford the additional burden of health care premium sharing.
Max Zemer, BWL retiree, stated there has been a great deal of discussion on retiree benefits. He expressed concern that with several key senior management members having left the BWL, it appears the new administration has not been brought up to date on the history of retiree benefits. He noted that when employees had the option of remaining with the defined benefit pension plan or to select the defined contribution pension plan, the differences between the two plans were explained. Mr. Zemer said he and other retirees are available to meet with management to discuss and clarify benefit issues. He urged the Commissioners and management to engage in more dialogue with retirees, particularly on benefit matters.
COMMUNICATIONS
Letter from James A. White, Attorney with White, Schneider, Young & Chiodini, PC, regarding health benefit cost to Board of Water and Light retirees, dated October 28, 2004.
Referred to management for future discussion with the Board.
Letter from Ronald T. Byrnes, Chair, Retirees Pension and Benefits Committee of the Board of Water and Light Retirees’ Club regarding retiree benefits, dated October 1, 2004.
Referred to management for future discussion with the Board.
Letter from Max Zemer, Vice Chair, Retirees Pension and Benefits Committee of the Board of Water and Light Retirees’ Club regarding retiree benefits, dated October 22, 2004.
Referred to management for future discussion with the Board.
Letter of thanks from Urban Options Board of Directors regarding the Energy Star business partnership, dated November 10, 2004.
Placed on file.
COMMITTEE REPORTS
FINANCE COMMITTEE REPORT
Committee Members Present: Committee Members Callen, Duncan, and Joseph (arrived at 5:40 p.m.) Commissioner Calkins
Committee Members Absent: Commissioner Smith
Finance Committee Chair Nancy Duncan requested a moment of silence to remember Curt Gates, BWL employee, who died today.
The Finance Committee met on October 12, 2004 at 5:30 p.m. to review and discuss the following issues:
1. Audited Financial Statements of the Enterprise Fund for Fiscal Year 2004
2. Draft Resolutions for:
a. Accepting the Fiscal Year 2004 Audited Financial Statements
b. Establishing Regulatory Assets for the North Lansing Landfill
3. August Financial Report
4. Internal Auditor Report
Senior Vice President of Finance and Administration, Dennis McFarland gave a brief review of the June financial report. Mr. McFarland pointed out the major items accounting for the variation in Operating Income for fiscal year 2004 as compared to budget which included decreased sales, environmental remediation costs, a write down in the value of Ottawa Station, and higher maintenance expense. Mr. McFarland noted that the audited financials for the Defined Benefit Pension Fund, the Defined Contribution Pension Fund and the VEBA were being presented to the Finance Committee for information. These statements will be reviewed with the Pension Fund Trustees at their November meeting.
Mr. McFarland introduced Doug Rober from Plante & Moran, who in turn introduced Jaclyn Simon, Bob Pekrul, John Novis and Frank Audia. Mr. Rober stated that they received good response from staff in conducting this year’s audit. The external auditors presented the results of the audit for fiscal year ended June 30, 2004 for the Board of Water and Light (BWL) Enterprise Fund. The auditors discussed their responsibility under generally accepted auditing standards. They reviewed the summary of Unrecorded Possible Adjustments and discussed why they did not need to be recorded for fiscal year 2004. The auditors reviewed their Management Letter comments and responded to questions. Staff presented its responses to their comments. Mr. Pekrul gave a presentation that included a four-year comparison of operating revenue, operating expenses, and operating income or loss. A comparative analysis was also presented on the bond debt service requirements, kilowatt hours generated versus purchased, and significant fuel costs.
The Finance Committee recommends the following resolutions:
Fiscal Year 2004 Audited Financial Statements
RESOLVED, That the fiscal year 2004 Audited Financial Statements for the Board of Water and Light Enterprise Fund have been reviewed and hereby accepted as presented.
FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a copy of the fiscal year 2004 Audited Financial Statements of the Board of Water and Light Enterprise Fund and the Report on Auditing Procedures with the State Treasurer as required by the Uniform Budgeting and Accounting Act (Public Act 2 of 1968, as amended).
Motion by Commissioner Calkins, seconded by Commissioner Callen, to refer this resolution to the Board Meeting in November. Approved.
