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HomeMy WebLinkAbout2014-05-15 RMLD Board of Commissioners MinutesStaff Coleen O'Brien, General Manager Jeanne Fall, Executive Assistant Bob Fournier, AccountingBusiness Manager Humid Jaffari, Director Engineering and Operations Priscilla Gottwald, Community Relations Manager Jane Parenteau, Integrated Resources and Planning Manager William Seldon, Senior Energy Analyst Citizens' Advisory Board: Dave Nelson, Secretary Call Meeting to Order Chairman Stempeck called the meeting to order and stated that the meeting was being videotaped; it is live in Reading only. Opening Remarks Chairman Stempeck read the RMLD Board of Commissioners Code of Conduct. ,eNtroductions IFS#wirtnan Stempeck welcomed RMLD's Citizens' Advisory Board Secretary, Dave Nelson. Chairman Stempeck said that the purpose of this meeting is to review the Cost of Service Study recommendations and obtain votes on the various options presented at the last meeting. Ms. O'Brien stated that she would like to turn over the staff recommendations to Jane Parenteau, the Director of Integrated Resources and Planning. Ms. Parenteau said that the results of the Cost of Service Study and rate design were presented to the Board of Commissioners Thursday, May 8 by Mayehew Seavey. Included in the results were various options regarding cost of service and rate design. This evening's presentation will be staffs recommendation on the Cost of Service. As presented, the RMLD can meet a 1.3% increase in its revenue requirement by implementing two options; Case I looked at a uniform increase of 1.3% across all customer classes and Case 2 was accomplished by adjusting each customer class to smooth out the rate of return by class. Staff is recommending Case 1, the uniform increase, and this will maintain the current rate of return by customer class at the range of the standard municipal utility practice. The proposed rate increase will be competitive with other municipals as well as private utilities. Motion to vote on the type of Proposed Rate Increase, Case I or Case 2 or Other. Mr. Pacino wanted to make it clear that if we do nothing, there still could be an increase because of the Purchase Power Adjustment going forward. Ms. Parenteau stated that purchase power charges have to be recovered by law. Part of the presentation demonstrated the unbundling and those costs will be accounted for and passed through to the customer. Whether they go up or down is a complete pass through - the Department does not earn any return on those expenses. Chairman Stempeck commented that it is impossible to predict if they are going to go up or down. Ms. Parenteau said that based on the current budget, there was an assumption of a little over nine and a half cents for the capacity, transmission and energy portion of purchase power. That amount was included in the budget which was approved by the RMLD Board and CAB, which totaled approximately $65 million. 4Ilr. Soli said that what this does to the current rates is that all portions would be increased 1.3 %. Ms. Parenteau stated that RMLD customers will we a 1.3% increase. Reading Municipal Light Board of Commissioners RECEIVED Reeular Session 230 Ash Street IOWN CLERK Reading, MA 01867 , '0NG, MASS. May 15, 2014 Start Time of Regular Session: 6:31 p.m. iJli DEC 22 A 4 kb End Time of Regular Session: 7:14 p.m. Commissioners: John Stempeck, Chairman Philip B. Pacino, Vice Chair Robert Sob, Commissioner David Talbot, Commissioner Thomas O'Rourke, Secretary Staff Coleen O'Brien, General Manager Jeanne Fall, Executive Assistant Bob Fournier, AccountingBusiness Manager Humid Jaffari, Director Engineering and Operations Priscilla Gottwald, Community Relations Manager Jane Parenteau, Integrated Resources and Planning Manager William Seldon, Senior Energy Analyst Citizens' Advisory Board: Dave Nelson, Secretary Call Meeting to Order Chairman Stempeck called the meeting to order and stated that the meeting was being videotaped; it is live in Reading only. Opening Remarks Chairman Stempeck read the RMLD Board of Commissioners Code of Conduct. ,eNtroductions IFS#wirtnan Stempeck welcomed RMLD's Citizens' Advisory Board Secretary, Dave Nelson. Chairman Stempeck said that the purpose of this meeting is to review the Cost of Service Study recommendations and obtain votes on the various options presented at the last meeting. Ms. O'Brien stated that she would like to turn over the staff recommendations to Jane Parenteau, the Director of Integrated Resources and Planning. Ms. Parenteau said that the results of the Cost of Service Study and rate design were presented to the Board of Commissioners Thursday, May 8 by Mayehew Seavey. Included in the results were various options regarding cost of service and rate design. This evening's presentation will be staffs recommendation