MINUTES OF THE
MUNICIPAL LIGHT BOARD
PUBLIC SESSION: JUNE 12, 2007
PURSUANT TO notice given the Wellesley Municipal Light Board (“Board”) met in the conference room of the DPW/MLP Building, 455 Worcester Street, at 5:30 PM.
PRESENT
Those present included Chairman William E. Charlton, Commissioners David A. T. Donohue, Michael D. Humphrys and Thomas E. Peisch; Municipal Light Plant (“MLP”) Director Richard F. Joyce; staff members Joseph A. Bisol, Peter Bracken, Debra J. Healy, William H. Marsh, Suzanne M. Newark, Donald H. Newell and James W. Verner. Also in attendance was Advisory Representative Katherine Gibson.
APPROVAL OF MINUTES
Upon a motion made by Mr. Donohue and seconded by Mr. Peisch, it was unanimously
VOTED: To approve the May 14, 2007 Public Session Minutes as written.
CITIZEN SPEAK
Mr. Charlton provided all those in attendance with the opportunity to speak on matters of interest with respect to the MLP. No one in attendance wished to speak.
DIRECTOR’S ITEMS
Financial Statements. Accounting Supervisor Joseph A. Bisol reviewed the April 2007 and Fiscal Year 2007 (“FY07”) year-to-date financial results. The MLP’s net income for FY07 is projected to be $7.4 million, approximately $2.7 million higher than the initial forecast. Mr. Bisol attributed the increase in profits to the Mystic Station reliability-must-run settlement and additional revenues from the monthly 1% rate increase. Neither of these events were anticipated when the financial projections were prepared in June 2006.
Mr. Charlton asked if the line loss analysis on page 10 in which the MLP’s losses were 4.5% represented the most efficiency the MLP could expect. Mr. Joyce questioned whether these losses were, in fact, too low given step down losses from 115 kV to 13.8 kV, central hub to the delivery point losses and the amount of 4 kV lines in Wellesley.
FY07 Write-Offs. The Director recognized the outstanding performance of Debra J. Healy, Suzanne M. Newark and the entire Customer Service staff in the collection of electric, water and sewer payments. From 1987 through 2001 the MLP’s annual write-offs averaged $22,000; from 2002 – 2009 the average write-offs were $3,000.
Ms. Healy reviewed the collection procedures utilized by the Customer Service staff. The collection of security deposits from residential renters and the placement of property liens have greatly reduced write-offs. Ms. Healy reviewed the fifteen (15) residential accounts and five (5) commercial accounts that have been deemed to be uncollectible. There were no write-offs for water and sewer receivables. The Board praised Ms. Healy and Ms. Newark for their outstanding work. Upon a motion made by Mr. Humphrys and seconded by Mr. Donohue it was unanimously
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 1
VOTED: To approve the write-off of $2,859.92 of electric receivables for Fiscal Year 2007 as detailed in the itemized listing provided to the Board.
Municipal Energy Conservation. Ms. Healy summarized the progress made to date in the Municipal Energy Conservation Program. Five buildings in total, Hardy and Hunnewell Schools, Town Hall, Fire Station and the DPW/MLP Administrative Building have been retrofitted with energy efficient lights. The annual kilowatt-hour (“kWh’) savings from these five buildings is 294,665 kWh’s. The annual dollar savings is $28,300 which provides a payback of 4 years. Based on information Ms. Healy received from Energy New England (“ENE”) the annual kWh’s eliminated is equivalent to taking 34.4 cars off the road.
Fiscal Year 2008 (“FY08”) Director’s Objectives. The Director reviewed each of the eleven (11) Objectives proposed for FY08. The Board discussed Objective #10, NStar Dispute in detail. NStar has retroactively billed the MLP $800,000 for past due property taxes and estimated operation and maintenance work. The Director reviewed the legal analysis provided by Attorney John P. Coyle and the relevant section of the 1998 Transmission Services Agreement, Substitute Third Revised rate Schedule FERC 167.
Mr. Charlton asked the Director to include a twelfth Objective that addresses the Board’s priority for establishing an energy conservation program for commercial customers. Mr. Donohue and Ms. Healy discussed the commercial energy conservation workshop the MLP sponsored in May 2007. Ms. Healy received feedback from many customers as well as the workshop presenter, Alan Mulak, that the payback for energy conservation investments in Wellesley is almost twice the payback period as NStar due to the rate differential.
Station 41 Switchgear. Mr. Newell reviewed the four (4) bids received in response to Bid Specification #07E-80-94. Bids ranged from a low of $742,706 to a high of $1,018,493. Mr. Newell explained that Item #3 of the bid request was not awarded because the engineering staff concluded that this equipment could be purchased less expensively from the manufacturer.
