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HomeMy WebLinkAbout2008-11-15 RMLD Power Contracts Rate Setting Green Power Committee MinutesReading Municipal Light Board of Commissioners Power Contracts Rate Settings, and Green Power Committee Mi utVe's November 15, 2008 Us'VI N C L E R K r- A r''1'!('~ h'A A Start Time: 10:10 a.m. End Time: 11:40 a.m. Attendees: Committee Members: Commissioners: RMLD Staff: Attendees: Mr. Hahn and Ms. O'Neill Messrs. Soli and Pacino, Ms. Kearns Messrs. Cameron and Seldon Ms. Parenteau Mr. Harry Simmons "IN 29 P g- 08 Mr. Hahn called the meeting to order at 10:10 a.m. and he stated that the Power Supply, Rate Setting, Green Power Committee meeting was being held in order that Mr. Soli could make a presentation on his concerns relative to the RMLD's Fuel Charge and PASNY credit. Mr. Soli stated that he had given the RMLD Board and General Manager two presentations to review and he was going to present them today. Mr. Soli explained the history of the PASNY credit based on the development of hydroelectric projects in upstate New York. Mr. Soli explained that his presentation would show that the RMLD's treatment of the PASNY credit was incorrect. Mr. Soli then presented a scenario of a hypothetical oil cooperative near the Canadian border. The scenario involved a person named Elmo Muppet purchasing oil from the cooperative with fuel assistance from the government that results in a credit to Mr. Muppet. Mr. Soli argued that Mr. Muppet should have received his oil at a lower rate and not the per gallon price everyone pays minus his fuel assistance credit. (Mr. Soli's presentation is attached to these minutes.) Mr. Simmons asked if, according to Mr. Soli's scenario, Mr. Muppet received his full credit in the end with no adjustment for taxes or other things? Mr. Soli said that Mr. Muppet received his full credit. Mr. Pacino said that he didn't see the point of Mr. Soli's argument. Ms. O'Neill stated that she is dismayed about the use of the word "phony" in Mr. Soli's presentation and does not understand what his point is in all of this. Mr. Hahn then explained the RMLD's methodology of calculating the PASNY credit. Mr. Soli said that the RMLD should have two separate fuel charges, one for the residential customers and one for the remainder of the customers. The difference between the two fuel charges should be the amount of benefit the residential customers receive from the RMLD receiving PASNY power. Mr. Cameron pointed out that the RMLD does, in effect, have two separate fuel charges. Ms. Parenteau went on to explain that when you subtract the PASNY credit from the Fuel Charge you have a different fuel charge from what is charged the commercial and industrial customers. Mr. Pacino said that he was involved in settling the issue in the 1980's with Wilmington when the RMLD was charged with rate discrimination. He stated that it was a very critical time and he does not want to go through it again. He went on to say that what Mr. Soli is proposing could create a possible rate discrimination case from the commercial and industrial customers. Mr. Simmons asked if, after all the conversation, is the RMLD customer receiving the full credit without any adjustments? Mr. Hahn answered in the affirmative. Power Contracts, Rate Settings, and Green Power Committee Minutes 2 Ms: Parenteau noted that the July, 2008 PASNY credit is not a good example to base the yearly charges on because the credit was estimated to be $287,000 based on estimated kWh sales. When the actual figures came in the credit was about $70,000. Mr. Soli then gave his second presentation which involved the RMLD data used to develop the September, 2008 Fuel charge. At the end of his presentation, Mr. Soli said that the RMLD should have charged the residential customers $.094/kWh and the other customers should have paid a fuel charge of $.10185/kWh based on his calculations. (Mr. Soli's second presentation is attached to these minutes.) Ms. Parenteau asked where Mr. Soli received his kWh sales figures for residential class sales? Mr. Soli replied he obtained the figures from the RMLD financials. Ms. Parenteau said that Mr. Soli's kWh sales are not the same as what appears in the September 2008 RMLD financials. Mr. Pacino stated that he is very concerned that the allegations Mr. Soli is making are based on flawed data. Mr. Soli reiterated that the RMLD is double billing its residential customers using the present methodology. Mr. Hahn then pointed out that there is another important point that is lacking in Mr. Soli's presentation. Mr. Hahn explained that nowhere in Mr. Soli's presentation