Approved by the Board: July 22, 2008
MINUTES OF THE BOARD OF COMMISSIONERS'
MEETING
_________________________
Tuesday, May 27, 2008
___________________________
The
Board of Commissioners met in the Boardroom of the Administrative Offices,
|
Present: |
Commissioners Robert Cochran, Tony
DeLuca, Semone James, Peter Kramer, Frank Lain and Sandra Zerkle. |
|
Absent: |
Commissioners Joseph Graves and
Julee Rodocker |
The
Secretary declared a quorum present.
Chairperson
James called the meeting to order at 5:30 p.m.
APPROVAL OF MINUTES
Motion
by Commissioner Cochran, seconded by Commissioner DeLuca, to approve the
minutes of the regular board meeting held March 25, 2008.
Carried
unanimously.
PUBLIC COMMENTS
THE
CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON
ANY AGENDA SUBJECT. ANYONE WISHING TO
COMMENT ON ANY MATTER NOT ON THE AGENDA MAY DO SO IMMEDIATELY PRIOR TO
ADJOURNMENT.
There
were no public comments.
COMMUNICATIONS
Letter from Commissioner Frank
Lain regarding Commissioner Retiree Appreciation Gift.
Received and placed on file.
COMMITTEE
REPORTS
COMMITTEE OF THE WHOLE
April 8, 2008
The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing beginning at 5:30 p.m. on Tuesday, April 8, 2008.
Committee of the Whole Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Tony DeLuca, Joseph Graves, Semone James, Frank Lain, Julee Rodocker and Sandra Zerkle.
Absent: Commissioner Peter Kramer.
Public Comments
There were no public comments.
Approval of Minutes
Motion by Commissioner Cochran, seconded by Commissioner Zerkle to approve the minutes of the Committee of the Whole meeting held March 13, 2008.
Carried unanimously.
Balanced Scorecard
Steve Brennan, Manager of Erickson Station gave an overview of the balanced scorecard, its components, and current standing. The balanced scorecard composed of four perspectives and measures include financial performance, customer service, operational excellence, and people excellence. Some of the items compete against one another therefore it is their goal to have greater than 50% of the items meet their respective targets, of which the BWL is currently at 75%. Listed below are the measures for each respective performance.
· Financial Performance
o Operations and Maintenance Budget to Actual Variance
o Rate Comparison to Competitors
o Commodity Unit Cost - $/KWH, $/ccf, $/Mlb, $/Ton-hrs
· Customer Service
o Speed of answer (seconds)
o Percentage of Meters Read
o Percentage New Services Installed on Time
· Operational Excellence
o Asset Reliability – CAIDI (minutes), Availability Factor, and Number of Circuits with 5 or more Breaker Actions
o Environmental Stewardship - Percentage of fly Ash Sold and Number of Variances, Compliance Notices and Fines
· People Excellence
o Safe Workplace
o Employee Development – Average number of training hours per employee
In response to a Commissioner question regarding the BWL’s rate comparison, staff noted that some of the percentage changes were a result of varying fuel cost adjustments, rate changes (including summer and winter month variations) and surcharges. BWL and Consumers Energy (CE) do not have identical rate comparisons due to the unbundled surcharges contained in CE’s rate structure. Following the completion of the overview, it was further noted that scorecard explanations are available online and each department has a departmental scorecard available to all employees.
Shut Off for Non-Pay Procedure
Bob Perialas, Manager of Customer Accounts and Collections thanked the committee members for an opportunity to present. He then proceeded to give an overview of the shut off for non-pay procedure relative to the billing cycle, grace period, delayed payment charge, shut off eligibility/final notices and the shut off pool.
In response to a Commissioner question, it was noted that the computer algorithm determines which accounts are eligible for shut off based on the number of days of delinquently and the amount owed.
It was also advised that the BWL has the flexibility to extend the leave on for heat season to protect the health and safety of its customers as well as the BWL’s equipment. The leave on for heat season is a practice in which electricity is not disconnected for non-payment during the winter months of December 1st thru April 1st due to incremental weather. It was also stressed that disconnecting service for non-payment is viewed as a last resort. Prior to disconnection, attempts are made to contact the customer in an effort to make account arrangements prior to service interruption. Customer Account Representatives also have the ability to install 8 amp limiters in lieu of disconnecting service, which typically allows limited use of the service until appropriate arrangements and/or payments have been made on the account. The BWL also have color-coded security tabs that alert personnel to a medical condition within the household that requires electricity. In addition, the BWL also partners with various agencies throughout the area that assist customers with utility bills.
In response to a Commissioner question regarding the representatives’ discretion, it was noted that in order to have a positive field action one of the following three things must happen: 1) the power will be shut-off, 2) the customer must make a signed arrangement, or 3) they can make a payment on the account. In response to another question regarding periodic patterns relative to the field representatives, it was advised that it is customary for the same representatives to work in the same territory. Therefore, if a promise to pay is not kept then the field representative is less likely to work with the customer. In addition, the BWL can also conduct energy audits for homeowners (via Urban Options), which help customers learn how to reduce their consumption.