The lowest conforming bidder, Petersen Power Products bid a total of $742,706 for items 1, 2 and 4, approximately $21,000 less than the next lowest bidder, Central Electric. The Board and staff discussed the two-phase approach for the replacement of Station 41. The first phase scheduled to be completed in FY08 at a cost of $1,710,000 involves the addition of a third transformer and associated switchgear. Phase II is scheduled to be completed in 2011. Upon a motion made by Mr. Donohue and seconded by Mr. Humphrys it was unanimously
VOTED: To award the purchase of the equipment listed within Bid Specification #07E-80-94 to the lowest conforming bidder, Pedersen Power Products for the following:
|
Item |
Amount |
1) |
One (1), 5 kV switchgear assembly as specified in Section D. |
$730,621.00 |
2) |
One (1) spare 15 kV circuit breaker as specified in Section 3, Article 2.08, B1. |
$9,155.00 |
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 2
|
Item |
Amount |
4) |
Factory inspection of switchgear, completed as specified in Section D, Article 2.08, B3. |
$2,930.00 |
Firm Capacity Purchase. The MLP’s annual capacity requirement is approximately 600,000 kilowatts (“kW”). With ISO-New England’s implementation of the Forward Capacity Market (“FCM”) in December 2006, the MLP will be required to purchase its capacity needs separate from energy upon the expiration of the Constellation Power Source agreement. ENE has identified two opportunities that will allow the MLP to hedge market costs. Twelve public power systems have expressed a non-firm interest in the purchase of capacity from Dominion from June 2010 through May 2015 at a cost of $6.50/kW month. This compares to FCM costs that will range from $4.50 to $10.50. ENE has 120 megawatts (“MW”) available. Since the non-firm demand from the 12
systems totaled 148 MW’s, each of the systems will receive a pro rata share of their request. The MLP’s share was reduced from 10 MW’s to 8.1 MW’s . Mr. Joyce estimates the MLP has a total loss exposure of $1 million over this five-year period if the FCM trades at the floor price and a potential savings of $2 million if it trades at the ceiling. The ten Massachusetts and one Rhode Island public power systems have an informal agreement to share Attorney Coyle’s legal costs for the review of the documents.
The second opportunity is the purchase of 3.416 MW’s of capacity from Bear Energy. This purchase was offered to seven public power systems. Similar to the Dominion offer, the demand exceeded the available capacity and, as such, the MLP’s non-firm 5 MW request was pro-rated downward to 3.416 MW’s.
The Bear Energy proposal would become effective October 1, 2007 and expire May 2025. During the remaining 32 months of the FCM fixed price period Bear Energy’s capacity price will be $0.20/per kW month below the fixed price. The MLP would realize a guaranteed savings of $20,400 during this period. From June 2010 through May 2025 Bear Energy’s capacity price would be fixed at $5.10/per kW month. As with the Dominion purchase, the MLP could incur an estimated potential loss of $123,000 if the FCM trades at the floor price during this five-year period. If FCM prices are at the ceiling the MLP would realize a savings of $1 million.
Mr. Joyce reviewed the process that the staff followed in an attempt to project FCM prices from June 2010 through May 2015. Given the starting auction price of $15.00/per kW month, ISO-New England’s track record and the fact that $23.00/per kW month charges were not uncommon in the past when capacity was deficient, Mr. Joyce recommended that the Board approve both purchases. The Board discussed the economics and the MLP’s overall strategy to hedge 50% of FCM charges. Upon a motion made by Mr. Charlton and seconded by Mr. Donohue, it was unanimously
VOTED: To authorize the Director to execute an agreement with Energy New England for the purchase of 8.1 MW’s of capacity from Dominion from June 1, 2010 through May 31, 2015 at a price of $6.50/per kilowatt month.
VOTED: To authorize the Director to execute an agreement with Energy New England for the purchase of 3.416 MW’s of capacity from Bear Energy in accordance with the following terms:
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 3
Period |
Monthly kW Charge |
October 1, 2007 – May 31, 2008 |
$2.85 |
June 1, 2008 – May 31, 2009 |
$3.55 |
June 1, 2009 – May 31, 2010 |
$3.90 |
June 1, 2010 – May 31, 2025 |
$5.10 |
Energy New England Ownership. Mr. Joyce summarized the due diligence he performed with respect to ENE’s offer to allow the MLP to purchase a 5% ownership interest. The Director concluded that a small annual return was likely and the downside risk was limited to the $150,000 investment. Aside from the financial considerations there were numerous benefits that were difficult to quantify but realistic. These include:
1. Public power systems are migrating to form regional cooperatives for power supply and related purchases; the existing three owners and the four systems ENE has offered ownership to are all systems that the MLP would prefer to be associated with.
