MINUTES
OF THE BOARD OF COMMISSIONERS' MEETING
LANSING BOARD OF WATER AND LIGHT
___________________________
Tuesday, November 23, 1999
___________________________
The Board of Commissioners met in regular session at 5:38 p.m., in the
Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing,
Michigan. The meeting was
called to order by the Chair, Diane Royal.
|
Present: |
Commissioners Rosemarie E. Aquilina,
Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Mark
A. Murray, David O’Leary, Diane R. Royal and Judson M.
Werbelow (by conference phone). |
|
Absent: |
None |
The Secretary declared a quorum present.
The Pledge of Allegiance was said by all.
APPROVAL OF MINUTES
Motion was made by Commissioner O’Leary, seconded by Commissioner
Callen, to approve the minutes of regular session held October 26,
1999.
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.
Richard
Vander Veen, President & CEO of Bay Windpower, LLC, 2050 Robinson
Road, Grand Rapids, MI 49506, supports the Board of Water and
Light’s (BWL) proposed wind power project.
A handout was provided on the advantages of wind power to the
Lansing community.
Rolf
Peterson, 16743 Eunice Street, East Lansing, MI 48823, representing
Primary Power Marketing, LLC, supports renewable green source of
electricity. A flyer was handed out describing energy marketed
by Primary Power Marketing, produced from biomass fuels.
James
Clift, Policy Director, Michigan Environmental Council (MEC), 119 Pere
Marquette, Suite 2A, Lansing, MI
48912, endorses the use of electricity produced by wind energy
due to its renewable nature and because it emits no pollutants.
The MEC is willing to pay extra for electricity derived from
renewable sources of energy to help spur the development of renewable
technology and to promote the renewable energy industry.
A handout was provided outlining certain MEC concerns regarding
the BWL green power proposal. He
expressed concern with the definition that BWL uses for green power
and biomass. The Board
was urged to continue to explore methods to provide cleaner energy in
the future for the benefit of customers and their children
(Commissioner
Murray arrived at the meeting at 5:50 p.m.)
Mark
Clevey, 222 N. Washington Square, Suite 100, Lansing, MI, supports
wind power renewable energy. He
spoke of his involvement as project manager in a solar utility
interconnect demonstration project launched in Detroit, in 1984,
sponsored by BWL, Detroit Edison and Consumers Energy.
Mr. Clevey noted that the project is not only continuing, but
is considered a success story among green power utility interconnect
projects in the nation. Mr. Clevey endorsed Bay Windpower’s proposal and
offered to share his thoughts and observations with the BWL on the
definition of green power, the economics of wind power, and other
related activities going on across the country.
Tom
Stanton, 216 Huron Street Lansing, a BWL customer for 22 years,
supports green power and the BWL’s efforts in exploring renewable
energy options. A handout
was provided outlining various green power opportunities to consider
in developing renewable resources at low cost, while simultaneously
helping customers to achieve their many goals.
He acknowledged the BWL’s efforts in “putting its toe into
the green-power water,” and urged the Board to jump in all the way
as quickly as possible. Mr.
Stanton expressed his appreciation to the BWL for its support in the
1999 Great Lakes Renewable Energy Fair that took place over the summer
in downtown Lansing.
A
letter was received from Dana Debel, Environmental Policy Specialist,
Michigan United Conservation Clubs, in support of the bid submitted by
Bay Windpower, LCC, to construct three 1.65 MW wind generation
turbines to serve over 1,500 Lansing customers.
Email
in support of renewal energy was received from the following persons:
·
Seth
C. Murray supports wind
power.
·
Darren
Bagley urges the prioritizing of wind power, biomass and natural gas
respectively.
·
Dennis
Propst suggests including wind in the mix of options and to
aggressively pursue efficiency among future green power options.
·
LeRoy
Harvey of Urban Options supports wind power as one of several green
power options.
The
communication items were acknowledged and placed on file.
REPORTS OF COMMITTEES
#99-11-3
PERSONNEL COMMITTEE REPORT
The
Personnel Committee met on October 27, 1999, to receive an update on
the total compensation study.
Committee members present: Commissioners
O’Leary, (Chair), Royal and Werbelow.
Excused absence: Commissioner Christian.
Consultant
Paul Reagan of Dorey, Reagan & Associates, updated the Committee
on executive compensation survey results, regarding market
competitiveness of the BWL’s current pay and incentive system.