on the Cost of Service. As presented, the RMLD can meet a 1.3% increase in its revenue requirement by implementing two options; Case I looked at a uniform increase of 1.3% across all customer classes and Case 2 was accomplished by adjusting each customer class to smooth out the rate of return by class. Staff is recommending Case 1, the uniform increase, and this will maintain the current rate of return by customer class at the range of the standard municipal utility practice. The proposed rate increase will be competitive with other municipals as well as private utilities. Motion to vote on the type of Proposed Rate Increase, Case I or Case 2 or Other. Mr. Pacino wanted to make it clear that if we do nothing, there still could be an increase because of the Purchase Power Adjustment going forward. Ms. Parenteau stated that purchase power charges have to be recovered by law. Part of the presentation demonstrated the unbundling and those costs will be accounted for and passed through to the customer. Whether they go up or down is a complete pass through - the Department does not earn any return on those expenses. Chairman Stempeck commented that it is impossible to predict if they are going to go up or down. Ms. Parenteau said that based on the current budget, there was an assumption of a little over nine and a half cents for the capacity, transmission and energy portion of purchase power. That amount was included in the budget which was approved by the RMLD Board and CAB, which totaled approximately $65 million. 4Ilr. Soli said that what this does to the current rates is that all portions would be increased 1.3 %. Ms. Parenteau stated that RMLD customers will we a 1.3% increase. Regular Session Meeting Minutes May 15, 2014 Motion to vote on the type of Proposed Rate Increase, Case 1 or Case 2 or Other. Ms. Parenteau said that obviously, the rates vary by customer class, usage and whether they take or do not take the prompt payment discount which all factor in. On average, in order to achieve an increase of 1.3% net revenue this will accomplish • that Mr. Soli commented that on his current bill there is a customer charge, and this will make it go up by 1.3 %. Ms. Parenteau explained that the proposed rates that were given for the Cost of Service have different components to them. The customer charges will remain the same. Mr. Soli said that this is quite different from this motion. Chairman Smmpeck said that this is not called out in the motion itself, there are no specific items as customer charge, it is not called out separately. Chairman Ste speck explained that the motion calls for an overall net increase that is composed of a mix of different pieces, Ms. Parenteau concurred. Chairman Stempeck said that some may be higher or lower in terms of a usage perspective. Mr. Soli said that he has not seen the details for the proposed adjustment to the rates. Mr. Soli commented that if the customer charge went up 1.3 %, base charge went up 1.3 %, clean energy 1.3% he would understand that Ms. Panentism explained that as has been indicated, the Cost of Service had many recommendations and part of that was undundling in order to promote the transparency so when Mr. Soli is saying that each line item goes up 1.3% that will not be the case because the RMLD is unbundling the rates. Mr. Soli commented that is another motion. Ms. Parenteau responded that is correct. Mr. Soli commented that unless he sees some detail he is not going to vote this. He added that we have not seen anything. Chairman Stempeck said that all the dam is available for us to look at any time, the data is there. Chairman Stempeck commented that for the purposes of moving us along, and get this in the CAB, he is recommending to have a vote. Mr. Soli said that we are really changing things and unbundling, he bas not seen that least bit that it is going to be fair. Mr. Pacioo said that with Mr. Seavey's chart the residential rates are what the bill is going to look like when it is all said and done. The chart for the residential rate that states present and proposed, is what the bill is going to look like. Ms. Parenteau explained that based on some of the discussion at the last meeting and some of the recommendations as part of the presentation there are slight variations to that. Ms. Parenteau stated that they look some of the comments made during the presentation on the Cost of Service and ran several analyses. The Cost of Service has to be tweaked in order to accomplish certain things. In particular, there was discussion relative to the prompt payment discount. Because of the unbundling, the distribution charge was going to be decreasing and the prompt payment discount relates to the distribution and customer charge. One of the concerns she heard at that meeting last Thursday, was what is the effect of the bottom line