Resolution 2004-11-2
Statement of Financial Accounting Standard (SFAS) #71
Establishing Regulatory Asset for North Lansing Landfill
RESOLVED, That the Board of Commissioners, as the regulatory body of the Board of Water and Light (BWL), approve that the estimated liability related to the BWL’s environmental remediation of the North Lake Lansing Road landfill site be recorded and a corresponding Statement of Financial Accounting Standards (SFAS) No. 71 regulatory asset be recognized.
Staff Comments: Through monitoring tests performed on the North Lake Lansing Road landfill, it has been discovered that the site is contaminating the ground water. The contamination does not pose a significant health risk but does lower the quality of the groundwater. The BWL is currently in the process of applying for approval from the State of Michigan to remediate the site. The BWL has estimated the total cost for remediation of the landfill to be $4,623,000. Generally accepted accounting principles require the BWL to record a liability for the estimated future costs of remediation and monitoring of the Lake Lansing Road Landfill. Each future year BWL will review the estimate and record appropriate adjustments. SFAS #71 allows for the BWL to record the estimated liability and a “deferred expense.” This deferral permits the BWL to charge operating expense as actual costs are paid.
Motion by Commissioner Joseph, seconded by Commissioner Callen. to refer this resolution to the Board Meeting in November. Approved.
Mr. McFarland discussed the August financial report. He projects that if the BWL follows the current pattern, net income will show a loss of approximately $2.5 million for the fiscal year. This is due to the weather, the pending union settlement and the General Motors slowdown. Commissioner Calkins suggested that he would like to see a recommendation from staff on what will be done about the 10 percent health care premium paid by non-bargaining employees. Mr. McFarland stated that this was being discussed but there were no staff recommendations at this time.
A letter transmitting to the City copies of the Audited Financial Statements will suggest that a review of the statements be included as an agenda item for the next quarterly meeting between City Council and BWL Commissioners. There was much discussion on how to structure the review. Staff will develop a proposed presentation.
Internal Auditor Glenn Holloway discussed his first priorities at the BWL and current projects:
Revise the Internal Audit Charter, which was last updated in 1995.
Meet with each of the Commissioners. Mr. Holloway wants to discuss with the Commissioners what they believe his priorities should be.
Conduct a risk assessment to assist in developing an annual audit plan.
Determine the quantity and depth of the annual audit plan.
There being no further business, the meeting adjourned at 7:40 p.m.
Respectfully submitted,
Nancy Duncan, Chair
Finance Committee
Motion by Commissioner Callen, seconded by Commissioner Haggart, to receive the report.
Action: Carried unanimously.
Motion by Commissioner Calkins, seconded by Commissioner Wonch, to approve Resolution 2004-11-1 relative to filing the Fiscal Year 2004 audited financial statements.
Action: Carried unanimously.
Motion by Commissioner Wonch, seconded by Commissioner Joseph, to approve Resolution 2004-11-2 relative to application of SFAS#71 on establishing regulatory asset for the North Lansing Landfill.
Action: Carried unanimously.
COMMITTEE OF THE WHOLE REPORT
Present: Commissioners Ronald C. Callen, Nancy W. Duncan, Ifield Joseph, Santiago Rios, Robin M. Smith and Nancy Wonch.
Absent: Commissioners Calkins and Haggart.
The Committee of the Whole met on October 21, 2004 at 6:15 p.m. to receive a presentation on environmental issues
Public Comments: There were no public comments.
General Manager Sanford Novick reported that power plants that use fossil fuels to generate electricity currently face a myriad of environmental regulations intended to restrict releases to the air, water, and land. Of these, the air quality regulations tend to be the most complex and costly. Over the past decade, numerous federal and state rules have been issued or proposed to mitigate multi-pollutants in the air and water. The U. S. Environmental Protection Agency (EPA) has developed new rules for controlling trace emissions of other substances, such as mercury. Mr. Novick told the Commissioners that staff intends to hold discussions on environmental issues with the Board on a regular basis to begin the process of getting feedback and guidance to set policy and direction in the technical and financial decision making. He noted that the purpose of the meeting was not intended to draw out a conclusion, but to promote good dialogue to formulate in a responsible way the direction the BWL is to pursue.
