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HomeMy WebLinkAbout2006-09-20 RMLD Board of Commissioners MinutesReadinLy Municipal Liaht Board of Commissioners Regular Session 230 Ash Street Reading, MA 01867 September 20, 2006 Start Time of Regular Session: Start Time of Executive Session: Start Time of Regular Session: End Time of Regular Session: Attendees: Commissioners: Pacino, RMLD Staff: CAB: Guests: 7:30 p.m. 8:00 p.m. 8:45 p.m. 9:45 p.m. Soli, Kearns, Hahn and O'Neill Messrs. Cameron, Dion, Fournier, Seldon Mses. Antonio, Cavagnaro and Parenteau Mr. Norton Mr. Biron, Melanson Heath & Company, PC Mses. Snow and Kupcho, Melanson Heath & Company, PC Chairman Pacino called the meeting to order at 7:30 p.m. This meeting of the Reading Municipal Light Department (RMLD) Board of Commissioner September 20, 2006 was not broadcast. Melanson Heath & Company, PC Audit Review - Frank Biron Mr. Biron stated that he would be addressing the Management Letter and Annual Financial Statements for the year ended June 30, 2006. Mr. Biron pointed out that the reports are in draft form. Mr. Biron explained the Independent Auditors' Report, provides an opinion that the Financial Statements are in accordance with General Accepted Accounting Principles (GAAP) and there are no exceptions. Mr. Biron pointed that this is the first full fiscal year for the RMLD. Mr. Biron commented that the RMLD Board Audit Subcommittee met and reviewed these numbers. Mr. Biron said that the RMLD had a very good year financially. Mr. Biron discussed the Management Letter, which contained no reportable conditions, which would bean indicator of serious breakdowns on the internal controls. Mr. Biron said that the issues mentioned are areas that could be performed more efficiently. Mr. Biron commended the RMLD for implementing a couple of prior year recommendations. The two items from the prior years have been partially resolved. The first is identifying obsolete inventory, isolating it in the warehouse and writing it off in the books. It is their understanding over the last year it has been a policy to identify the assets, but they have not been isolated or written off the books. Mr. Biron said that there is a response from management that they will follow through with this during the upcoming year. Mr. Biron stated that the last issue deals' with discussing fraud prevention with employees and establishing a fraud prevention policy. Mr. Biron said that this is a proactive comment to have a policy dealing with fraud in order that employees are aware that fraud will not be tolerated in any situation and what they should do if there is fraud is going on. Mr. Biron said that based upon the RMLD's response, a fraud policy is in the works and will be coming to the Board for review and approval. Mr. Biron stated that the RMLD has done a great job of closing its books timely, and getting things reconciled and ready for audit. The RMLD should be commended for this. Mr. Soli stated that the Audit Subcommittee met before the meeting for a more detailed discussion. The Town of Reading Audit Committee did not attend that meeting. Mr. Soli said that the Subcommittee `made a motion that recommends that the Reading Municipal Light Board accepts the audit, financial statement and management letter for the year ended June 30, 2006. Regular Session Minutes September 20, 2006 Melanson Heath & Company, PC Audit Review - Frank Biron Ms. Kearns inquired; did they recommend that the employees engage in a fraud prevention program, if so, she has never heard of such, an auditor suggesting that policy be established? Mr. Biron replied that this something being recommended to most of their municipal clients, and`it'comes from a new audit principle. In addition to accounting principles there are audit principles the auditors must follow. The one Mr. Biron is referring to is Statement of Audit Statements 99. It is applicable for every single audit performed in the United States. It is a result of national audit failures such as Enron that occurred. SAS 99 requires that fraud be a consideration of every audit. It requires auditors to be very proactive in audit procedures, communications with the audit team as communication with management discussing fraud. It needs to be discussed with employees; if there is no policy, they may not know how management feels about fraud. Mr. Soli made a motion seconded by Ms. Kearns that the Reading Municipal Light Board (RMLD) accept the Audited Financial Statements and Management Letter for the year June 30, 2006, from Melanson Heath & Company, PC on the recommendation of the RMLD Board of Commissioners Audit Subcommittee. Motion carried 5:0:0. Discussion followed. Chairman Pacino said that this information would be contained in the annual report. Chairman Pacino stated that the Department has to come to the Board at its next meeting regarding the $1.2 million over recovery. Mr. Cameron stated that he will come back to the Board with a recommendation at the next meeting. Executive Session (General Manager's Conference Room) At 8:00 p.m. Mr. Soli made a motion seconded by Mr. Hahn that the Board go, into Executive Session to discuss strategy with