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HomeMy WebLinkAbout2008-05-27 RMLD Operating and Capital Budget Pension Legal Services Committee Meeting Minutes` CEi ED N CLERK A IS. Reading Municipal Light Department Board of Commissioners - rz Y J, RMLD Board of Commissioners Operating and Capital Budget /Pension/Legal Services Committee Meeting 2q P 1; 01 May 27, 2008 Start Time of Regular Session: 6:10 p.m. End Time of Regular Session: 8:15 p.m. Attendees: Committee Members: Ellen Kearns, Commissioner Commissioners: Mary Ellen O'Neill, Vice Chair Philip Pacino, Commissioner Robert Soli, Secretary Staff: Vinnie Cameron, General Manager Beth Ellen Antonio, Human Resources Manager Jeanne Foti, Executive Assistant Robert Fournier, Accounting(Business Manager Jane Parenteau, Energy Services Manager William Seldon, Senior Energy Analyst Commissioner Kearns called the meeting to order at 6:15 p.m. The meeting opened with discussion on the Explanation Points dated May 23, 2008. RMLD Labor Analysis Dated May 23, 2008 Ms. Kearns clarified that the only labor costs being capitalized is the Engineering and Operations budget, is that correct? Mr. Fournier replied that the reason labor costs are in the Engineering and Operations (E&O) is because they are the only one department currently working on capital' projects. Ms. Kearns said that when looking at the E&O budget it is essentially the Line and Engineering Department. Mr. Fournier pointed out that in this fiscal year, there will be more Station involvement in the capital budget because of the Gaw substation project. Mr. Fournier explained that historically, E&O makes up most of the capital labor. Once in awhile the MIS Department has capital labor if they are working on a capital project such as a new system. The rest of the departments are categorized as expense in the Operating Budget. Ms. Kearns clarified that the capital labor for the Line Department this was discussed in the Capital Budget. Mr. Fournier said that the Line Department capital labor was discussed and approved at the last meeting. The numbers are 2,080 hours per employee some of this is found in the capital and some is in the operating side. Ms. Kearns asked under the category Building Maintenance is a $2,906 amount what would this be reflective of in terms of labor? Mr. Fournier replied it could be work performed on a new roof or camera. Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 3 Operating Budget Overview Ms. Kearns said that the numbers are at $40.6 million for the Base Revenues and $54.5 for the Fuel what will the numbers be? Mr. Cameron replied $39.1 million on the Base Revenues and the Fuel are a good number. Ms. O'Neill asked if the Board is going to see the adjusted figures? Mr. Fournier replied that there will be a Draft 2 to reflect such changes. Ms. Kearns asked does the CAB need to know about these changes? Mr. Fournier replied that the CAB is aware of these changes and is on board with them. Ms. Kearns clarified that growth was projected at 3.6% will this change? Mr. Cameron said that the new number will take into account a decrease in the projected growth. Mr. Fournier gave an overview of the expenses for the Operating Budget with the following highlights: 1. Three new hires: Energy Efficiency Manager, Linemen First Class and Junior Engineer. 2. There will be no overhead contract line crews beginning July 1, 2008. The RMLD will retain the underground crew. _ 3. Energy Efficiency Program There will a Draft 2 based on the discussions with the CAB. There is a net change in expenses $6,500, the new changes will be reflected in Draft 2. Mr. Fournier noted there are $95 million of expenses in the Operating Budget. Ms. Kearns said that if she lost income she would cut expenses but they are not. Mr. Cameron said that there should be a little over a $1 million with the revenue adjustment. Fixed Costs Mr. Fournier said that the Net Income Draft 1 is $2.5 million and if the Revenue is increased to $1.5 million it would produce $1 million. Mr. Fournier reported that there is $95 million in expenses. Mr. Fournier explained that 89% of the Operating Budget is fixed. Most of the RMLD's costs are fixed. Mr. Fournier commented that the Purchase Power contracts are fixed, Depreciation Expense there is some wiggle room but the depreciation is at 3% which represents the aging of RMLD's assets; the Town Payment per the Twenty Year Agreement is 2% of net plant based on kilowatt sales. Miscellaneous Deductions, Return on Investment to the Town of Reading is set up by the Agreement. Mr. Fournier said that $84 million of the $95 million reflects fixed expenses. Semi Variable Costs Mr. Fournier explained that there is 2,080 hours employee per year, when the capital portion is backed out it represents $4.7 million. Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 5 Business Division Ms. Kearns commented that this is a 16.78% increase over the three year rolling average. Ms. Kearns asked Mr. Fournier to go over the items that would cause such an increase. Mr. Fournier replied that most of that is driven by Miscellaneous Deductions, which contains Depreciation, Return on Investment to Reading and 2% Town Payment which have gone up. Ms. Kearns reiterated that if the budget goes up these items go up. Mr. Fournier replied, that is correct. Mr. Fournier said that another item that contributed to this increase is the appliance rebate program has been made more robust. Ms. Kearns clarified the energy audits went up 47%? Ms. O'Neill said that it is because it is a three year average, it went from $46,000 to $53,000. Mr. Soli asked if the appliance rebate program is capped? Mr. Cameron said that the RMLD has the right to stop the rebate program during the year. Mr. Soli asked how much is in the rebate program for this year? Mr. Fournier replied $53,000 and Tier 1 costs of $53,000. Ms. Kearns asked why some amounts in the budget are Out under supplies? Mr. Fournier explained that FERC accounts show the Balance Sheet and Income Statement accounts you cannot make up your own accounts. Mr. Fournier said that if he called everything "903", which is Accounting, Collection and Labor Expenses. Mr. Fournier pointed out that there are three departments that use 903 as an expense account, Accounting, Customer Service and MIS. Mr. Fournier did for reporting purposes everything rolls up to the FERC 903 account, which is regulated, throughout the country. What he did was to create is another subset of numbers 105 is for supplies. Mr. Fournier reported that every department has 105 and 109 accounts. Ms. Kearns inquired in a macro picture would she be able to discern which division is responsible for energy programs, would it be the Business Division? Mr. Fournier asked for clarification because there are other energy programs. Ms. Parenteau said that Customer Service handles the appliance rebate. Ms. Parenteau suggested creating a category of 107 for energy conservation programs. Mr. Fournier said that he will create a category 107 for energy conservation programs. This will be reflected in the Draft 2 budget. Mr. Fournier noted that Accounting Department increase in this year's budget is $90,000. There is a new hire in the Customer Service group, rebates and the bad debt has changed this to an increase of $216,383. Mr. Fournier noted in the MIS there was increase $84,160 is up due to maintenance contracts. Ms. Kearns asked about the Customer Service increase $216,000 contains one new position? Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 7 Business Division Ms. Kearns asked if there is a better way of dealing with uncollectibles? Mr. Fournier replied that the Customer Service does its due diligence via letters and phone calls. Mr. Fournier said that the RMLD couldn't control bankruptcies or customers that rent and move out without paying. Ms. Kearns suggested performing a six-month review of the account receivable agings. Mr. Soli commented that the tough financial times are affecting the uncollectibles. Mr. Fournier said that the times are tough, and the customers are doing the best they can. Ms. O'Neill stated that Ms. Cavagnaro did a presentation to the Board on the programs available to its customers. Mr. Soli asked if the RMLD files liens on foreclosed properties? Mr. Fournier replied, "yes." Ms. O'Neill would like a monthly report on the account receivable agings. Energy Services Division Ms. Parenteau said that the Energy Services budget has a significant increase. Last year the budget was $840,129 however; this year the budget is $1,197,638. Ms. Parenteau commented that as Mr. Fournier mentioned in his overview as a result of the GDS Program the Board has directed the General Manager to ` develop some programs to be presented to the Board by the end of June. During the budget process, she sat down with Mr. Cameron to earmark dollars to the program and get some general direction. They are trying to develop a program, collect revenues and costs are going up for consumers, however the Department needs to give them tools to manage. Ms. Parenteau has put in $255,000 for the DSM Energy Efficiency program. In addition to that, they increased the Commercial Energy Lighting Rebate program from $50,000 to $100,000. A new position has been put in the budget for the Energy Efficiency Manager. Ms. Parenteau said that they are trying to tie in the. GDS Study with the Reading Action Climate Protection Plan program presented to the Board in February. One thing they found as with the Key Accounts ten years ago, prior to putting the Key Accounts Manager position in place there were staff within Energy Services take a group of customers when they had free time look at the rates or anything they can do to assist them. What this bore out was that those customers were not receiving any attention whatsoever. They are trying to use the same model for the Energy Efficiency Manager if they develop the program than the individuals need the assistance on what to do. Ms. Parenteau pointed out that on the residential audits they provide a report there is no follow up. What they envision is the Energy Efficiency Manager will develop the programs and make contact with financial institutions, partner up with Keyspan and take out grants so the customers will have the tools to take the information and