Credit Card Payment
Bob Perialas gave an overview of the changes to the credit card payment process. It was advised that beginning May 1, 2008 the BWL would no longer directly accept non-enrolled credit card payments in an effort to reduce costs. Currently, the BWL is responsible for all credit card charges which amount to over $700,000 a year. As a result, customers would be allowed to pay by credit card through a 3rd party vendor for a convenience fee payable to the vendor. In addition, customers can also continue to participate in the automatic payment program in which the bill amount is deducted from their respective credit card at no additional fee. An automatic teller machine has been placed in the customer service lobby to allow customers to access cash and a phone line will also be available to allow persons to contact the 3rd party vendor to make credit card payments by phone. Changing the current process would allow the BWL to save approximately $400,000 a year. A customer feedback hotline number was installed to allow customers an opportunity to provide input regarding the changes. Thus far, staff has only received a couple of calls in which they were able to provide satisfactory explanations. Reducing the cost helps to eliminate the subsidy. It was also noted that approximately 10% of BWL customers pay by credit card, including those that are enrolled in the automatic bill payment plan.
Peter Lark, General Manager noted that 90% of the customer base is subsidizing those who choose to pay by credit card. At the present time, none of the larger utilities accept credit card payments and it is an option for the BWL to eliminate their use in its entirety. However, it was thought best to create a middle ground by allowing their continued use and eliminating the indiscriminate user. The first step would be implementing the change and then determining other options for the next year.
Following the overview, the Commissioners expressed concern with charging some customers a fee to pay by credit card while others are not required to do so. They also noted that occasional credit card users might have difficulty in paying their utility bill. Therefore, an additional convenience fee may unfairly disparage that customer base. The Commissioners also advised this to be a policy matter that should have brought before the committee prior to its implementation. In addition, it was suggested that they be made aware in advance of any changes that impact the ratepayer. After further discussion, the following action was taken:
On motion by Commissioner Lain, seconded by Commissioner James, the credit card payment matter was referred to the Finance Committee for further discussion.
Action: Carried unanimously.
Renewable Energy Update
· Landfill energy – very reliable, high availability and significantly less expensive than other renewable resources
· Hydro-electric – lower capacity factor than landfill facilities, price competitive relative to wind and solar, limited usage to existing instate dams
o
LBWL
o
BWL
o Tower-Kleber – The dam under contract to the BWL is scheduled to expire at the end of 2010. A re-evaluation as to whether the BWL should renew the contract is under review.
· Wind – high energy cost and low reliability. It also has a low capacity factor depending on its location within the state. The BWL currently has possible wind projects with Granger under review for small or medium size units.
·
Solar – low capacity factor, higher cost
compared to other renewable resources, and can have its greatest impact during
the summer peak periods. BWL staff is
currently developing a solar energy evaluation project for potential
installation on top of the reservoir located across from the Dye Water plant.
·
Biomass – involves the use of waste matter and organic
materials. Staff is currently exploring
the use of biomass to co-fire the
The
Committee of the Whole took a meeting break from 6:52 p.m. to 7:10 p.m. after
which the meeting resumed.
Marketing Update
In addition, the BWL along with six other utilities is a
member of the Michigan Public Power Agency (MPPA). The BWL sells a significant amount of power
to the power pool and the majority of the other members aside from Grand Haven
are net purchasers. There has been
significant conflict during the past few years as to how the power should be
priced for sell, which resulted in a termination of the BWL’s power pool
participation effective calendar year 2010.
Nevertheless, based on the negotiation efforts of
In response to a Commissioner question, it was noted that despite the termination notice given to the MPPA approximately 2.5 years ago, the BWL is still committed to its obligations. It was advised that the BWL did not increase its obligations to the MPPA within the confines of the new agreement. The BWL is also not committed to providing bridge power to the municipalities unless they are partners in the building of a new power plant. In relation to new generation, it was advised that utility companies need to determine their strategy relative to proposed environmental legislation and carbon footprints.
EPAct of 2005 Update
Sue Warren, Marketing Manager gave an EPAct of 2005 update which included a request to host a public hearing on May 22, 2008 to receive public comment regarding net metering, fuel diversity and fossil fuel generation efficiency. In response to a Commissioner question, it was noted that the customer group interested in said topics are those who store renewables on their property and are interested in selling it via net metering. Following the public hearing, staff is required to make its final recommendation to the Board of Commissioners prior to August 8, 2008.
On motion by Commissioner James, seconded by Commissioner Cochran, the Committee of the Whole agreed to host a public hearing on May 22, 2008 to fulfill the requirements of EPAct of 2005 that will address Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency.
Action: Carried unanimously.
Bond Issue
Sue Devon, Chief Financial Officer gave an update regarding
the bond issue and also introduced Bond Counselor, Bill Danhoff of Miller,
Canfield, Paddock and Stone, P.L.C. and Bond Financial Advisor, Warren Cramer
of Robert W. Baird & Company. The
bonds were sold through a competitive bid process on April 2, 2008 at a premium
rate of 4.835%. There were four bidders
that included City Group (4.91%), Merrill Lynch (5%), RW Baird (4.95%) and
Wachovia Bank (4.83%). Following the
conclusion of the bond process, the bid was awarded to Wachovia Bank. The BWL’s rating with Standard & Poor’s
is AA- and Moody’s is Aa3. The previous
rate covenant was 150% and was recently reduced to 125%, which results in lower
covenant requirements and lower promises to bond holders. It was also noted that the BWL has standalone
status regarding its financial qualifications.