to the customer. Ms. Parenteau said that they went back and worked with the consultant to achieve an overall increase of 1.3% on average for the customers. Them ate some slight variations in order to incorporate that change. That chart Mr. Pacino is referring to - there are some slight variations to that. Mr. O'Rourke asked by customer class. Ms. Parenteau responded that • is correct. Chairman Stempeck said that categorically it will not look exactly like this. You do not know what it is going to be. It could change by the time it comes out, by definition it will be slightly different, the point is the target is 1.3 %, is that correct? Ms. Parenteau agreed that is correct. Chairman Stempeck said that at a future date if it is not 1.3% then we can ask why not. Chairman Stempeck commented that not to sound cavalier, 1.3% is extremely modest, in terms of what we have seen over the last three years. This can be revisited at a date when the first invoice comes out to we if the increase is 1.3% or not, but the Department is in control of what that is. That is the purpose of the whole exercise, and can be connected if he is wrong. Mr. O'Rourke commented that he would say so. Mr. Parma suggested taking an average bill for each of the rate classes. He is in favor of moving this along because it needs to go to the CAB. One of the things he is concerned about, and Mr. Soli has touched upon some of these, is that he does not fully understand what the bottom line effect is on each of the rate bills. He would like to ask the Department to take each of the rate increases and show what the bill would look like with and without the rate increase going forward, best estimates. Mr. Patin made a motion seconded by Mr. Soh that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board the overall net increase of 1.3% in revenues for all customer classes based on the recommendation of the General Manager. Motion carried 4:1.0. Mr. Sol voted against the motion. Motion to accept a Residential Low Income Rate of a specific type. Mr. Talbot asked if this was Option 1. Chairman Stempeck replied that it was Option 1. Mr. Patin made a motion seconded by Mr. O'Rourke that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board to accept a Residential Low Income Rate that eliminates the customer charge for customers who meet eligibility for Low Income Home Energy Assistance Programs (LHIEAP) or its successor program based on the recommendation of the General Manager. Motion carried 5:0:0. Motion to continue the 'Prompt Payment Discount' for RMLD customers. • Messrs. Parma and Talbot asked for the explanation for the increase in the prompt payment discount. Ms. Parenteau explained that the change in the prompt payment discount was a result of the concerns they heard and the effects of the unbundling resulted in this increase. The result of the unbundling the purchase power costs out of the base rate charge and it affects the prompt payment discount. Regular Session Meeting Minutes May 15, 2014 Motion to continue the `Prompt Payment Discount' for RMLD customers Ms. Parenteau commented that currently, on customers' bills the base rate charge will become the distribution charge if that is the way the Board determines to proceed. That number will be cut in half because a portion of the capacity and 4wnsmission costs are currently embedded in the base rate. Mr. Talbot said that the increase in the prompt payment discount dl be effectively what it has been. Ms. Parenteau responded that is correct It was a concern that they heard at the last presentation. Ms. Pammeau said that they had Mr. Smvey perform some analysis in order to maintain the 1.3% overall and if the prompt payment is increased from 10% to 15% this would provide an equivalent benefit to the customer. Mr. O'Rourke said that at the last meeting we wanted that outcome, just not sure it would translate into 15 %, but the effect is what we were looking for. Chairman Stempeck added that he assumes that is something that can be modified or changed if it was significantly different than anticipated one way or another. Mr. Talbot added is there an argument for not increasing the prompt payment discount. Ms. Pare mat said that the reason for not doing this is as Mr. Seavey had discussed at the last presentation, the customers who do not take advantage of the prompt payment discount end up paying more. Chairman Stempeck recommended to RMLD's customers to take advantage of the prompt payment discount program. Mr. Talbot commented that the dollar value is the same as it is currently. Ms. Parenteau said that on average it will be equivalent. It is dependent on customer class and usage. The Board has to be clear that it is not a one for one dollar, if you use more, because of the rate structure it has varying percentage differences. It was the closest the Department