implement the recommendations. It is imperative considering the times and with the Fuel Cost increasing that this position gets put in place as well as move forward with the programs. There is only so much that you can do with RMLD's cost. If RMLD's customers can be served with the energy efficiency programs it is money well spent for the RMLD. Ms. Parenteau said that the $255,000 for the energy efficiency programs will be for all customer classes, they are looking at space heating and cooling for both residentials and commercials, develop lighting program, Energy Star appliances with the rebate program. Ms. Parenteau said that they costs are going up audits will mostly increase. Commercial Audits form $35,000 to $50,000. Outside Services went down from $250,000 to $200,000. Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 9 Energy Services Division Mr. Cameron said that money is in the budget and earmarked the best possible way to apportion energy costs. Mr. Cameron commented there is $133,000 budgeted for the Tier 1 and Tier 2. Mr. Cameron commented that he is working on is a surcharge that would recover moneys to the residential and commercial sectors. Mr. Pacino entered the meeting at this point. Mr. Soli said that the residential kicks into that pot, does the commercial kick into that pot? Mr. Soli asked right now. Mr. Cameron said that the commercials pay nothing. Mr. Soli said that the commercials are being subsidized. Ms. Kearns said that the structure Mr. Cameron has set in place is a good one. Ms. Kearns commented that the more the RMLD makes the commercial customer happy it will attract more commercial customers. Ms. Parenteau said that they are looking at a demand response program with the commercial customers because they get a bigger bang for the buck. Ms. O'Neill commented that she would like to see the package on the conservation measures. Mr. Cameron said that it may be ready for the July meeting. E&O Division Mr. Sullivan said that the budget is up 4.41% it is due to the hire of Lineman First Class and a Junior Engineer. Ms. Kearns said that the. 2009 has increased over the 2008 budget? Mr. Sullivan commented that the cost of the new hires is $133,000. In addition the employee education is $23,000. Ms. Kearns asked if tuition is collectively bargained? Mr. Cameron replied that "no", tuition reimbursement is not collectively bargained, it is Policy 17. Ms. O'Neill said that this not just includes tuition reimbursement but conferences and trainings. Ms. Kearns said that the trainings should be separated out from the college education. Ms. Kearns commented the college education as a benefit. Ms. Kearns thought that a lot of the labor had decreased because it was being capitalized. Mr. Soli commented that in the past Ms. Antonio has spoken about the aging population for the Linemen, would another employee coming on board will that ease the situation? Ms. Antonio replied that the apprenticeship program has started; currently there are four employees in the program. Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 11 Mr. Fournier agreed the bottom line will not change. E&O Division Ms. Kearns said that the three-year average on the station is up 17%, $85,000 is that due to the Gaw substation? Mr. Cameron replied that this includes labor pay increases and supervisor's allotment to this category. General Manager Division Mr. Cameron said that there is not much movement in this year's budget. There is an increase in the outside services by 2%. Ms. Kearns commented that the General Manager's labor regular why it is increased? Mr. Cameron said that the labor reflects his salary as well as the Executive Assistant. Mr. Cameron explained that on Outside Services he tries to stay within budget. Mr. Soli asked who pays for the Cost of Service Study? Mr. Cameron replied that this is coming out of his Outside Services that will be over budget for this fiscal year. Ms. Kearns asked about Miscellaneous General in Community Relations, it went from $95,000 to $125,760 then down to $100,000. Ms. Antonio replied that out of that account the Annual Report is $15,000, the RMLD's Newsletter $13,500, Brochure Programs $10,000, Green Choice Program, Calendars $23,000 and T-shirts $13,000. Ms. Antonio said that Community Relations holds four to five events annually. The budget was reviewed and cut by the General Manager. Ms. O'Neill commented that printing drives the cost in this budget. Ms. Antonio said that last year $20,000 was budgeted for the Annual Report this fiscal year it will be $9,000. Mr. Pacino asked how much of the $7,500 budget it has been spent? Mr. Fournier said that approximately $4,000 was spent. Ms. Kearns pointed out that there was an individual who facilitates discussions on the role of Commissioners and she would like to spend some moneys on this and will inform Chair Hahn. Mr. Soli asked how much has the CAB spent? Mr. Cameron replied a little less than the Board has. Mr. Pacino pointed out that the CAB is set by statute in the Twenty Year Agreement and in the past has spent money on a study. Facilities Manager Division Mr. Fournier said that this budget is down. Operating