Therefore, the BWL’s qualification status is separate from that of the
City of
In response to a Commissioner question, it was noted that customers could contact Wachovia Bank directly to determine whether or not the bonds are available for sale to the general public.
Following the update, the Commissioners requested a copy of the rating report and official statement.
Sparrow Foundation Update
In response to a Commissioner question, it was noted that proceeds from the Chili Cook-off are currently donated to the Impression 5 Museum and the Hope Scholarship program; and each charity will continue to be a recipient of said funding. In response to another question, staff noted that they were unaware of how much is donated to Pennies for Power. However, the BWL is currently in the early stages of developing a large fundraising effort that would benefit the Pennies for Power program.
On motion by Commissioner James, seconded by Commissioner Graves, the Committee of the Whole agreed to select the naming option of the Fast Track (Urgent Care) waiting room inside Sparrow’s new Emergency Department.
Action: Carried unanimously.
APPA National Conference Discussion
The Committee of the Whole discussed the upcoming American Public Power Association (APPA) National Conference scheduled for June 2008. It was noted that the conference is worthwhile and offers fine educational activities. It was also advised that as part of the conference, APPA is offering an opportunity to work with Habitat for Humanity in building new homes. As such, the Committee of the Whole agreed that since it is an APPA sponsored activity hosted as part of the conference, the cost to depart in advance in order to participate in said event would be covered in the overall conference cost.
Commissioner Cochran reported that he plans to attend the following pre-conference seminars entitled, “Improving Controls to Protect Your Utility’s Assets” and “Rates Part 2: Understand Marginal Cost-Based Rates”. He also recommended that other Commissioners consider attending the seminar entitled “Rates Part 1: Understanding Cost-of-Service-Based Rates”. In addition, it was also noted that it is general practice for the Secretary to receive a copy of the presentation materials from each Commissioner upon their return and compile a complete conference packet to distribute to each Commissioner for future reference and review.
Internal Auditor of the Year Award Discussion
The Board of Commissioners received a letter from the
On motion by Commissioner James, seconded by
Commissioner Cochran, the Committee of the Whole agreed to nominate Susan
Pifer, Director of Internal Audit for the Internal Auditor of the Year Award
with the
Action: Carried unanimously.
Following brief discussion, Commissioner Graves agreed that he would take responsibility for composing the information and submitting the nomination. Commissioner Graves also asked that all of the board members provide input within the next two days via email to Secretary Jones in order to finalize and submit the nomination letter by the April 16, 2008 deadline.
Commissioner Retiree Appreciation Resolution Discussion
On motion by Commissioner Cochran, seconded by Commissioner Lain, the Committee of the Whole agreed to postpone the Commissioner Retiree Appreciation resolution.
Discussion: It was noted that the Commissioner Retiree Appreciation resolution was previously passed at a prior committee meeting. It was then suggested that the Board continue to act under past practice regarding departing Commissioners as opposed to creating a new policy. Therefore, a departing Commissioner would continue to receive a resolution, BWL watch, and a dinner in honor of their service to the BWL. However, if a departing Commissioner does not want the dinner for any reason then they would have other options not to exceed $500.00. The choice to have or not have a dinner would be the option of the departing Commissioner. It was further advised that Director of Internal Audit Susan Pifer and Charles Moore of C.L. Moores & Associates confirmed that $500.00 does not meet the threshold of a 1099 form. In addition, it was also noted that the gift amount would be deducted from the Board of Commissioners budget.
Commissioner DeLuca expressed concern regarding the perception of giving a departing Commissioner a gift certificate in lieu of a dinner in their honor. Following brief discussion, the Committee of the Whole voted on the motion.
Action: Carried unanimously.
Other
On motion by Commissioner Lain, seconded by Commissioner Cochran, the Committee of the Whole agreed to excuse the absence of Commissioner Peter Kramer.
Action: Carried unanimously.
There being no further business, the meeting adjourned at 8:25 p.m.
Respectfully submitted,
Julee M. Rodocker, Chair
Committee of the Whole
FINANCE COMMITTEE
April 22, 2008
The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Tuesday, April 22, 2008.
Finance Committee Chair, Joseph Graves called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran (arrived at 4:17 p.m.), Joseph Graves, Semone James, and Peter Kramer. Alternate committee member Commissioner Frank Lain was present in addition to Commissioner Tony DeLuca.
Absent: None
Public Comments
There were no public comments.
Budget Information
Sue Devon, Chief Financial Officer gave note of the Board of Water and Light (BWL) budget assumptions for fiscal year 2009. The presentation materials contained information pertaining to the budget calendar, sales forecast, revenue assumptions, operating expenses and capital expenditures.
Following brief review, the committee asked that the presentation materials contained on page 5 under rate increases be changed to reflect, “increases/decreases”, since they have not made a determination as to whether or not future rate changes will increase or decrease. In addition, the committee also requested five years of charts/graphs depicting the yearly average increased costs for health care, prescription drugs and co-pays, which pertains to the anticipated health care, prescription increase of 9.5% noted on page 7 of the presentation.