does he mention or include the other costs of the PASNY power, which includes capacity and transmission. Mr. Hahn stated that capacity and transmission charges associated with PASNY cannot be ignored because the methodology calls for comparing the PASNY allotment to what power supply would replace PASNY if PASNY power was not received by the RMLD. That is the real benefit of receiving the PASNY power. Mr. Soli contends that he didn't ignore the capacity and transmission costs because they are paid for from another kitty. Mr. Hahn then drew up a diagram on an easel to demonstrate how the RMLD performs the PASNY credit using all costs related to the PASNY power, including capacity, transmission, and energy. Mr. Simmons asked Mr. Hahn, with respect to his diagram, are the customers receiving their total credit without adjustment? Mr. Hahn replied, "yes." Mr. Soli then went back to arguing Mr. Muppet's case in that Mr. Muppet should have received his oil at a lower rate and not the per gallon everyone pays minus the credit. Mr. Hahn pointed out that the electricity market is an hour-to-hour market and Mr. Muppet's case is not the same as what the RMLD experiences. The PASNY power can't be compared to the RMLD's average price of energy because if the RMLD did not have the PASNY power, it would have to be replaced with some other power supply. The RMLD's methodology uses "Pool Power" as the resource, which would replace PASNY power and this is the correct approach. Mr. Hahn further explained that the PASNY credit is based on calculations as he has described and is treated as an accounting adjustment. There is no invoice for the PASNY credit because it is an accounting adjustment. Mr. Soli asked Mr. Cameron if other municipals give a PASNY credit similar to what the RMLD does? Mr. Cameron said that many, if not all, municipals give a PASNY credit in a manner similar to the RMLD's. ` Power Contracts, Rate Settings, and Green Power Committee Minutes 3 Mr. Soli stated that he went to the Department of Public Utilities in Boston and looked at the financials for all other Massachusetts public utilities and found no mention of the PASNY credit. Mr. Cameron does not have faith in Mr. Soli's findings. Mr. Soli responded that he found no mention of the PASNY credit in the municipal financials. Mr. Hahn added that he is especially upset that Mr. Soli has gone to the Selectmen and made a presentation that essentially labeled the RMLD Board as being dishonest. Ms. O'Neill expressed her deep dismay with Mr. Soli's going to the Selectmen with false charges and without speaking to the RMLD Board first. Mr. Soli then said that based on what he has found that he will not sign the next DPU financial statement if the treatment of the PASNY credit is not changed to reflect his concerns. Mr. Pacino said he received three phone calls from customers asking about commissioners stealing money from the residential customers. Mr. Pacino went on to say that he has been on the RMLD Board for 22 years and he has never received phone calls from customers similar to what he has experienced lately. Mr. Hahn said that what is more disturbing is that Mr. Soli won't sign the DPU report. Mr. Hahn asked what can be done do that Mr. Soli will be satisfied that the RMLD is handling the PASNY credit correctly? Mr. Soli replied that the way the PASNY expense is handled could be changed so that it is being accounted for correctly. Mr. Hahn stated that it is being accounted for correctly and that is as an accounting adjustment. Mr. Hahn stated that Melanson Heath (MH) has performed audits on the RMLD and MH has given very good reports back to the Board. Mr. Cameron said that over the last two years the RMLD hasn't received a Management Letter from MH and they have looked at the PASNY credit and have accepted the way the RMLD accounts for it. Mr. Hahn asked Mr. Soli if the RMLD contacted MH, and asked them to look at the PASNY credit and if MH is satisfied with the way the RMLD accounts for the PASNY credit, will he stop his concerns regarding this issue. Mr. Soli replied, "yes" he would stop his actions on this issue if MH agrees with how the RMLD handles the PASNY credit. Mr. Soli expressed his desire to have the opportunity to meet with the MH auditor on this matter. It was the consensus of the Committee and the RMLD commissioners present to direct the General Manager to contact Melanson and Heath and ask them look at the PASNY credit and to issue an opinion letter on how the RMLD accounts for it. Motion to Adjourn At 11:40 a.m. Ms. Hahn made a motion seconded by Ms. O'Neill to adjourn the meeting. Motion carried 2:0:0.