respect to litigation and return to Regular Session. Motion carried 5:0:0. Chairman Pacino called for a poll of the Board: Mr. Hahn, Aye; Mr. Soli, Aye; Mr. Pacino, Aye; Ms. Kearns, Aye; and Ms. ONeill, Aye. Chairman Pacino called the meeting back to order at 8:45 p.m. General Manager's Report Power Supply Report/Update/BELD Contract Chairman Pacino said that the Board had discussions in Executive Session on the Braintree Electric Light Department (BELD) contract. Mr. Cameron stated that the Board has two sessions of discussion in which they have discussed the Braintree Electric Light Department (BELD) proposed Watson Power Plant unit. Ms. Parenteau stated that currently, the RMLD has approximately 50% shortfall in Firm, Contracted Capacity that equates to approximately 90 megawatts. In December 2006, the Independent System Operator will be implementing a Forward Capacity Market, which will increase capacity costs significantly for all utilities throughout New England. There is going to be a three-year transitional period with fixed costs followed by the uncertainty of the auction. Ms. Parenteau stated that the Energy Services Division recommends that the RMLD to diversify its power supply portfolio. Ms. Parenteau pointed out the Watson unit will cover ten percent of that deficiency and will be a twenty-year contract. Ms. Parenteau said that Braintree Electric Light Department (BELD) is municipally owned electric utility and provides a good credit risk because the Town of Braintree is taking out the bonds for this unit. In addition, BELD will be retaining thirty percent of the project. Mr. Cameron stated that the RMLD Board Chairman received a letter from the Citizens' Advisory Board Chairman Roger Lessard in which the CAB recommends the execution of the Watson unit contract. Regular Session Minutes September 20, 2006 General Manager's Report Power Supply Report/UpdateBELD Contract Mr. Soli made a motion seconded by Mr. Hahn that the RMLD Board of Commissioners authorizes the General Manager to execute the Unit Power Contract between Braintree Electric Light Department (BELD) and the Reading Municipal Light Department (RMLD) to purchase a unit entitlement,' not to exceed ten percent (10%), in the Thomas A. Watson Power Plant contingent upon a thorough and favorable review of the following: Engineering, Procurement, and Construction (EPC) contract, the turbine manufacturer's service agreement (warranty program), and the finalization of the appendices. The General Manager shall report back to the RMLD Board of Commissioners on the results of the review of the forgoing items in due course. Motion carried 5:0:0. Minutes August 30, 2006 Mr. Hahn made a motion seconded by Mr. Soli to approve the Regular Session meeting minutes of August 30, 2006, with the change presented by Commissioner Hahn. Motion carried 4:0:1. Mr. Hahn abstained. Ms. Kearns said that she appreciates Secretary Soli's attempt to keep the minutes to four pages. Report of the Chairman of the Board Chairman Pacino said that he attended the presentation Mr. Cameron made to the Town of Reading Board of Selectmen on green choice. Ms. O'Neill then requested an update on the status of the strategic planning because she thought that the General Manager was going to get back to the Board on this. Mr. Cameron replied that he has downloaded some articles on this and will get back to the Board on this at the next meeting. Ms. O'Neill would like a copy of the APPA Public Policymakers Guide in which there is a good section on strategic planning. Ms. Kearns added there may be information available at NEPPA. Mr. Soli stated he would like the Department look into the viability of wind turbines in the service territory. Mr. Cameron said that he will look into that. Mr. Dion added that there is a website that provides information if wind turbines are viable. Ms. Parenteau added that Ms. Benson, who is a member of the Cities for Climate Protection committee, they have looked at this website on wind turbines for RMLD's service territory as well. Selectmen Liaison, Citizens' Advisory Board and Customer Comments There were no comments from those in attendance. Action Items Single Phase Pole Mounted Transformers Mr. Dion reported that the Department went out to bid a couple of months earlier than planned based upon the discussions at the February meeting. Mr. Dion said that the lead times were longer based on vendor input. Mr. Soli requested that Mr. Dion to explain the liquidated damages. Mr. Dion replied that the issue with this year bid is that the winning bidder did not stand behind their delivery time. He said that is why liquidated damages have been put in bids as a means to drive conformance to delivery times. Regular Session Minutes September 20, 2006 Action Items Single Phase Pole Mounted Transformers Mr. Soli asked did Graybar non-delivery cause the Department to buy transformers from NSTAR? Mr. Dion replied that the Department bought transformers from NSTAR and refurbished transformers from T&R. Mr. Dion said that the Department paid an additional $60,000 for transformers due to Graybar's failure. Mr. Dion pointed out that the lower bidder was Graybar. Mr. Dion explained