In response to the request, Sue Devon noted that they would have the additional healthcare information available, which would also include a breakdown between active and retired employees.
Budget Review
Internal Auditor. Susan Pifer, Director of Internal Audit gave a brief overview of the proposed budget for the Department of Metrics and Audit for fiscal year 2009. During the overview it was noted that the proposed budget is on a continuance basis that contains 3 full time equivalents and a ¾ equivalent rate for outside consultant fees for the services of C.L. Moore & Associates.
Corporate Secretary and Board of Commissioners. Rhonda Jones, Corporate Secretary gave a brief overview of the Corporate Secretary and Board of Commissioners proposed budgets for fiscal year 2009. It was advised that both budgets were essentially similar to the previous year with decreases made to the Commissioners budget relative to outside services due to a decreased anticipated need for consultants. Following brief discussion, the Finance Committee took the following action:
On motion by Commissioner James, seconded by Commissioner Lain, the Finance Committee approved the fiscal year 2009 budget for the Department of Metrics and Audit, Corporate Secretary, and the Board of Commissioners, which will be submitted with the overall budget to the full board on May 27, 2008.
Discussion: Commissioners DeLuca and Lain noted for the record that they are not supportive of the retiree gifts.
Action: Carried unanimously.
Credit Card Payment
Peter Lark, General Manager gave an overview of the credit card payment system and the effects of the current structure, proposed changes, and the possible application of convenience fees to all credit card paying customers. The proposed change would eliminate the use of non-enrolled credit card payments. Therefore, customers who are enrolled in the automatic payment plan would not see any changes. Instead those who are not enrolled and desired to pay by credit card would contact a third party vendor who in turn would assess the customer a convenience fee. The proposed change made in an effort to reduce cost would save the BWL approximately $400,000. It was further advised that the change is the middle ground between either leaving the program as is or charging all credit card customers a convenience fee. In addition, Manager of Customer Accounts and Collections Bob Perialas explained the specifics of the cost breakdown associated with the credit card payment process and the analysis regarding merchant banks.
Following lengthy discussion, Commissioner Cochran expressed concern regarding the creation of disparity between one customer base versus another, and suggested that staff either leave the program as is or end the acceptance of credit card payments in its entirety.
Subsequent to additional discussion, it was also noted that the proposed credit card change is a good business practice and a way in which to exhibit cost reductions to the ratepayer. As such, cost reduction measures should be communicated to the ratepayer accordingly, as operating cost reductions were a topic of discussion during the previous rate hearing. Pursuant to additional discussion, the Finance Committee took the following action:
On motion by Commissioner James, seconded by Commissioner Kramer, the Finance Committee voted to support the credit card payment proposal as presented by the General Manager.
Yeas: Commissioners
Nays: Commissioner Cochran.
Action: Motion carried.
Following the vote, Commissioner Kramer congratulated staff regarding the task and asked that they continue to look for opportunities to save money.
Commissioner Graves also asked staff to send the Commissioners a copy of the verbiage they intend to use in announcing the proposed changes to the ratepayers prior to the next Board meeting.
Other
Commissioner Cochran gave a brief overview of his experience as a judge for the BWL amateur chili cook-off contest held on April 19, 2008.
There being no further business, the meeting adjourned at 4:35 p.m.
Respectfully submitted,
Joseph E. Graves, Jr., Chair
Finance Committee
HUMAN RESOURCE COMMITTEE
May 1, 2008
The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 12:10 p.m. on Thursday, May 1, 2008.
Human Resource Committee Chair, Sandra Zerkle called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Tony DeLuca, Frank Lain and Sandra Zerkle. Alternate committee members Commissioners Semone James and Julee Rodocker were also present.
Absent: Commissioner Joseph Graves
Public Comments
There were no public comments.
Uniform Board Appointee Evaluation Forms
The Human Resource Committee met to discuss the need for a simplified uniform evaluation tool in which to conduct the performance evaluations for the board’s appointees. As such, the committee members discussed utilizing the Board of Water and Light (BWL) Planning and Feedback Summary Form in conjunction with the Salary Development Interview Form as the performance evaluation tool. It was noted that the appointees would list their performance goals and objectives on the planning and feedback form and complete a self-evaluation at fiscal year-end. Following lengthy discussion, the Human Resource Committee took the following action:
On motion by Commissioner James, seconded by Commissioner Lain, the Human Resource Committee agreed to use the BWL Planning and Feedback Summary Form and the Salary Development Interview Forms as the employee performance evaluation tools for the Board of Commissioner board appointees. As such, the Salary Development Interview Form should remove the terminology of limited asset, definite asset, and strong asset and replace it with exceeds expectation, meets expectation, and does not meet expectation. In addition, an extra page will be added to the evaluation form to allow for appointee feedback following their respective evaluation.
Discussion: The committee confirmed that the forms would be used in the evaluation process for the current fiscal period. A copy of each appointee’s fiscal year-end goals will be included in their evaluation materials as a reference point. Additionally, the Human Resource Committee recommendation regarding the evaluation forms will be forwarded to the Committee of the Whole for further review and approval.