Nick Burwell of Environmental Services provided the Commissioners with a list of all environmental issues that would be facing the Board of Water and Light. He reported that the top two issues on the list are: New Source versus Routine Maintenance. Many of the existing and proposed regulations target the same emissions: sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury require different emissions reduction requirements and compliance timetables. He reported that both of these issues are of major concern to every coal-fired electric plant in the country. The first issue is a legal and interpretation issue for existing regulations. The second issue centers on proposed regulations. As a first step in the planning process of ensuring that the BWL is able to meet future needs, Mr. Burwell discussed the basis for controlling multi-pollutant emissions, current compliance, future regulations, the potential impact on BWL, planning BWL has already done, and the next steps.
The Commissioners recognized in their discussion that the environmental issues are complicated and are not just to be resolved for technical discussion. They discussed multi-pollutant approaches, both from an environmental and an economic standpoint. The Commissioners recognized the importance of community involvement and soliciting public input before a final decision is made. There was clear recognition that ultimately the proposed multi-pollution control strategies not only involve an engineering decision, but economics as well as community values and judgment.
There being no further business, the Committee of the Whole adjourned at 7:10 p.m. p.m.
Respectfully submitted,
Ron Callen, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Callen, seconded by Commissioner Duncan, to receive the report.
Action: Carried unanimously.
COMMITTEE OF THE WHOLE REPORT
Present: Commissioners Ronald C. Callen, Nancy W. Duncan, Ifield Joseph, Santiago Rios, Robin M. Smith and Nancy Wonch.
Absent: Commissioners Calkins and Haggart.
The Committee of the Whole met on October 21, 2004 at 6:15 p.m. to receive a presentation on environmental issues
Public Comments: There were no public comments.
General Manager Sanford Novick reported that power plants that use fossil fuels to generate electricity currently face a myriad of environmental regulations intended to restrict releases to the air, water, and land. Of these, the air quality regulations tend to be the most complex and costly. Over the past decade, numerous federal and state rules have been issued or proposed to mitigate multi-pollutants in the air and water. The U. S. Environmental Protection Agency (EPA) has developed new rules for controlling trace emissions of other substances, such as mercury. Mr. Novick told the Commissioners that staff intends to hold discussions on environmental issues with the Board on a regular basis to begin the process of getting feedback and guidance to set policy and direction in the technical and financial decision making. He noted that the purpose of the meeting was not intended to draw out a conclusion, but to promote good dialogue to formulate in a responsible way the direction the BWL is to pursue.
Nick Burwell of Environmental Services provided the Commissioners with a list of all environmental issues that would be facing the Board of Water and Light. He reported that the top two issues on the list are: New Source versus Routine Maintenance. Many of the existing and proposed regulations target the same emissions: sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury require different emissions reduction requirements and compliance timetables. He reported that both of these issues are of major concern to every coal-fired electric plant in the country. The first issue is a legal and interpretation issue for existing regulations. The second issue centers on proposed regulations. As a first step in the planning process of ensuring that the BWL is able to meet future needs, Mr. Burwell discussed the basis for controlling multi-pollutant emissions, current compliance, future regulations, the potential impact on BWL, planning BWL has already done, and the next steps.
The Commissioners recognized in their discussion that the environmental issues are complicated and are not just to be resolved for technical discussion. They discussed multi-pollutant approaches, both from an environmental and an economic standpoint. The Commissioners recognized the importance of community involvement and soliciting public input before a final decision is made. There was clear recognition that ultimately the proposed multi-pollution control strategies not only involve an engineering decision, but economics as well as community values and judgment.
There being no further business, the Committee of the Whole adjourned at 7:10 p.m. p.m.
Respectfully submitted,
Ron Callen, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Callen, seconded by Commissioner Duncan, to receive the report.
Action: Carried unanimously.
COMMITTEE OF THE WHOLE REPORT
Present: Commissioners Gary Calkins, Ronald C. Callen, Nancy W. Duncan, Tim Haggart, Ifield Joseph, Santiago Rios, Robin M. Smith and Nancy Wonch.