The objective of the compensation study is to realign the
current pay system with the labor market and performance, and to
support the move toward a process oriented organization.
The strategic direction of shifting the total cash compensation
mix from fixed base to variable pay is intended to keep the BWL at the
leading edge of competitive change in the utility industry.
Following
discussion, management was asked to provide specific recommendations
on variable pay for the executive staff as the pilot group, and to
report back to the Committee with suggested designs for analysis and
subsequent Board review and consideration.
Submitted
by,
David
O’Leary, Chair
Personnel
Committee
Motion
by Commissioner Christian, seconded by Commissioner Aquilina, for the
adoption of the Personnel Committee Report.
Action: Carried
unanimously.
GENERAL MANAGER’S RECOMMENDATIONS
Background
materials on items presented are on file in the Office of the
Corporate Secretary.
#99-11-1
SECOND
AMENDMENT TO AMENDED AND RESTATED COAL SALES AGREEMENT WITH COASTAL
COAL COMPANY, LLC
Resolved,
That the Board approve the Second Amendment to Amended and Restated
Coal Sales Agreement (“Agreement”) with Coastal Coal Company, LLC,
subject to approval by the BWL’s Legal Counsel.
The amendment particulars are as follows:
1.
The term of the Agreement will be extended twelve (12) months,
with an expiration date of December 31, 2001.
2.
The annual volume commitment shall remain at 300,000 tons.
3.
The pricing, as outlined on the attached supplemental price
sheet, under the Agreement shall be decreased twice and free from
escalation during the remainder of the contract.
4.
All other major terms and conditions shall remain the same.
Motion
by Commissioner O’Leary, seconded by Commissioner Christian, to
adopt the resolution.
Action: Carried
unanimously.
#99-11-2
FIRST AMENDMENT TO COAL
SALES AGREEMENT WITH LODESTAR ENERGY, INC.
Resolved, That the Board approve the First Amendment to
Coal Sales Agreement (“Agreement”) with Lodestar Energy, Inc.,
subject to approval by the BWL’s Legal Counsel.
The amendment particulars are as follows:
1. The
term of the Agreement will be extended six (6) months, with an
expiration date of June 30, 2000.
2. The
volume commitment shall range from 35,000 to 60,000 tons.
3 The
pricing, as outlined on the attached supplemental price sheet, under
the Agreement shall be held firm and free from escalation.
4 All
other major terms and conditions shall remain the same.
Motion
by Commissioner Christian, seconded by Commissioner O’Leary, to
adopt the resolution.
Action: Carried
unanimously.
UNFINISHED BUSINESS
No unfinished business
NEW BUSINESS
No new business.
GENERAL MANAGER'S REMARKS
Status Report on Green Power Bid
Solicitation Process and Results. General Manager
Pandy reported that copies of RFP’s for the purchase of Green Power
were issued in July, 1999, to 19 entities and only four bidders
responded.
Doug
Wood, Manager of System Integrity & Customer Projects, presented
an overview of the BWL’s Integrated Resource Plan (IRP) completed in
1996, which recommended development of a green power option to offer
customers with strong environmental ideals.
A customer survey in 1998 indicated that enough customers would
be willing to participate in such a program to make it feasible.
Mr. Wood reviewed the green power option analysis and noted
that Commercial Engineering submitted the best evaluated of four green
power proposals received.
A
lengthy question and answer period followed with regard to the
economic analysis of the project, environmental concerns, the
definition of green power and recent congressional activity on wind
power tax credits. Staff
agreed to investigate and report back on the latest developments of
federal wind power reimbursements and to clarify the definition of
green power.
Staff
presented the following action plan for information and Board
consensus:
1.
Begin
negotiations with Commercial Engineering to finalize arrangements to
begin taking delivery of one megawatt of “Green Power” with a
target date of September, 2000. (Must make sure they are viable, green by definition, and
reliable.)
2.
Market
a BWL “Green Power” Program and subscribe sufficient involvement
to enable such green power purchases to be self-funded.
Staff plans to solicit customer participation in a green power
program in the first quarter of 2000, and put the rate process in
motion once sufficient subscription is in place.
3.
In
the event that sufficient program subscription can be attained,
finalize the agreement with Commercial Engineering.
4.