Action: Carried unanimously.
There being no further business, the meeting adjourned at 12:43 p.m.
Respectfully submitted,
Sandra Zerkle, Chair
Human Resource Committee
FINANCE COMMITTEE
May 13, 2008
The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Tuesday, May 13, 2008.
Finance Committee Chair, Joseph Graves called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Joseph Graves, and Semone James (arrived at 4:10 p.m.). Alternate committee members Commissioners Frank Lain and Julee Rodocker were present in addition to Commissioners Tony DeLuca and Sandra Zerkle (arrived at 4:32 p.m.).
Absent: Commissioner Peter Kramer.
Public Comments
There were no public comments.
Approval of Minutes
Motion by Commissioner Lain, seconded by Commissioner Cochran to approve the minutes of the Finance Committee meeting held April 22, 2008.
Action: Carried unanimously.
Rules and Regulations for Electric, Water, Steam and Chilled Water
Kellee Christensen, Manager of Water System Integrity and Customer Projects referenced the Rules and Regulations summary update information contained in the committee meeting packet. Following brief discussion, the Finance Committee took the following action:
On motion by Commissioner Cochran, seconded by Commissioner Lain, the Finance Committee agreed to forward the proposed resolution for the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services to the full board for consideration and approval on May 27, 2008.
Action: Carried unanimously.
FY 2009 Budgets and Six Year Forecasts
SALES FORECAST FOR FY 2009 COMPARED WITH FY 2008
|
Utility |
FY09 Forecast |
FY08 Budget |
% ’08 Forecast to ’08 Budget |
|
Electric – Retail (mwh) Electric – Wholesale (mwh) Electric (mwh) Water (ccf) Steam (mlb) Chilled Water (tnhrs) |
2,346,879 1,037,009 3,383,888 10,697,797 692,250 9,641,418 |
2,275,881
3,185,203 10,782,933 749,719 8,613,560 |
3.1% 14.0% 6.2% -0.8% -7.7% 11.9% |
Electric:
· Residential & commercial is approximately flat.
· Industrial forecast is up due to increase in FY2008 actual sales.
· Wholesale volumes increased due to projected increases in power plan availability.
Water:
· Retail load is down 2.8% due to lost GM load.
·
Wholesale volumes increased over FY08 budgeted
levels for
Steam:
· Steam loads for GM approximately flat, reduction in Steam Commercial due to conservation.
Chilled Water:
· Chilled Water loads up due to higher 2007 and YTD 2008 sales.
REVENUE ASSUMPTIONS
· Projected rate increases, January 2009:
·
Electric:
4.0% = $3.2 million additional net revenue annually
·
Water:
7.0% = $.8 million additional net revenue annually
·
Steam:
9.0% = $.4 million additional net revenue annually
· Chilled Water based on minimum bill level, no rate increase.
· Electric Wholesale
·
Lower revenue than expected due to anticipated
· Electric Wholesale margin:
·
Margins will be affected by higher fuel
costs.
·
·
Increased MPPA power pool revenues.
· Water Wholesale – contract negotiations continue, anticipated increase included in budget.
OPERATING EXPENSE ASSUMPTIONS
· Reviews held with each department.
· Overall O&M increase 4.4% compared to final FY 2008 forecast.
· Current CPI Index – 4% inflation.
· Increase of 30 FTE employees while maintaining only 4.4% increase overall.
· Wage and salary increases = 2%.
· Increase in Health Care cost = 9.5%.
· Total cost per ton of coal in FY 2009 has increased 25% due to 30% increase in rail costs and 17% increase in coal costs vs. FY 2008.
FY 2009 O&M BUDGET BY CATEGORY (excludes depreciation)
Coal, Chemicals $77,958,000 33%
Labor 49,213,000 20%
Purchased Power 45,629,000 19%
Active/Retiree Benefits 27,612,000 11%
Other 22,238,000 9%
Material 11,534 5%
Pension 6,604 3%
$240,788,000
FY 2009 BUDGETED RETURN ON NET FIXED ASSETS
Total Electric Water Steam Chilled Water
0.9% 3.0% -1.1% -5.7% -5.3%
FINANCIAL PROJECTIONS: Six-year
Forecast FY2009 – FY2014 - Assumptions
· Projected sales levels – conservative growth
· Rate increases
· Electric (January) = 4% in FY09, 3% in FY10, 2.5% in FY11 – FY14
· Water (January) = 7% in FY09, 6% in FY10 – FY14
· Steam (January) = 9% in FY09, 7.5% in FY10 – FY14
· Chilled Water (July) = 3% in FY10 – FY14
· Begins with FY09 Operating expenses (included allocations) with 2.5% inflation in FY10 – FY14, benefits at 5%.
· Capital & environmental expenditures per six year forecast.
· $40mm bond issue for Water in FY09/10 only.
·
Includes $6mm per year drawn from
CREDIT ISSUES
·
Financial Goals
· Maintain credit quality
· Ensure adequate liquidity
· Maintain rate competitiveness
· Efficient & appropriate use of capital
· 4% Return on Net Assets
FY 2009 CAPITAL BUDGET ASSUMPTIONS
· Revenue producing customer driven capital additions and those projects justified by 7-year cost/benefit analysis (will be noted as “Revenue Projects”).