The Committee of the Whole met on November 23, 2004 at 4:30 p.m. to discuss the following:
Triangle Property Agreement
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Property: |
Bounded by Kalamazoo Street on South, Grand Avenue on West, Washtenaw right-of- way on North, river trail on Grand River on East as shown on a drawing that was handed out. |
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Price: |
$2.18 million |
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Purpose: |
Developer – Office Building of not less than 300,000 square feet |
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Special Terms: |
· Developer must exercise by June 15, 2005 (unless extended to October 14, 2005 on payment of $50,000.00 · Developer must close within 60 days of exercise · Two years from commencement to complete Office Building · Developer remediates whole site · City receives at least 20 years of taxes or equivalent of City 15 mils, Developer secures with Letter of Credit
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BWL Coal Site Agreement
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Property: |
Irregular parcel between Ottawa Station, Grand Avenue; Shiawassee Street, river trail on Grand River as shown on Parcels A and B of a drawing that was handed out. |
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Price: |
$1.99 million |
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Purpose: |
Developer – Construction of 80 unit residential Phase I and at least 8 units Phase II |
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Special Terms: |
· Developer removes BWL building · Developer remediates site · Time frames to close to be determined by BWL but not later than June 15, 2005
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Completion of construction from closing: · Damages for breach of contract: $1 million letter of credit for completion of construction Phase 3 (50%) and Phase II (40%) · Property conveyed to City for $1.00 if construction not commenced within 3 months of closing |
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Contingencies: |
· Developer must close on the site on or before closing on Triangle Property. |
Mr. Novak stated that he essentially wanted to provide a briefing on the status of the Triangle Property Agreement to encourage the Commissioners to do nothing at this time with respect to the BWL Coal Storage Agreement. If the Board elects to do nothing, the agreement continues the developer’s ability to purchase the BWL parcel, and it can be revisited at a future date. A number of things will be known in January that are not known now, and the most significant is whether the developers have been successful in their ongoing negotiations with the State’s Department of Management and Budget for a lease that will be the cornerstone that provides the financial support for this entire project. It may be known by the end of the legislative lame duck session whether the developers have been successful in those negotiations and will go before the Joint Committee on Capital Outlay to get tentative approval of that lease. A follow up report will be made to the Board in January. The Committee took no action on this matter.
General Manager’s Fiscal Year 2005 Objectives. The Commissioners had an opportunity to discuss a draft copy of the General Manager’s Fiscal Year 2005 Objectives at a Retreat held October 30th and again at the Committee of the Whole meeting held November 23rd. Following discussion and input, this item was referred to the Board for approval (see the “Resolutions” section of the minutes).
Employment Contracts. The Committee reviewed proposed employment contracts between the Board and the three Board Appointees; namely,
a. Sanford Novick, the Director and General Manager
b. Glenn Holloway, the Director of Internal Audit
c. Mary Sova, the Corporate Secretary
Contractual issues were discussed, and it was determined that the contracts accurately reflect the agreement between the Board and its appointees. The Committee of the Whole recommends that the three contracts be forwarded to the Board for approval. (See the “Resolutions” section of the minutes.)
Board Travel Policy. Due to the complex and changing environment, it is essential for Commissioners to be well informed on issues of importance to the utility industry. Commissioners are encouraged to attend seminars, meetings or other programs that provide information impacting the operations of the Board of Water and Light. The present Commissioners’ travel policy has been in effect since 1993. The Commissioners had an opportunity to review and discuss travel expense reimbursement practices of other public and non-profit organizations in the Greater Lansing Area and from other member utilities of the American Public Power Association (APPA). Draft policies were reviewed; one for the Commissioners and another for the three Board Appointees. The two policies are similar, except for the review process.
Following input and revision, the policies were referred to the Board for approval. (See the “Resolutions” section of the minutes.) Common Ground Sponsorship. Staff presented an overview of the sponsorship package for the Common Ground Festival. Last year the BWL joined as a sponsor of the Common Ground Festival for the first time. Results of that sponsorship were positive. The sponsorship package will continue to identify the BWL as the “official Electricity Provider of the Common Ground Festival.” It will also include customer BWL signage throughout the festival venue, and the BWL’s name included in program guides and festival advertising. Board approval is recommended for this community event. (See “General Manager’s Recommendations” section of the minutes.)