could get to maintaining the 1.3% and keeping the average increase at that level across all customer classes. Mr. O'Rourke asked if them is any additional penalty by doing this to those who do not take the prompt payment discount. Ms. Parenteau replied no, because the Cost of Service assumes all RMLD's customers take this. It will be the forfeited discount amount. Mr. O'Rourke added that the other last point they made at the last meeting is that it will be important to explain to customers that they are not losing the benefit, but do not want it to look like they are giving more discount than they really are getting. Is this handled through some communication on the bill? Ms. Parenteau said that Ms. O'Brien is planning on extensive education for our customers if the Board determines that we do this. Chairman Stempeck said that we should be very specific and have clear communications to all our customers along with the literature that goes along with the bill. The customers should know that the prompt payment discount bas been retained and the net effect will be the same. Any means to make this simple, clear and transparent is the way to handle this change. Mr. Talbot asked is there an average dollar figure that the prompt payment discount takes off customer bills such as $2 or $4. Ws. Parenteau replied that it is based on the distribution charge, base rate charge which is a per kilowatt hour charge, it is ily tied into a customer's usage. The Department can go through the billing system to determine what the average is. Mr. Talbot said that on the proposed low income rate, the prompt payment discount will be a flat amount, it does not penalize those who are frugal and conserving. Ms. Parenteau said that a lot of RMLD's commercial customers take advantage of the prompt payment discount which helps RMLD's cash flow. Ms. Parenteau said that the RMLD has various customer classes with different usage. Mr. O'Rourke mentioned that it is a consumption issue that the RMLD is sensitive to such as the peak consumption; it is primarily a cash flow issue. Mr. O'Rourke said that this may not be the correct vehicle for solving a peak issue. Chairman Stempeck said that the prompt payment does increase cash flow. Mr. Soli said that Mr. Talbot was asking the amount for the prompt payment discount In his May bill, 455 kilowatt hours, the prompt payment discount was $4.75. Mr. O'Rourke said that the issue is that if a customer is consuming so many kilowatt hours per month by not offering the prompt payment discount, the money will not come in. Mr. Talbot suggested to have a flat amount of $5 or $8, right now we are rewarding the customer that has a high kilowatt consumption. Mr. O'Rourke commented that if it is only $5 then someone may not be inclined to take advantage of the discount. Chairman Stempeck pointed out that we want customers to use more kilowatt hours and encourage paying on time for cash flow. Ms. Parenteau commented that the examples Mr. Potion has requested will show dollar amounts associated with that and get a better sense. Mr. Talbot said that having customers use more kilowatts goes against other variables. Chairman Stempeck stated that we do want customers to use more kilowatt hours off peak. Mr. Patton added that there is a trade off with the cash flow. If the discount rate was left at 10% would the rates still have to go up the 1.3 0/o? Ms. Parenteau responded that the 1.3% revenue requirement is necessary to meet expenses. Mr. Parino said that our bottom line is zero. The discount is being built into the rate somewhere, as to how we are doing this; it is not affecting the bottom line. We are actually building this discount into the rate somehow. He is not seeing the fact it is the same amount, as opposed to the percentage. Ms. O'Brien replied that is correct. Mr. Potion said that as long as we stay within the flat amount we are not increasing. Chairman Stempeck said that is something we can track on a monthly basis. Mr. O'Rourke added it is a bigger percentage of a smaller amount. Chairman Stempeck agreed. Mr. Pacino said that if we had a smaller amount discounted it would have a lesser increase in the rate. Chairman Stempeck said at the next meeting some of these questions should be answered, he would like to review some of the different rate classes. Mr. Pacino said that Peabody avoided a rate increase by changing their discount. Chairman Stempeck commented that by lowering the discount rate on a majority of the consumers that use the discount is effectively a rate increase. i4wor. Soli said that for what we are doing here right here and now, there is no free lunch. It is part of the Cost of Service Study. You are adding up stuff and are giving them a discount which is added in as a cost and when you get to the bottom line you take that out, net zero. When Peabody lowered