2. ENE has positioned itself to be at the forefront for purchasing power in the new market.
3. The MLP has entrusted ENE with developing a strategy to purchase $23 million of power annually, given the magnitude of these costs it makes sense that the MLP be in a position to influence ENE’s management in an ownership capacity.
4. Purchasing an ownership interest does not preclude the MLP from exploring and entering into other cost-beneficial transactions outside of ENE.
Mr. Joyce discussed a conversation he had with Mr. Peisch. Based on this conversation the Director reviewed the twelve participants that were offered a share of Dominion capacity and the seven that were offered Bear Energy capacity. The seven systems, with the exception of Pascoag, that were offered Bear Energy were the same systems that were offered ownership. The difference between Bear Energy ($5.10) and Dominion ($6.50) was $1.40/per kW month. The MLP will realize a savings of $285,600 as a result of ENE’s restricting its offer to only those systems it has offered an ownership purchase to. Mr. Joyce was of the opinion that these types of restricted offers would be available in the future and convinced him that the MLP would be well-served by purchasing a share of ENE. The Board
and staff discussed the ownership purchase further and upon a motion made by Mr. Humphrys and seconded by Mr. Peisch it was unanimously
VOTED: To authorize the Director to execute the necessary documents after receiving a favorable legal review to purchase a 5% ownership share in Energy New England at a one-time cost of $150,000.
Fiscal Year 2008 Streetlight Rate. In accordance with Massachusetts General Law Chapter 164, Section 58, the FY08 streetlight calculation results in a charge of $0.0756/per kWh. Based on the projected kWh usage the actual FY08 total costs should be $4,000 below the amount
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 4
approved at the March 2007 Town Meeting. Mr. Charlton asked if there was any other acceptable methodology used to set the streetlight rate. Mr. Joyce said the other calculation would be based on a cost of service, which PLM Consultants had previously determined to be $0.17/per kWh. Upon a motion made by Mr. Peisch and seconded by Mr. Donohue, it was unanimously
VOTED: To calculate the Fiscal Year 2008 streetlight rate in accordance with Massachusetts General Law Chapter 164, Section 58 resulting in a charge of $0.0756/per kWh.
PCB Site Remediation. The Director updated the Board on the excellent work performed by Assistant Town Engineer, Douglas R. Stewart with respect to PCB contamination. Request For Proposals (“RFP”) are scheduled to be opened at 3:00 PM on Thursday, June 14, 2007. To date 23 RFP’s have been sent out to interested bidders and 13 contractors attended the pre-bid meeting. Mr. Joyce was confident that the DPW and MLP would receive a very competitive price given the level of interest. In order to maintain the current building schedule the Director asked the Board to authorize the execution of the contract subject to specific conditions. Mr. Charlton was of the opinion that authorization should be granted to maintain the schedule and keep building costs as low as
possible. Mr. Peisch asked if there was an agreement in place for the DPW’s 50% reimbursement of these costs. Mr. Humphrys stated that an agreement was in place and Town Meeting had approved the FY08 expenditure of $200,000 for PCB remediation. Upon a motion made by Mr. Donohue and seconded by Mr. Humphrys it was unanimously
VOTED: To authorize the Director to execute a contract with the lowest conforming bidder to Bid Specification #07C-80-98, Excavation and Off-Site Management of PCB Impacted Soil, conditional upon a not to exceed price of $400,000.
Executive Session
Mr. Humphrys polled individual Board Members to enter into Executive Session for the sole purpose of discussing negotiation strategy for the Five-Year Mass Development extension. Each Board Member responded in the affirmative and the Board entered into Executive Session at 6:59 PM.
Return to Public Session. The Board returned to Public Session at 7:11 PM.
Mass Development-Devens (“Devens”). Upon a motion made by Mr. Humphrys and seconded by Mr. Peisch, it was unanimously
VOTED: To authorize the Director to enter into final negotiations with Mass Development-Devens and to execute the Five-Year Extension for the period April 1, 2009 through March 31, 2014 in accordance with the counter proposal provided by Mass Development-Devens.
Next Meeting. The Board scheduled the next meeting for Monday, July 16, 2007 at 5:30 PM.
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 5
ADJOURNMENT
The Board Meeting was adjourned at 7:12 PM.
Respectfully submitted,
____________________________
Michael D. Humphrys, Secretary
Minutes of Municipal Light Board Meeting: June 12, 2007 Page 6
| 