and Capital Budget Committee Budget /Pension/Legal Services Committee Meeting May 27, 2008 13 Facilities Manager Division Mr. Fournier said that the envelopes will still be an expense if it is outsourced, it is the labor expense that will saved. Mr. Soli asked if the inserts will be handled by the outside vendor? Mr. Fournier replied, "yes" they will handle those items. Mr. Soli pointed out that the RMLD will be losing two tenants, RCTV and substation function. Mr. Soli said that why not tear down both buildings for warehousing. Mr. Cameron pointed out that the substation is a historical building that has switchgear that needs to be taken out before it can it be used for storage. Mr. Cameron commented that it is one option for some storage. The RCTV building may get torn down for additional parking. The RCTV building itself needs a lot of work. Mr. Cameron pointed out that the capital budget has money in it for the substation roof. Mr. Soli expressed his concern over the slate roof versus replacing it with a standard roof and wants to know if that has been addressed. Mr. Cameron said that the Department has not gotten that far in the process. Mr. Cameron commented that the wood under the roof should be replaced. Ms. Kearns asked in the Transportation Budget, Reclass Allocation $220,000 what does that mean? Mr. Fournier replied that what happens is that the all the vehicle costs get pre allocated each month and each department has a vehicle expense associated with it. Mr. Fournier noted that there is a formula used to allocate these expenses to each department. Ms. Kearns asked why keep this category? Mr. Fournier replied that he does not know the transportation budget will be until Mr. Donahoe allocates the cost such as Taylor Lloyd. Mr. Cameron pointed out that this is a true accounting of each division's expenses of what they incur. Mr. Pacino explained that it starts here and it is spread out to each department. Mr. Pacino asked what Property Appraisal is? Mr. Cameron replied that every few years the insurance company wants appraisals done. Ms. Kearns asked if the RMLD has had a claim against the EPLI policy? Mr. Cameron said that he will check with Ms. O'Leary into this. Mr. Soli had a question on the Fidelity Bond what is the term? Mr. Cameron replied that it is his annual bond required by law. Ms. Kearns said that the budget is bare bones. Operating and Capital Budget Committee Budget /Pension/ Legal Services Committee Meeting May 27, 2008 15 Ms. O'Neill explained that her concern is about the customer. Mr. Cameron said that if the rate increase on the Base Rate were up another 2% it would be an additional increase of $1.60 or $1.70. Ms. Kearns said that the only amount of money that is not bound by contract or locked in is the $3.5 million. Ms. Kearns said that if we know that there is rate increases of 4.5% why not send the budget back to the Department to work on the cutting back the $3.5 million. Ms. Kearns commented that a possible rate increase of 7% how can you explain that to the customer without looking at cutting some of the $3.5 million. Mr. Fournier said that you do not want to compromise reliability, customer service and putting in new programs. Mr. Fournier said that the Rate Stabilization Fund is at $7 million. Ms. O'Neill pointed out that the Fuel Charge was supposed to level off by June but does not appear this will happen. It is difficult to ask customers to pay more with what they are already facing. Mr. Soli said that gas prices are having an impact on travel. Mr. Soli asked if the Fuel Charge is having an impact on consumption? Mr. Cameron replied that the RMLD can look at the average consumption seasonally or on annual basis. The average for the year is 860kV h, but the RMLD can look at this. Ms. Kearns asked Mr. Pacino because of his tenure on the Board if he has ever faced this type of situation in the past where the increases where going to be 6% to 7%? Mr. Pacino commented that the Board sets the rate increase at 4% it is up to management to follow this directive. Mr. Pacino said that a 7% increase is not acceptable. Mr. Pacino said that based on the Cost of Service the Department will bring the rate increase to the Board. Mr. Pacino said that the Board can say they can accept a 4.5% increase but it is up to the Department to deal with cost savings. Ms. O'Neill asked that by cutting back on the capital budget it can help diminish a rate increase? Mr. Cameron said that capital items are paid on year out. Ms. O'Neill asked about the schedule on the Cost of Service Study? Mr. Cameron replied that he has the draft, and he is looking at surcharges as well as rate increases. Mr. Cameron has a conference call with Mike Johnson to firm things up this Thursday. Discussion followed. Ms. Kearns commented that she remembers that on the Cost of Service there was a lot of discussion and disagreement on the Cost of Service Study. Mr. Cameron said that COSS will go to the Rate Subcommittee who will provide direction. Mr. Fournier commented there is not a lot of fat in the budget. Ms. O'Neill asked what has to be done to get to a 7% to a 4% rate increase how much has to be cut?