There being no further business, the Committee of the Whole adjourned at 5:29 p.m.
Respectfully submitted,
Ron Callen, Chair Pro Tem
Committee of the Whole
Motion by Commissioner Callen, seconded by Commissioner Haggart, to receive the report.
Action: Carried unanimously.
MANAGER’S RECOMMENDATIONS
Background materials on items presented are on file in the Office of the Corporate Secretary.
Resolution 2004-11-5
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A. |
EARLY RETIREMENT AND SALE OF EAST LANSING SUBSTATION BUILDING AND PROPERTY AND SUBSEQUENT REQUIRED INCREASE IN FY 2005 CAPITAL BUDGET |
WHEREAS, the current Board of Water and Light (BWL) Capital Budget includes a
project for the retirement of East Lansing Substation starting in FY2005 with
completion in FY2008, and upon retirement the substation and property will no
longer be needed for BWL operations and considered surplus; and
WHEREAS, the BWL property disposal procedure specifies that local units of government be given first rights to purchase surplus properties at an amount equal or greater than the appraised value; and
WHEREAS, the City of East Lansing, Michigan agrees to purchase the BWL East Lansing Substation building and property at the appraised amount of $115,000, and
WHEREAS, the City of East Lansing seeks possession of the substation building and property in FY2006 and agrees to reimburse the BWL $90,000 as the calculated costs associated with the BWL expediting the East Lansing Substation retirement; and
WHEREAS, the funds included in the Fiscal Year 2005 Capital Budget for Planned Projects for the retirement of the East Lansing Substation Project need to be increased to support the requested early retirement schedule,
RESOLVED, That the Board of Commissioners hereby moves that upon execution of an agreement between the City of East Lansing and the Board of Water and Light, approves the early retirement of the East Lansing Substation, declares the Substation building and property as surplus and no longer required for BWL operations upon completion of the retirement project, approves the sale of the Substation to the City of East Lansing and authorizes a $250,000 increase in the Fiscal Year 2005 Capital Budget for Planned Projects to expedite the early retirement of the Substation.
Staff Remarks: East Lansing Substation is a 4160V substation serving the area near Michigan Ave. between Harrison Rd. and Abbott Rd. The substation and its distribution circuits are approaching 70 years of service. Replacement equipment for the substation is becoming difficult to obtain and the aging distribution circuits require an upgrade to continue reliable service. Retirement of the substation will result in the 4160V circuits being converted to 13.2kV.
Motion by Commissioner Wonch, seconded by Commissioner Callen, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-11-6
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B. |
CORPORATE SPONSORSHIP OF COMMON GROUND |
RESOLVED, That the Board of Water & Light agrees to be a corporate sponsor of the Common Ground Festival at a sponsorship level of $5,000 per year for the years 2005 through 2007.
Staff Remarks: Last year the BWL joined as a sponsor of the Common Ground Festival for the first time. Results of that sponsorship were extremely positive, with the BWL, along with General Motors, being recalled most frequently as a sponsor of this event.
The sponsorship package will continue to identify the BWL as the “Official Electricity Provider of the Common Ground Festival.” Among other things, it will include custom BWL signage throughout the festival venue, and the BWL’s name included in program guides and festival advertising.
Motion by Commissioner Wonch, seconded by Commissioner Duncan, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-11-7
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C. |
BOARD MEETING SCHEDULE FOR CY 2005 |
In accordance with the Board’s Rules of Administrative Procedure, a schedule of dates, places and times for each regular meeting of the Board for the calendar year shall be adopted by the Board in November.
RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2005 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings:
2005
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Tuesday |
January 25 |
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Tuesday |
March 22 |
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Tuesday |
May 24 |
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Tuesday |
July 26 |
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Tuesday |
September 27 |
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Tuesday |
November 22 |
Meetings will be held in the Board Room located in the Board of Water and Light
Customer Service Center, 1232 Haco Drive, Lansing, at 5:30 p.m.
RESOLVED FURTHER, That a notice of the meeting schedule be published in the Lansing State Journal the week of January 9, 2005.