· Lead service replacement program budgeted at $7,000,000.
·
CSO related expenses budgeted to coincide with
most recent City of
· Environmental Compliance Projects included as required to meet current and projected future emissions regulations.
· Renewable Energy Projects budgeted at $2,230,000.
· Financial systems upgrades (HR and payroll) to SAP environment budgeted at $2,645,000.
FY 2009 CAPITAL BUDGET PROJECT CATEGORIES
Reliability $31,504,000 60%
Revenue 6,574,000 13%
Compliance 5,836,000 11%
Safety 4,570,000 9%
Environmental 4,002,000 8%
$52,486,000
The FY2009 capital budget recommendation also itemized by electric, water, steam, chilled water and common facilities total $52,486,000. The FY2009 – FY2014 six-year capital forecast and the historical and budgeted health care costs were also included in the committee meeting packet materials. Following discussion, the Finance Committee took the following action:
On motion by Commissioner Cochran, seconded by Commissioner Lain, the Finance Committee agreed to forward the proposed resolution for the Fiscal Year 2009 Operating and Capital Budgets to the full board for consideration and approval on May 27, 2008.
Action: Carried unanimously.
RFP (401A, 457) Update
There being no further business, the meeting adjourned at 4:41 p.m.
Respectfully submitted
Joseph E. Graves, Jr., Chair
Finance Committee
COMMITTEE OF THE WHOLE
May 13, 2008
The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing beginning at 5:30 p.m. on Tuesday, May 13, 2008.
Committee of the Whole Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Tony DeLuca, Joseph Graves, Semone James, Frank Lain, Julee Rodocker and Sandra Zerkle.
Absent: Commissioner Peter Kramer.
Public Comments
There were no public comments.
Approval of Minutes
Motion by Commissioner James, seconded by Commissioner Graves to approve the minutes of the Committee of the Whole meeting held April 8, 2008.
Discussion: Commissioner Lain provided a letter regarding the proposed Commissioner Retiree Appreciation resolution and asked that it be placed on file. Following his request, the committee members discussed the contents of the letter and explained their understanding of the resolution that was previously postponed. Following further discussion, the Committee of the Whole took the subsequent action regarding approval of the April 13, 2008 meeting minutes:
Action: Carried unanimously.
National Safety Council Assessment 2008 Report Summary
Sue Pemberton, Director of Industrial Health and Safety gave an overview of the National Safety Council Assessment 2008 report. The Board of Water and Light (BWL) has improved its rating from 1.3 in 2005 to 2.0 (fair) in 2008 on a 4.0 scale. There was significant improvement in 8 of the 9 assessment categories that included the following:
· Management Leadership and Commitment
· Assessments, Audits and Continuous Improvements
· Hazard Recognition, Evaluation and Control
· Motivation, Behavior and Attitudes
· Training and Orientation
In moving forward, it was also noted that the BWL should better utilize existing data, improve follow thru on near misses and accident reports, continue to evaluate risk, communicate information, and document policies and procedures. Following the overview, the committee noted the huge improvements over the last two years and applauded staff for their efforts.
Soil Erosion and Sedimentation Control Procedures
On motion by Commissioner Cochran, seconded by Commissioner Graves, the Committee of the Whole agreed to forward the proposed resolution for the BWL Soil Erosion & Sedimentation Control Program and In-house Contract General Requirements to the full board for consideration and approval on May 27, 2008.
Action: Carried unanimously.
Designated Representative and Alternate Designated Representative
On motion by Commissioner Zerkle, seconded by Commissioner Lain, the Committee of the Whole agreed to forward the proposed resolution for the Designated Representative and Alternative Designated Representative to Comply with the Clean Air Act to the full board for consideration and approval on May 27, 2008.
Action: Carried unanimously.
Integrated Resource Plan
Major Goals of Electric Generation Planning
· Minimize cost of providing electric generation services.
· Maintain electric generating reliability.
· Manage future risk and uncertainty.
Electric Resource Modeling Steps
· Assess adequacy of electric generating resources.
· Compile inventory of new electric generating options.
· Perform resource modeling.
- Develop base case
- Develop scenarios and sensitivities
Loads and Resource Assessment
· The analysis looked at maintaining the existing units versus replacement.
· The BWL has budgeted $1.4 million for an energy efficiency program; half of which will begin this year and the full program will commence next year.
Base Case Forecasts
· Annual energy and peak demand forecast
- Annual energy forecast 1.4%
- Peak demand forecast 1.6%
· Fuel forecast
- Coal
- Natural gas
· Air emissions allowances forecasts
-
SO2
-
NOx
- GHG
· Construction cost escalation
Base Case Modeling Results
· Selects natural gas/market purchase for short-term capacity need in 2016.
· Selects new base load unit to replace Eckert units in 2018.
Model Scenarios
· Base
· High and low energy demand growth
· Energy efficiency programming
· Expanded renewable energy program
· Energy efficiency and expanded renewables
· Joint unit construction
· No greenhouse gas (GHG) regulatory controls
·
Exclusive reliance on
Modeling Sensitivities
· High natural gas costs
· High construction cost escalation
· Low emission allowances costs
· High emission allowances costs
Modeling Results
· Short-term capacity needs beginning in 2016 in most scenarios and sensitivities.