Establish
a BWL Green Power Portfolio to initially include one megawatt which is
methane fuel produced from cow manure at a farm in southwest Michigan,
enough to supply about 2,800 residential customers with half their
electricity requirements.
5.
Establish
a Green Power rate at the BWL, which reflects all BWL green power
resources. Based on the
bids received, the premium for “Green Power” would be $5.00 to
$7.50 per month for a 250-350 kWh/month block.
This reflects about a 15% to 22% increase for the average
residential customer’s bill and supplies between 50% and 65% of
their energy needs.
6.
After
at least a year of experience in the Green Power Program, as interest
and subscription requests indicate, add to the BWL “Green Power”
portfolio as necessary. Given
current availability, cost and relative size of green power projects
received to date, future projects may include a joint venture with
other municipal utilities, through the Michigan Public Power Agency,
in developing wind power.
Anticipated BWL involvement includes:
·
Staff
plans to solicit customer participation in a green power program in
the first quarter of 2000, and put the rate process in motion once
sufficient subscription is in place.
The marketing and customer sign up costs associated with this
effort are estimated to be up to $30,000.
This cost would be recovered from those participating in the
program.
·
Provided
sufficient subscription can be obtained for an initial offering of
Green Power a “Green Rate” will be required.
To meet the BWL timetable to offer such a service in September,
2000, a rate hearing and rate approvals by the Board would have to be
completed prior to that time. April
or May, 2000 is the time period estimated since the BWL ratemaking
process requires a minimum of 75 days.
·
As
the development of a BWL green power program expands, and the BWL
moves toward owning or building a green power supply that requires a
capital investment, Board approval would be requested.
The Board concurred with the plan
Chilled
Water Project Update.
General Manager Pandy handed out an outline of the Chilled
Water Project construction timeline and issues potentially affecting
the timeline. Negotiations
are ongoing with Ingham County for the purchase of the proposed
chilled water facility site at 327 W. Walnut Street.
Staff is continuing to negotiate
with Michigan Radio Network (a.k.a.
SAGA Broadcasting Corporation) on a possible equity swap between their property (325 S.
Walnut) as part of consideration for the Michigan Retailers
Association property (221 N. Pine Street).
Mr. Pandy also reported that the Michigan Bar Association has
filed suit against the City of Lansing relative to rezoning and
special land use for the chilled water facility.
Discussion was held on risk assessment matters related to the
project.
Commissioner Creamer declared a possible
conflict of interest with respect to property discussions involving
the Michigan Retailers Association (MRA) and the Michigan Radio
Network. He stated for the record that as a BWL
Commissioner, he has not been involved nor does he plan to participate
in discussions or vote on issues pertaining to real estate
negotiations between the BWL and MRA.
Mr.
Pandy further reported that customers to be served by the chilled
water facility include (1) the future Ingham County Consolidated
Courts, (2) State of Michigan facilities currently being served by the
State-owned chiller; (3) the State’s new Hall of Justice, scheduled
to take service at a later phase, and (4) the office building being
constructed for State use at the former Civic Center site.
The chilled water facility is being constructed in modular
2,000-ton increments with an ultimate phase-in capacity of 12,000
tons. Modules will be
added as customer commitments are secured.
State
of Michigan Interested in Expanded Energy Services. General Manager Pandy reported that the State of
Michigan has approached the BWL to investigate the feasibility of
serving their energy needs at other locations.
Possible cooling and heating cost investments that would be
required were discussed.
Lansing
Business Climate Benchmarking Study Mentions Favorable Electric Rates.
General Manager Pandy handed out a summary of a Lansing
Business Climate Benchmarking Study recently conducted by the Anderson
Economic Group for the Lansing Regional Chamber of Commerce.
Noteworthy in the report was Lansing’s very attractive
electric rates.
BWL
Advertising Campaign Update. General Manager
Pandy handed out a memo from John Strickler, dated November 17, 1999,
detailing the status of the BWL advertising campaign and the BWL’s
visibility in television and radio commercials.
It was noted that the Board approved additional funding in
September, 1998, to support increased brand image advertising presence
in the BWL market. Mr. Pandy noted that the customer attitude survey
conducted in May, 1999, showed an increase in several general
communication perceptions.
Following discussion, the Commissioners
requested benchmarking data to determine the industry standard in
advertising campaigns to understand what level of performance is
possible.