that Graybar was disqualified for two reasons. One is that they did not provide good customer service and the second issue is they failed to deliver on three separate quoted delivery dates. Mr. Dion explained that the manner in which analysis are performed on transformers are a combination of first cost and total ownership cost, which takes into account the efficiency component. Mr. Dion explained that efficiency shows how well a transformer does converting energy from primary voltage to secondary voltage and what is lost in the conversion process. Mr. Dion stated that a vendor is selected on the total ownership cost. Mr. Dion said that there was an article in the newspaper a couple weeks ago in which the FERC is proceeding to require higher efficiency for distribution transformers, which may not take effect until 2010. Mr. Soli made a motion seconded by Ms. Kearns that bid 2007-1 for Single Phase Pole Mounted Transformers be awarded to Yale for a total cost of $277,305.00 as the lowest qualified bidder on the recommendation of the General Manager. Motion carried 5:0:0. Single Phase Watt-Hour Meters Mr. Dion explained that the Department went to bid on three items. The first item is a mobile reader to migrate to single-phase commercial meter readers, residential time of use, and to maximize efficiency of the readings and load profile readers. Discussion followed. Mr. Soli made a motion seconded by Ms. Kearns that bid 2006-7 for Single Phase Watt-Hour Meters be awarded to Avcom for a total cost of $46,330 as the lowest qualified bidder on the recommendation of the General Manager. Motion carried 5:0:0. General Manager's Report Engineering & Operations Report/Update Mr. Dion reported that next month he will provide a financial summary along with the Capital Project report. Mr. Dion explained that the financial information for the first month needs to be reviewed, but he will have this as a matter of reporting every month. Mr. Dion updated the Board on Substation Upgrade Projects, Completion of on-going Distribution Reliability and Upgrade work, New Construction and Lynnfield 4 KV Upgrade and Station Retirement Project. Mr. Dion stated that the Department changed vendors on the GIS system and now they will proceed to work on data conversion. Discussion followed. Power Supply Report/Update Ms. Parenteau said the load was up 7.6% from July 2005, the RMLD's peak was 168.7, which was 1% higher than July 2005, the energy costs $4.2;milhon or 5.5¢ per kilowatt hour. Ms. Parenteau commented that the RMLD under collected in the Fuel Charge by $322,000 that results in the Deferred Fuel Cash Reserve of $3.4 million. Discussion followed. Regular Session Minutes September 20, 2006 General Manager's Report Update on Green Choice Program Mr. Cameron stated that Ms. Gottwald, Community Relations Manager, has posters and brochures as well as signs on the RMLD vehicles relative to green power. Mr. Cameron said that the green choice program has been in the RMLD's In Brief and the commercial customers will be receiving notification. Mr. Cameron said that he received a call from David Price of The Boston Globe on green choice and there may be an article in The Sunday Boston Globe, Northwest. Mr. Cameron commented they have considered advertising in the four local newspapers. Mr. Cameron stated that he has met with three out of the four towns to give the green choice presentation. Mr. Soli cautioned Mr. Cameron the state law limitations on advertising. Mr. Cameron replied this is advertising the Green Choice Program to the public and the cost of doing service. Presentation to Subsequent Town Meeting, Town of Reading - November 13, 2006 Chairman Pacino said that he will be giving this presentation to Subsequent Town Meeting. Public Power Week October 2 to October 6 Mr. Cameron reminded those in attendance of this upcoming annual event. RMLD Halloween Party October 26 Mr. Cameron mentioned the RMLD Halloween Party and how historically it has been well attended. General Manager's Vehicle Replacement Mr. Cameron reported that his vehicle, which has to be replaced, and the new vehicle will be a Ford Escape hybrid that will cost approximately $26,000. Mr. Cameron said that he received a letter from Ted Garille asking him to serve on the Executive Board at NEPPA Board Discussion Rate Comparisons, September 2006 Mr. Cameron stated that the only municipal below the RMLD is Middleton. The RMLD's Time of Use Rate is close to Middleton's by a ten percent differential. Next Meeting Dates Wednesday, October 18, 2006 Monday, November 13, 2006, Subsequent Town Meeting Wednesday, November 15, 2006 Wednesday, December 13, 2006 RMLD Board of Commissioners Subcommittee Meetings Subcommittee meetings will be posted if deemed necessary by the Commissioners. RMLD Board Rotation at Citizens' Advisory Board (CAB) Meetings No date has been set for the next Citizens' Advisory Board meeting. Motion to Adjourn At 9:45 p.m. Ms. Kearns made a motion seconded by Mr. Soli to adjourn the Regular Session. Motion carried 5:0:0. A true copy of the RMLD Board of Commissioners minutes as approved by a majority of the Commission. Robert Soli, Secretary RMLD Board of Commissioners