· New baseload generation is selected to replace the Eckert units in all scenarios and sensitivities.
· It is not cost-effective to make major investments in Eckert plant.
· GHG regulations represent a major future regulatory cost.
· Exclusive reliance on wholesale markets increases the BWL’s costs significantly.
· Energy efficiency programs lower the total cost of meeting future electric energy needs.
Recommendations
· Implement an energy efficiency and load management programs to eliminate capacity need in 2016 and meet future electricity growth.
· Begin the process of replacing Eckert with a new baseload generating plant.
- Develop “hybrid” biomass/coal fueled unity.
-
Plan for unit about the size of Eckert with
Following the presentation and further discussion, it was noted that staff would a) meet with the Lansing State Journal editorial board on May 27th, b) work to permit the new baseload generating project with the Department of Environmental Quality, and c) involve the community. The permit process takes approximately 1 - 2 years. It was confirmed that the Board would be kept abreast of the research, findings and public support involved in replacing Eckert Station. It was further noted that the Board of Commissioners do not need to take action at the present time.
Strategic Plan
On motion by Commissioner Cochran, seconded by Commissioner James, the Committee of the Whole adopted the BWL Strategic Plan 2008.
Action: Carried unanimously.
Uniform Board Appointee Evaluation Forms
Commissioner Zerkle, Human Resource Chair noted that the Human Resource Committee addressed the matter of board appointee evaluation forms due to various past issues and a need to create a uniform evaluation process.
On motion by Commissioner James, seconded by Commissioner Lain, the Committee of the Whole adopted the BWL Planning and Feedback Summary Form, as the formal evaluation tool for Board appointed employees, as modified in the May 13, 2008 Committee of the Whole meeting packet.
Action: Carried unanimously.
Solar
Joint Commissioner/City Council Meeting Agenda
The Committee of the Whole reviewed a tentative agenda for the Joint Commissioner/City Council meeting scheduled for June 18, 2008 at 8:00 a.m. Following brief discussion, the committee members agreed to remove the Update on Credit Card Payments Changes item from the respective agenda.
Other
On motion by Commissioner Lain, seconded by Commissioner DeLuca, the Committee of the Whole agreed to excuse the absence of Commissioner Peter Kramer.
Action: Carried unanimously.
There being no further business, the meeting adjourned at 7:32 p.m.
Respectfully submitted,
Julee M. Rodocker, Chair
Committee of the Whole
MANAGER’S RECOMMENDATIONS
Resolution 2008-5-1
|
A. |
Electric
Residential Senior Citizen Rate No. 21 |
WHEREAS, the rate schedules of the BWL were subject to a general increase of 7% for the electric utility effective March 1, 2008, a general increase of 7% for the water utility effective March 1, 2008, and a general increase of 6% for the steam utility effective March 1, 2008 for electric, water, and steam consumption on or after March 1, 2008; and
WHEREAS, the general rate increase of 7% is also applied to Rate Schedule No. 21, the BWL’s electric senior citizen rate; and
WHEREAS, other Michigan utilities provide special senior citizen electric rate schedules with larger discounts than are offered under the current BWL senior citizen rate; and
WHEREAS, public comments support larger discounts for the BWL’s senior citizen rate schedule; and
WHEREAS, a $2.00 reduction in the monthly service charge under the BWL’s Rate Schedule No. 21 electric senior citizen rate would provide a larger discount for customers utilizing BWL’s senior citizen rate, and will bring the discounts available under the BWL’s senior citizen rate closer to comparable rates provided by other Michigan utilities;
WHEREAS, as notice of the proposed rate change was communicated to all customers by public notice on April 7, 2008, and a Public Hearing was held on May 22, 2008, to receive comments on the proposed $2.00 reduction in the monthly service charge under Electric Senior Citizen Rate Schedule No. 21; and
WHEREAS, the Board of Commissioners has considered the comments of the public as well as the recommendation made by the BWL;
RESOLVED, that the Electric Residential Senior Citizen Rate No. 21 as detailed in the attached rate schedule be made effective on or after July 1, 2008.
(Electric Residential Senior Citizen Rate No. 21 – attached)
--------------------
Motion by Commissioner Cochran, seconded by Commissioner Kramer, to approve the Electric Residential Senior Citizen Rate No. 21 resolution.
Action: Carried unanimously.
Resolution 2008-5-2
|
B. |
Rules and
Regulations for Electric, Water, Steam, and Chilled Water Utility Services |
RESOLVED, that the amendments to the Rules and Regulations for Electric, Water, Steam, and Chilled Water Services be approved as presented, to be effective July 1, 2008 (see attachments).
--------------------
Staff Comments: Staff recommends these amendments to the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services. Staff also recommends that the Finance Committee approve these amendments and forward them to the full Board for adoption on May 27, 2008.
--------------------
Motion by Commissioner Lain, seconded by Commissioner DeLuca, to approve the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services resolution.
Action: Carried unanimously.
(See attachments - electric, water, steam, chilled water).