Motion by Commissioner Wonch, seconded by Commissioner Duncan, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-11-8
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D. |
AMEND EXCEPTIONAL ACHIEVEMENT AWARD FOR NON-BARGAINING UNIT EMPLOYEES |
RESOLVED, That the financial worth of the Exceptional Achievement Award be amended to reflect a maximum award amount of $2,000.
FURTHER RESOLVED, That the General Manager is authorized to develop all procedures necessary for its implementation.
Staff Remarks: The current policy allows the General Manager to grant nominated non-bargaining unit employees an “Exceptional Achievement Award” to recognize outstanding achievement. Nominations are made annually by Managers and Directors, generally in December, and awards are worth up to $1,000 each. The policy has not been modified or reviewed since its inception in the mid-1980’s. The amendment would increase the value of the “Exceptional Achievement Award” to a maximum of $2,000 each, an amount that gives greater significance and recognition to outstanding performance.
Motion by Commissioner Wonch, seconded by Commissioner Duncan, to approve the resolution.
Action: Carried unanimously.
UNFINISHED BUSINESS
No unfinished business
Commissioner Calkins inquired about the status of replacing lead pipe and the CSO project. General Manager Novick reported that staff is in the process of preparing a progress report on the past construction season for presentation to the Board at the January meeting. Initial recommendations from the Lead Task Force Committee for the next construction season will be presented for concurrence. Lengthy discussion followed regarding miscommunications involving the CSO project and lead pipe replacement issues. Mr. Novick told the Board that when he met with the City’s Public Service Committee last year on this issue, he made a commitment that staff would come back to them at the end of the construction season with a project status report. Commissioner Smith noted that a disadvantage that others have chosen is to use public venues to bring attention to operational issues, which often magnifies the problem. It is essential to reiterate to all involved parties the importance of understanding the difference in policy versus management and operational responsibilities and placing issues that come to the forefront in the proper area for attention. The goal of management and the Board is to work toward serving the best interests of the utility.
Commissioner Wonch left the meeting at 6:05 p.m.
RESOLUTIONS
Resolution 2004-11-9
Resolution on Employment Contracts for Director, Internal Auditor, and Corporate Secretary
The Lansing City Charter directs the Board of Commissioners to fill the following Board of Light positions by appointment: 1) a Director, who shall be responsible for carrying out the duties assigned by the Board, and shall serve at its pleasure; 2) an Internal Auditor, who shall report directly to the Board, and serve at its pleasure; and 3) its own Secretary who shall be responsible to the Board and serve at its pleasure.
Pursuant to the Charter, the Board has reviewed the employment contracts for the three appointed positions, has had an opportunity to discuss the contractual issues and has determined that the contracts reflect the agreement between the Board and its appointees, and therefore:
IT IS HEREBY RESOLVED:
That the employment contract between the Board and Sanford Novick, the Director and General Manager, is hereby approved as amended and extended to August 17, 2005.
That the employment contract between the Board and Glenn Holloway, the Director of Internal Audit, is hereby approved through June 30, 2005.
That the employment contract between the Board and Mary Sova, the Corporate Secretary, is hereby approved through June 30, 2005.
IT IS FURTHER RESOLVED, That the contracts for the three appointed positions be placed on file with the Board of Water and Light’s Human Resources department.
Motion by Commissioner Duncan, seconded by Commissioner Joseph, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-11-10
TRAVEL EXPENSES FOR COMMISSIONERS AND BOARD STAFF APPOINTEES
WHEREAS, the Board of Water and Light operates in a highly competitive, complex, and rapidly changing environment, and
WHEREAS, the Board of Water and Light desires Commissioners and Appointees to identify and consider for implementation those best practices which will benefit ratepayers; and
WHEREAS, attendance at conferences, seminars, meetings and other programs is essential to obtaining knowledge of best practices; and
WHEREAS, the Board of Commissioners desires to establish guidelines related to attendance at such educational events, and has had an opportunity for deliberation of proposed policies “Travel Expense – Commissioners” and “Travel Expense – Board Appointees” dated November 23, 2004.