the prompt payment discount they did not do Cost of Service as with his discount it is $4.50 instead under the methodology Peabody utilized it is $2.50, it would be a rate increase of $2. Regular Session Meeting Minutes May 15, 2014 Motion to continue the `Prompt Payment Discount' for RMLD customers. Mr. O'Rourke said that for transparency, we are trying to show the customers what the real costs for the different items are, purchase power, cost of service and when you tinker with the prompt payment discount you move away from that r transparency. A 1.3% on average is required, it should be clear where it is and we are not trying to affect the prompt payment discount because it is working well. Chairman Stempeck reiterated that the prompt payment discount is a good benefit from a cash flow perspective. Mr. Pacino made a motion seconded by Mr. O'Rourke that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board to increase RMLD's prompt payment discount from 10% to 15% based on the recommendation of the General Manager. Motion carried 5:0:0. Motion to accept the format of Unbundled Rate structure. Chairman Stompers said that in order to do the right thing you have to take steps forward. Mr. Soli added if you have the dam. Mr. O'Rourke commented that the answer is going to be based over the next period of months; the heart of the issue is that =handling provides the best transparency. If everything is put together and we give a discount it is not really clear to the consumer what is going on. By doing this we may find things are not in order and unbundling will provide us the mechanism to see that. It is an answer to the issue rather than causing an issue. Mr. O'Rourke pointed out two meetings ago that we were driving towards the unbundling issue. Mr. Pacino made a motion seconded by Mr. O'Rourke that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board to accept the format of a unbundled rate structure for the RMLD on the recommendation of the General Manager. Motion carried 4:1:0. Mr. Soli voted against the motion. Motion to accept the New York Power Authority (NYPA) calculation. Mr. Pacino made a motion seconded by Mr. Soli that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board to accept that the RMLD change its New York Power Authority (NYPA) calculation to equal the difference between the average cost of energy excluding NYPA and the average cost of NYPA energy multiplier by the total kilowatts of NYPA received based on the recommendation of the General Manager. • Motion carried 5:0:0. On another matter, Mr. Pacino said that the Town of Reading Audit Committee asked if he was going to be reappointed. He needs to let them know. Chairman Stempeck asked if there were any other commission members interested in sitting on this committee, there was no response. Mr. Soli made a motion seconded by Mr. O'Rourke to appoint Philip Pacino to the Town of Reading Audit Committee. Motion carried 5:0:0. LED Street0ghfing Ms. O'Brien stated that the LED Streetliglaing rate motion is missing from the agenda. Chairman Stempeck said that the LED streetlighting rate was on the package from the last session. Ms. Parenteau apologized for this because she was going through the presentation and neglected to give the motion to Ms. Felt. Mr. Talbot asked if there is a meeting law issue with that. Ms. Foti replied that it is what you reasonably expect forty eight hours in advance, there is no reason this cannot be taken up. Chairman Stempeck clarified that this is not an open meeting issue because it was discussed at the last meeting in open session. Ms. Fell commented that when the agenda is posted, it is what you reasonably expect to put on the agenda. Since we are discussing rates, this is not something unrelated to what has been discussed. Mr. Pacino made a motion seconded by Mr. O'Rourke that the RMLD Board of Commissioners recommend to the RMLD Citizens' Advisory Board to adopt the formula rate in Chapter 164 Section 58 for municipal stredlights on the recommendation of the General Manager. Motion carried 5:0:0. RMLD Board Marinas Thursday, June 12, 2014 Thursday, July 31, 2014 Regular Session Meeting Minutes 5 May 15, 2014 Citizens' Advisory Board Meeting T'''uesday, June 3, 2014 /// . Pacino will cover the CAB meeting. Mr. O'Rourke will be the Secretary for this evening. Executive Session: Executive Session was posted in the event discussion relative to competitively sensitive issues relative to power issues arose. There was no discussion, therefore there was no Executive Session held. Adjournment At 7:14 p.m. Mr. Pacino made a motion seconded by Mr. Soli move to adjourn the Regular- Session to adjourn. Motion carried 5:0:0. A true copy of the RMLD Board of Commissioners minutes as approved by a majority of the Commission. 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