Resolution 2008-5-3
|
C. |
Fiscal Year 2009
Operating and Capital Budgets |
RESOLVED, that the annual Operating Budget covering Fiscal Year 2009 is hereby approved as presented:
RESOLVED: that the Fiscal Year 2009 Capital Budget is hereby approved as presented;
RESOLVED, that the forecast for capital expenditures for the Fiscal Years 2009-2014 is hereby accepted as presented; and
RESOLVED FURTHER, that the
Corporate Secretary be directed to make the appropriate filings with the City
of
--------------------
Staff Comments: Staff recommends an operating and expense maintenance budget of $240.8 million and a capital budget of $52.5 million for Fiscal Year 2009 to maintain ongoing services to customers and maintain and enhance facilities for continued future use. Capital expenditures for the Fiscal Years 2009-2014 are estimated to be $277 million. Staff recommends that the Finance Committee approve these budgets and proposed resolution for presentation and adopting by the Board at its May 27, 2008 Board Meeting.
--------------------
Motion by Commissioner Zerkle, seconded by Commissioner Kramer, to approve the Fiscal Year 2009 Operating and Capital Budgets resolution.
Action: Carried unanimously.
Resolution 2008-5-4
|
D. |
Soil Erosion & Sedimentation Control Program and In-House
Contract General Requirements |
WHEREAS, the
WHEREAS, that Authorized Public Agency designations are issued by the Michigan Department of Environmental Quality and are reviewed every five years. During such reviews the Michigan Department of Environmental Quality identifies changes that need to be made in the “Soil Erosion and Sedimentation Control Program and In-House Contract General Requirements” (Program); and,
WHEREAS, that on June 6 and 7, 2007 the Michigan Department of Environmental Quality performed an audit on the BWL’s Program and identified needed changes to the Program. The Environmental Services Department has incorporated the requested changes into the Program.
RESOLVED, that the Lansing Board of Water & Light Board of Commissioners does hereby support and adopt the “SOIL EROSION AND SEDIMENTATION CONTROL PROGRAM AND IN-HOUSE CONTRACT GENERAL REQUIREMENTS”, prepared by the Lansing Board of Water & Light Environmental Services Department, and dated April 11, 2008.
--------------------
Staff
Comments: The control of soil
erosion and sediment runoff from construction projects is a vital part of
protecting the surface waters of the State of
The MDEQ’s recommended changes have been incorporated into the program and MDEQ has given preliminary approval to the program changes. They will issue a final approval when we supply them with a resolution from the Board of Commissioners stating that the Program has been adopted.
--------------------
Motion by Commissioner DeLuca, seconded by Commissioner Cochran, to approve the Soil Erosion and Sedimentation Control Program and In-House Contract General Requirements resolution.
Action: Carried unanimously.
Resolution 2008-5-5
|
E. |
Designated
Representative and Alternative Designated Representative to Comply with Clean
Air Act |
RESOLVED, that Nicholas Burwell and
RESOLVED FURTHER, that the designated representative and the alternate designated representative are authorized to bind the BWL by their respective actions, inactions, and submissions with respect to the Clean Air Act.
----------------
Staff Comments: Due to changes in personnel, this revised resolution is necessary.
----------------
Motion by Commissioner Cochran, seconded by Commissioner Zerkle, to approve the Designated Representative and Alternative Designated Representative to Comply with the Clean Air Act resolution.
Action: Carried unanimously.
UNFINISHED BUSINESS
No
unfinished business.
NEW BUSINESS
No
new business.
RESOLUTIONS
No
resolutions.
GENERAL MANAGER’S REMARKS
J.
Peter Lark, General Manager reported that the Employee Diversity Survey would
be presented during the Safety meetings held in June 2008. The survey will be followed up with focus
interviews with approximately 70 employees in hopes of learning more about the
BWL and its policies. In addition, staff
also participated in a Lansing State Journal editorial board interview with
respect to a new power plant. The
interview went well and staff is hoping for a positive editorial in an upcoming
edition of the Lansing State Journal.
In
response to Commissioner Zerkle’s request, Mr. Lark gave a brief update
regarding First STEP (School to Training and Employment Program). As such, the program is scheduled to offer
approximately 20 qualified high school seniors an internship at the BWL. Following the internship, approximately 10
students will receive an offer of employment and the remaining students will
receive a one-year scholarship to
COMMISSIONERS’ REMARKS
Commissioners
James and Zerkle commended Mr. Lark and staff for their efforts in developing
and implementing First STEP.
Commissioner James also applauded staff’s efforts for the work done on
the senior citizen rate reduction and the fiscal year 2009 budget.
Commissioner
Cochran echoed the Commissioners sentiments regarding First STEP and also
thanked the bargaining unit for their cooperation in this endeavor.
EXCUSED ABSENCES
On
motion by Commissioner Lain, seconded by Commissioner Cochran, to excuse
the absence of Commissioners Joseph Graves and Julee Rodocker.
Action:
Carried unanimously.
PUBLIC COMMENTS
No
public comments.
ADJOURNMENT
On
motion by Commissioner Zerkle, seconded by Commissioner Cochran, the meeting
adjourned at 5:55 p.m.
/s/ Rhonda Jones, Corporate
Secretary
Filed with
June 6, 2008