RESOLVED, That the Board of Commissioners hereby approves the proposed policies.
RESOLVED FURTHER, That the proposed policies (and Exhibit 1 & Exhibit 2) be placed on file with the Corporate Secretary.
Motion by Commissioner Joseph, seconded by Commissioner Duncan, to approve the resolution.
Action: Carried unanimously.
Resolution 2004-11-11
WHEREAS, the Board of Commissioners has met with the General Manager to mutually establish his performance objectives for Fiscal Year 2005.
RESOLVED, That the Fiscal Year 2005 Performance Objectives for Sanford Novick, the Director and General Manager, are hereby approved.
FISCAL YEAR 2005 OBJECTIVES:
Ensure that day-to-day operations of the BWL meet customer needs:
· Maintain or improve current BWL reliability measures.
· Achieve the Corporate Balanced Scorecard objectives.
· Promptly address and resolve any unforeseen outages or service disruptions.
Effectively plan for the future of the BWL:
· Finalize the BWL strategic plan.
· Present 6-year financial plan and achieve Board concurrence with desired targets.
· Insure that financial plan is consistent with, and supportive of, the strategic plan.
· Insure readiness to participate in MISO market initiatives, which begin March 2005, to insure that BWL customers are benefited and not harmed.
· Study and promote awareness of current and potential environmental issues.
· Initiate an Integrated Resource Plan study to look at future power supply needs and sources.
· Continue to require updates to all succession plans by Sr. Vice Presidents and Directors.
Take concrete steps to address and improve employee concerns:
· Implement at least two new initiatives to improve communications with employees.
· Regularly meet with union leadership to address and anticipate potential issues.
· Improve safety performance.
· Continue implementation of diversity training throughout the organization.
· Enhance and improve supervisory training.
Finalize plan to replace lead services and begin implementation of the plan:
· Keep the public informed about BWL activities in this area, as well as any related issues.
· Insure that the plan stays on target to meet 10-year replacement goal, or to improve upon that goal if possible.
Take concrete steps to address problems associated with existing wholesale water contracts.
Improve customer communications:
· Develop and implement a pro-active public education strategy to anticipate customer issues and concerns and effectively communicate BWL activities to address those concerns.
· Develop a Crisis Management Plan for use in response to negative media coverage.
Motion by Commissioner Duncan, seconded by Commissioner Calkins, to approve the resolution.
Action: Carried unanimously.
Financial Report. Senior Vice President of Finance Dennis McFarland reviewed the financial report for the fiscal year-to-date ended October 31, 2004. Year-to-date actual results compared to budget are $200,000 under budget. Actual budgeted operating income came in at $6.5 million compared to the budgeted amount of $7.3 million. Items accounting for the variance between budgeted and actual operating income include:
· Effect of lower retail electric sales, offset by higher wholesale, decreased $/MWH
· Water sales are down by 10% from prior year and 8% under budget
· Union contract settlement – retroactive payment not included in original budget
· Labor – net amount under budget because of unfilled positions due to delays being addressed in Human Resources
· Refunds on life and health insurance premiums will be a plus
Timing differences involve O&M expenses for material and outside services and the net effect of higher $/MWH retail revenue, increased fuel, and purchased power (ECA).
The year-to-date net income is $157,000 lower from the projected $2.4 million, while expenses are 1% over budget. He reviewed certain pending items that are expected from this year forward and noted that if they all happen, the revised net income would result in $5 million.
United Way Report. Calvin Jones, co-chair of the BWL 2004 United Way Campaign, reported that the BWL campaign goal was $96,000 and the employees of the BWL contributed $96,652.85. A cookout that was recently held at BWL helped to raise $1,335.25 of the projected goal. Mr. Jones acknowledged the BWL leadership team members that assisted with the CAUW campaign: BWL campaign co-chair Jim Dravenstatt-Moceri, Joe Davis, Jan Simpson, Nancy Gilbert, Anne Weller and Mark Dykema. He expressed appreciation to the employees’ generous contributions to give back to the community.