Mr. Pandy agreed to place the advertising
campaign on a future Committee of the Whole agenda to solicit the
Board’s input on advertising, sponsorships and to review metrics
data.
Status
of State of Michigan Waterfront Redevelopment Grant Application for
Ottawa Station. General
Manager reported that a letter, dated November 18, 1999, has been
received from the Michigan Economic Development Corporation (MEDC) on
the BWL’s application for a grant to develop the Ottawa Power
Station under the Waterfront Redevelopment Program of the Clean
Michigan Initiative. MEDC
is asking for additional information relative to how the BWL would use
funding in a lesser amount than requested and the firmness of
commitments from private developers on this project.
Response is needed back to the State by December 2nd.
Report
on BWL Safety Statistics. General Manager
Pandy reviewed Share the Success fiscal year-to-date (FYTD) safety
ratio data as of October 31, 1999.
BWL safety statistics indicate the ratio of incidents vs. lost
time accidents is better than the FYTD goal at 15.50.
Although the BWL has exceeded its goal at this point, safety
remains a priority.
Report
on Electric Utility Deregulation Outlook. General
Manager Pandy reported that a compromise bill for electric utility
deregulation was introduced in the Michigan Senate.
The new bill is the work of a coalition led by the Michigan
Chamber of Commerce, Consumers Energy, and American Electric Power.
The BWL and other municipal utilities also participated in the
coalition and provided input. Bill Cook, Director of System Delivery, briefed the
Board on the public power ramifications in the compromise deregulation
bill. A summary of
electric utility deregulation issues was handed out for review.
Mr. Cook noted that the new bill is favorable because it
defines the future of a municipally owned utility.
IBEW
Local 352 Defeats Contractual Change to Share the Success. General Manager Pandy reported that the union voted
November 11, 1999, on the process measures portion of the Share the
Success (STS) program. Members
voted by a margin of 302 no
to 6 yes votes. The union rejected the notion of having the
processes earning a different bonus based on STS process measures.
As the result of the union vote, the STS program is in place
for Non-Bargaining unit employees only.
The bargaining team is continuing with negotiations. Management hopes to present a package for union
vote by mid-December. Linda
Gardner, Director of Human Resources, noted for the record that
although all union members were notified and had the opportunity to
vote on the STS process measures question, 101 members did not
participate in the vote.
Financial
Condition of the BWL.
General Manager Pandy updated the Commissioners on the BWL
financial condition as of October 31, 1999.
He reported that management is continuing to curtail expenses
in areas of outside services and overtime; significant cuts in
overtime in the Production Process have been accomplished; and the use
of outside services will slow as the construction season winds down.
Staff is exploring the possibility of rate increases and plans
to bring a rate review recommendation to the Board after the first of
the year, for both the electric and water utilities.
Chief Financial Officer Dana Tousley
presented a synopsis of the budget variance analysis and selected
data. Specific indicators
that provide pertinent information on the performance of the budget
were discussed.
APPA
Publication on Electric Utility
Basics. General Manager Pandy distributed a copy of a new
publication from the American Public Power Association (APPA)
entitled, Electric Utility
Basics. The
publication discusses how electricity is made, who delivers it, and
the changing electric utility industry.
REMARKS BY COMMISSIONERS
No
remarks.
EXCUSED ABSENCES
There were no absences.
PUBLIC COMMENTS
THE CHAIR ANNOUNCED THAT MEMBERS OF THE
PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND
LIGHT SUBJECT.
Rolf Peterson, representing Primary Power
Marketing, 16743 Eunice Street, East Lansing, MI 48823, urged that a
process be set up to define green power.
He requested an opportunity to clarify that industrial wood
waste used by Primary Power, as its fuel source is a legitimate
renewable option for the City of Lansing.
Richard Vander Veen, President & CEO,
Bay Windpower, LLC, 2050 Robinson Road, Grand Rapids, MI 49506,
offered to work with staff to address the questions raised by the
Commissioners during discussions on green power.
He also extended his assistance to re-examine the precise
economics of establishing a windpower project in Lansing.
On motion by Commissioner Callen, seconded
by Commissioner Christian, the meeting adjourned at 7:35 p.m.
/s/
Mary E. Sova, Secretary
Filed:
December 3, 1999
__________________________
Marilynn Slade, City Clerk