Environmental Issues. Nick Burwell of Environmental Services presented an overview on the history of the Clean Air Act. The Air Pollution Control Act of 1955 identified air pollution as a problem. The Clean Air Act of 1963 focused on stationary sources, specifically power plants and steel mills. The clean Air Act amendments in 1965, 1966, 1967, and 1969 placed deadlines on auto emissions and other stationary sources. Tougher standards for stationary and mobile sources were imposed by the Clean Air Act of 1970. Air quality, toxic air pollutants, acid rain and ozone standards were included in the Clean Air Act of 1990.
Mr. Burwell discussed when an old source is considered new. New Sources are required to meet strict emission limits, often requiring the best available control technology available. Existing sources have less restrictive requirements. In November 1999, EPA filed suit against seven utilities, alleging, in part, that Best Available Control Technology (BACT) was not installed under New Source requirements. In addition, an Administrative Order was filed against Tennessee Valley Authority. Mr. Burwell reviewed United States district Court opinions on New Source Requirements for Ohio Edison, Duke Energy, and Tennessee Valley Authority. He further reported that in October 2003, EPA published the Equipment Replacement Rule, which set out objective guidelines for maintenance versus New Source. Before the new rule could take effect, in December 2003 the D. C. Circuit stayed the Rule. In the meantime, EPA continues to issue notices of violation to utilities; for example, Westar Energy and East Kentucky Power Cooperative. Mr. Burwell said that every coal-fired utility in the country has concerns over the implementation of New Source review versus routine maintenance, replacement and repair. General Manager Novick reported that discussions on environmental issues will continue to be brought to the Board at future meetings on a regular basis.
COMMISSIONERS’ COMMENTS
Commissioner Calkins suggested that Internal Auditor Glenn Holloway contact the Runzheimer travel management consulting firm for information on travel programs, policies and costs. This information will be useful in researching nationally accepted limits for travel expenditures.
ABSENCES
On motion by Commissioner Duncan and seconded by Commissioner Smith, that Commissioner Wonch’s early departure (left the meeting at 6:05 p.m.) be excused.
Carried unanimously.
PUBLIC COMMENTS
Max Zemer, BWL retiree, clarified that the letter he sent to the Board (see “Communications”) was sent on behalf of the Retirees’ Pension and Benefits Committee of the BWL Retirees Club. He also noted that when employees switched from the Defined Benefit (DB) to the Defined Contribution (DC) Plan, it was made clear that once they selected the DC Plan, adjustments would no longer take place. The three-year adjustment would only apply to DB Plan participants. Thus, by switching to the DC Plan, those funds no longer belong to BWL. Mr. Zemer said that DC plan participants have total control of their funds to make or lose whatever the market provides.
Ron Byrnes, BWL retiree, stated that the Retirees’ Pension and Benefits Committee retained Attorney James A. White as a result of a Freedom of Information Act (FOIA) request for any legal opinions received by the BWL concerning benefits for BWL retirees and/or written correspondence to or from any consultant. The FOIA was denied based on an exemption on attorney-client privilege. Mr. Byrnes stated that the group wants assurance that the BWL’s outside counsel considers the historical agreements mentioned earlier in the meeting under “Public Comment.” He reiterated that the retiree benefits issue can be resolved at BWL in-house. The retirees are looking for dialogue with staff to resolve these issues.
Dick Sevic, BWL retiree, reported that General Manager Novick attended the retiree breakfast at his invitation. Mr. Sevic said that he thought Mr. Novick did a nice job in responding to questions raised by retirees. Mr. Sevic also emphasized the importance for BWL management to maintain good dialogue with the retirees and doing what is best for everybody.
General Manager Novick stated that when he met with the retirees at their breakfast he and staff committed to come back every time the retirees invite them. Staff committed to do nothing as far as health insurance until they talk with the retirees first.
The Commissioners expressed an interest in reviewing the resolutions and historical information referenced by the retiree group. Chairperson Smith stated that there seems to be an expression from management and the retiree group to communicate directly without the necessity of legal intervention at this time. This issue will be discussed again by the Commissioners in January.
ADJOURNMENT
On motion by Commissioner Calkins, seconded by Commissioner Joseph, the meeting adjourned at 7:07 p.m.
/s/ Mary E. Sova, Secretary
Draft Filed with Lansing City Clerk
December 9, 2004